REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders and the Board of Directors of Ginkgo Bioworks Holdings, Inc.
Opinion on the Financial Statements
We have audited the
accompanying consolidated balance sheets of Ginkgo Bioworks Holdings, Inc. and subsidiaries (the Company) as of December 31, 2021 and 2020, the related consolidated statements of operations and comprehensive loss, stockholders equity and
cash flows for each of the three years in the period ended December 31, 2021, and the related notes (collectively referred to as the consolidated financial statements). In our opinion, the consolidated financial statements present
fairly, in all material respects, the financial position of the Company at December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021, in conformity
with U.S. generally accepted accounting principles.
Basis for Opinion
These financial statements are the responsibility of the Companys management. Our responsibility is to express an opinion on the Companys financial
statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal
securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance
with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not
required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of
expressing an opinion on the effectiveness of the Companys internal control over financial reporting. Accordingly, we express no such opinion.
Our
audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test
basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the
financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/ Ernst & Young LLP
We have served as the Companys auditor since 2018.
Boston, Massachusetts
March 28, 2022
F-2
Ginkgo Bioworks Holdings, Inc. and Subsidiaries
Consolidated Balance Sheets
(in
thousands, except share and per share data)
|
|
|
|
|
|
|
|
|
|
|
As of December 31, |
|
|
|
2021 |
|
|
2020 |
|
Assets |
|
|
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
1,550,004 |
|
|
$ |
380,801 |
|
Accounts receivable, net |
|
|
131,544 |
|
|
|
16,694 |
|
Accounts receivablerelated parties |
|
|
4,598 |
|
|
|
5,212 |
|
Inventory, net |
|
|
3,362 |
|
|
|
2,736 |
|
Prepaid expenses and other current assets |
|
|
33,537 |
|
|
|
21,099 |
|
|
|
|
|
|
|
|
|
|
Total current assets |
|
|
1,723,045 |
|
|
|
426,542 |
|
Property and equipment, net |
|
|
145,770 |
|
|
|
121,435 |
|
Investments |
|
|
102,037 |
|
|
|
74,200 |
|
Equity method investments |
|
|
13,194 |
|
|
|
28,924 |
|
Intangible assets, net |
|
|
21,642 |
|
|
|
3,294 |
|
Goodwill |
|
|
21,312 |
|
|
|
1,857 |
|
Loans receivable, net of current portion |
|
|
|
|
|
|
13,298 |
|
Other non-current assets |
|
|
43,990 |
|
|
|
5,603 |
|
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
2,070,990 |
|
|
$ |
675,153 |
|
|
|
|
|
|
|
|
|
|
Liabilities and Stockholders Equity |
|
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
|
Accounts payable |
|
$ |
8,189 |
|
|
$ |
13,893 |
|
Deferred revenue (includes $12,502 and $22,101 from related parties) |
|
|
33,240 |
|
|
|
28,823 |
|
Accrued expenses and other current liabilities |
|
|
93,332 |
|
|
|
30,505 |
|
|
|
|
|
|
|
|
|
|
Total current liabilities |
|
|
134,761 |
|
|
|
73,221 |
|
Non-current liabilities: |
|
|
|
|
|
|
|
|
Deferred rent, net of current portion |
|
|
18,746 |
|
|
|
12,678 |
|
Deferred revenue, net of current portion (includes $148,319 and $97,977 from related
parties) |
|
|
155,991 |
|
|
|
99,652 |
|
Lease financing obligation |
|
|
22,283 |
|
|
|
16,518 |
|
Warrant liabilities |
|
|
135,838 |
|
|
|
|
|
Other non-current liabilities |
|
|
35,992 |
|
|
|
3,032 |
|
|
|
|
|
|
|
|
|
|
Total liabilities |
|
|
503,611 |
|
|
|
205,101 |
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies (Note 14) |
|
|
|
|
|
|
|
|
Stockholders equity (1): |
|
|
|
|
|
|
|
|
Preferred stock, $0.0001 par value; 200,000,000 shares authorized; none issued |
|
|
|
|
|
|
|
|
Class A, Class B and Class C common stock $0.0001 par value; 15,800,000,000 shares
authorized (Class A 10,500,000,000, Class B 4,500,000,000, Class C 800,000,000); 1,690,990,815 (Class A 1,326,146,808, Class B 364,844,007, Class C 0) and 1,289,014,925 (Class A 974,224,443, Class B 314,790,482, Class C
0) shares issued as of December 31, 2021 and 2020, respectively; 1,611,392,152 (Class A 1,273,976,963, Class B 337,415,189, Class C 0) and 1,288,595,876 (Class A 974,166,577, Class B 314,429,299, Class C 0) shares
outstanding as of December 31, 2021 and 2020, respectively |
|
|
161 |
|
|
|
129 |
|
Additional paid-in capital |
|
|
3,804,844 |
|
|
|
929,125 |
|
Accumulated deficit |
|
|
(2,297,925 |
) |
|
|
(467,878 |
) |
Accumulated other comprehensive loss |
|
|
(1,715 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Ginkgo Bioworks Holdings, Inc. stockholders equity |
|
|
1,505,365 |
|
|
|
461,376 |
|
Non-controlling interest |
|
|
62,014 |
|
|
|
8,676 |
|
|
|
|
|
|
|
|
|
|
Total stockholders equity |
|
|
1,567,379 |
|
|
|
470,052 |
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders equity |
|
$ |
2,070,990 |
|
|
$ |
675,153 |
|
|
|
|
|
|
|
|
|
|
(1) |
Balances as of December 31, 2020 have been retroactively restated for the reverse recapitalization as
described in Note 2. |
The accompanying notes are an integral part of these consolidated financial statements.
F-3
Ginkgo Bioworks Holdings, Inc. and Subsidiaries
Consolidated Statements of Operations and Comprehensive Loss
(in thousands, except share and per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, |
|
|
|
2021 |
|
|
2020 |
|
|
2019 |
|
Foundry revenue (related party revenue of $47,161, $42,535 and $35,268 for the years ended 2021,
2020 and 2019, respectively) |
|
$ |
112,989 |
|
|
$ |
59,221 |
|
|
$ |
54,184 |
|
Biosecurity revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
Product |
|
|
23,040 |
|
|
|
8,707 |
|
|
|
|
|
Service |
|
|
177,808 |
|
|
|
8,729 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue |
|
|
313,837 |
|
|
|
76,657 |
|
|
|
54,184 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs and operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
Cost of Biosecurity product revenue |
|
|
20,017 |
|
|
|
6,705 |
|
|
|
|
|
Cost of Biosecurity service revenue |
|
|
109,673 |
|
|
|
8,906 |
|
|
|
|
|
Research and development |
|
|
1,149,662 |
|
|
|
159,767 |
|
|
|
96,299 |
|
General and administrative |
|
|
862,952 |
|
|
|
38,306 |
|
|
|
29,483 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses |
|
|
2,142,304 |
|
|
|
213,684 |
|
|
|
125,782 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from operations |
|
|
(1,828,467 |
) |
|
|
(137,027 |
) |
|
|
(71,598 |
) |
Other (expense) income: |
|
|
|
|
|
|
|
|
|
|
|
|
Interest income |
|
|
837 |
|
|
|
2,582 |
|
|
|
5,756 |
|
Interest expense |
|
|
(2,373 |
) |
|
|
(2,385 |
) |
|
|
(2,421 |
) |
Loss on equity method investments |
|
|
(77,284 |
) |
|
|
(396 |
) |
|
|
(27,533 |
) |
Loss on investments |
|
|
(11,543 |
) |
|
|
(3,733 |
) |
|
|
(27,200 |
) |
Change in fair value of warrant liabilities |
|
|
58,615 |
|
|
|
|
|
|
|
|
|
Gain on settlement of partnership agreement |
|
|
23,826 |
|
|
|
8,286 |
|
|
|
1,587 |
|
Other (expense) income, net |
|
|
(1,733 |
) |
|
|
7,839 |
|
|
|
1,574 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other (expense) income, net |
|
|
(9,655 |
) |
|
|
12,193 |
|
|
|
(48,237 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss before income taxes |
|
|
(1,838,122 |
) |
|
|
(124,834 |
) |
|
|
(119,835 |
) |
Income tax (benefit) provision |
|
|
(1,480 |
) |
|
|
1,889 |
|
|
|
22 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
|
(1,836,642 |
) |
|
|
(126,723 |
) |
|
|
(119,857 |
) |
Net loss attributable to non-controlling interest |
|
|
(6,595 |
) |
|
|
(114 |
) |
|
|
(530 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss attributable to Ginkgo Bioworks Holdings, Inc. stockholders |
|
$ |
(1,830,047 |
) |
|
$ |
(126,609 |
) |
|
$ |
(119,327 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss per share attributable to Ginkgo Bioworks Holdings, Inc. (1) common stockholders: |
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
$ |
(1.35 |
) |
|
$ |
(0.10 |
) |
|
$ |
(0.10 |
) |
Diluted |
|
$ |
(1.39 |
) |
|
$ |
(0.10 |
) |
|
$ |
(0.10 |
) |
Weighted average common shares outstanding
(1) |
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
1,359,848,803 |
|
|
|
1,274,766,915 |
|
|
|
1,149,000,417 |
|
Diluted |
|
|
1,360,373,343 |
|
|
|
1,274,766,915 |
|
|
|
1,149,000,417 |
|
Comprehensive loss: |
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(1,836,642 |
) |
|
$ |
(126,723 |
) |
|
$ |
(119,857 |
) |
Other comprehensive loss: |
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustment |
|
|
(1,715 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other comprehensive loss |
|
|
(1,715 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive loss |
|
$ |
(1,838,357 |
) |
|
$ |
(126,723 |
) |
|
$ |
(119,857 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
Amounts for the year ended December 31, 2020 and 2019 have been retroactively restated for the reverse
recapitalization as described in Note 2. |
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
Ginkgo Bioworks Holdings, Inc. and Subsidiaries
Consolidated Statements of Stockholders Equity
(in thousands, except share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Series B, C, D, E Convertible Preferred Stock |
|
|
Old Ginkgo Common Stock |
|
|
Common Stock |
|
|
|
Shares |
|
|
Amount |
|
|
Shares |
|
|
Amount |
|
|
Shares |
|
|
Amount |
|
Balance as of December 31, 2018 (as previously reported) |
|
|
14,943,599 |
|
|
$ |
149 |
|
|
|
8,555,710 |
|
|
$ |
86 |
|
|
|
|
|
|
$ |
|
|
Retroactive application of the reverse recapitalization |
|
|
(14,943,599 |
) |
|
|
(149 |
) |
|
|
(8,555,710 |
) |
|
|
(86 |
) |
|
|
1,153,356,703 |
|
|
|
116 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of December 31, 2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,153,356,703 |
|
|
|
116 |
|
Exercise of stock options |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
500,621 |
|
|
|
|
|
Issuance of Series E convertible preferred stock, net of issuance costs of $4,830 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
69,812,427 |
|
|
|
7 |
|
Beneficial conversion feature of convertible promissory notes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Conversion of convertible promissory notes into Series E convertible preferred stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
69,151,117 |
|
|
|
7 |
|
Vesting of restricted stock awards |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
367,858 |
|
|
|
|
|
Repurchase of common stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retirement of treasury stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(37,626,694 |
) |
|
|
(4 |
) |
Issuance of warrants to purchase convertible preferred stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based compensation expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss and comprehensive loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of December 31, 2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,255,562,032 |
|
|
|
126 |
|
Exercise of stock options |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,921,941 |
|
|
|
|
|
Issuance of Series E convertible preferred stock, net of issuance costs of $0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30,855,065 |
|
|
|
3 |
|
Vesting of restricted stock awards |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
256,838 |
|
|
|
|
|
Stock-based compensation expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss and comprehensive loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of December 31, 2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,288,595,876 |
|
|
|
129 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common stock upon exercise or vesting of equity awards |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
91,080,290 |
|
|
|
9 |
|
Vesting of restricted stockearnouts |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
38,798,801 |
|
|
|
4 |
|
Tax withholdings related to net share settlement of equity awards |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(797,313 |
) |
|
|
|
|
Founder shares repurchase |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,707,280 |
) |
|
|
|
|
Issuance of warrants to purchase Series D convertible preferred stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of Series D and B convertible preferred stock upon exercise of warrants |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,013,708 |
|
|
|
|
|
Issuance of Series E convertible preferred stock in exchange for warrants |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
408,497 |
|
|
|
|
|
Issuance of common stock for a business acquisition |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,633,937 |
|
|
|
|
|
Issuance of common stock upon reverse recapitalization, net of offering costs (Note 3) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
193,365,636 |
|
|
|
19 |
|
Assumption of Public and Private Placement Warrants |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contributions from non-controlling interests |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based compensation expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of December 31, 2021 |
|
|
|
|
|
$ |
|
|
|
|
|
|
|
$ |
|
|
|
|
1,611,392,152 |
|
|
$ |
161 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these consolidated financial statements.
F-5
Ginkgo Bioworks Holdings, Inc. and Subsidiaries
Consolidated Statements of Stockholders Equity
(in thousands, except share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Treasury Stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares |
|
|
Amount |
|
|
Additional Paid-In Capital |
|
|
Accumulated Deficit |
|
|
Accumulated Other Comprehensive Loss |
|
|
Non- Controlling Interest |
|
|
Total Stockholders Equity |
|
Balance as of December 31, 2018 (as previously reported) |
|
|
(756,633 |
) |
|
$ |
(24,449 |
) |
|
$ |
450,268 |
|
|
$ |
(221,942 |
) |
|
$ |
|
|
|
$ |
9,320 |
|
|
$ |
213,432 |
|
Retroactive application of the reverse recapitalization |
|
|
(36,379,256 |
) |
|
|
(4 |
) |
|
|
123 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of December 31, 2018 |
|
|
(37,135,889 |
) |
|
|
(24,453 |
) |
|
|
450,391 |
|
|
|
(221,942 |
) |
|
|
|
|
|
|
9,320 |
|
|
|
213,432 |
|
Exercise of stock options |
|
|
|
|
|
|
|
|
|
|
7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7 |
|
Issuance of Series E convertible preferred stock, net of issuance costs of $4,830 |
|
|
|
|
|
|
|
|
|
|
208,794 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
208,801 |
|
Beneficial conversion feature of convertible promissory notes |
|
|
|
|
|
|
|
|
|
|
(12,651 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(12,651 |
) |
Conversion of convertible promissory notes into Series E convertible preferred stock |
|
|
|
|
|
|
|
|
|
|
211,601 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
211,608 |
|
Vesting of restricted stock awards |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Repurchase of common stock |
|
|
(490,805 |
) |
|
|
(408 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(408 |
) |
Retirement of treasury stock |
|
|
37,626,694 |
|
|
|
24,861 |
|
|
|
(24,857 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of warrants to purchase convertible preferred stock |
|
|
|
|
|
|
|
|
|
|
150 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
150 |
|
Stock-based compensation expense |
|
|
|
|
|
|
|
|
|
|
771 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
771 |
|
Net loss and comprehensive loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(119,327 |
) |
|
|
|
|
|
|
(530 |
) |
|
|
(119,857 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of December 31, 2019 |
|
|
|
|
|
|
|
|
|
|
834,206 |
|
|
|
(341,269 |
) |
|
|
|
|
|
|
8,790 |
|
|
|
501,853 |
|
Exercise of stock options |
|
|
|
|
|
|
|
|
|
|
26 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
26 |
|
Issuance of Series E convertible preferred stock, net of issuance costs of $0 |
|
|
|
|
|
|
|
|
|
|
94,417 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
94,420 |
|
Vesting of restricted stock awards |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based compensation expense |
|
|
|
|
|
|
|
|
|
|
476 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
476 |
|
Net loss and comprehensive loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(126,609 |
) |
|
|
|
|
|
|
(114 |
) |
|
|
(126,723 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of December 31, 2020 |
|
|
|
|
|
|
|
|
|
|
929,125 |
|
|
|
(467,878 |
) |
|
|
|
|
|
|
8,676 |
|
|
|
470,052 |
|
Issuance of common stock upon exercise or vesting of equity awards |
|
|
|
|
|
|
|
|
|
|
167 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
176 |
|
Vesting of restricted stockearnouts |
|
|
|
|
|
|
|
|
|
|
(4 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tax withholdings related to net share settlement of equity awards |
|
|
|
|
|
|
|
|
|
|
(9,463 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(9,463 |
) |
Founder shares repurchase |
|
|
|
|
|
|
|
|
|
|
(24,998 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(24,998 |
) |
Issuance of warrants to purchase Series D convertible preferred stock |
|
|
|
|
|
|
|
|
|
|
300 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
300 |
|
Issuance of Series D and B convertible preferred stock upon exercise of warrants |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of Series E convertible preferred stock in exchange for warrants |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common stock for a business acquisition |
|
|
|
|
|
|
|
|
|
|
15,160 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,160 |
|
Issuance of common stock upon reverse recapitalization, net of offering costs (Note 3) |
|
|
|
|
|
|
|
|
|
|
1,509,610 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,509,629 |
|
Assumption of Public and Private Placement Warrants |
|
|
|
|
|
|
|
|
|
|
(194,453 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(194,453 |
) |
Contributions from non-controlling interests |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
59,933 |
|
|
|
59,933 |
|
Stock-based compensation expense |
|
|
|
|
|
|
|
|
|
|
1,579,400 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,579,400 |
|
Foreign currency translation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,715 |
) |
|
|
|
|
|
|
(1,715 |
) |
Net loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,830,047 |
) |
|
|
|
|
|
|
(6,595 |
) |
|
|
(1,836,642 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of December 31, 2021 |
|
|
|
|
|
$ |
|
|
|
$ |
3,804,844 |
|
|
$ |
(2,297,925 |
) |
|
$ |
(1,715 |
) |
|
$ |
62,014 |
|
|
$ |
1,567,379 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these consolidated financial statements.
F-6
Ginkgo Bioworks Holdings, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, |
|
|
|
2021 |
|
|
2020 |
|
|
2019 |
|
Cash flows from operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(1,836,642 |
) |
|
$ |
(126,723 |
) |
|
$ |
(119,857 |
) |
Adjustments to reconcile net loss to net cash used in operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
29,076 |
|
|
|
13,864 |
|
|
|
10,755 |
|
Stock-based compensation |
|
|
1,606,020 |
|
|
|
476 |
|
|
|
771 |
|
Non-cash equity consideration |
|
|
(24,185 |
) |
|
|
|
|
|
|
|
|
Loss on equity method investments |
|
|
77,284 |
|
|
|
396 |
|
|
|
27,533 |
|
Loss on investments |
|
|
11,543 |
|
|
|
3,733 |
|
|
|
27,200 |
|
Change in fair value of loans receivable |
|
|
3,508 |
|
|
|
(1,061 |
) |
|
|
(914 |
) |
Change in fair value of warrant liabilities |
|
|
(58,615 |
) |
|
|
|
|
|
|
|
|
Other non-cash activity |
|
|
(270 |
) |
|
|
|
|
|
|
(728 |
) |
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable ($614, ($995) and ($2,221) from related parties) |
|
|
(114,094 |
) |
|
|
(14,228 |
) |
|
|
(1,843 |
) |
Prepaid expenses and other current assets |
|
|
(2,981 |
) |
|
|
(11,352 |
) |
|
|
(4,031 |
) |
Inventory |
|
|
(626 |
) |
|
|
(2,736 |
) |
|
|
|
|
Other non-current assets |
|
|
(539 |
) |
|
|
1,834 |
|
|
|
(2,361 |
) |
Accounts payable |
|
|
(2,247 |
) |
|
|
7,019 |
|
|
|
664 |
|
Accrued expenses and other current liabilities |
|
|
44,796 |
|
|
|
8,665 |
|
|
|
4,170 |
|
Deferred revenue, current and non-current ($40,743,
($22,253) and $3,112 from related parties) |
|
|
(10,498 |
) |
|
|
(19,423 |
) |
|
|
4,883 |
|
Deferred rent, non-current |
|
|
6,032 |
|
|
|
1,045 |
|
|
|
9,095 |
|
Other non-current liabilities |
|
|
18,620 |
|
|
|
2,661 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in operating activities |
|
|
(253,818 |
) |
|
|
(135,830 |
) |
|
|
(44,663 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
Purchases of property and equipment |
|
|
(56,521 |
) |
|
|
(57,821 |
) |
|
|
(22,219 |
) |
Purchases and issuances of loan receivable |
|
|
|
|
|
|
(10,100 |
) |
|
|
(2,250 |
) |
Proceeds from loans receivable |
|
|
304 |
|
|
|
800 |
|
|
|
|
|
Purchase of investments |
|
|
(5,000 |
) |
|
|
|
|
|
|
(50,133 |
) |
Business acquisition, net of cash acquired |
|
|
(12,040 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities |
|
|
(73,257 |
) |
|
|
(67,121 |
) |
|
|
(74,602 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from reverse recapitalization, net of redemptions of $867,253 and offering costs of
$108,118 (Note 3) |
|
|
1,509,629 |
|
|
|
|
|
|
|
|
|
Proceeds from exercise of stock options |
|
|
167 |
|
|
|
26 |
|
|
|
7 |
|
Repurchases of common stock |
|
|
(24,998 |
) |
|
|
|
|
|
|
(408 |
) |
Taxes paid related to net share settlement of equity awards |
|
|
(9,463 |
) |
|
|
|
|
|
|
|
|
Principal payments on capital leases and lease financing obligation |
|
|
(1,123 |
) |
|
|
(748 |
) |
|
|
(828 |
) |
Proceeds from lease financing obligation |
|
|
|
|
|
|
|
|
|
|
476 |
|
Contributions from non-controlling interests |
|
|
59,933 |
|
|
|
|
|
|
|
|
|
Proceeds from issuance of convertible promissory notes, net of issuance costs |
|
|
|
|
|
|
|
|
|
|
198,957 |
|
Proceeds from issuance of Series E convertible preferred stock, net of issuance costs |
|
|
|
|
|
|
91,040 |
|
|
|
212,181 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by financing activities |
|
|
1,534,145 |
|
|
|
90,318 |
|
|
|
410,385 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of foreign exchange rates on cash and cash equivalents |
|
|
(19 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash, cash equivalents and restricted cash |
|
|
1,207,051 |
|
|
|
(112,633 |
) |
|
|
291,120 |
|
Cash, cash equivalents and restricted cash, beginning of period |
|
|
385,877 |
|
|
|
498,510 |
|
|
|
207,390 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash, cash equivalents and restricted cash, end of period |
|
$ |
1,592,928 |
|
|
$ |
385,877 |
|
|
$ |
498,510 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these consolidated financial statements.
F-7
Ginkgo Bioworks Holdings, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, |
|
|
|
2021 |
|
|
2020 |
|
|
2019 |
|
Supplemental disclosure of cash flow information: |
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid for interest |
|
$ |
2,370 |
|
|
$ |
2,572 |
|
|
$ |
2,348 |
|
Cash paid for income taxes |
|
$ |
61 |
|
|
$ |
|
|
|
$ |
31 |
|
Supplemental disclosure of non-cash investing and
financing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
Purchases of equipment through capital leases |
|
$ |
1,981 |
|
|
$ |
|
|
|
$ |
406 |
|
Purchases of property and equipment included in accounts payable and accrued expenses |
|
$ |
1,815 |
|
|
$ |
14,458 |
|
|
$ |
605 |
|
Equity received in related parties |
|
$ |
61,554 |
|
|
$ |
|
|
|
$ |
24,480 |
|
Purchase of non-marketable equity securities |
|
$ |
10,000 |
|
|
$ |
|
|
|
$ |
|
|
Issuance of common stock for a business acquisition |
|
$ |
15,087 |
|
|
$ |
|
|
|
$ |
|
|
Acquisition date fair value of contingent consideration |
|
$ |
8,760 |
|
|
$ |
|
|
|
$ |
|
|
Purchases and issuances of loans receivable |
|
$ |
|
|
|
$ |
375 |
|
|
$ |
2,744 |
|
Initial fair value of warrant liabilities |
|
$ |
194,453 |
|
|
$ |
|
|
|
$ |
|
|
Conversion of convertible promissory notes to preferred stock |
|
$ |
195 |
|
|
$ |
|
|
|
$ |
211,608 |
|
Series E convertible preferred stock issuance costs included in accrued expenses |
|
$ |
|
|
|
$ |
|
|
|
$ |
3,380 |
|
Lease financing obligation for
build-to-suit lease |
|
$ |
6,120 |
|
|
$ |
|
|
|
$ |
|
|
The following table provides a reconciliation of the cash, cash equivalents and restricted cash balances as of each of the
periods shown above:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, |
|
|
|
2021 |
|
|
2020 |
|
|
2019 |
|
Cash and cash equivalents |
|
$ |
1,550,004 |
|
|
$ |
380,801 |
|
|
$ |
495,287 |
|
Restricted cash |
|
|
42,924 |
|
|
|
5,076 |
|
|
|
3,223 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total cash, cash equivalents and restricted cash |
|
$ |
1,592,928 |
|
|
$ |
385,877 |
|
|
$ |
498,510 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these consolidated financial statements.
F-8
1. Organization and Basis of Presentation
Business
The mission of Ginkgo Bioworks Holdings,
Inc. (New Ginkgo, or the Company) is to make biology easier to engineer. The Company designs custom cells for customers across multiple markets. Since inception, the Company has devoted its efforts to improving its platform
for programming cells to enable customers to leverage biology to create impactful products across a range of industries. The Companys platform comprises (i) equipment, robotic automation, software, data pipelines and tools, and standard
operating procedures for high throughput genetic engineering, fermentation, and analytics (referred to collectively as the Foundry), (ii) a library of proprietary genetic assets and associated performance data (referred to collectively
as Codebase), and (iii) the Companys team of expert users, developers and operators of the Foundry and Codebase.
On
September 16, 2021, Soaring Eagle Acquisition Corp. (SRNG) consummated the merger transaction contemplated by the agreement and plan of merger, dated as of May 11, 2021, and amended on May 14, 2021 (the Merger
Agreement), by and among SRNG, SEAC Merger Sub Inc., a wholly owned subsidiary of SRNG (Merger Sub), and Ginkgo Bioworks, Inc. (Old Ginkgo), whereby Merger Sub merged with and into Old Ginkgo, the separate corporate
existence of Merger Sub ceased and Old Ginkgo survived the merger as a wholly owned subsidiary of SRNG (the Business Combination). In connection with the consummation of the Business Combination, SRNG changed its name to Ginkgo
Bioworks Holdings, Inc. and, among other transactions contemplated by the Merger Agreement, the existing equity holders of Old Ginkgo exchanged their equity interests of Old Ginkgo for equity interests of New Ginkgo.
As a result of the Business Combination, the shares and corresponding capital amounts and loss per share related to Old Ginkgos outstanding convertible
preferred stock and common stock prior to the Business Combination have been retroactively restated to reflect the Exchange Ratio established in the Merger Agreement. See Note 3 for additional information on the Business Combination.
Risks and Uncertainties
The Company is subject to
a number of risks including rapid technological change, regulatory change, technical feasibility, commercial viability, public perception of genetically modified organisms, uncertain market acceptance of products derived from engineered organisms,
alternative means of production, government funding of biosecurity initiatives, data and cybersecurity breaches, and dependence on key vendors and personnel.
Impact of the COVID-19 Pandemic
In March 2020, the World Health Organization declared the novel strain of coronavirus (COVID-19) outbreak a
global pandemic. Since then, extraordinary actions have been taken by authorities to contain and manage the outbreak and spread of COVID-19 around the world. Consistent with the actions taken by governmental
authorities, the Company has taken steps to protect its workforce and support the community efforts. From approximately March 2020 to June 2020, the Company operated at a reduced capacity. The Company also restricted
non-essential travel and allowed most of its non-laboratory workforce to work remotely. In June 2020, the Company resumed modified
on-site operations for its lab workers following the Center for Disease Control and Prevention guidance on mitigating and preventing the spread of COVID-19 in the
workplace. The COVID-19 pandemic caused some disruption in the Companys operations and the Company experienced partial suspensions and delays in servicing certain customer contracts. However, the Company
believes that the COVID-19 pandemic did not have a material adverse impact on its financial condition or results of operations. The Company continues to monitor and assess the effects of COVID-19 on its financial condition, results of operations and cash flows.
F-9
2. Summary of Significant Accounting Policies
Basis of Presentation
The accompanying
consolidated financial statements have been prepared in conformity with the rules and regulations of the Securities and Exchange Commission (SEC) and generally accepted accounting principles in the United States of America (U.S.
GAAP). Any reference in these notes to applicable guidance is meant to refer to the authoritative U.S. GAAP as found in the Accounting Standards Codification (ASC) and Accounting Standards Updates (ASU) of the Financial
Accounting Standards Board (FASB).
The Business Combination was accounted for as a reverse recapitalization, in accordance with U.S. GAAP
(the Reverse Recapitalization). Under this method of accounting, SRNG was treated as the acquired company for financial reporting purposes. Accordingly, for accounting purposes, the Reverse Recapitalization was treated as the
equivalent of Old Ginkgo issuing stock for the net assets of SRNG, accompanied by a recapitalization. The net assets of SRNG are stated at historical cost, with no goodwill or other intangible assets recorded. The determination of Old Ginkgo as the
accounting acquirer was primarily based on the fact that Old Ginkgos former shareholders currently have the largest voting interest in New Ginkgo, all of the management of New Ginkgo is comprised of Old Ginkgos former executive
management, Old Ginkgos former directors and individuals designated by, or representing, Old Ginkgo shareholders constitute a majority of the initial New Ginkgo Board, and the operations of Old Ginkgo comprise all of the ongoing operations of
New Ginkgo.
The consolidated assets, liabilities and results of operations prior to the Reverse Recapitalization are those of Old Ginkgo. The shares and
corresponding capital amounts and loss per share prior to the Reverse Recapitalization have been retroactively restated to reflect the Exchange Ratio established in the Merger Agreement.
Principles of Consolidation
The accompanying
consolidated financial statements include the accounts of the Company, its wholly owned subsidiaries, majority owned subsidiaries and variable interest entities if the Company is the primary beneficiary. All intercompany accounts and transactions
have been eliminated.
Reclassifications
Certain prior year amounts have been reclassified for consistency with the current year presentation. These reclassifications had no effect on the reported
results of operations.
Variable Interest Entities
The Company evaluates its variable interests in variable interest entities (VIE) and consolidates VIEs when the Company is the primary beneficiary.
The Company determines whether it is the primary beneficiary of each VIE based on its assessment of whether the Company possesses both (i) the power to direct the activities that most significantly affect the VIEs economic performance and
(ii) the obligation to absorb losses that could be significant to the VIE or the right to receive benefits that could be significant to the VIE. The Company reevaluates the accounting for its VIEs upon the occurrence of events that could change
the primary beneficiary conclusion. As of December 31, 2021 and 2020, the maximum risk of loss related to the Companys VIEs was limited to the carrying value of its investment in such entities.
Use of Estimates
The preparation of financial
statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the consolidated financial
statements, and the reported amounts of revenues and expenses during the reporting period. Significant estimates and assumptions used in preparation of these consolidated
F-10
financial statements include, among others, those related to the fair value of equity instruments and equity awards, revenue recognition, the fair value of loans receivable, the fair value of
certain investments, including equity method investments, the fair value of warrant liabilities, accrued expenses, and income taxes.
The Company bases
its estimates on historical experience and other market-specific or relevant assumptions that it believes to be reasonable under the circumstances. Reported amounts and disclosures reflect the overall economic conditions that management believes are
most likely to occur, and the anticipated measures management intends to take. Actual results could differ materially from those estimates. All revisions to accounting estimates are recognized in the period in which the estimates are revised.
Segment Information
The Company and the Chief
Operating Decision Maker (CODM), which is comprised of the Chief Executive Officer and the Chief Operating Officer, view the Companys operations and manage the business as a single operating segment. Strategic decisions are managed
centrally, and consistent with this decision-making process, the CODM uses consolidated financial information for purposes of evaluating performance, allocating resources, as well as forecasting future period financial results. The majority of the
Companys long-lived assets are held in the United States.
For the year ended December 31, 2021, two customers accounted for 17.0% and 10.5% of
the Companys total revenue. For the year ended December 31, 2020, two customers that are related parties accounted for 27.1% and 12.3% of the Companys total revenue. For the year ended December 31, 2019, three customers that
are related parties accounted for 35.0%, 17.3% and 11.5% of the Companys total revenue and one customer that was not a related party accounted for 13.5% of the Companys total revenue. No other customers exceeded more than 10% of the
Companys total revenue during the years ended December 31, 2021, 2020 and 2019.
Concentrations of Credit Risk
Financial instruments that potentially subject the Company to concentrations of credit risk primarily consist of cash and cash equivalents, restricted cash,
accounts receivable, and loans receivable. The Companys cash and cash equivalents and restricted cash are maintained in bank deposit accounts and money market funds that regularly exceed federally insured limits. The Company believes that it
is not exposed to significant credit risk as its deposits are held in financial institutions that management believes to be of high credit quality. The Companys accounts receivable primarily consists of amounts due under its Biosecurity
contracts; however, concentrations of credit risk associated with these contracts are limited because the customer base is largely made up of state government agencies. The Company has not experienced any material write-offs related to its accounts
receivable since inception.
Cash and Cash Equivalents
The Company considers all highly liquid investments with original maturities of three months or less at the date of purchase to be cash equivalents. Cash and
cash equivalents include cash held in banks and amounts held in money market accounts. The carrying value of the Companys cash and cash equivalents approximate fair value due to their short-term maturities.
Restricted Cash
Restricted cash primarily
includes cash balances collateralizing letters of credit associated with the Companys facility leases and a customer prepayment requiring segregation and restrictions in its use in accordance with the customer agreement. Restricted cash is
included in other non-current assets on the Consolidated Balance Sheets.
F-11
Accounts Receivable, net
Accounts receivable consists of credit extended to customers in the normal course of business and is reported at the estimated net realizable value. Accounts
receivable includes unbilled amounts that have been recognized in revenue but have not yet been invoiced based on timing differences and the terms of the underlying arrangements.
The Company maintains an allowance for doubtful accounts to provide for the estimated amounts of receivables that will not be collected. The allowance is
based upon an assessment of customer creditworthiness, historical payment experience, the age of outstanding receivables and collateral to the extent applicable. The Company re-evaluates such allowance on a
regular basis and adjusts the allowance as needed. Once a receivable is deemed to be uncollectible, such balance is charged against the allowance.
Inventory, net
Inventory mainly consists of
diagnostic testing kits purchased from suppliers, testing program supplies and the costs of assembling sample collection kits. Finished goods inventory for lateral flow assay (LFA) and polymerase chain reaction (PCR) tests
are valued at the lower of cost or net realizable value using the first-in first-out method. Raw materials, work in process and finished goods inventory for pooled tests
are valued at the lower of cost or net realizable value using the average cost method. Inventory has been reduced by an allowance for excess and obsolete inventory based on the specific identification method.
Loans Receivable
The Company has elected the fair
value option under ASC 825, Financial Instruments (ASC 825) to account for its loans receivable. The Company classifies the current portion of the loans receivable balance as a component of prepaid expenses and other current
assets on the Consolidated Balance Sheets based on the principal balance of the loan that matures within one year from the balance sheet date. The Company records loans receivable at fair value and recognizes changes in fair value as a component of
other (expense) income, net in the Consolidated Statements of Operations and Comprehensive Loss.
Property and Equipment,
net
Property and equipment are stated at cost less accumulated depreciation and amortization. Depreciation and
amortization are computed using the straight-line method over the estimated useful lives of the assets or the remaining lease term with respect to leasehold improvement assets. Estimated lives of property and equipment are as follows:
|
|
|
|
|
Estimated Useful Life |
Computer equipment and software |
|
2 to 5 years |
Furniture and fixtures |
|
7 years |
Lab equipment |
|
1 to 5 years |
Facilities |
|
15 to 30 years |
Vehicles |
|
5 years |
Leasehold improvements |
|
Shorter of useful life or remaining lease term |
Expenditures for maintenance and repairs are expensed as incurred. When assets are retired or otherwise disposed of, the
related cost and accumulated depreciation or amortization is removed from the accounts and any resulting gain or loss is reflected in other (expense) income, net in the Consolidated Statements of Operations and Comprehensive Loss.
Construction in progress relates to assets which have not been placed in service as of period end. Facilities relate to assets acquired under a build-to-suit lease arrangement described in Note 14.
F-12
Equity Method Investments
The Company utilizes the equity method to account for its investments in common stock, or in-substance common stock,
when it possesses the ability to exercise significant influence, but not control, over the operating and financial policies of the investee. The Company uses judgment when determining the level of influence over the operating and financial policies
of the investee considering key factors including, among others, the Companys ownership interest, representation on the board of directors, participation in policy-making decisions and material contractual arrangements and obligations. Income
and losses are allocated based upon relative ownership interest unless there is a substantive profit-sharing agreement in place.
For investments with a
substantive profit-sharing agreement, the Company utilizes the Hypothetical Liquidation at Book Value (HLBV) method to allocate income and losses from the equity method investment. Under the HLBV method, the Company utilizes the capital
account at the end of the period assuming the book value of the entity was liquidated or sold minus the same calculation at the beginning of the period. The difference is the share of earnings or losses attributable to the equity method investment.
Under the equity method, if there is a commitment for the Company to fund the losses of its equity method investees, the Company would continue to record
its share of losses resulting in a negative equity method investment, which would be presented as a liability on the Consolidated Balance Sheets. Commitments may be explicit and may include formal guarantees, legal obligations, or arrangements by
contract. Implicit commitments may arise from reputational expectations, intercompany relationships, statements by the Company of its intention to provide support, a history of providing financial support or other facts and circumstances. When the
Company has no commitment to fund the losses of its equity method investees, the carrying value of its equity method investments will not be reduced below zero. The Company had no commitment to fund additional losses of its equity method investments
during the years ended December 31, 2021, 2020 and 2019.
The Company evaluates its equity method investments for impairment whenever events or
circumstances indicate that the carrying value of the investment may not be recoverable. The Company considers the investees financial position, forecasts and economic outlook, and the estimated duration and extent of losses to determine
whether a recovery is anticipated. An impairment that is other-than-temporary is recognized in the period identified. The Company has not recognized an impairment loss related to its equity method investments for the years ended December 31,
2021, 2020 and 2019.
The Company may elect the fair value option for its equity method investments on an investment-by-investment basis. For all equity method investments accounted for under the fair value option, the Company carries the equity method investment at fair value and records all subsequent changes
in fair value as a component of loss on equity method investments in the Consolidated Statements of Operations and Comprehensive Loss.
Investments
Investments include warrants and marketable equity securities in publicly-traded companies and
non-marketable equity securities in privately-held companies, in each case, in which the Company does not possess the ability to exercise significant influence over the investee.
Investments in warrants and marketable equity securities of publicly-traded companies are measured at fair value with subsequent changes in fair value
recorded in loss on investments in the Consolidated Statements of Operations and Comprehensive Loss.
Investments in
non-marketable equity securities of privately-held companies that do not have readily determinable fair values are carried at cost, less any impairments, plus or minus changes resulting from observable price
changes in orderly transactions for the identical or a similar investment of the same issuer. Each period the Company assesses relevant transactions to identify observable price changes, and the Company
F-13
regularly monitors these investments to evaluate whether there is an indication of impairment. The Company evaluates whether an investments fair value is less than its carrying value using
an estimate of fair value, if such an estimate is available. For periods in which there is no estimate of fair value, the Company evaluates whether an event or change in circumstances has occurred that may have a significant adverse effect on the
value of the investment. The Company has not recognized an impairment loss, nor any upward or downward adjustments resulting from observable price changes in identical or similar investments, for the years ended December 31, 2021, 2020 and
2019.
Fair Value Measurements
The Company
categorizes its assets and liabilities measured at fair value in accordance with the authoritative accounting guidance that establishes a consistent framework for measuring fair value and requires disclosures for each major asset and liability
category measured at fair value on either a recurring or nonrecurring basis.
ASC 820, Fair Value Measurement (ASC 820), establishes a
fair value hierarchy for instruments measured at fair value that distinguishes between assumptions based on market data (observable inputs) and the Companys own assumptions (unobservable inputs). Observable inputs are inputs that market
participants would use in pricing the asset or liability based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Companys assumptions about the inputs that market participants
would use in pricing the asset or liability and are developed based on the best information available in the circumstances.
ASC 820 identifies fair value
as the exchange price, or exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As a basis for considering market participant assumptions in
fair value measurements, ASC 820 establishes a three-tier fair value hierarchy that distinguishes among the following:
|
|
|
Level 1- Quoted prices (unadjusted) in active markets for identical
assets or liabilities; |
|
|
|
Level 2- Inputs other than quoted prices included within
Level 1 that are either directly or indirectly observable; and |
|
|
|
Level 3- Unobservable inputs in which little or no market activity
exists, therefore requiring an entity to develop its own assumptions about the assumptions that market participants would use in pricing. |
To the extent that the valuation is based on models or inputs that are either less observable or unobservable in the market, the determination of fair value
requires more judgment. Accordingly, the degree of judgment exercised by the Company in determining fair value is greatest for instruments categorized in Level 3. A financial instruments level within the fair value hierarchy is based on
the lowest level of any input that is significant to the fair value measurement.
The Company valued its money market fund holdings, loans receivable,
marketable equity securities, warrant liabilities and contingent consideration at fair value on a recurring basis. The carrying amounts of the Companys other financial instruments, which include accounts receivable, certain prepaid expenses
and other current assets, accounts payable and accrued expenses and other current liabilities, approximate their fair values due to their short-term nature.
Impairment of Long-Lived Assets
The Company
reviews its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. Recoverability is measured by comparing the book values of the assets to the expected
future net undiscounted cash flows that the assets are expected to generate. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the book values of the assets exceed their fair value. The
Company has not recognized an impairment loss for the years ended December 31, 2021, 2020 and 2019.
F-14
Business Combinations
The Company accounts for business combinations using the acquisition method of accounting. The Company recognizes the identifiable assets acquired and
liabilities assumed at their acquisition-date fair values and recognizes any excess of the total consideration paid over the fair value of the identifiable net assets as goodwill. Any purchase price that is considered contingent consideration is
measured at its estimated fair value at the acquisition date and remeasured at each reporting period, with changes in estimated fair value recorded in general and administrative expenses on the Consolidated Statements of Operations and Comprehensive
Loss. Acquisition transaction costs are expensed when incurred. The operating results of an acquisition are included in the Companys consolidated financial statements as of the acquisition date.
Intangible Assets, net
Intangible assets, net
consist of certain definite-lived assets including patents, processes and know-how related to technology acquired through business combinations. The Company amortizes such intangible assets on a straight-line
basis over their estimated useful life.
The Company reviews intangible assets for impairment whenever events or changes in circumstances have occurred
which could indicate that the carrying value of the assets are not recoverable. Recoverability is measured by comparing the carrying value of the intangible assets to the future undiscounted cash flows expected to be generated by the asset. In
determining the expected future cash flows, the Company uses assumptions believed to be reasonable, but which are unpredictable and inherently uncertain. Actual future cash flows may differ from the estimates used in impairment testing. The Company
recognizes an impairment loss when and to the extent that the estimated fair value of an intangible asset is less than its carrying value. The Company has not recognized an impairment loss for the years ended December 31, 2021, 2020 and 2019.
Goodwill
Goodwill represents the excess of
acquisition cost over the fair market value of the net assets acquired. Goodwill is tested for impairment on an annual basis during the fourth quarter or whenever events or changes in circumstances indicate the carrying amount may not be
recoverable. The Company considers various qualitative factors that could indicate impairment such as macroeconomic conditions, industry and market environment, technological obsolescence, overall financial performance of the Company, cash flow from
operating activities and market capitalization. If the qualitative assessment indicates that it is more likely than not that the fair value of the reporting unit is less than its carrying amount, the Company performs a quantitative assessment to
compare the fair value of the reporting unit to its carrying value, including goodwill. If the carrying value of the reporting unit exceeds the fair value, an impairment loss is recognized. A combination of the income approach and the market
approach may be used to determine fair value of the reporting unit. The Company has not recognized an impairment loss for the years ended December 31, 2021, 2020 and 2019.
Deferred Rent
Deferred rent consists of the
difference between cash paid and rent expense recognized on a straight-line basis for the facilities that the Company occupies under operating leases. The Company classifies the current portion of the deferred rent balance as a component of accrued
expenses and other current liabilities on the Consolidated Balance Sheets.
Revenue Recognition
The Company accounts for revenue in accordance with ASC 606, Revenue from Contracts with Customers (ASC 606). Under ASC 606, the Company
recognizes revenue when the customer obtains control of the promised goods or services at an amount that reflects the consideration the Company expects to receive in
F-15
exchange for those goods or services. To determine revenue recognition for arrangements that are within the scope of ASC 606, the Company performs the following five steps: (i) identify the
contract(s) with a customer, (ii) identify the promises and distinct performance obligations in the contract, (iii) determine the transaction price, (iv) allocate the transaction price to the performance obligations in the contract,
and (v) recognize revenue when (or as) the Company satisfies the performance obligations.
Foundry Revenue
The Company generates license and service revenue through the execution of license and collaboration agreements whereby customers obtain license rights to the
Companys proprietary technology and intellectual property for use in the research, development and commercialization of engineered organisms, and derived products. Under these agreements, the Company typically provides research and development
services, which includes the provision of a license to the Companys intellectual property. Additionally, the customer obtains license rights to the output of the Companys services in order to commercialize the resulting output of such
services. Generally, the terms of these agreements provide that the Company receives some combination of: (1) Foundry usage fees in the form of (i) upfront payments upon consummation of the agreement or other fixed payments,
(ii) reimbursement for costs incurred for research and development services and (iii) milestone payments upon the achievement of specified technical criteria, plus (2) downstream value share payments in the form of (i) milestone
payments upon the achievement of specified commercial criteria, (ii) royalties on sales of products from or comprising engineered organisms arising from the collaboration or licensing agreement and (iii) royalties related to cost of goods
sold reductions realized by customers.
The Companys collaboration and licensing agreements often contain multiple promises, including
(i) licenses and assignments of intellectual property and materials and (ii) research and development services, and the Company determines whether each of the promises is a distinct performance obligation based on the nature of each
agreement. As the Company is generally performing research and development services that are highly integrated and interrelated to the licenses and assignments of intellectual property and materials, the promises are generally inseparable. As such,
the Company typically combines the research and development services, licenses, and assignments into a single performance obligation. However, for certain agreements, the Company only grants licenses or effects such transfers and assignments upon
the successful completion of the research and development services or delivery of a developed product. For these agreements, the Company typically considers (i) the research and development services and (ii) the licenses, transfers, and
assignments as distinct performance obligations, as each is transferred separately and has a separately identifiable benefit.
Options to acquire
additional goods and services are evaluated to determine if such options provide a material right to the counterparty that it would not have received without entering into the contract. If so, the option is accounted for as a separate performance
obligation. If not, the option is considered a marketing offer which is accounted for as a separate contract upon the counterpartys election.
At
contract inception, the Company determines the transaction price, including fixed consideration and any estimated amounts of variable consideration. Any upfront cash payment received upon consummation of the agreement is fixed and generally non-refundable. Variable consideration is subject to a constraint, and amounts are included in the transaction price to the extent that it is probable that a significant reversal in the amount of cumulative revenue
recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved. Variable consideration may include reimbursement for costs incurred for the Companys research and development efforts,
milestone payments upon the achievement of certain technical and commercial criteria, and royalties on sales of products from or comprising engineered organisms arising from the agreement. With respect to the research and development reimbursements
and milestone payments, the Company uses the most likely amount method to estimate variable consideration. With respect to agreements that include royalties on sales or other contingent payments based on sales, the Company applies the royalty
recognition constraint which requires a constraint until the royalty or value-sharing transaction occurs. Certain agreements contain payment in the form of equity or other non-cash consideration. Any non-cash consideration is measured at the fair value of the non-cash consideration at contract inception.
F-16
For agreements with promises that are combined into a single performance obligation, the entire transaction
price is allocated to the single performance obligation. For agreements with multiple performance obligations, the transaction price is allocated to the performance obligations using the relative standalone selling price methodology. For agreements
featuring variable consideration, the Company allocates variable consideration to one or more, but not all, performance obligations if certain conditions are met. Specifically, the Company assesses whether the variable consideration relates solely
to its efforts to satisfy the performance obligation and whether allocating such variable consideration entirely to the performance obligation is consistent with the overall allocation objective. If these conditions are not met, the Company
allocates the variable consideration based on the relative standalone selling price methodology. The key assumptions utilized in determining the standalone selling price for each performance obligation include development timelines, estimated
research and development costs, commercial markets, likelihood of exercise (in the case of options considered to be material rights), and probabilities of success.
For agreements where the licenses or assignments are considered separate performance obligations or represent the only performance obligation, the Company
recognizes revenue at the point in time that the Company effectively grants the license as the licenses or assignments represent functional intellectual property. For agreements where the licenses and the research and development services represent
a combined performance obligation, the Company recognizes revenue over the period of performance using a measure of progress based on costs incurred to date as compared to total estimated costs.
The Company evaluates its measure of progress to recognize revenue at each reporting period and, as necessary, adjusts the measure of progress and related
revenue recognition. The Companys measure of progress and revenue recognition involves significant judgment and assumptions, including, but not limited to, estimated costs and timelines to complete its performance obligations. The Company
evaluates contract modifications and amendments to determine whether any changes should be accounted for prospectively or on a cumulative catch-up basis. The Company utilizes the right to invoice practical
expedient when it has a right to consideration in an amount that corresponds directly with the value of the Companys performance to date.
Royalties
are recognized as revenue when sales have occurred as the Company applies the sales or usage-based royalties recognition constraint. The Company has determined the application of this exception is appropriate because the license granted in the
agreement is the predominant item to which the royalties relate.
As the Company receives upfront payments for technical services under certain of its
arrangements, the Company evaluates whether any significant financing components exist given the term over which the fees will be earned may exceed one year. Based on the nature of the Companys agreements, there are no significant financing
components as the purpose of the upfront payment is not to provide financing, but rather to secure technical services, exclusivity rights, and Foundry capacity, or the timing of transfer of those goods or services is at the discretion of the
customer.
Deferred revenue represents consideration received by the Company in excess of revenue recognized and primarily results from transactions where
the Company receives upfront payments and non-cash equity consideration. In instances where the Company has received consideration in advance for an undefined number of technical development plans
(TDPs) under its customer agreements, the Company records the advance payments as deferred revenue, net of current portion on the Consolidated Balance Sheets. Upon the execution of a specific TDP, the Company reclassifies the estimated
consideration to be earned under that TDP within the next twelve months as current deferred revenue. The Company also classifies unexercised material rights related to future TDPs as deferred revenue, net of current portion on the Consolidated
Balance Sheets. When a TDP is executed, and the material right is exercised, the amount allocated to the material right, which will be earned within the next twelve months, is reclassified to current deferred revenue. All other deferred revenue is
classified as current or non-current based on the timing of when the Company expects to earn the underlying revenue based upon the projected progress of activities under the TDP.
F-17
Collaboration Arrangements
For arrangements that do not represent contracts with a customer, the Company analyzes its collaboration transactions to assess whether they are within the
scope of ASC 808, Collaborative Arrangements (ASC 808), to determine whether such arrangements involve joint operating activities performed by parties that are both active participants in the activities and exposed to significant
risks and rewards that are dependent on the commercial success of such activities. To the extent the arrangement is within the scope of ASC 808, the Company assesses whether aspects of the arrangement between the Company and its collaboration
partner are within the scope of other accounting literature. If the Company concludes that some or all aspects of the arrangement represent a transaction with a customer, the Company accounts for those aspects of the arrangement within the scope of
ASC 606.
Biosecurity Revenue
In 2020, the Company
launched its commercial offering of COVID-19 testing products and services for businesses, academic institutions, and other organizations in which the Company generates product and service revenue. Beginning
in the first quarter of 2021, the Company launched its pooled testing initiative which focuses on providing end-to-end COVID-19
testing services to public health authorities. The Company currently offers pooled testing and reporting services for K-12 schools across the United States, at airports through its partnership with XpresCheck
and the CDC, as well as through other congregate settings such as its partnership with Eurofins. The Company sells COVID-19 test kits on a standalone basis or as part of an end-to-end testing service. The Company records product revenue from sales of LFA, PCR, and pooled test kits. The Company records service revenue from sales of its end-to-end COVID-19 testing services, which consist of multiple promised goods and services including sample collection kits, physician authorizations, onsite test
administration, outsourced laboratory PCR analysis, and access to results reported through the Companys proprietary web-based portal. The Company recognizes its product and service revenue using the
five-step model under ASC 606, Revenue from Contracts with Customers (ASC 606).
Product revenue is recognized when the test kits are shipped
and risk of loss is transferred to the carrier. The Companys test kits are generally not subject to a customer right of return except for product recalls under the rules and regulations of the U.S. Food and Drug Administration
(FDA). The Company has elected to include shipping and handling fees billed to customers as a component of Biosecurity revenue.
Service
revenue from the Companys end-to-end COVID-19 testing services is recognized upon completion of the tests and release of
the test results on the web-based portal. The Company has identified one performance obligation in its testing services contracts that represents a series of distinct goods or services that are substantially
the same and that have the same pattern of transfer to the customer, with each test as a distinct service within the series. As the price for the testing services is fixed under each customer contract, the Company has elected the practical expedient
to recognize revenue at the amount to which it has the right to invoice for services performed. The Companys testing services contracts are generally one year or less in length and contain fixed unit pricing. Under typical payment terms for
testing services, amounts are billed monthly in arrears for services performed or in advance based on contractual billing terms.
Cost of
Biosecurity Revenue
Cost of Biosecurity product revenue consists of costs associated with the sale of diagnostic and sample collection test kits
which includes costs paid to purchase test kits from third parties. Cost of Biosecurity service revenue consists of costs associated with the provision of the Companys
end-to-end COVID-19 testing services, which includes costs paid to provide sample collection kits, physician authorizations,
onsite test administration, outsourced laboratory PCR analysis, access to results reported through a web-based portal and reporting of results to public health authorities.
F-18
Research and Development Costs
Research and development costs are expensed as incurred. Research and development costs consist of direct and indirect internal costs related to specific
projects and initiatives, acquired intellectual property deemed to be in-process research and development, as well as fees paid to other entities that conduct certain research and development activities on the
Companys behalf.
Patent Costs
The
Company expenses all costs as incurred in connection with the filing, prosecution, maintenance, defense, and enforcement of patent applications, including direct application fees and related legal and consulting expenses. Patent costs are included
in general and administrative expenses within the Consolidated Statements of Operations and Comprehensive Loss.
Stock-Based Compensation
The Company measures and recognizes compensation expense for all stock-based awards based on estimated grant-date fair values recognized over the
requisite service period. For awards that vest solely based on a service condition, the Company recognizes compensation expense on a straight-line basis over the requisite service period. For awards that vest based on multiple conditions, the
Company recognizes compensation expense using the accelerated attribution method on a tranche- by-tranche basis over the requisite service period such that the amount of compensation expense recognized at each
reporting period is at least equal to the vested tranches at that date. For awards with a performance-based vesting condition, the Company recognizes stock-based compensation when achievement of the performance condition is deemed probable, and upon
achieving a performance condition that was not previously considered as probable, records a cumulative catch-up adjustment to reflect the portion of the grantees requisite service that has been provided
to date. For awards with market conditions, the compensation expense recognized over the requisite service period is not reversed if the market condition is not satisfied. The Company recognizes forfeitures as they occur.
The Company estimates the grant date fair value of stock options using the Black-Scholes option-pricing model. The Black-Scholes option-pricing model requires
the input of subjective assumptions, including fair value of common stock (for options granted prior to the Business Combination), expected term, expected volatility, risk-free interest rate and expected dividend yield. The expected term was
generally determined using the simplified method for standard options. The Company determined expected volatility using the historical volatility of the stock prices of similar publicly traded peer companies. The risk-free interest rate
was based on the yield available on U.S. Treasury zero-coupon issues similar in duration to the expected term of the stock options. The Company has not paid, and does not expect to pay, dividends in the
foreseeable future.
For awards with market conditions, the Company determines the grant date fair value using a Monte Carlo simulation model, which
incorporates various assumptions including expected stock price volatility, risk-free interest rates, expected term, and expected dividend yield. The Company determines expected volatility using the historical volatility of the stock prices of
similar publicly traded peer companies. The risk-free interest rate is based on the yield available on U.S. Treasury zero-coupon issues similar in duration to the expected term of the awards. The expected term
is equal to the contractual term and a dividend yield of zero is assumed.
For awards granted prior to the Business Combination, the Company utilized the
hybrid method to estimate the grant date fair value of its common stock underlying its stock-based awards. The hybrid method is a probability-weighted expected return method (PWERM) where the equity value in at least one scenario is
allocated using an option pricing method (OPM). Under the PWERM, the value of the common stock is estimated based on the probability-weighted present value of expected future investment returns considering various liquidity events and
the rights and privileges of each class of equity. Under the OPM, each class of stock is treated as a call option on the Companys equity value, with exercise prices based on the liquidation preferences of the convertible
F-19
preferred stock. The Black-Scholes model is used to price the call options which includes assumptions for the time to liquidity and volatility of equity value. A discount for lack of
marketability is then applied to the common stock value. There are significant judgments and estimates inherent in determining the fair value of the common stock. These judgments and estimates include factors, both subjective and objective,
including: (i) a discount for lack of marketability; (ii) external market data; (iii) historical activity by the Company in selling equity to outside investors; (iv) the Companys stage of development; (v) rights and
preferences of the Companys equity securities that rank senior to common stock; and (vi) the likelihood of various liquidity events, among others. Changes to these assumptions could result in different fair values of common stock.
Income Taxes
The Company accounts for income
taxes using the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in the consolidated financial statements or in the
Companys tax returns. Under this method, deferred tax assets and liabilities are determined based on differences between the financial statement carrying amounts and the tax bases of the assets and liabilities using the enacted tax rates in
effect in the years in which the differences are expected to reverse. A valuation allowance against deferred tax assets is recorded if, based on the weight of the available evidence, it is more likely than not that some or all of the deferred tax
assets will not be realized. Potential for recovery of deferred tax assets is evaluated by considering several factors, including estimating the future taxable profits expected, estimating future reversals of existing taxable temporary differences,
considering taxable profits in carryback periods, and considering prudent and feasible tax planning strategies.
The Company accounts for uncertain tax
positions using a more-likely-than-not threshold for recognizing and resolving uncertain tax positions. The evaluation of uncertain tax positions is based on factors including, but not limited to, changes in
the law, the measurement of tax positions taken or expected to be taken in tax returns, the effective settlement of matters subject to audit, new audit activity, and changes in facts or circumstances related to a tax position. The Company evaluates
uncertain tax positions on an annual basis and adjusts the level of the liability to reflect any subsequent changes in the relevant facts surrounding the uncertain positions. The Company accounts for interest and penalties related to uncertain tax
positions as part of its provision for income taxes. As of December 31, 2021 and 2020, the Company did not have any uncertain tax positions and no accrued interest or penalties related to uncertain tax positions. The Company does not expect a
material change in unrecognized tax benefits in the next twelve months.
Warrant Liabilities
The Company classifies Private Placement Warrants and Public Warrants (both defined and discussed in Note 15) as liabilities. At the end of each reporting
period, changes in fair value during the period are recognized as change in fair value of warrant liabilities on the Consolidated Statements of Operations and Comprehensive Loss. The Company will continue to adjust the warrant liability for changes
in the fair value until the earlier of (a) the exercise or expiration of the warrants or (b) the redemption of the warrants, at which time the warrants will be reclassified to additional paid-in
capital.
Foreign Currency Translation
The
Companys reporting currency is the U.S. dollar while the functional currency of the Companys non-U.S. subsidiary, Ginkgo Bioworks Netherlands, BV, is the Euro. The financial statements of the non-U.S. subsidiary are translated into U.S. dollars in accordance with ASC 830, Foreign Currency Matters, using period-end exchange rates for assets and liabilities,
average exchange rates in the period for revenues and expenses and historical exchange rates for equity. Foreign currency translation adjustments are recorded as a component of other comprehensive income (loss) on the Consolidated Statements of
Operations and Comprehensive Loss and accumulated in other comprehensive income (loss) in stockholders equity.
F-20
Comprehensive Loss
Comprehensive loss is defined as the change in equity during a period from transactions and other events and circumstances from
non-owner sources. Other comprehensive loss consists of foreign currency translation adjustments.
Net Loss
per Share
The Company follows the two-class method when computing net loss per share attributable to
Ginkgo Bioworks Holdings, Inc. common stockholders as the Company has issued shares that meet the definition of participating securities. The two-class method determines net loss per share for each class of
common and participating securities according to dividends declared or accumulated and participation rights in undistributed earnings. The two-class method requires earnings for the period to be allocated
between common and participating securities based upon their respective rights to share in the earnings as if all earnings for the period had been distributed. During periods of loss, there is no allocation required under the two-class method since the participating securities do not have a contractual obligation to fund the losses of the Company.
Basic net loss per share is computed by dividing the net loss attributable to Ginkgo Bioworks Holdings, Inc. common stockholders by the weighted average
number of common shares outstanding for the period. Diluted net loss per share is equal to the net loss attributable to Ginkgo Bioworks Holdings, Inc. common stockholders less the gain (if any) on the change in fair value of warrant liabilities,
divided by the weighted average number of common shares outstanding for the period, including the effect of potentially dilutive common shares. For purposes of this calculation, outstanding options to purchase shares of common stock, unvested RSAs,
unvested RSUs, warrants to purchase shares of common stock and contingently issued earnout shares are considered potentially dilutive common shares.
Recent Accounting Pronouncements
The Company is
an emerging growth company as defined in the Jumpstart Our Business Startups Act of 2012, under which it may take advantage of an extended transition period for complying with new or revised accounting standards until such time as those standards
apply to private companies. The Company has elected not to opt out of this extended transition period and, as a result, these consolidated financial statements may not be comparable to companies that comply with new or revised accounting
pronouncements as of public company effective dates.
Recently Adopted Accounting Pronouncements
In October 2018, the FASB issued ASU 2018-17, Consolidation (Topic 810): Targeted Improvements to Related Party
Guidance for Variable Interest Entities (ASU 2018-17). The provisions of ASU 2018-17 modify the guidance under ASC 810 related to the evaluation of
indirect interests held through related parties under common control when determining whether fees paid to decision makers and service providers are variable interests. Indirect interests held through related parties that are under common control
are no longer considered to be the equivalent of direct interests in their entirety and instead should be considered on a proportional basis. This guidance more closely aligns with accounting of how indirect interests held through related parties
under common control are considered for determining whether a reporting entity must consolidate a variable interest entity. The Company adopted ASU 2018-17 on January 1, 2021 and the adoption did not have
a material impact on the Companys consolidated financial statements and related disclosures.
Recently Issued Accounting Pronouncements
In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842): Amendments to the FASB Accounting Standards
Codification (ASC 842), which has been clarified and amended by various subsequent updates. ASC 842 requires lessees to record a right-of-use
(ROU) asset and a lease liability on the balance sheet for all leases with a lease term of more than 12 months. ASC 842 also requires additional disclosures about the amount, timing
F-21
and uncertainty of cash flows arising from leases. The Company is required to adopt ASC 842 as of January 1, 2022. In connection with the adoption of ASC 842, the Company will apply the
modified retrospective approach and recognize a cumulative-effect adjustment to the opening balance of accumulated deficit in the period of adoption. The Company has elected to apply the package of practical expedients that allows for not
reassessing (i) whether any expired or existing contracts are or contain leases, (ii) the lease classification of any expired or existing leases, and (iii) the accounting for initial direct costs for any existing leases. The Company
has also elected, by class of underlying asset, not to apply the recognition requirements of ASC 842 to short-term leases. While the Company continues to assess the various impacts of adoption, the most significant effects will primarily relate to
(1) the recognition of an ROU asset and lease liability on the balance sheet for the Companys existing operating leases; and (2) providing significant new disclosures about leasing activities. The Company does not anticipate that the
adoption of ASC 842 will have a material impact on its results of operations and cash flows.
In June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, and subsequently issued multiple amendments to the standard (collectively, ASU 2016-13). The provisions of ASU 2016-13 modify the impairment model to utilize an expected loss methodology in place of the currently used incurred loss methodology and
require a consideration of a broader range of reasonable and supportable information to inform credit loss estimates. The guidance is effective for the Company on January 1, 2023, with early adoption permitted. The Company is currently
evaluating the impact that the implementation of this standard will have on its consolidated financial statements and related disclosures.
In December
2019, the FASB issued ASU 2019-12, Simplifying the Accounting for Income Taxes (ASU 2019-12). The provisions of ASU
2019-12 eliminate certain exceptions related to the approach for intraperiod tax allocation and deferred tax liabilities for outside basis differences and clarify when a
step-up in the tax basis of goodwill should be considered part of a business combination or a separate transaction. It also clarifies and simplifies other aspects of the accounting for income taxes. The
guidance is effective for the Company on January 1, 2022. The adoption of ASU 2019-12 is not expected to have a material impact on the Companys consolidated financial statements and related
disclosures.
In January 2020, the FASB issued ASU 2020-01, InvestmentsEquity Securities (Topic 321),
InvestmentsEquity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815)Clarifying the Interactions between Topic 321, Topic 323, and Topic 815 (a consensus of the FASB Emerging Issues Task Force)
(ASU 2020-01). ASU 2020-01 addresses accounting for the transition into and out of the equity method and provides clarification of the interaction of
rules for equity securities, the equity method of accounting, and forward contracts and purchase options on certain types of securities. The guidance is effective for the Company on January 1, 2022. The adoption of ASU 2020-01 is not expected to have a material impact on the Companys consolidated financial statements and related disclosures.
In August 2020, the FASB issued ASU 2020-06, DebtDebt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging- Contracts in Entitys Own Equity (Subtopic 815-40) (ASU 2020-06) which
simplifies the accounting for convertible instruments by reducing the number of accounting models and the number of embedded conversion features that could be recognized separately from the host contract. Additionally, ASU 2020-06 removes certain settlement conditions that are required for contracts in an entitys own equity to qualify for the derivatives scope exception. The guidance also modifies diluted earnings per share
calculations by requiring entities to use the if-converted method for convertible instruments and to assume share settlement when an instrument can be settled in cash or shares. The guidance is effective for
the Company on January 1, 2024 with early adoption permitted. The Company is currently evaluating the impact that the implementation of this standard will have on its consolidated financial statements and related disclosures.
In November 2021, the FASB issued ASU 2021-10, Government Assistance (Topic 832): Disclosures by Business Entities
about Government Assistance (ASU 2021-10). This update requires annual disclosures about
F-22
transactions with a government that are accounted for by applying a grant or contribution accounting model by analogy including: (1) the types of transactions; (2) the accounting for
the transactions; and (3) the effect of the transactions on a business entitys financial statements. ASU 2021-10 is effective for the Company on January 1, 2022. The adoption of ASU 2021-10 is not expected to have a material impact on the Companys consolidated financial statements and related disclosures.
3. Business Combination
On September 16, 2021 (the
Closing Date), the Company and SRNG completed the merger transaction contemplated by the Merger Agreement (the Closing), with Old Ginkgo surviving the merger as a wholly owned subsidiary of SRNG.
Pursuant to the Merger Agreement, SRNG acquired all of the outstanding equity interests of Old Ginkgo for approximately $15.8 billion in aggregate
consideration in the form of common stock of New Ginkgo valued at $10 per share (the Base Equity Consideration). The Base Equity Consideration was allocated among Old Ginkgo equity holders based on an exchange ratio of 49.080452
(Exchange Ratio). Accordingly, upon the closing of the Business Combination, all shares of Old Ginkgo Class A common stock and Old Ginkgo Class B common stock issued and outstanding immediately prior to the Business Combination
converted into New Ginkgo Class A common stock and New Ginkgo Class B common stock, respectively, each with a par value of $0.0001 per share, based on the Exchange Ratio. All equity awards under Old Ginkgos stock incentive plans were
assumed by the Company and converted into comparable equity awards that are settled or exercisable for shares of the Companys common stock. As a result, (i) each outstanding stock option to acquire Old Ginkgo common stock was converted
into an option to purchase approximately 49.080452 shares of New Ginkgo common stock, (ii) each outstanding share of restricted common stock was converted into approximately 49.080452 shares of restricted common stock of New Ginkgo and
(iii) each outstanding award of restricted stock units was assumed and converted into a restricted stock unit having the same terms and conditions as applied to the Old Ginkgo restricted stock unit so converted but relating to approximately
49.080452 shares of common stock of New Ginkgo.
In addition to the Base Equity Consideration, the equity holders of Old Ginkgo received approximately
188.7 million shares of New Ginkgo common stock (the Earnout Consideration), which are subject to forfeiture to the extent that the vesting conditions described below are not satisfied on or before the fifth anniversary of the
Closing (the Earnout Period). If at any point during the trading hours of a trading day, for any 20 trading days within any period of 30 consecutive trading days during the Earnout Period, the trading price per share of the
Companys Class A common stock is greater than or equal to:
|
|
|
$12.50, then 25% of the Earnout Consideration will immediately vest; |
|
|
|
$15.00, then an additional 25% of the Earnout Consideration will immediately vest; |
|
|
|
$17.50, then an additional 25% of the Earnout Consideration will immediately vest; and |
|
|
|
$20.00, then the remaining 25% of the Earnout Consideration will immediately vest. |
The Company evaluated the earnout shares and concluded that they qualify for the scope exception from derivative accounting in ASC 815-10-15-74 and meet the criteria for equity classification under ASC 815-40. The Company
determined that the earnout shares underlying rollover equity awards (i.e., restricted stock awards, restricted stock units and options) granted under the Companys stock incentive plans (together the Rollover Equity Awards) that
are unvested as of the Closing Date are within the scope of ASC 718 (see Note 18). The remaining earnout shares issued to holders of Old Ginkgo common stock and those earnout shares underlying vested Rollover Equity Awards were initially measured at
fair value at Closing and recorded within additional paid-in-capital (APIC) and had no net impact on APIC. Since those earnout shares are equity-classified,
there is no remeasurement unless reclassification is required. Upon meeting an earnout target, the earnout shares delivered to the equity holders are recorded in equity as shares outstanding with the appropriate allocation to par
F-23
value of common stock and APIC. The first earnout target of $12.50 was met on November 15, 2021 and, as a result, approximately 38.8 million earnout shares became vested and
outstanding.
In connection with the entry into the Merger Agreement, Eagle Equity Partners III, LLC, a Delaware limited liability
company (the Sponsor), forfeited 11,534,052 of its shares of New Ginkgo Class A common stock and an additional 16,737,183 of its shares of New Ginkgo Class A common stock (the Sponsor Earnout Shares) became subject
to vesting and forfeiture conditions identical to those applicable to the Earnout Consideration issued to Old Ginkgo equity holders. Similar to the Earnout Consideration, the Sponsor Earnout Shares were accounted for as equity classified instruments
and were included as merger consideration and recorded in additional paid-in capital. The Sponsor Earnout Shares are considered legally issued and outstanding shares of common stock subject to restrictions on
transfer and do not participate in the earnings or losses of the Company prior to vesting.
The Business Combination is accounted for as a reverse
recapitalization, in accordance with U.S. GAAP. Under this method of accounting, SRNG was treated as the acquired company for financial reporting purposes. Accordingly, the Business Combination was treated as the equivalent of Old Ginkgo
issuing stock for the net assets of SRNG, accompanied by a recapitalization. The net assets of SRNG are stated at historical cost, with no goodwill or other intangible assets recorded.
PIPE Investment
On May 11, 2021,
concurrently with the execution of the Merger Agreement, SRNG entered into subscription agreements with certain accredited investors (the PIPE Investors). In connection with the consummation of the Business Combination on
September 16, 2021, the PIPE Investors collectively consummated investments for 76,000,000 shares of the Companys Class A common stock at a price of $10.00 per share (the PIPE Shares) for an aggregate amount of
$760.0 million (the PIPE Investment).
Summary of Net Proceeds
The following table summarizes the elements of the net proceeds from the Business Combination as of December 31, 2021 (in thousands):
|
|
|
|
|
CashSRNG Trust and cash (net of redemptions) |
|
$ |
857,747 |
|
CashPIPE Investment |
|
|
760,000 |
|
Less: Payment of underwriter fees and other offering costs |
|
|
(108,118 |
) |
|
|
|
|
|
Net proceeds from the Business Combination |
|
$ |
1,509,629 |
|
|
|
|
|
|
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Summary of Shares Issued
The following table summarizes the number of shares of common stock outstanding immediately following the consummation of the Business Combination:
|
|
|
|
|
SRNG shares outstanding prior to the Business Combination |
|
|
215,625,000 |
|
Less: redemption of SRNG shares prior to the Business Combination |
|
|
(86,725,312 |
) |
Less: SRNG shares forfeited |
|
|
(11,534,052 |
) |
|
|
|
|
|
Common stock of SRNG (1) |
|
|
117,365,636 |
|
Shares issued pursuant to the PIPE Investment |
|
|
76,000,000 |
|
|
|
|
|
|
Business Combination and PIPE Investment shares |
|
|
193,365,636 |
|
Conversion of Old Ginkgo Series B preferred stock to common stock |
|
|
203,346,152 |
|
Conversion of Old Ginkgo Series C preferred stock to common stock |
|
|
228,641,430 |
|
Conversion of Old Ginkgo Series D preferred stock to common stock |
|
|
302,464,716 |
|
Conversion of Old Ginkgo Series E preferred stock to common stock |
|
|
170,227,108 |
|
Conversion of Old Ginkgo common stock
(2) |
|
|
387,016,194 |
|
|
|
|
|
|
Total shares of New Ginkgo common stock outstanding immediately following the Business
Combination |
|
|
1,485,061,236 |
|
|
|
|
|
|
(1) |
Includes 16,737,183 shares of Class A common stock, the Sponsor Earnout Shares, that are subject to
forfeiture if certain earnout conditions are not met, as the shares are legally outstanding as of the Closing of the Business Combination. |
(2) |
Excludes 283,396,094 shares of Class A and Class B common stock underlying rollover equity
instruments (i.e., restricted stock units and stock options) and 259,440 shares of Class A and Class B common stock underlying unvested restricted stock awards. |
4. Acquisition
On July 1, 2021, the Company
completed an acquisition of 100% of the equity of Dutch DNA Biotech B.V. (Dutch DNA), a company based in the Netherlands with a proprietary platform technology focused on the development of fungal strains and fermentation processes for
the production of proteins and organic acids. Dutch DNAs significant expertise and fungal strain assets for the large-scale production of proteins is expected to add a valuable set of tools to the Companys Codebase and broader platform
for cell programming.
The following table summarizes the preliminary acquisition date fair value of the consideration transferred for Dutch DNA (in
thousands):
|
|
|
|
|
Cash |
|
$ |
11,451 |
|
Fair value of Class A common stock |
|
|
15,087 |
|
Contingent consideration |
|
|
8,760 |
|
|
|
|
|
|
Total Dutch DNA consideration |
|
$ |
35,298 |
|
|
|
|
|
|
The fair value of the Class A common stock issued as part of the consideration paid for Dutch DNA was determined using
the then-most recently available third-party valuation of the Companys common stock. The contingent consideration arrangement requires the Company to pay up to a maximum of $20.0 million to the seller upon the achievement of certain
technical and commercial milestones by Dutch DNA pursuant to a Technical Development Agreement executed between the Company and Dutch DNA prior to the close of the acquisition. Refer to Note 5 for further discussion of the fair value of the
contingent consideration liability.
The acquisition was accounted for in accordance with ASC 805, Business Combinations. Dutch DNAs results
of operations have been included in the Consolidated Statements of Operations and Comprehensive Loss since the
F-25
date of acquisition, which were not material. The Dutch DNA acquisition does not represent a material business combination, and therefore pro forma financial information is not provided. The
Company allocated the purchase price to the tangible and identifiable intangible assets acquired and liabilities assumed based on their respective estimated fair values on the acquisition date. The fair value of the intangible assets was determined
using the replacement cost method which estimates the cost the Company would incur in rebuilding the technology. The excess purchase price consideration was recorded as goodwill and is made up of the future potential value of the acquired
intellectual property and the assembled workforce. The Company incurred $0.6 million of acquisition-related costs which were included in general and administrative expenses in the Consolidated Statements of Operations and Comprehensive Loss.
The following table summarizes the acquisition date fair values of assets acquired and liabilities assumed as of the acquisition date (in thousands):
|
|
|
|
|
Cash |
|
$ |
387 |
|
Accounts receivable |
|
|
149 |
|
Prepaid expenses and other current assets |
|
|
170 |
|
Property, plant and equipment |
|
|
234 |
|
Intangibles (1) |
|
|
20,500 |
|
Goodwill (2) |
|
|
15,177 |
|
Accounts payable |
|
|
(194 |
) |
Accrued expenses and other current liabilities |
|
|
(137 |
) |
Other non-current liabilities |
|
|
(988 |
) |
|
|
|
|
|
Net assets acquired |
|
$ |
35,298 |
|
|
|
|
|
|
(1) |
Estimated useful life of 15 years. |
(2) |
Non-deductible for tax purposes. |
The purchase price allocation presented above has been finalized as of the fourth quarter of 2021 and includes a $5.0 million measurement period
adjustment related to deferred income taxes. As a result, goodwill associated with Dutch DNA was $19.5 million as of December 31, 2021, including currency translation adjustments.
F-26
5. Fair Value Measurements
No transfers between levels have occurred during the periods presented. The following tables present information about the Companys financial assets and
liabilities measured at fair value on a recurring basis (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2021 |
|
|
|
Total |
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Money market funds, included in cash and cash equivalents |
|
$ |
1,482,063 |
|
|
$ |
1,482,063 |
|
|
$ |
|
|
|
$ |
|
|
Synlogic, Inc. common stock, included in investments |
|
|
15,345 |
|
|
|
15,345 |
|
|
|
|
|
|
|
|
|
Synlogic, Inc. warrants, included in investments |
|
|
6,166 |
|
|
|
|
|
|
|
6,166 |
|
|
|
|
|
Cronos Group Inc. common stock, included in investments |
|
|
10,331 |
|
|
|
|
|
|
|
10,331 |
|
|
|
|
|
Loans receivable, included in prepaid expenses and other current assets |
|
|
11,559 |
|
|
|
|
|
|
|
|
|
|
|
11,559 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
1,525,464 |
|
|
$ |
1,497,408 |
|
|
$ |
16,497 |
|
|
$ |
11,559 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Public Warrants, included in warrant liabilities |
|
$ |
77,280 |
|
|
$ |
77,280 |
|
|
$ |
|
|
|
$ |
|
|
Private Placement Warrants, included in warrant liabilities |
|
|
58,558 |
|
|
|
|
|
|
|
|
|
|
|
58,558 |
|
Contingent consideration, included in other non-current
liabilities |
|
|
8,467 |
|
|
|
|
|
|
|
|
|
|
|
8,467 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities |
|
$ |
144,305 |
|
|
$ |
77,280 |
|
|
$ |
|
|
|
$ |
67,025 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2020 |
|
|
|
Total |
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Money market funds, included in cash and cash equivalents |
|
$ |
372,537 |
|
|
$ |
372,537 |
|
|
$ |
|
|
|
$ |
|
|
Synlogic, Inc. common stock, included in investments |
|
|
13,696 |
|
|
|
13,696 |
|
|
|
|
|
|
|
|
|
Synlogic, Inc. warrants, included in investments |
|
|
5,504 |
|
|
|
|
|
|
|
5,504 |
|
|
|
|
|
Loans receivable, included in prepaid expenses and other current assets |
|
|
2,268 |
|
|
|
|
|
|
|
|
|
|
|
2,268 |
|
Loans receivable, net of current portion |
|
|
13,298 |
|
|
|
|
|
|
|
|
|
|
|
13,298 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
407,303 |
|
|
$ |
386,233 |
|
|
$ |
5,504 |
|
|
$ |
15,566 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The fair value of the warrants to purchase Synlogic common stock (Note 10) is calculated as the value of the underlying common
stock, less the related unpaid exercise price and represents a Level 2 measurement within the fair value hierarchy.
During the year ended
December 31, 2021, the Company received 2,934,980 shares of Cronos Group Inc. (Cronos) common stock as consideration for the achievement of certain target productivity milestones related to two cultured cannabinoids under the
collaboration agreement with Cronos to produce eight cultured cannabinoids. The fair value of the Cronos common stock is calculated as the quoted price of the common stock adjusted for short-term marketability restrictions. Accordingly, these shares
are classified as Level 2 financial instruments.
F-27
Loans Receivable
As of December 31, 2021 and 2020, loans receivable primarily consisted of a revolving promissory note with Glycosyn, LLC (Glycosyn) which is
secured by the assets of Glycosyn, including certain intellectual property such as patents and copyrights held by Glycosyn (Glycosyn Promissory Note) and a series of convertible notes with Access Bio, Inc. (Access Bio Convertible
Notes). The fair value of the Glycosyn Promissory Note and Access Bio Convertible Notes were determined based on significant inputs not observable in the market, which represent a Level 3 measurement within the fair value hierarchy.
Significant changes in these unobservable inputs in isolation could have resulted in a significantly lower or higher fair value measurement. Refer to Note 6 for additional details on loans receivable.
As of December 31, 2021, the Company estimated the fair value of the Glycosyn Promissory Note using a probability-weighted discounted cash flow model
under a dissolution scenario with partial recovery and no recovery as Glycosyn was in default on that date (see Note 6). The significant assumptions used in valuing the Glycosyn Promissory Note were scenario probabilities of 50%, a recovery rate on
first lien debt of 63% and a discount rate of 15%. As of December 31, 2020, the Company used a probability-weighted discounted cash flow model under four settlement scenarios: (i) a qualified financing which resulted in a 20% conversion
discount, (ii) repayment upon change in control, (iii) a dissolution scenario and (iv) repayment in accordance with the terms of the note. The significant assumptions used in valuing the Glycosyn Promissory Note included the expected
timing and probability of each scenario, ranging from 1 to 2.5 years and from 10% to 40%, respectively, and a discount rate of 15%. The weighted average timing of the scenarios weighted based on the probability of each scenario was 1.2 years as of
December 31, 2020.
As of December 31, 2021, the Company estimated the fair value of the Access Bio Convertible Notes using a binomial lattice
model using the following key assumptions: 85.5% equity volatility, 0.88 years to maturity, 0.3% risk-free rate, 30.9% risk-adjusted rate and 0% dividend yield. As of December 31, 2020, the Company estimated the fair value of the Access Bio
Convertible Notes using a Monte-Carlo simulation model as the conversion price of the notes had not yet reset to the minimum reset price. Under the Monte-Carlo simulation model, the future stock price of Access Bio, Inc. (Access Bio) was
simulated over the term of the note to assess the value of the settlement features which included conversion into stock at a discount determined under a reset provision tied to the stock price of Access Bio and redemption at maturity. The key inputs
into the Monte Carlo simulation model were a discount rate of 32.8% and volatility of 88.5%.
The following table provides a reconciliation of loans
receivable measured at fair value using Level 3 significant unobservable inputs (in thousands):
|
|
|
|
|
|
|
|
|
|
|
2021 |
|
|
2020 |
|
Balance at January 1 |
|
$ |
15,566 |
|
|
$ |
4,830 |
|
Purchases and issuances |
|
|
|
|
|
|
10,475 |
|
Proceeds from loans receivable |
|
|
(304 |
) |
|
|
(800 |
) |
Conversion of promissory notes |
|
|
(195 |
) |
|
|
|
|
Change in fair value |
|
|
(3,508 |
) |
|
|
1,061 |
|
|
|
|
|
|
|
|
|
|
Balance at December 31 |
|
$ |
11,559 |
|
|
$ |
15,566 |
|
|
|
|
|
|
|
|
|
|
Warrant Liabilities
The fair value of the Private Placement Warrants have been estimated using a Monte Carlo simulation model as of the date the Company assumed the warrants from
SRNG and subsequently as of the balance sheet date. The fair value of the Public Warrants have been measured based on the quoted price of such warrants on the NYSE. The estimated fair value of the Private Placement Warrants is determined using
Level 3 inputs. Inherent in a Monte Carlo simulation are assumptions related to expected stock-price volatility, expected life, risk-free interest rate and dividend yield. Material increases (or decreases) in any of those inputs may result in a
significantly
F-28
higher (or lower) fair value measurement. The Company estimates the volatility of its Private Placement Warrants based on implied volatility from the Companys Public Warrants and from
historical volatility of select peer companys common stock that matches the expected remaining life of the warrants. The risk-free interest rate is based on the U.S. Treasury zero-coupon yield curve for
a maturity similar to the expected remaining life of the warrants. The expected life of the warrants is assumed to be equivalent to their remaining contractual term. The dividend yield is based on the historical rate, which the Company anticipates
remaining at zero. Refer to Note 15 for additional details on the Companys warrant liabilities.
The following table provides quantitative
information regarding Level 3 inputs used in the recurring valuation of the Private Placement Warrants as of their measurement dates:
|
|
|
|
|
|
|
|
|
|
|
September 16, 2021 (Closing) |
|
|
December 31, 2021 |
|
Exercise price |
|
$ |
11.50 |
|
|
$ |
11.50 |
|
Stock price |
|
$ |
11.42 |
|
|
$ |
8.31 |
|
Volatility |
|
|
53.1 |
% |
|
|
58.7 |
% |
Term (in years) |
|
|
5.00 |
|
|
|
4.71 |
|
Risk-free interest rate |
|
|
0.84 |
% |
|
|
1.25 |
% |
The following table provides a reconciliation of the Private Placement Warrants measured at fair value using Level 3
significant unobservable inputs (in thousands):
|
|
|
|
|
|
|
2021 |
|
Balance at January 1 |
|
$ |
|
|
Additions pursuant to the Business Combination |
|
|
90,263 |
|
Change in fair value |
|
|
(31,705 |
) |
|
|
|
|
|
Balance at December 31 |
|
$ |
58,558 |
|
|
|
|
|
|
Contingent Consideration
In connection with the acquisition of Dutch DNA, the Company recorded contingent consideration liabilities for the estimated fair value of earnout payments up
to a maximum of $20.0 million payable to the seller upon the achievement of certain technical and commercial milestones by Dutch DNA pursuant to a Technical Development Agreement executed between the Company and Dutch DNA prior to the close of
the acquisition. The contingent consideration liabilities are measured at fair value and are based on significant inputs not observable in the marketplace, which represent a Level 3 measurement. Material increases (or decreases) in any of those
inputs may result in a significantly higher (or lower) fair value measurement. The fair value of the earnouts was estimated using a combination of probability weighted present value and discounted cash flow models. The key valuation inputs used as
of December 31, 2021 and the acquisition date were managements estimate of the probability of achieving each milestone ranging from 10% to 80% and projections related to Dutch DNAs after-tax
revenues for each of the calendar years through 2046. The earnout payments were discounted at rates ranging from 9% to 11.31% as of December 31, 2021 and from 6.93% to 9% as of the acquisition date.
The following table provides a reconciliation of the contingent consideration measured at fair value using Level 3 significant unobservable inputs (in
thousands):
|
|
|
|
|
|
|
2021 |
|
Balance at January 1 |
|
$ |
|
|
Acquisition |
|
|
8,760 |
|
Change in fair value |
|
|
(293 |
) |
|
|
|
|
|
Balance at December 31 |
|
$ |
8,467 |
|
|
|
|
|
|
F-29
6. Loans Receivable
Glycosyn Promissory Note
In October 2018, the
Company provided a revolving promissory note to Glycosyn which has been amended several times since inception. The Glycosyn Promissory Note is convertible at a discount, at the Companys election, into equity securities of Glycosyn upon
Glycosyns first issuance of equity securities, other than an underwritten public offering, from which Glycosyn receives gross proceeds of at least $10.0 million. In addition, Glycosyn is obligated to immediately repay the outstanding
balance of the loan, plus accrued interest, upon a change in control event. In January 2021, the existing terms of the Glycosyn Promissory Note were amended to add an additional $0.2 million to the principal balance, extend the number of
interest-only payments through June 30, 2021 and to increase the interest rate from 7.5% to 12.5% in the event of default. In July 2021, the parties entered into an additional amendment to extend the number of interest-only payments through the
end of 2021 and to accelerate the maturity date to December 31, 2021. As of December 31, 2021, the Glycosyn Promissory Note was in default with an unpaid principal balance of $5.4 million and a fair value of $1.8 million, which
is recorded in prepaid expenses and other current assets on the Consolidated Balance Sheets. As of December 31, 2020, the Glycosyn Promissory Note had an unpaid principal balance of $5.3 million and a fair value of $4.5 million, of
which $2.0 million was recorded in prepaid expenses and other current assets and the remainder in loans receivable, net of current portion on the Consolidated Balance Sheets. For the years ended December 31, 2021, 2020 and 2019, the (loss)
gain on the change in fair value of the Glycosyn Promissory Note was $(2.5) million, $0.5 million and $(0.9) million, respectively, which was recorded in other (expense) income, net on the Consolidated Statements of Operations and Comprehensive
Loss.
Access Bio Convertible Notes
In
November 2020, the Company entered into a convertible note subscription agreement with Access Bio, a supplier of the Companys diagnostic test kits. The Access Bio Convertible Notes are due in November 2022 in the aggregate principal amount of
$10.0 million plus a 2% rate of return compounded annually. The Access Bio Convertible Notes are convertible into a number of shares of common stock of Access Bio, a company listed on the Korea Stock Exchange, of up to $10.0 million based
on a fixed foreign currency exchange rate and a conversion price subject to certain adjustments, including reset adjustments each quarter based on the trading price of Access Bios stock. The adjusted conversion price cannot be reduced to less
than 70% of the initial conversion price and the reset adjustments cannot increase the effective conversion ratio. The Access Bio Convertible Notes are convertible at the Companys election any time following the first anniversary of the
issuance date of the notes and prior to the 30th day before the maturity date. Additionally, subject to certain provisions, the Company has the option to cause Access Bio to repurchase, or Access Bio has the option to repurchase, a portion of the
outstanding balance under the notes (up to the entire balance in the case of the Companys option) at a price to ensure a 2% rate of return compounded annually.
As of December 31, 2021, the fair value of the Access Bio Convertible Notes was $9.8 million, which was recorded in prepaid expenses and other
current assets on the Consolidated Balance Sheets. As of December 31, 2020, the fair value of the Access Bio Convertible Notes was $10.7 million, which was recorded in loans receivable, net of current portion on the Consolidated Balance
Sheets. The (loss) gain from the change in fair value of the Access Bio Convertible Notes during the years ended December 31, 2021 and 2020 was $(0.9) million and $0.7 million, respectively, and was recorded in other (expense) income, net
on the Consolidated Statements of Operations and Comprehensive Loss.
F-30
7. Prepaid Expenses and Other Current Assets
Prepaid expenses and other current assets consisted of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
As of December 31, |
|
|
|
2021 |
|
|
2020 |
|
Prepaid expenses |
|
$ |
9,739 |
|
|
$ |
9,727 |
|
Prepaid insurance |
|
|
9,199 |
|
|
|
1,127 |
|
Prepaid inventory |
|
|
144 |
|
|
|
6,536 |
|
Loans receivable |
|
|
11,559 |
|
|
|
2,268 |
|
Other receivables |
|
|
2,198 |
|
|
|
761 |
|
Other current assets |
|
|
698 |
|
|
|
680 |
|
|
|
|
|
|
|
|
|
|
Prepaid expenses and other current assets |
|
$ |
33,537 |
|
|
$ |
21,099 |
|
|
|
|
|
|
|
|
|
|
8. Inventory, net
Inventory, net consisted of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
As of December 31, |
|
|
|
2021 |
|
|
2020 |
|
Finished goods |
|
$ |
3,264 |
|
|
$ |
2,756 |
|
Raw materials |
|
|
64 |
|
|
|
|
|
Work in process |
|
|
50 |
|
|
|
|
|
Less: Inventory reserve |
|
|
(16 |
) |
|
|
(20 |
) |
|
|
|
|
|
|
|
|
|
Inventory, net |
|
$ |
3,362 |
|
|
$ |
2,736 |
|
|
|
|
|
|
|
|
|
|
9. Property and Equipment, net
Property and equipment, net consisted of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
As of December 31, |
|
|
|
2021 |
|
|
2020 |
|
Facilities |
|
$ |
12,762 |
|
|
$ |
12,762 |
|
Furniture and fixtures |
|
|
4,617 |
|
|
|
2,165 |
|
Lab equipment |
|
|
113,963 |
|
|
|
51,072 |
|
Computer equipment and software |
|
|
10,129 |
|
|
|
6,204 |
|
Leasehold improvements |
|
|
55,033 |
|
|
|
40,435 |
|
Construction in progress |
|
|
10,278 |
|
|
|
42,575 |
|
Vehicles |
|
|
40 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total property and equipment |
|
|
206,822 |
|
|
|
155,213 |
|
Less: Accumulated depreciation |
|
|
(61,052 |
) |
|
|
(33,778 |
) |
|
|
|
|
|
|
|
|
|
Property and equipment, net |
|
$ |
145,770 |
|
|
$ |
121,435 |
|
|
|
|
|
|
|
|
|
|
As of December 31, 2021 and 2020, capital leases totaling $4.1 million and $3.3 million, respectively, were
included in lab equipment, with related accumulated depreciation of $2.1 million and $2.4 million, respectively.
Depreciation expense for the
years ended December 31, 2021, 2020 and 2019 totaled $26.9 million, $12.6 million and $9.6 million, respectively, inclusive of $0.7 million, $0.7 million and $0.6 million, respectively, related to capital leases.
F-31
10. Investments and Equity Method Investments
The Company partners with other investors to form new ventures, including Joyn, Motif Foodworks, Inc. (Motif), Allonnia, LLC (Allonnia)
and Arcaea LLC (Arcaea, FKA Kalo Ingredients LLC) (collectively Platform Ventures). The Company also partners with existing entities, including Genomatica, Inc. (Genomatica) and Synlogic, Inc.
(Synlogic) (collectively, Structured Partnerships), with complementary assets for high potential synthetic biology applications. The Company or its subsidiaries hold equity interests in these Platform Ventures and Structured
Partnerships. The Companys investments in Platform Ventures are accounted for under the equity method. The Companys investments in Synlogic, a publicly traded company, are carried at fair value. As of December 31, 2021 and 2020, the
Company held 6,340,771 shares of Synlogic common stock and warrants to purchase an aggregate of 2,548,117 shares of Synlogic common stock. Prior to the third quarter of 2021, the Companys investment in Synlogic common stock was classified as
an equity method investment based on the Companys ownership interest in Synlogic and accounted for under the fair value option. Due to a decrease in the level of ownership interest during the third quarter of 2021, the investment was
reclassified from equity method investments to investments on the Consolidated Balance Sheets, and from loss on equity method investments to (loss) gain on investments on the Consolidated Statements of Operations and Comprehensive Loss for all
periods presented. However, the Company continues to account for its investments in Synlogic at fair value.
The Companys non-marketable equity securities are investments in privately held companies without readily determinable fair values. The investment in Genomatica preferred stock and other
non-marketable equity securities are initially recorded using the measurement alternative at cost and subsequently adjusted to fair value for any impairment and observable price changes in orderly transactions
for identical or similar investments of the same issuer. As of December 31, 2021 and 2020, no impairment or adjustment from observable price changes were recognized related to investments accounted for under the measurement alternative.
Investments and equity method investments consisted of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
As of December 31, |
|
|
|
2021 |
|
|
2020 |
|
Investments: |
|
|
|
|
|
|
|
|
Genomatica, Inc. preferred stock |
|
$ |
55,000 |
|
|
$ |
55,000 |
|
Synlogic, Inc. common stock |
|
|
15,345 |
|
|
|
13,696 |
|
Synlogic, Inc. warrants |
|
|
6,166 |
|
|
|
5,504 |
|
Cronos Group Inc. common stock |
|
|
10,331 |
|
|
|
|
|
Non-marketable equity securities |
|
|
15,195 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
102,037 |
|
|
$ |
74,200 |
|
|
|
|
|
|
|
|
|
|
Equity method investments
(1): |
|
|
|
|
|
|
|
|
Joyn Bio, LLC |
|
$ |
11,694 |
|
|
$ |
28,924 |
|
Other |
|
|
1,500 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
13,194 |
|
|
$ |
28,924 |
|
|
|
|
|
|
|
|
|
|
(1) |
Equity method investments in Platform Ventures with a carrying value of zero as of December 31, 2021 and
2020 were excluded from the table above. |
F-32
(Loss) gain on investments and equity method investments consisted of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, |
|
|
|
2021 |
|
|
2020 |
|
|
2019 |
|
(Loss) gain on investments: |
|
|
|
|
|
|
|
|
|
|
|
|
Synlogic, Inc. common stock |
|
$ |
1,649 |
|
|
$ |
(2,663 |
) |
|
$ |
(19,403 |
) |
Synlogic, Inc. warrants |
|
|
662 |
|
|
|
(1,070 |
) |
|
|
(7,797 |
) |
Cronos Group Inc. |
|
|
(13,854 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
(11,543 |
) |
|
$ |
(3,733 |
) |
|
$ |
(27,200 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss on equity method investments: |
|
|
|
|
|
|
|
|
|
|
|
|
Joyn Bio, LLC |
|
$ |
(17,230 |
) |
|
$ |
(396 |
) |
|
$ |
(1,730 |
) |
Allonnia, LLC |
|
|
(12,698 |
) |
|
|
|
|
|
|
(24,480 |
) |
Arcaea, LLC |
|
|
(47,356 |
) |
|
|
|
|
|
|
|
|
Glycosyn, LLC |
|
|
|
|
|
|
|
|
|
|
(1,323 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
(77,284 |
) |
|
$ |
(396 |
) |
|
$ |
(27,533 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
11. Variable Interest Entities
Consolidated Variable Interest Entities
As of
December 31, 2021, the Company has consolidated three VIEs: Cooksonia, Ayana Bio, LLC (Ayana) and Verb Biotics, LLC (Verb), as the Company holds variable interests in and was deemed to be the primary beneficiary of the
VIEs. The other investors equity interests in the consolidated VIEs are presented as non-controlling interests in the accompanying consolidated financial statements.
The Company holds a 70% equity interest in Cooksonia, which was formed by the Company and certain other investors for the purposes of holding the
Companys investment in Joyn. The Company concluded that it holds a variable interest in and is the primary beneficiary of Cooksonia as it controls the most significant activities of Cooksonia by controlling 100% of the board of directors of
Cooksonia and holds a controlling financial interest in Cooksonia. As a result, the Company has consolidated the financial statements of Cooksonia in accordance with ASC 810, Consolidation (ASC 810) into its consolidated financial
statements and has recognized a non-controlling interest associated with the minority equity interest held by other investors of Cooksonia, which together hold the remaining 30% equity interest in Cooksonia.
The Company holds an interest in 9,000,000 common units (representing 100% of common units at inception) in each of Ayana and Verb, two Platform Ventures
formed in September 2021 by the Company and certain of its investors. The Company has also provided Ayana and Verb with certain licenses to intellectual property for use in the development or production of products that the parties agree to research
and develop under technical development plans. Additionally, in September 2021, Ayana and Verb entered into a Series A Preferred Unit Purchase Agreement under which each entity sold 9,000,000 Series A preferred units to certain of the Companys
investors for aggregate proceeds of approximately $30.0 million each. The Company concluded that it holds a variable interest in and is the primary beneficiary of Ayana and Verb as it controls the most significant activities of these entities.
These conclusions were reached because, as of the primary beneficiary assessment date, for both Verb and Ayana: (i) the Company has substantive control of the board of directors; (ii) all capital contributions were made by related parties
of New Ginkgo; and (iii) New Ginkgo or its related parties comprise the entirety of the Joint Steering Committee, the governing body which holds significant oversight with respect to the entities research and development programs.
F-33
The following table presents the carrying amounts and classification of the VIEs assets and
liabilities included in the Consolidated Balance Sheets:
|
|
|
|
|
|
|
|
|
|
|
As of December 31, |
|
|
|
2021 |
|
|
2020 |
|
Cash and cash equivalents |
|
$ |
58,025 |
|
|
$ |
|
|
Prepaid expenses and other current assets |
|
|
737 |
|
|
|
|
|
Equity method investments |
|
|
11,694 |
|
|
|
28,924 |
|
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
70,456 |
|
|
$ |
28,924 |
|
|
|
|
|
|
|
|
|
|
Accounts payable |
|
$ |
188 |
|
|
$ |
|
|
Accrued expenses and other current liabilities |
|
|
440 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities |
|
$ |
628 |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
Unconsolidated Variable Interest Entities
With respect to the Companys investments in Motif, Allonnia, Genomatica and Arcaea, the Company has concluded these entities represent VIEs. However,
although the Company holds board representation and is involved in the ongoing development activities of the entities via its participation on joint steering committees, the Company has concluded that it is not the primary beneficiary of these
entities. This conclusion is supported by the fact that: (i) it does not control the board of directors of any of Motif, Allonnia, Genomatica or Arcaea, and no voting or consent agreements exist between the Company and other members of each
respective board of directors or other investors, (ii) the holders of preferred security interests in Motif, Allonnia, Genomatica and Arcaea hold certain rights that require their consent prior to the taking of certain actions, which include
certain significant operating and financing decisions, and (iii) the Companys representation on the joint steering committee of each respective entity does not give it control over the development activities of any of Motif, Allonnia,
Genomatica or Arcaea, as all votes must pass by consensus and there are no agreements in place that would require any of the entities to vote in alignment with the Company. As the Companys involvement in Motif, Allonnia, Genomatica and Arcaea
does not give it the power to control the decisions with respect to their development or other activities, which are their most significant activities, the Company has concluded that it is not the primary beneficiary of Motif, Allonnia, Genomatica
or Arcaea.
With respect to Cooksonias investment in Joyn, as Cooksonia does not control Joyns board of directors, it does not have the power
to control the decisions related to the development activities of Joyn, which are its most significant activities. Accordingly, the Company has concluded that Cooksonia is not the primary beneficiary of Joyn.
Additionally, the Company holds equity interests in certain privately-held companies that are not consolidated as the Company is not the primary beneficiary.
As of December 31, 2021 and 2020, the maximum risk of loss related to the Companys unconsolidated VIEs was limited to the carrying value of its investment in such entities.
Refer to Notes 10 and 20 for additional details on the Companys investments and equity method investments.
F-34
12. Goodwill and Intangible Assets, net
Goodwill consisted of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
As of December 31, |
|
|
|
2021 |
|
|
2020 |
|
Beginning balance |
|
$ |
1,857 |
|
|
$ |
1,857 |
|
Goodwill acquired in Dutch DNA acquisition |
|
|
15,177 |
|
|
|
|
|
Measurement period adjustment (see Note 4) |
|
|
5,000 |
|
|
|
|
|
Currency translation |
|
|
(722 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance |
|
$ |
21,312 |
|
|
$ |
1,857 |
|
|
|
|
|
|
|
|
|
|
Intangible assets, net consisted of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average Amortization Period |
|
|
Gross Carrying Value |
|
|
Accumulated Amortization |
|
|
Net (1) |
|
Balances as of December 31, 2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquired technology |
|
|
13.3 |
|
|
$ |
25,038 |
|
|
$ |
(3,396 |
) |
|
$ |
21,642 |
|
Balances as of December 31, 2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquired technology |
|
|
6.0 |
|
|
$ |
5,490 |
|
|
$ |
(2,196 |
) |
|
$ |
3,294 |
|
(1) |
Includes a decrease of $0.9 million in the net intangible assets balance in 2021 due to foreign currency
translation. |
Amortization expense was $1.2 million, $0.5 million and $0.5 million for the years ended December 31,
2021, 2020 and 2019, respectively. Future amortization expense for each of the next five years will be $1.8 million.
13. Accrued Expenses and
Other Current Liabilities
Accrued expenses and other current liabilities consisted of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
As of December 31, |
|
|
|
2021 |
|
|
2020 |
|
Employee compensation and benefits |
|
$ |
3,650 |
|
|
$ |
3,037 |
|
Professional fees |
|
|
14,871 |
|
|
|
6,381 |
|
Property and equipment |
|
|
991 |
|
|
|
10,017 |
|
Product revenue accruals |
|
|
4,565 |
|
|
|
|
|
Biosecurity service revenue accruals |
|
|
28,726 |
|
|
|
1,440 |
|
Inventory related accruals |
|
|
3,538 |
|
|
|
|
|
Lab supplies |
|
|
560 |
|
|
|
4,276 |
|
External research and development expenses |
|
|
11 |
|
|
|
2,594 |
|
Liability classified stock-based compensation (Note 18) |
|
|
26,612 |
|
|
|
|
|
Capital lease obligation |
|
|
747 |
|
|
|
485 |
|
Other current liabilities |
|
|
9,061 |
|
|
|
2,275 |
|
|
|
|
|
|
|
|
|
|
Accrued expenses and other current liabilities |
|
$ |
93,332 |
|
|
$ |
30,505 |
|
|
|
|
|
|
|
|
|
|
F-35
14. Commitments and Contingencies
Lease Obligations
The Company has entered into
various noncancelable operating leases for office and lab space in Boston and Cambridge, Massachusetts, Emeryville, California and Utrecht, Netherlands. The leases expire on dates ranging from 2030 to 2036 and contain periods of free rent,
escalating rent, tenant improvement incentives, renewal periods, and expansion options. The Company recognizes rent expense on a straight-line basis over the term of each lease, inclusive of the free rent periods and reduced by the amortization of
the tenant incentives.
The Companys headquarters and primary operations are located in the Seaport district of Boston, Massachusetts and are
comprised of a number of leases across 21, 23, 25 and 27 Drydock Avenue, which represent the Companys most significant lease arrangements. In April 2021, the Company entered into an operating lease for a new life science campus spanning two
buildings that is being constructed at 1 Au Bon Pain Way and 3 Anchor Way, Boston, Massachusetts near the Companys headquarters. The following summarizes the key terms of such leases:
21-23-25 Drydock Avenue
In March 2016, the Company entered into a noncancelable operating lease for approximately 87,000 square feet of office and lab space. The lease is comprised of
five suites, the first of which was delivered to the Company in April 2016. The Company currently occupies four suites totaling approximately 70,000 square feet and the Company anticipates occupying the remaining suite in 2022. The lease contains
periods of free rent, annual rent increases and tenant improvement incentives totaling $5.3 million. The lease expires in January 2030 and contains one option to extend the lease term for five years at then-market rates. The lease is secured by
a $1.4 million letter of credit recorded in other non-current assets on the Consolidated Balance Sheets.
At
the time the Company took possession of the first three suites, the premises were in shell condition and required substantial work prior to occupancy. The Company was deemed the accounting owner during the construction period as the improvements
constituted structural elements of the project. Accordingly, the Company capitalized the fair value of the leased space upon delivery from the landlord and recorded a corresponding lease financing obligation. The Company also capitalized the
construction costs, leasehold improvements, and interest incurred during the construction period. Construction was complete, and the assets were placed in service, for the first three suites in September 2016, December 2017, and January 2019,
respectively. Upon completion of the construction, the Company evaluated the lease and determined it did not meet the criteria for sale-leaseback treatment. Accordingly, the Company depreciates the capitalized assets and recognizes interest expense
related to the lease financing obligation using the effective interest rate method over the lease term. For the years ended December 31, 2021, 2020 and 2019, the Company recognized $0.4 million of depreciation expense and $2.3 million
of interest expense related to the lease. As of December 31, 2021 and 2020, the aggregate lease financing obligation for the capitalized suites totaled $16.5 million and $16.8 million, respectively.
27 Drydock Avenue
Beginning in December 2011, the
Company entered into a series of noncancelable operating leases with the same landlord for an aggregate of approximately 130,000 square feet of office and lab space. In September 2021, the Company executed an amendment expanding the leased premises
by approximately 48,000 square feet and extending the lease term by six years from January 2030 to January 2036. The Company has an option to extend the lease term for five years at then-market rates. The lease contains periods of free rent, annual
rent increases and aggregate tenant improvement allowances of $16.1 million. As of December 31, 2021 and 2020, the unamortized balance of the tenant improvement allowance was $10.0 million and $8.1 million, respectively. The
lease is secured by a letter of credit totaling $2.9 million and $1.6 million as of December 31, 2021 and 2020, respectively, recorded in other non-current assets on the Consolidated Balance
Sheets.
F-36
1 Au Bon Pain Way and 3 Anchor Way
In April 2021, the Company entered into a noncancelable operating lease consisting of approximately 152,000 square feet of a new life science campus spanning
two buildings that is being constructed on the property to be known as The Foundry at Drydock located at 1 Au Bon Pain Way and 3 Anchor Way, Boston, Massachusetts near the Companys headquarters. The lease commencement date is estimated to be
June 1, 2024 for a portion of the premises and September 1, 2024 for the remaining premises. The lease expires on the fifteenth anniversary of the lease commencement date and includes one option to extend the lease for ten years at
then-market rates. In September 2021, the Company exercised its expansion option to include the entire rentable area of the primary building resulting in approximately 262,000 square feet of leased space in aggregate. Annual base rent for the first
lease year will be approximately $21.6 million, subject to annual rent increases. The lease contains periods of free rent, tenant improvement allowances based on a rate per square foot and a $14.7 million letter of credit which is recorded
in other non-current assets on the Consolidated Balance Sheets. The Company has concluded that it is the deemed owner (for accounting purposes) of the buildings during the construction period. As a result, the
Company has recorded $6.1 million to construction in progress in property and equipment, net and a corresponding $6.1 million lease financing obligation in its Consolidated Balance Sheets as of December 31, 2021 related to project
costs incurred to date by the owner-lessor.
The Company subleases a portion of its office and lab space to Joyn and Motif. The sublease with Joyn runs
coterminous with the Foundry Services Agreement (Note 20) and the sublease with Motif expires in November 2024. The Company receives approximately $0.2 million and $0.7 million per year under subleases with Joyn and Motif, respectively,
and records sublease income in other (expense) income, net on the Consolidated Statements of Operations and Comprehensive Loss. As of December 31, 2021, future minimum sublease rentals under noncancelable subleases totaled $2.1 million.
Rent expense under operating leases was $17.7 million, $7.0 million and $6.1 million for the years ended December 31, 2021, 2020 and
2019, respectively. Future minimum lease payments under noncancelable operating lease agreements, inclusive of payments for the lease financing obligations, as of December 31, 2021 are as follows (in thousands):
|
|
|
|
|
Years Ending December 31, |
|
Minimum Lease Payments (1) |
|
2022 |
|
$ |
20,600 |
|
2023 |
|
|
22,505 |
|
2024 |
|
|
33,469 |
|
2025 |
|
|
47,376 |
|
2026 |
|
|
44,092 |
|
Thereafter |
|
|
517,399 |
|
|
|
|
|
|
Total |
|
$ |
685,441 |
|
|
|
|
|
|
(1) |
Excluded from the table above is $6.1 million of other debt associated with construction in progress
related to build-to-suit operating leases. |
F-37
The Company enters into certain capital leases for lab equipment used in research and development
activities. Lease terms range from three to five years, may include bargain purchase options, and have fixed monthly rental payments. Future minimum lease payments under capital leases as of December 31, 2021 are as follows (in thousands):
|
|
|
|
|
Years Ending December 31, |
|
Minimum Lease Payments |
|
2022 |
|
$ |
816 |
|
2023 |
|
|
681 |
|
2024 |
|
|
438 |
|
2025 |
|
|
163 |
|
2026 |
|
|
|
|
Thereafter |
|
|
|
|
|
|
|
|
|
Total noncancelable payments |
|
$ |
2,098 |
|
Less: Imputed interest expense |
|
|
(127 |
) |
|
|
|
|
|
Present value of future minimum lease payments |
|
$ |
1,971 |
|
|
|
|
|
|
Purchase Obligations
In September 2019, the Company executed a noncancelable collaboration agreement with Berkeley Lights, Inc. (Berkeley Lights), under which the
Company will incorporate Berkeley Lights Platform into its Foundry for engineering of biotherapeutics and cell-based products and the parties will jointly develop workflows for the Companys use of the Berkeley Lights Platform.
Under the collaboration agreement, the Company is obligated to pay Berkeley Lights at least $109.0 million, and up to $150.0 million, over a seven year term for (i) Berkeley Lights efforts under the workflow development plans
and for (ii) purchases of certain equipment, associated consumables, and other goods and services. The purchase obligation includes variable license fees based on usage of the Berkeley Lights Platform and milestone payments of up to
$11.5 million upon achievement of development and regulatory milestones. All such license fees and milestone payments are applied against the minimum purchase commitment. The minimum purchase commitment will increase to $150.0 million if
Berkeley Lights achieves certain performance targets.
For contract years one and two, which represents an
18-month period, the minimum purchase commitments must be met each year. For contract years three through seven, the minimum purchase commitment is measured on a cumulative basis with any excess applied
towards the next years minimum. Minimum purchase commitments for the remaining contract years of the collaboration agreement are as follows (in thousands):
|
|
|
|
|
Contract Years |
|
Minimum Purchase Commitment |
|
October 1, 2020 - March 31, 2022 |
|
|
15,000 |
|
April 1, 2022 - March 31, 2023 |
|
|
14,000 |
|
April 1, 2023 - March 31, 2024 |
|
|
17,500 |
|
April 1, 2024 - March 31, 2025 |
|
|
17,500 |
|
Thereafter |
|
|
35,000 |
|
|
|
|
|
|
Total |
|
$ |
99,000 |
|
|
|
|
|
|
In March 2018, the Company entered into a noncancelable supply agreement, with Twist Bioscience Corporation
(Twist), a supplier of synthetic DNA. Under the supply agreement, the Company is obligated to purchase specified volumes of synthetic DNA subject to quarterly minimums over a four year term. Products purchased that contribute to the
quarterly minimums can vary based on the Companys discretion and the minimums can be
F-38
adjusted up or down based on certain scenarios. During the years ended December 31, 2021, 2020 and 2019, the Company incurred $8.9 million, $10.4 million and $8.3 million,
respectively, of research and development expenses under its supply agreement with Twist.
Indemnification Agreements
The Company enters into standard indemnification agreements and has agreements with indemnification clauses in the ordinary course of business. Under such
arrangements, the Company indemnifies, holds harmless and agrees to reimburse the indemnified party for losses suffered or incurred by the indemnified party, who are generally the Companys business partners. The terms of these indemnification
arrangements are generally perpetual and effective any time after contract execution. The maximum potential liability resulting from these indemnification arrangements may be unlimited. The Company has never incurred costs to defend lawsuits or
settle claims as a result of such indemnifications and the Company is not aware of any indemnification arrangements that could have a material effect on its financial position, results of operations or cash flows, and it has not accrued any
liabilities related to such obligations as of December 31, 2021.
Legal Proceedings
The Company is not currently party to any material legal proceedings. As of each reporting date, the Company evaluates whether or not a potential loss amount
or range of loss amounts is reasonably estimable and probable of being incurred and whether such amounts meet the requirements to be accrued or disclosed pursuant to ASC 450, Contingencies (ASC 450). The Company expenses costs
related to such legal proceedings as incurred.
Registration Rights
In connection with the closing of the Business Combination, the Company entered into an amended and restated registration rights agreement (the
Registration Rights Agreement) among the Company, SRNG and certain Old Ginkgo stockholders. Pursuant to the Registration Rights Agreement, the Company will be required to register for resale securities held by the stockholders. The
Company will have no obligation to facilitate more than two demands per calendar year for each of the SRNG or the Ginkgo Holders (as defined in the Registration Rights Agreement) that the Company register such stockholders securities. In
addition, the holders have certain piggyback registration rights with respect to registrations initiated by the Company. The Company will bear the expenses incurred in connection with the filing of any registration statements pursuant to
the Registration Rights Agreement.
15. Warrant Liabilities
Upon the closing of the Business Combination, the Company assumed 34,499,925 publicly-traded warrants (Public Warrants) and 17,325,000 private
placement warrants (the Private Placement Warrants) held by the Sponsor. Both the Public Warrants and the Private Placement Warrants were issued in conjunction with the consummation of SRNGs initial public offering on
February 26, 2021. Each whole warrant entitles the holder to purchase one share of the Companys Class A common stock at a price of $11.50 per share, subject to adjustments. The warrants will expire five years from the completion of
the Business Combination, or earlier upon redemption or liquidation.
No Public Warrants will be exercisable for cash unless the Company has an effective
and current registration statement covering the issuance of the shares of common stock issuable upon exercise of the Public Warrants. On November 23, 2021, the Companys registration statement covering such shares became effective. The
Company may redeem the outstanding Public Warrants:
|
|
|
in whole and not in part |
F-39
|
|
|
at a price of $0.01 per Public Warrant; |
|
|
|
upon not less than 30 days prior written notice of redemption to each warrant holder; and
|
|
|
|
if, and only if, the reported closing price of the ordinary shares equals or exceeds $18.00 per share (as
adjusted for share sub-divisions, share capitalizations, reorganizations, recapitalizations and the like) for any 20 trading days within a 30-trading day period ending
three business days before the Company sends the notice of redemption to the warrant holders. |
If the Company calls the Public Warrants
for redemption, as described above, its management will have the option to require any holder that wishes to exercise the Public Warrants to do so on a cashless basis, as described in the warrant agreement. The exercise price and number
of ordinary shares issuable upon exercise of the Public Warrants may be adjusted in certain circumstances including in the event of a share dividend, extraordinary dividend or recapitalization, reorganization, merger or consolidation. However,
except as described above, the Public Warrants will not be adjusted for issuances of ordinary shares at a price below its exercise price. Additionally, in no event will the Company be required to net cash settle the Public Warrants.
The Private Placement Warrants are identical to the Public Warrants, except that (i) the Private Placement Warrants will be exercisable on a cashless
basis and be non-redeemable so long as they are held by the initial purchasers or their permitted transferees and (ii) the Private Placement Warrants and the Class A ordinary shares issuable upon
exercise of the Private Placement Warrants were entitled to registration rights, which was satisfied on November 23, 2021 when the Companys registration statement covering such shares became effective. If the Private Placement Warrants
are held by someone other than the initial purchasers or their permitted transferees, the Private Placement Warrants will be redeemable by the Company and exercisable by such holders on the same basis as the Public Warrants.
As of December 31, 2021, the aggregate values of the Public Warrants and the Private Placement Warrants was $77.3 million and $58.6 million,
respectively, representing warrants outstanding to purchase 34.5 million shares and 17.3 million shares, respectively, of the Companys Class A common stock. The warrants are accounted for as liabilities in accordance with ASC 815-40 and are presented within warrant liabilities on the Consolidated Balance Sheets. The warrant liabilities are measured at fair value at inception and on a recurring basis, with changes in fair value presented
within change in fair value of warrant liabilities on the Consolidated Statement of Operations and Comprehensive Loss. See Note 5 for additional information.
16. Convertible Promissory Notes
In June 2019, the
Company entered into a Note Purchase Agreement (NPA) with certain existing investors. In connection with the NPA, the Company issued convertible promissory notes (Convertible Promissory Notes) and received $199.0 million
in cash proceeds, net of issuance costs of $1.0 million. The Convertible Promissory Notes carried interest at the rate of 3% per annum and had a maturity date of June 21, 2021. Pursuant to the NPA, all of the outstanding principal and
interest under the Convertible Promissory Notes were to be automatically converted into (i) preferred stock issued in connection with the Companys next financing that resulted in at least $50.0 million of gross proceeds (NPA
Qualified Financing) at a 5% discount, (ii) common stock issued in connection with the filing of an effective registration statement pursuant to an initial public offering, or (iii) cash equal to the greater of (x) one and a
half times the outstanding principal and interest accrued immediately prior to a sale or change in control event (as defined in the NPA) in which the Company or one of its subsidiaries was a party, or (y) the amount each investor would have
received if the outstanding principal and accrued interest had been converted into Series D convertible preferred stock immediately prior to such sale or change in control event. On the maturity date, the Convertible Promissory Notes were to be
automatically converted into shares of Series D convertible preferred stock, at a predetermined conversion rate, which was less than the fair value of Series D convertible preferred stock at the date of issuance of the Convertible Promissory Notes.
The Company determined that at the Convertible Promissory Notes commitment date, this conversion feature was beneficial to the investors and, as such, calculated and recorded a beneficial conversion feature (BCF). The intrinsic
value of
F-40
the BCF, which was calculated utilizing the fair value of the underlying Series D convertible preferred stock and effective conversion price on the commitment date, was $199.0 million and
was recorded as a debt discount with an offset to additional paid-in capital. The debt discount was amortized to interest expense using the effective interest method through the maturity date of the
Convertible Promissory Notes. For the year ended December 31, 2019, the Company recorded interest expense of $0.1 million related to the amortization of the debt discount in the Consolidated Statements of Operations and Comprehensive Loss.
The Companys Series E convertible preferred stock issuance in September 2019 (Note 17) met the criteria of an NPA Qualified Financing. Accordingly,
the Convertible Promissory Notes were converted into Series E convertible preferred stock. In connection with the NPA Qualified Financing and the associated conversion, the Company was required to account for the repurchase of the BCF. The total
repurchase price associated with the reacquisition of the BCF in connection with the settlement of the Convertible Promissory Notes was the issuance of 1,408,934 shares of Series E convertible preferred stock valued at $211.6 million. The
intrinsic value of the BCF upon the NPA Qualified Financing was measured based on the intrinsic value of the conversion option at the settlement date which was in excess of the repurchase price. Therefore, the entire $211.6 million was
allocated to the reacquisition of the BCF which was recorded as a reduction to additional paid-in capital. As a result of the extinguishment of the Convertible Promissory Notes, the Company recorded a gain of
$0.1 million in other (expense) income, net in the Consolidated Statements of Operations and Comprehensive Loss for the year ended December 31, 2019.
17. Stockholders Equity
The Consolidated Statement
of Stockholders Equity has been retroactively adjusted for all periods presented to reflect the Business Combination and reverse recapitalization as described in Note 3.
Old Ginkgo Convertible Preferred Stock
In 2019,
the Company received $208.8 million in cash proceeds from the issuance of 69,812,427 shares of Series E convertible preferred stock to various investors at $3.06 per share, net of $4.8 million in issuance costs. In conjunction with the
issuance of the Series E preferred stock, $201.0 million of principal and accrued interest associated with the Convertible Promissory Notes (Note 16) was converted at a 5% discount into 69,151,117 shares of Series E preferred stock. In May and
July of 2020, the Company received $94.4 million in cash proceeds from the issuance of an additional 30,855,065 shares of Series E preferred stock to various investors at $3.06 per share.
Immediately prior to the closing of the Business Combination on September 16, 2021, all outstanding Series B, C, D, and E convertible preferred stock
converted into shares of Old Ginkgo common stock on a one-for-one basis. Upon closing of the Business Combination, those shares converted into an aggregate
904.7 million shares of New Ginkgos Class A common stock pursuant to the Exchange Ratio established in the Merger Agreement. All fractional shares were rounded down.
New Ginkgo Preferred Stock
The Company is
authorized to issue 200,000,000 shares of preferred stock with a par value $0.0001 per share. The Companys board of directors are authorized, without stockholder approval, to issue such shares of preferred stock in one or more series, to
establish from time to time the number of shares to be included in each such series, and to fix the designations, powers, voting, and other rights, preferences and privileges of the shares. There were no issued and outstanding shares of preferred
stock as of December 31, 2021.
Common Stock
The Company is authorized to issue 15,800,000,000 shares of common stock, including 10,500,000,000 shares of Class A common stock, par value $0.0001 per
share, 4,500,000,000 shares of Class B common stock, par value $0.0001 per share, and 800,000,000 shares of Class C common stock, par value $0.0001 per share.
F-41
Voting
Holders of Class A common stock are entitled to one vote per share and holders of Class B common stock are entitled to ten votes per share. Holders
of Class C common stock are not entitled to vote except as otherwise expressly provided in the certificate of incorporation or required by applicable law.
Dividends
Common stockholders are entitled to receive
dividends, as may be declared by the board of directors. Different classes of common stock are legally entitled to equal per share distributions whether through dividends or liquidation. No dividends have been declared to date.
Conversion
Each share of Class B common stock is
convertible at any time at the option of the holder into one share of Class A common stock. Generally, shares of Class B common stock will convert automatically into Class A common stock upon the holder ceasing to be an Eligible
Holder (i.e., director, employee, trust or legal entity of New Ginkgo), unless otherwise determined by affirmative vote of a majority of independent directors of New Ginkgo.
Treasury Stock
During the year ended
December 31, 2019, the Company repurchased 490,805 shares of common stock from its employees. The fair value of the common stock on the repurchase date was recorded as a reduction to stockholders equity and the excess $0.1 million
paid over the fair value was recorded as additional compensation expense. Upon the repurchase, the Company returned all shares of treasury stock to authorized and unissued shares of common stock by deducting the carrying value of treasury stock from
common stock and additional paid-in capital. As of December 31, 2021 and 2020, no shares of common stock remained in treasury.
Common Stock Reserved for Future Issuances
The
Company had the following common stock reserved for future issuance as of the date indicated:
|
|
|
|
|
|
|
December 31, 2021 |
|
Stock options issued and outstanding |
|
|
25,228,853 |
|
Restricted stock units outstanding |
|
|
168,321,952 |
|
Shares available for grant under the 2021 Plan |
|
|
200,569,979 |
|
Shares available for grant under the ESPP |
|
|
20,000,000 |
|
Warrants to purchase Class A common stock |
|
|
51,824,925 |
|
|
|
|
|
|
Total common stock reserved for future issuances
(1) |
|
|
465,945,709 |
|
|
|
|
|
|
(1) |
Excludes unvested earnout shares which are restricted shares issued to equity holders of Old Ginkgo as part of
the Business Combination (Note 3) and are recorded in equity as shares outstanding upon satisfying the vesting conditions. |
18.
Stock-Based Compensation
2021 Incentive Award Plan
On September 16, 2021, the 2021 Incentive Award Plan (the 2021 Plan) became effective. The 2021 Plan provides for the grant of stock options,
including incentive stock options (ISOs) and nonqualified stock options, stock appreciation rights, restricted stock, dividend equivalents, RSUs and other stock or cash-based awards to employees, consultants and directors of New Ginkgo
and its subsidiaries.
F-42
The aggregate number of shares of common stock available for issuance under the 2021 Plan, which may be
issued as Class A common stock and/or Class B common stock, was initially 200,440,957 shares. As of December 31, 2021, 200,569,979 shares are available for future issuance under the 2021 Plan. The number of shares of common stock
reserved for issuance under the 2021 Plan will automatically increase for ten years on January 1 of each year, starting on January 1, 2022, in an amount equal to the lesser of (a) 4.0% of the aggregate number of shares of common stock
outstanding on the final day of the immediately preceding calendar year and (b) such smaller number of shares as is determined by the Board. The maximum number of shares of common stock that may be issued pursuant to the exercise of incentive
stock options granted under the 2021 Plan is 200 million shares. Shares issued under the 2021 Plan may consist of authorized but unissued shares, shares purchased on the open market or treasury shares.
2021 Employee Stock Purchase Plan
On
September 16, 2021, the 2021 Employee Stock Purchase Plan (the ESPP) became effective. The ESPP authorizes (i) the grant of options that are intended to qualify for favorable U.S. federal tax treatment under Section 423 of
the Internal Revenue Code of 1986 (the Section 423 Component) and (ii) the grant of options that are not intended to be tax-qualified (the
Non-Section 423 Component). All of the Companys employees are expected to be eligible to participate in the ESPP. However, with respect to the Section 423 Component, an employee may not
be granted rights to purchase stock under the ESPP if the employee, immediately after the grant, would own (directly or through attribution) stock possessing 5% or more of the total combined voting power or value of all classes of the Companys
common stock.
The ESPP permits the Company to deliver up to 20 million shares of common stock pursuant to awards issued under the ESPP, which may be
Class A common stock and/or Class B common stock. The number of shares of common stock reserved for issuance under the ESPP will automatically increase each January 1, beginning on January 1, 2022, by an amount equal to the
lesser of (a) 1% of the aggregate number of shares of common stock outstanding on the final day of the immediately preceding calendar year and (b) such smaller number of shares as is determined by the Board, provided that no more than
100 million shares may be issued under the Section 423 Component. Prior to or in connection with issuing any shares of common stock under the ESPP, the ESPP administrator may convert awards covering shares of Class B common stock to
Class A common stock. As of December 31, 2021, no awards have been granted under the ESPP.
2014 Stock Incentive Plan
The 2014 Stock Incentive Plan (the 2014 Plan) provided for the Company to grant options, stock appreciation rights, restricted stock, restricted
stock units (RSUs) and other stock-based awards. From and after the effective date of the 2021 Incentive Award Plan, the Company ceased granting awards under the 2014 Plan. However, the 2014 Plan continues to govern the terms and
conditions of the outstanding awards previously granted thereunder. Shares of common stock underlying any awards that are forfeited, cancelled, repurchased, or otherwise terminated by the Company under the 2014 Plan will be added back to the shares
available for issuance under the 2021 Incentive Award Plan.
2008 Stock Incentive Plan
The 2008 Stock Incentive Plan (the 2008 Plan) provided for the Company to grant options and restricted stock awards (RSAs). From and
after the effective date of the 2014 Stock Incentive Plan, the Company ceased granting awards under the 2008 Plan. However, the 2008 Plan continues to govern the terms and conditions of the outstanding awards previously granted thereunder. Shares of
common stock underlying any awards that are forfeited, cancelled, repurchased, or otherwise terminated by the Company under the 2008 Plan will be added back to the shares available for issuance under the 2021 Incentive Award Plan.
F-43
Stock Options
Options outstanding under the 2008 Plan and 2014 Plan are fully vested. Options outstanding under the 2021 Plan consists of options granted to a non-employee director and vest in three equal annual installments. All stock options expire no later than ten years after the grant date. The exercise price of each option under the 2021 Plan is equal to the closing
price of the Companys common stock on the date of grant.
A summary of stock option activity for the year ended December 31, 2021 is presented
below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Shares |
|
|
Weighted Average Exercise Price per Share |
|
|
Weighted Average Remaining Contractual Term |
|
|
Aggregate Intrinsic Value (1) |
|
|
|
|
|
|
|
|
|
(in years) |
|
|
(in thousands) |
|
Outstanding as of December 31, 2020 |
|
|
33,354,871 |
|
|
$ |
0.02 |
|
|
|
|
|
|
|
|
|
Granted |
|
|
1,664,251 |
|
|
$ |
0.50 |
|
|
|
|
|
|
|
|
|
Exercised |
|
|
(10,969,639 |
) |
|
$ |
0.02 |
|
|
|
|
|
|
|
|
|
Forfeited |
|
|
(1,594,820 |
) |
|
$ |
0.02 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding as of December 31, 2021 |
|
|
22,454,663 |
|
|
$ |
0.05 |
|
|
|
2.32 |
|
|
$ |
185,620 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable as of December 31, 2021 |
|
|
22,385,232 |
|
|
$ |
0.02 |
|
|
|
2.30 |
|
|
$ |
185,620 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
The aggregate intrinsic value is calculated as the difference between the Companys closing stock price on
the last trading day of the year and the exercise prices, multiplied by the number of in-the-money stock options. |
The aggregate intrinsic value of stock options exercised during the years ended December 31, 2021, 2020 and 2019 was $91.0 million,
$5.3 million and $1.1 million, respectively. The weighted-average fair value of options granted during the year ended December 31, 2021 was $8.97 per share and was calculated using the following assumptions. No options were granted
during 2020 and 2019.
|
|
|
|
|
|
|
Year Ended December 31, 2021 |
|
Risk-free interest rate |
|
|
0.11 |
% |
Dividend yield |
|
|
0 |
% |
Expected volatility |
|
|
88.6 |
% |
Expected term (in years) |
|
|
0.96 |
|
Restricted Stock and Restricted Stock Units
RSAs granted under the 2014 Plan are subject to a service-based vesting condition and generally vest in equal monthly installments over four years. RSUs
granted under the 2014 Plan are subject to two vesting conditions: (i) a service-based vesting condition that is generally met over four years with 25% of the shares vesting on the first anniversary of the grant date with monthly vesting
thereafter, and (ii) a performance-based vesting condition that is met through a liquidity event in the form of either a change of control or an initial public offering (the performance condition). RSUs granted under the 2021 Plan
are subject to a service-based vesting condition only that is generally met over four years with 25% of the shares vesting on the first anniversary of the grant date with monthly vesting thereafter.
Prior to the Business Combination, no stock-based compensation expense had been recognized related to RSUs granted under the 2014 Plan as the performance
condition was not probable of being met and the Business Combination did not meet the definition of a liquidity event as defined in the 2014 Plan. As a result of the Business Combination, on November 17, 2021 the Board of Directors modified the
vesting terms of RSUs
F-44
granted under the 2014 Plan to allow 10% of the RSUs that met the service condition as of the closing of the Business Combination (the 10% RSUs) to vest with respect to the
performance condition, effective as of November 19, 2021, the date on which the Form S-8 registration statement covering such shares became effective. In addition, on November 17, 2021 the Board of
Directors modified the vesting terms of the remaining RSUs granted under the 2014 Plan such that they will vest in full with respect to the performance condition on or before March 15, 2022 (the original service-based vesting condition is still
applicable). As a result of these modifications, the performance condition for all RSUs granted under the 2014 Plan became probable of being met during the fourth quarter of 2021. As the performance condition was not probable of being met prior to
the modification, the RSU awards were remeasured as of the modification date pursuant ASC 718 and the Company recorded a cumulative-catch up adjustment to reflect the change in the probability assessment. The modification resulted in
approximately $1,492.2 million of incremental stock-based compensation expense recognized in the fourth quarter of 2021 based on the modification-date fair value. The Company cash settled the 10% RSUs for a total cash payment of
$76.5 million equal to the fair value of the stock on the Form S-8 effective date.
In September 2021, the
Board of Directors modified the terms of RSUs granted to non-employee directors by adding a cash settlement feature to the awards which allowed the non-employee
directors to elect to settle in cash up to 50% of their RSUs that were vested with respect to the service condition on or prior to December 31, 2021 (the 50% RSUs). The director RSUs were subject to the same performance condition as
all other RSUs granted under the 2014 Plan. In the fourth quarter of 2021, all directors elected to cash settle the 50% RSUs. As a result, the 50% RSUs are classified as liability awards and the liability is measured at fair value at the reporting
date. The aggregate fair value of the liability classified awards was $26.6 million as of December 31, 2021 which is included in accrued expenses and other current liabilities on the Consolidated Balance Sheets.
A summary of the RSU and RSA activity for the year ended December 31, 2021 is presented below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted Stock Units |
|
|
Restricted Stock Awards |
|
|
|
Number of Shares |
|
|
Weighted Average Grant Date Fair Value (1) |
|
|
Number of Shares |
|
|
Weighted Average Grant Date Fair Value |
|
Nonvested as of December 31, 2020 |
|
|
124,932,207 |
|
|
$ |
1.74 |
|
|
|
419,049 |
|
|
$ |
1.99 |
|
Granted |
|
|
133,307,479 |
|
|
$ |
13.53 |
|
|
|
|
|
|
|
|
|
Vested |
|
|
(85,829,389 |
) |
|
$ |
13.39 |
|
|
|
(236,427 |
) |
|
$ |
1.99 |
|
Forfeited |
|
|
(4,088,345 |
) |
|
$ |
5.23 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonvested as of December 31, 2021 |
|
|
168,321,952 |
|
|
$ |
13.58 |
|
|
|
182,622 |
|
|
$ |
1.99 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
The weighted average grant date fair value of awards nonvested as of December 31, 2020 and awards
forfeited prior to the modification date reflect the original grant date fair value and not the modification-date fair value. |
The
weighted average grant date fair value of RSUs granted during the year ended December 31, 2021 was $13.53, which represents the weighted average of the modification-date fair value and any post modification grant date fair values. The weighted
average grant date fair value of RSUs granted during the years ended December 31, 2020 and 2019 was $2.68 and $1.78 per share, respectively, and is no longer relevant for expense recognition due to the modification in the fourth quarter of
2021. The weighted average grant date fair value of the RSAs granted during the year ended December 31, 2019 was $1.99 per share. No RSAs were granted during 2021 and 2020.
The aggregate fair value of the RSUs that vested during the year ended December 31, 2021 was $1,149.5 million. No RSUs vested during 2020 and 2019
as the performance condition was not probable of being met. The aggregate fair value of the RSAs that vested during the years ended December 31, 2021, 2020 and 2019 was $0.5 million, $0.5 million and $0.7 million, respectively.
F-45
Earnouts
As described in Note 3, the holders of Rollover Equity Awards outstanding immediately prior to the effective time of the Business Combination received a
proportional amount of the Earnout Consideration, which is divided into four equal tranches subject to vesting during the five years after the Closing Date (the Earnout Period). The earnout shares in respect of the Rollover Equity Awards
are subject to the same terms and conditions as the underlying Rollover Equity Awards (including with respect to vesting and termination-related provisions). Additionally, the earnout shares in respect of the Rollover Equity Awards are subject to a
market condition that will be met when the trading price of the Companys common stock is greater than or equal to $12.50, $15.00, $17.50 and $20.00 for any 20 trading days within any period of 30 consecutive trading days during the Earnout
Period (collectively, the Earnout Targets). To the extent that the Earnout Targets are not achieved during the Earnout Period, the portion of the Earnout Consideration that remains subject to vesting and forfeiture at the end of the
Earnout Period will be forfeited to New Ginkgo for no consideration and cancelled.
As described above, the earnout shares related to Old Ginkgo RSUs
(Earnout RSUs) are subject to the same performance condition as the underlying RSUs. As a result of the November 2021 modification to the RSUs described above, the performance condition became probable of being met in the fourth quarter
of 2021. The modification resulted in approximately $173.5 million of incremental stock-based compensation expense recognized in the fourth quarter of 2021 related to the Earnout RSUs based on the modification-date fair value. The first
earnout target of $12.50 per share was met on November 15, 2021 and the earnout shares related to the first tranche of the Earnout Consideration for which the service condition had also been met became vested and were settled, less shares
withheld to cover tax withholding obligations.
The grant date fair value of Earnout RSUs was estimated on the Closing Date and remeasured on the
modification date using a Monte Carlo simulation model with the following assumptions:
|
|
|
|
|
|
|
Year Ended December 31, 2021 |
|
Risk-free interest rate |
|
|
0.84% - 1.21% |
|
Expected volatility |
|
|
53.1% - 81% |
|
Expected term (in years) |
|
|
4.83 - 5 |
|
Dividend yield |
|
|
|
|
A summary of activity during the year ended December 31, 2021 for the Earnout RSUs and the earnout shares underlying Old
Ginkgo RSAs (Earnout RSAs) is presented below:
|
|
|
|
|
|
|
|
|
|
|
Number of Shares |
|
|
Weighted Average Grant Date Fair Value |
|
Nonvested as of December 31, 2020 |
|
|
|
|
|
|
|
|
Granted |
|
|
30,539,475 |
|
|
$ |
12.91 |
|
Vested |
|
|
(2,580,570 |
) |
|
$ |
13.33 |
|
Forfeited |
|
|
(95,780 |
) |
|
$ |
12.92 |
|
|
|
|
|
|
|
|
|
|
Nonvested as of December 31, 2021 |
|
|
27,863,125 |
|
|
$ |
12.87 |
|
|
|
|
|
|
|
|
|
|
The aggregate fair value of the Earnout RSUs and Earnout RSAs that vested during the year ended December 31, 2021 was
$34.4 million.
F-46
Stock-Based Compensation
Stock-based compensation expense was allocated as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, |
|
|
|
2021 |
|
|
2020 |
|
|
2019 |
|
Research and development |
|
$ |
926,730 |
|
|
$ |
79 |
|
|
$ |
64 |
|
General and administrative |
|
|
755,835 |
|
|
|
397 |
|
|
|
707 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
1,682,565 |
|
|
$ |
476 |
|
|
$ |
771 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2021, there was $0.5 million of unrecognized compensation expense related to stock options to be
recognized over a weighted-average period of 2.4 years, $2,160.8 million of unrecognized compensation expense related to RSUs and Earnout RSUs to be recognized over a weighted-average period of 1.6 years and $0.4 million of
unrecognized compensation expense related to RSAs and Earnout RSAs to be recognized over a weighted-average period of 1.0 year.
19. Revenue
Recognition
Disaggregation of Revenue
The
following table sets forth the percentage of total Foundry revenue by industry:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, |
|
|
|
2021 |
|
|
2020 |
|
|
2019 |
|
Consumer and technology |
|
|
36 |
% |
|
|
12 |
% |
|
|
19 |
% |
Food and nutrition |
|
|
25 |
% |
|
|
35 |
% |
|
|
39 |
% |
Industrial and environment |
|
|
16 |
% |
|
|
29 |
% |
|
|
13 |
% |
Agriculture |
|
|
8 |
% |
|
|
13 |
% |
|
|
18 |
% |
Pharma and Biotech |
|
|
8 |
% |
|
|
2 |
% |
|
|
2 |
% |
Government and Defense |
|
|
7 |
% |
|
|
9 |
% |
|
|
9 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Foundry revenue |
|
|
100 |
% |
|
|
100 |
% |
|
|
100 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
The Companys revenue is derived from customers located primarily in the United States. For the years ended
December 31, 2021, 2020, and 2019, the Companys revenue from customers within the United States comprised 86%, 88% and 81%, respectively, of total revenue.
Contract Balances
The Company recognizes a
contract asset when the Company transfers goods or services to a customer before the customer pays consideration or before payment is due, excluding any amounts presented as accounts receivable. The Company did not have any contract assets as of
December 31, 2021 and 2020.
Contract liabilities, or deferred revenue, primarily consist of payments received in advance of performance under the
contract or when the Company has an unconditional right to consideration under the terms of the contract before it transfers goods or services to the customer. The Companys collaborative arrangements with its equity investees and related
parties typically include upfront payments consisting of cash or non-cash consideration for future research and development services and non-cash consideration in the
form of equity securities for licenses that will be transferred in the future. The Company records the upfront cash payments and fair value of the equity securities as deferred revenue.
The Company also invoices customers based on contractual billing schedules, which results in the recording of deferred revenue to the extent payment is
received prior to the Companys performance of the related services. Contract liabilities are recognized as revenue as (or when) the Company performs under the contract.
F-47
Of the Companys $128.5 million in deferred revenue at December 31, 2020, $28.8 million
was recognized as revenue during 2021. Of the Companys $147.9 million in deferred revenue at December 31, 2019, $25.5 million was recognized as revenue during 2020.
Performance Obligations
The aggregate amount of
the transaction price that was allocated to performance obligations that have not yet been satisfied or are partially satisfied as of December 31, 2021 and 2020 was $21.1 million and $20.7 million, respectively. The Company has
elected the practical expedient not to provide the remaining performance obligation disclosures related to contracts for which the Company recognizes revenue on a cost-plus basis in the amount to which it has the right to invoice and for contracts
with a term of one year or less. As of December 31, 2021, of the performance obligations not yet satisfied or partially satisfied, approximately 90% is expected to be recognized as revenue during the years 2022 to 2026. The remainder cannot be
reasonably estimated due to uncertainty about the timing of future events, including development milestones. When a milestone subject to the variable consideration constraint is achieved, the Company updates its estimate of the transaction price to
include the milestone payment and records a cumulative catch-up in revenue. During the year ended December 31, 2021, the Company recorded a $6.4 million cumulative
catch-up in revenue primarily due to recognition of previously constrained variable consideration related to milestones. The cumulative catch-up adjustment in years 2020
and 2019 was not material.
20. Significant Collaboration Transactions
Arcaea LLC (FKA Kalo Ingredients, LLC)
Summary
of Arrangement
Arcaea was formed in March 2021 to focus on the application of synthetic biology in the personal care products industry. In March 2021,
the Company entered into (i) an Intellectual Property Contribution Agreement (Arcaea IP Agreement) that granted Arcaea a license to certain of the Companys intellectual property, (ii) a Technical Development Agreement
(Arcaea TDA) that establishes the terms under which the Company will provide technical research and development services, and (iii) a Common Unit Issuance Agreement (Arcaea CUIA) which compensates the Company for its
intellectual property contribution. Contemporaneous with these transactions, Arcaea entered into a Series A Preferred Unit Purchase Agreement under which it sold 1,755,000 Series A preferred units to certain of the Companys investors, for
aggregate proceeds of approximately $19.5 million. The Series A Preferred Unit Purchase Agreement provided for the sale and issuance of up to an additional 7,245,000 Series A preferred units subsequent to the initial closing. In subsequent
closings during 2021, Arcaea issued an additional 5,139,900 Series A preferred units to existing and third-party investors for aggregate proceeds of approximately $57.1 million and closed its Series A preferred unit financing. As a result, the
Company received an additional 5,229,900 common units in Arcaea for total consideration of $35.5 million.
Under the Arcaea IP Agreement, the Company
licensed certain intellectual property to Arcaea for use in the development or the production of Arcaeas products that the parties will subsequently agree to research and develop under technical development plans (TDPs). The
license rights provide Arcaea with the ability to commercialize the specified products from the corresponding TDP under the Arcaea TDA. In return for the license to the intellectual property, Arcaea has agreed to issue the Company up to 9,000,000
common units in accordance with certain terms and conditions set forth within the agreements. The Company received 1,755,000 common units upon execution of the Arcaea CUIA and an additional 5,229,900 common units upon closing of the Series A
preferred unit financing in July 2021 (as discussed above). No additional common units are expected to be issued to the Company.
Under the Arcaea TDA,
the parties jointly agree on TDPs, through equal representation on a joint steering committee, under which the Company will perform agreed-upon research and development services in return for consideration on a cost-plus basis for all services
provided.
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Accounting Analysis
The common unit investment in Arcaea is considered an equity method investment as a result of the Companys ability to exercise significant influence over
Arcaeas financial and operating policies through its ownership of common units. The initial carrying value of the equity method investment in Arcaea is the fair value of the common units of $11.9 million received in exchange for the
Arcaea IP Agreement which, as discussed below, was accounted for as deferred revenue at inception. The fair value of Arcaeas common units was determined at inception of the agreements using the option pricing method. The option pricing method
used a back-solve methodology to infer the total equity value based on the pricing of the Series A preferred unit financing, which was contemporaneous with the Arcaea IP Agreement. Further, the Company determined the rights to up to an additional
7,245,000 common units did not meet the definition of a freestanding financial instrument and are not representative of a derivative. The right to the additional common units is considered variable consideration that is fully constrained at
inception and until the contingencies related to the issuance of the additional shares are resolved.
The Series A preferred units issued by Arcaea
receive a liquidation preference prior to common units. As such, the Company concluded that this represents a substantive profit-sharing arrangement, and the Company is recognizing earnings and losses on the equity method investment using the HLBV
method. The Company recorded a $11.9 million loss on its equity method investment in Arcaea in 2021. The loss allocated to the Company primarily relates to Arcaeas accounting for the non-cash
consideration related to the Arcaea IP Agreement as in-process research and development, which resulted in the full value of the Companys intellectual property contribution being expensed in 2021. As of
December 31, 2021, the carrying value of the equity method investment in Arcaea has been reduced to zero. There is no commitment for the Company to provide further financial support to Arcaea, and therefore the carrying value of the equity
method investment will not be reduced below zero.
The relationship with Arcaea is a vendor-customer relationship and is within the scope of ASC 606, as
the provision of services and corresponding license rights are considered a part of the Companys ordinary activities. The common units issued to the Company represent non-cash consideration. While the
Arcaea TDA has been executed by the parties and provides the payments terms for future services, the Arcaea TDA does not provide for any transfer of goods or services between the parties. However, the Company will provide licenses and services upon
execution of the contemplated TDPs. Accordingly, the Company concluded that the Arcaea TDA, in combination with the Arcaea CUIA, met the definition of a contract under ASC 606. Each TDP executed under the Arcaea TDA will be accounted for in
accordance with ASC 606.
The Companys performance obligations under the contract consist of ten material rights to future technical research and
development services and commercial licenses under individual TDPs that the Company expects to execute under the Arcaea TDA. The material rights represent an advance payment for the license rights, which will be granted upon the execution of future
TDPs. As there is no additional payment for these license rights when future TDPs are executed, the Company has determined that there is a material right associated with each of the contemplated additional TDPs under the Arcaea TDA. The Company has
allocated approximately $1.2 million of the upfront non-cash consideration to each of the ten material rights based on the estimated standalone selling price of the performance obligations. During the
year ended December 31, 2021, the additional non-cash consideration received of $35.5 million, which is representative of previously constrained variable consideration, was allocated to each of the
ten performance obligations under the arrangement with Arcaea of $3.6 million each consistent with the initial relative selling price allocation. Unexercised material rights are recorded as non-current
deferred revenue until such time as the parties execute a TDP conveying a commercial license.
Upon the execution of a TDP underlying a material right,
the Company is obligated to provide technical research and development services under the TDP and a license to applicable patents and other intellectual property designed and developed under the TDP. The technical research and development services
and license provided
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under a TDP are highly interdependent and interrelated with one another. Without the Companys knowledge, expertise, and platform, there would not be a licensable strain or other
commercializable product to transfer to Arcaea. Further, Arcaea has rights to development intellectual property created as part of each TDP, irrespective of the result of the development. Therefore, each executed TDP underlying a material right
consists of one combined performance obligation for the technical research and development services and license to be provided by the Company.
For each
TDP underlying a material right, the transaction price consists of variable consideration for the most likely amount of estimated consideration to be received under the cost-plus arrangement and non-cash
consideration allocated to the material rights. As the services performed by the Company under a TDP create or enhance an asset that Arcaea controls as the asset is created or enhanced, the Company satisfies the performance obligation and recognizes
revenue over time. The Company uses an input method that compares total costs incurred relative to total estimated cost to complete to estimate progress under the contract. Any revisions to the estimated total budgeted costs to complete, and the
resulting impact to revenue recognition, are reflected in the period of the change through a cumulative catch-up adjustment.
As of December 31, 2021, the Company had a deferred revenue balance of $47.4 million with Arcaea. During the year ended December 31, 2021, the
Company recognized revenue of $3.7 million from services provided to Arcaea.
Allonnia, LLC
Summary of Arrangement
In December 2019, the Company
entered into (i) an Intellectual Property Contribution Agreement (Allonnia IP Agreement) that granted Allonnia a license to certain of the Companys intellectual property, (ii) a Technical Development Agreement
(Allonnia TDA) that establishes the terms under which the Company is providing technical development services, and (iii) a Common Unit Issuance Agreement (CUIA) which provides for the issuance of common units of Allonnia
to the Company in exchange for the license rights granted under the Allonnia IP Agreement. Contemporaneous with these agreements, Allonnia entered into a Series A Preferred Unit Purchase Agreement under which Allonnia sold 2,970,000 Series A
Preferred Units to certain of the Companys investors, as well as a third-party investor, for aggregate proceeds of approximately $33.0 million. Allonnia also agreed to issue an additional 630,000 Series A Preferred Units to a strategic
partner as compensation for the delivery of future services to Allonnia. The Series A Preferred Unit Purchase Agreement also provided for the sale and issuance of up to an additional 5,400,000 Series A Preferred Units subsequent to the initial
closing. In 2020, Allonnia issued an additional 1,844,911 Series A Preferred Units, 1,664,911 of which were sold for aggregate proceeds of $18.5 million and 180,000 of which were issued in exchange for the rights to certain intellectual
property which will vest based on the achievement of milestones associated with the development of the intellectual property received. In 2021, Allonnia issued an additional 22,500 Series A Preferred Units for aggregate proceeds of $0.2 million
and closed their Series A Preferred Unit financing.
Under the Allonnia IP Agreement, the Company licensed intellectual property to Allonnia for use in
the development or the production of its products that the parties will subsequently agree to develop under TDPs. The license rights provide Allonnia with the ability to commercialize the specified products from the corresponding strain or enzyme,
which can only be developed by the Company under the Allonnia TDA. The Company received 3,600,000 common units as consideration for the license upon execution of the Allonnia IP Agreement and an additional 1,867,411 common units during the year
ended December 31, 2021 in connection with the closing of the Series A preferred unit financing.
Under the Allonnia TDA, the parties jointly agree,
through equal representation on a joint steering committee, on TDPs for specific strains and enzymes, in which the Company will perform agreed upon development services in return for consideration on a cost-plus basis for all services provided.
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Accounting Analysis
The common unit investment in Allonnia is considered an equity method investment as a result of the Companys ability to exercise significant influence
over Allonnias financial and operating policies through its ownership of common units. The initial carrying value of the equity method investment in Allonnia is the fair value of the common units of $24.5 million received in exchange for
the Allonnia IP Agreement which, as discussed below, was accounted for as deferred revenue at inception. The fair value of Allonnias common units was determined at inception of the agreements using the option pricing method. The option pricing
method used a back-solve methodology to infer the total equity value based on the pricing of the Series A Preferred Unit financing, which was contemporaneous with the Allonnia IP Agreement. Further, the Company determined the rights to up to an
additional 5,400,000 common units did not meet the definition of a freestanding financial instrument and are not representative of a derivative. The right to the additional common units is considered variable consideration that is fully constrained
at inception and until the contingencies related to the issuance of the additional shares are resolved. This contingency was resolved in 2021 when the Company received an additional 1,867,411 common units in connection with the closing of the Series
A preferred unit financing.
The Series A Preferred Units issued by Allonnia receive a liquidation preference prior to common units. As such, the Company
concluded that this represents a substantive profit-sharing arrangement and the Company is recognizing earnings and losses on the equity method investment using the HLBV method. The Company recorded a loss on equity method investment of
$24.5 million in 2019 and $12.7 million in 2021 as a result of the application of the HLBV method. The loss allocated to the Company primarily relates to Allonnias accounting for the non-cash
consideration related to the Allonnia IP Agreement as in-process research and development, which resulted in the full value of the Companys intellectual property contribution being expensed in the year
that the shares were issued. As of December 31, 2021, the carrying value of the equity method investment in Allonnia has been reduced to zero. There is no commitment for the Company to provide further financial support to Allonnia and therefore
the carrying value of the equity method investment will not be reduced below zero.
The relationship with Allonnia is a vendor-customer relationship and
is within the scope of ASC 606 as the provision of services and corresponding license rights are considered a part of the Companys ordinary activities and the common units represent non-cash
consideration. While the Allonnia TDA has been executed by the parties and provides the payments terms for future services, the Allonnia TDA does not provide for any transfer of goods or services between the parties. However, the Company will
provide licenses and services upon execution of the contemplated TDPs. Accordingly, the Company concluded that the Allonnia TDA met the definition of a contract under ASC 606 and each TDP executed under the Allonnia TDA will be accounted for in
accordance with ASC 606.
The Companys performance obligations under the contract consist of a ten material rights related to the estimated number
of TDPs the parties expect to execute under the Allonnia TDA. The material rights represent an advance payment for the license rights which will be granted upon the execution of each TDP. As there is no additional payment for these license rights
upon execution of a TDP, the Company has determined that there is a material right associated with each of the contemplated future TDPs. The Company has allocated $2.5 million of the upfront non-cash
consideration to each of the ten performance obligations under the contract based on the estimated standalone selling price of the performance obligations. Unexercised material rights are recorded as
non-current deferred revenue until such time as the parties execute a TDP.
Upon the execution of each TDP, the
Company is obligated to provide development services under the TDP and a license to applicable patents and other intellectual property to the ingredient developed under the plan. The license and research and development services under a TDP are
highly interdependent and interrelated with one another. Without the Companys knowledge, expertise, and platform, there would not be a licensable strain or other commercializable product to transfer to Allonnia. Further, Allonnia has rights to
all development intellectual property created as part of each TDP, irrespective of the result of the development. Therefore, each
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executed TDP consists of one combined performance obligation for the license and research and development services to be performed by the Company.
For each TDP, the transaction price consists of variable consideration for the most likely amount of estimated consideration to be received under the
cost-plus arrangement and the $2.5 million allocation of the fixed non-cash consideration. As the services performed by the Company create or enhance an asset that Allonnia controls as the asset is
created or enhanced, the Company satisfies the performance obligation and recognizes revenue over time. The Company uses an input method that compares total costs incurred relative to total estimated cost to complete to estimate progress under the
contract. Any revisions to the estimated total budgeted costs to complete, and the resulting impact to revenue recognition, are reflected in the period of the change through a cumulative catch-up adjustment.
In 2021, the additional non-cash consideration of $12.7 million, which represents previously constrained variable consideration, was allocated to all of the performance obligations consistent with the
initial relative selling price allocation and a cumulative catch up was recognized for the TDPs in process.
As of December 31, 2021 and 2020, the
Company had a deferred revenue balance of $38.0 million and $26.1 million, respectively, with Allonnia. During the years ended December 31, 2021, 2020 and 2019, the Company recognized revenue of $5.1 million, $5.0 million
and $0 million, respectively, from services provided to Allonnia.
Motif FoodWorks, Inc.
Summary of Arrangement
In September 2018, the Company
entered into (i) an Intellectual Property Contribution Agreement (Motif IP Agreement) with Motif that granted Motif a license to certain of the Companys intellectual property and (ii) a Technical Development Agreement
(Motif TDA) that establishes the terms under which the Company is providing technical development services.
Under the Motif IP Agreement, the
Company licensed intellectual property to Motif for use in strain development to produce ingredients that the parties will subsequently agree to develop under TDPs. The license rights provide Motif with the ability to commercialize the specified
ingredients from the corresponding strain, which can only be developed by the Company under the Motif TDA. In return for the license to the intellectual property, Motif granted the Company 9,000,900 shares of common stock. Concurrent with the Motif
IP Agreement, Motif also sold 8,100,720 shares of Series A preferred stock to certain of the Companys investors, as well as third-party investors, for aggregate proceeds of approximately $90.0 million.
The Motif TDA governs the procurement of the Companys expertise and technical development services to collaborate in the research, development, and
commercialization of specified ingredients. Under the Motif TDA, the parties jointly agree on TDPs for specific ingredients, in which the Company will perform agreed upon development services in return for consideration on a cost-plus fixed margin
basis for all services provided. At inception, the Company estimated that it would execute ten TDPs with Motif.
Accounting Analysis
The investment in Motif common stock is considered an equity method investment as a result of the Companys ability to exercise significant influence over
the financial and operating policies through its common stock ownership. The initial carrying value of the equity method investment in Motif is the fair value of the common stock received in exchange for the Motif IP Agreement of $65.1 million
which, as discussed below, is being accounted for as non-cash consideration under ASC 606. As Motifs Series A preferred stockholders receive a liquidation preference prior to common stock, the Company
concluded that this represents a substantive profit-sharing arrangement. Accordingly, the Company is recognizing earnings and losses on the equity method
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investment using the HLBV method. The Company recorded a loss on equity method investment of $65.1 million from inception through December 31, 2018 which reduced the carrying value to
zero. The loss allocated to the Company primarily relates to Motifs accounting for the non-cash consideration related to the Motif IP Agreement as in-process
research and development, which resulted in the full value of Companys intellectual property contribution being expensed in the period ended December 31, 2018, at which time the carrying value of the equity method investment in Motif had
been reduced to zero. There is no commitment for the Company to provide further financial support to Motif and therefore the carrying value of the equity method investment will not be reduced below zero. As a result, no loss was recognized during
the years ended December 31, 2021, 2020 and 2019 on the equity method investment.
The overall arrangement with Motif is a vendor-customer
relationship and is within the scope of ASC 606 as the provision of development services and corresponding license rights are considered a part of the Companys ordinary activities. The licenses contemplated under the Motif IP Agreement are
contingent upon a TDP being agreed to by the parties under the Motif TDA and only relate to strains that are developed under a TDP. While the TDPs require approval by the parties, the parties initially estimated that ten TDPs would be negotiated
under the arrangement.
The Companys performance obligations under the Motif IP Agreement consist of ten material rights, related to the initial set
of ingredients that the parties desired to develop in the first two years. The material rights represent an advance payment for the license rights which will be granted upon the execution of each TDP. As there is no additional payment for these
license rights upon execution of a TDP, the Company has determined that there is a material right associated with each of the contemplated TDPs. The common stock received under the Motif IP Agreement is considered
non-cash consideration and has been recognized at fair value. The Company determined the fair value of the common stock was $65.1 million at inception of the agreement with the assistance of a third-party
valuation specialist, which was initially recorded as non-current deferred revenue. The option pricing model used a back-solve methodology to determine the total equity value based on the pricing of the Series
A financing, which was contemporaneous with the Motif IP Agreement. The Company has allocated $6.5 million to each of the ten material rights. The Company allocated the transaction price based on the estimated standalone selling price of the
material rights which is, in turn, based on the intrinsic value of the right and the probability of exercise.
Upon the execution of each TDP, the Company
is obligated to provide development services under the TDP and a license to applicable patents and other intellectual property to the ingredient developed under the plan. The license and research and development services under a TDP are highly
interdependent and interrelated with one another. Without the Companys knowledge, expertise and platform, there would not be a licensable strain or other commercializable product to transfer to Motif. Further, Motif has rights to all
development intellectual property created as part of each TDP, irrespective of the result of the development. Therefore, each executed TDP consists of one combined performance obligation for the license and research and development services to be
performed by the Company.
For each TDP, the transaction price consists of variable consideration for the most likely amount of estimated consideration to
be received under the cost-plus arrangement and the $6.5 million which was allocated to the associated material right under the Motif IP Agreement. As the services performed by the Company create or enhance an asset (i.e., the specified
ingredient) that Motif controls as the asset is created or enhanced, the Company satisfies the performance obligation and recognizes revenue over time. The Company uses an input method that compares total costs incurred relative to total estimated
cost to complete to estimate progress under the contract. Any revisions to the estimated total budgeted costs to complete, and the resulting impact to revenue recognition, are reflected in the period of the change through a cumulative catch-up adjustment.
As of December 31, 2021 and 2020, the Company had a deferred revenue balance of
$52.2 million and $54.0 million, respectively, with Motif. During the years ended December 31, 2021, 2020 and 2019, the Company recognized revenue of $20.2 million, $20.8 million and $19.0 million, respectively, from
services provided to Motif.
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Genomatica, Inc.
2016 Genomatica Agreement
In 2016, the Company purchased
Series A preferred stock of Genomatica, Inc. (Genomatica), a biotechnology company specializing in the development and manufacturing of intermediate and specialty chemicals from both sugar and alternative feedstocks. The Company also
entered into a Collaboration Agreement with Genomatica (Genomatica Collaboration) in connection with the financing. The Genomatica Collaboration was entered into to share expertise on biotechnology solutions. Specifically, Genomatica
provided the Company with scale-up and process optimization functions, and the Company has provided Genomatica with certain technology development functions generally centered on high throughput strain
engineering capabilities. The Genomatica Collaborations focus was on obtaining new customers for either party that could benefit from the combined expertise of both parties, and the agreement provides for profit-sharing allocations between
Genomatica and the Company depending on the category of the potential product. Each party is responsible for their own costs incurred under an agreed upon TDP.
2018 Genomatica Agreement
In September 2018, the Company
entered into a stock purchase agreement with Genomatica under which it received $40.0 million of Series B preferred stock from Genomatica. In lieu of cash consideration, the Company entered into a Foundry Terms of Service Agreement
(Genomatica FSA) with Genomatica in which the Company would provide up to $40.0 million in services at no charge to Genomatica (Initial Prepayment). The Genomatica FSA terminated the Genomatica Collaboration and changed
the pricing terms for work performed under TDPs to a cost-plus fixed margin agreement. Genomatica can apply a portion of the $40.0 million in prepaid services to outstanding invoices under the Genomatica FSA, subject to certain limitations that
require cash payment for services over certain monthly thresholds. Further, while the Genomatica FSA replaced the Genomatica Collaboration, any fees that would have been paid to or by the Company under contracts previously governed by the Genomatica
Collaboration continued to be shared between the parties. These amounts are either (i) added to, if payable to the Company, or (ii) reduced from, if payable to Genomatica, the balance of the prepaid services over the term of the
arrangement, with certain restrictions. As of December 31, 2021 and 2020, the Company has received $8.3 million and $6.9 million, respectively, under the Genomatica FSA. All contracts previously governed by the Genomatica
Collaboration have ended as of December 31, 2021, therefore, no additional payments are expected.
Accounting Analysis
The Company concluded the preferred stock investment was not in-substance common stock and therefore did not qualify
for accounting as an equity method investment. Rather, the Company concluded the preferred stock investment should be accounted for as an equity security as it represents an ownership interest in Genomatica that is not mandatorily redeemable nor
does the Company have the unilateral right to redeem the preferred stock. Genomaticas preferred stock is not exchange-traded and does not have a readily determinable fair value. Therefore, the Company accounts for the Genomatica preferred
stock under the measurement alternative for equity investments that do not have a readily determinable fair value, which in this case is at historical cost. As of December 31, 2021 and 2020, the cost of the investment in Genomaticas
preferred stock was $55.0 million and is included in investments on the Consolidated Balance Sheets. As of December 31, 2021 and 2020, no adjustments have been recognized related to the preferred stock investment as a result of the
application of the measurement alternative.
Under the Genomatica Collaboration, the Company was entitled to receive a portion of fees earned from third
party customers of Genomatica that were within the scope of the agreement. The Company accounted for the collaboration under ASC 808, however the Company applied ASC 606 by analogy for measurement and recognition purposes. Under the Genomatica
Collaboration, the Companys promises consisted of (i) licenses to the Companys intellectual property, related to the specified development work, and (ii) research and
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development services. The Company determined that there was a single, combined performance obligation consisting of research services and licenses to certain intellectual property. The Company
recognized the revenue for the combined performance obligation using an over-time input method, as the Companys performance under the contract created or enhanced the target product or strain as such product or strain was developed. The
Company measured progress based on the cost incurred relative to total forecasted cost.
The Genomatica FSA represents a modification to the Genomatica
Collaboration that resulted in a change in transaction price from milestones to a cost-plus fixed margin structure. The Genomatica FSA did not result in the addition of any distinct promised goods or services, and the Companys remaining
obligation post-modification was to finish the partially satisfied development work that had commenced under the Genomatica Collaboration. This performance obligation was satisfied during the year ended December 31, 2019 and the parties have
entered into subsequent TDPs under the Genomatica FSA.
As of December 31, 2021 and 2020, the Company had a deferred revenue balance of
$17.1 million and $30.1 million, respectively, with Genomatica. During the years ended December 31, 2021, 2020 and 2019, the Company recognized revenue of $12.9 million, $9.4 million and $6.2 million, respectively, from
services provided to Genomatica.
Joyn Bio, LLC
Summary of Arrangement
In September 2017, the Company and
certain other investors formed Cooksonia for the purposes of holding the Companys investment in Joyn. Concurrently, Cooksonia entered into a commitment agreement with Bayer CropScience LP (Bayer) to form Joyn. Joyn is focused on
research, development, discovery, and commercialization of engineered microbes for use in agriculture. The initial program uses advanced techniques in biology to study and engineer naturally occurring soil microbes and their nitrogen-fixing genes to
enable crops to produce their own fixed nitrogen and reduce the nitrogen fertilizer required.
The Company contributed $5.0 million in cash and
certain intellectual property to Cooksonia in exchange for a 70% equity interest in Cooksonia (Class A Units). Cooksonia received $20.0 million in cash from another investor, who is a related party of the Company, for a 20%
equity interest in Cooksonia (Class B Units). Cooksonia also received certain intellectual property from Genomatica and issued Genomatica a 10% equity interest in Cooksonia (Cooksonia Class C Units) and paid
Genomatica $5.0 million in cash. Subsequently, Cooksonia contributed $20.0 million and all intellectual property received from the Company and Genomatica in exchange for a 50% equity interest in Joyn. Bayer contributed $20.0 million
in cash funding plus specified intellectual property. In addition, Bayer committed to contribute up to an additional $60.0 million to be paid subject to certain funding procedures. In return, Bayer obtained a 50% equity interest in Joyn. The
agreements may be terminated by mutual agreement, following a change in control, and for breach.
Joyn is governed by a Board of Managers (Joyn
Board) comprised of equal representation of the Company and Bayer. The Joyn Board has all the rights, powers, obligations, and authority to manage the business and affairs of Joyn.
The Company also entered into a Foundry Services Agreement (Joyn FSA) with Joyn under which the Company will provide Joyn with technical services
and preferred access to the Companys facilities. Joyn paid the Company a non-refundable $20.0 million prepayment for services to be provided under the Joyn FSA (Joyn Prepaid Services).
The Joyn Prepaid Services can be utilized for technical services performed by the Company, its subcontractors, and third parties involved in the performance of the overall technical services. Amounts due to the Company are applied to the balance of
Joyn Prepaid Services as earned. During the year ended December 31, 2019, Joyn made an additional $15.0 million prepayment for services (Joyn Additional Prepaid Services). Under certain Joyn termination scenarios, any amount of
unused Joyn Additional Prepaid Services shall be repaid by the Company to Joyn.
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Accounting Analysis
From inception, the Companys investment in Cooksonia has represented a controlling financial interest, resulting in consolidation of Cooksonia within the
Companys consolidated financial statements (see Note 11). The initial cash and in-kind contributions the Company made to Cooksonia have been recorded at carrying value as the transaction was with
entities under common control. All assets of Cooksonia after the initial investments, net of the amounts paid to Genomatica, were contributed to Joyn for a 50% equity interest in Joyn. The initial carrying value of the Companys equity interest
in Cooksonia was $13.1 million, comprised of the initial $5.0 million cash investment and an $8.1 million adjustment for Cooksonias claim on net assets in accordance with ASC 810, Consolidation (ASC 810)
recognized to reflect a certain investors liquidation preference in a termination event that represents a substantive profit-sharing agreement. The initial carrying value of the non-controlling interest
was comprised of cash and intellectual property contributions from the other investors of $29.7 million, less the $8.1 million adjustment for the non-controlling interest holders claim on the
net assets of Cooksonia.
Cooksonia accounts for its 50% equity interest in Joyn as an equity method investment based on the size of its equity interest
and its influence on the board of directors. The equity method investment in Joyn was recorded at an initial carrying value of $97.9 million, which is the fair value of Cooksonias interest in Joyn. The fair value was determined by
management with the assistance of a third-party valuation specialist. The option pricing model used a back-solve methodology to determine the total equity value based on the pricing of the Class B Units which were exchanged for cash. The
license of intellectual property to Joyn has been accounted for under ASC 606 as described below. Upon liquidation, the net assets of Joyn are not distributed in accordance with each partys respective ownership interest. Depending on the
circumstances or type of liquidation event, Bayer or Cooksonia may receive certain preference payments or priority in the assets that are distributed. These preferences represent a substantive profit-sharing arrangement and, accordingly, Cooksonia
recognizes earnings and losses on its equity method investment using the HLBV method. Refer to Note 11 for additional details on Cooksonias investment in Joyn.
The Company accounts separately under ASC 606 for Cooksonias contribution of its intellectual property and the services performed by the Company under
technical project plans governed by the Joyn FSA. The Company accounts for the intellectual property sale and the technical services separately as the two agreements were not negotiated with a single commercial objective, the consideration under
each agreement is not interdependent, and the intellectual property contribution from Cooksonia is separate and distinct from the research and development services performed under the Joyn FSA.
The Company considers the granting of licenses to the Companys intellectual property as part of its ordinary business activities and, therefore,
Cooksonias contribution of intellectual property to Joyn represents a contract with a customer. The intellectual property contains multiple licenses for which control transfers at inception and all revenue associated with the licenses was
recognized during the year ended December 31, 2017.
The Joyn FSA functions as a master services agreement that provides the framework for the
ongoing research and development services relationship between the Company and Joyn. The Joyn FSA does not create a contract under ASC 606 as it does not identify goods or services to be performed nor does it define consideration under the contract.
Upon the execution of a technical project plan under the Joyn FSA, the arrangement qualifies as a contract under ASC 606.
The Company accounts for each
technical project separately. Each technical project plan provides for distinct services in the context of the contract, has been separately negotiated with Joyn, focuses on different specified strains with separate scopes of work, and has its own
budget. The sole performance obligation under each individual technical project plan consists of the research and development services as the requisite licenses were transferred prior to the execution of the technical project plans. The transaction
price for each technical project plan is determined at plan inception based on the consideration that the Company negotiated in exchange for the
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services to be provided. The Companys performance under each technical project plan creates or enhances assets under Joyns control. Joyn receives the benefits of the output of the
research and development services which allow Joyn to make strategic business decisions on the direction of each product candidate. Therefore, the Company satisfies the respective performance obligations and recognizes revenue over time.
As of December 31, 2021 and 2020, the Company had a deferred revenue balance of $4.6 million and $9.9 million, respectively, with Joyn,
representing the remaining balance of the prepaid services. The entire deferred revenue balance remains refundable under certain termination scenarios. During the years ended December 31, 2021, 2020 and 2019, the Company recognized revenue of
$5.3 million, $7.3 million and $9.3 million, respectively, from services provided to Joyn for which the balance was applied against deferred revenue.
Amyris, Inc.
During 2017, the Company terminated
its collaborative relationship with Amyris, Inc. (Amyris) as provided in the Amyris Collaboration Agreement and executed a settlement arrangement (Partnership Agreement) under which the Company is entitled to receive
(i) value share payments owed to the Company under the Amyris Collaboration Agreement, (ii) payments of $0.8 million each quarter commencing on December 31, 2018 through the quarter ended September 30, 2022, and
(iii) payments due under an interest bearing $12.0 million promissory note.
The parties amended the agreements during the year ended
December 31, 2020 to defer certain payments and provide Amyris waivers for noncompliance with certain covenants. As of December 31, 2020, the Company was owed (i) the $12.0 million principal balance on the promissory note which
matures on October 19, 2022 and (ii) payments under the Partnership Agreement, as amended, which includes quarterly payments of $0.2 million to $0.3 million through September 2022 and an end of term payment of $9.8 million
on October 19, 2022.
The Company concluded that all amounts due are a settlement for accounting purposes as the payments are being made without any
obligation from the Company to Amyris. The balance due on the promissory note and right to payments due under the Partnership Agreement are not recognized in the Companys financial statements until the gain is realized. The Company recognizes
any payments made under the Partnership Agreement and promissory note, including interest, when the cash is received as a component of other (expense) income. On November 15, 2021, the Company received a $22.8 million payment from Amyris
in full settlement of all amounts due under the Partnership Agreement including (i) the $12.0 million principal balance on the promissory note and all interest due, (ii) all quarterly payments due under the Partnership Agreement
through September 2022 and (iii) an end of term payment of $9.8 million. Payments received from Amyris are recorded as gain on settlement of partnership agreement in the Consolidated Statements of Operations and Comprehensive Loss.
Synlogic, Inc.
Summary of Arrangement
In June 2019, the Company entered into several agreements with Synlogic, a publicly traded clinical-stage biopharmaceutical company focused on advancing drug
discovery and development for synthetic biology-derived medicines. The Company entered into a Subscription Agreement with Synlogic whereby it purchased 6,340,771 shares of common stock at $9.00 per share for a total purchase price of
$57.1 million, which represented a 19.9% equity interest in Synlogic. The Company also entered into a Warrant Agreement whereby it received the right to purchase 2,548,117 shares of common stock of Synlogic at an exercise price of $9.00 per
share. The Company made a non-refundable prepayment related to the exercise price of the warrant equal to $8.99 per share for a total payment of $22.9 million. The warrant is only exercisable to the
extent the Companys interest in Synlogic does not exceed 19.99%. The Company also entered into a Foundry Services Agreement (Synlogic FSA) whereby Synlogic provided $30.0 million in cash as a
non-refundable prepayment for Foundry services. The prepaid
F-57
Foundry services can be utilized for development of collaboration strains. Services performed under the services agreement will be applied to the prepaid amount based on the contractual rates
included in the contract, based on costs incurred plus a fixed margin. Work will be performed under the Synlogic FSA pursuant to TDPs. Each TDP will pursue the development of a specific collaboration strain and/or production protocol. The Synlogic
FSA will terminate upon the earlier of the exhaustion of the prepayment amount in full or the fifth anniversary of the effective date of the agreement and may be extended in certain circumstances.
Accounting Analysis
The overall arrangement with
Synlogic includes the Subscription Agreement whereby the Company purchased shares of Synlogic common stock, the Warrant Agreement whereby the Company prepaid a significant portion of the exercise price of the warrant to purchase Synlogic common
stock, which is non-refundable, and the Synlogic FSA whereby the Company will perform services for Synlogic. The Company concluded that these agreements should be considered one arrangement for accounting
purposes as they were entered into at the same time and negotiated as a package with a single commercial objective.
At inception, the common stock
investment in Synlogic was considered an equity method investment as the Company did not have a controlling financial interest in Synlogic but did have the ability to influence the financial and operating policies through its ownership of common
stock. The Company elected to apply the fair value option to account for the equity method investment as the fair value of Synlogics common stock is objectively determinable based on quoted market prices in an active market for the identical
securities. At inception, the fair value of the equity method investment in Synlogic was recorded at $35.8 million as a component of equity method investments on the Consolidated Balance Sheet. Beginning with the third quarter of 2021, due to a
decrease in the level of ownership, the investment no longer qualifies for the equity method and was reclassified from equity method investments to investments on the Condensed Consolidated Balance Sheets, and from loss on equity method investments
to (loss) gain on investments on the Condensed Consolidated Statements of Operations and Comprehensive Loss for all periods presented. However, the Company continues to apply the fair value option to account for its investments in Synlogic. The
Company has also elected to apply the fair value option to account for the warrant to purchase Synlogic common stock, which at inception was recorded at $14.4 million as a component of investments on the Consolidated Balance Sheet. See Note 5
for additional information related to the fair value measurements of Synlogic common stock and the Synlogic warrants and Note 10 for additional information related to the net gains and losses recognized during the periods presented related to these
securities.
The Company concluded that the TDPs represent contracts with a customer and will be accounted for under ASC 606. At inception, Synlogic
prepaid $30.0 million for services under the Synlogic FSA. The prepaid services were reduced by $29.8 million, which represents the excess of the aggregate $80.0 million the Company paid to purchase Synlogics common stock and
warrant over the respective fair values of those instruments. This resulted in a deferred revenue balance of $0.2 million at inception, which is being recognized over the period in which the Company will provide services to Synlogic. The
Company recognized nominal amounts of revenue during each of the years ended December 31, 2021, 2020 and 2019 from services provided to Synlogic. As of December 31, 2021 and 2020, the Company had a deferred revenue balance of less than
$0.1 million with Synlogic.
21. Employee Benefit Plan
The Company has a 401(k) retirement plan covering substantially all employees. Under the retirement plan, employees make voluntary contributions and the
Company makes a 5% non-elective contribution for all employees based on compensation, subject to IRS contribution limits. For the years ended December 31, 2021, 2020 and 2019, the Company contributed
$3.7 million, $2.2 million and $1.6 million, respectively, to the retirement plan.
F-58
22. Income Taxes
For the years ended December 31, 2021, 2020 and 2019, the loss before income taxes consisted of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, |
|
|
|
2021 |
|
|
2020 |
|
|
2019 |
|
Domestic |
|
$ |
(1,837,497 |
) |
|
$ |
(124,834 |
) |
|
$ |
(119,835 |
) |
Foreign |
|
|
(625 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
(1,838,122 |
) |
|
$ |
(124,834 |
) |
|
$ |
(119,835 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
For the years ended December 31, 2021, 2020 and 2019, the Company incurred the following income tax (benefit) expense (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, |
|
|
|
2021 |
|
|
2020 |
|
|
2019 |
|
Current state income tax |
|
$ |
1 |
|
|
$ |
26 |
|
|
$ |
22 |
|
Deferred federal income tax |
|
|
(413 |
) |
|
|
581 |
|
|
|
|
|
Deferred state income tax |
|
|
(912 |
) |
|
|
1,282 |
|
|
|
|
|
Deferred foreign income tax |
|
|
(156 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax (benefit) expense |
|
$ |
(1,480 |
) |
|
$ |
1,889 |
|
|
$ |
22 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
A reconciliation of income tax (benefit) expense computed at the statutory corporate income tax rate to the effective income
tax rate for the years ended December 31, 2021, 2020 and 2019 is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, |
|
|
|
2021 |
|
|
2020 |
|
|
2019 |
|
Federal income tax at statutory rate |
|
|
21.0 |
% |
|
|
21.0 |
% |
|
|
21.0 |
% |
State income tax |
|
|
4.5 |
% |
|
|
4.5 |
% |
|
|
4.2 |
% |
Change in valuation allowance |
|
|
(23.9 |
)% |
|
|
(31.3 |
)% |
|
|
(25.2 |
)% |
Executive compensation |
|
|
(2.0 |
)% |
|
|
|
|
|
|
|
|
Equity investments |
|
|
(0.7 |
)% |
|
|
(0.6 |
)% |
|
|
(5.7 |
)% |
Tax credits |
|
|
0.9 |
% |
|
|
4.8 |
% |
|
|
4.4 |
% |
Non-deductible expenses and change in fair value of
warrant liability |
|
|
0.9 |
% |
|
|
(0.2 |
)% |
|
|
(0.1 |
)% |
Other expenses |
|
|
(0.6 |
)% |
|
|
0.3 |
% |
|
|
1.4 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Effective tax rate |
|
|
0.1 |
% |
|
|
(1.5 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-59
The Companys deferred tax assets and liabilities consist of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, |
|
|
|
2021 |
|
|
2020 |
|
Deferred tax assets: |
|
|
|
|
|
|
|
|
Net operating loss carryforwards |
|
$ |
174,127 |
|
|
$ |
91,467 |
|
Tax credit carryforwards |
|
|
37,455 |
|
|
|
20,338 |
|
Accrued expenses |
|
|
2,690 |
|
|
|
1,265 |
|
Deferred revenue |
|
|
45,928 |
|
|
|
28,590 |
|
Stock-based compensation |
|
|
318,049 |
|
|
|
|
|
Amortizable intangibles |
|
|
3,834 |
|
|
|
4,198 |
|
Tenant allowance |
|
|
2,927 |
|
|
|
2,206 |
|
|
|
|
|
|
|
|
|
|
Deferred tax assets before valuation allowance |
|
|
585,010 |
|
|
|
148,064 |
|
Valuation allowance |
|
|
(583,107 |
) |
|
|
(143,827 |
) |
|
|
|
|
|
|
|
|
|
Deferred tax assets, net of valuation allowance |
|
|
1,903 |
|
|
|
4,237 |
|
Deferred tax liabilities: |
|
|
|
|
|
|
|
|
Amortizable intangibles |
|
|
(4,722 |
) |
|
|
|
|
Property and equipment |
|
|
(830 |
) |
|
|
(830 |
) |
Basis differences |
|
|
(1,522 |
) |
|
|
(5,270 |
) |
|
|
|
|
|
|
|
|
|
Deferred tax liabilities |
|
|
(7,074 |
) |
|
|
(6,100 |
) |
|
|
|
|
|
|
|
|
|
Net deferred taxes |
|
$ |
(5,171 |
) |
|
$ |
(1,863 |
) |
|
|
|
|
|
|
|
|
|
Activity in the deferred tax assets valuation allowance is summarized as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning of Period |
|
|
Additions |
|
|
End of Period |
|
Deferred tax assets valuation allowance: |
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31, 2021 |
|
$ |
143,827 |
|
|
$ |
439,280 |
|
|
$ |
583,107 |
|
Year ended December 31, 2020 |
|
$ |
104,745 |
|
|
$ |
39,082 |
|
|
$ |
143,827 |
|
The Company has evaluated the positive and negative evidence bearing upon its ability to realize the deferred tax assets. The
Company considered its history of cumulative net losses incurred since inception and has concluded that it is more likely than not that it will not realize the benefits of the deferred tax assets. Accordingly, a valuation allowance has been
established against the deferred tax assets as of December 31, 2021 and 2020 that are not expected to be realized. The Company reevaluates the positive and negative evidence at each reporting period. The valuation allowance increased on a net
basis by approximately $439.3 million during the year ended December 31, 2021 primarily due to an increase in the deferred tax asset related to stock-based compensation and the increase in the net operating losses and tax credits
carryforwards.
As of December 31, 2021, the Company had federal net operating loss carryforwards of approximately $665.2 million, of which
$139.2 million begin to expire in 2029. The Company has approximately $526.0 million of federal net operating losses as of December 31, 2021 that can be carried forward indefinitely. As of December 31, 2021, the Company had state
net operating loss carryforwards of approximately $529.3 million, of which $485.9 million begin to expire in 2029. The Company has approximately $43.4 million of state net operating losses as of December 31, 2021 that can be
carried forward indefinitely.
As of December 31, 2021, the Company had federal research and development tax credit carryforwards of approximately
$23.3 million which begin to expire in 2029. As of December 31, 2021, the Company also had state research and development and investment tax credit carryforwards of approximately $18.0 million which begin to expire in 2030.
F-60
Under Sections 382 and 383 of the U.S. Internal Revenue Code, if a corporation undergoes an ownership
change, the corporations ability to use its pre-change net operating loss carryforwards and other pre-change tax attributes, such as research tax credits, to
offset its post-change income and taxes may be limited. In general, an ownership change generally occurs if there is a cumulative change in its ownership by 5% stockholders that exceeds 50 percentage points over a rolling three-year period. Similar
rules may apply under U.S. state tax laws. The Company may have experienced an ownership change in the past and may experience ownership changes in the future as a result of future transactions in its share capital, some of which may be outside of
the Companys control. As a result, if the Company earns net taxable income, the Companys ability to use its pre-change net operating loss carryforwards, or other
pre-change tax attributes, to offset U.S. federal and state taxable income and taxes may be subject to significant limitations.
We assess the impact of various tax reform proposals and modifications to existing tax treaties in all jurisdictions where we have operations to determine the
potential effect on our business and any assumptions we have made about our future taxable income. We cannot predict whether any specific proposals will be enacted, the terms of any such proposals or what effect, if any, such proposals would have on
our business if they were to be enacted. Beginning in 2022, the Tax Cuts and Jobs Act of 2017 eliminates the currently available option to deduct research and development expenditures and requires taxpayers to amortize them over five years. The U.S.
Congress is considering legislation that would defer the amortization requirement to future periods, however, we have no assurance that the provision will be repealed or otherwise modified.
The Company files tax returns as prescribed by the tax laws of the jurisdictions in which the Company operates. In the normal course of business, the Company
is subject to examination by federal and state jurisdictions, where applicable. There are currently no pending tax examinations. As of December 31, 2021, the Companys tax years are still open under statute from 2018 to the present in the
United States and 2016 to the present in the Netherlands. To the extent the Company has tax attribute carryforwards, the tax years in which the attribute was generated may still be adjusted upon examination by the Internal Revenue Service or state
taxing authorities to the extent utilized in a future period.
The Company accounts for uncertain tax positions using a more likely than not threshold for
recognizing and resolving uncertain tax positions. The evaluation of uncertain tax positions is based on factors that include, but are not limited to, changes in tax law, the measurement of tax positions taken or expected to be taken in tax returns,
the effective settlement of matters subject to audit, new audit activity and changes in facts or circumstances related to a tax position. The Company evaluates uncertain tax positions on an annual basis and adjusts the level of the liability to
reflect any subsequent changes in the relevant facts surrounding the uncertain positions. The Company accounts for interest and penalties related to uncertain tax positions as part of its provision for income taxes. As of December 31, 2021 and
2020, the Company had no recorded liabilities for uncertain tax positions and had no accrued interest or penalties related to uncertain tax positions. The Company does not expect a material change in unrecognized tax benefits in the next twelve
months.
23. Net Loss per Share
As a result of the
Business Combination, the Company has retroactively restated the weighted average shares outstanding prior to September 16, 2021 to give effect to the Exchange Ratio.
F-61
The Company computes net loss per share of the Class A common stock and Class B common stock using
the two-class method required for participating securities. The earnings per share amounts are the same for the different classes of common stock because the holders of each class are legally entitled to equal
per share distributions whether through dividends or liquidation. The calculation of basic and diluted earnings per common share are as follows (in thousands, except per share amounts):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31, |
|
|
|
2021 |
|
|
2020 |
|
|
2019 |
|
Numerator: |
|
|
|
|
|
|
|
|
|
|
|
|
Net loss attributable to Ginkgo Bioworks Holdings, Inc. stockholders, basic |
|
$ |
(1,830,047 |
) |
|
$ |
(126,609 |
) |
|
$ |
(119,327 |
) |
Change in fair value of warrant liabilities |
|
$ |
58,615 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss attributable to Ginkgo Bioworks Holdings, Inc. stockholders, diluted |
|
$ |
(1,888,662 |
) |
|
$ |
(126,609 |
) |
|
$ |
(119,327 |
) |
Denominator |
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding, basic |
|
|
1,359,848,803 |
|
|
|
1,274,766,915 |
|
|
|
1,149,000,417 |
|
Weighted average effect of dilutive outstanding warrants |
|
|
524,540 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding, diluted |
|
|
1,360,373,343 |
|
|
|
1,274,766,915 |
|
|
|
1,149,000,417 |
|
Basic net loss per share |
|
$ |
(1.35 |
) |
|
$ |
(0.10 |
) |
|
$ |
(0.10 |
) |
Diluted net loss per share |
|
$ |
(1.39 |
) |
|
$ |
(0.10 |
) |
|
$ |
(0.10 |
) |
The following potential common shares, presented based on amounts outstanding at each period end, were excluded from the
calculation of diluted net loss per share attributable to Ginkgo Bioworks Holdings, Inc. common stockholders for the periods presented because including them would have been anti-dilutive:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, |
|
|
|
2021 |
|
|
2020 |
|
|
2019 |
|
Warrants to purchase Class A common stock |
|
|
|
|
|
|
1,020,187 |
|
|
|
1,020,187 |
|
Outstanding stock options |
|
|
25,228,853 |
|
|
|
33,354,871 |
|
|
|
35,276,812 |
|
Unvested RSUs |
|
|
168,321,952 |
|
|
|
124,932,207 |
|
|
|
70,119,944 |
|
Unvested RSAs |
|
|
182,622 |
|
|
|
419,049 |
|
|
|
675,887 |
|
New Ginkgo and Sponsor earnout shares
(1) |
|
|
160,995,237 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
354,728,664 |
|
|
|
159,726,314 |
|
|
|
107,092,830 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
Represents earnout shares for which the vesting conditions have not been satisfied. |
F-62
24. Related Parties
Related party transactions included in the Consolidated Balance Sheets, excluding the Companys investments and equity method investments, are summarized
below (in thousands):
|
|
|
|
|
|
|
|
|
|
|
As of December 31, |
|
|
|
2021 |
|
|
2020 |
|
Accounts receivable: |
|
|
|
|
|
|
|
|
Joyn |
|
$ |
5 |
|
|
$ |
|
|
Motif |
|
|
3,020 |
|
|
|
2,403 |
|
Genomatica |
|
|
|
|
|
|
1,500 |
|
Allonnia |
|
|
849 |
|
|
|
1,309 |
|
Arcaea |
|
|
724 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
4,598 |
|
|
$ |
5,212 |
|
|
|
|
|
|
|
|
|
|
Deferred revenue, current and
non-current: |
|
|
|
|
|
|
|
|
Joyn |
|
$ |
4,608 |
|
|
$ |
9,862 |
|
Motif |
|
|
52,171 |
|
|
|
53,952 |
|
Genomatica |
|
|
17,111 |
|
|
|
30,128 |
|
Allonnia |
|
|
38,016 |
|
|
|
26,064 |
|
Arcaea |
|
|
47,356 |
|
|
|
|
|
Other equity investees |
|
|
1,559 |
|
|
|
72 |
|
|
|
|
|
|
|
|
|
|
|
|
$ |
160,821 |
|
|
$ |
120,078 |
|
|
|
|
|
|
|
|
|
|
Related party transactions included in the Consolidated Statements Operations and Comprehensive Loss, excluding the losses on
the Companys investments and equity method investments, are summarized below (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, |
|
|
|
2021 |
|
|
2020 |
|
|
2019 |
|
Foundry revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
Joyn |
|
$ |
5,254 |
|
|
$ |
7,273 |
|
|
$ |
9,349 |
|
Motif |
|
|
20,224 |
|
|
|
20,798 |
|
|
|
18,986 |
|
Genomatica |
|
|
12,868 |
|
|
|
9,431 |
|
|
|
6,248 |
|
Allonnia |
|
|
5,126 |
|
|
|
4,960 |
|
|
|
|
|
Arcaea |
|
|
3,676 |
|
|
|
|
|
|
|
|
|
Other equity investees |
|
|
13 |
|
|
|
73 |
|
|
|
685 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
47,161 |
|
|
$ |
42,535 |
|
|
$ |
35,268 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Refer to Notes 10 and 20 for additional details on the Companys investments and equity method investments held in its
related parties.
25. Subsequent Events
The Company
announced subsequent to year end a change in its reporting structure to formalize Concentric as a separate business unit. The purpose of the reorganization is to strengthen the Companys focus on the Biosecurity market opportunity which the
Company believes is broader than its current offering of the Concentric testing program. The Biosecurity business unit will initially consist of the Concentric platform along with additional biosecurity activities as they are developed potentially
including wastewater monitoring, supporting rapid vaccine readiness and future biology-based countermeasures for infectious disease. Beginning in the first quarter of 2022, the Company will report its segment results under two reportable segments:
Cell Programming / Foundry and Biosecurity.
F-63
On March 11, 2022, the Company entered into a definitive agreement to acquire FGen AG
(FGen), a Swiss company specializing in strain development and optimization. FGen has developed an ultra-high-throughput screening platform built on nanoliter reactor technology which the Company believes will enhance its cell screening
capabilities and potentially increase the likelihood of finding enzymes, pathways, and strains or cell lines that perform to diverse product specifications. Under the terms of the agreement, the Company will acquire 100% of the equity of FGen for
total consideration of $17.5 million, subject to certain adjustments, payable in New Ginkgo class A common stock, and additional contingent consideration up to $25.0 million related to, among other things, the successful integration and
deployment of the FGen technology across the Companys programs. The transaction is expected to close in April 2022.
F-64
GINKGO BIOWORKS HOLDINGS, INC.
84,346,092 Shares of Class A Common Stock
51,824,925 Shares of Class A Common Stock Underlying Warrants
17,325,000 Private Placement Warrants
Prospectus
May 13,
2022