Ginkgo Bioworks Holdings Inc

1. Basis of Presentation and Summary of Significant Accounting Policies

Business

The mission of Ginkgo Bioworks Holdings, Inc. (“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 Company’s platform comprises (i) equipment, robotic automation, software, data pipelines and tools, and standard operating procedures for high throughput cell engineering, fermentation, and analytics (referred to collectively as the “Foundry”), (ii) a library of proprietary biological assets and associated performance data (referred to collectively as “Codebase”), and (iii) the Company’s team of expert users, developers and operators of the Foundry and Codebase.

With a mission to make biology easier to engineer, the Company has recognized the need to invest in biosecurity as a key component of its platform. The Company’s Biosecurity business is building a global infrastructure for biosecurity to empower governments, communities, and public health leaders to prevent, detect and respond to a wide variety of biological threats.

Basis of Presentation

The accompanying condensed consolidated financial statements have been prepared in conformity with the rules and regulations of the Securities and Exchange Commission and generally accepted accounting principles in the United States (“GAAP”) for interim financial reporting. Accordingly, certain detailed disclosures which would normally be included with annual financial statements have been omitted. In the opinion of management, all normal recurring adjustments necessary for a fair presentation have been made. These condensed consolidated financial statements should be read in conjunction with the Company's 2023 Annual Report on Form 10-K. Interim results are not necessarily indicative of results for a full year.

Reverse Stock Split

On August 19, 2024 (the “Effective Date”), with the approval of the Company's board of directors and shareholders, the Company effected a one-for-forty (1:40) reverse stock split (the “Reverse Stock Split”) for the Company’s common stock (inclusive of Class A common stock, Class B common stock and Class C common stock, par value $0.0001 per share). Accordingly, all common shares, common stock equity awards and common stock per share amounts presented herein have been retrospectively adjusted to reflect the Reverse Stock Split.

On the Effective Date, every forty shares of common stock issued and outstanding immediately prior to the Effective Date were automatically combined into one share of such class of common stock without any change to the par value per share. The number of shares reserved under the Company’s equity plans and the number of shares underlying awards outstanding under the Company’s equity plans was reduced proportionately. No fractional shares were issued in connection with the Reverse Stock Split. Shareholders entitled to receive a fractional share as a result of the Reverse Stock Split received a cash payment in lieu of such fractional shares. The number of authorized shares of common stock was not reduced.

In respect of the underlying common stock split, an adjustment to the exercise price of the Company’s warrants (the “Warrants”) and the number of shares of the Company’s Class A common stock issuable on exercise of each Warrant was adjusted in proportion to the Reverse Stock Split. As of the effectiveness of the Reverse Stock Split, the exercise price to purchase one share of Class A common stock equals $460.00 ($11.50 per Warrant). Each Warrant equals one-fortieth (1/40) of one share of Class A common stock (40 Warrants must be exercised for one share of Class A common stock). No fractional shares of Class A common stock will be issued upon exercise of the Warrants; therefore, a minimum of 40 Warrants must be exercised to receive any entitlement. For the avoidance of doubt, no other amendment, modification, alteration or change was made to the terms of the Warrants as a result of the Reverse Stock Split.

Principles of Consolidation

The accompanying condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany accounts and transactions have been eliminated.

Reclassifications

Certain prior year amounts have been reclassified for consistency with the current year presentation. In the accompanying condensed consolidated statements of cash flows for the nine months ended September 31, 2023, (i) $0.9 million was reclassified from non-cash customer consideration to other non-cash activity and (ii) $0.1 million was reclassified from other financing activities to proceeds from exercise of stock options. The total cash used in operating and financing activities for the nine months ended September 31, 2023 is not changed as a result of these reclassifications.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, revenues and expenses, and the disclosure of contingent liabilities in the consolidated financial statements. 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.

Significant Accounting Policies

There have been no new or material changes to the Company’s significant accounting policies during the nine months ended September 30, 2024 as compared to the significant accounting policies described in Note 2 to the Company's 2023 consolidated financial statements included in the Company's 2023 Annual Report on Form 10-K.

Recently Issued Accounting Pronouncements

There were no new recently issued accounting pronouncements that are of significance or potential significance to the Company from those disclosed within Note 2 to the Company's 2023 consolidated financial statements included in the 2023 Annual Report on Form 10-K.

2. Acquisitions and Divestiture

AgBiome

On April 10, 2024, the Company acquired certain platform assets, including fully sequenced and isolated strains, unique gene sequences, relevant functional data and metadata, and a development pipeline from AgBiome, Inc. (“AgBiome”), a biotechnology company in the agriculture industry. These assets expand the Company’s proprietary unified metagenomics database. The fair value of the consideration transferred totaled $18.2 million and was paid with the issuance of 0.4 million shares of Ginkgo's Class A common stock. The Company accounted for the transaction as an asset acquisition since substantially all of the value received was concentrated in the acquired developed technology, which is being amortized over a useful life ofthree years.

Zymergen

On October 3, 2023, and in connection with the Zymergen Bankruptcy, as defined and discussed in the Company’s 2023 Annual Report on Form 10-K, the Company entered into an asset purchase agreement with Zymergen (the “Zymergen APA”) as the stalking horse bidder under Section 363 of the U.S. Bankruptcy Code to acquire exclusive rights to substantially all of Zymergen’s intellectual property assets and certain other assets.

On January 18, 2024 (the “Closing Date”), the Company, through certain of its affiliates, completed its acquisition of substantially all of Zymergen’s assets under the Zymergen APA, and on February 5, 2024, Zymergen’s plan of liquidation was confirmed by the Bankruptcy Court. All of the Company’s interests in the Zymergen entities were extinguished and terminated as of February 23, 2024. The acquisition under the Zymergen APA was accounted for as a business combination in accordance with ASC 805 and was not material to the Company's consolidated financial statements. The total cash purchase price was $6.2 million, with $5.4 million paid at closing and $0.8 million released from escrow. The allocation of the purchase price to the assets acquired and liabilities assumed as of the acquisition date primarily includes $19.9 million of operating lease right-of-use assets, $6.0 million of property and equipment, and $19.9 million of operating lease liabilities. No goodwill or intangible assets were recognized. Transaction costs associated with the Zymergen APA werenot material for the nine months ended September 30, 2024.

Other Acquisitions

The Company completed three other asset acquisitions during the nine months ended September 30, 2024. The aggregate purchase price for thethree acquisitions was $19.8 million and was paid with the issuance of 0.4 million shares of Ginkgo's Class A common stock. Each transaction was accounted for as an asset acquisition as the acquired assets, consisting primarily of intellectual property rights, did not meet the definition of a business. The assets acquired represent in-process research and development with no alternative future use. Accordingly, the Company recorded $19.8 million as acquired in-process research and development expense in the accompanying condensed consolidated statements of operations and comprehensive loss for the nine months ended September 30, 2024.

Divestiture

On September 30, 2024, the Company sold the equity interests of its former subsidiary Altar SAS (“Altar”) for a nominal amount. As a result of the sale, the Company deconsolidated all of Altar's assets and liabilities from its consolidated financial statements effective September 30, 2024, and recognized a loss on deconsolidation of $7.0 million in the condensed consolidated statements of operations and comprehensive loss for the three and nine months ended September 30, 2024. The loss on deconsolidation includes a $1.5 million reclassification of accumulated currency translation adjustments to earnings. The sale did not meet the criteria to be reported as a discontinued operation.

3. Restructuring

In the second quarter of 2024, in connection with the Company’s plans to reduce operational expenditures, management, with the approval of the Board of Directors, approved a restructuring plan. This plan includes an expected reduction in labor expenses, primarily through a workforce reduction of at least 35%, and the planned consolidation and sublease of certain facilities. Initial workforce reductions commenced in June 2024 and continued into the third quarter, with further reductions expected in the fourth quarter of 2024 and into 2025. All reductions are expected to be substantially completed in 2025, subject to compliance with applicable laws. The Company plans to consolidate certain facilities through various actions, including combining office and laboratory operations into fewer locations, subleasing unused facilities, and has taken or plans to take other related measures, such as the sale of its subsidiary, Altar, in the third quarter of 2024 (see Note 2). While the Company aims to complete the majority of its facility consolidation actions in 2025, the actual timing may vary, especially for subleasing unused or underutilized facilities, which may extend beyond 2025 or may not occur prior to termination of such lease, depending on market conditions. Additionally, restructuring expenses related to potential asset impairments or contract amendments or terminations for any facilities no longer in use or underutilized could be material.

The costs for the reduction in force are expected to range from $18.0 million to $22.0 million primarily in the Cell Engineering segment and consist of one-time cash severance and related costs. The employee termination costs are recognized as of the communication date to employees, given (i) the Company instituted a one-time employee termination benefit related to its restructuring, and (ii) the employees will not be retained to render service beyond a minimum retention period. The Company is currently unable to estimate the costs associated with consolidating its facilities. These costs may include, but are not limited to, losses on subleases, contract terminations, asset impairments, sale or disposal of equipment or other long-lived assets, and related costs and fees pertaining to the consolidation, closure, or disposition of facilities. Additional charges may be incurred as the Company progresses its restructuring plan and such charges could be material.

The following table presents restructuring costs incurred during the periods presented, which are recorded as “Restructuring charges” in the condensed consolidated statements of operations and comprehensive loss (in thousands):

(1) Relates to a sublease of a facility in connection with the restructuring and reflects the excess of the right-of-use asset's carrying value over its fair value, which was determined based on estimates of future discounted cash flows and is classified as Level 3 in the fair value hierarchy.

Additionally, the Company recorded a $7.0 million loss on the sale and deconsolidation of Altar as a component of other income (expense) in the condensed consolidated statements of operations and comprehensive loss for the three and nine months ended September 30, 2024.

The following table presents the change in the accrued liability balance related to the restructuring activities, which is included in “Accounts payable” and “Accrued expenses and other current liabilities” in the accompanying condensed consolidated balance sheet as of September 30, 2024 (in thousands):

4. Fair Value Measurements

The following tables present information about the Company’s financial assets and liabilities measured at fair value on a recurring basis (in thousands):

(1)The fair value of Synlogic, Inc. warrants is calculated as the quoted price of the underlying common stock, less the unpaid exercise price of the warrants.

(2)Marketable equity securities classified as Level 2 reflect a discount for lack of marketability due to regulatory sales restrictions.

(3)The fair value of Private Placement Warrants classified as Level 2 is equivalent to that of Public Warrants as the transfer of Private Placement Warrants to anyone other than the initial purchasers or any of their permitted transferees results in the Private Placement Warrants having substantially the same terms as the Public Warrants.

Transfers to and from Levels 1, 2 and 3 are recognized at the end of the reporting period in which a change in valuation technique or methodology occurs. During the nine months ended September 30, 2024, transfers from Level 2 to Level 1 occurred due to lapse of regulatory sales restrictions on marketable equity securities. Additionally, during the nine months ended September 30, 2024, a portion of the Private Placement Warrants' estimated fair value was transferred from Level 3 to Level 2 as a result of the Private Placement Warrants having substantially the same terms as the Public Warrants when transferred to anyone other than the initial purchasers or their permitted transferees, leading the Company to determine their fair value to be equivalent to that of the Public Warrants. There were no other transfers between Levels 1, 2, or 3 during the nine months ended September 30, 2024 or 2023.

The table below provides a reconciliation of the beginning and ending balances for assets and liabilities measured at fair value using Level 3 significant unobservable inputs for the nine months ended September 30 (in thousands):

Notes Receivable

For all of its notes receivable, the Company has elected the fair value option, for which changes in fair value are recorded in other income, net in the condensed consolidated statements of operations and comprehensive loss.

The Company's notes receivable consisted of a senior secured note in the principal amount of $11.8 million and a convertible promissory note in the principal amount of $10.0 million, both issued by Bolt Threads, Inc. (“Bolt Threads”). The senior secured note bears interest at 12% per annum, is due December 31, 2027 and is included in other non-current assets at its estimated fair value. The convertible promissory note bore interest at 8% per annum, was convertible into equity securities of Bolt Threads upon a qualified financing, a non-qualified financing, or special purpose acquisition company transaction, at a conversion price based on certain conditions as defined in the note agreement, or was otherwise payable on demand any time after the maturity date of October 4, 2024. During the three months ended September 30, 2024, $10.5 million in principal and accrued interest on the convertible promissory note was converted into 2.7 million shares of Bolt Threads' common stock, which is classified as a marketable equity security.

The Company used the yield method to value the senior secured note. Under this method, the estimated future cash flows, consisting of principal and interest payments, are discounted to present value using an applicable market yield or discount rate. Increases or decreases in the market yield or discount rate would result in a decrease or increase, respectively, in the fair value measurement. The market yield is determined using a corporate bond yield curve corresponding to the credit rating category of the issuer. The fair value of the senior secured note is based on observable market inputs, which represents a Level 2 measurement within the fair value hierarchy.

In addition to the convertible promissory note issued by Bolt Threads, the Company holds a series of convertible debt instruments issued by customers as payment for Cell Engineering services. The Company used a scenario-based method to value the convertible debt instruments issued by customers. Under this method, future cash flows are evaluated under various payoff scenarios, probability-weighted, and discounted to present value. The significant unobservable (Level 3) inputs used in the fair value measurement as of September 30, 2024, included scenario probabilities ranging from 20% to 27%, a discount rate of 16%, and estimated time to event date of up totwo years. The significant unobservable (Level 3) inputs used in the fair value measurement as of December 31, 2023, included scenario probabilities ranging from 5% to 85%, a discount rate of 17% and estimated time to event date ofone totwo years. Significant changes in these inputs could have resulted in a significantly lower or higher fair value measurement. As of September 30, 2024, the convertible debt instruments had an unpaid principal balance of $13.1 million and a fair value of $3.2 million. As of December 31, 2023, the convertible debt instruments had an unpaid principal balance of $21.0 million and a fair value of $14.1 million.

Contingent Consideration

In connection with various business acquisitions, the Company is required to make contingent earnout payments payable upon the achievement of certain technical, commercial and/or performance milestones. The Company also issued restricted stock in connection with acquisitions, which is subject to vesting conditions and is classified as contingent consideration liability.

The Company can settle a majority of its contingent consideration liabilities in cash or shares of Class A common stock at the Company’s election with the remainder payable in cash. During the nine months ended September 30, 2024, the Company settled $12.7 million in contingent consideration liabilities through payment of $2.8 million in cash and vesting of 0.8 million shares of restricted stock valued at $9.9 million. During the nine months ended September 30, 2023, the Company settled $4.8 million in contingent consideration liability through payment of $1.5 million in cash and vesting of 1.6 million shares of restricted stock valued at $3.2 million. Of that amount, $1.4 million was recorded as an increase to the acquired intangible asset with an offset to additional paid-in-capital as the contingent consideration liability was deemed not probable of occurring.

The fair value of contingent consideration related to earnout payments from acquisitions was estimated using unobservable (Level 3) inputs as illustrated in the table below. The fair value of contingent consideration related to restricted stock was estimated using the quoted price of Ginkgo's Class A common stock, an estimate of the number of shares expected to vest, probability of vesting, and a discount rate. Material increases or decreases in these inputs could result in a higher or lower fair value measurement. Changes in the fair value of contingent consideration are recorded in general and administrative expense in the condensed consolidated statements of operations and comprehensive loss.

The following table provides quantitative information regarding Level 3 inputs used in the fair value measurements of contingent consideration liabilities as of the periods presented:

Nonrecurring Fair Value Measurements

The Company measures the fair value of certain assets, including investments in privately held companies without readily determinable fair values, on a nonrecurring basis when events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable, or when observable price changes occur for identical or similar securities from the same issuer.

The fair value of non-marketable equity securities is classified within Level 3 in the fair value hierarchy when the Company estimates fair value using unobservable inputs to measure the amount of the impairment loss. The fair value of non-marketable equity securities is classified within Level 2 in the fair value hierarchy when the Company estimates fair value using the observable transaction price paid by third party investors for the identical or similar security of the same issuer.

During the nine months ended September 30, 2024, the Company recorded a $4.9 million impairment loss related to its investment in Genomatica preferred stock. The fair value measurement was determined using the guideline public company method under the market approach. The significant unobservable inputs used in the valuation included the selection and analysis of guideline public companies, revenue multiple and other unobservable assumptions. The fair value measurement is classified as Level 3 in the fair value hierarchy.

During the nine months ended September 30, 2023, the Company received a total purchase amount of $11.0 million in Simple Agreement for Future Equity (“SAFEs”) from customers as prepayment for Cell Engineering services. The Company used a scenario-based method to value the SAFEs as of each contract inception date, which resulted in total fair value of $4.5 million. Under the scenario-based method, future cash flows were evaluated under qualified financing and dissolution scenarios with partial recovery and no recovery in dissolution. The cash flows under each scenario were probability-weighted and discounted to present value. The significant unobservable (Level 3) inputs used in the fair value measurement were scenario probabilities of 20% to 60%, a discount rate of 14% and estimated time to event date of one totwo years.

The Company recorded impairment losses of $5.2 million and $1.8 million related to SAFEs during the nine months ended September 30, 2024 and 2023, respectively. The fair value was generally estimated using the scenario-based method, where various payout scenarios were probability-weighted and discounted to present value.

5. Investments and Equity Method Investments

The Company has partnered with other investors to form business ventures, including Motif FoodWorks, Inc. (“Motif”), Allonnia, LLC (“Allonnia”), Arcaea, LLC (“Arcaea”), Verb Biotics, LLC (“Verb”), BiomEdit, LLC (“BiomEdit”) and Ayana Bio, LLC (“Ayana”) (collectively “Platform Ventures”). The Company also partners with existing entities, including Genomatica, Inc. (“Genomatica”) and Synlogic, Inc. (“Synlogic”) (collectively, “Legacy Structured Partnerships”) with complementary assets for high potential synthetic biology applications. The Company holds equity interests in these Platform Ventures and Legacy Structured Partnerships. The Company also holds equity interests in other public and private companies as a result of entering into collaboration and license revenue arrangements with these entities.

The Company accounts for its investments in Platform Ventures under the equity method. The Company's marketable equity securities consist of Synlogic common stock, Synlogic warrants and the shares of common stock of other publicly traded companies. Marketable equity securities are measured at fair value with changes in fair value recorded in other income (expense) in the condensed consolidated statements of operations and comprehensive loss. The Company’s non-marketable equity securities consist of preferred stock of Genomatica and preferred and common stock of other privately held companies without readily determinable fair values. Non-marketable equity securities are initially recorded using the measurement alternative at cost and subsequently adjusted for any impairment and observable price changes in orderly transactions for the identical or a similar security of the same issuer. Impairment losses and adjustments from observable price changes are recorded in loss on investments in the condensed consolidated statements of operations and comprehensive loss.

The Company also holds investments in early-stage synthetic biology product companies via SAFEs. The Company enters into SAFE agreements in conjunction with a revenue contract with a customer under which the Company grants the customer a prepaid Cell Engineering services credit equal to the principal amount of the SAFE (the “Purchase Amount”), which may be used and drawn down as payment for the Company’s research and development services. The SAFEs will automatically convert into shares of preferred stock equal to the Purchase Amount divided by the discount price, which is calculated as the price per share sold in a qualified equity financing multiplied by a discount rate. The SAFEs also provide the Company with the right to future equity of the entity in a liquidation scenario or the cash-out amount in liquidation and dissolution scenarios or at the election of the SAFE issuer prior to an agreed outside date. The Company initially records SAFEs at fair value (see Note 4) and adjusts the carrying amount of the instrument at each reporting period for any impairments.

Investments consisted of the following (in thousands):

Loss on investments and equity method investments consisted of the following (in thousands):

The components of loss on investments for each period were as follows (in thousands):

Total realized and unrealized gains and losses associated with equity investments accounted for at fair value or the fair value measurement alternative consisted of the following (in thousands):

(1) Reflects the difference between the sale proceeds and the carrying value of the equity investments at the beginning of the period or the acquisition date, if later.

The carrying value of non-marketable equity securities accounted for using the fair value measurement alternative and still held as of September 30, 2024, including cumulative unrealized losses, were as follows (in thousands):

6. Variable Interest Entities

With respect to the Company’s investments in Motif, Allonnia, Genomatica, Arcaea, BiomEdit, Verb and Ayana (collectively, the “Unconsolidated VIEs”), the Company has concluded these entities represent variable interest entities (“VIEs”). While the Company has board representation on certain of these entities and is involved in the ongoing development activities of these entities via its participation on such entities’ joint steering committees (“JSC”), the Company has concluded that it is not the primary beneficiary of these entities because: (i) the Company does not control the board of directors of any of the Unconsolidated VIEs, 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 the Unconsolidated VIEs hold certain rights that require their consent prior to taking certain actions, which include certain significant operating and financing decisions, and (iii) the Company’s representation on the JSC of each respective entity does not give it control over the development activities of any of the Unconsolidated VIEs, as all JSC decisions are made 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 Company’s involvement in the Unconsolidated VIEs 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 the Unconsolidated VIEs.

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 September 30, 2024 and December 31, 2023, the maximum risk of loss related to the Company’s VIEs was limited to the carrying value of its investments in such entities.

Refer to Note 5 for additional details on the Company’s investments and equity method investments.

7. Supplemental Financial Information

Cash, Cash Equivalents and Restricted Cash

The reconciliation of cash, cash equivalents and restricted cash reported within the condensed consolidated balance sheet to the totals shown within the condensed consolidated statement of cash flows is as follows (in thousands):

(1)Includes cash balances collateralizing letters of credit associated with the Company’s facility leases and customer prepayments requiring segregation and restrictions in its use in accordance with the customer agreement.

Supplemental cash flow information

The following table presents non-cash investing and financing activities (in thousands):

Property, Plant, and Equipment, net

Property, plant, and equipment, net consisted of the following (in thousands):

Operating Lease

In April 2024, the Company commenced its 15-year lease of a new office and laboratory space located in Boston, Massachusetts. The leased property consists of approximately 260,000 rentable square feet and is expected to be occupied by mid-2025. The lease agreement includes an option to extend the lease forten years at then-market rates. The Company is not reasonably certain to exercise this option at lease commencement. The lease is classified as an operating lease, includes a period of free rent and also tenant improvement incentives. The lease does not contain material restrictive covenants or residual value guarantees. Upon the lease commencement, the Company recorded a right-of-use asset of $213.3 million, net of lease incentives received, and a lease liability of $223.9 million. The discount rate used in determining the lease liability was the Company’s estimated incremental borrowing rate of 7.8%. Base rent during the first lease year is approximately $21.1 million and is subject to annual increases of 3% thereafter.

Exit of a Leased Facility

In September 2023, the Company’s former subsidiary, Zymergen, ceased the use of and exited a leased facility consisting of approximately 300,000 square feet of office and laboratory space in Emeryville, California. The facility was used pursuant to an operating lease with a minimum term expiring in August 2033. Zymergen's exit resulted in an impairment loss of $96.2 million, including $36.6 million for the right-of-use asset and $59.6 million for the related leasehold improvements. The impairment loss represents the amount by which the carrying value of the assets exceed their estimated fair values as of September 30, 2023, as determined using a discounted cash flow model under the income approach. The fair value measurements are based on significant inputs not observable in the market and therefore represent Level 3 fair value measurements. The key inputs used in the valuation were estimated sublease rental income and a discount rate of 8.5%. The impairments are presented as impairment of lease assets in the condensed consolidated statement of operations and comprehensive loss for the three and nine months ended September 30, 2023.

Capitalization

The following table presents the Company’s authorized, issued, and outstanding common stock as of the dates indicated (in thousands):

On April 3, 2023, the Company issued 0.1 million shares of its Class A common stock as purchase consideration for the acquisition of certain intellectual property assets of StrideBio, Inc. Refer to Note 2, Acquisitions, for shares of common stock issued related to fiscal 2024 acquisitions.

On May 9, 2023, the Company issued 0.1 million shares of Class A common stock, valued at $2.5 million, as settlement for an employee retention milestone related to the FGen AG business acquisition. An additional 0.1 million shares, valued at $2.5 million, were issued on April 26, 2024 for the final milestone payable in connection with that acquisition.

Refer to Note 10, Stock-Based Compensation, for a summary of shares of common stock issued in connection with the Company’s equity incentive plans.

8. Goodwill and Intangible Assets, net

All goodwill is allocated to the Cell Engineering reporting unit and segment identified in Note 12.

Due to a sustained decrease in the market price of the Company's Class A common stock and market capitalization, the Company identified that an indicator of impairment was present as of June 30, 2024. As such, the Company completed a quantitative impairment test related to its Cell Engineering reporting unit. To conduct the impairment test of goodwill, the estimated fair value of the reporting unit was compared to its carrying value. The estimated fair value of the reporting unit was determined using a weighted approach that considered a discounted cash flow (“DCF”) model under the income approach and the guideline public company (“GPC”) method under the market approach. Significant inputs used in the DCF model included the projected future operating results of the reporting unit and the applicable discount rate, while inputs used in the GPC method consisted of a revenue multiple. The fair value measurement of the reporting unit is classified as Level 3 in the fair value hierarchy because it involves significant unobservable inputs. The Company reconciled the resulting fair value of its reporting unit to the market capitalization of the Company to corroborate the fair value estimate used in the impairment test.

The result of the interim impairment test indicated that the estimated fair value of the reporting unit was less than its carrying value. As a result, the Company recorded a $47.9 million goodwill impairment charge during the nine months ended September 30, 2024.

Changes in the carrying amount of goodwill consisted of the following (in thousands):

Intangible assets, net consisted of the following (in thousands):

(1)The gross carrying value and accumulated amortization balances include the impact of cumulative foreign currency translation adjustments.

(2)During the third quarter of 2024, the Company deconsolidated $8.3 million of developed technology intangible assets related to the deconsolidation of Altar (see Note 2).

In the second quarter of 2024, in connection with the acquisition of AgBiome, the Company acquired developed technology with an aggregate fair value of $18.2 million and an estimated useful life ofthree years. For further information, see Note 2.

Amortization expense was $4.9 million and $4.0 million for the three months ended September 30, 2024 and 2023, respectively, and $13.3 million and $12.2 million for the nine months ended September 30, 2024 and 2023, respectively. As of September 30, 2024, estimated future amortization expense for identifiable intangible assets is as follows (in thousands):

9. Commitments and Contingencies

Legal Proceedings

From time to time, the Company may in the ordinary course of business be named as a defendant in lawsuits, indemnity claims and other legal proceedings. The Company accrues for a loss contingency when it concludes that the likelihood of a loss is probable and the amount of loss can be reasonably estimated. The Company adjusts its accruals from time to time as it receives additional information. The Company does not believe any pending litigation to be material, or that the outcome of any such pending litigation, in management’s judgment based on information currently available, would have a material adverse effect on the Company’s results of operations, cash flows or financial condition.

10. Stock-Based Compensation

The following table summarizes stock-based compensation expense by financial statement line item in the Company’s condensed consolidated statement of operations and comprehensive loss for the periods presented (in thousands):

The Company grants stock-based incentive awards pursuant to the 2021 Incentive Award Plan (the “2021 Plan”) and the 2022 Inducement Plan (the “2022 Inducement Plan”). As of September 30, 2024, there were approximately 4.6 million shares and 0.1 million shares available for future issuance under the 2021 Plan and 2022 Inducement Plan, respectively.

Time-based Stock Options

A summary of stock option activity for options that are subject to time-based vesting conditions for the nine months ended September 30, 2024, is presented below:

(1)The aggregate intrinsic value is calculated as the difference between the Company's closing stock price on the last trading day of the quarter and the exercise prices, multiplied by the number of in-the-money stock options.

The aggregate intrinsic value of options exercised during the nine months ended September 30, 2024 and 2023 was $0.7 million and $8.4 million, respectively. The weighted-average grant-date fair value of options granted during the nine months ended September 30, 2024 and 2023 was $14.14 and $57.20 per share, respectively, and was calculated using the following key assumptions in the Black-Scholes option-pricing model:

As of September 30, 2024, there was $1.8 million of unrecognized compensation expense related to time-based stock options recognizable over a weighted-average period of 1.6 years.

Market-based Stock Options

In April 2024, the Company granted to each of the Company'sfour founders an option to purchase in aggregate 0.1 million shares of Ginkgo's Class A common stock with an exercise price of $100.00 per share, subject both to time-based and market-based vesting criteria (the “Founder Options”). The market-based vesting is tied to the achievement offour specified stock price hurdles within afive-year period, with 10% of the Founder Options vesting based on the achievement of a 90-calendar-day average stock price of $200.00,10% of the Founder Options vesting based on the achievement of a 90-calendar-day average stock price of $300.00,20% of the Founder Options vesting based on the achievement of a 90-calendar-day average stock price of $400.00 and the remaining 60% of the Founder Options vesting based on the achievement of a 90-calendar-day average stock price of $500.00. If the market-based criteria are achieved during thefive-year period, the awards will vest on thefive-year anniversary of the grant date.

The weighted-average grant-date fair value of the options granted was $7.80 per share and was calculated using a Monte Carlo simulation model with the following assumptions:

As of September 30, 2024, there was $3.6 million of unrecognized compensation expense related to the market-based stock options recognizable over a weighted-average period of 4.6 years.

Restricted Stock Units

A summary of the restricted stock units (“RSU”) activity for the nine months ended September 30, 2024 is presented below:

The weighted average grant date fair value of RSUs granted during the nine months ended September 30, 2024 and 2023 was $44.73 and $55.20, respectively.

As of September 30, 2024, there was $241.1 million of unrecognized compensation expense related to RSUs recognizable over a weighted-average period of 2.8 years.

Earnouts

Earnout shares represent equity awards in the form of RSUs and restricted stock awards (“RSAs”) that were granted to existing shareholders of the Company as of the closing date of the Company's merger with SRNG on September 16, 2021 (the “Closing Date”). The earnout shares are subject to the same time vesting and performance conditions (change in control or an initial public offering) as the underlying awards (including with respect to vesting and termination-related provisions). Additionally, the earnout shares are subject to a market condition that will be met when the trading price of the Company's Class A common stock is greater than or equal to $500.00, $600.00, $700.00 and $800.00 for any 20 trading days within any period of 30 consecutive trading days, on or before the fifth anniversary of the Closing Date (collectively, the “Earnout Targets”). The first Earnout Target of $500.00 per share was met on November 15, 2021.

A summary of activity during the nine months ended September 30, 2024 for the earnout shares is presented below:

As of September 30, 2024, there was $0.4 million of unrecognized compensation expense related to earnout shares recognizable over a weighted-average period of 0.7 years.

11. Revenue Recognition

Disaggregation of Revenue

The following table sets forth the percentage of Cell Engineering revenues by industry based on total Cell Engineering revenue:

For the three months ended September 30, 2024 and 2023, the Company’s revenue from customers within the United States comprised 89% and 81%, respectively, of total revenue. For the nine months ended September 30, 2024 and 2023, the Company's revenue from customers within the United States comprised 84% and 83%, 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 hadno contract asset balances as of September 30, 2024 and December 31, 2023. The Company's accounts receivable consists of both billed and unbilled amounts. Unbilled receivables arise when revenue is recognized in excess of invoiced amounts and represent the Company’s unconditional right to consideration for goods or services already transferred to the customer. The balance of unbilled accounts receivable, included in accounts receivable, net in the accompanying condensed consolidated balance sheets, was $8.1 million and $9.1 million as of September 30, 2024 and December 31, 2023, respectively.

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 Company’s collaborative arrangements with its 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 convertible financial instruments and equity securities for licenses that will be transferred in the future. The Company records the upfront cash payments and fair value of the convertible financial instruments and 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 Company’s performance of the related services. Contract liabilities are recognized as revenue as (or when) the Company performs under the contract.

During the nine months ended September 30, 2024, the Company recognized $84.3 million of revenue that was included in the contract liabilities balance of $202.5 million as of December 31, 2023. During the nine months ended September 30, 2023, the Company recognized $59.8 million of revenue that was included in the contract liabilities balance of $222.6 million as of December 31, 2022.

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 September 30, 2024 and December 31, 2023 was $68.0 million and $110.0 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 September 30, 2024, of the performance obligations not yet satisfied or partially satisfied, nearly all is expected to be recognized as revenue during the years 2024 to 2029.

12. Segment Information

The Company has identifiedtwo operating and reportable segments: Cell Engineering and Biosecurity. The Company’s chief operating decision makers (“CODMs”) evaluate the financial performance of the Company’s segments based upon segment revenues and operating results. The Company’s measure of segment operating results for management reporting purposes excludes the impact of stock-based compensation expense, depreciation and amortization, asset impairment charges, restructuring charges, and change in fair value of certain contingent liabilities.

The following table presents summary results of the Company’s reportable segments for the periods indicated (in thousands):

(1)Includes $0.2 million and $1.1 million in employer payroll taxes for the three months ended September 30, 2024 and 2023, respectively, and $2.9 million and $4.3 million in employer payroll taxes for the nine months ended September 30, 2024 and 2023, respectively.

(2)For 2024, includes $47.9 million related to goodwill impairment. For the three months ended September 30, 2023, includes a $16.2 million impairment loss on lab equipment and a $96.2 million impairment loss on an operating lease right-of-use asset and related leasehold improvements associated with an exited Zymergen leased facility. For the nine months ended September 30, 2023, includes a $25.2 million impairment loss on lab equipment and a $96.2 million impairment loss on lease assets associated with the exited Zymergen leased facility.

(3)See Note 3, Restructuring, for composition of costs.

13. Net Loss per Share

The Company computes net loss per share 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):

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 for the periods presented because including them would have been anti-dilutive (in thousands):

(1)In connection with the Company's merger with Soaring Eagle Acquisition Corp. (“SRNG”) on September 16, 2021, the Company assumed 34.5 million formerly publicly traded warrants (“Public Warrants”) and 17.3 million private placement warrants (the “Private Placement Warrants”), initially issued in connection with SRNG’s initial public offering. Each Warrant equals one-fortieth (1/40) of one share of Class A common stock (40 Warrants must be exercised for one share of Class A common stock).

(2)Represents earnout shares for which the service-based and/or market-based vesting conditions have not been satisfied.

(3)Represents restricted common stock issued in connection with asset acquisitions, held in escrow for indemnification purposes, and subject to forfeiture.

14. Related Parties

The Company’s significant transactions with its related parties are primarily comprised of revenue generating activities under collaboration and license agreements.

Significant related party transactions included in the condensed consolidated balance sheet are summarized below (in thousands):

Significant related party transactions included in the condensed consolidated statement of operations and comprehensive loss are summarized below (in thousands):

Motif FoodWorks

In September 2018, the Company entered into (i) an Intellectual Property Contribution Agreement (“IPCA”) with Motif that granted Motif a license to certain of the Company’s intellectual property and (ii) a Technical Development Agreement (“TDA”) that established the terms under which the Company was to provide technical development services. In return for the Company's contribution of intellectual property and access to its platform, the Company received shares of common stock in Motif. The initial fair value of the common stock investment in Motif was $65.1 million, which has subsequently been reduced to a carrying value of zero as a result of the allocation of losses under the accounting for equity method investments.

The initial non-refundable fair value of the equity received, totaling $65.1 million and considered non-cash consideration under ASC 606, was accounted for as material rights under ASC 606. The material rights pertained to Motif's license rights for a set of ingredients that the parties intended to develop within the first two years. This amount was recorded as deferred revenue for the future license rights and recognizable as revenue as the Company performed qualifying services for Motif, or when such rights expire upon termination of the agreements. As of December 31, 2023, the Company had a remaining deferred revenue balance of $45.4 million with Motif under this arrangement. Effective in August 2024, the Motif IPCA and the TDA agreements were mutually terminated with no adjustment to the original consideration. As a result, the Company has no further obligation to perform services for Motif and, accordingly, the remaining $45.4 million in deferred revenue under this arrangement has been recognized in full as revenue in the three and nine months ended September 30, 2024.

Refer to Note 5 for additional details on the Company’s investments and equity method investments held in its related parties.