Ginkgo Bioworks Holdings Inc

7. Variable Interest Entities

2022 Deconsolidations: Ayana Bio and Verb Biotics

The Company holds an interest in 9,000,000 common units (representing 100% of common units at inception) in each of Ayana Bio and Verb Biotics, two Platform Ventures formed in September 2021 by the Company and certain of its investors. The Company has agreed to provide Ayana Bio and Verb Biotics 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 (“TDPs”). Additionally, in September 2021, Ayana Bio and Verb Biotics 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 Company’s investors for aggregate proceeds of approximately $30.0 million each. During 2021, the Company concluded that it held a variable interest in and was the primary beneficiary of Ayana Bio and Verb Biotics as it controlled the most significant activities of these entities. These conclusions were reached because, as of the primary beneficiary assessment dates in 2021, for both Verb Biotics and Ayana Bio: (i) the Company had substantive control of the board of directors; (ii) all capital contributions were made by related parties of Ginkgo; and (iii) Ginkgo or its related parties comprised the entirety of the joint steering committee (“JSC”), the governing body which holds significant oversight with respect to the entities' research and development programs.

During 2022, Verb Biotics and Ayana Bio each hired a new chief executive officer who was not an affiliate, related party or agent of Ginkgo. The chief executive officer was also appointed to each entity's JSC and board of directors. As a result, the Company concluded it no longer had substantive control of each entity's JSC and board of directors. Accordingly, the Company concluded that it was no longer the primary beneficiary of Verb Biotics and Ayana Bio as it no longer controlled the most significant activities of the entities. As a result of this change in the primary beneficiary determination, the Company deconsolidated Verb Biotics and Ayana Bio and recorded a gain on deconsolidation of $31.9 million for the year ended December 31, 2022 in the consolidated statements of operations and comprehensive loss. The gain on deconsolidation was equal to the fair value of the retained interest in each entity as of the deconsolidation date and was calculated 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 is the most recent financing transaction to the deconsolidation event.

The JSC, with equal representation from each of Verb Biotics or Ayana Bio and Ginkgo, governs the TDPs 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. Ginkgo has agreed to provide Verb Biotics and Ayana Bio with licenses to certain of its intellectual property for use in the development, production and commercialization of each entity's products under the TDPs. The Company's common unit investment in Verb Biotics and Ayana Bio is accounted for as an equity method investment, and accordingly, Verb Biotics and Ayana Bio are related parties of Ginkgo. The initial carrying value of the equity method investment was equal to the fair value of the retained interest of $15.9 million for Verb Biotics and $16.0 million for Ayana Bio as of the applicable deconsolidation date. The Series A preferred units issued by Verb Biotics and Ayana Bio 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 its equity method investment in Verb Biotics and Ayana Bio of $31.9 million in the year ended December 31, 2022, due to a basis difference associated with in-process research and development identified as part of the initial accounting for the equity method investment. This loss reduced the carrying value of the equity method investment in each of Verb Biotics and Ayana Bio tozero. There isno commitment for the Company to provide further financial support to Verb Biotics and Ayana Bio, and therefore the carrying value of the equity method investment will not be reduced below zero.

Additional Variable Interest Entities

With respect to the Company’s investments in Motif, Allonnia, Genomatica, Arcaea, and BiomEdit, the Company has concluded these entities represent 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' 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 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 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 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 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 VIEs.

With respect to Cooksonia’s investment in Joyn Bio prior to the joint venture’s termination on October 17, 2022 (see Note 4), as Cooksonia did not control Joyn Bio’s board of directors, it did not have the power to control the decisions related to the development activities of Joyn Bio, which were its most significant activities. Accordingly, the Company concluded that Cooksonia was not the primary beneficiary of Joyn Bio. The Company provided $10.0 million in financial support to Joyn Bio during the year ended December 31, 2022 in the form of convertible promissory notes (see Note 20), which were deemed necessary to fund Joyn Bio’s operations pre-dissolution. Joyn Bio was fully dissolved in 2023.

Additionally, the Company holds equity interests in certain other privately-held companies that are not consolidated as the Company is not the primary beneficiary. As of December 31, 2024 and 2023, the maximum risk of loss related to the Company’s unconsolidated VIEs was limited to the carrying value of its investments in such entities.

Refer to Notes 6 and 16 for additional details on the Company’s investments and equity method investments.