8-K - DNA - Equibles

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported): January 27, 2023

GINKGO BIOWORKS HOLDINGS, INC.

(Exact name of registrant as specified in its charter)

Delaware	001-40097	87-2652913
(State or other jurisdiction<br> <br>of incorporation)	(Commission<br> <br>File Number)	(IRS Employer<br> <br>Identification No.)

27 Drydock Avenue

8th Floor

Boston, MA 02210

(Address of principal executive offices, including zip code)

Registrant’s telephone number, including area code: (877) 422-5362

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

☐	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
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☐	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
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☐	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
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Securities registered pursuant to Section 12(b) of the Act

Title of each class	Trading<br>Symbol(s)	Name of each exchange<br>on which registered
Class A common stock, par value $0.0001 per share	DNA	NYSE
Warrants to purchase one share of Class A common stock, each at an exercise price of $11.50 per share	DNA.WS	NYSE

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter). ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Item 8.01. Other Events.

On October 19, 2022, Ginkgo Bioworks Holdings, Inc. (“Ginkgo”) filed a Current Report on Form 8-K with the Securities and Exchange Commission to report the completion of its acquisition of Zymergen Inc. (“Zymergen”). Ginkgo is filing this Current Report on Form 8-K to include certain updated financial statements of Zymergen and certain updated pro forma financial information in connection with the acquisition.

Item 9.01. Financial Statements and Exhibits.

(a) Financial Statements of Business Acquired

The unaudited consolidated interim financial statements of Zymergen as of and for the quarterly period ended September 30, 2022 are filed as Exhibit 99.1 attached hereto and incorporated herein by reference.

(b)

The unaudited pro forma condensed combined balance sheet as of September 30, 2022 and the unaudited pro forma condensed combined statements of operations for the nine months ended September 30, 2022 and the year ended December 31, 2021 are filed as Exhibit 99.2 attached hereto and incorporated herein by reference.

(d) Exhibits.

Exhibit Number	Description
99.1	Unaudited Consolidated Interim Financial Statements for Zymergen Inc. as of and for the quarterly period ended September 30, 2022.
99.2	Unaudited Pro Forma Condensed Combined Balance Sheet as of September 30, 2022 and the Unaudited Pro Forma Condensed Combined Statements of Operations for the nine months ended September 30, 2022 and the year ended December 31, 2021.
104	Cover Page Interactive Data File (embedded within the Inline XBRL).

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized

Date: January 27, 2023	GINKGO BIOWORKS HOLDINGS, INC.
	(REGISTRANT)
	By:	/s/ Mark Dmytruk
	Name:	Mark Dmytruk
	Title:	Chief Financial Officer

EX-99.1

Exhibit 99.1

CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

ZYMERGENINC.

Interim Periods Ended September 30, 2022 and September 30, 2021

	Page
Item 1. Financial Statements (Unaudited)		1
Condensed Consolidated Balance Sheets		1
Condensed Consolidated Statements of Operations and Comprehensive<br>Loss		2
Condensed Consolidated Statements of Changes in Convertible Preferred Stock<br> and Stockholders’ Equity (Deficit)		3
Condensed Consolidated Statements of Cash Flows		5
Notes to Condensed Consolidated Financial Statements		7

Item 1. Financial Statements

ZYMERGEN INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(in thousands, except share and per share data)

			As of December<br>31, 2021 ^(1)^
ASSETS
Current assets:
Cash and cash equivalents	153,412		$	386,105
Accounts receivable	130			520
Accounts receivable, unbilled, net of allowance for doubtful accounts of 2,214 and 0,<br>respectively	203			2,565
Prepaid expenses	9,362			7,818
Inventories	6,366			6,035
Restricted cash, current	2,844			2,105
Other current assets	1,157			2,201
Total current assets	173,474			407,349
Restricted cash	10,016			9,849
Property and equipment, net	82,604			53,799
Operating lease<br>right-of-use assets	127,924			—
Goodwill	—			40,645
Intangible assets, net	6,830			8,529
Other long-term assets	1,931			2,225
Total assets	402,779		$	522,396
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	2,786		$	5,418
Accrued and other liabilities	38,337			17,496
Short-term operating lease liabilities	7,779			—
Short-term debt, net	—			43,953
Short-term deferred rent	—			2,218
Deferred revenue	4,400			4,468
Total current liabilities	53,302			73,553
Long-term operating lease liabilities	176,200			—
Long-term deferred rent	—			35,390
Other long-term liabilities	3,677			4,967
Total liabilities	233,179			113,910
Commitments and contingencies
Stockholders’ equity
Preferred stock, 0.001 par value, 170,000,000 shares authorized as of September 30, 2022 and<br>December 31, 2021, respectively; no shares issued and outstanding as of September 30, 2022 and December 31, 2021, respectively	—			—
Common stock, 0.001 par value, 1,500,000,000 shares authorized as of September 30, 2022 and<br>December 31, 2021, respectively; 104,576,106 and 103,045,299 shares issued and outstanding as of September 30, 2022 and December 31, 2021, respectively	105			103
Additional paid-in capital	1,569,347			1,543,908
Accumulated deficit	(1,399,852	)		(1,135,525	)
Total stockholders’ equity	169,600			408,486
Total liabilities and stockholders’ equity	402,779		$	522,396

All values are in US Dollars.

(1)	The balance sheet as of December 31, 2021 is derived from the audited financial statements as of that<br>date.

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

ZYMERGEN INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND

COMPREHENSIVE LOSS

(Unaudited)

(in thousands,except share and per share data)

	Three Months Ended<br>September 30,						Nine Months Ended<br>September 30,
	2022			2021			2022			2021
Revenues from research and development service agreements	$	1,809		$	3,343		$	6,221		$	10,803
Collaboration and other revenue		—			1,135			2,079			3,264
Automation revenue		44			—			524			—
Grant revenue		430			—			884			—
Total revenues		2,283			4,478			9,708			14,067
Cost and operating expenses:
Cost of service revenue		7,410			17,179			28,960			60,138
Cost of automation revenue		978			—			1,615			—
Research and development		28,807			39,073			88,732			129,036
Sales and marketing		5,218			3,977			12,014			18,753
General and administrative		36,463			17,906			84,462			60,898
Goodwill impairment charge		—			—			40,645
Restructuring charges (benefit)		(1,296	)		21,193			(1,611	)		21,193
Total cost and operating expenses		77,580			99,328			254,817			290,018
Operating loss		(75,297	)		(94,850	)		(245,109	)		(275,951	)
Other income (expense):
Interest income		8			7			61			62
Interest expense		—			(2,809	)		(17,423	)		(8,303	)
Gain on change in fair value of warrant liabilities		—			—			—			1,849
Other expense, net		(449	)		(199	)		(1,866	)		(967	)
Total other expense		(441	)		(3,001	)		(19,228	)		(7,359	)
Loss before income taxes		(75,738	)		(97,851	)		(264,337	)		(283,310	)
Benefit from (provision for) income taxes		(5	)		18			10			26
Net loss and comprehensive loss	$	(75,743	)	$	(97,833	)	$	(264,327	)	$	(283,284	)
Net loss per share attributable to common stockholders, basic	$	(0.73	)	$	(0.96	)	$	(2.55	)	$	(4.38	)
Net loss per share attributable to common stockholders, diluted	$	(0.73	)	$	(0.96	)	$	(2.55	)	$	(4.40	)
Weighted average shares used in computing net loss per share to common stockholders,<br>basic		104,322,566			102,337,242			103,642,658			64,662,332
Weighted average shares used in computing net loss per share to common stockholders,<br>diluted		104,322,566			102,337,242			103,642,658			64,812,356

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

ZYMERGEN INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN CONVERTIBLE PREFERRED STOCK AND

STOCKHOLDERS’ EQUITY (DEFICIT)

(Unaudited)

(in thousands,except share data)

	Convertible<br>Preferred Stock				Common Stock				Additional<br>Paid-in<br>Capital			Accumulated<br>Deficit			TotalStockholders’<br>Equity(Deficit)
	Shares		Amount		Shares		Amount
Balance, December 31, 2021		—	$	—		103,045,299	$	103	$	1,543,908		$	(1,135,525	)	$	408,486
Vesting of restricted stock units		—		—		916		—		—			—			—
Issuance of common stock upon exercise of options		—		—		77,093		—		303			—			303
Stock-based compensation expense		—		—		—		—		7,391			—			7,391
Net loss		—		—		—		—		—			(72,116	)		(72,116	)
Balance, March 31, 2022		—		—		103,123,308		103		1,551,602			(1,207,641	)		344,064
Vesting of restricted stock units		—		—		427,996		1		(1	)		—			—
Stock-based compensation expense		—		—		—		—		8,642			—			8,642
Issuance of common stock pursuant to ESPP purchases		—		—		276,792		—		385			—			385
Net loss		—		—		—		—		—			(116,468	)		(116,468	)
Balance, June 30, 2022		—		—		103,828,096		104		1,560,628			(1,324,109	)		236,623
Vesting of restricted stock units		—		—		738,158		1		(1	)		—			—
Issuance of common stock upon exercise of options		—		—		5,166		—		10			—			10
Stock-based compensation expense		—		—		—		—		8,710			—			8,710
Other		—		—		4,686		—		—			—			—
Net loss		—		—		—		—		—			(75,743	)		(75,743	)
Balance, September 30, 2022		—	$	—		104,576,106	$	105	$	1,569,347		$	(1,399,852	)	$	169,600

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

ZYMERGEN INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN CONVERTIBLE PREFERRED STOCK AND

STOCKHOLDERS’ EQUITY (DEFICIT)

(Unaudited)

(in thousands,except share data)

						Common Stock					Additional<br>Paid-in<br>Capital		Accumulated<br>Deficit			TotalStockholders’<br>Equity(Deficit)
			Amount			Shares			Amount
Balance, December 31, 2020	68,093,280		$	900,798			12,812,109		$	13	$	29,991	$	(773,740	)	$	(743,736	)
Vesting of restricted common stock	—			—			16,810			—		—		—			—
Issuance of common stock upon exercise of options	—			—			711,963			—		3,189		—			3,189
Stock-based compensation expense	—			—			—			—		2,253		—			2,253
Share settlement of non-recourse loan to employee	—			—			(67,050	)		—		—		—			—
Cash settlement of non-recourse loan to employee	—			—			—			—		1,946		—			1,946
Net loss	—			—			—			—		—		(84,585	)		(84,585	)
Balance, March 31, 2021	68,093,280			900,798			13,473,832			13		37,379		(858,325	)		(820,933	)
Issuance of common stock upon initial public offering, net of commission and issuance costs of<br>45,138	—			—			18,549,500			19		529,878		—			529,897
Issuance of preferred stock upon exercise of Series C Preferred Stock warrants	883,332			27,384			—			—		—		—			—
Conversion of preferred stock into common stock	(68,976,612	)		(928,182	)		68,998,791			69		928,113		—			928,182
Issuance of common stock upon exercise of warrants	—			—			226,880			—		—		—			—
Issuance of common stock in business acquisition	—			—			774,402			1		24,808		—			24,809
Vesting of restricted common stock	—			—			16,810			—		—		—			—
Issuance of common stock upon exercise of options	—			—			256,960			1		1,257		—			1,258
Stock-based compensation expense	—			—			—			—		6,965		—			6,965
Net loss	—			—			—			—		—		(100,866	)		(100,866	)
Balance, June 30, 2021	—			—			102,297,175			103		1,528,400		(959,191	)		569,312
Vesting of restricted common stock	—			—			16,810			—		—		—			—
Issuance of common stock upon exercise of options	—			—			56,542			—		271		—			271
Stock-based compensation expense	—			—			—			—		5,422		—			5,422
Other	—			—			—			—		7		—			7
Net loss	—			—			—			—		—		(97,833	)		(97,833	)
Balance, September 30, 2021	—		$	—			102,370,527		$	103	$	1,534,100	$	(1,057,024	)	$	477,179

All values are in US Dollars.

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

ZYMERGEN INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(in thousands)

	Nine Months Ended<br>September 30,
	2022			2021
Operating activities
Net loss	$	(264,327	)	$	(283,284	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization expense		16,361			15,129
Stock-based compensation expense		24,743			14,640
Non-cash lease expense		8,565			—
Non-cash interest expense		14,532			890
Goodwill impairment charge		40,645			—
Impairment of long-lived assets		—			11,155
(Gain) loss on change in fair value of warrant liabilities		—			(1,849	)
Foreign exchange loss		1,725			695
Restructuring benefit		(1,300	)		—
Other		114			37
Changes in operating assets and liabilities:
Accounts receivable		390			574
Accounts receivable, unbilled		147			(943	)
Allowance for doubtful accounts		2,215			—
Prepaid expenses		(3,280	)		(2,373	)
Inventories		(331	)		(1,241	)
Other current assets		1,129			612
Operating lease<br>right-of-use assets		13,223			—
Other long-term assets		343			18
Accounts payable		(996	)		(3,733	)
Accrued and other liabilities		15,447			(4,909	)
Deferred revenue		(1,317	)		(1,271	)
Operating lease liabilities		(1,497	)		—
Deferred rent		—			18,041
Other long-term liabilities		(41	)		172
Net cash used in operating activities		(133,510	)		(237,640	)
Investing activities
Purchases of property and equipment		(39,987	)		(27,264	)
Proceeds from sale of property and equipment		1,147
Business acquisition, net of cash acquired		—			1,238
Net cash used in investing activities		(38,840	)		(26,026	)
Financing activities
Proceeds from initial public offering, net of commission and issuance cost		—			529,897
Proceeds from exercise of Series C warrants		—			15,002
Proceeds from exercise of common stock options		313			4,719
Proceeds from ESPP		385			—
Payments on debt		(58,485	)		—
Proceeds from repayment of non-recourse loan to<br>employee		—			1,946
Other		(49	)		—
Net cash (used in) provided by financing activities		(57,836	)		551,564
Effect of exchange rate changes on cash		(1,601	)		(654	)
Change in cash and cash equivalents		(231,787	)		287,244
Cash, cash equivalents, and restricted cash at beginning of the period		398,059			219,810
Cash, cash equivalents, and restricted cash at end of the period	$	166,272		$	507,054
Cash and cash equivalents	$	153,412		$	496,247
Restricted cash, current		2,844			30
Restricted cash, non-current		10,016			10,777
Total cash, cash equivalents, and restricted cash shown in the statement of cash flows	$	166,272		$	507,054

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

ZYMERGEN INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(in thousands)

	Nine Months Ended<br>September 30,
	2022			2021
Supplemental disclosure of cash flow information:
Cash paid during the period for interest	$	2,891		$	8,254
Supplemental disclosure of non-cash investing and<br>financing activities:
Conversion of preferred shares to common stock	$	—		$	928,182
Exercise of warrant liability into preferred stock	$	—		$	12,382
Issuance of common stock upon cashless exercise of warrants	$	—		$	749
Issuance of common stock in business combination	$	—		$	24,816
Acquisitions of property and equipment under accounts payable and accrued and other<br>liabilities	$	9,495		$	6,665
Operating lease<br>right-of-use assets obtained in the exchange for new operating lease liabilities, net	$	(4,112	)	$	—
Share settlement of non-recourse loan to employee	$	—		$	1,946

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

ZYMERGEN INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1.	Nature of Operations

Zymergen Inc. (“Zymergen” or the “Company”) integrates computational and manufacturing technologies to design, develop, and commercialize bio-based breakthrough products in a broad range of industries. The Company has developed a platform based on its collection of accessible biomolecules, its software and data science technology, and its data driven microbe optimization processes. In addition, the Company’s platform is used to discover novel molecules used to enable unique material properties. Utilizing its platform Zymergen is pursuing three markets focused on advanced materials, drug discovery and automation. The Company was incorporated in Delaware on April 24, 2013.

As discussed in Note 14, on October 19, 2022, Ginkgo Bioworks Holdings, Inc., a Delaware corporation (“Ginkgo”), completed the previously announced acquisition of the Company, pursuant to the Agreement and Plan of Merger, dated as of July 24, 2022 (the “Merger Agreement”), by and among the Company, Ginkgo and Pepper Merger Subsidiary Inc., a Delaware corporation and indirect wholly owned subsidiary of Ginkgo (“Merger Sub”). Pursuant to the Merger Agreement, at the Effective Time, and upon the terms and subject to the conditions set forth therein, Merger Sub was merged with and into the Company, with the Company surviving as an indirect wholly owned subsidiary of Ginkgo (the “Merger”).

Need for Additional Capital

In accordance with Accounting Standards Update (“ASU”) No. 2014-15, Disclosures of Uncertainties about an Entity’s Ability to Continue as a Going Concern (Subtopic205-40) (“ASU No. 2014-15”), management must evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date that the financial statements are issued. As of June 30, 2022, a substantial doubt as to the Company’s ability to continue as a going concern existed. Subsequent to September 30, 2022, and as of the date of issuance of these Condensed Consolidated Financial Statements, the completion of the Merger alleviated the substantial doubt.

Impact of COVID-19

The Company cannot at this time predict the specific extent, duration, or full impact that the ongoing COVID-19 pandemic will have on its financial condition and operations. The impact of the COVID-19 pandemic on the financial performance of the Company will depend on future developments, including the duration and spread of the pandemic and related governmental advisories and restrictions. These developments and the continuing impact of the COVID-19 pandemic on the financial markets and the overall economy are highly uncertain. If business conditions, financial markets and/or the overall economy continue to be impacted, the Company’s results may be adversely affected.

2.	Summary of Significant Accounting Policies

There were no significant changes to the accounting policies during the nine months ended September 30, 2022, from the significant accounting policies described in Note 2 of the “Notes to Consolidated Financial Statements” in the Company’s 2021 Form 10-K, filed with the Securities and Exchange Commission (“SEC”) on March 30, 2022, except as described below.

Basis of Preparation

The accompanying unaudited Condensed Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) regarding interim financial reporting. The balance sheet as of December 31, 2021 has been derived from audited financial statements at that date but does not include all of the information required by U.S. GAAP for complete financial statements. These unaudited interim Condensed Consolidated Financial Statements have been prepared on the same basis as the annual financial statements and, in the opinion of management, reflect all adjustments (consisting only of normal recurring adjustments) that are necessary for a fair presentation of the financial information. The results of operations for the three and nine months ended September 30, 2022 are not necessarily indicative of the results to be expected for the year ending December 31, 2022 or for any other interim period or for any other future year.

ZYMERGEN INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The accompanying unaudited Condensed Consolidated Financial Statements and related financial information should be read in conjunction with the audited financial statements and the related notes thereto for the year ended December 31, 2021 included in the Company’s 2021 Form 10-K. The Company has reclassified certain prior year amounts to conform with current period presentation.

Principles of Consolidation

These Condensed Consolidated Financial Statements include the accounts of the Company and its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated upon consolidation.

Fiscal Year

The Company’s fiscal year ends on December 31. References to fiscal 2022, for example, refer to the fiscal year ended December 31, 2022. The period end for the Company covered by this report is September 30, 2022.

Use of Estimates

The presentation 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 and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. These estimates include, but are not limited to, standalone selling price of performance obligations for contracts with multiple performance obligations, estimate of variable consideration from revenue contracts, useful life of property and equipment, fair value of the reporting unit for purposes of the assessment of goodwill impairment and undiscounted cash flows and residual values of long-lived assets of which the carrying value may not be recoverable, allowance for doubtful accounts, net realizable value of inventories, the valuation of intangible assets, the valuation of common and preferred stock used in the valuation of options to purchase common stock and warrants to purchase common stock or preferred stock, prior to being a publicly traded company, and the incremental borrowing rate used in determining operating lease liabilities. Actual results could differ from those estimates.

Segment Information

Operating segments are identified as components of an enterprise about which discrete financial information is available for evaluation by the chief operating decision-maker (“CODM”) in deciding resource allocation and assessing performance. The Company’s Acting Chief Executive Officer was its CODM. The Company’s CODM reviews financial information presented on a consolidated basis for the purposes of making operating decisions, allocating resources and evaluating financial performance. Consequently, the Company has determined it operates and manages its business in one operating and one reportable segment.

Foreign Currency

For the Company and its subsidiaries, the functional currency has been determined to be the U.S. Dollar (USD). Monetary assets and liabilities denominated in foreign currency are remeasured at period-end exchange rates. Non-monetary assets and liabilities denominated in foreign currencies are remeasured at historical rates. Foreign currency transaction gains and losses resulting from remeasurement are recognized in Other expense, net in the Condensed Consolidated Statements of Operations and Comprehensive Loss.

Contingencies

The Company is subject to various litigation and arbitration claims that arise in the ordinary course of business, including but not limited to those related to employee and shareholder matters. Some of these proceedings involve claims that are subject to substantial uncertainties and unascertainable damages. The Company makes a provision for a liability when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated. The Company has determined that no provision for liability nor disclosure is required related to any claim against the Company when: (a) there is not a reasonable possibility that a loss exceeding amounts already recognized (if any) may be incurred with respect to such claim; (b) a reasonably possible loss or range of loss cannot be estimated; or (c) such estimate is immaterial.

ZYMERGEN INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

CARES Act

On March 27, 2020, the U.S. government enacted the Coronavirus Aid, Relief and Economic Security (CARES) Act which, among other things, permits the deferral of the employer’s portion of social security tax payments between March 27, 2020 and December 31, 2020. As of September 30, 2022 and December 31, 2021, approximately $1.8 million and $3.7 million, respectively, of employer payroll tax payments were deferred. The $1.8 million deferred as of September 30, 2022 is due by December 31, 2022.

Inventories

Inventories, which consist of various types of lab supplies and automation hardware, are stated at the lower of cost or net realizable value using the weighted average cost method. The Company assesses the valuation of its inventories and reduces the carrying value of those inventories that are obsolete or in excess of the Company’s forecasted usage to their estimated net realizable value. If the Company determines that the cost of inventories exceeds its estimated net realizable value, the Company records a write-down equal to the difference between the cost of inventories and the estimated net realizable value. If the future demand for the Company’s services and products is less favorable than the Company’s forecasts, the value of the inventories may be required to be reduced, which could result in additional expense to the Company and affect its results of operations.

Goodwill and AcquiredIntangible Assets

Goodwill is not amortized, but is evaluated for impairment annually, or whenever events or changes in circumstances indicate that the carrying value may not be recoverable. The Company performs a goodwill impairment test annually in the fourth quarter. Goodwill impairment is recognized for the amount that the carrying value of the reporting unit, including goodwill, exceeds the reporting unit’s fair value. The loss recognized cannot exceed the total amount of goodwill allocated to the reporting unit. The inputs to the Company’s business are primarily comprised of a collection of accessible biomolecules, its software and data science technology, and its data driven microbe optimization processes which enable its platform to deliver products and services to its customers. Additionally, the Company manages its platform based on entity wide metrics and consolidated financial results. Therefore, the Company has determined that there is a single reporting unit for the purpose of conducting this goodwill impairment assessment.

Intangible assets acquired in a business combination are recorded at their estimated fair values at the date of acquisition. The Company amortizes acquired definite-lived intangible assets over their estimated useful lives based on the pattern of consumption of the economic benefits or, if that pattern cannot be readily determined, on a straight-line basis.

Long-Lived Assets

The Company evaluates its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is assessed by a comparison of the carrying amount of an asset to future net undiscounted cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured as the amount by which the carrying amount of the assets exceeds the fair value of the assets. The Company’s platform provides the lowest level of identifiable independent cash flows. Therefore, for purposes of evaluating potential impairment of the Company’s long-lived assets, a single entity-wide asset group exists.

Leases

Leases (Topic 842)Effective January 1, 2022

The Company determines if an arrangement is or contains a lease at inception by assessing whether the arrangement contains an identified asset and whether the Company has the right to control the identified asset. Lease assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease.

ZYMERGEN INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The Company has a variety of different types of operating leases, the specific terms and conditions of which vary from lease to lease. Certain operating lease agreements include terms such as: (i) renewal and early termination options; (ii) tenant improvement allowances; and (iii) rent escalation clauses. The lease agreements also include provisions for the maintenance of the leased asset and payment of lease related costs. The Company reviews the specific terms and conditions of each lease and, as appropriate, renewal or termination options reasonably certain to be exercised are included in the Company’s lease terms. The Company’s leases do not contain any residual value guarantees.

Certain of the Company’s lease agreements include rental payments that may be adjusted in the future based on economic conditions and others include rental payments adjusted periodically for inflation. Variable lease expense is disclosed for the adjusted portion of such payments. Lease income, attributable to subleases, is recognized in Cost and operating expenses on the Condensed Consolidated Statements of Operations and Comprehensive Loss.

Currently, the Company’s sole underlying asset class is real estate.

Lease liabilities are recognized at the lease commencement date based on the present value of lease payments over the non-cancelable lease term. Right-of-use assets are recognized for the amount of the lease liability, adjusted for any lease payments made prior to or on lease commencement, lease incentives received and initial direct costs incurred, as applicable. As most of the Company’s operating leases do not provide an implicit rate, the Company uses an estimated incremental borrowing rate based on information available at the date of adoption and subsequent lease commencement dates in calculating the present value of its operating lease liabilities. The incremental borrowing rate is determined using the Company’s synthetic credit rating, adjusted for a credit premium, historical recovery rates of secured debt, and the respective tenor’s risk-free rates determined using U.S. Treasury rates.

Revenue Recognition

Grant Revenue

Grants received are assessed to determine if the agreement should be accounted for as an exchange transaction or a contribution. An agreement is accounted for as a contribution if the resource provider does not receive commensurate value in return for the assets transferred. Contributions are recognized as grant revenue when all donor-imposed conditions have been met.

Automation Revenue

The Company enters into contracts to sell automation products for laboratory operations, web-based software services, support services or the combinations of products and services. Automation products generally include third party lab equipment hardware, customized enclosures and other elements for the Company’s reconfigurable automation cart (“RAC”) system. Services may include one-time service events, such as installation, consultation or design services, or software subscription and support services performed over time.

If the contract is comprised of both products and services, the Company applies judgment in determining if those performance obligations are distinct. If the customer can derive benefits from the use of the hardware with or without the services or the customer can derive the benefits from the services together with available resources, such as the previously delivered hardware, then the hardware and services are accounted for as distinct performance obligations.

The transaction price is allocated to the separate performance obligations on a relative standalone selling price basis. The Company’s process for determining the standalone selling price requires judgment and considers multiple factors that are reasonably available and maximizes the use of observable inputs that may vary over time depending upon the unique facts and circumstances related to each performance obligation. The Company believes that this method results in an estimate that represents the price the Company would charge for the product offerings if they were sold separately.

ZYMERGEN INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Revenue related to the identified distinct performance obligations is recognized when, or as, control of each individual performance obligation is transferred to the customer. For RAC systems control generally transfers to the customer at a point in time. The Company uses present right to payment, legal title, physical possession of the asset, and risks and rewards of ownership as indicators to determine the transfer of control to the customer. If customer acceptance of the product is not a formality, revenue is recognized upon receipt of such customer acceptance. Software subscription and support service revenues are recognized ratably over the respective non-cancelable subscription term as control continuously transfers to the customer. The Company’s subscription arrangements are considered service contracts, and the customer does not have the right to take possession of the software.

Sales taxes collected from customers and remitted to governmental authorities are not included in revenue.

Accounting Pronouncements Adopted

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) (“ASU 2016-02”). Under ASU 2016-02, a lessee is required to recognize assets and liabilities for leases with lease terms of more than twelve months. Recognition, measurement, and presentation of expenses and cash flows arising from a lease by a lessee primarily will depend on its classification as a finance or operating lease. ASU 2016-02 requires both types of leases to be recognized on the balance sheet. The ASU also requires disclosures to help investors and other financial statement users better understand the amount, timing, and uncertainty of cash flows arising from leases. These disclosures include qualitative and quantitative requirements, providing additional information about the amounts recorded in the financial statements.

The Company adopted Topic 842 on January 1, 2022 using the modified retrospective approach with the cumulative effect of adoption recognized to retained earnings on January 1, 2022. Under this method, the Company is allowed to record a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption and not restate prior periods. Additionally, the Company elected the transitional practical expedients such that the Company will not reassess whether contracts are leases and will retain lease classification and initial direct costs for leases existing prior to the adoption of the new standard. The Company also made the following elections: (1) elect the short term lease exception, (2) not elect hindsight and (3) elect to not separate its nonlease components for its real estate leases. Significant assumptions and judgments made in applying the new lease accounting standard include determining the Company’s incremental borrowing rate and evaluating the probability of exercising lease options. On January 1, 2022 the Company recorded total assets and total liabilities on the Condensed Consolidated Balance Sheets of $152.3 million and $189.9 million, respectively, due to the recognition of right-of-use assets and lease liabilities upon adoption, net of the impact of eliminating existing deferred rent liabilities related to its leasing arrangements. The adoption of ASU 2016-02, as amended, did not have a material impact to the Company’s Condensed Consolidated Statements of Operations and Comprehensive Loss or Condensed Consolidated Statements of Cash Flows.

In December 2019, the FASB issued ASU 2019-12, Income Taxes(Topic 740): Simplifying the Accounting for Income Taxes, which is intended to simplify various aspects related to accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and clarifies and amends existing guidance to improve consistent application. This pronouncement is effective for the Company for fiscal years beginning after December 15, 2021, and for interim periods within fiscal years beginning after December 15, 2022, with early adoption permitted. The Company adopted the new standard on January 1, 2022 using a modified retrospective transition method. The adoption did not have a material impact on the Condensed Consolidated Financial Statements.

Recent Accounting Pronouncements Not Yet Adopted

In June 2016, the FASB issued ASU 2016-13, Credit losses (Topic 326), subsequently amended by ASU 2019-10, which sets forth a “current expected credit loss” model which requires the Company to measure all expected credit losses for financial instruments held at the reporting date based on historical experience, current conditions, and reasonable supportable forecasts. This replaces the existing incurred loss model and is applicable to the measurement of credit losses on financial assets measured at amortized cost. The standard will become effective for the Company for fiscal years beginning after December 15, 2022. Early adoption is permitted. The Company is evaluating the impact the adoption of this standard will have on its financial statements and related disclosures.

ZYMERGEN INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

3. Business Combination

Lodo Therapeutics Corporation

On May 16, 2021, the Company completed a nontaxable acquisition of 100% of the equity interests of Lodo Therapeutics Corporation (“Lodo”), a privately-held company which uses its proprietary bacterial metagenomics discovery platform to develop novel therapeutics from nature. The acquisition was accounted for as a business combination. The purchase price for the acquisition was $25.3 million, substantially all of which was non-cash consideration. The non-cash consideration consisted of 774,402 shares of the Company’s common stock. The intangible assets acquired consisted primarily of $29.0 million of goodwill and Lodo’s developed technology of $5.4 million. Goodwill recognized is primarily a measure of the expected synergies from combining the operations of Lodo and the Company’s developed technologies.

The Company granted restricted stock units (“RSUs”) to certain employees and consultants of Lodo in connection with the acquisition that generally vest in three installments over a period of up to two years, subject to their continued service with the Company.

As a result of the business combination the Company incurred $0.9 million of acquisition related costs for its benefit which are not accounted for as part of consideration transferred. Acquisition related costs related primarily to legal services, accounting, tax, valuation, and due diligence and are recognized in General and administrative expenses on the Condensed Consolidated Statements of Operations and Comprehensive Loss. Pro forma results of operations will not be presented because the effects of this acquisition were not material to the Company’s Condensed Consolidated Financial Statements under applicable SEC rules.

4. Restructuring

Refer to Note 4 of the “Notes to Consolidated Financial Statements” in the Company’s 2021 Form 10-K for additional information related to the Company’s 2021 Restructuring. The 2021 Restructuring was substantially complete as of December 31, 2021. The Company does not expect to incur additional restructuring costs under the 2021 Restructuring.

The Company incurred total pre-tax charges of approximately $27.2 million and approximately $15.4 million of these charges resulted in cash outlays, of which the Company has made payments of $15.4 million through September 30, 2022. The Company has recorded costs of $27.2 million from the inception of the initiative through September 30, 2022.

The following table provides a summary of our costs incurred from the inception of the initiative through September 30, 2022, and cost estimates associated with the 2021 Restructuring, by major type of cost (in thousands):

	Total amountincurred sinceinception throughSeptember 30, 2022		Total estimatedamount expected tobe incurred
Restructuring charges:
Termination benefits	$	8,580	$	8,580
Impairment of long-lived assets		11,815		11,815
Contract terminations		2,211		2,211
Other ^(1)^		4,591		4,591
Total	$	27,197	$	27,197
(1)	Comprised of other costs directly related to the 2021 Restructuring, including consulting fees in relation to<br>portfolio review, realignment of organizational resources to strategic priorities and organization redesign in order to achieve reduced operating costs.
---	---

ZYMERGEN INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The following table provides a reconciliation of the beginning and ending balances for the restructuring liabilities, which are reported as components of Accounts payable and Accrued and other liabilities in the accompanying Condensed Consolidated Balance Sheets (in thousands):

	TerminationBenefits			ContractTerminations			Other		Total
Balance at January 1, 2022	$	948		$	1,450		$	—	$	2,398
Charges		—			—			—		—
Adjustments^(1)^		(73	)		(1,538	)		—		(1,611	)
Cash Payments, net		(875	)		88			—		(787	)
Balance at September 30, 2022	$	—		$	—		$	—	$	—
(1)	A $1.3 million reversal of contract termination costs was recognized in the three months ended<br>September 30, 2022 related to the Company’s contractual release from certain equipment disposal liabilities.
---	---

5. Goodwilland Intangible Assets

The following table summarizes goodwill as of September 30, 2022 and December 31, 2021 (in thousands):

	September 30,<br>2022		December 31,<br>2021
Goodwill	$	—	$	40,645

The economic and capital market volatility in 2022 and the Company’s business plan which required continued funding, resulted in the sustained decrease in the Company’s share price. As a result, the Company identified that a possible indicator of impairment was present as of the second quarter of 2022. As such, impairment testing of the Company’s goodwill was triggered. To conduct impairment tests of goodwill, the fair value of the reporting unit is compared to its carrying value. If the reporting unit’s carrying value exceeds its fair value, the Company records an impairment loss to the extent that the carrying value of goodwill exceeds its implied fair value, not to exceed the recorded amount of goodwill. The Company estimated the fair value of the reporting unit using a combination of income-based and market-based methods, including a discounted cash flow method, a market-based revenue multiple method and a probability-weighted scenario of a potential merger transaction based on the terms and information available as of the measurement date, June 30, 2022.

The result of the interim impairment test in the second quarter of 2022 indicated that the estimated fair value of the reporting unit was less than its carrying value. Consequently, a non-deductible, non-cash goodwill impairment charge was recorded in the amount of $40.6 million during the three months ended June 30, 2022, reducing the book value of goodwill to zero as of June 30, 2022.

The following table summarizes the net book value of the finite-lived intangible assets as of September 30, 2022 and December 31, 2021 (in thousands):

	Cost				Accumulated<br>Amortization						Intangible Assets, Net
	September 30,<br>2022		December 31,<br>2021		September 30,<br>2022			December 31,<br>2021			September 30,<br>2022		December 31,<br>2021
Developed technology	$	12,300	$	12,300	$	(5,601	)	$	(4,110	)	$	6,699	$	8,190
Customer relationships		1,400		1,400		(1,269	)		(1,061	)		131		339
Total	$	13,700	$	13,700	$	(6,870	)	$	(5,171	)	$	6,830	$	8,529

The Company recognized $0.6 million and $0.7 million in amortization expense for the three months ended September 30, 2022 and 2021, and $1.7 million and $1.5 million for the nine months ended September 30, 2022 and 2021, respectively.

ZYMERGEN INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Future amortization of intangible assets is as follows (in thousands):

Remainder of 2022	$	550
2023		2,067
2024		1,271
2025		1,271
2026		1,271
Thereafter		400
Total	$	6,830

6. Fair Value Measurements of Financial Instruments

GAAP defines fair value, establishes a framework for measuring fair value, and requires certain disclosures about fair value measurements. GAAP permits an entity to choose to measure many financial instruments and certain other items at fair value and contains financial statement presentation and disclosure requirements for assets and liabilities for which the fair value option is elected.

The hierarchy of fair value valuation techniques under GAAP provides for three levels: Level 1 provides the most reliable measure of fair value, whereas Level 3, if applicable, generally would require significant management judgment. The three levels for categorizing assets and liabilities under GAAP’s fair value measurement requirements are as follows:

Level 1 – Fair value of the asset or liability is determined using unadjusted quoted prices in active markets for identical assets or liabilities.

Level 2 – Fair value of the asset or liability is determined using inputs other than quoted prices that are observable for the applicable asset or liability, either directly or indirectly, such as quoted prices for similar (as opposed to identical) assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.

Level 3 – Fair value of the asset or liability is determined using unobservable inputs that are significant to the fair value measurement and reflect management’s own assumptions regarding the applicable asset or liability.

There were no transfers between the levels during the periods presented. As of September 30, 2022 and December 31, 2021, the Company’s financial assets and financial liabilities measured at fair value on a recurring basis were classified within the fair value hierarchy as follows (in thousands):

	Level 1		Level 2		Level 3		Balance as of September<br>30, 2022
Financial Assets
Cash equivalents	$	1,676	$	—	$	—	$	1,676
Total financial assets	$	1,676	$	—	$	—	$	1,676
	Level 1		Level 2		Level 3		Balance as of December<br>31, 2021
---	---	---	---	---	---	---	---	---
Financial Assets
Cash equivalents	$	1,667	$	—	$	—	$	1,667
Total financial assets	$	1,667	$	—	$	—	$	1,667

Financial instruments consist principally of cash equivalents, accounts receivables, accounts payable, accrued liabilities and debt.

The following methods and assumptions were used by the Company in estimating the fair value of financial instruments:

Accounts receivable, accounts payable, and accrued liabilities: The amounts reported in the accompanying balance sheets approximate fair value due to the short maturity of these instruments.

Debt: The gross amounts reported approximate fair value due to the debt being a variable interest rate debt and its relatively short-term maturity.

ZYMERGEN INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

7. Balance Sheet Components

Property and equipment consist of the following as of September 30, 2022 and December 31, 2021 (in thousands):

	September 30,<br>2022			December 31,<br>2021
Machinery and equipment	$	60,016		$	74,548
Leasehold improvements		58,711			31,488
Furniture and office equipment		3,212			3,189
Computers and software		2,757			2,764
		124,696			111,989
Less accumulated depreciation and amortization		(61,673	)		(78,132	)
		63,023			33,857
Construction in progress		19,581			19,942
Total property and equipment, net	$	82,604		$	53,799

During the three months ended September 30, 2022 the Company placed $42.1 million of construction in progress into service for leasehold improvements associated with the Company’s new corporate headquarters. Additionally, during the three months ended September 30, 2022 the Company disposed of $11.2 million of machinery and equipment cost related to previously fully impaired assets, $7.0 million of machinery and equipment cost related to asset sales with insignificant net book value, and $14.0 million of leasehold improvements cost related to fully amortized assets for leases that expired during the three months ended September 30, 2022.

Depreciation and amortization expense was $5.6 million and $5.2 million for the three months ended September 30, 2022 and 2021, and $14.7 million and $13.7 million for the nine months ended September 30, 2022 and 2021, respectively.

Accrued and other current liabilities consist of the following as of September 30, 2022 and December 31, 2021 (in thousands):

	September 30,<br>2022		December 31,<br>2021
Accrued compensation and compensation-related costs	$	17,929	$	6,027
Other accrued liabilities		12,510		7,045
Accrued restructuring costs		—		2,398
Accrued legal service fees		7,886		1,940
Accrued tax liabilities		12		86
Total accrued and other current liabilities	$	38,337	$	17,496

Accrued compensation and compensation-related costs at September 30, 2022 include employee severance costs of $5.5 million related to the Company’s July 26, 2022 and August 25, 2022 reductions in force. These compensation costs were granted pursuant to a company-wide Severance Plan that was enacted on July 24, 2022. The Company considers the Severance Plan an ongoing benefit arrangement in accordance with ASC 712.

Inventories consist of the following as of September 30, 2022 and December 31, 2021 (in thousands):

	September 30,<br>2022		December 31,<br>2021
Consumables	$	5,346	$	6,035
Automation—Raw materials		1,020		—
Total Inventories	$	6,366	$	6,035

ZYMERGEN INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

8. Term Loan

Except as described below, the Company’s debt is described in Note 8 of the “Notes to Consolidated Financial Statements” in the Company’s 2021 Form 10-K.

The Company’s previously outstanding term loan matured in June 2022, upon which the remaining outstanding principal and applicable prepayment premium were paid. No debt was outstanding at September 30, 2022.

Debt consists of the following as of December 31, 2021 (in thousands):

	December 31,<br>2021
Senior secured delayed draw term loan facility bearing interest equal to 11.5%	$	50,000
Unamortized discount and offering costs		(8,310	)
Accrued<br>end-of-term payment		2,263
Senior secured delayed draw term loan facility, net		43,953
Less current portion		43,953
Long-term debt, net	$	—

Interest expense on the Company’s term loan consists of the following (in thousands):

	Three Months Ended<br>September 30,				Nine Months Ended<br>September 30,
	2022		2021		2022		2021
Coupon interest	$	—	$	2,499	$	2,891	$	7,413
Amortization of debt discount and offering costs		—		310		8,310		890
Accretion of<br>end-of-term payment		—		—		6,222		—
Total interest expense on term loan	$	—	$	2,809	$	17,423	$	8,303

9. Leases

The Company adopted FASB ASC 842 on January 1, 2022 (Note 2). The Company did not have any finance leases during the nine months ended September 30, 2022.

In July 2019, the Company entered into an operating lease agreement to rent approximately 58,000 square feet of warehouse and office space in Emeryville, California. In February 2021 the lease was amended to include an additional approximately 10,000 square feet of space. The lease, as amended, features escalating rent with fixed annual increases of approximately 3% from January 2022 and terminates in January 2033 for all leased spaces. The Company has two options to extend the lease by 5 years at the prevailing market rent at the time of extension. The Company did not consider it reasonably certain that it would exercise these options.

In July 2019, the Company entered into an operating lease agreement to sublease approximately 76,000 square feet of laboratory and office space in Emeryville, California. The lease features escalating rent with fixed annual increases of approximately 3% starting August 2020 and terminates in March 2031. The Company has no options to extend the sublease beyond its initial term.

In October 2019, the Company entered into an operating lease agreement, which was subsequently amended, for a building containing approximately 303,000 square feet of office and laboratory space in Emeryville, California. The lease commenced in February 2021 and terminates in August 2033. The lease provides for two options to extend the term for 5 years at the prevailing market rent at the time of extension. The Company did not consider it reasonably certain that it would exercise these options. Lease payments are subject to a fixed annual escalation of approximately 3%. The lease contains free and reduced rent periods during the initial 1.5 years of the term from the commencement date. Additionally, the lease provides for tenant improvement allowances up to a total of $46.9 million.

ZYMERGEN INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Components of lease cost recorded in Cost and operating expenses in the Company’s Condensed Consolidated Statement of Operations and Comprehensive Loss for the three and nine months ended September 30, 2022 consist of the following (in thousands):

	Three Months EndedSeptember 30,			Nine Months EndedSeptember 30,
	2022			2022
Operating lease cost	$	8,450		$	25,887
Operating variable lease cost		2,098			5,404
Operating sublease income		(172	)		(516	)
Total lease costs	$	10,376		$	30,775

Rent expense under operating leases, net of sublease income, was $9.9 million and $25.7 million for the three and nine months ended June 30, 2021, respectively.

Other information related to the Company’s operating leases for the three and nine months ended September 30, 2022 is as follows (in thousands, except lease term and discount rate):

	Three Months Ended September 30,		Nine Months EndedSeptember 30,
	2022		2022
Cash paid for amounts included in operating lease liabilities	$	7,942	$	19,161
	September 30,2022
---	---	---	---
Weighted-average remaining operating lease term (in years)		10.25
Weighted-average incremental borrowing rate		12.60	%

Maturities of operating lease liabilities at September 30, 2022 are as follows (in thousands):

Remainder of 2022	$	7,774
2023		30,256
2024		30,661
2025		30,253
2026		31,091
Thereafter		208,242
Total		338,277
Less: Interest		(154,298	)
Present value of operating lease liabilities	$	183,979

Maturities of operating sublease payments at September 30, 2022 are as follows (in thousands):

Remainder of 2022	$	172
2023		686
2024		686
2025		114
Thereafter		—
Total	$	1,658

ZYMERGEN INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

At December 31, 2021, total future minimum rental commitments under long-term leases, net of sublease income, with an initial term of more than one year were estimated as follows (in thousands):

2022	$	26,387
2023		30,450
2024		30,630
2025		29,459
2026		30,350
Thereafter		206,587
Total	$	353,863

10. Common Stock

Equity Incentive Plans

The Company has three stock-based compensation plans – the 2021 Incentive Award Plan (the “2021 Plan”), the 2014 Stock Plan (the “2014 Plan”) and the Employee Stock Purchase Plan (the “ESPP”). As of September 30, 2022, there were 2,442,398 shares available for the Company to grant under the 2021 Plan and 2,758,864 shares available for the Company to grant under the ESPP. The shares available for grant for the 2021 Plan and the ESPP were increased by 5,152,264 and 1,030,452 shares, respectively during the three months ended March 31, 2022, which represent the annual increases of shares available for grant under those plans. Upon adoption of the 2021 Plan in April 2021, no new awards or grants are permitted under the 2014 Plan. Refer to Note 10 of the “Notes to Consolidated Financial Statements” in the Company’s 2021 Form 10-K for additional information related to these stock-based compensation plans.

Stock Options Originally Granted with Service-based Vesting Conditions

The following table summarizes option activity under the 2021 Plan and the 2014 Plan:

			Weighted<br>Average<br>Exercise<br>Price			Aggregate<br>Intrinsic Value
						(in thousands)
Outstanding — December 31, 2021	7,555,966		$	12.55	8.15	$	3,668
Options granted	—			—
Options exercised	(82,259	)	$	3.81
Options cancelled	(1,073,691	)	$	10.66
Outstanding — September 30, 2022	6,400,016		$	12.98	5.77	$	52
Unvested — September 30, 2022	2,828,777		$	15.53	6.57		—
Exercisable — September 30, 2022	3,571,239		$	10.97	5.13	$	52

No options were granted during the nine months ended September 30, 2022. The weighted average grant-date fair value of options granted was $15.26 per share, during the nine months ended September 30, 2021.

The aggregate intrinsic value of stock option awards exercised, determined at the date of option exercise, was $0.1 million and $27.1 million, during the nine months ended September 30, 2022, and 2021, respectively. The aggregate intrinsic value was calculated as the difference between the exercise prices of the underlying stock option awards and the estimated fair value of the Company’s common stock on the date of exercise.

In connection with the July 26, 2022 and August 25, 2022 reductions in force, the Company modified certain options for impacted employees to include a performance vesting condition that would accelerate the remaining unvested options upon a change in control event occurring within 12 months of the respective employees termination date. As of September 30, 2022, out of the 6,400,016 options outstanding, 1,820,014 options contained this performance vesting condition.

ZYMERGEN INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Stock-based compensation expense for stock options is estimated at the grant date based on the fair-value calculated using the Black-Scholes option pricing model. The fair value of employee stock options is recognized as an expense ratably over the requisite service period of the awards. The fair value of employee stock options was estimated using the following assumptions, in periods for which options were granted:

	Three Months EndedSeptember 30,			Nine Months EndedSeptember 30,
	2021			2021
Expected dividend yield		—	%		—	%
Risk-free interest rate		0.95% - 1.09	%		0.77% - 1.09	%
Expected term (in years)		6.08			6.08
Expected volatility		70.09% - 71.58	%		70.09% - 74.67	%

As of September 30, 2022 the Company had employee stock-based compensation expense of $18.3 million related to unvested stock options with only a service-based vesting condition not yet recognized, which is expected to be recognized over an estimated weighted average period of approximately 2.04 years. As of September 30, 2022 the Company had employee stock-based compensation expense of $0.1 million related to unvested stock options with only a performance based vesting condition not yet recognized as the performance condition was not probable of achievement.

Stock Options with Market-based Vesting Conditions

Except as described below, the Company’s stock options with market-based vesting conditions are described in Note 10 of the “Notes to Consolidated Financial Statements” in the Company’s 2021 Form 10-K.

As of September 30, 2022, 458,333 options remain outstanding and unvested. In connection with the August 25, 2022 reduction in force, the holder of these options terminated employment with the Company on September 22, 2022. Pursuant to the terms of the employment agreement with the holder, the options remained outstanding until the effective date of the Merger with Ginkgo at which point the options were forfeited in accordance with the change of control provisions of the original award. As of September 30, 2022, the stock based compensation related to these unvested stock options not yet recognized was insignificant.

Restricted Stock Units Originally Grantedwith Service-based Vesting Conditions

The following table summarizes RSU activity (in thousands, except share and per share amounts and term):

			Weighted Average<br>Grant Date Fair Value
Non-vested Restricted Stock Units as of December 31,<br>2021	2,475,983		$	13.47
Granted	10,464,820		$	2.86
Vested	(1,167,070	)	$	5.05
Forfeited	(820,405	)	$	7.35
Non-vested Restricted Stock Units as of September 30,<br>2022	10,953,328		$	4.67

RSUs granted are valued at the market price of our common stock on the date of grant. The Company recognizes compensation expense for the fair value of RSUs ratably over the requisite service period of the awards. The total intrinsic value of RSUs vested was $2.2 million during the nine months ended September 30, 2022.

In connection with the July 26, 2022 and August 25, 2022 reductions in force, the Company modified certain RSU’s for impacted employees to include (i) acceleration of vesting upon termination for a portion of awards based on service to the Company prior to termination, and (ii) a performance vesting condition that would accelerate the remaining unvested RSUs upon a change in control event occurring within 12 months of the respective employees termination date. As of September 30, 2022, out of the 10,953,328 RSUs outstanding 2,355,159 RSUs contained this performance vesting condition.

As of September 30, 2022 there was $30.3 million of total unrecognized compensation cost related to RSUs with only a service-based vesting condition, which is expected to be recognized over a weighted average period of 1.63 years. As of September 30, 2022 the Company had compensation cost of $4.8 million related to RSUs with only a performance based vesting condition not yet recognized as the performance condition was not probable.

ZYMERGEN INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Compensation Expense

Compensation expense related to stock-based awards was included in the following categories in the accompanying Condensed Consolidated Statements of Operations and Comprehensive Loss in accordance with the accounting guidance for share-based payments for the three and nine months ended September 30, 2022 and 2021 (in thousands):

	Three Months Ended<br>September 30,				Nine Months Ended<br>September 30,
	2022		2021		2022		2021
Cost of service revenue	$	1,135	$	1,189	$	2,597	$	2,557
Cost of automation revenue		201		—		225		—
Research and development		1,244		3,775		6,839		7,065
Sales and marketing		400		437		1,311		998
General and administrative		5,730		21		13,771		4,020
Total stock-based compensation	$	8,710	$	5,422	$	24,743	$	14,640

Compensation expense by stock-based award was as follows for the three and nine months ended September 30, 2022 and 2021 (in thousands):

	Three Months Ended<br>September 30,					Nine Months Ended<br>September 30,
	2022			2021		2022			2021
Stock options with service based vesting conditions	$	3,592		$	2,589	$	11,389		$	8,115
Stock options with market based vesting conditions		(3,273	)		24		(1,911	)		2,438
RSUs with service based vesting conditions		8,315			1,601		14,833			2,186
Non-vested stock		—			84		—			250
ESPP		76			1,124		432			1,651
Total stock-based compensation	$	8,710		$	5,422	$	24,743		$	14,640

11. Net Loss Per Share

Basic net loss per share is determined by dividing net loss by the weighted average shares outstanding for the period. The Company analyzes the potential dilutive effect of stock options, non-vested stock, RSUs, stock issuable under the ESPP, and warrants under the treasury stock method (as applicable), during periods of income, or during periods in which income is recognized related to changes in fair value of its liability-classified securities.

ZYMERGEN INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The following table presents the calculation of basic and diluted net loss per share (in thousands, except share and per share data) applicable to common stockholders for the three and nine months ended September 30, 2022 and 2021:

	Three Months Ended<br>September 30,						Nine Months Ended<br>September 30,
	2022			2021			2022			2021
Numerator:
Net loss, basic	$	(75,743	)	$	(97,833	)	$	(264,327	)	$	(283,284	)
Less: Gain on change in fair value of warrant liabilities		—			—			—			1,849
Net loss, diluted	$	(75,743	)	$	(97,833	)	$	(264,327	)	$	(285,133	)
Denominator:
Weighted average shares used in calculating net loss per share, basic		104,322,566			102,337,242			103,642,658			64,662,332
Effect of dilutive securities:
Warrants to purchase Series C convertible preferred stock		—			—			—			150,024
Weighted average shares used in calculating net loss per share, diluted		104,322,566			102,337,242			103,642,658			64,812,356
Net loss per share, basic	$	(0.73	)	$	(0.96	)	$	(2.55	)	$	(4.38	)
Net loss per share, diluted	$	(0.73	)	$	(0.96	)	$	(2.55	)	$	(4.40	)

The following potentially dilutive shares as of the periods ended September 30, 2022, and 2021, were excluded from the calculation of diluted net loss per share applicable to common stockholders because their effect would have been anti-dilutive for the periods presented:


Options to purchase common stock	6,400,016	6,680,932
Restricted stock units	10,953,328	1,942,195
Non-vested stock	—	16,810
Total	17,353,344	8,639,937

12. Revenue, Credit Concentrations and Geographic Information

Revenues from research and development service agreements

The Company’s R&D service contracts generally consist of fixed-fee multi-phase research terms with concurrent value-share and/or performance bonus payments based on developing an improved microbial strain. The research term of the contracts typically spans several quarters and the contract term for revenue recognition purposes is determined based on the customer’s rights to terminate the contract for convenience. Other payment types, typically consisting of performance bonuses or value share payments, are constrained until those payments become probable or are earned. The Company recognized performance bonuses of $0.3 million for the nine months ended September 30, 2021. For the three months ended September 30, 2021 and for the three and nine months ended September 30, 2022, performance bonuses the Company recognized were insignificant. For the three and nine months ended September 30, 2022 and 2021, the Company has not recognized any royalty or value share payments.

When acceptance clauses are present in an agreement, the Company recognizes the R&D service revenue at a point in time when the R&D services provided have been accepted by the customer and the Company has a present right for payment and no refunds are permitted. The Company recognized revenue at a point in time due to customer acceptance clauses of $0.4 million for the three months ended September 30, 2021. For the three months ended September 30, 2022, revenue recognized at a point in time due to customer acceptance clauses were insignificant. The Company recognized revenue at a point in time due to customer acceptance clauses of $0.5 million and $2.7 million for the nine months ended September 30, 2022 and 2021, respectively.

ZYMERGEN INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Automation Revenue

The Company’s automation contract generally consists of fixed consideration for the delivery of hardware and software subscription and support services over a specified period of time. The Company recognizes revenue related to the delivery of hardware at a point in time when the hardware has been accepted by the customer and the Company has a present right for payment and no refunds are permitted. Revenue for the delivery of automation services is recognized over time as the customer receives and consumes the benefits of the automation services. Revenue recognized at a point in time for the delivery of automation hardware for the three months ended September 30, 2022 was insignificant. The Company recognized revenue at a point in time for the delivery of automation hardware of $0.5 million for the nine months ended September 30, 2022. Automation revenue recognized at a point in time for the three months ended September 30, 2022 was insignificant.

Contract Balances

The following table represents changes in the balances of our contract liabilities during the periods ended September 30, 2022, and 2021 (in thousands):

	December 31,2021		Additions		Adjustments		Deletions			September 30,2022
Contract liabilities:
Deferred revenue	$	8,195	$	3,243	$	—	$	(5,439	)	$	5,999
	December 31,2020		Additions		Adjustments		Deletions			September 30,2021
---	---	---	---	---	---	---	---	---	---	---	---
Contract liabilities:
Deferred revenue	$	3,014	$	7,658	$	6,222	$	(7,850	)	$	9,044

Long-term deferred revenue is included in Other long-term liabilities on the Condensed Consolidated Balance Sheets. Adjustments to deferred revenue for the period ended September 30, 2021 are attributable to the adoption of ASU 2021-08, as applied to a customer contract in connection with the acquisition of Lodo.

Performance Obligations

Transaction price allocated to the remaining performance obligation represents contracted revenue that has not yet been recognized, which includes unearned revenue and unbilled amounts that will be recognized as revenue in future periods. Remaining performance obligations consist of the following (in thousands):

	Current		Noncurrent		Total
As of September 30, 2022	$	4,773	$	4,055	$	8,828

The Company’s noncurrent remaining performance obligation is expected to be recognized in the next 1.1 to 2.7 years.

Grant Revenue

On October 10, 2021, the Company entered into a grant agreement with the Bill & Melinda Gates Foundation under which it was awarded a grant totaling up to $2.9 million to discover potential natural product hits for malaria, tuberculosis, and COVID-19 targets. In December 2022, the Company entered into an amendment of this grant agreement to extend its effectiveness until September 30, 2023.The grant agreement will remain in effect until that date, unless earlier terminated by the Bill & Melinda Gates Foundation for the Company’s breach of the terms of the grant agreement, failure to progress the funded project, in the event of the Company’s change of control, change in the Company’s tax status, or significant changes in the Company’s leadership that the Bill & Melinda Gates Foundation reasonably believes may threaten the success of the project.

Payments received in advance that are related to future research activities are deferred and recognized as revenue when the donor-imposed conditions are met, which is as the research and development activities are performed. The Company recognized grant revenue of $0.4 million and $0.9 million for the three and nine months ended September 30, 2022, respectively. As of September 30, 2022, the Company has deferred revenue of $1.9 million under this grant agreement.

ZYMERGEN INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Credit Concentrations

Customers representing 10% or greater of revenue were as follows for the three and nine months ended September 30, 2022 and 2021:

	Three Months Ended<br>September 30,						Nine Months Ended<br>September 30,
	2022			2021			2022			2021
Customer A		—	%		10	%		17	%		*
Customer B		—	%		25	%		20	%		23	%
Customer C		29	%		13	%		20	%		13	%
Customer E		—	%		19	%		—	%		27	%
Customer H		50	%		12	%		22	%		*
Customer J		19	%		—	%		*			—	%

—–—–—–—–—–—–

*	Less than 10%

Customers representing 10% or greater of billed accounts receivable were as follows as of September 30, 2022 and December 31, 2021:


Customer F	75	%	68	%
Customer G	—	%	29	%
Customer I	20	%	—	%

Geographic Information

The Company’s revenues by geographic region are presented in the table below for the three and nine months ended September 30, 2022 and 2021 (in thousands):

	Three Months Ended<br>September 30,				Nine Months Ended<br>September 30,
	2022		2021		2022		2021
United States of America	$	2,283	$	2,051	$	6,089	$	5,065
Asia		—		1,142		1,944		3,871
Europe		—		1,285		1,675		5,131
Total revenue	$	2,283	$	4,478	$	9,708	$	14,067

13. Commitments and Contingencies

The Company is subject to various litigation and arbitration claims that arise in the ordinary course of business, including but not limited to those related to employee matters. Unless otherwise specifically disclosed, the Company has determined that no provision for liability is required related to any claim against the Company.

On August 4, 2021, a putative securities class action was filed on behalf of purchasers of the Company’s common stock pursuant to or traceable to the registration statement for its initial public offering (“IPO”). The action is pending in the United States District Court for the Northern District of California, and is captioned Shankar v. Zymergen Inc. et al., Case No. 3:21-cv-06028-JCS. The action alleges violations of Sections 11 and 15 of the Securities Act of 1933, as amended, in connection with the Company’s IPO, names the Company, certain of its former officers and directors, the Company’s IPO underwriters, and certain stockholders as defendants and seeks damages in an unspecified amount, attorneys’ fees, and other remedies. The Company intends to defend vigorously against such allegations. The Company’s motion to dismiss was granted in part and denied in part.

ZYMERGEN INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

On November 9, 2021, a purported shareholder of the Company filed a putative derivative lawsuit in the United States District Court for the Northern District of California, that is captioned Mellor v. Hoffman, et al., Case No. 4:21-cv-08723. The complaint names certain of the Company’s former officers and directors as defendants and the Company as nominal defendant based on allegations substantially similar to those in the securities class action. The complaint purports to assert claims on the Company’s behalf for breach of fiduciary duty, unjust enrichment, abuse of control, gross mismanagement, corporate waste, and contribution under the federal securities laws and seeks corporate reforms, unspecified damages and restitution, and fees and costs.

In addition, certain government agencies, including the SEC, have requested information related to the Company’s August 3, 2021 disclosure. The Company is cooperating fully.

14. Subsequent Events

In addition to the completion of the Merger on October 19, 2022, which has been disclosed in Note 1 above, the following events occurred subsequent to September 30, 2022.

On October 18, 2022, the Company announced a reduction in force (the “October 2022 Reduction in Force”) that resulted in the termination of approximately 110 employees. The Company incurred cash-based severance and stock based compensation costs of approximately $7.9 million and approximately $3.5 million, respectively, related to the October 2022 Reduction in Force. Additionally, related to the Company’s July 26, 2022 and August 25, 2022 reductions in force, the Company incurred additional cash-based severance costs of approximately $2.3 million that were dependent on the consummation of a change in control event.

On November 11, 2022, the Company entered into an agreement whereby it sublet the entirety of its 76,000 square feet of laboratory and office space in Emeryville, California (Note 9) for the remainder of the existing lease term. The sublease commenced on January 1, 2023. The undiscounted, noncancellable, future sublease income associated with the agreement is $49.3 million.

EX-99.2

Exhibit 99.2

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

Introduction

The following unaudited pro forma condensed combined financial information and related notes have been prepared in accordance with Article 11 of Regulation S-X.

The unaudited pro forma condensed combined balance sheet as of September 30, 2022 gives effect to the Merger (as defined below) as if the transaction had been completed on September 30, 2022 and combines the unaudited condensed consolidated balance sheet of Ginkgo Bioworks Holdings, Inc. (“Ginkgo”) as of September 30, 2022 with the unaudited condensed consolidated balance sheet of Zymergen Inc. (“Zymergen”) as of September 30, 2022.

The unaudited pro forma condensed combined statement of operations for the nine months ended September 30, 2022 and the year ended December 31, 2021 give effect to the Merger as if it had occurred on January 1, 2021, the first day of Ginkgo’s fiscal year 2021, and combines the historical results of Ginkgo and Zymergen. The unaudited pro forma condensed combined statement of operations for the nine months ended September 30, 2022 combines the unaudited consolidated statement of operations and comprehensive loss of Ginkgo with Zymergen’s unaudited consolidated statement of operations and comprehensive loss for the nine months ended September 30, 2022. The unaudited pro forma condensed combined statement of operations for the fiscal year ended December 31, 2021 combines the audited consolidated statement of operations and comprehensive loss of Ginkgo with Zymergen’s audited consolidated statement of operations and comprehensive loss for the fiscal year ended December 31, 2021.

The historical financial statements of Ginkgo and Zymergen have been adjusted in the accompanying unaudited pro forma condensed combined financial information to give effect to the transaction accounting adjustments which are necessary to account for the Merger in accordance with GAAP. These unaudited pro forma condensed combined financial statements do not include any adjustments not otherwise described herein, including such adjustments associated with Ginkgo’s acquisitions that have closed or may close after September 30, 2022, or the related financing of those acquisitions, as such acquisitions were not significant either individually or in the aggregate. The unaudited pro forma adjustments are based upon available information and certain assumptions that management believes are reasonable.

The unaudited pro forma condensed combined financial information should be read in conjunction with:

•	The accompanying notes to the unaudited pro forma condensed combined financial information;<br>
•	The separate audited consolidated financial statements of Ginkgo as of and for the fiscal year ended<br>December 31, 2021 and the related notes, included in Ginkgo’s Current Report on Form 8-K filed with the SEC on October 4, 2022;
---	---
•	The separate unaudited condensed consolidated financial statements of Ginkgo as of and for the nine months ended<br>September 30, 2022 and the related notes, included in Ginkgo’s Quarterly Report on Form 10-Q for the nine months ended September 30, 2022 filed with the SEC on November 14, 2022;<br>
---	---
•	The separate audited consolidated financial statements of Zymergen as of and for the fiscal year ended<br>December 31, 2021 and the related notes, included in Zymergen’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021 filed with the SEC on March 30, 2022; and<br>
---	---
•	The separate unaudited condensed consolidated financial statements of Zymergen as of and for the nine months<br>ended September 30, 2022 and the related notes, disclosed as Exhibit 99.1 to Ginkgo’s Current Report on Form 8-K filed with the SEC on January 27, 2023.
---	---

Description of the Merger

On October 19, 2022, Ginkgo and Zymergen completed the previously announced acquisition contemplated by that certain Agreement and Plan of Merger, dated as of July 24, 2022 (the “Merger Agreement”) among Zymergen, a Delaware public benefit corporation, Ginkgo, and Pepper Merger Subsidiary Inc., a Delaware corporation and an indirect wholly owned subsidiary of Ginkgo (“Merger Subsidiary”). Pursuant to the Merger Agreement, Merger Subsidiary merged with and into Zymergen, with Zymergen surviving as a wholly owned subsidiary of Ginkgo (the “Merger”).

At the effective time of the Merger (the “Effective Time”), each share of common stock, par value $0.001 per share, of Zymergen (each, a “Zymergen Common Share”) that was issued and outstanding immediately prior to the Effective Time (other than certain excluded shares specified in the Merger Agreement) was cancelled, extinguished and converted into the right to receive 0.9179 of a share of Class A Common Stock, par value $0.0001 per share, of Ginkgo (each, a “Ginkgo Class A Share,” and such consideration the “Merger Consideration”) and cash in lieu of any fractional Ginkgo Class A Shares, without interest. Further, under the terms of the Merger Agreement, at the Effective Time:

•	Each option to purchase Zymergen Common Shares (a “Zymergen Option”) with an exercise price per share<br>that was less than the Merger Consideration Value (as defined below) that was outstanding immediately prior to the Effective Time, whether or not exercisable or vested, was cancelled and converted into the right to receive a number of Ginkgo<br>Class A Shares equal to the Option Consideration Value (as defined below) with respect to such Zymergen Option divided by the Ginkgo Class A Share Price (as defined below), and each Zymergen Option with an exercise price per share that is<br>equal to or greater than the Merger Consideration Value was cancelled for no consideration. “Option Consideration Value” means an amount, without interest, equal to the product of (i) the excess of (A) the Merger Consideration<br>Value over (B) the exercise price per share of such Zymergen Option, and (ii) the total number of Zymergen Common Shares issuable upon exercise in full of such Zymergen Option. “Merger Consideration Value” means an amount<br>(rounded down to the nearest whole cent) equal to the product of (x) the Merger Consideration and (y) the Ginkgo Class A Share Price. “Ginkgo Class A Share Price” means the volume-weighted average price of Ginkgo<br>Class A Shares on the New York Stock Exchange (“NYSE”) for the period of five consecutive trading days ending on and including the second full trading day prior to the Effective Time.
•	Each vested Zymergen restricted stock unit (each, a “Zymergen RSU”) that was outstanding immediately<br>prior to the Effective Time (including after giving effect to any acceleration of vesting to which such Zymergen RSU was entitled as of immediately prior to the Effective Time as disclosed to Ginkgo) was cancelled and converted into the right to<br>receive the Merger Consideration. The vesting of certain Zymergen RSUs was accelerated immediately prior to the closing of the Merger. Some of the accelerated vesting was outlined in Zymergen’s staged reduction in workforce plans (the<br>“Zymergen RIFs”), which also included certain enhancements to Zymergen’s existing severance plan in the form of cash severance and bonus payments (the “Enhanced Severance”). Further, in connection with the Merger, certain<br>Zymergen employees also received Zymergen RSUs and cash retention bonus payments pursuant to the Zymergen retention plan entered into in 2022 (the “Zymergen New Retention Plan”). Further terminations may be executed under additional<br>Zymergen RIFs following the closing of the Merger, and such terminations will result in the issuance of additional Ginkgo Class A Common Shares and the recognition of additional compensation expense than is presented in this unaudited pro forma<br>condensed combined financial information.
---	---
•	Each unvested Zymergen RSU, not accelerated as outlined above, that was outstanding immediately prior to the<br>Effective Time was cancelled and converted into a Ginkgo restricted stock unit award (“Ginkgo RSU”) with respect to the number of Ginkgo Class A Shares that is equal to the product of (A) the number of Zymergen Common Shares<br>subject to such unvested Zymergen RSU as of immediately prior to the Effective Time and (B) the Merger Consideration, rounded down to the nearest whole share, which such Ginkgo RSU award will be subject to the same vesting terms and conditions<br>applicable to the Zymergen RSU to which it relates as of immediately prior to the Effective Time, including any applicable vesting acceleration provisions in connection with such holder’s termination of employment or service but otherwise will<br>be subject to the terms and conditions of Ginkgo’s 2021 stock incentive award plan.
---	---
•	The Zymergen Employee Stock Purchase Plan (the “ESPP”) terminated immediately prior to the completion<br>of the Merger and any Zymergen ESPP participants in the current offering period were allowed to purchase Zymergen Common Shares on the day immediately preceding the completion of the Merger.
---	---
•	Each Zymergen Common Share that was (i) held by Zymergen as treasury stock; (ii) owned by Ginkgo or<br>Merger Subsidiary; or (iii) owned by any direct or indirect wholly owned subsidiary of Ginkgo or Merger Subsidiary as of immediately prior to the Effective Time was automatically cancelled and extinguished without any conversion thereof or<br>consideration paid therefor.
---	---

Accounting for the Merger

The Merger is expected to be accounted for as a business combination using the acquisition method with Ginkgo as the accounting acquirer in accordance with ASC 805, Business Combinations (“ASC 805”). Under this method of accounting, the purchase consideration will be allocated to Zymergen’s assets acquired and liabilities assumed based upon their estimated fair values at the date of completion of the Merger, which was October 19, 2022. The process of valuing the net assets of Zymergen, as well as evaluating accounting policies for conformity, is preliminary. In addition, the acquisition method of accounting requires the acquirer to recognize the consideration transferred at fair value. Any differences between the estimated fair value of the purchase consideration and the estimated fair value of the assets acquired and liabilities assumed will be recorded as goodwill. Accordingly, the purchase consideration allocation and related adjustments reflected in this unaudited pro forma condensed combined financial information are preliminary and subject to revision based on a final determination of fair value. Refer to Note 1, “Basis of Presentation” for more information.

The unaudited pro forma condensed combined financial information presented is for informational purposes only and is not necessarily indicative of the financial position or results of operations that would have been realized if the Merger had been completed on the dates set forth above, nor is it indicative of the future results or financial position of the combined company.

As a result of the foregoing, the unaudited pro forma condensed combined financial information is based on the preliminary information available and management’s preliminary valuation of the fair value of tangible and intangible assets acquired and liabilities assumed, and the preliminary value of the consideration transferred. The actual accounting may vary based on final analyses of the valuation of assets acquired and liabilities assumed, particularly regarding definite-lived tangible and intangible assets, which could be material. Ginkgo will finalize the accounting for the Merger as soon as practicable within the measurement period in accordance with ASC 805, but in no event later than one year from the closing of the Merger.

The unaudited pro forma condensed combined financial information does not reflect any expected cost savings, operating synergies or revenue enhancements that the combined company may achieve as a result of the Merger, any termination, restructuring or other costs to integrate the operations of Ginkgo and Zymergen or the costs necessary to achieve any such cost savings, operating synergies or revenue enhancements.

GINKGO BIOWORKS HOLDINGS, INC. AND SUBSIDIARIES

Unaudited Pro Forma Condensed Combined Balance Sheet

As of September 30, 2022

(in thousands, except share and per share data)

			Zymergen ReclassedAs of September 30,2022 (Note 2)			ZymergenTransactionAccountingAdjustments				Pro FormaCombined
Assets
Current assets:
Cash and cash equivalents	1,302,603		$	153,412		$	—			$	1,456,015
Accounts receivable, net	113,661			333			—				113,994
Accounts receivable – related parties	2,095			—			—				2,095
Inventory, net	5,860			6,366			(5,346	)	(a)		6,880
Prepaid expenses and other current assets (6,177 from related party)	37,784			13,363			(3,916	)	(b)		47,231
Total current assets	1,462,003			173,474			(9,262	)			1,626,215
Property and equipment, net	187,577			82,604			14,590		(c)		284,771
Investments	96,310			—			—				96,310
Equity method investments	4,135			—			—				4,135
Intangible assets, net	47,938			6,830			11,770		(d)		66,538
Goodwill	28,804			—			5,685		(e)		34,489
Other non-current assets	43,928			139,871			(129,132	)	(f)		54,667
Total assets	1,870,695		$	402,779		$	(106,349	)		$	2,167,125
Liabilities and Stockholders’ Equity		****
Current liabilities:
Accounts payable	11,323		$	2,786		$	13,137		(g)	$	27,246
Deferred revenue (includes 11,461 from related parties)	40,505			4,400			—				44,905
Accrued expenses and other current liabilities	72,990			46,116			1,469		(h)		120,575
Total current liabilities	124,818			53,302			14,606				192,726
Non-current liabilities:
Deferred rent, net of current	21,001			—			—				21,001
Deferred revenue, net of current portion (includes 127,586 from related parties)	150,637			3,506			—				154,143
Lease financing obligation	59,842			—			—				59,842
Warrant liabilities	39,739			—			—				39,739
Other non-current liabilities	34,922			176,371			(176,200	)	(i)		35,093
Total liabilities	430,959			233,179			(161,594	)			502,544
Commitments and contingencies
Stockholders’ equity:
Preferred stock	—			—			—				—
Common stock	165			105			(95	)	(j)		175
Additional paid-in capital	5,668,791			1,569,347			(1,324,006	)	(k)		5,914,132
Accumulated deficit	(4,226,310	)		(1,399,852	)		1,379,346		(l)		(4,246,816	)
Accumulated other comprehensive loss	(7,910	)		—			—				(7,910	)
Total Ginkgo Bioworks Holdings, Inc. stockholders’ equity	1,434,736			169,600			55,245				1,659,581
Non-controlling interest	5,000			—			—				5,000
Total stockholders’ equity	1,439,736			169,600			55,245				1,664,581
Total liabilities and stockholders’ equity	1,870,695		$	402,779		$	(106,349	)		$	2,167,125

All values are in US Dollars.

See the accompanying notes to unaudited pro forma condensed combined financial information.

GINKGO BIOWORKS HOLDINGS, INC. AND SUBSIDIARIES

Unaudited Pro Forma Condensed Combined Statement of Operations

For the Nine Months Ended September 30, 2022

(in thousands, except share and per share data)

	Ginkgo<br>Historical<br>Nine MonthsEndedSeptember 30,2022			ZymergenReclassedNine MonthsEndedSeptember 30,2022(Note 2)			ZymergenTransactionAccountingAdjustments				Pro FormaCombined
Foundry revenue	$	90,409		$	6,745		$	—			$	97,154
Biosecurity revenue:
Product		23,024			—			—				23,024
Service		265,988			—			—				265,988
Collaborations, grants and other		—			2,963			—				2,963
Total revenue		379,421			9,708			—				389,129
Costs and operating expenses:
Cost of Biosecurity product revenue		13,199			—			—				13,199
Cost of Biosecurity service revenue		160,799			—			—				160,799
Research and development		871,488			119,307			(1,805	)	(a)		988,990
General and administrative		1,308,379			96,476			(1,385	)	(b)		1,403,470
Goodwill impairment charge		—			40,645			—				40,645
Restructuring charges (benefit)		—			(1,611	)		—				(1,611	)
Total operating expenses		2,353,865			254,817			(3,190	)			2,605,492
Loss from operations		(1,974,444	)		(245,109	)		3,190				(2,216,363	)
Other (expense) income:
Interest income (expense), net		7,097			(17,362	)		—				(10,265	)
Loss on equity method investments		(53,764	)		—			—				(53,764	)
Loss on investments		(39,981	)		—			—				(39,981	)
Change in fair value of warrant liabilities		96,099			—			—				96,099
Gain on deconsolidation of subsidiary		31,889			—			—				31,889
Other income (expense), net		629			(1,866	)		—				(1,237	)
Total other (expense) income, net		41,969			(19,228	)		—				22,741
Loss before income taxes		(1,932,475	)		(264,337	)		3,190				(2,193,622	)
Income tax benefit		(257	)		(10	)		—		(c)		(267	)
Net loss		(1,932,218	)		(264,327	)		3,190				(2,193,355	)
Net loss attributable to non-controlling interest		(3,833	)		—			—				(3,833	)
Net loss attributable to Ginkgo Bioworks Holdings, Inc. stockholders	$	(1,928,385	)		$(264,327	)	$	3,190			$	(2,189,522	)
Net loss per share attributable to Ginkgo Bioworks Holdings, Inc. common stockholders, basic and<br>diluted	$	(1.19	)								$	(1.27	)
Weighted average common shares outstanding, basic and diluted		1,619,790,335						99,422,907		(d)		1,719,213,242

See the accompanying notes to unaudited pro forma condensed combined financial information.

GINKGO BIOWORKS HOLDINGS, INC. AND SUBSIDIARIES

Unaudited Pro Forma Condensed Combined Statement of Operations

For the year ended December 31, 2021

(in thousands, except share and per share data)

	Ginkgo HistoricalYear EndedDecember 31, 2021			Zymergen ReclassedYear EndedDecember 31, 2021(Note 2)			ZymergenTransactionAccountingAdjustments				Pro FormaCombined
Foundry revenue	$	112,989		$	12,414		$	—			$	125,403
Biosecurity revenue:
Product		23,040			—			—				23,040
Service		177,808			—			—				177,808
Collaborations, grants and other		—			4,329			—				4,329
Total revenue		313,837			16,743			—				330,580
Costs and operating expenses:
Cost of Biosecurity product revenue		20,017			—			—				20,017
Cost of Biosecurity service revenue		109,673			—			—				109,673
Research and development		1,149,662			228,841			9,549		(a)		1,388,052
General and administrative		862,952			106,657			9,924		(b)		979,533
Restructuring charges (benefit)		—			28,808			—				28,808
Total operating expenses		2,142,304			364,306			19,473				2,526,083
Loss from operations		(1,828,467	)		(347,563	)		(19,473	)			(2,195,503	)
Other income (expense):
Interest income		837			64			—				901
Interest expense		(2,373	)		(14,705	)		—				(17,078	)
Loss on equity method investments		(77,284	)		—			—				(77,284	)
Loss on investments		(11,543	)		—			—				(11,543	)
Change in fair value of warrant liabilities		58,615			1,849			—				60,464
Gain on settlement of partnership agreement		23,826			—			—				23,826
Other income (expense), net		(1,733	)		(1,379	)		—				(3,112	)
Total other income (expense), net		(9,655	)		(14,171	)		—				(23,826	)
Loss before income taxes		(1,838,122	)		(361,734	)		(19,473	)			(2,219,329	)
Income tax (benefit) provision		(1,480	)		51			—		(c)		(1,429	)
Net loss		(1,836,642	)		(361,785	)		(19,473	)			(2,217,900	)
Net loss attributable to non-controlling interest		(6,595	)		—			—				(6,595	)
Net loss attributable to Ginkgo Bioworks Holdings, Inc. stockholders		$(1,830,047	)		$(361,785	)	$	(19,473	)			$(2,211,305	)
Net loss per share attributable to Ginkgo Bioworks Holdings, Inc. common stockholders:
Basic	$	(1.35	)								$	(1.52	)
Diluted	$	(1.39	)								$	(1.55	)
Weighted average common shares outstanding:
Basic		1,359,848,803						99,422,907		(d)		1,459,271,710
Diluted		1,360,373,343						99,422,907		(d)		1,459,796,250

See the accompanying notes to unaudited pro forma condensed combined financial information.

NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

Note 1. Basis of Presentation

The unaudited pro forma condensed combined financial information and related notes have been prepared in accordance with Article 11 of Regulation S-X.

Both Ginkgo’s and Zymergen’s historical financial statements were prepared in accordance with GAAP and presented in U.S. dollars. As discussed in Note 2, “Reclassification Adjustments”, certain reclassifications were made to align Zymergen’s financial statement presentation with that of Ginkgo. Ginkgo is currently in the process of evaluating Zymergen’s accounting policies. As a result of that review, Ginkgo identified a material accounting policy difference related to the adoption date of ASC Topic 842, Leases (“ASC 842”). Zymergen has already adopted ASC 842 in its unaudited condensed consolidated financial statements as of and for the nine months ended September 30, 2022, whereas Ginkgo has not yet adopted ASC 842 and therefore continues to apply ASC Topic 840, Leases (“ASC 840”). Accordingly, an adjustment has been reflected in this unaudited pro forma condensed combined financial information to report Zymergen’s leases under ASC 840, resulting in the elimination of the operating lease right-of-use assets and lease liabilities that Zymergen historically recognized. Additional differences could be identified between the accounting policies of the two companies as Ginkgo finalizes its review.

The unaudited pro forma condensed combined financial information was prepared using the acquisition method of accounting in accordance with ASC 805, with Ginkgo identified as the accounting acquirer, using the fair value concepts defined in ASC Topic 820, Fair Value Measurement (“ASC 820”) and based on the historical consolidated financial statements of Ginkgo and Zymergen. Under ASC 805, assets acquired and liabilities assumed in a business combination are recognized and measured at their assumed acquisition date fair value with certain limited exceptions, while transaction costs associated with a business combination are expensed as incurred. The excess of purchase consideration over the estimated fair value of assets acquired and liabilities assumed is allocated to goodwill.

The purchase consideration and estimated fair values of assets acquired and liabilities assumed will be updated and finalized within the measurement period that will not extend beyond one year from the closing of the Merger. Estimated fair value adjustments could change significantly from those amounts used in the unaudited pro forma condensed combined financial information.

The unaudited pro forma condensed combined balance sheet is presented as if the Merger had occurred on September 30, 2022. The unaudited pro forma condensed combined statements of operations for the nine months ended September 30, 2022 and for the year ended December 31, 2021 give effect to the Merger as if it occurred on January 1, 2021.

The unaudited pro forma condensed combined financial information does not reflect any anticipated synergies or dis-synergies, operating efficiencies or cost savings that may result from the Merger and integration costs that may be incurred. The pro forma adjustments represent Ginkgo’s best estimates and are based upon currently available information and certain assumptions that Ginkgo believes are reasonable under the circumstances. There were no material transactions between Ginkgo and Zymergen during the periods presented. Accordingly, adjustments to eliminate transactions between Ginkgo and Zymergen have not been reflected in the unaudited pro forma condensed combined financial information.

Note2. Reclassification Adjustments

During the preparation of this unaudited pro forma condensed combined financial information, management performed a preliminary analysis of Zymergen’s financial information to identify differences in accounting policies and financial statement presentation as compared to Ginkgo. The pro forma adjustments include adjustments to align Zymergen’s accounting policies to Ginkgo’s accounting policies and include certain reclassification adjustments to conform Zymergen’s historical financial statement presentation to Ginkgo’s financial statement presentation. The Company is in process of finalizing the review of accounting policies and reclassifications, which could be materially different from the amounts set forth in the unaudited pro forma condensed combined financial information presented herein.

A)	Refer to the table below for a summary of reclassification adjustments made to conform Zymergen’s<br>historical balance sheet presentation as of September 30, 2022 with that of Ginkgo’s:
(in thousands)	Ginkgo<br>HistoricalCondensed ConsolidatedBalance Sheet Line Items	Zymergen HistoricalCondensed ConsolidatedBalances as ofSeptember 30, 2022			Reclassification				ZymergenReclassedAs of September<br>30, 2022
---	---	---	---	---	---	---	---	---	---	---	---
	Cash and cash equivalents	$	153,412		$	—			$	153,412
	Accounts receivable, net		130			203		(a)		333
	Accounts receivable - related parties		—			—				—
			203			(203	)	(a)		—
	Inventory, net		6,366			—				6,366
	Prepaid expenses and other current assets (6,177 from related party)		9,362			4,001		(b)(c)		13,363
			2,844			(2,844	)	(b)		—
			1,157			(1,157	)	(c)		—
			10,016			(10,016	)	(d)		—
	Property and equipment, net		82,604			—				82,604
	Investments		—			—				—
	Equity method investments		—			—				—
			127,924			(127,924	)	(e)		—
	Intangible assets, net		6,830			—				6,830
	Goodwill		—			—				—
	Other non-current assets		1,931			137,940		(d)(e)		139,871
	Accounts payable		2,786			—				2,786
	Deferred revenue (11,461 from related parties)		4,400			—				4,400
	Accrued expenses and other current liabilities		38,337			7,779		(f)		46,116
			7,779			(7,779	)	(f)		—
			—			—				—
			—			—				—
			176,200			(176,200	)	(g)		—
	Deferred rent, net of current portion		—			—				—
	Deferred revenue, net of current portion (127,586 from related parties)		—			3,506		(h)		3,506
	Lease financing obligation		—			—				—
	Warrant liabilities		—			—				—
	Other non-current liabilities		3,677			172,694		(g)(h)		176,371
	Commitments and contingencies		—			—				—
	Preferred stock		—			—				—
	Common stock		105			—				105
	Additional paid-in capital		1,569,347			—				1,569,347
	Accumulated deficit		(1,399,852	)		—				(1,399,852	)

All values are in US Dollars.

(a)	Reclassification of $0.2 million of accounts receivable, unbilled to accounts receivable, net.<br>
(b)	Reclassification of $2.8 million of restricted cash, current to prepaid expenses and other current assets.<br>
---	---
(c)	Reclassification of $1.2 million of other current assets to prepaid expenses and other current assets.<br>
---	---
(d)	Reclassification of $10.0 million of non-current restricted cash<br>to other non-current assets.
---	---
(e)	Reclassification of $127.9 million of operating lease right-of-use assets to other non-current assets.
---	---
(f)	Reclassification of $7.8 million of short-term operating lease liabilities to accrued expenses and other<br>current liabilities.
---	---
(g)	Reclassification of $176.2 million of long-term operating lease liabilities to other non-current liabilities.
---	---
(h)	Reclassification of $3.5 million of non-current deferred revenue<br>within other long-term liabilities to deferred revenue, net of current portion.
---	---

B)	Refer to the table below for a summary of adjustments made to conform Zymergen’s historical statements of<br>operations and comprehensive loss presentation for the nine months ended September 30, 2022 with that of Ginkgo’s:
(in thousands)	Ginkgo HistoricalCondensed Consolidated<br><br><br>Statements of Operations<br><br><br>and Comprehensive Loss<br><br><br>Line Items	Zymergen Historical<br><br><br>Condensed Consolidated<br><br><br>Statements of Operations<br><br><br>and Comprehensive Loss<br><br><br>Line Items	ZymergenHistoricalNine MonthsEndedSeptember 30,2022			Reclassification				ZymergenReclassedNine MonthsEndedSeptember 30,2022
---	---	---	---	---	---	---	---	---	---	---	---	---
	Foundry revenue		$	—		$	6,745		(a)(b)	$	6,745
	Biosecurity product revenue			—			—				—
	Biosecurity service revenue			—			—				—
		Revenues from research and development service agreements		6,221			(6,221	)	(a)		—
		Automation revenue		524			(524	)	(b)		—
		Collaboration and other revenue		2,079			884		(c)		2,963
		Grant revenue		884			(884	)	(c)		—
	Cost of Biosecurity product revenue			—			—				—
	Cost of Biosecurity service revenue			—			—				—
	Research and development	Research and development		88,732			30,575		(d)(e)		119,307
		Cost of automation revenue		1,615			(1,615	)	(d)		—
		Cost of service revenue		28,960			(28,960	)	(e)		—
	General and administrative	General and administrative		84,462			12,014		(f)		96,476
		Sales and marketing		12,014			(12,014	)	(f)		—
		Goodwill impairment charge		40,645			—				40,645
		Restructuring charges (benefit)		(1,611	)		—				(1,611	)
	Interest income (expense), net	Interest expense		(17,423	)		61		(g)		(17,362	)
		Interest income		61			(61	)	(g)		—
	Loss on equity method investments			—			—				—
	(Loss) gain on investments			—			—				—
	Change in fair value of warrant liabilities	Gain on change in fair value of warrant liabilities		—			—				—
	Gain on deconsolidation of subsidiary			—			—				—
	Other (expense) income, net	Other expense, net		(1,866	)		—				(1,866	)
	Income tax benefit	Benefit from (provision for) income taxes		10			—				10
(a)	Reclassification of $6.2 million of revenues from research and development service agreements to foundry<br>revenue.
---	---
(b)	Reclassification of $0.5 million of automation revenue to foundry revenue.
---	---
(c)	Reclassification of $0.9 million of grant revenue to collaboration and other revenue.
---	---
(d)	Reclassification of $1.6 million of cost of automation revenue to research and development.<br>
---	---
(e)	Reclassification of $29.0 million of cost of service revenue to research and development.<br>
---	---
(f)	Reclassification of $12.0 million of sales and marketing to general and administrative.
---	---
(g)	Reclassification of $0.1 million of interest income to interest expense, net.
---	---

C)	Refer to the table below for a summary of adjustments made to conform Zymergen’s historical statements of<br>operations and comprehensive loss presentation for the year ended December 31, 2021 with that of Ginkgo’s:
(in thousands)	Ginkgo Historical<br><br><br>Consolidated Statements<br> <br>ofOperations and<br> <br>Comprehensive Loss<br><br><br>Line Items	Zymergen HistoricalConsolidated StatementsofOperations andComprehensive Loss<br> <br>Line Items	Zymergen<br>HistoricalYear EndedDecember 31,2021			Reclassification				ZymergenReclassedYear EndedDecember 31, 2021
---	---	---	---	---	---	---	---	---	---	---	---	---
	Foundry revenue		$	—		$	12,414		(a)	$	12,414
	Biosecurity product revenue			—			—				—
	Biosecurity service revenue			—			—				—
		Revenues from research and development service agreements		12,414			(12,414	)	(a)		—
		Collaboration and other revenue		4,329			—				4,329
	Cost of Biosecurity product revenue			—			—				—
	Cost of Biosecurity service revenue			—			—				—
	Research and development	Research and development		159,120			69,721		(b)		228,841
		Cost of service revenue		69,721			(69,721	)	(b)		—
	General and administrative	General and administrative		83,009			23,648		(c)		106,657
		Sales and marketing		23,648			(23,648	)	(c)		—
		Restructuring charges		28,808			—				28,808
	Interest income	Interest income		64			—				64
	Interest expense	Interest expense		(14,705	)		—				(14,705	)
	Loss on equity method investments			—			—				—
	Loss on investments			—			—				—
	Change in fair value of warrant liabilities	Gain (loss) on change in fair value of warrant liabilities		1,849			—				1,849
	Gain on settlement of partnership agreement			—			—				—
	Other (expense) income, net	Other income (expense), net		(1,379	)		—				(1,379	)
	Income tax (benefit) provision	(Provision for) benefit from income taxes		(51	)		—				(51	)
(a)	Reclassification of $12.4 million of revenues from research and development service agreements to foundry<br>revenue.
---	---
(b)	Reclassification of $69.7 million of cost of service revenue to research and development.<br>
---	---
(c)	Reclassification of $23.6 million of sales and marketing to general and administrative.<br>
---	---

Note 3. Estimated Purchase Consideration and Preliminary Purchase Consideration Allocation

Preliminary purchase consideration

Per the Merger Agreement, on October 19, 2022, each Zymergen Common Share that was issued and outstanding immediately prior to the Effective Time was cancelled, extinguished, and converted into the right to receive 0.9179 of a Ginkgo Class A Share and cash in lieu of any fractional Ginkgo Class A Shares, without interest. See “Description of the Merger” for further detail.

The following table summarizes the acquisition date fair value of the estimated consideration transferred to Zymergen:

(in thousands)	Amount
Estimated fair value of Ginkgo Class A Common Shares issued to Zymergen shareholders<br>(i)	$	236,331
Estimated fair value of replacement Ginkgo RSUs and Ginkgo Class A Common Shares issued under<br>Zymergen RIFs attributable to pre-combination services (ii)		1,571
Less: Estimated Enhanced Severance and Zymergen New Retention Plan cash bonuses incurred for the<br>benefit of the combined company (iii)		(4,261	)
Total estimated consideration transferred	$	233,641
(i)	As consideration for the Merger, the Company delivered to Zymergen common stockholders approximately 99,422,907<br>of its Class A Common Shares, of which approximately 96,859,594 of its Class A Common Shares represent estimated consideration transferred for the Merger under ASC 805. The fair value of the Company’s Class A Common Shares issued as<br>consideration transferred was determined based on a per share price of $2.44, which was the closing price of Company’s Class A Common Shares on October 19, 2022. An immaterial amount related to the incremental fair value attributable<br>to Zymergen stock options, calculated as the difference between the fair value of the options immediately before the Merger and the Option Consideration Value the option holders received upon closing of the Merger, was excluded from total estimated<br>consideration transferred and will be recognized in Ginkgo’s unaudited pro forma condensed combined financial information as stock-based compensation expense in the period subsequent to the Merger.
---	---
(ii)	Represents the estimated fair value of the replacement Ginkgo RSUs and the Ginkgo Class A Common Shares<br>issued under the Zymergen RIFs attributable to pre-combination services. The remaining portion of the fair value is associated with future service and will be recognized in the post-combination financial<br>statements over the remaining service period.
---	---
(iii)	Represents estimated cash bonuses payable to Zymergen employees in accordance with the Enhanced Severance and<br>the Zymergen New Retention Plan. These payments were determined to be for the benefit of the combined company, and a portion of the fair value recognized as estimated consideration transferred will be allocated to compensation expense in<br>Ginkgo’s unaudited pro forma condensed combined financial information in the period subsequent to the Merger.
---	---

Preliminarypurchase consideration allocation

The assumed accounting for the Merger, including the preliminary purchase consideration, is based on provisional amounts, and the associated purchase accounting is not final. The preliminary allocation of the purchase consideration to the acquired assets and assumed liabilities was based upon the preliminary estimate of fair values. For the preliminary estimate of fair values of assets acquired and liabilities assumed of Zymergen, Ginkgo used widely accepted income-based and cost-based valuation approaches. Actual results may differ materially from the assumptions within the accompanying unaudited pro forma condensed combined financial information. The unaudited pro forma adjustments are based upon available information and certain assumptions that Ginkgo believes are reasonable under the circumstances. The unaudited pro forma adjustments relating to the Ginkgo and Zymergen combined financial information are preliminary and subject to change, as additional information becomes available and as additional analyses are performed, and such amounts will be finalized within the measurement period that will not extend beyond one year from the closing of the Merger.

The following table summarizes the preliminary purchase consideration allocation, as if the Merger had been completed on September 30, 2022:

(in thousands)	Amount
Cash and cash equivalents	$	153,412
Accounts receivable		333
Inventory		1,020
Prepaid expenses and other current assets		9,447
Property and equipment (i)		97,194
Intangible assets (ii)		18,600
Goodwill		5,685
Other non-current assets		11,947
Accounts payable		(14,455	)
Deferred revenue (iii)		(4,400	)
Accrued expenses and other current liabilities		(41,465	)
Deferred revenue, net of current portion (iii)		(3,506	)
Other non-current liabilities		(171	)
Estimated preliminary purchase consideration	$	233,641	****
(i)	Preliminary property and equipment in the unaudited pro forma condensed combined financial information consists<br>of the following:
---	---
	Preliminary Fair Value(in thousands)		Estimated Useful Life(in years)
---	---	---	---	---
Leasehold improvements	$	52,206		11
Laboratory equipment		32,626		4 to 7
Furniture and fixtures		2,024		5
Computer equipment		403		3
Software		367		2
General equipment		70		6
Construction-in-progress		9,498		N/A
Total property and equipment acquired	$	97,194

A 10% change in the valuation of property and equipment would cause a corresponding increase or decrease in the depreciation expense of approximately $0.8 million for the nine months ended September 30, 2022, and $1.0 million for the year ended December 31, 2021. Property and equipment amounts included in this unaudited pro forma condensed combined financial information are subject to change as additional information becomes available, and such changes could be materially different from the amounts presented herein. Pro forma depreciation is preliminary and is based on the use of straight-line depreciation. The amount of depreciation following the completion of the Merger may differ significantly between periods based upon the final value assigned.

(ii)	Preliminary identifiable intangible assets in the unaudited pro forma condensed combined financial information<br>consist of the following:
	Preliminary Fair Value(in thousands)		Estimated Useful Life(in years)
---	---	---	---	---
Software design tools	$	5,500		10
Software workflow tools		4,000		10
Strain engineering tools		3,900		10
Codebase assets		3,700		7
Automation core technology		1,500		10
Total intangible assets acquired	$	18,600

A 10% change in the valuation of intangible assets would cause a corresponding increase or decrease in the amortization expense of approximately $0.2 million for the nine months ended September 30, 2022 and $0.2 million for the year ended December 31, 2021. Intangible asset amounts included in this unaudited pro forma condensed combined financial information are subject to change as additional information becomes available, and such changes could be materially different from the amounts presented herein. Pro forma amortization is preliminary and is based on the use of straight-line amortization. The amount of amortization following the completion of the Merger may differ significantly between periods based upon the final value assigned.

(iii)

The unaudited pro forma condensed combined financial information presented reflects the early adoption of<br>Accounting Standards Update (“ASU”) 2021-08, Accounting for Contract Assets and Contract Liabilities from Contracts with Customers. Under this new standard, deferred revenue acquired in a<br>business combination is measured pursuant to ASC Topic 606, Revenue from Contracts with Customers (“ASC 606”), rather than at its assumed acquisition date fair value. Ginkgo early adopted the requirements of ASU 2021-08 and is required to apply the amendments prospectively to all business combinations that occurred on or after April 1, 2022. The

adoption of the standard will have no retrospective impact to Ginkgo or Zymergen’s historical financial statements. In connection with the adoption of ASU 2021-08, Ginkgo did not change the historical book value of Zymergen’s deferred revenue in this unaudited pro forma condensed combined financial information. Ginkgo’s accounting policy analysis related to Zymergen’s accounting for its contracts with customers is preliminary and not yet complete, but will be finalized within the measurement period. Accordingly, any deferred revenue in this unaudited pro forma condensed combined financial information is preliminary and subject to change.

Note 4 – Adjustments to the Unaudited Pro Forma Condensed Combined Balance Sheet

The following are adjustments that assume the Merger was consummated on September 30, 2022 and are included in the Zymergen Transaction Accounting Adjustments column in the accompanying unaudited pro forma condensed combined balance sheet as of September 30, 2022:

(a) Reflects the policy conformity adjustment to expense Zymergen’s previously capitalized consumables inventory and conform to Ginkgo’s accounting policy for inventory as Ginkgo’s accounting policy is to expense lab supplies upon purchase. This adjustment derecognizes the consumables inventory balance of $5.3 million from the unaudited pro forma condensed combined balance sheet as of September 30, 2022.

(b) Reflects the preliminary adjustment to prepaid expenses and other current assets for the following:

(in thousands)	Amount
Pro forma transaction accounting adjustments:
Eliminate Zymergen’s historical prepaid rent (i)	$	(5	)
Eliminate Zymergen’s historical prepaid directors and officers insurance policies<br>(ii)		(3,911	)
Net pro forma transaction accounting adjustment to prepaid expenses and other current<br>assets	$	(3,916	)
(i)	Eliminate Zymergen’s prepaid rent in accordance with ASC 805.
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(ii)	Eliminate Zymergen’s existing prepaid directors and officers insurance policies that were terminated upon<br>the closing of the Merger.
---	---

(c) Reflects the preliminary adjustment for the estimated fair value of acquired property and equipment in accordance with ASC 805. Refer to Note 3, “Preliminary Purchase Consideration and Preliminary Purchase Consideration Allocation” above for additional information.

(in thousands)	Amount
Pro forma transaction accounting adjustments:
Eliminate Zymergen’s historical net book value of property and equipment	$	(82,604	)
Record the preliminary fair value of acquired property and equipment		97,194
Net pro forma transaction accounting adjustment to property and equipment, net	$	14,590

(d) Reflects the preliminary adjustment for the estimated fair value of acquired intangibles in accordance with ASC 805. Refer to Note 3, “Preliminary Purchase Consideration and Preliminary Purchase Consideration Allocation” above for additional information.

(in thousands)	Amount
Pro forma transaction accounting adjustments:
Eliminate Zymergen’s historical net book value of intangible assets	$	(6,830	)
Record the preliminary fair value of acquired intangible assets		18,600
Net pro forma transaction accounting adjustment to intangible assets, net	$	11,770

(e) Reflects the preliminary goodwill adjustment of $5.7 million as a result of the Merger, which represents the excess of the preliminary purchase consideration transferred over the preliminary fair value of the assets acquired and liabilities assumed. Refer to Note 3, “Preliminary Purchase Consideration and Preliminary Purchase ConsiderationAllocation” above for additional information.

(f) Reflects the preliminary adjustments to other non-current assets for the following:

(in thousands)	Amount
Pro forma transaction accounting adjustments:
Reclassify Ginkgo’s deferred equity issuance costs from other<br>non-current assets to additional paid-in capital upon Merger close (i)	$	(1,208	)
Remove Zymergen’s historical<br>right-of-use asset to align with Ginkgo’s ASC 840 accounting policy (ii)		(127,924	)
Net pro forma transaction accounting adjustment to other<br>non-current assets	$	(129,132	)

(i)	Record an adjustment to reclassify deferred equity issuance costs incurred by Ginkgo as of September 30,<br>2022 related to the issuance of Ginkgo Class A Common Shares in connection with the Merger from other non-current assets to additional paid-in capital.<br>
(ii)	Record an accounting policy conformity adjustment to derecognize Zymergen’s<br>right-of-use asset resulting from the alignment of Zymergen’s accounting for leases pursuant to ASC 842 to Ginkgo’s accounting for leases pursuant to ASC 840.<br>
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(g) Reflects the preliminary adjustment to accounts payable for the following:

(in thousands)	Amount
Pro forma transaction accounting adjustments:
Record incurred transaction costs (i)	$	5,971
Record liability related to new Zymergen directors and officers and other insurance policies<br>(ii)		7,166
Net pro forma transaction accounting adjustment to accounts payable	$	13,137
(i)	Record transaction costs of $1.5 million incurred since September 30, 2022 by Ginkgo and<br>$4.5 million incurred since September 30, 2022 by Zymergen in connection with the Merger. As of September 30, 2022, Ginkgo had not recorded any transaction costs incurred in connection with the Merger in accounts payable in its<br>historical financial information. As of September 30, 2022, Zymergen had recorded less than $0.1 million of transaction costs incurred in connection with the Merger in accounts payable in its respective historical financial information.<br>
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(ii)	Record accounts payable of $7.2 million related to insurance premiums payable by Zymergen required to be<br>entered into upon the closing of the Merger. These policies primarily relate to claims against directors and officers for actions that occurred prior to the Merger.
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(h) Reflects the preliminary adjustments to accrued expenses and other current liabilities for the following:

(in thousands)	Amount
Pro forma transaction accounting adjustments:
Record liability related to Zymergen Enhanced Severance (i)	$	1,741
Record incremental liability related to Zymergen New Retention Plan cash bonuses (ii)		1,561
Record incremental liability related to existing Zymergen cash bonus program (iii)		46
Remove liability related to Zymergen ESPP (iv)		(220	)
Record incurred transaction costs (v)		5,861
Record Ginkgo’s incurred equity issuance costs (vi)		259
Remove Zymergen’s historical short-term operating lease liability to align with Ginkgo’s<br>ASC 840 accounting policy (vii)		(7,779	)
Net pro forma transaction accounting adjustment to accrued expenses and other current<br>liabilities	$	1,469
(i)	Record a liability for the cash bonuses payable pursuant to Zymergen’s Enhanced Severance triggered upon<br>termination and the occurrence of a change in control within twelve months of termination (see “Description of the Merger” for further detail regarding the Enhanced Severance).
---	---
(ii)	Record the incremental liability for cash bonuses payable pursuant to the Zymergen New Retention Plan triggered<br>upon a change in control (see “Description of the Merger” for further detail regarding the Zymergen New Retention Plan).
---	---
(iii)	Record the incremental liability for cash bonuses payable pursuant to Zymergen’s existing bonus program<br>triggered upon a change in control.
---	---
(iv)	Derecognize the liability related to Zymergen’s ESPP that was terminated immediately prior to the<br>completion of the Merger in exchange for the right to receive Merger Consideration.
---	---
(v)	Record transaction costs of $5.9 million incurred since September 30, 2022 by Ginkgo in connection<br>with the Merger. As of September 30, 2022, Ginkgo had accrued for $4.3 million and Zymergen had accrued for $5.2 million of transaction costs incurred in connection with the Merger in their respective historical financial information.<br>
---	---

(vi)	Record equity issuance costs incurred since September 30, 2022 related to the issuance of Ginkgo<br>Class A Common Shares in conjunction with the Merger.
(vii)	Record an accounting policy conformity adjustment to derecognize the short-term portion of Zymergen’s<br>operating lease liability from accrued expenses and other current liabilities resulting from the alignment of Zymergen’s accounting for leases pursuant to ASC 842 to Ginkgo’s accounting for leases pursuant to ASC 840.<br>
---	---

(i) Reflects an accounting policy conformity adjustment to derecognize Zymergen’s long-term lease liability of $176.2 million from other non-current liabilities resulting from the alignment of Zymergen’s accounting for leases pursuant to ASC 842 to Ginkgo’s accounting for leases pursuant to ASC 840.

(j) Reflects the preliminary adjustments to eliminate Zymergen’s historical Common Stock and record the par value of the Ginkgo Class A Common Shares issued to acquire Zymergen. See Note 3, “Preliminary Purchase Consideration and Preliminary Purchase Consideration Allocation” for further detail.

(in thousands)	Amount
Pro forma transaction accounting adjustments:
Eliminate Zymergen’s historical Common Stock	$	(105	)
Record par value of Ginkgo Class A Common Shares issued to acquire Zymergen		10
Net pro forma transaction accounting adjustment to common stock	$	(95	)

(k) Reflects the preliminary adjustments to additional paid-in capital for the following:

(in thousands)	Amount
Pro forma transaction accounting adjustments:
Eliminate Zymergen’s historical additional paid-in<br>capital (i)	$	(1,569,347	)
Record purchase consideration in excess of the par value of Ginkgo Class A Common Shares<br>issued to acquire Zymergen (ii)		237,892
Record stock-based compensation expense for accelerated Zymergen options and the accelerated<br>Zymergen RSUs under the Zymergen RIFs and the Zymergen New Retention Plan (iii)		8,916
Record Ginkgo’s incurred equity issuance costs (iv)		(1,467	)
Net pro forma transaction accounting adjustment to additional<br>paid-in capital	$	(1,324,006	)
(i)	Eliminate Zymergen’s historical additional paid-in capital.<br>
---	---
(ii)	Record the estimated purchase consideration in excess of the par value of Ginkgo Class A Common Shares<br>issued to acquire Zymergen.
---	---
(iii)	Record adjustments related to (a) the incremental fair value attributable to Zymergen stock options<br>exchanged for Ginkgo Class A Common Shares upon a change in control, calculated as the difference between the fair value of the options immediately before the Merger and the Option Consideration Value the option holders received upon closing of<br>the Merger, and (b) accelerated vesting related to Zymergen RSUs under the Zymergen RIFs and the Zymergen New Retention Plan deemed to be for the benefit of the combined company. The corresponding expense was recognized by Ginkgo as a one-time stock-based compensation charge upon the closing of the Merger as these awards required no further service by Zymergen employees.
---	---
(iv)	Record equity issuance costs incurred by Ginkgo as of and since September 30, 2022 related to the issuance<br>of Ginkgo Class A Common Shares in connection with the Merger as a reduction to additional paid-in capital.
---	---

(l) Reflects the preliminary adjustments to accumulated deficit for the following:

(in thousands)	Amount
Pro forma transaction accounting adjustments:
Eliminate Zymergen’s accumulated deficit (i)	$	1,399,852
Record estimated Enhanced Severance and Zymergen New Retention Plan cash bonuses incurred for the<br>benefit of the combined company (ii)		(4,261	)
Record stock-based compensation expense for accelerated Zymergen options and the accelerated<br>Zymergen RSUs under the Zymergen RIFs and the Zymergen New Retention Plan (iii)		(8,916	)
Record incurred transaction costs (iv)		(7,329	)
Net pro forma transaction accounting adjustment to accumulated deficit	$	1,379,346
(i)	Eliminate Zymergen’s historical accumulated deficit.
---	---
(ii)	Represents an adjustment for estimated cash bonuses payable to Zymergen employees in accordance with the<br>Enhanced Severance and the Zymergen New Retention Plan. These payments were determined to be for the benefit of the combined company, and a portion of the fair value otherwise recognized as estimated consideration transferred will be allocated to<br>compensation expense in Ginkgo’s unaudited pro forma condensed combined financial information in the period subsequent to the Merger.
---	---
(iii)	Record a one-time stock-based compensation charge related (a) the<br>incremental fair value attributable to Zymergen stock options exchanged for Ginkgo Class A Common Shares upon a change in control, calculated as the difference between the fair value of the options immediately before the Merger and the Option<br>Consideration Value the option holders received upon closing of the Merger, and (b) and accelerated vesting related to Zymergen RSUs under the Zymergen RIFs and the Zymergen New Retention Plan deemed to be for the benefit of the combined<br>company. The corresponding expense was recognized by Ginkgo as a one-time stock-based compensation charge upon the closing of the Merger as these awards required no further service by Zymergen employees.<br>
---	---
(iv)	Record transaction costs that were incurred since September 30, 2022 by Ginkgo in connection with the<br>Merger. See adjustments (g) and (h) above for further detail.
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Note 5 – Pro Forma Adjustments to the Unaudited CondensedCombined Statements of Operations

Adjustments included in the Zymergen Transaction Accounting Adjustments column of the accompanying unaudited pro forma condensed combined statement of operations for the nine months ended September 30, 2022 and year ended December 31, 2021 are as follows:

(a) Reflects the adjustments to research and development (“R&D”) expense for the following:

(in thousands)	For the NineMonths EndedSeptember 30,2022			For the YearEndedDecember 31,2021
Pro forma transaction accounting adjustments:
Remove historical Zymergen depreciation of property and equipment (i)	$	(9,851	)	$	(12,511	)
Record depreciation of fair value of Zymergen’s property and equipment (ii)		5,416			6.848
Remove historical Zymergen amortization of intangible assets (iii)		(1,699	)		(1,197	)
Record amortization of fair value of Zymergen’s intangible assets (iv)		1,515			2,019
Record compensation expense for Enhanced Severance and Zymergen RSUs granted, and cash retention<br>bonuses paid under the Zymergen New Retention Plan (v)		1,606			8,297
Adjust the expense for Zymergen’s consumables inventory (vi)		(685	)		1,104
Record incremental rent expense for Zymergen’s operating leases (vii)		1,893			4,989
Net pro forma transaction accounting adjustment to research and development expense	$	(1,805	)	$	9,549
(i)	Remove historical Zymergen depreciation of property and equipment.
---	---
(ii)	Record depreciation of the estimated fair value of property and equipment.
---	---
(iii)	Remove historical Zymergen amortization of intangible assets.
---	---
(iv)	Record amortization of the estimated fair value of intangible assets.
---	---
(v)	Record preliminary compensation expense for (a) cash bonuses payable under the Enhanced Severance upon<br>termination and a change in control and (b) Zymergen RSUs issued and incremental cash retention bonuses payable under the Zymergen New Retention Plan. Under the Enhanced Severance, certain Zymergen employees were eligible to receive cash<br>severance and bonus payments upon termination of employment and occurrence of a change in control within twelve months of termination. Under the Zymergen New Retention Plan, certain Zymergen employees were granted modifications to their RSUs, which<br>accelerated a portion of the vesting upon a change in control and required future service for the remainder of the vesting term. In addition, certain Zymergen employees were granted cash retention bonuses, a portion of which became<br>
---	---

payable upon a change in control, with the remainder payable within six months following the closing of the Merger. Of the total compensation expense of $8.3 million recognized through this<br>adjustment to the unaudited pro forma condensed combined statement of operations for the year ended December 31, 2021, $3.5 million represents a one-time charge.
(vi)	Adjust the expense related to the alignment of Zymergen’s consumables inventory to Ginkgo’s<br>accounting policy for inventory.
---	---
(vii)	Record incremental rent expense resulting from recalculating straight-line rent expense as of the pro forma<br>acquisition date and from aligning accounting policies to report Zymergen’s leases under ASC 840.
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(b) Reflects the adjustments to general and administrative (“G&A”) expense for the following:

(in thousands)	For the NineMonths EndedSeptember 30,2022			For the YearEndedDecember 31,2021
Pro forma transaction accounting adjustments:
Remove historical Zymergen depreciation of property and equipment (i)	$	(4,810	)	$	(6,104	)
Record depreciation of fair value of Zymergen’s property and equipment (ii)		2,228			3,341
Remove historical Zymergen amortization of intangible assets (iii)		—			(885	)
Record incurred transaction costs (iv)		—			7,329
Record compensation expense for Enhanced Severance as well as Zymergen RSUs granted and cash<br>retention bonuses paid under the Zymergen New Retention Plan (v)		85			4,058
Record incremental rent expense for Zymergen’s operating leases (vi)		1,112			2,185
Net pro forma transaction accounting adjustment to general and administrative expense	$	(1,385	)	$	9,924
(i)	Remove historical Zymergen depreciation of property and equipment.
---	---
(ii)	Record depreciation of the estimated fair value of property and equipment.
---	---
(iii)	Remove historical Zymergen amortization of intangible assets.
---	---
(iv)	Record transaction costs related to the Merger incurred by Ginkgo since September 30, 2022 that are<br>nonrecurring and are not anticipated to affect the unaudited pro forma condensed combined statements of operations beyond twelve months after the closing of the Merger.
---	---
(v)	Record preliminary compensation expense for (a) cash bonuses payable under the Enhanced Severance upon<br>termination and a change in control and (b) Zymergen RSUs issued and incremental cash retention bonuses payable under the Zymergen New Retention Plan. Under the Enhanced Severance, certain Zymergen employees were eligible to receive cash<br>severance and bonus payments upon termination of employment and occurrence of a change in control within twelve months of termination. Under the Zymergen New Retention Plan, certain Zymergen employees were granted modifications to their RSUs, which<br>accelerated a portion of the vesting upon a change in control and required future service for the remainder of the vesting term. In addition, certain Zymergen employees were granted cash retention bonuses, a portion of which became payable upon a<br>change in control, with the remainder payable within six months following the closing of the Merger. Of the total compensation expense of $4.1 million recognized through this adjustment to the unaudited pro forma condensed combined statement of<br>operations for the year ended December 31, 2021, $2.7 million represents a one-time charge.
---	---
(vi)	Record incremental rent expense resulting from recalculating straight-line rent expense as of the pro forma<br>acquisition date and from aligning accounting policies to report Zymergen’s leases under ASC 840.
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(c) Ginkgo has considered the impact of the business combination fair value and other pro forma adjustments that impact current and deferred taxes, and due to the significant valuation allowances, no adjustments to current or deferred taxes are needed (but will have certain presentational adjustments in the deferred tax component section of footnotes). As such, post-Merger, there will be a full valuation allowance against deferred tax assets resulting in no overall impact on deferred taxes. The effective tax rate of the combined company could be different (either higher or lower) depending on post-Merger activities, including cash needs, the geographical mix of income and changes in tax law. Because the tax rates used for the unaudited pro forma condensed combined financial information are estimated, the blended rate will likely vary from the actual effective rate in reporting periods subsequent to completion of the Merger.

(d) The adjustment to pro forma basic and diluted weighted average shares outstanding of 99,422,907 shares as of September 30, 2022 and December 31, 2021 relates to the Ginkgo Class A Common Shares issued as consideration for the Merger.