0001645842-22-000074.txt : 20220512 0001645842-22-000074.hdr.sgml : 20220512 20220512172902 ACCESSION NUMBER: 0001645842-22-000074 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 84 CONFORMED PERIOD OF REPORT: 20220331 FILED AS OF DATE: 20220512 DATE AS OF CHANGE: 20220512 FILER: COMPANY DATA: COMPANY CONFORMED NAME: Zymergen Inc. CENTRAL INDEX KEY: 0001645842 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-COMMERCIAL PHYSICAL & BIOLOGICAL RESEARCH [8731] IRS NUMBER: 462942439 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-40354 FILM NUMBER: 22919197 BUSINESS ADDRESS: STREET 1: 5980 HORTON STREET, SUITE 105 CITY: EMERYVILLE STATE: CA ZIP: 94608 BUSINESS PHONE: (415) 801-8073 MAIL ADDRESS: STREET 1: 5980 HORTON STREET, SUITE 105 CITY: EMERYVILLE STATE: CA ZIP: 94608 FORMER COMPANY: FORMER CONFORMED NAME: Zymergen, Inc. DATE OF NAME CHANGE: 20150622 10-Q 1 zy-20220331.htm 10-Q zy-20220331
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2022
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For transition period from         to
Commission File Number 001-40354
Zymergen Inc.
(Exact name of registrant as specified in its charter)
Delaware46-2942439
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification Number)
5980 Horton Street, Suite 105
Emeryville, California 94608
(415) 801-8073
(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading SymbolName of each exchange on which registered
Common stock, $0.001 par value per shareZYThe Nasdaq Global Select Market
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filerAccelerated filer
Non-accelerated filerSmaller reporting company
Emerging growth company
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 7(a)(2)(B) of the Securities Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act): Yes ☐ No
As of April 29, 2022, there were approximately 103,140,755 shares of the registrant's common stock, par value $0.001 per share, outstanding.


 Page


SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), which statements involve substantial risk and uncertainties. In some cases, you can identify forward-looking statements by the following words: “anticipate,” “believe,” “can,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “might,” “ongoing,” “plan,” “potential,” “positioned,” “predict,” “project,” “should,” “target,” “will,” “would,” or the negative of these terms or other comparable terminology, although not all forward-looking statements contain these words.
These statements involve risks, uncertainties and other factors that may cause actual results, levels of activity, performance or achievements to be materially different from the information expressed or implied by these forward-looking statements. Although we believe we have a reasonable basis for each forward-looking statement contained in this Quarterly Report on Form 10-Q, we caution you that these statements are based on a combination of facts and factors currently known by us and our projections of the future, about which we cannot be certain. Forward-looking statements in this Quarterly Report on Form 10-Q include, but are not limited to, statements about:
our ability to successfully commercialize our products;
our ability to execute on our new strategic plan;
our ability to reduce our operating costs and fund our operations to the middle of 2023;
the scope and timing of restructuring activities and the effects of restructuring activities on our business;
our ability to focus on a smaller number of programs that capitalize on our capabilities;
the potential applications of our technologies and the commercial opportunities and market sizes for the programs on which we are focused, including in advanced materials, drug discovery and automation;
the differentiation and capabilities of our platform, including with respect to our collection of accessible biomolecules, our software and data science technology, and our data driven microbe optimization processes;
our ability to identify candidates for drug development;
our ability to generate revenues from our products and the timelines for our products;
our plans for the development, launch and commercialization of the products in our pipeline;
our ability to successfully produce products through fermentation that we initially launch using non-fermentation or non-bio-based molecules;
the implementation of our business model and our ability to transition from revenues that are substantially all derived from research and development (“R&D”) service contracts and collaboration agreements to revenues derived from the commercialization of our products;
our ability to find and qualify sources of manufacturing;
the potential benefits of our existing and potential future R&D collaborations and other partner relationships;
our ability to accurately anticipate and address the market opportunity in our target markets, as well as the total market opportunity across numerous sectors;
our ability to accurately anticipate the size and growth potential of the markets for our products and our ability to develop and commercialize products that gain customer acceptance in those markets;
our expectations regarding our ability to obtain and maintain intellectual property protection for our platform, products and related technologies;
our ability to obtain and maintain regulatory approval for certain of our products;
regulatory developments in the United States and foreign countries;


the ability of incumbent chemical companies and synthetic biology companies to address the needs of our existing and potential customers;
developments relating to our competitors and our industry;
the success of competing products that are or may become available;
our goals for producing bio-based products that contribute to a more sustainable future;
our ability to successfully enter new markets and manage any international expansion;
our financial performance;
our ability to obtain funding for our operations, including funding necessary to complete further development of our current and future products;
our estimates regarding margins, future revenue, our ability to manage our expenses, capital requirements and needs for additional financing;
our preliminary allocation of the purchase price of acquisitions;
the success of our significant investments in our continued R&D of new products;
the impact of COVID-19 on our business; and
our ability to attract, train, and retain key personnel, including a permanent Chief Executive Officer.
You should refer to the “Risk Factors” section of this Quarterly Report on Form 10-Q for a discussion of important factors that may cause actual results to differ materially from those expressed or implied by the forward-looking statements. As a result of these factors, we cannot assure you that the forward-looking statements in this Quarterly Report on Form 10-Q will prove to be accurate. Furthermore, if the forward-looking statements prove to be inaccurate, the inaccuracy may be material. In light of the significant uncertainties in these forward-looking statements, you should not regard these statements as a representation or warranty by us or any other person that we will achieve our objectives and plans in any specified time frame, or at all. The forward-looking statements in this Quarterly Report on Form 10-Q represent our views as of the date of this Quarterly Report on Form 10-Q. We anticipate that subsequent events and developments will cause our views to change. However, while we may elect to update these forward-looking statements at some point in the future, we have no current intention of doing so except to the extent required by applicable law. You should, therefore, not rely on these forward-looking statements as representing our views as of any date subsequent to the date of this Quarterly Report on Form 10-Q.


PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
ZYMERGEN INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(in thousands, except share and per share data)
 As of March 31, 2022
As of December 31, 2021 (1)
ASSETS
Current assets:  
Cash and cash equivalents$336,980 $386,105 
Accounts receivable374 520 
Accounts receivable, unbilled2,025 2,565 
Prepaid expenses5,764 7,818 
Inventories5,995 6,035 
Restricted cash, current1,686 2,105 
Other current assets791 2,201 
Total current assets353,615 407,349 
Restricted cash9,849 9,849 
Property and equipment, net56,004 53,799 
Operating lease right-of-use assets147,960 — 
Goodwill40,645 40,645 
Intangible assets, net7,929 8,529 
Other long-term assets2,187 2,225 
Total assets$618,189 $522,396 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable$6,371 $5,418 
Accrued and other liabilities21,383 17,496 
Short-term operating lease liabilities7,285 — 
Short-term debt, net50,560 43,953 
Short-term deferred rent 2,218 
Deferred revenue2,862 4,468 
Total current liabilities88,461 73,553 
Long-term operating lease liabilities181,168 — 
Long-term deferred rent 35,390 
Other long-term liabilities4,496 4,967 
Total liabilities274,125 113,910 
Commitments and contingencies
Stockholders' equity
Preferred stock, $0.001 par value, 170,000,000 authorized as of March 31, 2022 and December 31, 2021, respectively; no shares issued and outstanding as of March 31, 2022 and December 31, 2021, respectively
  
Common stock, $0.001 par value, 1,500,000,000 shares authorized as of March 31, 2022 and December 31, 2021, respectively; 103,123,308 and 103,045,299 shares issued and outstanding as of March 31, 2022 and December 31, 2021, respectively
103 103 
Additional paid-in capital1,551,602 1,543,908 
Accumulated deficit(1,207,641)(1,135,525)
Total stockholders' equity344,064 408,486 
Total liabilities and stockholders' equity$618,189 $522,396 
(1) The balance sheet as of December 31, 2021 is derived from the audited financial statements as of that date.
The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
1

ZYMERGEN INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND
COMPREHENSIVE LOSS
(Unaudited)
(in thousands, except share and per share data)
Three Months Ended
March 31,
 20222021
Revenues from research and development service agreements$3,221 $2,614 
Collaboration and other revenue1,333 1,121 
Grant revenue237  
Total revenues4,791 3,735 
Cost and operating expenses:
Cost of service revenue12,455 21,130 
Research and development28,739 39,811 
Sales and marketing3,638 6,872 
General and administrative23,705 19,331 
Restructuring charges (benefit)(130) 
Total cost and operating expenses68,407 87,144 
Operating loss(63,616)(83,409)
Other income (expense):
Interest income51 43 
Interest expense(8,045)(2,727)
Gain (loss) on change in fair value of warrant liabilities  2,279 
Other expense, net(532)(763)
Total other expense(8,526)(1,168)
Loss before income taxes(72,142)(84,577)
Benefit from (provision for) income taxes26 (8)
Net loss and comprehensive loss$(72,116)$(84,585)
Net loss per share attributable to common stockholders, basic$(0.70)$(6.51)
Net loss per share attributable to common stockholders, diluted$(0.70)$(6.51)
Weighted average shares used in computing net loss per share to common stockholders, basic103,109,168 12,996,344 
Weighted average shares used in computing net loss per share to common stockholders, diluted103,109,168 13,340,457 
The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
2

ZYMERGEN INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY (DEFICIT)
(Unaudited)
(in thousands, except share data)

Convertible
Preferred Stock
Common StockAdditional
Paid-in
Capital
Accumulated
Deficit
Total Stockholders’
Equity (Deficit)
SharesAmountSharesAmount
Balance, December 31, 2021 $ 103,045,299 $103 $1,543,908 $(1,135,525)$408,486 
Vesting of restricted stock units, net— — 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 
Convertible
Preferred Stock
Common StockAdditional
Paid-in
Capital
Accumulated
Deficit
Total Stockholders’
Equity (Deficit)
SharesAmountSharesAmount
Balance, December 31, 202068,093,280 $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, 202168,093,280 900,798 13,473,832 $13$37,379 $(858,325)$(820,933)
The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
3

ZYMERGEN INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Three Months Ended
March 31,
 20222021
Operating activities
Net loss$(72,116)$(84,585)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization expense5,492 4,412 
Stock-based compensation expense7,391 2,253 
Non-cash lease expense3,043  
Non-cash interest expense6,607 283 
(Gain) loss on change in fair value of warrant liabilities (2,279)
Unrealized foreign exchange loss432 661 
Other10 (2)
Changes in operating assets and liabilities:
Accounts receivable146 94 
Accounts receivable, unbilled540 (35)
Prepaid expenses318 1,037 
Inventories40 (714)
Other current assets1,410 (685)
Other long-term assets38 3 
Accounts payable2,806 1,223 
Accrued and other liabilities(401)(7,682)
Deferred revenue(2,037)(348)
Operating lease liabilities1,578  
Deferred rent 3,144 
Other long-term liabilities(40)172 
Net cash used in operating activities(44,743)(83,048)
Investing activities
Purchases of property and equipment(4,764)(8,639)
Proceeds from sale of property and equipment86  
Net cash used in investing activities(4,678)(8,639)
Financing activities
Proceeds from exercise of common stock options303 3,189 
Proceeds from repayment of non-recourse loan to employee 1,946 
Payment of deferred offering costs (806)
Net cash provided by financing activities303 4,329 
Effect of exchange rate changes on cash(426)(620)
Change in cash and cash equivalents(49,544)(87,978)
Cash, cash equivalents, and restricted cash at beginning of the period398,059 219,810 
Cash, cash equivalents, and restricted cash at end of the period$348,515 $131,832 
Cash and cash equivalents$336,980 $121,035 
Restricted cash, current1,686 20 
Restricted cash, non-current9,849 10,777 
Total cash, cash equivalents, and restricted cash shown in the statement of cash flows$348,515 $131,832 
The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
4

ZYMERGEN INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Three Months Ended
March 31,
20222021
Supplemental disclosure of cash flow information:
Cash paid during the period for interest$1,438 $3,285
Supplemental disclosure of non-cash investing and financing activities:
Acquisitions of property and equipment under accounts payable and accrued and other liabilities$6,794 $6,095
Operating lease right-of-use assets obtained in the exchange for new operating lease liabilities, net$(2,821)$
Offering costs related to initial public offering under accounts payable and accrued and other liabilities$ $2,843 
Share settlement of non-recourse loan to employee$ $1,946 
The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
5

ZYMERGEN INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1.    Nature of Operations
Zymergen (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 building three businesses focused on advanced materials, drug discovery and automation. The Company was incorporated in Delaware on April 24, 2013.
Need for Additional Capital
The Company has sustained operating losses and expects to continue to generate operating losses for the foreseeable future. The Company had unrestricted cash and cash equivalents of $337.0 million as of March 31, 2022. Since inception through March 31, 2022, the Company has incurred cumulative net losses of $1.2 billion.
While the Company has signed a number of initial customer R&D services and collaboration contracts, revenues have been insufficient to fund operations. Accordingly, the Company has funded the portion of operating costs exceeding revenues through a combination of proceeds raised from equity and debt issuances. The Company’s operating costs include the cost of developing and commercializing products, costs associated with restructuring (Note 4), as well as providing research and development services. As a consequence, the Company expects it will need to raise additional equity or debt financing to fund future operations. The Company's ability to obtain additional funding will depend on a variety of factors, many of which are unpredictable and beyond the Company's control, including general conditions in the global economy and in the global financial markets, which may be impacted by interruptions, delays and/or cost increases resulting from the ongoing COVID-19 pandemic, political instability or geopolitical tensions, such as the current war in Ukraine (the “Ukraine War”), economic weakness or inflationary pressures. As a result of these, or any other circumstances, if the equity and credit markets deteriorate, it may make any necessary equity or debt financing more difficult to obtain in a timely manner and on favorable terms, if at all, and if obtained, it may be more costly or more dilutive. The Company expects that its cash and cash equivalents will be sufficient to fund its operations for a period of at least one year from the date the accompanying Condensed Consolidated Financial Statements are filed with the Securities and Exchange Commission (“SEC”).
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 three months ended March 31, 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 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”) and applicable rules and regulations of the SEC regarding interim financial reporting. As permitted under those rules, certain footnotes or other financial information that are normally required by U.S. GAAP have been condensed or omitted, and accordingly 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 months ended March 31, 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.
6

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.
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 March 31, 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 property and equipment 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 is 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.
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 March 31, 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 March 31, 2022 is due by December 31, 2022.
7

ZYMERGEN INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
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.
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, as the sublease activity is outside Company’s normal business operations.
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.
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.
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.
8

ZYMERGEN INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
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.
In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides optional expedients and exceptions for applying U.S. GAAP to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. The amendments of ASU 2020-04 are effective for all entities as of March 12, 2020 through December 31, 2022 and do not apply to contract modifications made after December 31, 2022. The Company is evaluating the effect of this guidance and has not yet determined the impact to its financial statements and related disclosures.
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.
9

ZYMERGEN INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The following table represents the allocation of the purchase consideration, including the non-cash consideration, based on fair value (in thousands):
Cash and cash equivalents$1,778 
Other current assets464 
Property, plant and equipment948 
Other non-current assets305 
Developed technology5,400 
Customer relationship intangible asset420 
Total identifiable assets acquired$9,315 
Accounts payable and accrued expenses$4,683 
Other liabilities8,353 
Deferred tax liability11 
Total liabilities assumed$13,047 
Net identifiable assets acquired$(3,732)
Goodwill29,041 
Net assets acquired$25,309 
The Company's purchase price allocation for the acquisition is preliminary and subject to revision as additional information about the fair value of the assets and liabilities becomes available. The fair values assigned to tangible and intangible assets acquired and liabilities assumed are based on management’s estimates and assumptions and may be subject to change as additional information is received. Primary areas that are not yet finalized are related to acquired intangible assets including goodwill. Additional information that existed as of the closing date but not known at the time of this filing may become known to the Company during the remainder of the measurement period, a period not to exceed 12 months from the closing date.
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 expects to incur additional restructuring costs which are currently estimable of approximately $0.5 million in 2022.
The Company expects the 2021 Restructuring to result in total pre-tax charges of approximately $29.2 million and approximately $17.4 million of these charges are estimated to result in cash outlays, of which the Company has made payments of $15.3 million through March 31, 2022. The Company has recorded costs of $28.7 million from the inception of the initiative through March 31, 2022.
10

ZYMERGEN INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The following table provides a summary of our costs incurred from the inception of the initiative through March 31, 2022, and cost estimates associated with the 2021 Restructuring, by major type of cost (in thousands):
Total amount incurred since inception through March 31, 2022Total estimated amount expected to be incurred
Restructuring charges:
Termination benefits$8,585 $8,585 
Impairment of long-lived assets11,815 11,815 
Contract terminations3,687 4,200 
Other (1)
4,591 4,591 
Total$28,678 $29,191 
—–—–—–—–—–—–
(1) Comprised of other costs directly related to the 2021 Restructuring, including consulting fees in relation to portfolio review, realignment of organizational resources to strategic priorities and organization redesign in order to achieve reduced operating costs.
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):
Termination BenefitsContract TerminationsOtherTotal
Balance at January 1, 2022$948 $1,450 $ $2,398 
Charges 44  44 
Adjustments(69)(105) (174)
Cash Payments, net(733)85  (648)
Balance at March 31, 2022$146 $1,474 $ $1,620 
5.    Goodwill and Intangible Assets
The following table summarizes goodwill as of March 31, 2022 and December 31, 2021 (in thousands):
March 31,
2022
December 31,
2021
Goodwill$40,645 $40,645 
The following table summarizes the net book value of the finite-lived intangible assets as of March 31, 2022 and December 31, 2021 (in thousands):
 CostAccumulated
Amortization
Intangible Assets, Net
 March 31,
2022
December 31,
2021
March 31,
2022
December 31,
2021
March 31,
2022
December 31,
2021
Developed technology$12,300 $12,300 $(4,607)$(4,110)$7,693 $8,190 
Customer relationships1,400 1,400 (1,164)(1,061)236 339 
Net carrying value$13,700 $13,700 $(5,771)$(5,171)$7,929 $8,529 
The Company recognized $0.6 million and $0.3 million in amortization expense for the three months ended March 31, 2022 and 2021, respectively.
11

ZYMERGEN INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Future amortization of intangible assets is as follows (in thousands):
Remainder of 2022$1,649 
20232,067 
20241,271 
20251,271 
20261,271 
Thereafter400 
Total$7,929 
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 March 31, 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 1Level 2Level 3Balance as of March 31, 2022
Financial Assets    
Cash equivalents$1,667 $ $ $1,667 
Total financial assets$1,667 $ $ $1,667 
Level 1Level 2Level 3Balance as of December 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, debt, and warrant derivative liability.
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.
12

ZYMERGEN INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
7.    Balance Sheet Components
Property and equipment consist of the following as of March 31, 2022 and December 31, 2021 (in thousands):
 March 31,
2022
December 31,
2021
Machinery and equipment$76,305 $74,548 
Leasehold improvements27,345 31,488 
Furniture and office equipment3,191 3,189 
Computers and software2,775 2,764 
109,616 111,989 
Less accumulated depreciation and amortization(78,818)(78,132)
30,798 33,857 
Construction in progress25,206 19,942 
Total property and equipment, net$56,004 $53,799 
Depreciation and amortization expense was $4.9 million and $4.1 million for the three months ended March 31, 2022 and 2021, respectively.
Accrued and other current liabilities consist of the following as of March 31, 2022 and December 31, 2021 (in thousands):
March 31,
2022
December 31,
2021
Accrued compensation and compensation-related costs$6,797 $6,027 
Other accrued liabilities11,101 7,045 
Accrued restructuring costs1,576 2,398 
Accrued legal service fees1,814 1,940 
Accrued tax liabilities95 86 
Accrued and other current liabilities$21,383 $17,496 
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 was in compliance with all covenants of the credit and guaranty agreement with Perceptive Credit Holdings II, LP and PCOF EQ AIV II, LP, as amended and restated in February 2021 and further amended in October 2021 (the “Perceptive Credit Agreement”), as of March 31, 2022.
Debt consists of the following as of March 31, 2022 and December 31, 2021 (in thousands):
 March 31,
2022
December 31,
2021
Senior secured delayed draw term loan facility bearing interest equal to 11.5% as of March 31, 2022 and December 31, 2021
$50,000 $50,000 
Unamortized discount and offering costs(4,669)(8,310)
Accrued end-of-term payment5,229 2,263 
Senior secured delayed draw term loan facility, net50,560 43,953 
Less current portion50,560 43,953 
Long-term debt, net$ $ 
13

ZYMERGEN INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Interest expense on the Company’s term loan consisted of the following (in thousands):
Three Months Ended
March 31,
20222021
Coupon interest$1,438 $2,444 
Amortization of debt discount and offering costs3,641 283 
Accretion of end-of-term payment2,966  
Total interest expense on term loan$8,045 $2,727 
9.    Leases
The Company adopted FASB ASC 842 on January 1, 2022 (Note 2). The Company did not have any finance leases during the three months ended March 31, 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.
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 months ended March 31, 2022 consisted of the following (in thousands):
Three Months Ended
March 31,
2022
Operating lease cost$8,809 
Operating variable lease cost1,619 
Operating sublease income(172)
Total lease costs$10,256 
Rent expense under operating leases, net of sublease income, was $6.3 million for the three months ended March 31, 2021.
Other information related to the Company’s operating leases for the three months ended March 31, 2022 is as follows (in thousands, except lease term and discount rate):
Three Months Ended
March 31,
2022
Cash paid for amounts included in operating lease liabilities$4,347
Weighted-average remaining operating lease term10.50
Weighted-average incremental borrowing rate12.59 %

14

ZYMERGEN INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Maturities of operating lease liabilities at March 31, 2022 are as follows (in thousands):
Remainder of 2022$22,836 
202330,972 
202431,336 
202530,253 
202631,091 
Thereafter208,243 
Total354,731 
Less: Interest(166,278)
Present value of operating lease liabilities$188,453 
Maturities of operating sublease payments at March 31, 2022 are as follows (in thousands):
Remainder of 2022$515 
2023686 
2024686 
2025114 
2026 
Thereafter 
Total$2,001 
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 
202330,450 
202430,630 
202529,459 
202630,350 
Thereafter206,587 
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 March 31, 2022, there were 5,435,987 shares available for the Company to grant under the 2021 Plan and 3,035,656 shares available for the Company to grant under the ESPP. The shares available for grant as of March 31, 2022 included 5,152,264 and 1,030,452 shares, respectively, for the 2021 Plan and the ESPP, 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.
15

ZYMERGEN INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Stock Options with Service-based Vesting Conditions
The following table summarizes option activity under the 2021 Plan and the 2014 Plan:
 Number of
Options
Weighted
Average
Exercise
Price
Weighted
Average
Remaining
Contractual Life
Aggregate
Intrinsic Value
    (in thousands)
Outstanding - December 31, 20217,555,966 $12.558.15$3,668
Options granted 
Options exercised(77,093)$3.94
Options cancelled(392,330)$10.55
Outstanding - March 31, 20227,086,543 $12.767.57$117
Unvested - March 31, 20224,184,738 $15.399.10
Exercisable - March 31, 20222,901,805 $8.966.02$117
No options were granted during the three months ended March 31, 2022. The weighted average grant-date fair value of options granted was $17.42 per share, during the three months ended March 31, 2021.
The aggregate intrinsic value of stock option awards exercised, determined at the date of option exercise, was $0.1 million and $17.8 million, during the three months ended March 31, 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.
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 Ended March 31,
2021
Expected dividend yield %
Risk-free interest rate
0.77% - 1.04%
Expected term (in years)6.08
Expected volatility
73.43% - 74.67%
As of March 31, 2022 the Company had employee stock-based compensation expense of $35.9 million related to unvested stock options not yet recognized, which is expected to be recognized over an estimated weighted average period of approximately 2.60 years.
Stock Options with Market-based Vesting Conditions
Except as described below, the Company’s stock options with market-based vesting conditions debt is described in Note 10 of the “Notes to Consolidated Financial Statements” in the Company's 2021 Form 10-K.
As of March 31, 2022, 458,333 options remain outstanding and unvested. As of March 31, 2022, the Company has $6.1 million of stock based compensation related to these unvested stock options not yet recognized, which is expected to be recognized over an estimated weighted average period of approximately 2.27 years.
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ZYMERGEN INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Restricted Stock Units with Service-based Vesting Conditions
The following table summarizes RSU activity (in thousands, except share and per share amounts and term):
SharesWeighted Average
Grant Date Fair Value
Non-vested Restricted Stock Units as of December 31, 20212,475,983$13.47
Granted6,222,827$3.14
Vested(916)$35.00
Forfeited(253,362)$10.37
Non-vested Restricted Stock Units as of March 31, 20228,444,532$5.95
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 nominal during the three months ended March 31, 2022. As of March 31, 2022 there was $44.3 million of total unrecognized compensation cost related to RSUs, which is expected to be recognized over a weighted average period of 2.12 years.
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 months ended March 31, 2022 and 2021 (in thousands):
Three Months Ended
March 31,
 20222021
Cost of service revenue$801 $424 
Research and development2,347 753 
Sales and marketing438 195 
General and administrative3,805 881 
Total stock-based compensation$7,391 $2,253 
Compensation expense by stock-based award was as follows for the three months ended March 31, 2022 and 2021 (in thousands):
Three Months Ended
March 31,
20222021
Stock options with service based vesting conditions$3,992 $2,170 
Stock options with market based vesting conditions 677  
RSUs with service based vesting conditions 2,508  
Non-vested stock  83 
ESPP214  
Total stock-based compensation$7,391 $2,253 
11.    Net Loss Per Share
Basic net loss per share is determined by dividing net loss by the weighted average shares outstanding for the period. The Company analyzes the potential dilutive effect of stock options, non-vested stock, RSUs, stock issuable under the ESPP, and warrants under the treasury stock method (as applicable), during periods of income, or during periods in which income is recognized related to changes in fair value of its liability-classified securities.
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ZYMERGEN INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The following table presents the calculation of basic and diluted net loss per share (in thousands, except share and per share data) applicable to common stockholders for the three months ended March 31, 2022 and 2021:
Three Months Ended
March 31,
 20222021
Numerator:
Net loss, basic$(72,116)$(84,585)
Less: Gain on change in fair value of warrant liabilities  2,279 
Net loss, diluted $(72,116)$(86,864)
Denominator:
Weighted average shares used in calculating net loss per share, basic103,109,168 12,996,344 
Effect of dilutive securities:
Warrants to purchase Series C convertible preferred stock344,113
Weighted average shares used in calculating net loss per share, diluted103,109,16813,340,457
Net loss per share, basic$(0.70)$(6.51)
Net loss per share, diluted$(0.70)$(6.51)
The following potentially dilutive shares as of the periods ended March 31, 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:
 March 31, 2022March 31, 2021
Shares issuable under convertible preferred stock 68,115,459 
Options to purchase common stock7,086,543 6,429,610 
Restricted stock units8,444,532  
Non-vested stock 50,430 
Warrants to purchase common stock 242,322 
Total15,531,075 74,837,821 
12.    Revenue, Credit Concentrations and Geographic Information
Revenues from research and development service agreements
The Company has primarily earned revenue by engaging in R&D service contracts. The Company also earns revenue through collaborative arrangements with partners to develop novel materials to be commercialized by the collaborative partner and the Company.
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 three months ended March 31, 2021. For the three months ended March 31, 2022, performance bonuses the Company recognized were insignificant. For the three months ended March 31, 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 $0.5 million and $0.8 million for the three months ended March 31, 2022 and 2021, respectively.
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ZYMERGEN INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The following table represents changes in the balances of our contract liabilities during the periods ended March 31, 2022, and 2021 (in thousands):
December 31, 2021AdditionsDeletionsMarch 31, 2022
Contract liabilities:
Deferred revenue$8,195$600 $(2,400)$6,395
December 31, 2020AdditionsDeletionsMarch 31, 2021
Contract liabilities:
Deferred revenue$3,014$1,256 $(1,604)$2,666
Long-term deferred revenue is included in Other long-term liabilities on the Condensed Consolidated Balance Sheets.
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 consisted of the following (in thousands):
 CurrentNoncurrentTotal
As of March 31, 2022$2,165 $4,324$6,489 
The Company’s noncurrent remaining performance obligation is expected to be recognized in the next 1.1 to 3.1 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. This grant agreement will remain in effect until February 28, 2023, 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 $0.2 million for the three months ended March 31, 2022. As of March 31, 2022, the Company has deferred revenue of $0.8 million under this grant agreement.
19

ZYMERGEN INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Credit Concentrations
Customers representing 10% or greater of revenue were as follows for the three months ended March 31, 2022 and 2021:
Three Months Ended
March 31,
 20222021
Customer A35 %11 %
Customer B26 %30 %
Customer C13 %16 %
Customer D11 % %
Customer E %18 %
Customers representing 10% or greater of billed accounts receivable were as follows as of March 31, 2022 and December 31, 2021:
 March 31,
2022
December 31,
2021
Customer D68 % %
Customer F25 %68 %
Customer G %29 %
Geographic Information
The Company's revenues by geographic region are presented in the table below for the three months ended March 31, 2022 and 2021 (in thousands):
Three Months Ended
March 31,
 20222021
United States of America$1,869 $1,232 
Asia1,252 1,421 
Europe1,670 1,082 
Total revenue$4,791 $3,735 
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, we have 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 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 our current and former officers and directors, our 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.
On November 9, 2021, a purported shareholder of Zymergen 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 current and former officers and directors and the Company as nominal defendants 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.
20