zy-20220630
0001645842FALSE12/312022Q2http://fasb.org/us-gaap/2022#AccountingStandardsUpdate201602Member000P12M00016458422022-01-012022-06-300001645842dei:FormerAddressMember2022-01-012022-06-3000016458422022-07-29xbrli:shares00016458422022-06-30iso4217:USD00016458422021-12-31iso4217:USDxbrli:shares0001645842zy:RevenuesFromResearchAndDevelopmentServiceAgreementsMember2022-04-012022-06-300001645842zy:RevenuesFromResearchAndDevelopmentServiceAgreementsMember2021-04-012021-06-300001645842zy:RevenuesFromResearchAndDevelopmentServiceAgreementsMember2022-01-012022-06-300001645842zy:RevenuesFromResearchAndDevelopmentServiceAgreementsMember2021-01-012021-06-300001645842zy:RevenueFromCollaborativeArrangementAndOtherMember2022-04-012022-06-300001645842zy:RevenueFromCollaborativeArrangementAndOtherMember2021-04-012021-06-300001645842zy:RevenueFromCollaborativeArrangementAndOtherMember2022-01-012022-06-300001645842zy:RevenueFromCollaborativeArrangementAndOtherMember2021-01-012021-06-300001645842zy:AutomationRevenueMember2022-04-012022-06-300001645842zy:AutomationRevenueMember2021-04-012021-06-300001645842zy:AutomationRevenueMember2022-01-012022-06-300001645842zy:AutomationRevenueMember2021-01-012021-06-300001645842us-gaap:GrantMember2022-04-012022-06-300001645842us-gaap:GrantMember2021-04-012021-06-300001645842us-gaap:GrantMember2022-01-012022-06-300001645842us-gaap:GrantMember2021-01-012021-06-3000016458422022-04-012022-06-3000016458422021-04-012021-06-3000016458422021-01-012021-06-300001645842us-gaap:ServiceMember2022-04-012022-06-300001645842us-gaap:ServiceMember2021-04-012021-06-300001645842us-gaap:ServiceMember2022-01-012022-06-300001645842us-gaap:ServiceMember2021-01-012021-06-300001645842us-gaap:CommonStockMember2021-12-310001645842us-gaap:AdditionalPaidInCapitalMember2021-12-310001645842us-gaap:RetainedEarningsMember2021-12-310001645842us-gaap:CommonStockMember2022-01-012022-03-310001645842us-gaap:AdditionalPaidInCapitalMember2022-01-012022-03-3100016458422022-01-012022-03-310001645842us-gaap:RetainedEarningsMember2022-01-012022-03-3100016458422022-03-310001645842us-gaap:CommonStockMember2022-03-310001645842us-gaap:AdditionalPaidInCapitalMember2022-03-310001645842us-gaap:RetainedEarningsMember2022-03-310001645842us-gaap:CommonStockMember2022-04-012022-06-300001645842us-gaap:AdditionalPaidInCapitalMember2022-04-012022-06-300001645842us-gaap:RetainedEarningsMember2022-04-012022-06-300001645842us-gaap:CommonStockMember2022-06-300001645842us-gaap:AdditionalPaidInCapitalMember2022-06-300001645842us-gaap:RetainedEarningsMember2022-06-3000016458422020-12-310001645842us-gaap:CommonStockMember2020-12-310001645842us-gaap:AdditionalPaidInCapitalMember2020-12-310001645842us-gaap:RetainedEarningsMember2020-12-310001645842us-gaap:CommonStockMember2021-01-012021-03-310001645842us-gaap:AdditionalPaidInCapitalMember2021-01-012021-03-3100016458422021-01-012021-03-310001645842us-gaap:RetainedEarningsMember2021-01-012021-03-3100016458422021-03-310001645842us-gaap:CommonStockMember2021-03-310001645842us-gaap:AdditionalPaidInCapitalMember2021-03-310001645842us-gaap:RetainedEarningsMember2021-03-310001645842us-gaap:CommonStockMember2021-04-012021-06-300001645842us-gaap:AdditionalPaidInCapitalMember2021-04-012021-06-300001645842us-gaap:RetainedEarningsMember2021-04-012021-06-3000016458422021-06-300001645842us-gaap:CommonStockMember2021-06-300001645842us-gaap:AdditionalPaidInCapitalMember2021-06-300001645842us-gaap:RetainedEarningsMember2021-06-30zy:segment00016458422021-01-012021-12-310001645842srt:CumulativeEffectPeriodOfAdoptionAdjustmentMember2021-12-310001645842zy:LodoTherapeuticsCorporationMember2021-05-16xbrli:pure0001645842zy:LodoTherapeuticsCorporationMember2021-05-162021-05-160001645842zy:LodoTherapeuticsCorporationMemberus-gaap:CommonStockMember2021-05-162021-05-160001645842zy:LodoTherapeuticsCorporationMemberus-gaap:DevelopedTechnologyRightsMember2021-05-160001645842us-gaap:RestrictedStockUnitsRSUMemberzy:LodoTherapeuticsCorporationMember2021-05-162021-05-16zy:installment00016458422021-09-012022-06-300001645842us-gaap:OneTimeTerminationBenefitsMember2022-06-300001645842zy:ImpairmentOfLongLivedAssetsMember2022-06-300001645842us-gaap:ContractTerminationMember2022-06-300001645842us-gaap:OtherRestructuringMember2022-06-300001645842us-gaap:OneTimeTerminationBenefitsMember2021-12-310001645842us-gaap:ContractTerminationMember2021-12-310001645842us-gaap:OtherRestructuringMember2021-12-310001645842us-gaap:OneTimeTerminationBenefitsMember2022-01-012022-06-300001645842us-gaap:ContractTerminationMember2022-01-012022-06-300001645842us-gaap:OtherRestructuringMember2022-01-012022-06-300001645842us-gaap:DevelopedTechnologyRightsMember2022-06-300001645842us-gaap:DevelopedTechnologyRightsMember2021-12-310001645842us-gaap:CustomerRelationshipsMember2022-06-300001645842us-gaap:CustomerRelationshipsMember2021-12-310001645842us-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMember2022-06-300001645842us-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMember2022-06-300001645842us-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsRecurringMember2022-06-300001645842us-gaap:FairValueMeasurementsRecurringMember2022-06-300001645842us-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMember2021-12-310001645842us-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMember2021-12-310001645842us-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsRecurringMember2021-12-310001645842us-gaap:FairValueMeasurementsRecurringMember2021-12-310001645842us-gaap:MachineryAndEquipmentMember2022-06-300001645842us-gaap:MachineryAndEquipmentMember2021-12-310001645842us-gaap:LeaseholdImprovementsMember2022-06-300001645842us-gaap:LeaseholdImprovementsMember2021-12-310001645842us-gaap:FurnitureAndFixturesMember2022-06-300001645842us-gaap:FurnitureAndFixturesMember2021-12-310001645842zy:ComputerEquipmentAndSoftwareMember2022-06-300001645842zy:ComputerEquipmentAndSoftwareMember2021-12-310001645842zy:DepreciablePropertyPlantAndEquipmentMember2022-06-300001645842zy:DepreciablePropertyPlantAndEquipmentMember2021-12-310001645842us-gaap:ConstructionInProgressMember2022-06-300001645842us-gaap:ConstructionInProgressMember2021-12-310001645842zy:ConsumablesMember2022-06-300001645842zy:ConsumablesMember2021-12-310001645842us-gaap:PublicUtilitiesInventoryRawMaterialsMember2022-06-300001645842us-gaap:PublicUtilitiesInventoryRawMaterialsMember2021-12-310001645842zy:SeniorSecuredDelayedDrawTermLoanFacilityMemberus-gaap:SecuredDebtMember2022-06-300001645842zy:SeniorSecuredDelayedDrawTermLoanFacilityMemberus-gaap:SecuredDebtMember2021-12-310001645842zy:WarehouseAndOfficeSpaceMember2019-07-31utr:sqft0001645842zy:WarehouseAndOfficeSpaceMember2021-02-280001645842zy:WarehouseAndOfficeSpaceMember2021-02-012021-02-28zy:renewal_option0001645842zy:LaboratoryAndOfficeSpaceMember2019-07-310001645842zy:LaboratoryAndOfficeSpaceMember2019-07-012019-07-310001645842us-gaap:BuildingMember2019-10-310001645842us-gaap:BuildingMember2021-02-012021-02-280001645842us-gaap:BuildingMember2021-02-28zy:stock_based_compensation_plan0001645842zy:A2021IncentiveAwardPlanMember2022-06-300001645842zy:EmployeeStockPurchasePlan2021Member2022-06-300001645842zy:StockPlan2014And2021IncentiveAwardPlanMember2021-12-310001645842zy:StockPlan2014And2021IncentiveAwardPlanMember2021-01-012021-12-310001645842zy:StockPlan2014And2021IncentiveAwardPlanMember2022-01-012022-06-300001645842zy:StockPlan2014And2021IncentiveAwardPlanMember2022-06-300001645842zy:StockPlan2014And2021IncentiveAwardPlanMember2021-01-012021-06-300001645842us-gaap:EmployeeStockOptionMember2021-04-012021-06-300001645842us-gaap:EmployeeStockOptionMember2021-01-012021-06-300001645842us-gaap:EmployeeStockOptionMember2022-01-012022-06-300001645842zy:A2021IncentiveAwardPlanMemberus-gaap:PerformanceSharesMember2022-06-300001645842zy:A2021IncentiveAwardPlanMemberus-gaap:PerformanceSharesMember2022-01-012022-06-300001645842us-gaap:RestrictedStockUnitsRSUMember2021-12-310001645842us-gaap:RestrictedStockUnitsRSUMember2022-01-012022-06-300001645842us-gaap:RestrictedStockUnitsRSUMember2022-06-300001645842us-gaap:CostOfSalesMemberus-gaap:ServiceMember2022-04-012022-06-300001645842us-gaap:CostOfSalesMemberus-gaap:ServiceMember2021-04-012021-06-300001645842us-gaap:CostOfSalesMemberus-gaap:ServiceMember2022-01-012022-06-300001645842us-gaap:CostOfSalesMemberus-gaap:ServiceMember2021-01-012021-06-300001645842us-gaap:CostOfSalesMemberzy:AutomationRevenueMember2022-04-012022-06-300001645842us-gaap:CostOfSalesMemberzy:AutomationRevenueMember2021-04-012021-06-300001645842us-gaap:CostOfSalesMemberzy:AutomationRevenueMember2022-01-012022-06-300001645842us-gaap:CostOfSalesMemberzy:AutomationRevenueMember2021-01-012021-06-300001645842us-gaap:ResearchAndDevelopmentExpenseMember2022-04-012022-06-300001645842us-gaap:ResearchAndDevelopmentExpenseMember2021-04-012021-06-300001645842us-gaap:ResearchAndDevelopmentExpenseMember2022-01-012022-06-300001645842us-gaap:ResearchAndDevelopmentExpenseMember2021-01-012021-06-300001645842us-gaap:SellingAndMarketingExpenseMember2022-04-012022-06-300001645842us-gaap:SellingAndMarketingExpenseMember2021-04-012021-06-300001645842us-gaap:SellingAndMarketingExpenseMember2022-01-012022-06-300001645842us-gaap:SellingAndMarketingExpenseMember2021-01-012021-06-300001645842us-gaap:GeneralAndAdministrativeExpenseMember2022-04-012022-06-300001645842us-gaap:GeneralAndAdministrativeExpenseMember2021-04-012021-06-300001645842us-gaap:GeneralAndAdministrativeExpenseMember2022-01-012022-06-300001645842us-gaap:GeneralAndAdministrativeExpenseMember2021-01-012021-06-300001645842us-gaap:EmployeeStockOptionMember2022-04-012022-06-300001645842us-gaap:PerformanceSharesMember2022-04-012022-06-300001645842us-gaap:PerformanceSharesMember2021-04-012021-06-300001645842us-gaap:PerformanceSharesMember2022-01-012022-06-300001645842us-gaap:PerformanceSharesMember2021-01-012021-06-300001645842us-gaap:RestrictedStockUnitsRSUMember2022-04-012022-06-300001645842us-gaap:RestrictedStockUnitsRSUMember2021-04-012021-06-300001645842us-gaap:RestrictedStockUnitsRSUMember2021-01-012021-06-300001645842us-gaap:StockCompensationPlanMember2022-04-012022-06-300001645842us-gaap:StockCompensationPlanMember2021-04-012021-06-300001645842us-gaap:StockCompensationPlanMember2022-01-012022-06-300001645842us-gaap:StockCompensationPlanMember2021-01-012021-06-300001645842us-gaap:EmployeeStockMember2022-04-012022-06-300001645842us-gaap:EmployeeStockMember2021-04-012021-06-300001645842us-gaap:EmployeeStockMember2022-01-012022-06-300001645842us-gaap:EmployeeStockMember2021-01-012021-06-300001645842us-gaap:EmployeeStockOptionMember2022-01-012022-06-300001645842us-gaap:EmployeeStockOptionMember2021-01-012021-06-300001645842us-gaap:RestrictedStockUnitsRSUMember2022-01-012022-06-300001645842us-gaap:RestrictedStockUnitsRSUMember2021-01-012021-06-300001645842us-gaap:StockCompensationPlanMember2022-01-012022-06-300001645842us-gaap:StockCompensationPlanMember2021-01-012021-06-300001645842zy:ResearchAndDevelopmentRevenuePerformanceBonusesMember2021-01-012021-06-300001645842zy:ResearchAndDevelopmentRevenuePerformanceBonusesMember2021-04-012021-06-300001645842zy:ResearchAndDevelopmentServiceRevenueCustomerAcceptanceClausesMember2022-01-012022-06-300001645842zy:ResearchAndDevelopmentServiceRevenueCustomerAcceptanceClausesMember2021-04-012021-06-300001645842zy:ResearchAndDevelopmentServiceRevenueCustomerAcceptanceClausesMember2021-01-012021-06-3000016458422022-07-012022-06-3000016458422023-07-012022-06-300001645842srt:MinimumMember2023-07-012022-06-300001645842srt:MaximumMember2023-07-012022-06-3000016458422021-10-100001645842us-gaap:SalesRevenueNetMemberus-gaap:CustomerConcentrationRiskMemberzy:CustomerAMember2022-04-012022-06-300001645842us-gaap:SalesRevenueNetMemberus-gaap:CustomerConcentrationRiskMemberzy:CustomerAMember2022-01-012022-06-300001645842us-gaap:SalesRevenueNetMemberus-gaap:CustomerConcentrationRiskMemberzy:CustomerBMember2022-04-012022-06-300001645842us-gaap:SalesRevenueNetMemberus-gaap:CustomerConcentrationRiskMemberzy:CustomerBMember2021-04-012021-06-300001645842us-gaap:SalesRevenueNetMemberus-gaap:CustomerConcentrationRiskMemberzy:CustomerBMember2022-01-012022-06-300001645842us-gaap:SalesRevenueNetMemberus-gaap:CustomerConcentrationRiskMemberzy:CustomerBMember2021-01-012021-06-300001645842us-gaap:SalesRevenueNetMemberus-gaap:CustomerConcentrationRiskMemberzy:CustomerCMember2022-04-012022-06-300001645842us-gaap:SalesRevenueNetMemberus-gaap:CustomerConcentrationRiskMemberzy:CustomerCMember2021-04-012021-06-300001645842us-gaap:SalesRevenueNetMemberus-gaap:CustomerConcentrationRiskMemberzy:CustomerCMember2022-01-012022-06-300001645842us-gaap:SalesRevenueNetMemberus-gaap:CustomerConcentrationRiskMemberzy:CustomerCMember2021-01-012021-06-300001645842us-gaap:SalesRevenueNetMemberus-gaap:CustomerConcentrationRiskMemberzy:CustomerEMember2022-04-012022-06-300001645842us-gaap:SalesRevenueNetMemberus-gaap:CustomerConcentrationRiskMemberzy:CustomerEMember2021-04-012021-06-300001645842us-gaap:SalesRevenueNetMemberus-gaap:CustomerConcentrationRiskMemberzy:CustomerEMember2022-01-012022-06-300001645842us-gaap:SalesRevenueNetMemberus-gaap:CustomerConcentrationRiskMemberzy:CustomerEMember2021-01-012021-06-300001645842zy:CustomerHMemberus-gaap:SalesRevenueNetMemberus-gaap:CustomerConcentrationRiskMember2022-04-012022-06-300001645842zy:CustomerHMemberus-gaap:SalesRevenueNetMemberus-gaap:CustomerConcentrationRiskMember2022-01-012022-06-300001645842us-gaap:SalesRevenueNetMemberzy:CustomerIMemberus-gaap:CustomerConcentrationRiskMember2022-04-012022-06-300001645842us-gaap:SalesRevenueNetMemberzy:CustomerIMemberus-gaap:CustomerConcentrationRiskMember2021-04-012021-06-300001645842us-gaap:SalesRevenueNetMemberzy:CustomerIMemberus-gaap:CustomerConcentrationRiskMember2021-01-012021-06-300001645842us-gaap:AccountsReceivableMemberus-gaap:CustomerConcentrationRiskMemberzy:CustomerCMember2022-01-012022-06-300001645842us-gaap:AccountsReceivableMemberus-gaap:CustomerConcentrationRiskMemberzy:CustomerCMember2021-01-012021-12-310001645842us-gaap:AccountsReceivableMemberus-gaap:CustomerConcentrationRiskMemberzy:CustomerFMember2021-01-012021-12-310001645842us-gaap:AccountsReceivableMemberzy:CustomerGMemberus-gaap:CustomerConcentrationRiskMember2022-01-012022-06-300001645842us-gaap:AccountsReceivableMemberzy:CustomerGMemberus-gaap:CustomerConcentrationRiskMember2021-01-012021-12-310001645842us-gaap:AccountsReceivableMemberzy:CustomerIMemberus-gaap:CustomerConcentrationRiskMember2022-01-012022-06-300001645842us-gaap:AccountsReceivableMemberzy:CustomerIMemberus-gaap:CustomerConcentrationRiskMember2021-01-012021-12-310001645842country:US2022-04-012022-06-300001645842country:US2021-04-012021-06-300001645842country:US2022-01-012022-06-300001645842country:US2021-01-012021-06-300001645842srt:AsiaMember2022-04-012022-06-300001645842srt:AsiaMember2021-04-012021-06-300001645842srt:AsiaMember2022-01-012022-06-300001645842srt:AsiaMember2021-01-012021-06-300001645842srt:EuropeMember2022-04-012022-06-300001645842srt:EuropeMember2021-04-012021-06-300001645842srt:EuropeMember2022-01-012022-06-300001645842srt:EuropeMember2021-01-012021-06-300001645842zy:ResearchAndDevelopmentRevenuePerformanceBonusesMember2022-04-012022-06-300001645842zy:ResearchAndDevelopmentRevenuePerformanceBonusesMember2022-01-012022-06-300001645842zy:ResearchAndDevelopmentServiceRevenueCustomerAcceptanceClausesMember2022-04-012022-06-300001645842zy:GinkgoBioworksHoldingsIncAndPepperMergerSubsidiaryMergerMemberus-gaap:SubsequentEventMember2022-07-240001645842zy:GinkgoBioworksHoldingsIncAndPepperMergerSubsidiaryMergerMemberus-gaap:SubsequentEventMember2022-07-242022-07-24zy:extension0001645842us-gaap:SubsequentEventMember2022-07-262022-07-26zy:employee0001645842us-gaap:SubsequentEventMember2022-07-26
TABLE OF CONTENTS
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 June 30, 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)
5959 Horton Street, Suite 700
Emeryville, California 94608
(415) 801-8073
(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)
5980 Horton Street, Suite 105
Emeryville, California 94608
(Former name, former address and former fiscal year, if changed since last report)

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 July 29, 2022, there were approximately 104,098,538 shares of the registrant's common stock, par value $0.001 per share, outstanding.


TABLE OF CONTENTS
 Page


TABLE OF CONTENTS
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,” “explore,” “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. The forward-looking statements in this report, other than statements regarding our proposed transaction with Ginkgo Bioworks Holdings, Inc., a Delaware corporation (“Ginkgo”) pursuant to that certain Agreement and Plan of Merger (the “Merger Agreement”), dated as of July 24, 2022, between Ginkgo, Pepper Merger Subsidiary Inc., a Delaware corporation and an indirect wholly owned subsidiary of Ginkgo (“Merger Sub”), and us, providing for the merger of Merger Sub with and into Zymergen (the “Merger”), with Zymergen surviving the Merger as a wholly owned subsidiary of Ginkgo, do not assume the consummation of the Merger unless specifically stated otherwise. Forward-looking statements in this Quarterly Report on Form 10-Q include, but are not limited to, statements about:
our expectations regarding the Merger, including our ability to satisfy the conditions to closing and complete the Merger, the timing of the Merger and the occurrence of any event, change, or other circumstances that could delay or prevent completion of the proposed Merger or give rise to the termination of the Merger Agreement;
the impact of the Merger on our and Ginkgo’s businesses and future financial and operating results;
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;
our ability to continue as a going concern;
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;
our ability to identify and complete strategic transactions for our advanced materials and drug discovery businesses;
our ability to retain employees and manage attrition;
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;


TABLE OF CONTENTS
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;
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 retain, attract, and train key personnel.
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.


TABLE OF CONTENTS
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 June 30, 2022
As of December 31, 2021 (1)
ASSETS
Current assets:  
Cash and cash equivalents$213,558 $386,105 
Accounts receivable1,272 520 
Accounts receivable, unbilled2,424 2,565 
Prepaid expenses11,814 7,818 
Inventories6,107 6,035 
Restricted cash, current2,997 2,105 
Other current assets1,469 2,201 
Total current assets239,641 407,349 
Restricted cash10,016 9,849 
Property and equipment, net70,590 53,799 
Operating lease right-of-use assets141,105 — 
Goodwill 40,645 
Intangible assets, net7,380 8,529 
Other long-term assets2,236 2,225 
Total assets$470,968 $522,396 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable$12,877 $5,418 
Accrued and other liabilities27,009 17,496 
Short-term operating lease liabilities7,900 — 
Short-term debt, net 43,953 
Short-term deferred rent 2,218 
Deferred revenue4,410 4,468 
Total current liabilities52,196 73,553 
Long-term operating lease liabilities178,181 — 
Long-term deferred rent 35,390 
Other long-term liabilities3,968 4,967 
Total liabilities234,345 113,910 
Commitments and contingencies
Stockholders' equity
Preferred stock, $0.001 par value, 170,000,000 authorized as of June 30, 2022 and December 31, 2021, respectively; no shares issued and outstanding as of June 30, 2022 and December 31, 2021, respectively
  
Common stock, $0.001 par value, 1,500,000,000 shares authorized as of June 30, 2022 and December 31, 2021, respectively; 103,828,096 and 103,045,299 shares issued and outstanding as of June 30, 2022 and December 31, 2021, respectively
104 103 
Additional paid-in capital1,560,628 1,543,908 
Accumulated deficit(1,324,109)(1,135,525)
Total stockholders' equity236,623 408,486 
Total liabilities and stockholders' equity$470,968 $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

TABLE OF CONTENTS
ZYMERGEN INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND
COMPREHENSIVE LOSS
(Unaudited)
(in thousands, except share and per share data)
Three Months Ended
June 30,
Six Months Ended
June 30,
 2022202120222021
Revenues from research and development service agreements$1,191 $4,846 $4,412 $7,460 
Collaboration and other revenue746 1,008 2,079 2,129 
Automation revenue480  480  
Grant revenue217  454  
Total revenues2,634 5,854 7,425 9,589 
Cost and operating expenses:
Cost of service revenue9,095 21,829 21,550 42,959 
Cost of automation revenue637  637  
Research and development31,186 50,152 59,925 89,963 
Sales and marketing3,158 7,904 6,796 14,776 
General and administrative24,294 23,661 47,999 42,992 
Goodwill impairment charge40,645  40,645  
Restructuring charges (benefit)(185) (315) 
Total cost and operating expenses108,830 103,546 177,237 190,690 
Operating loss(106,196)(97,692)(169,812)(181,101)
Other income (expense):
Interest income2 12 53 55 
Interest expense(9,378)(2,767)(17,423)(5,494)
Gain (loss) on change in fair value of warrant liabilities  (430) 1,849 
Other expense, net(885)(5)(1,417)(768)
Total other expense(10,261)(3,190)(18,787)(4,358)
Loss before income taxes(116,457)(100,882)(188,599)(185,459)
Benefit from (provision for) income taxes(11)16 15 8 
Net loss and comprehensive loss$(116,468)$(100,866)$(188,584)$(185,451)
Net loss per share attributable to common stockholders, basic$(1.13)$(1.30)$(1.83)$(4.07)
Net loss per share attributable to common stockholders, diluted$(1.13)$(1.30)$(1.83)$(4.10)
Weighted average shares used in computing net loss per share to common stockholders, basic103,482,907 77,671,643 103,297,070 45,512,654 
Weighted average shares used in computing net loss per share to common stockholders, diluted103,482,907 77,671,643 103,297,070 45,727,153 
The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
2

TABLE OF CONTENTS
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— — 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 1031,551,602 (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 
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 1337,379 (858,325)(820,933)
Issuance of common stock upon initial public offering, net of commission and issuance costs of $45,138
— — 18,549,500 19529,878 — 529,897 
Issuance of preferred stock upon exercise of Series C Preferred Stock warrants883,332 27,384 — — — — 
Conversion of preferred stock into common stock(68,976,612)(928,182)68,998,791 69928,113 — 928,182 
Issuance of common stock upon exercise of warrants— — 226,880 — — — 
Issuance of common stock in business acquisition— — 774,402 124,808 — 24,809 
Vesting of restricted common stock— — 16,810 — — — 
Issuance of common stock upon exercise of options— — 256,960 11,257 — 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 
The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
3

TABLE OF CONTENTS
ZYMERGEN INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Six Months Ended
June 30,
 20222021
Operating activities
Net loss$(188,584)$(185,451)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization expense10,209 9,330 
Stock-based compensation expense16,033 9,218 
Non-cash lease expense5,930  
Non-cash interest expense14,532 580 
Goodwill impairment charge40,645  
(Gain) loss on change in fair value of warrant liabilities (1,849)
Foreign exchange loss1,290 573 
Other(111)(35)
Changes in operating assets and liabilities:
Accounts receivable(752)(3,482)
Accounts receivable, unbilled141 192 
Prepaid expenses(5,732)(6,718)
Inventories(72)(982)
Other current assets732 430 
Operating lease right-of-use assets2,677 — 
Other long-term assets38 3 
Accounts payable1,076 (2,821)
Accrued and other liabilities2,825 1,879 
Deferred revenue(1,015)(87)
Operating lease liabilities605  
Deferred rent 11,943 
Other long-term liabilities(42)173 
Net cash used in operating activities(99,575)(167,104)
Investing activities
Purchases of property and equipment(13,068)(19,563)
Proceeds from sale of property and equipment209  
Business acquisition, net of cash acquired 1,238 
Net cash used in investing activities(12,859)(18,325)
Financing activities
Proceeds from initial public offering, net of commission and issuance cost 533,293 
Proceeds from exercise of Series C warrants 15,002 
Proceeds from exercise of common stock options303 4,448 
Proceeds from ESPP385  
Payments on debt(58,485) 
Proceeds from repayment of non-recourse loan to employee 1,946 
Other(49) 
Net cash (used in) provided by financing activities(57,846)554,689 
Effect of exchange rate changes on cash(1,208)(532)
Change in cash and cash equivalents(171,488)368,728 
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$226,571 $588,538 
Cash and cash equivalents$213,558 $577,731 
Restricted cash, current2,997 30 
Restricted cash, non-current10,016 10,777 
Total cash, cash equivalents, and restricted cash shown in the statement of cash flows$226,571 $588,538 
The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
4

TABLE OF CONTENTS
ZYMERGEN INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Six Months Ended
June 30,
20222021
Supplemental disclosure of cash flow information:
Cash paid during the period for interest$2,891 $4,942
Supplemental disclosure of non-cash investing and financing activities:
Conversion of preferred shares to common stock$ $928,182
Exercise of warrant liability into preferred stock$ $12,382
Issuance of common stock upon cashless exercise of warrants$ $749
Issuance of common stock in business combination$ $24,809
Acquisitions of property and equipment under accounts payable and accrued and other liabilities$17,550 $5,675
Operating lease right-of-use assets obtained in the exchange for new operating lease liabilities, net$(4,112)$
Offering costs related to initial public offering under accounts payable and accrued and other liabilities$ $2,948 
Share settlement of non-recourse loan to employee$ $1,946 
The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
5

TABLE OF CONTENTS
ZYMERGEN INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1.    Nature of Operations
Zymergen Inc. (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.
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 (Subtopic 205-40) (“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. This evaluation initially does not take into consideration the potential mitigating effect of management’s plans that have not been fully implemented as of the date the financial statements are issued. When substantial doubt about the Company’s ability to continue as a going concern exists under this methodology, management evaluates whether the mitigating effect of its plans sufficiently alleviates substantial doubt about the Company’s ability to continue as a going concern. The mitigating effect of management’s plans, however, is only considered if both (1) it is probable that the plans will be effectively implemented within one year after the date that the financial statements are issued and (2) it is probable that the plans, when implemented, will mitigate the relevant conditions or events that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the date that the financial statements are issued. Generally, to be considered probable of being effectively implemented, the plans must have been approved before the date that the financial statements are issued.
The Company has sustained operating losses and expects to continue to generate operating losses for the foreseeable future. The Company had an accumulated deficit of $1.3 billion as of June 30, 2022. During the six months ended June 30, 2022, the Company incurred a net loss of $188.6 million and used $99.6 million of cash in operating activities. 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 had unrestricted cash and cash equivalents of $213.6 million as of June 30, 2022. As of August 15, 2022, the date of issuance of these Condensed Consolidated Financial Statements, the Company expects that its cash and cash equivalents as of June 30, 2022 will not be sufficient to fund its current business plan, including related operating expenses and capital expenditure requirements, through at least 12 months from the date of issuance of these Condensed Consolidated Financial Statements. These conditions raise substantial doubt as to the Company’s ability to continue as a going concern.
To address these conditions, the Company has implemented measures to reduce its operating costs by executing a reduction in force (as discussed in Note 14), and plans to implement additional operating cost and capital expenditure reduction measures, including further reductions in force.
As discussed in Note 14, on July 24, 2022, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Ginkgo Bioworks Holdings, Inc. (“Ginkgo”) and Pepper Merger Subsidiary, Inc. (“Merger Sub”), providing for the merger of Merger Sub with and into the Company (the “Merger”), with the Company surviving as a wholly owned subsidiary of Ginkgo. The Merger Agreement contains certain covenants that restrict the Company’s ability to enter into certain transactions during the pendency of the proposed Merger, including, among others, equity offerings, debt financings and the subleasing of the Company’s leased properties, without obtaining the consent of Ginkgo. The Company therefore may be unable to engage in such transactions during the pendency of the Merger unless it obtains the consent of Ginkgo.
Consistent with regular practice for a growth-stage company, and as the Company has done in the past, the Company anticipates the need, and is exploring options for, additional financing in order to meet our cash requirements if the proposed merger with Ginkgo is not ultimately consummated. However, there can be no assurances that the Company will be able to obtain additional capital on acceptable terms and in the amounts necessary to fully fund current operating expenses or reduced operating expenses reflecting delays or reductions in the scope of our product development programs beyond one year from the date this annual report is issued. Additionally, 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 have been, and may continue to 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.
6

TABLE OF CONTENTS
ZYMERGEN INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
As such, we believe there is substantial doubt regarding our ability to continue as a going concern within one year after the date this Quarterly Report on Form 10-Q is filed with the SEC.
The accompanying Condensed Consolidated Financial Statements have been prepared on a going concern basis, which assumes the Company will continue as a going concern and contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. The Company’s operating costs include the cost of developing and commercializing products, as well as providing research and development services.
The accompanying Condensed Consolidated Financial Statements do not reflect any adjustments relating to the recoverability and reclassifications of assets and liabilities that would be necessary if the Company is unable to continue as a going concern.
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 six months ended June 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”) 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 and six months ended June 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.
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 June 30, 2022.
7

TABLE OF CONTENTS
ZYMERGEN INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
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 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 June 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 June 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.
8

TABLE OF CONTENTS
ZYMERGEN INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Goodwill and Acquired Intangible 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.
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.
9

TABLE OF CONTENTS
ZYMERGEN INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
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.
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.
10

TABLE OF CONTENTS
ZYMERGEN INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
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.
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
2021 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 expects the 2021 Restructuring to result in total pre-tax charges of approximately $28.5 million and approximately $16.7 million of these charges are estimated to result in cash outlays, of which the Company has made payments of $15.3 million through June 30, 2022. The Company has recorded costs of $28.5 million from the inception of the initiative through June 30, 2022.
11

TABLE OF CONTENTS
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 June 30, 2022, and cost estimates associated with the 2021 Restructuring, by major type of cost (in thousands):
Total amount incurred since inception through June 30, 2022Total estimated amount expected to be incurred
Restructuring charges:
Termination benefits$8,580 $8,580 
Impairment of long-lived assets11,815 11,815 
Contract terminations3,507 3,507 
Other (1)
4,591 4,591 
Total$28,493 $28,493 
—–—–—–—–—–—–
(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    
Adjustments(73)(242) (315)
Cash Payments, net(846)92  (754)
Balance at June 30, 2022$29 $1,300 $ $1,329 
5.    Goodwill and Intangible Assets
The following table summarizes goodwill as of June 30, 2022 and December 31, 2021 (in thousands):
June 30,
2022
December 31,
2021
Goodwill$ $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, we record 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.
12

TABLE OF CONTENTS
ZYMERGEN INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The following table summarizes the net book value of the finite-lived intangible assets as of June 30, 2022 and December 31, 2021 (in thousands):
 CostAccumulated
Amortization
Intangible Assets, Net
 June 30,
2022
December 31,
2021
June 30,
2022
December 31,
2021
June 30,
2022
December 31,
2021
Developed technology$12,300 $12,300 $(5,104)$(4,110)$7,196 $8,190 
Customer relationships1,400 1,400 (1,216)(1,061)184 339 
Total$13,700 $13,700 $(6,320)$(5,171)$7,380 $8,529 
The Company recognized $0.5 million and $0.5 million in amortization expense for the three months ended June 30, 2022 and 2021, and $1.1 million and $0.8 million for the six months ended June 30, 2022 and 2021, respectively.
Future amortization of intangible assets is as follows (in thousands):
Remainder of 2022$1,099 
20232,067 
20241,271 
20251,271 
20261,271 
Thereafter401 
Total$7,380 
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.
13

TABLE OF CONTENTS
ZYMERGEN INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
There were no transfers between the levels during the periods presented. As of June 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 1Level 2Level 3Balance as of June 30, 2022
Financial Assets    
Cash equivalents$1,669 $ $ $1,669 
Total financial assets$1,669 $ $ $1,669 
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 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.
7.    Balance Sheet Components
Property and equipment consist of the following as of June 30, 2022 and December 31, 2021 (in thousands):
 June 30,
2022
December 31,
2021
Machinery and equipment$76,195 $74,548 
Leasehold improvements27,379 31,488 
Furniture and office equipment3,191 3,189 
Computers and software2,775 2,764 
109,540 111,989 
Less accumulated depreciation and amortization(82,784)(78,132)
26,756 33,857 
Construction in progress43,834 19,942 
Total property and equipment, net$70,590 $53,799 
Depreciation and amortization expense was $4.2 million and $4.4 million for the three months ended June 30, 2022 and 2021, and $9.1 million and $8.5 million for the six months ended June 30, 2022 and 2021, respectively.
Accrued and other current liabilities consist of the following as of June 30, 2022 and December 31, 2021 (in thousands):
June 30,
2022
December 31,
2021
Accrued compensation and compensation-related costs$9,089 $6,027 
Other accrued liabilities13,317 7,045 
Accrued restructuring costs1,329 2,398 
Accrued legal service fees3,206 1,940 
Accrued tax liabilities68 86 
Total accrued and other current liabilities$27,009 $17,496 
14

TABLE OF CONTENTS
ZYMERGEN INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Inventories consist of the following as of June 30, 2022 and December 31, 2021 (in thousands):
June 30,
2022
December 31,
2021
Consumables$5,480 $6,035 
Automation - Raw materials627  
Total Inventories$6,107 $6,035 
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 June 30, 2022.
Debt consists of the following as of December 31, 2021 (in thousands):
 December 31,
2021
Senior secured delayed draw term loan facility bearing interest equal to 11.5%
$50,000 
Unamortized discount and offering costs(8,310)
Accrued end-of-term payment2,263 
Senior secured delayed draw term loan facility, net43,953 
Less current portion43,953 
Long-term debt, net$ 
Interest expense on the Company’s term loan consists of the following (in thousands):
Three Months Ended
June 30,
Six Months Ended
June 30,
2022202120222021
Coupon interest$1,453 $2,471 $2,891 $4,914 
Amortization of debt discount and offering costs4,669 296 8,310 580 
Accretion of end-of-term payment3,256  6,222  
Total interest expense on term loan$9,378 $2,767 $17,423 $5,494 
9.    Leases
The Company adopted FASB ASC 842 on January 1, 2022 (Note 2). The Company did not have any finance leases during the six months ended June 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.
15

TABLE OF CONTENTS
ZYMERGEN INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
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 and six months ended June 30, 2022 consist of the following (in thousands):
Three Months Ended June 30,Six Months Ended June 30,
20222022
Operating lease cost$8,628 $17,437 
Operating variable lease cost1,687 3,306 
Operating sublease income(172)(344)
Total lease costs$10,143 $20,399 
Rent expense under operating leases, net of sublease income, was $9.5 million and $15.8 million for the three and six months ended June 30, 2021, respectively.
Other information related to the Company’s operating leases for the three and six months ended June 30, 2022 is as follows (in thousands, except lease term and discount rate):
Three Months Ended June 30,Six Months Ended June 30,
20222022
Cash paid for amounts included in operating lease liabilities$6,872 $11,219 
June 30, 2022
Weighted-average remaining operating lease term (in years)10.43
Weighted-average incremental borrowing rate12.60