SEC Filing | Schrödinger, Inc.

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

View:

Download DOC

Download PDF

Download XLS

Download XBRL

sdgr-10q_20220331.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 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

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-39206

Schrodinger, Inc.

(Exact Name of Registrant as Specified in its Charter)

Delaware	95-4284541
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

1540 Broadway, 24^th Floor New York, NY	10036
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (212) 295-5800

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading

Symbol(s)

Name of each exchange on which registered

Common stock, par value $0.01 per share

SDGR

The Nasdaq Stock Market LLC

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, 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.

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

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 19, 2022, the registrant had 61,973,968 shares of common stock, $0.01 par value per share, and 9,164,193 shares of limited common stock, $0.01 par value per share, outstanding.

Table of Contents

		Page
PART I.	FINANCIAL INFORMATION
Item 1.	Financial Statements	6
	Condensed Consolidated Balance Sheets as of March 31, 2022 and December 31, 2021 (Unaudited)	6
	Condensed Consolidated Statements of Operations for the three months ended March 31, 2022 and 2021 (Unaudited)	7
	Condensed Consolidated Statements of Comprehensive Loss for the three months ended March 31, 2022 and 2021 (Unaudited)	8
	Consolidated Statements of Stockholders’ Equity for the three months ended March 31, 2022 and 2021 (Unaudited)	9
	Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2022 and 2021 (Unaudited)	10
	Notes to Condensed Consolidated Financial Statements (Unaudited)	11
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	27
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	37
Item 4.	Controls and Procedures	37
PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings	38
Item 1A.	Risk Factors	38
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	72
Item 3.	Defaults Upon Senior Securities	72
Item 4.	Mine Safety Disclosures	73
Item 5.	Other Information	73
Item 6.	Exhibits	74

Table of Contents

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q, or this Quarterly Report, contains forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act and Section 21E of the Securities Exchange Act of 1934, as amended, that involve substantial risks and uncertainties. All statements, other than statements of historical fact, contained in this Quarterly Report, including statements regarding our strategy, future operations, future financial position, future revenue, projected costs, prospects, plans and objectives of management, are forward-looking statements. The words “aim,” “anticipate,” “believe,” “contemplate,” “continue,” “could,” “estimate,” “expect,” “goal,” “intend,” “may,” “might,” “plan,” “potential,” “predict,” “project,” “should,” “target,” “will,” “would” or the negative of these words or other similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words.

The forward-looking statements in this Quarterly Report include, among other things, statements about:

•

the potential advantages of our physics-based computational platform;

•

our strategic plans to accelerate the growth of our software business;

•

our research and development efforts for our internal drug discovery programs and our computational platform;

•

the initiation, timing, progress, and results of our internal drug discovery programs or the drug discovery programs of our collaborators;

•

our plans to submit investigational new drug applications to the U.S. Food and Drug Administration for our internal drug discovery programs;

•

our plans to discover and develop product candidates and to maximize their commercial potential by advancing such product candidates ourselves or in collaboration with others;

•

our plans to leverage the synergies between our businesses;

•

the timing of, the ability to submit applications for and the ability to obtain and maintain regulatory approvals for any product candidates we or one of our collaborators may develop;

•

our drug discovery collaborations and our estimates or expectations regarding any milestone or other payments we may receive from such collaborations, including pursuant to our collaboration with Bristol-Myers Squibb Company;

•

our expectations regarding our ability to fund our operating expenses and capital expenditure requirements with our cash, cash equivalents, and marketable securities;

•

the potential advantages of our drug discovery programs;

•

the rate and degree of market acceptance of our software solutions;

•

the potential continued impact of the COVID-19 pandemic on our business, operations, liquidity and prospects;

•

the rate and degree of market acceptance and clinical utility of our products;

•

our estimates regarding the potential market opportunity for our software solutions and any product candidate we or any of our collaborators may in the future develop;

•

our marketing capabilities and strategy;

•

our intellectual property position;

•

our ability to identify technologies with significant commercial potential that are consistent with our commercial objectives;

•

our expectations related to the use of our cash, cash equivalents, and marketable securities;

•

our expectations related to the key drivers of our performance;

•

the impact of government laws and regulations;

•

our competitive position and expectations regarding developments and projections relating to our competitors and any competing products, technologies, or therapies that are or become available;

•

our ability to maintain and establish collaborations or obtain additional funding; and

•

our reliance on key personnel and our ability to identify, recruit, and retain skilled personnel.

Table of Contents

We may not actually achieve the plans, intentions, or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions, and expectations disclosed in the forward-looking statements we make. We have included important factors in the cautionary statements included in this Quarterly Report, particularly in “Risk Factor Summary” below and Part II, Item 1A. “Risk Factors”, that we believe could cause actual results or events to differ materially from the forward-looking statements that we make. Moreover, we operate in a competitive and rapidly changing environment. New risks and uncertainties emerge from time to time, and it is not possible for us to predict all risks and uncertainties that could have an impact on the forward-looking statements contained in this Quarterly Report. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, collaborations, joint ventures, or investments we may make or enter into.

You should read this Quarterly Report and the documents that we file with the Securities and Exchange Commission, or the SEC, with the understanding that our actual future results may be materially different from what we expect. The forward-looking statements contained in this Quarterly Report are made as of the date of this Quarterly Report, and we do not assume any obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable law.

In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this Quarterly Report, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete. Our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and investors are cautioned not to unduly rely upon these statements.

Unless the context otherwise requires, we use the terms “company,” “we,” “us” and “our” in this Quarterly Report to refer to Schrödinger, Inc. and its consolidated subsidiaries.

Table of Contents

RISK FACTOR SUMMARY

Our business is subject to a number of risks of which you should be aware before making an investment decision. Below we summarize what we believe are the principal risk factors but these risks are not the only ones we face, and you should carefully review and consider the full discussion of our risk factors in the section titled “Risk Factors”, together with the other information in this Quarterly Report.

•

We have a history of significant operating losses, and we expect to incur losses over the next several years.

•

If we are unable to increase sales of our software, or if we and our current and future collaborators are unable to successfully develop and commercialize drug products, our revenues may be insufficient for us to achieve or maintain profitability.

•

Our quarterly and annual results may fluctuate significantly, which could adversely impact the value of our common stock.

•

If our existing customers do not renew their licenses, do not buy additional solutions from us, or renew at lower prices, our business and operating results will suffer.

•

A significant portion of our revenues are generated by sales to life sciences industry customers, and factors that adversely affect this industry could also adversely affect our software sales.

•

The markets in which we participate are highly competitive, and if we do not compete effectively, our business and operating results could be adversely affected.

•

We may never realize a return on our investment of resources and cash in our drug discovery collaborations.

•

Although we believe that our computational platform has the potential to identify more promising molecules than traditional methods and to accelerate drug discovery, our focus on using our platform technology to discover and design molecules with therapeutic potential may not result in the discovery and development of commercially viable products for us or our collaborators.

•

We may not be successful in our efforts to identify, discover or develop product candidates and may fail to capitalize on programs, collaborations, or product candidates that may present a greater commercial opportunity or for which there is a greater likelihood of success.

•

As a company, we do not have any experience in clinical development and have not advanced any product candidate into clinical development.

•

Conducting successful clinical trials requires the enrollment of a sufficient number of patients, and suitable patients may be difficult to identify and recruit.

•

A widespread outbreak of an illness or other health issue, such as the COVID-19 pandemic, could negatively affect various aspects of our business and make it more difficult to meet our obligations to our customers, and could result in reduced demand from our customers as well as delays in our drug discovery and development programs.

•

If we fail to comply with our obligations under our existing license agreements with Columbia University, under any of our other intellectual property licenses, or under any future intellectual property licenses, or otherwise experience disruptions to our business relationships with our current or any future licensors, we could lose intellectual property rights that are important to our business.

•

If we are unable to obtain, maintain, enforce, and protect patent protection for our technology and product candidates or if the scope of the patent protection obtained is not sufficiently broad, our competitors could develop and commercialize technology and products similar or identical to ours, and our ability to successfully develop and commercialize our technology and product candidates may be adversely affected.

•

Our internal information technology systems, or those of our third-party vendors, contractors, or consultants, may fail or suffer security breaches, loss or leakage of data, and other disruptions, which could result in a material disruption of our services, compromise sensitive information related to our business, or prevent us from accessing critical information, potentially exposing us to liability or otherwise adversely affecting our business.

•

Our future success depends on our ability to retain key executives and to attract, retain, and motivate qualified personnel.

•

We are pursuing multiple business strategies and expect to expand our development and regulatory capabilities, and as a result, we may encounter difficulties in managing our multiple business units and our growth, which could disrupt our operations.

Table of Contents

•

Our executive officers, directors, and principal stockholders, if they choose to act together, have the ability to influence all matters submitted to stockholders for approval.

•

Our actual operating results may differ significantly from our guidance.

Table of Contents

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

SCHRÖDINGER, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets (Unaudited)

(in thousands, except for share and per share amounts)

Assets	March 31, 2022			December 31, 2021
Current assets:
Cash and cash equivalents	$	117,257		$	120,267
Restricted cash		3,500			3,000
Marketable securities		408,275			456,212
Accounts receivable, net of allowance for doubtful accounts of $127 and $108		29,321			31,744
Unbilled and other receivables, net for allowance for unbilled receivables of $40 and $30		16,273			8,807
Prepaid expenses		11,542			5,030
Total current assets		586,168			625,060
Property and equipment, net		11,120			10,025
Equity investments		37,002			43,167
Goodwill		4,791			—
Intangible assets, net		986			—
Right of use assets		78,136			75,384
Other assets		1,334			2,851
Total assets	$	719,537		$	756,487
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	9,766		$	8,079
Accrued payroll, taxes, and benefits		10,951			18,405
Deferred revenue		53,771			55,368
Lease liabilities		4,151			2,042
Other accrued liabilities		6,893			7,317
Total current liabilities		85,532			91,211
Deferred revenue, long-term		24,582			30,064
Lease liabilities, long-term		77,353			77,827
Other liabilities, long-term		1,400			300
Total liabilities		188,867			199,402
Commitments and contingencies (Note 6)
Stockholders' equity:
Preferred stock, $0.01 par value. Authorized 10,000,000 shares; zero shares issued and outstanding at March 31, 2022 and December 31, 2021		—			—
Common stock, $0.01 par value. Authorized 500,000,000 shares; 61,972,400 and 61,834,515 shares issued and outstanding at March 31, 2022 and December 31, 2021, respectively		620			618
Limited common stock, $0.01 par value. Authorized 100,000,000 shares; 9,164,193 shares issued and outstanding at March 31, 2022 and December 31, 2021		92			92
Additional paid-in capital		797,004			786,964
Accumulated deficit		(264,392	)		(229,952	)
Accumulated other comprehensive loss		(2,657	)		(651	)
Total stockholders’ equity of Schrödinger stockholders		530,667			557,071
Noncontrolling interest		3			14
Total stockholders’ equity		530,670			557,085
Total liabilities and stockholders’ equity	$	719,537		$	756,487

See accompanying notes to unaudited condensed consolidated financial statements.

Table of Contents

SCHRÖDINGER, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Operations (Unaudited)

(in thousands, except for share and per share amounts)

	Three Months Ended March 31,
	2022			2021
Revenues:
Software products and services	$	33,081		$	26,340
Drug discovery		15,582			5,787
Total revenues		48,663			32,127
Cost of revenues:
Software products and services		7,511			5,906
Drug discovery		13,169			10,057
Total cost of revenues		20,680			15,963
Gross profit		27,983			16,164
Operating expenses:
Research and development		27,822			21,448
Sales and marketing		6,671			5,239
General and administrative		22,133			13,389
Total operating expenses		56,626			40,076
Loss from operations		(28,643	)		(23,912	)
Other (expense) income:
Loss on equity investments		—			(1,781	)
Change in fair value		(6,164	)		24,824
Interest income		328			420
Total other (expense) income		(5,836	)		23,463
Loss before income taxes		(34,479	)		(449	)
Income tax (benefit) expense		(28	)		74
Net loss		(34,451	)		(523	)
Net loss attributable to noncontrolling interest		(11	)		(494	)
Net loss attributable to Schrödinger common and limited common stockholders	$	(34,440	)	$	(29	)
Net loss per share attributable to Schrödinger common and limited common stockholders, basic and diluted:	$	(0.48	)	$	(0.00	)
Weighted average shares used to compute net loss per share attributable to Schrödinger common and limited common stockholders, basic and diluted:		71,050,432			70,071,625

See accompanying notes to unaudited condensed consolidated financial statements.

Table of Contents

SCHRÖDINGER, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Comprehensive Loss (Unaudited)

(in thousands)

	Three Months Ended March 31,
	2022			2021
Net loss attributable to Schrödinger common and limited common stockholders	$	(34,440	)	$	(29	)
Changes in market value of investments, net of tax:
Unrealized loss on marketable securities		(2,006	)		(240	)
Comprehensive loss	$	(36,446	)	$	(269	)

See accompanying notes to unaudited condensed consolidated financial statements.

Table of Contents

SCHRÖDINGER, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Stockholders’ Equity (Unaudited)

(in thousands, except for share amounts)


														Accumulated
	Common stock				Limited common stock				Additional paid-in		Accumulated			other comprehensive			Non controlling			Total stockholders’
	Shares		Amount		Shares		Amount		capital		deficit			income (loss)			interest			equity
Balance at December 31, 2021		61,834,515	$	618		9,164,193	$	92	$	786,964	$	(229,952	)	$	(651	)	$	14		$	557,085
Change in unrealized loss on marketable securities		—		—		—		—		—		—			(2,006	)		—			(2,006	)
Issuances of common stock upon stock option exercise		137,885		2		—		—		906		—			—			—			908
Stock-based compensation		—		—		—		—		9,134		—			—			—			9,134
Net loss		—		—		—		—		—		(34,440	)		—			(11	)		(34,451	)
Balance at March 31, 2022		61,972,400	$	620		9,164,193	$	92	$	797,004	$	(264,392	)	$	(2,657	)	$	3		$	530,670

Balance at December 31, 2020		60,713,534	$	607		9,164,193	$	92	$	752,558	$	(129,559	)	$	317		$	4		$	624,019
Change in unrealized loss on marketable securities		—		—		—		—		—		—			(240	)		—			(240	)
Issuances of common stock upon stock option exercise		587,141		6		—		—		3,650		—			—			—			3,656
Stock-based compensation		—		—		—		—		4,366		—			—			—			4,366
Contributions by non-controlling interest		—		—		—		—				—			—			498			498
Net loss		—		—		—		—		—		(29	)		—			(494	)		(523	)
Balance at March 31, 2021		61,300,675	$	613		9,164,193	$	92	$	760,574	$	(129,588	)	$	77		$	8		$	631,776

See accompanying notes to unaudited condensed consolidated financial statements.

Table of Contents

SCHRÖDINGER, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows (Unaudited)

(in thousands)

	Three Months Ended March 31,
	2022			2021
Cash flows from operating activities:
Net loss	$	(34,451	)	$	(523	)
Adjustments to reconcile net loss to net cash used in
operating activities:
Loss on equity investments		—			1,781
Noncash revenue from equity investments		—			(5	)
Fair value adjustments		6,164			(24,824	)
Depreciation and amortization		969			887
Stock-based compensation		9,134			4,366
Noncash research and development expenses		—			498
Noncash investment amortization		1,504			1,955
(Gain) loss on disposal of property and equipment		(4	)		19
Decrease (increase) in assets, net of acquisition:
Accounts receivable, net		2,935			20,153
Unbilled and other receivables		(7,390	)		(3,065	)
Reduction in the carrying amount of right of use assets		1,221			1,264
Prepaid expenses and other assets		(7,725	)		(3,549	)
Increase (decrease) in liabilities, net of acquisition:
Accounts payable		1,328			(1,230	)
Accrued payroll, taxes, and benefits		(7,454	)		(1,655	)
Deferred revenue		(7,079	)		(8,447	)
Lease liabilities		489			(1,352	)
Other accrued liabilities		637			2,806
Net cash used in operating activities		(39,722	)		(10,921	)
Cash flows from investing activities:
Purchases of property and equipment		(1,696	)		(513	)
Distribution from equity investment		—			40
Proceeds from sale of equity investments		—			15,735
Acquisition, net of acquired cash		(6,427	)		—
Purchases of marketable securities		(55,068	)		(143,671	)
Proceeds from maturity of marketable securities		99,495			66,500
Net cash provided by (used in) investing activities		36,304			(61,909	)
Cash flows from financing activities:
Issuances of common stock upon stock option exercises		908			3,656
Net cash provided by financing activities		908			3,656
Net decrease in cash and cash equivalents and restricted cash		(2,510	)		(69,174	)
Cash and cash equivalents and restricted cash, beginning of period		123,267			202,796
Cash and cash equivalents and restricted cash, end of period	$	120,757		$	133,622

Supplemental disclosure of cash flow and noncash information
Cash paid for income taxes	$	37		$	119
Supplemental disclosure of non-cash investing and financing activities
Purchases of property and equipment in accounts payable		317			52
Purchases of property and equipment in accrued liabilities		343			—
Acquisition of right to use assets, contingency resolution		1,513			—
Acquisition of right of use assets		1,146			—
Acquisition of lease liabilities		1,146			—

See accompanying notes to unaudited condensed consolidated financial statements.

Table of Contents

SCHRÖDINGER, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited)

For the three months ended March 31, 2022 and 2021

(in thousands, except for share and per share amounts)

(1)	Description of Business

Schrödinger, Inc. (the “Company”) has developed a differentiated, physics-based software platform that enables discovery of high-quality, novel molecules for drug development and materials applications more rapidly and at a lower cost, compared to traditional methods. The Company sells its software to biopharmaceutical and industrial companies, academic institutions, and government laboratories. The Company also applies its computational platform to a broad pipeline of drug discovery and development programs in collaboration with biopharmaceutical companies. In addition, the Company uses its platform to advance a pipeline of internal drug discovery programs.

(2)	Significant Accounting Policies

(a)	Recently Issued Accounting Pronouncements

In October 2021, the Financial Accounting Standards Board issued Accounting Standards Update (“ASU”) No. 2021-08, Business Combinations (Topic 805) – Accounting for Contract Assets and Contract Liabilities from Contracts with Customers, which requires the measurement and recognition of contract assets and contract liabilities acquired in a business combination in accordance with Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers (Topic 606). This update replaces the existing guidance requiring contract assets and contract liabilities to be measured and recognized at fair value. The standard is effective on a prospective basis for annual periods beginning after December 15, 2022, including interim periods within the fiscal year, with early adoption permitted. The Company early adopted this new standard effective January 1, 2022 with no material impact on its unaudited condensed consolidated financial statements.

(b)	Basis of Presentation and Use of Estimates

The accompanying unaudited condensed consolidated financial statements and the related interim disclosures have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) and pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) for the interim financial information. These unaudited condensed consolidated financial statements include all adjustments necessary, consisting of only normal recurring adjustments, to fairly state the financial position and the results of the Company’s operations and cash flows for interim periods in accordance with U.S. GAAP. Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted as permitted by the SEC’s rules and regulations for interim reporting. Interim period results are not necessarily indicative of results of operations or cash flows for a full year or any subsequent interim period. The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021, which was filed with the SEC on February 24, 2022.

The preparation 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, disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period. Significant estimates include the assumptions used in the allocation of revenue, estimates regarding the progress of completing performance obligations under collaboration agreements, and the valuation of stock-based compensation. Actual results could differ from those estimates, and such differences may be material to the unaudited condensed consolidated financial statements.

(c)	Principles of Consolidation

The Company’s unaudited condensed consolidated financial statements include the accounts of Schrödinger, Inc., its wholly owned subsidiaries, and its variable interest entity. All intercompany balances and transactions have been eliminated in consolidation. The functional currency for foreign entities is the United States dollar. The Company accounts for investments over which it has significant influence, but not a controlling financial interest, using the equity method.

Table of Contents

(d)	Restricted Cash

Restricted cash consists of letters of credit held with the Company’s financial institution related to facility leases and is classified as current in the Company’s balance sheets based on the maturity of the underlying letters of credit.

(e)	Concentrations

Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of trade receivables.

The Company does not require customers to provide collateral to support accounts receivable. If deemed necessary, credit reviews of significant new customers may be performed prior to extending credit. The determination of a customer’s ability to pay requires judgment, and failure to collect from a customer can adversely affect revenue, cash flows, and results of operations.

As of March 31, 2022, two customers accounted for 34% and 12% of total accounts receivable, respectively. As of December 31, 2021, three customers accounted for 17%, 15%, and 11% of total accounts receivable, respectively. One customer accounted for 15% of total revenues during the three months ended March 31, 2022 and no customers accounted for more than 10% of total revenues during the three months ended March 31, 2021.

(f)	Income Taxes

The Company records deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the financial statement carrying amounts and the tax basis of the assets and liabilities. Deferred tax assets are reduced by a valuation allowance when it is estimated to become more likely than not that a portion of the deferred tax assets will not be realized. Accordingly, the Company currently maintains a full valuation allowance against existing net deferred tax assets.

The Company recognizes the effect of income tax positions only if such positions are deemed “more likely than not” capable of being sustained. Interest and penalties accrued on unrecognized tax benefits are included within income tax expense in the unaudited condensed consolidated financial statements.

(g)	Equity Investments

In the normal course of business, the Company has entered, and may continue to enter, into collaboration agreements with companies to perform drug design services for such companies in exchange for equity ownership stakes in such companies. If it is determined that the Company has control over the investee, the investee is consolidated in the financial statements. If the investee is consolidated with the Company and less than 100% of the equity is owned by the Company, the Company will present non-controlling interest to represent the portion of the investee owned by other investors. If it is determined that the Company does not have control over the investee, the Company evaluates the investment for the ability to exercise significant influence.

Equity investments over which the Company has significant influence may be accounted for under equity method accounting in accordance with ASC Topic 323, Equity Method and Joint Ventures. If it is determined that the Company does not have significant influence over the investee, and there is no readily determinable fair value for the investment, the equity investment may be accounted for at cost minus impairment in accordance with ASC Topic 321, Equity Securities.

For further information regarding the Company’s equity investments, see Note 5, Fair Value Measurements, Note 10, Noncontrolling Interest, and Note 12, Equity Investments.

(h)	Net Loss per Share Attributable to Common and Limited Common Stockholders

The outstanding equity of the Company consists of common stock and limited common stock. Under the Company’s certificate of incorporation, the rights of the holders of common stock and limited common stock are identical, except with respect to voting and conversion. Holders of limited common stock are precluded from voting such shares in any election of directors or on the removal of directors. Limited common stock may be converted into common stock at any time at the option of the stockholder.

Undistributed earnings allocated to the participating securities are subtracted from net income in determining net (loss) income attributable to common and limited common stockholders. Basic net (loss) income per share is computed by dividing net (loss) income attributable to common and limited common stockholders by the weighted-average number of shares of common and limited common stock outstanding during the period.

Table of Contents

For the calculation of diluted net income, net income attributable to common and limited common stockholders for basic net income is adjusted by the effect of dilutive securities, including awards under the Company’s equity compensation plans. Diluted net income per share attributable to common and limited common stockholders is computed by dividing the resulting net income attributable to common and limited common stockholders by the weighted-average number of fully diluted shares of common and limited common stock outstanding.

(3)	Revenue Recognition

Revenue is recognized upon transfer of control of promised products or services to customers in an amount that reflects the consideration to which the Company expects to be entitled in exchange for promised goods or services. The Company’s performance obligations are satisfied either over time or at a point in time.

The following table illustrates the timing of the Company’s revenue recognition:

	Three Months Ended March 31,
	2022			2021
Software products and services – point in time		44.8	%		54.0	%
Software products and services – over time		23.2			28.0
Drug Discovery – point in time		19.0			-
Drug Discovery – over time		13.0