SEC Filing - SomaLogic

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slgc-20210930

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 September 30, 2021


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

For transition period from to

Commission File Number 001-39796

SOMALOGIC, INC.

(Exact name of registrant as specified in its charter)


Delaware						52-4298912
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification Number)

2945 Wilderness Place

Boulder, Colorado 80301

(303) 625-9000

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

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

Title of each class

Trading Symbol

Name of each exchange on which registered

Common Stock, $0.0001 par value

SLGC

Nasdaq Capital Market

Warrants to purchase Common Stock

SLGCW

Nasdaq Capital 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 filer

Accelerated filer

Non-accelerated filer

Smaller 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 October 29, 2021, there were approximately 181,172,759 shares of the registrant's common stock outstanding.

TABLE OF CONTENTS


		Page

	Cautionary Note Regarding Forward-Looking Statements	1

	PART I—FINANCIAL INFORMATION
Item 1.	Condensed Consolidated Financial Statements	2
	Condensed Consolidated Balance Sheets	2
	Condensed Consolidated Statements of Operations and Comprehensive Loss	3
	Condensed Consolidated Statements of Redeemable Convertible Preferred Stock and Stockholders' Equity (Deficit)	4
	Condensed Consolidated Statements of Cash Flows	6
	Notes to Condensed Consolidated Financial Statements	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	27
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	41
Item 4.	Controls and Procedures	41
	PART II—OTHER INFORMATION
Item 1.	Legal Proceedings	43
Item 1A.	Risk Factors	43
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	43
Item 3.	Defaults Upon Senior Securities	43
Item 4.	Mine Safety Disclosures	43
Item 5.	Other Information	43
Item 6.	Exhibits	44

	Signatures	46

Table of Contents

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

The information in this Quarterly Report on Form 10-Q includes “forward-looking statements” within the meaning of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. All statements, other than statements of historical fact included in or incorporated by reference into this Quarterly Report on Form 10-Q, regarding our strategy, future operations, financial position, estimated revenues and losses, projected costs, prospects, plans and objectives of management are forward-looking statements. When used in this report, the words ““will be,” “will,” “expect,” “anticipate,” “continue,” “project,” “believe,” “plan,” “could,” “estimate,” “forecast,” “guidance,” “intend,” “may,” “plan,” “possible,” “potential,” “predict,” “pursue,” “should,” “target” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain such identifying words. These forward-looking statements are based on management’s current expectations and assumptions about future events and are based on currently available information as to the outcome and timing of future events.

These statements include, but are not limited to the following:

•the occurrence of any event, change or other circumstances, including the outcome of any legal proceedings that may be instituted against the Company;

•the ability to maintain the listing of the Company’s Common Stock on the Nasdaq, as applicable;

•the risk of disruption to the Company’s current plans and operations;

•the ability to recognize the anticipated benefits of the Company’s business, which may be affected by, among other things, competition and the ability to grow and manage growth profitably and retain its key employees;

•costs related to the Company’s business;

•changes in applicable laws or regulations;

•the ability of the Company to raise financing in the future;

•the success, cost and timing of the Company’s product development activities;

•the Company’s ability to obtain and maintain regulatory approval for its products, and any related restrictions and limitations of any approved product;

•the Company’s ability to maintain existing license agreements and manufacturing arrangements;

•the Company’s ability to compete with other companies currently marketing or engaged in the development of products and services that serve customers engaged in proteomic analysis, many of which have greater financial and marketing resources than the Company;

•the size and growth potential of the markets for the Company’s products, and the ability of each to serve those markets, either alone or in partnership with others;

•the Company’s estimates regarding expenses, future revenue, capital requirements and needs for additional financing;

•the Company’s financial performance; and

•the impact of the COVID-19 pandemic on the Company.

The forward-looking statements contained in this Quarterly Report on Form 10-Q are based on the Company’s current expectations and beliefs concerning future developments and their potential effects on the Company. There can be no assurance that future developments affecting the Company will be those that the Company has anticipated. These forward-looking statements involve a number of risks, uncertainties (some of which are beyond the Company’s control) or other assumptions that may cause actual results or performance to be materially different from those expressed or implied by these forward-looking statements. These risks and uncertainties include, but are not limited to, those factors described under section entitled “Risk Factors” in our registration statement on Form S-1, filed on October 18, 2021. Should one or more of these risks or uncertainties materialize, or should any of the assumptions prove incorrect, actual results may vary in material respects from those projected in these forward-looking statements. The Company will not and does not undertake any obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.

Table of Contents

PART 1 – FINANCIAL INFORMATION

Item 1. Financial Statements

SomaLogic, Inc.
Condensed Consolidated Balance Sheets
Unaudited

(in thousands, except share data)


	September 30, 2021		December 31, 2020
ASSETS
Current assets
Cash and cash equivalents	$	468,708	$	164,944
Investments	206,995		39,954
Accounts receivable, net	14,690		17,449
Inventory	10,646		7,020
Deferred costs of services	883		1,450
Prepaid expenses and other current assets	5,414		1,158
Total current assets	707,336		231,975
Non-current inventory	3,810		6,024
Property and equipment, net	6,487		3,913
Other long-term assets	908		378
Total assets	$	718,541	$	242,290

LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
Current liabilities
Accounts payable	$	11,340	$	7,064
Accrued liabilities	6,489		6,310
Deferred revenue	3,998		1,762
Deferred rent	59		238
Current portion of long-term debt	—		2,423
Total current liabilities	21,886		17,797
Warrant liabilities	36,340		—
Earn-out liability	30,678		—
Deferred revenue, net of current portion	2,627		3,415
Convertible debt	—		1,926
Long-term debt	—		32,326
Other long-term liabilities	1,111		909
Total liabilities	92,642		56,373
Commitments and contingencies (Note 9)
Stockholders’ equity (deficit)
Preferred stock, $0.0001 par value; 1,000,000 shares authorized; no shares issued and outstanding at September 30, 2021 and December 31, 2020	—		—
Common stock, $0.0001 par value; 600,000,000 shares authorized; 181,164,377 and 114,266,515 shares issued and outstanding at September 30, 2021 and December 31, 2020, respectively	18		11



Additional paid-in capital	1,101,499		597,274
Accumulated other comprehensive loss	(12)		(2)
Accumulated deficit	(475,606)		(411,366)
Total stockholders’ equity (deficit)	625,899		185,917
Total liabilities and stockholders’ equity (deficit)	$	718,541	$	242,290

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

Table of Contents

SomaLogic, Inc.
Condensed Consolidated Statements of Operations and Comprehensive Loss
Unaudited

(in thousands, except share and per share amounts)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Revenue
Assay services revenue	$	17,499	$	11,378	$	48,308	$	22,166
Product revenue	75		455		730		1,144
Collaboration revenue	763		763		2,288		1,720
Other revenue	1,655		1,637		7,306		2,636
Total revenue	19,992		14,233		58,632		27,666
Operating expenses
Cost of assay services revenue	8,737		4,750		22,548		11,883
Cost of product revenue	33		163		452		497
Research and development	15,596		6,884		32,304		23,180
Selling, general and administrative	20,632		8,337		48,274		26,755
Total operating expenses	44,998		20,134		103,578		62,315
Loss from operations	(25,006)		(5,901)		(44,946)		(34,649)
Other (expense) income
Interest income and other, net	55		13		126		138
Interest expense	(2)		(1,595)		(1,324)		(9,590)
Change in fair value of warrant liabilities	(8,111)		—		(8,111)		—
Change in fair value of earn-out liability	(5,662)		—		(5,662)		—
Loss on extinguishment of debt, net	(2,693)		—		(4,323)		—
Total other expense	(16,413)		(1,582)		(19,294)		(9,452)
Net loss	$	(41,419)	$	(7,483)	$	(64,240)	$	(44,101)

Other comprehensive loss
Net unrealized loss on available-for-sale securities	$	(15)	$	(3)	$	(7)	$	(23)
Foreign currency translation loss	(4)		(2)		(3)		(6)
Total other comprehensive loss	(19)		(5)		(10)		(29)
Comprehensive loss	$	(41,438)	$	(7,488)	$	(64,250)	$	(44,130)

Net loss per share, basic and diluted	$	(0.55)	$	(0.12)	$	(1.01)	$	(0.72)
Weighted-average shares used to compute net loss per share, basic and diluted	75,684,521		61,099,901		63,752,006		60,934,489

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

Table of Contents

SomaLogic, Inc.
Condensed Consolidated Statements of Redeemable Convertible Preferred Stock and
Stockholders’ Equity (Deficit)
Unaudited

(in thousands, except share amounts)


	Redeemable Convertible Preferred Stock			Common Stock			Treasury Stock			Additional Paid-In Capital		Accumulated Other Comprehensive Income (Loss)		Accumulated Deficit		Total Stockholders’ Equity (Deficit)
	Shares	Amount		Shares	Amount		Shares	Amount
Balance at December 31, 2020	31,485,973	$	202,116	73,481,228	$	735	(113,220)	$	(352)	$	394,786	$	(2)	$	(411,366)	$	(16,199)
Retrospective application of recapitalization	(31,485,973)	(202,116)		40,785,287	(724)		113,220	352		202,488		—		—		202,116
Adjusted Balance at December 31, 2020	—	$	—	114,266,515	$	11	—	$	—	$	597,274	$	(2)	$	(411,366)	$	185,917
Issuance of Common Stock upon exercise of options	—	—		411,789	—		—	—		877		—		—		877
Issuance of Common Stock for services	—	—		162,737	—		—	—		114		—		—		114
Stock-based compensation	—	—		—	—		—	—		3,140		—		—		3,140
Surrender of shares in cashless exercise	—	—		(15,189)	—		—	—		(56)		—		—		(56)
Other comprehensive loss	—	—		—	—		—	—		—		(5)		—		(5)
Net loss	—	—		—	—		—	—		—		—		(9,484)		(9,484)
Balance at March 31, 2021	—	$	—	114,825,852	$	11	—	$	—	$	601,349	$	(7)	$	(420,850)	$	180,503
Issuance of Common Stock upon exercise of options	—	—		545,677	—		—	—		1,915		—		—		1,915
Issuance of Common Stock for services	—	—		—	—		—	—		150		—		—		150
Stock-based compensation	—	—		—	—		—	—		4,614		—		—		4,614

Other comprehensive income	—	—		—	—		—	—		—		14		—		14
Net loss	—	—		—	—		—	—		—		—		(13,337)		(13,337)
Balance at June 30, 2021	—	$	—	115,371,529	$	11	—	$	—	$	608,028	$	7	$	(434,187)	$	173,859
Issuance of Common Stock upon exercise of options	—	—		19,116	—		—	—		63		—		—		63
Issuance of Common Stock for services	—	—		12,342	—		—	—		273		—		—		273
Issuance of Common Stock upon conversion of convertible debt	—	—		571,642	—		—	—		4,631		—		—		4,631
Stock-based compensation	—	—		—	—		—	—		11,742		—		—		11,742

Issuance of Common Stock upon Business Combination, net of transaction costs of $31,511	—	—		28,689,748	3		—	—		119,568		—		—		119,571
Issuance of Common Stock upon PIPE Investment, net of transaction costs of $7,802	—	—		36,500,000	4		—	—		357,194		—		—		357,198
Other comprehensive loss	—	—		—	—		—	—		—		(19)		—		(19)
Net loss	—	—		—	—		—	—		—		—		(41,419)		(41,419)
Balance at September 30, 2021	—	$	—	181,164,377	$	18	—	$	—	$	1,101,499	$	(12)	$	(475,606)	$	625,899

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SomaLogic, Inc.
Condensed Consolidated Statements of Redeemable Convertible Preferred Stock and
Stockholders’ Equity (Deficit)
Unaudited

(in thousands, except share amounts)


	Redeemable Convertible Preferred Stock			Common Stock			Treasury Stock			Additional Paid-In Capital		Accumulated Other Comprehensive Income (Loss)		Accumulated Deficit		Total Stockholders’ Equity (Deficit)
	Shares	Amount		Shares	Amount		Shares	Amount
Balance at December 31, 2019	—	$	—	72,657,092	$	727	(112,645)	$	(347)	$	378,364	$	27	$	(358,351)	$	20,420
Retrospective application of recapitalization	—	—		(11,857,590)	(721)		112,645	347		374		—		—		—
Adjusted Balance at December 31, 2019	—	$	—	60,799,502	$	6	—	$	—	$	378,738	$	27	$	(358,351)	$	20,420
Issuance of Common Stock upon exercise of options	—	—		18,019	—		—	—		38		—		—		38
Issuance of Common Stock for services	—	—		—	—		—	—		115		—		—		115
Stock-based compensation	—	—		—	—		—	—		3,039		—		—		3,039
Surrender of shares in cashless exercise	—	—		(481)	—		—	—		(5)		—		—		(5)
Other comprehensive loss	—	—		—	—		—	—		—		(18)		—		(18)
Other	—	—		—	—		—	—		148		—		—		148
Net loss	—	—		—	—		—	—		—		—		(17,579)		(17,579)
Balance at March 31, 2020	—	$	—	60,817,040	$	6	—	$	—	$	382,073	$	9	$	(375,930)	$	6,158
Issuance of Common Stock upon exercise of options	—	—		152,464	—		—	—		247		—		—		247
Issuance of Common Stock for services	—	—		73,752	—		—	—		38		—		—		38
Stock-based compensation	—	—		—	—		—	—		3,555		—		—		3,555

Other comprehensive loss	—	—		—	—		—	—		—		(6)		—		(6)
Net loss	—	—		—	—		—	—		—		—		(19,039)		(19,039)
Balance at June 30, 2020	—	$	—	61,043,256	$	6	—	$	—	$	385,913	$	3	$	(394,969)	$	(9,047)
Issuance of Common Stock upon exercise of options	—	—		283,141	—		—	—		534		—		—		534
Issuance of Common Stock for services	—	—		—	—		—	—		37		—		—		37
Stock-based compensation	—	—		—	—		—	—		3,050		—		—		3,050

Other comprehensive loss	—	—		—	—		—	—		—		(5)		—		(5)
Net loss	—	—		—	—		—	—		—		—		(7,483)		(7,483)
Balance at September 30, 2020	—	$	—	61,326,397	$	6	—	$	—	$	389,534	$	(2)	$	(402,452)	$	(12,914)

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

Table of Contents

SomaLogic, Inc.
Condensed Consolidated Statements of Cash Flows
Unaudited

(in thousands)


	Nine Months Ended September 30,
	2021		2020
Operating activities
Net loss	$	(64,240)	$	(44,101)
Adjustments to reconcile net loss to cash used in operating activities:
Stock-based compensation expense	20,700		9,833
Depreciation and amortization	1,909		2,079
Amortization of debt issuance costs, discounts and premiums	258		1,573
Change in fair value of compound derivative liability	7		4,846

Change in fair value of warrant liabilities	8,111		—
Change in fair value of earn-out liability	5,662		—

Amortization of premium (accretion of discount) on available-for-sale securities, net	276		(62)
Provision (recovery) for excess and obsolete inventory	623		(295)
(Recovery) provision for doubtful accounts	(14)		15
Loss on extinguishment of debt, net	4,323		—
Paid-in-kind interest	165		329
Other	11		47
Changes in operating assets and liabilities:
Accounts receivable	2,773		(3,526)
Prepaid expenses and other current assets	(4,228)		(84)
Inventory	(2,035)		(225)
Deferred costs of services	567		(2,273)
Other long-term assets	—		(15)
Accounts payable	1,992		2,437
Deferred revenue	1,448		664
Accrued and other liabilities	(2)		1,007
Payment of paid-in-kind interest on extinguishment of debt	(752)		—
Net cash used in operating activities	(22,446)		(27,751)
Investing activities
Proceeds from sale of property and equipment	8		—
Purchase of property and equipment	(3,021)		(689)
Purchase of available-for-sale securities	(241,891)		(5,738)
Proceeds from sales and maturities of available-for-sale securities	74,567		37,273
Net cash (used in) provided by investing activities	(170,337)		30,846
Financing activities

Repayment of long-term debt	(36,512)		—
Proceeds from PIPE Investment, net of transaction costs	357,198		—
Proceeds from Business Combination, net of transaction costs	173,601		—
Proceeds from Paycheck Protection Program loan	—		3,520
Proceeds from SAFE agreement	—		5,000
Proceeds from exercise of stock options	2,801		815
Net cash provided by financing activities	497,088		9,335
Effect of exchange rates on cash, cash equivalents and restricted cash	(11)		(15)
Net increase in cash, cash equivalents and restricted cash	304,294		12,415
Cash, cash equivalents and restricted cash at beginning of period	165,194		14,310
Cash, cash equivalents and restricted cash at end of period	$	469,488	$	26,725

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SomaLogic, Inc.
Condensed Consolidated Statements of Cash Flows
Unaudited

(in thousands)


	Nine Months Ended September 30,
	2021		2020
Supplemental cash flow information:
Cash paid for interest	$	1,627	$	2,827
Supplemental disclosure of non-cash investing and financing activities:
Purchase of property and equipment included in accounts payable	$	1,471	$	185
Surrender of shares in cashless exercise	56		5
Amendment fee related to extinguishment of debt financed through additional principal	—		2,500
Issuance of Common Stock for services	535		189
Transaction costs included in accounts payable	743		—
Forgiveness of Paycheck Protection Program loan and accrued interest	3,561		—
Issuance of Common Stock for conversion of convertible debt	4,631		—

Reconciliation of cash, cash equivalents and restricted cash
Cash and cash equivalents	$	468,708	$	26,475
Restricted cash included in other long-term assets	780		250
Total cash, cash equivalents and restricted cash at end of period	$	469,488	$	26,725

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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SomaLogic, Inc.
Notes to Condensed Consolidated Financial Statements

Unaudited

Note 1 — Description of Business

Organization and Operations

SomaLogic Operating Co., Inc. (formerly SomaLogic, Inc., and herein “SomaLogic Operating") was incorporated in the state of Delaware on October 13, 1999 and is headquartered in Boulder, Colorado. SomaLogic Operating is a protein biomarker discovery and clinical diagnostics company that develops slow-offrate modified aptamers (“SOMAmers®”), which are modified nucleic acid-based protein binding reagents that are specific for their cognate protein, and offer proprietary SomaScan® services, which provide multiplex protein detection and quantification of protein levels in complex biological samples. The SOMAmers®/SomaScan® technology enables researchers to analyze various types of biological samples for protein biomarker signatures, which can be utilized in drug discovery and development. Biomarker discoveries from SomaScan® can lead to diagnostic applications in various areas of diseases including cardiovascular and metabolic disease, nonalcoholic steatohepatitis, and wellness, among others.

CM Life Sciences II Inc. (“CMLS II”) is a blank check company incorporated as a Delaware corporation on December 15, 2020. CMLS II was formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization, or similar business combination with one or more businesses.

On September 1, 2021 (the “Closing Date”), we consummated the business combination (the “Business Combination”) contemplated by the Merger Agreement (as amended, the “Merger Agreement”), dated March 28, 2021 by and among CMLS II, S-Craft Merger Sub, Inc., a Delaware corporation and a direct, wholly-owned subsidiary of CMLS II (“Merger Sub”), and SomaLogic Operating ("Old SomaLogic"). Pursuant to the Merger Agreement, Merger Sub merged with and into Old SomaLogic, with Old SomaLogic surviving the merger as a wholly-owned subsidiary of CMLS II. Upon the closing of the Business Combination (the “Closing”), CMLS II changed its name to SomaLogic, Inc., and Old SomaLogic changed its name to SomaLogic Operating Co., Inc.

Unless the context otherwise requires, the terms “we”, “us”, “our”, “SomaLogic" and “the Company" refer to Old SomaLogic, SomaLogic, Inc., or the combined company and its subsidiaries following the Business Combination. See Note 2, Summary of Significant Accounting Policies—Presentation of Amounts After the Business Combination, and Note 3, Business Combination, for more details of the Business Combination and the presentation of historical amounts and balances after the Business Combination. The Company's Common Stock and warrants to purchase Common Stock are now listed on the Nasdaq under the ticker symbols “SLGC” and "SLGCW".

COVID-19 Pandemic

The Company is subject to ongoing uncertainty concerning the Coronavirus Disease 2019 (COVID-19) pandemic, including its length and severity and its effect on the Company’s business. The COVID-19 pandemic resulted in delays in fundraising efforts and revenue during fiscal year 2020. In response, the Company took aggressive actions to reduce spend and contain costs including implementing a hiring freeze, eliminating travel, executing early lease terminations for two administrative buildings in Boulder, Colorado, as well as closing the Company’s Oxford, United Kingdom laboratory. The Company experienced notable shifts in research funding in the pharmaceutical industry to COVID-19 research, largely delaying revenue from the first half of 2020 to the second half of 2020. The Company modified its Amended and Restated Credit Agreement in the second and fourth quarters of 2020 in order to avoid noncompliance with financial and nonfinancial covenants (see Note 10, Debt).

The COVID-19 pandemic continues to be dynamic and near-term challenges across the economy remain. The Company expects continued volatility and unpredictability related to the impact of COVID-19 on business results. The Company continues to actively monitor the pandemic and will continue to take appropriate steps to mitigate the adverse impacts on the business posed by the on-going spread of COVID-19.

Note 2 — Summary of Significant Accounting Policies

Basis of Presentation

The condensed consolidated interim financial statements and accompanying notes include the accounts of SomaLogic and our wholly-owned subsidiaries. All intercompany transactions and balances have been eliminated in consolidation. The accompanying condensed consolidated interim financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information. Any reference in these notes to applicable guidance is meant to refer to the authoritative GAAP as found in the Accounting Standards Codification (“ASC”) and Accounting Standards Updates (“ASUs”) of the Financial Accounting Standards Board (“FASB”).

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SomaLogic, Inc.
Notes to Condensed Consolidated Financial Statements

Unaudited

Certain information and disclosures normally included in consolidated financial statements prepared in accordance with GAAP have been condensed or omitted. Accordingly, these condensed consolidated interim financial statements should be read in conjunction with the audited consolidated financial statements of Old SomaLogic as of and for the year ended December 31, 2020, and of CMLS II as of December 31, 2020 and for the period from December 15, 2020 (inception) through December 31, 2020. The December 31, 2020 condensed consolidated balance sheet presented herein was derived from Old SomaLogic’s audited consolidated financial statements.

These unaudited condensed consolidated interim financial statements have been prepared on the same basis as the annual consolidated financial statements and, in the opinion of management, reflect all adjustments, which include normal recurring adjustments considered necessary for a fair presentation of interim financial information, to present fairly the Company’s condensed consolidated financial position and its results of operations and cash flows. The results of operations for the periods presented are not necessarily indicative of the results to be expected for the year ending December 31, 2021 or for any other future annual or interim period.

Basis for Financial Balances After the Business Combination

The Business Combination was accounted for as a reverse recapitalization in accordance with GAAP. Under this method of accounting, CMLS II is treated as the “acquired” company for financial reporting purposes and Old SomaLogic is treated as the accounting acquirer. This determination was primarily based on the following:

•the Old SomaLogic stockholders hold the majority of voting rights in the Company;

•Old SomaLogic had the right to designate a majority of members of the board of directors of the Company immediately after giving effect to the Business Combination;

•the senior management of Old SomaLogic comprises the senior management of the Company; and

•the operations of Old SomaLogic comprise the ongoing operations of the Company.

Accordingly, for accounting purposes, our financial statements represent a continuation of the financial statements of Old SomaLogic with the Business Combination being treated as the equivalent of Old SomaLogic issuing stock for the net assets of the CMLS II, accompanied by a recapitalization. The net assets of Old SomaLogic are stated at historical cost, with no goodwill or other intangible assets recorded.

In connection with the Business Combination each share of Old SomaLogic Class B common stock (including shares of Old SomaLogic Class B common stock resulting from the deemed conversion of Old SomaLogic redeemable convertible preferred stock) converted into the right to receive 0.8381 shares (the "Exchange Ratio”) of our Class A common stock, par value $0.0001, (“Common Stock”). The recapitalization of the number of shares of our Common Stock is reflected retrospectively to the earliest period presented, based upon the Exchange Ratio, and is utilized for calculating net loss per share in all prior periods presented.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the periods. Actual results could differ from those estimates. Significant estimates and assumptions reflected in these financial statements include, but are not limited to, revenue recognition, inventory valuation, compound derivative liability valuation, the valuation of stock-based compensation awards, warrant liabilities valuations, and earn-out liability valuations. We base our estimates on current facts, historical and anticipated results, trends, and other relevant assumptions that we believe are reasonable under the circumstances. Actual results could differ from these estimates, and such differences could be material to the Company’s consolidated financial position and results of operations.

Concentration of Credit Risk and Other Risks and Uncertainties

Financial instruments that potentially expose the Company to concentrations of credit risk consist principally of cash and cash equivalents, investments, and accounts receivable. Our cash and cash equivalents are deposited with high-quality financial institutions. Deposits at these institutions may, at times, exceed federally insured limits.

Significant customers are those that represent more than 10% of the Company’s total revenues or gross accounts receivable balances for the periods and as of each balance sheet date presented. For each significant customer, revenue

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SomaLogic, Inc.
Notes to Condensed Consolidated Financial Statements

Unaudited

as a percentage of total revenues and gross accounts receivable as a percentage of total gross accounts receivable as of the periods presented were as follows:


	Accounts Receivable		Revenue
	September 30, 2021	December 31, 2020	Three months ended September 30,				Nine Months Ended September 30,
			2021		2020		2021		2020
Customer A	36%	26%	27	%	23	%	24	%	35	%
Customer B	*	11%	*		39	%	17	%	20	%
Customer C	10%	25%	*		11	%	11	%	*
Customer D	*	16%	*		*		*		*
Customer E	11%	*	*		*		*		*

* less than 10%

Customers outside of the United States collectively represented 18% and 6% of the Company’s gross accounts receivable balance as of September 30, 2021 and December 31, 2020, respectively.

Certain components included in our products require customization and are obtained from a single source or a limited number of suppliers.

Inventory

Inventory is stated at the lower of cost (on a first-in, first-out basis) or net realizable value. Cost is determined using a standard cost system, whereby the standard costs are updated periodically to reflect current costs. The Company estimates the recoverability of inventory by referencing estimates of future demands and product life cycles, including expiration. The Company periodically analyzes its inventory levels to identify inventory that may expire prior to expected usage, no longer meets quality specifications, or has a cost basis in excess of its estimated net realizable value and records a charge to cost of revenue for such inventory as appropriate. The value of inventory that is not expected to be used within 12 months of the balance sheet date is classified as non-current inventory in the accompanying condensed consolidated balance sheets.

Warrant Liabilities

During February 2021, in connection with CMLS II’s initial public offering, CMLS II issued 5,519,991 warrants (the “Public Warrants”) to purchase shares of Common Stock at $11.50 per share. Simultaneously, with the consummation of the CMLS II initial public offering, CMLS II issued 5,013,333 warrants through a private placement (the “Private Placement Warrants”, and together with the Public Warrants, the “Warrants”) to purchase shares of Common Stock at $11.50 per share. All of the Warrants were outstanding as of September 30, 2021.

We classify the Warrants as liabilities on our condensed consolidated balance sheet as these instruments are precluded from being indexed to our own stock given that the terms allow for a settlement adjustment that does not meet the scope for the fixed-for-fixed exception in ASC 815, Derivatives and Hedging (“ASC 815”). Since the Warrants meet the definition of a derivative under ASC 815-40, the Company recorded these warrants as long-term liabilities at fair value on the date of the Business Combination, with subsequent changes in their respective fair values recognized within change in fair value of warrant liabilities in the condensed consolidated statements of operations and comprehensive loss at each reporting date. See Note 11, Stockholders' Equity, for more information on the Warrants.

Earn-Out Liability

As a result of the Business Combination, the Company recognized Earn-Out Shares (defined below) contingently issuable to former stockholders of Old SomaLogic as a liability in accordance with ASC 815. The liability was included as part of the consideration transferred in the Business Combination and was recorded at fair value. The earn-out liability is remeasured at the end of each reporting period, with the corresponding gain or loss recorded within change in fair value of earn-out liability in the condensed consolidated statements of operations and comprehensive loss. See Note 3, Business Combination, for more information on the Earn-Out Shares and liability.

Revenue Recognition

The Company recognizes revenue from sales to customers under ASC 606, Revenue from Contracts with Customers (“ASC 606”). ASC 606 provides a five-step model for recognizing revenue that includes identifying the contract with a customer, identifying the performance obligations in the contract, determining the transaction price, allocating the

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SomaLogic, Inc.
Notes to Condensed Consolidated Financial Statements

Unaudited

transaction price to the performance obligations, and recognizing revenue when, or as, an entity satisfies a performance obligation.

The Company recognizes revenue when or as control of promised goods or services is transferred to the Company’s customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services. Sales, value add, and other taxes collected concurrent with revenue-producing activities are excluded from revenue and products are sold without the right of return.

Payment terms may vary by customer, are based on customary commercial terms, and are generally less than one year. The Company does not adjust revenue for the effects of a significant financing component for contracts where the period between the transfer of the good or service and collection is one year or less. The Company expenses incremental costs to obtain a contract when incurred since the amortization period of the asset that would otherwise be recognized is one year or less.

Assay Services Revenue

The Company generates assay services revenue primarily from the sale of SomaScan® services. SomaScan® service revenue is derived from performing the SomaScan® assay on customer samples to generate data on protein biomarkers. Revenue from SomaScan® services is recognized at the time the analysis data or report is delivered to the customer, which is when control has been transferred to the customer. SomaScan® services are sold at a fixed price per sample without any volume discounts, rebates, or refunds.

The delivery of each assay data report is a separate performance obligation. For arrangements with multiple performance obligations, the transaction price must be allocated to each performance obligation based on its relative standalone selling price. Judgment is required to determine the standalone selling price for each distinct performance obligation as there are few directly comparable products in the market and factors such as customer size are factored into the determination of selling price. We determine standalone selling prices base