SEC Filing - SomaLogic

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slgc-20220630

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


☐			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						85-4298912
(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 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 August 5, 2022, there were approximately 183,453,347 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	3
	Condensed Consolidated Balance Sheets	3
	Condensed Consolidated Statements of Operations and Comprehensive Loss	4
	Condensed Consolidated Statements of Stockholders' Equity	5
	Condensed Consolidated Statements of Cash Flows	7
	Notes to Condensed Consolidated Financial Statements	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	22
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	34
Item 4.	Controls and Procedures	34
	PART II—OTHER INFORMATION
Item 1.	Legal Proceedings	36
Item 1A.	Risk Factors	36
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	36
Item 3.	Defaults Upon Senior Securities	36
Item 4.	Mine Safety Disclosures	36
Item 5.	Other Information	36
Item 6.	Exhibits	37

	Signatures	38

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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 and other federal securities laws. 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;

•the risk of disruption, including to the Company’s information technology systems, to the Company’s current plans and operations;

•the ability to protect the Company’s intellectual property;

•the Company’s plans to engage in acquisition activities and the anticipated impact of such activities on the Company’s financial results;

•the impact of the procurement and budgetary cycles of customers;

•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, sales and marketing, and research and 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 attract or retain sales and distribution partners;

•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 ability to use net operating losses and certain other tax attributes;

•the Company’s financial performance; and

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

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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 Annual Report on Form 10-K for the year ended December 31, 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.

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PART 1 – FINANCIAL INFORMATION

Item 1. Financial Statements

SomaLogic, Inc.
Condensed Consolidated Balance Sheets
Unaudited

(in thousands, except share data)


	June 30, 2022		December 31, 2021
ASSETS
Current assets
Cash and cash equivalents	$	418,182	$	439,488
Investments	200,912		218,218
Accounts receivable, net	13,681		17,074
Inventory	20,768		11,213
Deferred costs of services	8		462
Prepaid expenses and other current assets	5,158		5,097
Total current assets	658,709		691,552
Non-current inventory	2,547		4,085
Property and equipment, net of accumulated depreciation of $16,448 and $15,244 as of June 30, 2022 and December 31, 2021, respectively	15,857		9,557
Other long-term assets	8,966		908
Total assets	$	686,079	$	706,102

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Accounts payable	$	19,076	$	15,089
Accrued liabilities	9,305		11,109
Deferred revenue	5,300		3,021
Other current liabilities	1,250		66

Total current liabilities	34,931		29,285
Warrant liabilities	8,005		35,181
Earn-out liability	1,396		26,885
Deferred revenue, net of current portion	31,839		2,364


Other long-term liabilities	2,690		363
Total liabilities	78,861		94,078
Commitments and contingencies (Note 8)
Stockholders’ equity
Preferred stock, $0.0001 par value; 1,000,000 shares authorized; no shares issued and outstanding at June 30, 2022 and December 31, 2021	—		—
Common stock, $0.0001 par value; 600,000,000 shares authorized; 183,453,324 and 181,552,241 shares issued and outstanding at June 30, 2022 and December 31, 2021, respectively	18		18
Additional paid-in capital	1,134,024		1,110,991
Accumulated other comprehensive loss	(947)		(72)
Accumulated deficit	(525,877)		(498,913)
Total stockholders’ equity	607,218		612,024
Total liabilities and stockholders’ equity	$	686,079	$	706,102

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

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

(in thousands, except share and per share amounts)


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Revenue
Assay services revenue	$	10,931	$	16,236	$	29,731	$	30,809
Product revenue	714		462		1,167		655
Collaboration revenue	762		762		1,525		1,525
Other revenue	1,737		2,320		4,701		5,651
Total revenue	14,144		19,780		37,124		38,640
Operating expenses
Cost of assay services revenue	6,571		7,656		17,951		13,811
Cost of product revenue	506		329		778		419
Research and development	17,636		8,590		31,436		16,708
Selling, general and administrative	36,812		14,833		67,627		27,642
Total operating expenses	61,525		31,408		117,792		58,580
Loss from operations	(47,381)		(11,628)		(80,668)		(19,940)
Other income (expense)
Interest income and other, net	833		69		1,039		71
Interest expense	—		(148)		—		(1,322)
Change in fair value of warrant liabilities	14,536		—		27,176		—
Change in fair value of earn-out liability	9,027		—		25,489		—
Loss on extinguishment of debt, net	—		(1,630)		—		(1,630)
Total other income (expense)	24,396		(1,709)		53,704		(2,881)
Net loss	$	(22,985)	$	(13,337)	$	(26,964)	$	(22,821)

Other comprehensive loss
Net unrealized loss on available-for-sale securities	$	(209)	$	14	$	(861)	$	8
Foreign currency translation (loss) gain	(11)		—		(14)		1
Total other comprehensive (loss) gain	(220)		14		(875)		9
Comprehensive loss	$	(23,205)	$	(13,323)	$	(27,839)	$	(22,812)

Net loss per share, basic and diluted	$	(0.13)	$	(0.12)	$	(0.15)	$	(0.20)
Weighted-average shares outstanding, basic and diluted	183,143,391		114,904,241		182,599,949		114,691,007

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

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SomaLogic, Inc.
Condensed Consolidated Statements of Stockholders’ Equity
Unaudited

(in thousands, except share amounts)


	Three Months Ended June 30, 2022
	Common Stock			Treasury Stock				Additional Paid-In Capital		Accumulated Other Comprehensive Income (Loss)		Accumulated Deficit		Total Stockholders’ Equity (Deficit)
	Shares	Amount			Shares		Amount







Balance at March 31, 2022	182,176,926	$	18			—		$	—	$	1,120,910	$	(727)	$	(502,892)	$	617,309
Issuance of Common Stock upon exercise of options	1,241,871	—				—		—		3,510		—		—		3,510
Shares issued under employee stock purchase plan	34,527	—				—		—		133		—		—		133

Stock-based compensation	—	—				—		—		9,471		—		—		9,471

Net unrealized loss on available-for-sale securities	—	—				—		—		—		(209)		—		(209)
Foreign currency translation loss	—	—				—		—		—		(11)		—		(11)
Net loss	—	—				—		—		—		—		(22,985)		(22,985)
Balance at June 30, 2022	183,453,324	$	18			—		$	—	$	1,134,024	$	(947)	$	(525,877)	$	607,218


	Three Months Ended June 30, 2021
	Common Stock			Treasury Stock			Additional Paid-In Capital		Accumulated Other Comprehensive Income (Loss)		Accumulated Deficit		Total Stockholders’ Equity (Deficit)
	Shares	Amount		Shares	Amount










Balance at March 31, 2021	74,166,739	$	742	(131,344)	$	(408)	$	398,910	$	(7)	$	(420,850)	$	(21,613)
Retrospective application of recapitalization	40,659,113	(731)		131,344	408		202,439		—		—		202,116
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

Net unrealized gain on available-for-sale securities	—	—		—	—		—		14		—		14

Net loss	—	—		—	—		—		—		(13,337)		(13,337)
Balance at June 30, 2021	115,371,529	$	11	—	$	—	$	608,028	$	7	$	(434,187)	$	173,859

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

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SomaLogic, Inc.
Condensed Consolidated Statements of Stockholders’ Equity
Unaudited

(in thousands, except share amounts)


	Six Months Ended June 30, 2022
	Common Stock			Treasury Stock			Additional Paid-In Capital		Accumulated Other Comprehensive Income (Loss)		Accumulated Deficit		Total Stockholders’ Equity (Deficit)
	Shares	Amount		Shares	Amount
Balance at December 31, 2021	181,552,241	$	18	—	$	—	$	1,110,991	$	(72)	$	(498,913)	$	612,024
Issuance of Common Stock upon exercise of options	1,866,556	—		—	—		4,752		—		—		4,752
Shares issued under employee stock purchase plan	34,527	—		—	—		133		—		—		133
Issuance of Common Stock for services	—	—		—	—		50		—		—		50
Stock-based compensation	—	—		—	—		18,098		—		—		18,098

Net unrealized loss on available-for-sale securities	—	—		—	—		—		(861)		—		(861)
Foreign currency translation loss	—	—		—	—		—		(14)		—		(14)
Net loss	—	—		—	—		—		—		(26,964)		(26,964)
Balance at June 30, 2022	183,453,324	$	18	—	$	—	$	1,134,024	$	(947)	$	(525,877)	$	607,218


	Six Months Ended June 30, 2021
	Common Stock			Treasury Stock			Additional Paid-In Capital		Accumulated Other Comprehensive Income (Loss)		Accumulated Deficit		Total Stockholders’ Equity (Deficit)
	Shares	Amount		Shares	Amount
Balance at December 31, 2020	73,481,228	$	735	(113,220)	$	(352)	$	394,786	$	(2)	$	(411,366)	$	(16,199)
Retrospective application of recapitalization	40,785,287	(724)		113,220	352		202,488		—		—		202,116
Balance at December 31, 2020	114,266,515	$	11	—	$	—	$	597,274	$	(2)	$	(411,366)	$	185,917
Issuance of Common Stock upon exercise of options	957,466	—		—	—		2,792		—		—		2,792
Issuance of Common Stock for services	162,737	—		—	—		264		—		—		264
Stock-based compensation	—	—		—	—		7,754		—		—		7,754
Surrender of shares in cashless exercise	(15,189)	—		—	—		(56)		—		—		(56)
Net unrealized gain on available-for-sale securities	—	—		—	—		—		8		—		8
Foreign currency translation gain	—	—		—	—		—		1		—		1
Net loss	—	—		—	—		—		—		(22,821)		(22,821)
Balance at June 30, 2021	115,371,529	$	11	—	$	—	$	608,028	$	7	$	(434,187)	$	173,859

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

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SomaLogic, Inc.
Condensed Consolidated Statements of Cash Flows
Unaudited

(in thousands)


	Six Months Ended June 30,
	2022		2021
Operating activities
Net loss	$	(26,964)	$	(22,821)
Adjustments to reconcile net loss to cash used in operating activities:
Stock-based compensation expense	18,131		8,016
Depreciation and amortization	1,718		1,377
Amortization of debt issuance costs, discounts and premiums	—		258
Noncash lease expense	(746)		—
Change in fair value of compound derivative liability	—		7
Change in fair value of warrant liabilities	(27,176)		—
Change in fair value of earn-out liability	(25,489)		—

Amortization of premium on available-for-sale securities, net	82		155
Provision for excess and obsolete inventory	142		385
Provision (recovery) for doubtful accounts	17		(36)
Loss on extinguishment of debt, net	—		1,630

Paid-in-kind interest	—		165
Other	6		7
Changes in operating assets and liabilities:
Accounts receivable	3,376		3,919
Inventory	(8,159)		109
Deferred costs of services	454		(271)
Prepaid expenses and other current assets	(64)		(570)
Other long-term assets	1,182		—
Accounts payable	3,454		172
Deferred revenue	31,754		2,502
Accrued and other liabilities	(2,655)		(877)
Payment of paid-in-kind interest on extinguishment of debt	—		(752)
Net cash used in operating activities	(30,937)		(6,625)
Investing activities
Proceeds from sale of property and equipment	—		8
Purchase of property and equipment	(7,477)		(962)
Purchase of available-for-sale securities	(112,287)		(102,106)
Proceeds from sales and maturities of available-for-sale securities	128,650		30,872
Net cash provided by (used in) investing activities	8,886		(72,188)
Financing activities
Repayment of long-term debt	—		(36,512)
Payment of deferred transaction costs	—		(4,686)


Proceeds from exercise of stock options	4,885		2,738
Net cash provided by (used in) financing activities	4,885		(38,460)
Effect of exchange rates on cash, cash equivalents and restricted cash	(20)		(3)
Net decrease in cash, cash equivalents and restricted cash	(17,186)		(117,276)
Cash, cash equivalents and restricted cash at beginning of period	440,268		165,194
Cash, cash equivalents and restricted cash at end of period	$	423,082	$	47,918

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SomaLogic, Inc.
Condensed Consolidated Statements of Cash Flows
Unaudited

(in thousands)


	Six Months Ended June 30,
	2022		2021
Supplemental cash flow information:
Cash paid for interest	$	—	$	1,627
Supplemental disclosure of non-cash investing and financing activities:
Purchase of property and equipment included in accounts payable	$	533	$	910
Operating lease assets obtained in exchange for lease obligations	4,134		—
Surrender of shares in cashless exercise	—		56

Issuance of Common Stock for services	50		262
Transaction costs included in accounts payable	—		685
Forgiveness of Paycheck Protection Program loan and accrued interest	—		3,561


Reconciliation of cash, cash equivalents and restricted cash
Cash and cash equivalents	$	418,182	$	47,138
Restricted cash included in other long-term assets	4,900		780
Total cash, cash equivalents and restricted cash at end of period	$	423,082	$	47,918

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, Inc. (“SomaLogic” or the “Company”) was originally incorporated in Delaware on December 15, 2020 as a special purpose acquisition company under the name CM Life Sciences II Inc. (“CMLS II”) 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”) of SomaLogic Operating Co. Inc. (“SomaLogic Operating”), a Delaware corporation formed on October 13, 1999, wherein SomaLogic Operating became a wholly-owned subsidiary of CMLS II. In connection with the closing of the Business Combination, we changed our name from CM Life Sciences II Inc. to SomaLogic, Inc.

The Business Combination was accounted for as a reverse recapitalization in accordance with U.S. generally accepted accounting principles (“GAAP”). Under this method of accounting, CMLS II was treated as the “acquired” company for financial reporting purposes and SomaLogic Operating was treated as the accounting acquirer. Accordingly, for accounting purposes, our financial statements represent a continuation of the financial statements of SomaLogic Operating with the Business Combination being treated as the equivalent of SomaLogic Operating issuing stock for the net assets of CMLS II, accompanied by a recapitalization. The net assets of SomaLogic Operating are stated at historical cost, with no goodwill or other intangible assets recorded. Operations prior to the Business Combination in these financial statements are those of SomaLogic Operating. The recapitalization of our Common Stock is reflected retrospectively to the earliest period presented, and is utilized for calculating net loss per share in all prior periods presented.

Other than information discussed herein, there have been no significant changes to our description of business and Business Combination disclosed in our Annual Report on Form 10-K for the year ended December 31, 2021 (the “2021 Form 10-K”).

We are a protein biomarker discovery and clinical diagnostics company that develops slow off-rate 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.

Unless the context otherwise requires, the terms “we”, “us”, “our”, “SomaLogic" and “the Company" refer to SomaLogic, Inc. and its consolidated subsidiaries.

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. Our suppliers have been impacted by the COVID-19 pandemic, and we have experienced supply delays for certain equipment, instrumentation, and other supplies that we use for our services and products.

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 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 financial statements have been prepared in accordance with 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”).

Certain information and disclosures normally included in consolidated financial statements prepared in accordance with GAAP have been condensed or omitted. Accordingly, these condensed consolidated financial statements should be

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SomaLogic, Inc.
Notes to Condensed Consolidated Financial Statements

Unaudited

read in conjunction with our audited consolidated financial statements as of and for the year ended December 31, 2021 included in the 2021 Form 10-K.

These unaudited condensed consolidated financial statements have been prepared on the same basis as our 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, 2022 or for any other future annual or interim period.

Certain reclassifications have been made to prior period amounts to conform to the current presentation.

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, incremental borrowing rates used in the determination of lease assets and liabilities, 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 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
	June 30, 2022	December 31, 2021	Three months ended June 30,		Six months ended June 30,
			2022	2021	2022	2021
Customer A	*	10%	*	22%	25%	22%
Customer B	*	*	*	14%	*	25%
Customer C	28%	20%	*	10%	10%	13%
Customer D	*	26%	*	*	*	*

* less than 10%

International sales entail a variety of risks, including currency exchange fluctuations, longer payment cycles, and greater difficulty in accounts receivable collection. The risks of international sales are mitigated in part by the fact that contracts are in U.S. dollars. Customers outside the United States collectively represent 33% and 31% of the Company’s revenues for the three months ended June 30, 2022 and 2021, respectively, and 40% and 28% for the six months ended June 30, 2022 and 2021, respectively. Customers outside of the United States collectively represented 24% and 18% of the Company’s gross accounts receivable balance as of June 30, 2022 and December 31, 2021, respectively.

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

Leases

Following the adoption of ASU 2016-02, Leases (Topic 842) (“ASC 842”), on January 1, 2022, we determine if an arrangement is a lease at inception of the contract. Operating lease right-of-use (“ROU”) assets are included in other long-term assets, and operating lease liabilities are included in other current liabilities and other long-term liabilities in the condensed consolidated balance sheets.

ROU assets and operating lease liabilities are recognized based on the present value of the future lease payments over the lease term at commencement date. As the implicit rate in the Company's leases is generally unknown, the

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Company uses its incremental borrowing rate based on the information available at the lease commencement date in determining the present value of future lease payments. The Company gives consideration to its credit risk, term of the lease, total lease payments and adjusts for the impacts of collateral, as necessary, when calculating its incremental borrowing rates.

Operating lease ROU assets include lease incentives and initial direct costs incurred. When the lease incentives specify a maximum level of reimbursement and we are reasonably certain to incur reimbursable costs equal to or exceeding this level, we include the lease incentive in the measurement of the ROU assets and lease liabilities at commencement. The lease terms may include options to extend or terminate the lease when it is reasonably certain the Company will exercise any such options. Lease costs for our operating leases are recognized on a straight-line basis within operating expenses over the lease term in the condensed consolidated statements of operations and comprehensive loss.

We have lease agreements with lease and non-lease components. However, we have elected the practical expedient to not separate lease and non-lease components for all of our existing classes of assets. Therefore, the lease and non-lease components are accounted for as a single lease component. We have also elected to not apply the recognition requirement to any short-term leases with a term of 12 months or less.

We monitor for events or changes in circumstances that may require a reassessment or impairment of our leases, at which time our ROU assets for operating leases may be reduced by impairment losses.

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 June 30, 2022.

We classify the Warrants as liabilities on our condensed balance sheets 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.

Earn-Out Liability

As a result of the Business Combination, additional shares of Common Stock were provided to SomaLogic Operating shareholders and to certain employees and directors of SomaLogic (“Earn-Out Service Providers”) of up to 3,500,125 and 1,499,875, respectively (the “Earn-Out Shares”). The Earn-Out Shares are payable if the price of our Common Stock is greater than or equal to $20.00 for a period of at least 20 out of 30 consecutive trading days at any time between the 13- and 24-month anniversary of the Closing Date (the “Triggering Event”). Any Earn-Out Shares issuable to an Earn-Out Service Provider shall be issued only if such individual continues to provide services (whether as an employee or director) through the date of occurrence of the corresponding Triggering Event (or a change in control acceleration event, if applicable) that causes such Earn-Out Shares to become issuable. Any Earn-Out Shares that are forfeited pursuant to the preceding sentence shall be reallocated to the SomaLogic Operating stockholders in accordance with their respective pro rata Earn-Out Shares.

The Earn-Out Shares were recognized 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 subsequent changes in fair value recognized within change in fair value of earn-out liability in the condensed consolidated statements of operations and comprehensive loss.

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 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

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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 based on amounts invoiced to customers in observable transactions.

Product Revenue

Product revenue primarily consists of equipment and kit sales to customers who assay samples in their own laboratories. Equipment is generally accounted for as a bundle with installation, qualification and training services. Revenue is recognized over time based on the progress made toward achieving the performance obligation utilizing input methods, including costs and labor hours incurred. The Company receives fixed consideration per kit and revenue from kit sales is recognized upon transfer of control to the customer. Shipping and handling costs billed to customers are included in product revenue in the condensed consolidated statements of operations and comprehensive loss.

Collaboration Revenue

In July 2011, NEC Corporation (“NEC”) and the Company entered into a Strategic Alliance Agreement (the “SAA”) to develop a professional software tool to enable SomaScan® customers to easily access and interpret the highly multiplexed proteomic data generated by SomaLogic’s SomaScan® assay technology in the United States. To support this development, NEC made an upfront payment of $12.0 million and SomaLogic agreed to pay NEC a perpetual royalty on certain SomaScan® revenues. This agreement includes a clause whereby if there is a material breach of the contract or change in control of the Company, the Company may be required to pay a fee to terminate the agreement.

The Company determined that the SAA met the criteria set forth in ASC 808, Collaborative Arrangements, (“ASC 808”) because both parties were active participants and were exposed to significant risks and rewards dependent on commercial failure or success. The Company recorded the upfront payment as deferred revenue to be recognized over the period of performance of 15 years. The revenue was recorded in collaboration revenue in the condensed consolidated statements of operations and comprehensive loss.

In March 2020, NEC and the Company mutually terminated the SAA and concurrently the Company and NEC Solution Innovators, Ltd. (“NES”), a wholly owned subsidiary of NEC, entered into a new arrangement, the JDCA, to develop and commercialize SomaScan® services in Japan, as described in the section entitled “Collaboration Agreements” above. NES agreed to make annual payments of $2.0 million for 5 years, for a total of $10.0 million, in exchange for research and development activities, as described below. The Company determined the JDCA should be accounted for as a modification of the SAA. Therefore, the remaining SAA deferred revenue balance as of the date of the modification was included as consideration under the JDCA resulting in total consideration of $15.3 million for research and development activities. We determined that this arrangement also meets the criteria set forth in ASC 808. The JDCA contains three separate performance obligations: (i) research and development activities, (ii) assay services, and (iii) a 10-year exclusive license of the Company’s intellectual property.

(i) Research and Development Activities

The Company determined that NES is not a customer with respect to the research and development activities associated with the collaboration arrangement under ASC 808. The Company’s efforts related to the research and development activities are incurred consistently throughout the performance period. As a result, the Company recognizes

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revenue from these activities over time on a straight-line basis and records revenue in collaboration revenue in the condensed consolidated statements of operations and comprehensive loss.

(ii) Assay Services

The Company determined that NES is a customer for the assay services performance obligation, which should be accounted for using the criteria under ASC 606. The Company receives a fixed fee (standalone selling price) per sample in exchange for assaying samples, which is a service performed for other customers in the ordinary course of business. This performance obligation is recognized at a point in time when the assay data report is delivered to the customer and recorded in assay services revenue in the condensed consolidated statements of operations and comprehensive loss.

(iii) License of Intellectual Property

The Company determined that NES is a customer for the license performance obligation, which should be accounted for using the criteria under ASC 606. The Company receives royalties based on NES’ net sales and determined the allocation of royalties solely to this performance obligation is consistent with the objectives in ASC 606. This performance obligation was satisfied at the beginning of the license term. Subject to the sales and usage-based royalty exception, revenue is recognized in the period in which the subsequent sale or usage has occurred. Royalties are recorded in other revenue in the condensed consolidated statements of operations and comprehensive loss.

Other Revenue

Other revenue includes royalty revenue and revenue received from research grants. The Company recognizes royalty revenue for fees paid by customers in return for the exclusive license to make, use or sell certain licensed products in certain geographic areas. These fees are equivalent to a percentage of the customer’s related revenues. The Company recognizes revenue for sales-based or usage-based royalties promised in exchange for a license of intellectual property when the later of the following events occurs: (i) the subsequent sale or usage occurs, or (ii) the performance obligation to which some or all of the sales-based or usage-based royalty has been satisfied. As such, revenue is recognized in the period in which the subsequent sale or usage has occurred.

In June 2008, the Company and New England Biolabs, Inc. (“NEB”) entered into an exclusive licensing agreement, whereby the Company provides a license to use certain proprietary information and know-how relating to its aptamer technology to make and use commercial products. In exchange, the Company receives royalties from NEB for these products.

Grant revenue represents funding under cost reimbursement programs from government agencies and non-profit foundations for qualified research and development activities performed by the Company. The Company recognizes grant revenue when it is reasonably assured that the grant funding will be received as evidenced through the existence of a grant arrangement, amounts eligible for reimbursement are determinable and have been incurred, the applicable conditions under the grant arrangements have been met, and collectability of amounts due is reasonably assured. The classification of costs incurred related to grants is based on the nature of the activities performed by the Company. Grant revenue is recognized when the related costs are incurred and recorded in other revenue in the condensed consolidated statements of operations and comprehensive loss.

Illumina Cambridge, Ltd.

On December 31, 2021, the Company entered into a multi-year arrangement with Illumina Cambridge, Ltd. (“Illumina Agreement”) to jointly develop and commercialize co-branded kits that will combine Illumina’s Next Generation Sequencing (“NGS”) technology with SomaLogic’s SomaScan technology. Pursuant to the agreement, we received a non-refundable upfront payment of $30.0 million on January 4, 2022. This arrangement is accounted for in accordance with Topic 606 by analogy. The Company concluded there are two performance obligations: (1) combined performance obligation that includes the following material promises: licenses, patents, training, transfer of know-how and SOMAmer reagents necessary to use the SomaScan technology (“Bundled SomaScan Technology”), and (2) an option to purchase goods post-commercialization with a material right (“Material Right”). The total transaction price is subject to a constraint since it is uncertain that commercialization will be achieved; and therefore the transaction price was determined to be $30.0 million and was allocated to each of the performance obligations identified on a relative standalone selling price basis.

Bundled SomaScan Technology: Revenue is recognized as control transfers when the SOMAmer reagents are shipped. The Company estimated the standalone selling price (“SSP”) based on observable pricing of similar performance obligations.

Material Right: Revenue is recognized when Illumina exercises its option to purchase goods post-commercialization. The Company estimated the SSP based on the incremental discount adjusted for the likelihood that Illumina will exercise the option.

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Contract Modification: In June 2022, Illumina issued a purchase order that changed the future obligations due from SomaLogic under the Illumina Agreement. The purchase order represents a contract modification that is accounted for prospectively as if it were a termination of the existing contract and the creation of a new contract.

As a result, the Company determined that there were three new performance obligations (total of five performance obligations): (1) equipment bundle that includes customization services, integration services, system qualification services, site initiation services and training (“Equipment Bundle”), (2) qualification kits, and (3) support services. The contract modification resulted in an increase in the transaction price of $0.5 million. The updated transaction price was allocated between the performance obligations on a relative SSP basis.

Equipment Bundle: Revenue is recognized over time based on the progress made toward achieving the performance obligation utilizing input methods, including costs and labor hours incurred. The Company estimated the SSP based on observable pricing of similar performance obligations.

Qualification Kits: Revenue is recognized as control transfers when the qualification kits are shipped. The Company estimated the SSP based on observable pricing of similar performance obligations.

Support Services: Revenue is recognized for the support services over the service period, using an input method based on time. The Company estimated the SSP based on observable pricing of similar performance obligations.

During the three and six months ended June 30, 2022, the Company recognized $0.1 million of revenue pursuant to the Illumina Agreement.

Restricted Cash

Restricted cash represents cash on deposit with a financial institution as security for letters of credit outstanding for the benefit of the landlords related to operating leases. The restricted cash is classified as other long-term assets on the condensed consolidated balance sheets based on the terms of the underlying leases. As of June 30, 2022 and December 31, 2021, the restricted cash on deposit was $4.9 million and $0.8 million, respectively.

Segment Information

The Company has one operating segment. The Company’s chief operating decision maker (the “CODM”) role is performed by the Company’s Chief Executive Officer. The CODM manages the Company’s operations on a consolidated basis for purposes of allocating resources and assessing performance. Substantially all of the Company’s operations and decision-making functions are located in the United States.

Other Significant Accounting Policies

Our significant accounting policies are described in our 2021 Form 10-K. There have been no significant changes to those policies.

Recent Accounting Pronouncements

We are an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012, as amended (the “JOBS Act”). The JOBS Act provides that an emerging growth company can take advantage of an extended transition period for complying with new or revised accounting standards. Thus, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected to use this extended transition period and, as a result, we will not be required to adopt new or revised accounting standards on the relevant dates on which adoption of such standards is required for other public companies so long as we remain an emerging growth company.

Recently Adopted Accounting Standards

Leases. In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which requires lessees to recognize assets and liabilities for the rights and obligations created by most leases on their balance sheet. In June 2020, the FASB issued ASU 2020-05, Revenue from Contracts with Customers (Topic 606) and Leases (Topic 842): Effective Dates for Certain Entities, which extended the effective date of ASU 2016-02 for non-public business entities.

We adopted ASU 2016-02, as amended, on January 1, 2022 using a modified retrospective approach and elected to apply the legacy lease guidance and disclosure requirements (“ASC 840”) in the comparative periods presented for the year of adoption.

We elected the package of transition practical expedients, permitting us to not reassess our prior conclusions about lease identification, lease classification and initial direct costs.

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The new lease standard impacted our condensed consolidated balance sheets as a result of the ROU assets and operating lease liabilities, but did not impact our condensed consolidated statements of operations or condensed consolidated statements of cash flows. The adoption did not require any cumulative-effect adjustments to opening accumulated deficit. We currently have no finance leases. Upon adoption, we recorded $4.1 million of ROU assets, $1.0 million of current operating lease liabilities, and $3.6 million of non-current operating lease liabilities.

For more information on our leases, refer to Note 5, Leases.

Income Taxes. In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which removes certain exceptions to the general principles of ASC 740 as part of an overall simplification initiative. We adopted ASU 2019-12 prospectively when it became effective on January 1, 2022 and the adoption did not have a material impact on our condensed consolidated financial statements and related disclosures.

Accounting Standards Not Yet Adopted

Financial Instruments — Credit Losses. In June 2016, the FASB issued ASU 2016-13, Financial Instruments — Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, as amended, which sets forth a “current expected credit loss” (CECL) model that requires us 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 and applies to some off-balance sheet credit exposures. In November 2019, the FASB issued ASU 2019-10, Financial Instruments — Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842): Effective Dates, which extends the effective date of ASU 2016-13 for non-public business entities. ASU 2016-13, as amended, is effective for us on January 1, 2023, with early adoption permitted. We are currently evaluating the impact of adopting the standard on our condensed consolidated financial statements and related disclosures.

Convertible Debt, Contracts in an Entity’s Own Equity and EPS. In August 2020, the FASB issued ASU 2020-06, Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in an Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity, which simplifies the accounting for convertible debt by removing the requirements to separately present certain conversion features in equity. In addition, the amendment also simplifies the guidance in ASC Subtopic 815-40, Derivatives and Hedging: Contracts in Entity's Own Equity, by removing certain criteria that must be satisfied in order to classify a contract as equity. Further, contracts which can be settled in cash or shares, excluding liability-classified share-based payment awards, are to be included in diluted earnings per share using the “if-converted” method if the effect is dilutive, regardless of whether the entity or the counterparty can choose between cash and share settlement. The share-settlement presumption may not be rebutted based on past experience or a stated policy. ASC 2020-06 is effective for us on January 1, 2024, although early adoption is permitted. ASU 2020-06 may be adopted through either the fully retrospective or modified retrospective method of transition. We are currently evaluating the impact of this standard on our condensed consolidated financial statements and related disclosures.

Note 3 — Revenue

The following table provides information about disaggregated revenue by product line:


	Three Months Ended June 30,				Six Months Ended June 30,
(in thousands)	2022		2021		2022		2021
Assay services revenue	$	10,931	$	16,236	$	29,731	$	30,809
Product revenue	714		462		1,167		655
Collaboration revenue	762		762		1,525		1,525
Other revenue:
Royalties	930		2,050		3,885		5,050
Other	807		270		816		601
Total other revenue	1,737		2,320		4,701		5,651
Total revenue	$	14,144	$	19,780	$	37,124	$	38,640

Contract Balances and Remaining Performance Obligations

As of June 30, 2022 and December 31, 2021, deferred revenue of $37.1 million and $5.4 million, respectively, was comprised of balances related to our collaboration revenue, assay services, and other revenue. As of June 30, 2022 and December 31, 2021, the portion of deferred revenue related to collaboration revenue was $4.4 million and $3.9 million, respectively, which is being recognized on a straight-line basis over the period of performance. As of June 30, 2022, the estimated remaining performance period is 2.8 years. As of June 30, 2022 and December 31, 2021, the portion of

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deferred revenue related to assay services and other revenue was $2.7 million and $1.5 million, respectively. As of June 30, 2022, the deferred revenue related to assay services and other revenue will be recognized within 12 months.

As of June 30, 2022 and December 31, 2021, the deferred revenue related to the Illumina Agreement amounted to $30.0 million and nil, respectively. As of June 30, 2022, the estimated remaining performance obligation period is approximately nine years.

A summary of the change in contract liabilities is as follows:


(in thousands)	June 30, 2022		December 31, 2021
Balance at beginning of period	$	5,385	$	5,177
Recognition of revenue included in balance at beginning of period	(1,618)		(1,762)
Revenue deferred during the period, net of revenue recognized	33,372		1,970
Balance at end of period	$	37,139	$	5,385

Note 4 — Fair Value Measurements

Assets measured at fair value on a recurring basis

The following tables set forth our financial assets measured at fair value on a recurring basis and the level of inputs used in such measurements:


As of June 30, 2022 (in thousands)	Amortized Cost		Gross Unrealized Gain		Gross Unrealized Loss		Aggregate Fair Value		Fair Value Level
Cash and cash equivalents:
Cash	$	76,006	$	—	$	—	$	76,006	Level 1
Money market funds	328,933		—		—		328,933		Level 1
Commercial paper	13,246		—		(3)		13,243		Level 2
Total cash and cash equivalents	418,185		—		(3)		418,182
Investments:
Commercial paper	122,813		—		(364)		122,449		Level 2
U.S. Treasuries	60,612		—		(430)		60,182		Level 2
Asset-backed securities	4,011		—		(11)