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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2023
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For transition period from    to
Commission File Number 001-40090
SOMALOGIC, INC.
(Exact name of registrant as specified in its charter)
Delaware85-4298912
(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 classTrading SymbolName of each exchange on which registered
Common Stock, $0.0001 par valueSLGC
Nasdaq Capital Market
Warrants to purchase Common StockSLGCW
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. YesNo
Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files). Yes No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filerAccelerated filerNon-accelerated filerSmaller reporting companyEmerging 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): YesNo
As of August 10, 2023, there were approximately 188,071,546 shares of the registrant's common stock outstanding.



TABLE OF CONTENTS
 
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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 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 comply with the listing requirements of the Nasdaq;
the risk of disruption, including in the Company’s information technology systems, 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, sales and marketing, and research and development activities;
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 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; and
the Company’s financial performance.
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, 2022. 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.

1

Table of Contents
PART 1 – FINANCIAL INFORMATION
Item 1. Financial Statements
SomaLogic, Inc.
Condensed Consolidated Balance Sheets
Unaudited
(in thousands, except share data)
June 30, 2023December 31, 2022
ASSETS
Current assets
Cash and cash equivalents
$354,544 $421,830 
Investments
119,646 117,758 
Accounts receivable, net
21,750 17,006 
Inventory
15,123 13,897 
Deferred costs of services
440 1,337 
Prepaid expenses and other current assets
4,760 9,873 
Total current assets
516,263 581,701 
Non-current inventory
10,296 4,643 
Accounts receivable, net of current portion9,041 9,284 
Property and equipment, net of accumulated depreciation and amortization of $21,390 and $17,899 as of June 30, 2023 and December 31, 2022, respectively
18,668 19,564 
Other long-term assets
4,379 5,083 
Intangible assets16,700 16,700 
Goodwill10,399 10,399 
Total assets
$585,746 $647,374 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Accounts payable
$13,079 $16,794 
Accrued liabilities
10,926 20,678 
Deferred revenue
5,083 3,383 
Other current liabilities
2,413 2,477 
Total current liabilities
31,501 43,332 
Warrant liabilities2,633 4,213 
Deferred revenue, net of current portion
31,207 31,732 
Other long-term liabilities
5,253 5,539 
Total liabilities
70,594 84,816 
Commitments and contingencies (Note 10)
Stockholders’ equity
Preferred stock, $0.0001 par value; 1,000,000 shares authorized; no shares issued and outstanding at June 30, 2023 and December 31, 2022
  
Common stock, $0.0001 par value; 600,000,000 shares authorized; 188,071,445 and 187,647,973 shares issued and outstanding at June 30, 2023 and December 31, 2022, respectively
19 19 
Additional paid-in capital
1,182,645 1,171,122 
Accumulated other comprehensive income (loss)
17 (513)
Accumulated deficit
(667,529)(608,070)
Total stockholders’ equity
515,152 562,558 
Total liabilities and stockholders’ equity
$585,746 $647,374 
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,
 2023202220232022
Revenue 
Assay services revenue $16,597 $10,931 $35,016 $29,731 
Product revenue 2,909 714 4,095 1,167 
Collaboration revenue 762 762 1,525 1,525 
Other revenue 200 1,737 211 4,701 
Total revenue 20,468 14,144 40,847 37,124 
Operating expenses 
Cost of assay services revenue 9,677 6,571 21,359 17,951 
Cost of product revenue 1,498 506 2,132 778 
Research and development 10,815 17,636 24,882 31,436 
Selling, general and administrative 29,573 36,812 63,762 67,627 
Total operating expenses 51,563 61,525 112,135 117,792 
Loss from operations (31,095)(47,381)(71,288)(80,668)
Other income 
Interest income and other, net 5,798 838 10,723 1,047 
Change in fair value of warrant liabilities527 14,536 1,580 27,176 
Change in fair value of earn-out liability 9,027 15 25,489 
Total other income 6,325 24,401 12,318 53,712 
Net loss before income tax provision$(24,770)$(22,980)$(58,970)$(26,956)
Income tax provision(2)(5)(4)(8)
Net loss $(24,772)$(22,985)$(58,974)$(26,964)
Other comprehensive income (loss) 
Net unrealized gain (loss) on available-for-sale securities $177 $(209)$528 $(861)
Foreign currency translation gain (loss) 4 (11)2 (14)
Total other comprehensive income (loss) 181 (220)530 (875)
Comprehensive loss $(24,591)$(23,205)$(58,444)$(27,839)
Net loss per share, basic and diluted $(0.13)$(0.13)$(0.32)$(0.15)
Weighted-average shares outstanding used to compute net loss per share, basic and diluted 186,741,112183,143,391186,633,391182,599,949
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, 2023
Common StockAdditional Paid-In CapitalAccumulated Other Comprehensive Income (Loss)Accumulated DeficitTotal Stockholders’ Equity
SharesAmount
Balance at March 31, 2023187,945,232 $19 $1,178,212 $(164)$(642,757)$535,310 
Issuance of Common Stock upon exercise of options12,608 — 27 — — 27 
Shares issued under employee stock purchase plan113,605 — 223 — — 223 
Stock-based compensation— — 4,183 — — 4,183 
Net unrealized gain on available-for-sale securities— — — 177 — 177 
Foreign currency translation gain— — — 4 — 4 
Net loss— — — — (24,772)(24,772)
Balance at June 30, 2023188,071,445 $19 $1,182,645 $17 $(667,529)$515,152 

Three Months Ended June 30, 2022
Common StockAdditional Paid-In CapitalAccumulated Other Comprehensive Income (Loss)Accumulated
Deficit
Total Stockholders’ Equity
SharesAmount
Balance at March 31, 2022182,176,926 $18 $1,120,910 $(727)$(502,892)$617,309 
Issuance of Common Stock upon exercise of options1,241,871 — 3,510 — — 3,510 
Shares issued under employee stock purchase plan34,527 — 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, 2022183,453,324 $18 $1,134,024 $(947)$(525,877)$607,218 
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, 2023
Common StockAdditional Paid-In CapitalAccumulated Other Comprehensive Income (Loss)Accumulated DeficitTotal Stockholders’ Equity
SharesAmount
Balance at December 31, 2022187,647,973 $19 $1,171,122 $(513)$(608,070)$562,558 
Issuance of Common Stock upon vesting of RSUs185,863 — — — — — 
Issuance of Common Stock upon exercise of options124,004 — 199 — — 199 
Shares issued under employee stock purchase plan113,605 — 223 — — 223 
Stock-based compensation— — 11,101 — — 11,101 
Impact of adoption of ASC 326— — — — (485)(485)
Net unrealized gain on available-for-sale securities— — — 528 — 528 
Foreign currency translation gain— — — 2 — 2 
Net loss— — — — (58,974)(58,974)
Balance at June 30, 2023188,071,445 $19 $1,182,645 $17 $(667,529)$515,152 

Six Months Ended June 30, 2022
Common StockAdditional Paid-In CapitalAccumulated Other Comprehensive Income (Loss)Accumulated
Deficit
Total Stockholders’ Equity
SharesAmount
Balance at December 31, 2021181,552,241 $18 $1,110,991 $(72)$(498,913)$612,024 
Issuance of Common Stock upon exercise of options1,866,556 — 4,752 — — 4,752 
Shares issued under employee stock purchase plan34,527 — 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, 2022183,453,324 $18 $1,134,024 $(947)$(525,877)$607,218 
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,
 20232022
Operating activities    
Net loss $(58,974)$(26,964)
Adjustments to reconcile net loss to cash used in operating activities: 
Stock-based compensation expense 11,490 18,131 
Depreciation and amortization 3,644 1,718 
Noncash lease expense1,133 505 
Change in fair value of warrant liabilities (1,580)(27,176)
Change in fair value of earn-out liability(15)(25,489)
Change in fair value contingent consideration455  
Amortization of premium (accretion of discount) on available-for-sale securities, net(1,085)82 
Provision (recovery) for expected credit losses(6)17 
Cloud computing arrangement expenditures(910)(5,339)
Other 45 6 
Changes in operating assets and liabilities: 
Accounts receivable(4,980)3,376 
Inventory(6,879)(8,017)
Deferred costs of services 897 454 
Prepaid expenses and other current assets 1,002 (64)
Other long-term assets  1,182 
Accounts payable(3,706)3,454 
Deferred revenue 1,175 31,754 
Accrued and other liabilities (9,761)(2,655)
Operating lease liabilities(1,227)(1,251)
Net cash used in operating activities (69,282)(36,276)
Investing activities 
Purchases of property and equipment(2,148)(2,138)
Capitalized external use software development costs(248) 
Purchases of available-for-sale securities (98,072)(112,287)
Proceeds from maturities of available-for-sale securities 94,291 128,650 
Proceeds from sales of available-for-sale securities3,484  
Net cash (used in) provided by investing activities (2,693)14,225 
Financing activities 
Proceeds from exercise of stock options and employee stock purchase plan422 4,885 
Net cash provided by financing activities 422 4,885 
Effect of exchange rates on cash, cash equivalents and restricted cash (12)(20)
Net decrease in cash, cash equivalents and restricted cash(71,565)(17,186)
Cash, cash equivalents and restricted cash at beginning of period427,282 440,268 
Cash, cash equivalents and restricted cash at end of period$355,717 $423,082 
Supplemental disclosure of non-cash investing and financing activities: 
Capital expenditures included in accounts payable $626 $865 
Operating lease assets obtained in exchange for lease obligations 4,134 
Issuance of Common Stock for services 50 
Reconciliation of cash, cash equivalents and restricted cash 
Cash and cash equivalents $354,544 $418,182 
Restricted cash included in prepaid expenses and other current assets547  
Restricted cash included in other long-term assets 626 4,900 
Total cash, cash equivalents and restricted cash at end of period $355,717 $423,082 
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”) operates as a protein biomarker discovery 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.
SomaLogic, Inc. was incorporated in Delaware on December 15, 2020 as a special purpose acquisition company (“SPAC”) 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, we consummated a business combination (the “SPAC Merger”) wherein SomaLogic Operating Co. Inc. (“SomaLogic Operating”), a Delaware corporation formed on October 13, 1999, became a wholly-owned subsidiary of CMLS II. In connection with the closing of the SPAC Merger, we changed our name from CM Life Sciences II Inc. to SomaLogic, Inc.
Unless the context otherwise requires, the terms “we”, “us”, “our”, “SomaLogic" and “the Company" refer to SomaLogic, Inc. and its consolidated subsidiaries. The SPAC Merger and presentation of historical amounts and balances after the SPAC Merger are more fully described in Part II, Item 8 “Financial Statements and Supplementary Data - Note 3 to the Consolidated Financial Statements - Business Combinations” in our Annual Report on Form 10-K for the year ended December 31, 2022 (the “2022 Form 10-K”). Our Common Stock and warrants to purchase Common Stock are listed on the Nasdaq under the ticker symbols “SLGC” and “SLGCW”, respectively.
Other than information discussed herein, there have been no significant changes to our description of business disclosed in our 2022 Form 10-K.
Note 2 — Summary of Significant Accounting Policies
Basis of Presentation
The accompanying condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and applicable rules and regulations of the U.S. Securities and Exchange Commission regarding financial reporting. All intercompany transactions and balances have been eliminated in consolidation. 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 read in conjunction with our audited consolidated financial statements as of and for the year ended December 31, 2022 included in the 2022 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 our condensed consolidated financial position and our 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, 2023 or for any other future annual or interim period.
Certain reclassifications have been made to prior period amounts to conform to the current presentation.
Revisions of prior period consolidated financial statements
Capitalized software development costs related to hosting arrangements that are service contracts should be classified as operating activities in the statement of cash flows. We made immaterial revisions to amounts previously reported on our condensed consolidated statement of cash flows for the six months ended June 30, 2022 in order to reclassify capitalized cloud computing arrangement expenditures from investing activities to operating activities. The table below reflects the revisions:
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SomaLogic, Inc.
Notes to Condensed Consolidated Financial Statements
Unaudited
Six Months Ended June 30, 2022
(in thousands)As Previously ReportedReclassificationRevised
Operating Activities
Cloud computing arrangement expenditures$ $(5,339)$(5,339)
Net cash used in operating activities$(30,937)$(5,339)$(36,276)
Investing Activities
Purchases of property and equipment $(7,477)$5,339 $(2,138)
Net cash provided by investing activities$8,886 $5,339 $14,225 
Supplemental disclosure of non-cash investing and financing activities:
Purchase of property and equipment included in accounts payable$533 $332 $865 
The prior misclassification of these capitalized cloud computing arrangement expenditures was not material to the previously issued condensed consolidated financial statements as of and for the six months ended June 30, 2022.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and disclosed in the accompanying notes. Actual results could differ materially from these estimates.
Significant estimates and assumptions which form the basis of amounts reported in the condensed consolidated financial statements include, but are not limited to, the standalone selling prices of our performance obligations; timing of revenue recognition; fair value measurements; net realizable value of inventory; income taxes; and the fair value of intangible assets acquired in business combinations. We base our estimates on current facts and circumstances, historical experience, forecasted results, and various other assumptions that we believe to be reasonable. We obtain reports from third-party valuation experts to inform and support estimates related to certain fair value measurements.
Concentration of Credit Risk and Other Risks and Uncertainties
Financial instruments that potentially expose us to concentrations of credit risk consist principally of cash, cash equivalents, investments, and accounts receivable. Accounts receivable are unsecured. Cash and cash equivalents are deposited with major financial institutions. In certain accounts, we maintain cash balances in excess of federally insured limits. We have not experienced losses in these accounts and believe that we are not exposed to significant risk.
Significant customers are those that represent more than 10% of total revenues for any period presented in the condensed consolidated statements of operations and comprehensive loss, or that represent more than 10% of the gross accounts receivable balance as of either balance sheet date presented. The table below sets forth percentages of revenue and gross accounts receivable attributable to significant customers:
Accounts Receivable Revenue
 June 30, 2023December 31, 2022 Three months ended June 30,Six months ended June 30,
  2023202220232022
Customer A
19%11%28%*36%25%
Customer B(1)
43%51%***10%
Customer C
**14%***
(1)    All revenue related to accounts receivable from Customer B was recognized during the year ended December 31, 2022.
*    less than 10%
International sales entail a variety of risks, including currency exchange fluctuations, longer payment cycles, and greater difficulty in accounts receivable collection. Customers outside the United States collectively represent 53% and 33% of our revenues for the three months ended June 30, 2023 and 2022, respectively, and represent 59% and 40% of our revenues for the six months ended June 30, 2023 and 2022, respectively. Customers outside of the United States
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SomaLogic, Inc.
Notes to Condensed Consolidated Financial Statements
Unaudited
collectively represented 32% and 23% of our gross accounts receivable balance as of June 30, 2023 and December 31, 2022, respectively.
Certain components included in our products require customization and are obtained from a single source or a limited number of suppliers.
Business Combinations
We account for business combinations using the acquisition method of accounting in accordance with ASC 805, Business Combinations. Application of this method of accounting requires that (i) identifiable assets acquired (including identifiable intangible assets) and liabilities assumed generally be measured and recognized at fair value as of the acquisition date and (ii) the excess of the purchase price over the net fair value of identifiable assets acquired and liabilities assumed be recognized as goodwill. Transaction costs related to business combinations are expensed as incurred and classified as selling, general and administrative expenses in the condensed consolidated statements of operations and comprehensive loss. Determining the fair value of assets acquired and liabilities assumed in a business combination requires management to use significant judgment and estimates, especially with respect to intangible assets.
During the measurement period, which extends one year from the acquisition date, we may record certain adjustments to the carrying value of the assets acquired and liabilities assumed with a corresponding adjustment to goodwill.
Contingent Consideration
Acquisition-related contingent consideration was initially recorded in the condensed consolidated balance sheets at its acquisition-date estimated fair value, in accordance with the acquisition method of accounting. Contingent consideration liabilities contractually due beyond 12 months are recorded in other long-term liabilities on the condensed consolidated balance sheets. The fair value of the acquisition-related contingent consideration is remeasured each reporting period, with changes in fair value recorded in selling, general and administrative expenses in the condensed consolidated statements of operations and comprehensive loss. The fair value measurement is based on significant inputs not observable by market participants and thus represents a Level 3 input in the fair value hierarchy.
Accounts Receivable and Allowance for Expected Credit Losses
Effective January 1, 2023, we adopted the requirements of ASU 2016-13, Financial Instruments - Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”), along with the subsequently issued guidance amending and clarifying various aspects of ASU 2016-13, using the modified retrospective method of adoption. In accordance with that method, the comparative periods’ information continues to be reported under the relevant accounting guidance in effect for that period. For the current period, the standard replaces the existing incurred credit loss model with the current expected credit losses model for financial instruments, including accounts receivable, through a cumulative-effect adjustment to accumulated deficit as of the beginning of the first reporting period in which the guidance is effective.
Accounts receivable are recorded at invoiced amounts, net of an allowance for expected credit losses. We are exposed to credit losses primarily through sales of products and services. The estimation of the allowance for expected credit losses is based on historical loss experience, the current aging status of receivables, current and estimated future economic and market conditions, and specific customer accounts considered to be at risk or uncollectible. We write off accounts receivable against the allowance for expected credit losses when we determine a balance is uncollectible and cease collection efforts. We did not write off any material accounts receivable balances during the periods ended June 30, 2023 and 2022.
The non-current portion of accounts receivable primarily consists of guaranteed minimum fixed royalty payments owed to us under licensing agreements. Non-current accounts receivable are recorded net of significant financing components.
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. We estimate the recoverability of inventory by referencing estimates of future demands and product life cycles, including expiration. We periodically analyze our 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 record a charge to cost of revenue for such inventory as appropriate. 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.
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SomaLogic, Inc.
Notes to Condensed Consolidated Financial Statements
Unaudited
Intangible Assets
Intangible assets primarily consists of acquired in-process research and development (“IPR&D”). IPR&D relates to substantial research and development efforts that are incomplete at the acquisition date. IPR&D intangible assets are considered indefinite-lived until the completion or abandonment of the associated research and development efforts. During the development phase, these assets are not amortized but are tested for impairment annually during the fourth quarter of the year or more frequently if events or changes in circumstances indicate that it is more likely than not that the asset is impaired. Once the IPR&D activities are completed, the intangible asset is amortized over its useful life on a straight-line basis.
Goodwill
Goodwill represents the excess of the purchase price from business combinations over the fair value of the net assets acquired. Goodwill is not amortized but is tested for impairment at least annually during the fourth quarter, or more frequently if events or changes in circumstances indicate that it may be impaired. All of our goodwill is assigned to our one reporting unit.
We perform impairment testing by first assessing qualitative factors to determine whether it is more likely than not that the fair value of the reporting unit is less than its carrying amount, including goodwill. If we conclude that that it is more likely than not that the fair value of the reporting unit is less than its carrying amount, then a quantitative test is required.
If the estimated fair value of the reporting unit exceeds the carrying amount, goodwill is not considered to be impaired. If the carrying value exceeds estimated fair value, there is an impairment of goodwill and an impairment loss would be recorded. The impairment loss is calculating by comparing the fair value of the reporting unit less the carrying amount, including goodwill. Goodwill impairment would be limited to the carrying value of goodwill. There were no goodwill impairment losses recorded in any period presented.
Software Development Costs
Internal-Use Software
The Company capitalizes certain internal and external costs related to the acquisition and development of internal-use software or cloud computing arrangements during the application development stages of projects. The costs incurred for development of software intended for internal use and cloud computing arrangements are capitalized in accordance with ASC 350-40, Goodwill and Other, Internal-Use Software. These costs are included in property and equipment, net of accumulated depreciation and amortization in the condensed consolidated balance sheets.
When the software is ready for its intended use, the Company amortizes these costs using the straight-line method over the estimated useful life of the asset, or, for cloud computing service arrangements, over the term of the hosting arrangement. Costs incurred during the preliminary project or the post-implementation/operation stages of the project are expensed as incurred.
Software Developed for Sale
The costs incurred for the development of computer software to be sold, leased, or otherwise marketed are capitalized in accordance with ASC 985-20, Costs of Software to be Sold, Leased or Marketed, when technological feasibility has been established. Technological feasibility generally occurs when all planning, design, coding and testing activities are completed that are necessary to establish that the product can be produced to meet its design specifications, including functions, features and technical performance requirements. The establishment of technological feasibility is an ongoing assessment of judgment by management with respect to certain external factors, including, but not limited to, anticipated future revenues, estimated economic life and changes in technology. Capitalized software costs include direct labor and related expenses for software development for new products. Capitalized software costs are included in other long-term assets in the condensed consolidated balance sheets. Costs to develop software to be sold are not yet subject to amortization as our software to be sold was not available for general release as of June 30, 2023.
Impairment of Long-Lived Assets
We evaluate a long-lived asset (or asset group) for impairment whenever events or changes in circumstances indicate that the carrying value of the asset (or asset group) may not be recoverable. If indicators of impairment exist and the undiscounted future cash flows that the asset is expected to generate are less than the carrying value of the asset, an impairment loss is recorded to write down the asset to its estimated fair value based on a discounted cash flow approach. There were no impairment losses recorded in any period presented.
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SomaLogic, Inc.
Notes to Condensed Consolidated Financial Statements
Unaudited
Leases
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 our leases is generally unknown, we use our incremental borrowing rate based on the information available at the lease commencement date in determining the present value of future lease payments. We give consideration to our credit risk, term of the lease, total lease payments and adjust for the impacts of collateral, as necessary, when calculating our 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 we 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, 2023.
We classify the Warrants as liabilities on our condensed consolidated 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, we recorded these warrants as long-term liabilities at fair value on the date of the SPAC Merger, 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 SPAC Merger, 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 of the SPAC Merger (the “Triggering Event”). Any Earn-Out Shares issuable to an Earn-Out Service Provider (the “Service Provider Earn-Outs”) 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 shareholders in accordance with their respective pro rata Earn-Out Shares.
The Earn-Out Shares granted to shareholders are recognized as a liability in accordance with ASC 815. The liability was included as part of the consideration transferred in the SPAC Merger 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
We recognize 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
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SomaLogic, Inc.
Notes to Condensed Consolidated Financial Statements
Unaudited
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.
We recognize revenue when or as control of promised goods or services is transferred to our customers, in an amount that reflects the consideration we expect 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.
Payment terms may vary by customer, are based on customary commercial terms, and are generally less than one year. We do 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. We expense 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
We generate 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 that assay samples in their own laboratories, referred to as authorized sites. Equipment is generally accounted for as a bundle with installation, qualification and training services. Revenue is recognized based on the progress made toward achieving the performance obligation utilizing input methods, including costs incurred. 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 SomaLogic 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. This agreement includes a clause whereby if there is a material breach of the contract or change in control of SomaLogic, we may be required to pay a fee to terminate the agreement.
We 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. We 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 SomaLogic mutually terminated the SAA and concurrently SomaLogic and NEC Solution Innovators, Ltd. (“NES”), a wholly owned subsidiary of NEC, entered into a new arrangement, the Joint Development & Commercialization Agreement (the “JDCA”), to develop and commercialize SomaScan® services in Japan. NES agreed to make annual payments of $2.0 million for five years, for a total of $10.0 million, in exchange for research and development activities, as described below. We 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 our intellectual property.
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Notes to Condensed Consolidated Financial Statements
Unaudited
(i) Research and Development Activities
We determined that NES is not a customer with respect to the research and development activities associated with the collaboration arrangement under ASC 808. We recognize revenue from these activities based on the progress made toward achieving the performance obligation utilizing input methods, including costs incurred, in collaboration revenue in the condensed consolidated statements of operations and comprehensive loss.
(ii) Assay Services
We determined that NES is a customer for the assay services performance obligation, which should be accounted for using the criteria under ASC 606. We receive 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
We determined that NES is a customer for the license performance obligation, which should be accounted for using the criteria under ASC 606. We receive 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. We recognize royalty revenue for fees paid by customers in return for a 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. We recognize revenue for sales-based or usage-based royalties promised in exchange for a functional 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, SomaLogic and New England Biolabs, Inc. (“NEB”) entered into an exclusive licensing agreement, whereby we provide a license to use certain proprietary information and know-how relating to its aptamer technology to make and use commercial products. In exchange, we receive royalties from NEB for this functional license of intellectual property. In September 2022, SomaLogic and NEB entered into a license and settlement agreement (“NEB Agreement”) that terminated the existing exclusive licensing arrangement and provided for a settlement of $8.0 million of previously constrained royalties recognized for the year ended December 31, 2022. The NEB Agreement also provided a non-exclusive license arrangement for the same proprietary information and know-how under which we are guaranteed fixed minimum royalties of $15.0 million to be received over 3 years. We recognized revenue for the guaranteed fixed minimum royalties of $13.2 million for the year ended December 31, 2022, net of a significant financing component of $1.8 million. Any revenue above the guaranteed fixed minimum royalties is recognized in the period in which the subsequent sale or usage has occurred. We have recorded a receivable of $13.1 million as of June 30, 2023, of which $8.9 million is recorded in accounts receivable, net of current portion and $4.2 million is recorded in accounts receivable, net on the condensed consolidated balance sheets. Interest income related to the significant financing component was $0.2 million and $0.4 million for the three and six months ended June 30, 2023, respectively, and is included in interest income and other, net in the condensed consolidated statements of operations and comprehensive loss.
Grant revenue represents funding under cost reimbursement programs or fixed rate arrangements from government agencies and non-profit foundations for qualified research and development activities performed by SomaLogic. We recognize 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 SomaLogic. 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, we 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
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Notes to Condensed Consolidated Financial Statements
Unaudited
ASC 606. We concluded there are two performance obligations: (1) SOMAmer reagents necessary to develop and commercialize NGS based proteomic products, inclusive of the rights to licenses, patents and training to allow for the use of such reagents 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. Revenue from the performance obligations is recognized as follows in product revenue in the condensed consolidated statements of operations and comprehensive loss:
Reagents: Revenue is recognized when control transfers to the customer (i.e., when the SOMAmer reagents are shipped). We 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. We estimated the SSP based on an incremental discount to be provided to the customer adjusted for the likelihood that Illumina will exercise the option.
In June 2022, Illumina issued a purchase order that changed the promises 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, we 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. We estimated the SSP based on observable pricing of similar performance obligations. Revenue from the performance obligations is recognized as follows in product revenue in the condensed consolidated statements of operations and comprehensive loss:
Equipment Bundle: Revenue is recognized based on the progress made toward achieving the performance obligation utilizing input methods, including costs incurred.
Qualification Kits: Revenue is recognized when control transfers to the customer (i.e., when the qualification kits are shipped).
Support Services: Revenue is recognized for the support services as the services are provided.
We did not recognize any revenue during the three and six months ended June 30, 2023 or 2022 pursuant to the Illumina Agreement for performance obligations satisfied.
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 and a bank guarantee with an international customer. The portion of restricted cash expected to be released within twelve months is classified as prepaid expenses and other current assets on the condensed consolidated balance sheets was $0.5 million and $4.7 million as of June 30, 2023 and December 31, 2022, respectively. Cash expected to be restricted for greater than twelve months is classified as other long-term assets on the condensed consolidated balance sheets was $0.6 million and $0.8 million as of June 30, 2023 and December 31, 2022.
Income Taxes
We use the asset and liability method of accounting for income taxes. Under this method, deferred income tax assets and liabilities are determined based on differences between the tax bases of assets and liabilities and their respective financial reporting amounts, based on enacted tax laws and statutory tax rates applicable to the periods in which these temporary differences are expected to reverse. We evaluate the need to establish or release a valuation allowance based upon expected levels of taxable income, future reversals of existing temporary differences, tax planning strategies, and recent financial operations. Valuation allowances are established to reduce deferred tax assets to the amount expected to be more likely than not realized in the future.
The effect of income tax positions is recognized only when it is more likely than not to be sustained. Interest and penalties associated with uncertain tax positions are recorded in income tax benefit (provision) in the condensed consolidated statements of operations and comprehensive loss.
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Notes to Condensed Consolidated Financial Statements
Unaudited
Segment Information
We have one operating segment. Our chief operating decision maker (the “CODM”) role is performed by our Chief Executive Officer. The CODM manages our operations on a consolidated basis for purposes of allocating resources and assessing performance. Substantially all of our operations and decision-making functions are located in the United States.
Other Significant Accounting Policies
Our significant accounting policies are described in our 2022 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
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. We adopted ASU 2016-13, as amended, on January 1, 2023 using a modified retrospective approach and recorded a cumulative effect adjustment to accumulated deficit. The adoption of ASU 2016-13 did not have a material impact on our condensed consolidated financial statements.
Note 3 — Revenue
The following table disaggregates our revenue by product line:
Three Months Ended June 30,Six Months Ended June 30,
 (in thousands)
2023202220232022
Assay services revenue
$16,597 $10,931 $35,016 $29,731 
Product revenue
2,909 714 4,095 1,167 
Collaboration revenue
762 762 1,525 1,525 
Other revenue:
Royalties
 930  3,885 
Other
200 807 211 816 
Total other revenue
200 1,737 211 4,701 
Total revenue
$20,468 $14,144 $40,847 $37,124 
Contract Balances and Remaining Performance Obligations
As of June 30, 2023 and December 31, 2022, deferred revenue of $36.3 million and $35.1 million, respectively, was comprised of balances related to our collaboration revenue, product, assay services, and other revenue. As of June 30, 2023 and December 31, 2022, the portion of deferred revenue related to collaboration revenue was $3.3 million and $2.9 million, respectively. As of June 30, 2023, the estimated remaining performance period is 1.8 years. As of June 30, 2023 and December 31, 2022, the portion of deferred revenue related to assay services and other revenue was $2.5 million and $1.8 million, respectively. As of June 30, 2023, the deferred revenue related to assay services and other revenue will be recognized within 12 months.

As of June 30, 2023 and December 31, 2022, the deferred product revenue related to the Illumina Agreement amounted to $30.4 million for each period. As of June 30, 2023, the estimated remaining performance obligation period is approximately 7.5 years.
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Notes to Condensed Consolidated Financial Statements
Unaudited
During the three and six months ended June 30, 2023, we recognized revenue of $0.4 million and $1.6 million, respectively, from deferred revenue recorded in prior periods.
Note 4 — Accounts Receivable, net
Accounts receivable, net consisted of the following:
(in thousands)June 30, 2023December 31, 2022
Accounts receivable$31,421 $26,441 
Less: allowance for expected credit losses(630)(151)
Accounts receivable, net$30,791 $26,290 
Accounts receivable, net (current)$21,750 $17,006 
Accounts receivable, net of current portion$9,041 $9,284 
Note 5 — Business Combinations
On August 31, 2022, we acquired 100% of the equity interests in Palamedrix, Inc. ("Palamedrix") (the “Palamedrix Acquisition”) in exchange for purchase consideration of $29.7 million. Consideration transferred included cash of $15.8 million, equity consideration of $12.5 million, and contingent consideration of $1.4 million. Palamedrix is a DNA nano tech firm that provides scientific and engineering expertise, miniaturization technology and enhanced ease-of-use capabilities that we intend to leverage as we develop the next generation of SomaScan® Assay.
The Palamedrix Acquisition provided for up to $0.5 million to be paid to the founders contingent upon settlement of pre-acquisition legal matters. It also provided for three potential additional payments of up to $17.5 million to the owners, including non-founder and founder employees, to be settled in cash and/or Common Stock contingent on the achievement of certain net sales milestone targets by the fifth and sixth year anniversary of the closing date of the acquisition (the “Milestone Consideration”).
Note 6 — 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, 2023
(in thousands)
 
Amortized
Cost
Gross
Unrealized
Gain
Gross
Unrealized
Loss
Aggregate
Fair Value
 
Fair Value
Level
Cash and cash equivalents:
         
Cash
 $20,010 $ $ $20,010 Level 1
Money market funds
 289,678   289,678 Level 1
U.S. Treasuries
 44,841 15  44,856 Level 1
Total cash and cash equivalents
 354,529 15  354,544 
Investments:
 
Commercial paper
 13,720 1 (8)13,713 Level 2
U.S. Treasuries
 98,418 33  98,451 Level 2
Agency bonds
 7,491  (9)7,482 Level 2
Total investments
 119,629 34 (17)119,646 
Total assets measured at fair value on a recurring basis
 $474,158 $49 $(17)$474,190 
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Notes to Condensed Consolidated Financial Statements
Unaudited
As of December 31, 2022
(in thousands)
Amortized Cost
Gross
Unrealized
Gain
Gross
Unrealized
Loss
Aggregate
Fair Value
Fair Value
Level
Cash and cash equivalents:
     
Cash
$44,045 $ $ $44,045 Level 1
Money market funds
377,785   377,785 Level 1
Total cash and cash equivalents
421,830   421,830 
Investments:
Commercial paper
58,794  (195)58,599 Level 2
U.S. Treasuries
35,252  (175)35,077 Level 2
Corporate bonds
11,782  (39)11,743 Level 2
Agency bonds12,426  (87)12,339 Level 2
Total investments
118,254  (496)117,758 
Total assets measured at fair value on a recurring basis
$540,084 $ $(496)$539,588 
As of June 30, 2023 and December 31, 2022, we had $0.2 million and $0.5 million, respectively, of accrued interest on investments recorded in prepaid expenses and other current assets on the condensed consolidated balance sheets.
Our investments consist of money market funds, commercial paper, U.S. Treasuries, corporate bonds, and agency bonds. All of the commercial paper, U.S. Treasuries, corporate bonds and agency bonds are designated as available-for-sale securities and have an effective maturity date that is less than one year from the respective balance sheet date, and accordingly, have been classified as current in the condensed consolidated balance sheets.
We classify our investments in money market funds within Level 1 of the fair value hierarchy because they are valued using quoted market prices. We classify our commercial paper, U.S. Treasuries, asset-backed securities, corporate bonds and agency bonds as Level 2 and obtain the fair value from a third-party pricing service, which may use quoted market prices for identical or comparable instruments or model-driven valuations using observable market data or inputs corroborated by observable market data.
We adopted ASU 2016-13 on January 1, 2023. Under the new guidance, we evaluated our available-for-sale securities with unrealized losses for impairment, considering available evidence, including the extent to which fair value is less than cost, whether an allowance for expected credit loss is required, and adverse factors that could affect the value of the securities. Any unrealized losses from declines in fair value below the amortized cost basis as a result of non-credit factors are recognized in accumulated other comprehensive loss as a separate component of stockholders’ equity, along with unrealized gains. Realized gains and losses and declines in fair value, if any, on available-for-sale securities are included in interest and other income, net in the condensed consolidated statements of operations and comprehensive loss.
We evaluated the available-for-sale securities as of June 30, 2023 and determined that no available-for-sale securities in an unrealized loss position are arising from credit related reasons. Additionally, we do not intend to sell or believe that it is not more likely than not that we will be required to sell the securities before recovery of the amortized cost bases and have therefore not recorded any allowances for available-for-sale securities in our allowance for expected credit losses as of June 30, 2023. We did not recognize material realized gains or losses for the three or six months ended June 30, 2023.
Liabilities measured at fair value on a recurring basis
The following table presents information about our liabilities that are measured at fair value on a recurring basis, and indicates the fair value hierarchy of the valuation inputs we utilized to determine such fair value:
(in thousands)June 30, 2023December 31, 2022Fair Value Level
Warrant liability - public warrants
$1,380 $2,208 Level 1
Warrant liability - private placement warrants
1,253 2,005 Level 2
Earn-out liability
 15 Level 3
Milestone contingent consideration1,620 1,165 Level 3
Holdback contingent consideration450 450 Level 3
Total liabilities measured at fair value on a recurring basis
$4,703 $5,843 

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Notes to Condensed Consolidated Financial Statements
Unaudited
Liabilities that are measured at fair value on a recurring basis are recorded on the condensed consolidated balance sheet as of June 30, 2023 as follows:
(in thousands)June 30, 2023December 31, 2022
Other current liabilities
$450 $ 
Warrant liabilities
2,633 4,213 
Other long-term liabilities1,620 1,630 
Total liabilities measured at fair value on a recurring basis
$4,703 $5,843 
Warrant liabilities
The public warrants were valued using Level 1 inputs as they are traded in an active market. The fair value of the private placement warrants is equivalent to that of the public warrants as they have substantially the same terms; however, as they are not actively traded, they are classified as Level 2 in the hierarchy table above.
Earn-out liability
The fair value of the Earn-Out Shares was estimated using a Monte Carlo simulation model. The fair value is based on the simulated price of the Company over the maturity date of the contingent consideration and increased by estimated forfeitures of Earn-Out Shares issued to Earn-Out Service Providers. During the three months ended March 31, 2023, the earn-out liability was determined to be immaterial and was fully written off.
Milestone Contingent Consideration
The fair value of milestone contingent consideration was estimated using a Monte Carlo simulation model. The fair value is based on an option pricing framework, whereby a range of possible scenarios were simulated around forecasted net sales.
The significant unobservable inputs used in the Monte Carlo simulation to measure the milestone contingent consideration that are categorized within Level 3 of the fair value hierarchy were as follows:
June 30, 2023December 31, 2022
Volatility35.0%35.0 %
Risk-free rate4.1%4.0 %
Weighted average cost of capital30.0%30.0 %
Cost of debt10.0%10.0 %
The change in the fair value of the milestone contingent consideration is summarized as follows:
(in thousands)Fair Value
Balance as of December 31, 2022$1,165 
Change in fair value of milestone contingent consideration455 
Balance as of June 30, 2023$1,620 

Holdback Contingent Consideration
The fair value of holdback contingent consideration was estimated using a scenario-based analysis. The fair value is based on the expected holdback release date and expected holdback payment. The future expected payments were discounted to the valuation date using the cost of debt.
The significant unobservable inputs used in the scenario-based analysis to measure the holdback contingent consideration that are categorized within Level 3 of the fair value hierarchy were as follows:
June 30, 2023December 31, 2022
Cost of debt10.6%10.2 %

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Notes to Condensed Consolidated Financial Statements
Unaudited
Note 7 — Leases
We have operating leases for certain office spaces with lease terms ranging from two to five years. These leases require monthly lease payments that may be subject to annual increases throughout the lease term. Certain of these leases also include renewal options at our election to renew or extend the leases for additional periods ranging from three to ten years. These optional periods have not been considered in the determination of the ROU assets or lease liabilities associated with these leases as we did not consider the exercise of these options to be reasonably certain. The ROU asset is included in other long-term assets on the condensed consolidated balance sheets and was $2.8 million and $3.9 million as of June 30, 2023, and December 31, 2022, respectively.
Lease Costs
Lease costs for operating leases are recognized on a straight-line basis over the lease term. The total lease cost for the period was as follows:
Three Months Ended June 30,Six Months Ended June 30,
(in thousands)2023202220232022
Operating lease cost$591 $406 $1,182 $807 
Variable lease cost326 209 704 390 
Short-term lease cost12 12 24 23 
Total lease cost$929 $627 $1,910 $1,220 
Lease Maturities
The table below reconciles the undiscounted lease payment maturities to the lease liabilities for our operating leases:
(in thousands)June 30, 2023
Remainder of 2023$1,285 
20241,143 
2025834 
2026143 
Total3,405 
Less: amount of lease payments representing interest(93)
Present value of future minimum lease payments3,312 
Less: current operating lease liabilities (included in other current liabilities)(1,963)
Long-term operating lease liabilities (included in other long-term liabilities)$1,349 
Supplemental Lease Information
Supplemental information related to our operating leases was as follows:
June 30, 2023
Weighted average remaining lease term2.0 years
Weighted average discount rate2.6 %
Cash paid for amounts included in the measurement of our operating lease liabilities for the six months ended June 30, 2023 and 2022 was $1.3 million and $0.9 million, respectively.
In February 2022, we executed two separate lease agreements (the “Leases”) to lease buildings pending construction that had not yet commenced. Both leases were set to expire on November 30, 2033, unless extended or early terminated in accordance with the terms of the lease. In accordance with the lease agreements, we made a deposit of $4.1 million during the first quarter of 2022. The deposit was restricted from withdrawal and held by a bank in the form of collateral for an irrevocable standby letter of credit held as security.
On August 25, 2022, we entered into a lease termination agreement (the “Lease Termination”) for the Leases prior to lease commencement. As consideration for the termination of the Leases, we agreed to pay the landlord a termination fee of $6.0 million of which $2.5 million was paid on the termination date. During the fourth quarter of 2022 the remaining liability was reduced by $1.0 million after the landlord entered into a separate lease with a third party. The remaining $2.5 million liability was paid in January 2023 and the $4.1 million deposit was released in March 2023.
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Notes to Condensed Consolidated Financial Statements
Unaudited
Note 8 — Inventory

Inventory consisted of the following:
(in thousands)June 30, 2023December 31, 2022
Raw materials
$23,418 $16,710 
Work in process1,492 1,191 
Finished goods
509 639 
Total inventory
$25,419 $18,540 
Inventory (current)
$15,123 $13,897 
Non-current inventory
$10,296 $4,643 
Note 9 — Accrued Liabilities and Other Long-Term Liabilities
Accrued liabilities consisted of the following:
(in thousands)June 30, 2023December 31, 2022
Accrued compensation
$9,172 $13,897 
Accrued restructuring costs442 2,223 
Accrued lease termination fee
 2,500 
Accrued real estate agent commission
 764 
Accrued medical claims
646 663 
Other
666 631 
Total accrued liabilities
$10,926 $20,678 
Other long-term liabilities consisted of the following:
(in thousands)June 30, 2023December 31, 2022
Long-term operating lease liabilities$1,349 $2,063 
Milestone consideration replacement award liability1,699 1,261 
Milestone contingent consideration1,620 1,165 
Holdback contingent consideration(1)
 450 
Long-term deferred tax liability585 585 
Earn-out liability 15 
Total other long-term liabilities$5,253 $5,539 
(1)    As of June 30, 2023, the holdback contingent consideration is included within other current liabilities on the condensed consolidated balance sheet.
Note 10 — Commitments and Contingencies
Legal Proceedings
We are subject to claims and assessments from time to time in the ordinary course of business. We will accrue a liability for such matters when it is probable that a liability has been incurred and the amount can be reasonably estimated. When only a range of possible loss can be established, the most probable amount in the range is accrued. If no amount within this range is a better estimate than any other amount within the range, the minimum amount in the range is accrued. We are not currently party to any material legal proceedings in which a potential loss is probable or reasonably estimable.
Indemnification
In the normal course of business, we enter into contracts and agreements that contain a variety of representations and warranties and provide for general indemnifications. Our exposure under these agreements is unknown because it involves claims that may be made against us in the future, but that have not yet been made. To date, we have not paid any claims or been required to defend any action related to our indemnification obligations. However, we may record charges in the future as a result of these indemnification obligations.
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Note 11 — Stockholders' Equity
Under our amended and restated certificate of incorporation, we are authorized to issue 600,000,000 shares of Common Stock, par value of $0.0001 per share, and 1,000,000 shares of preferred stock, par value $0.0001 per share.
As of June 30, 2023, there were an aggregate of 5,519,991 and 5,013,333 outstanding public warrants and private placement warrants, respectively. Each warrant entitles the holder to purchase one share of our Common Stock at a price of $11.50 per share at any time commencing on February 25, 2022. As of June 30, 2023, no warrants have been exercised. The warrants will expire on September 1, 2026 or earlier upon redemption or liquidation.
There have been no significant changes to the disclosures in our 2022 Form 10-K related to Common Stock, preferred stock, or our public and private placement warrants, including warrant redemption terms.
Note 12 — Stock-based Compensation
We have various stock-based compensation plans, which are more fully described in Part II, Item 8 “Financial Statements and Supplementary Data - Note 13 to the Consolidated Financial Statements - Stock-based Compensation” in the 2022 Form 10-K. Under the 2021 Omnibus Incentive Plan (the “2021 Plan”), we have the ability to grant several forms of incentive awards to our eligible employees, directors, and non-employee consultants.
Effective January 2023, we increased the reserve of Common Stock for issuance under all incentive plans by approximately 9 million shares in accordance with the 2021 Plan.
The following table summarizes our stock-based compensation expense:
Three months ended June 30,Six Months Ended June 30,
(in thousands) 
2023202220232022
Cost of assay services revenue
$186 $292 $376 $583 
Cost of product revenue
28 18 38 25 
Research and development
1,340 1,834 3,110 3,566 
Selling, general and administrative
2,753 7,316 7,966 13,957 
Total stock-based compensation
$4,307 $9,460 $11,490 $18,131 
The following table summarizes activity for stock options and RSUs during the six months ended June 30, 2023:
Stock Options(1)
RSUs(2)
Outstanding as of December 31, 202223,541,194 3,084,379 
Granted
5,438,689 1,130,838 
Exercised or Issued
(124,004)(185,863)
Forfeited
(3,792,335)(821,136)
Expired
(62,857)— 
Outstanding as of June 30, 202325,000,687 3,208,218 
(1)    The stock options generally vest over four years, with 25% vesting upon the first-year anniversary of the grant date and the remaining options vesting ratably each month thereafter.
(2)    The RSUs vest subject to the satisfaction of service requirements. The grant date fair values of these awards are determined based on the closing price of our Common Stock on the date of grant.
We also incurred incremental stock-based compensation expense related to option modifications of $0.3 million and $1.3 million for the three and six months ended June 30, 2023. We incurred incremental stock-based compensation related to option modifications of nil and $0.1 million for the three and six months ended June 30, 2022.
We recorded nil and $3.7 million in stock-based compensation expense related to the Service Provider Earn-Outs during the six months ended June 30, 2023 and 2022, respectively. As the derived service period has passed, expenses related to the Service Provider Earn-Outs were fully recognized as of December 31, 2022.
Note 13 — Income Taxes
There has historically been no federal or state provision for income taxes because we have incurred operating losses and maintain a valuation allowance against our net realizable deferred tax assets in the United States. For the three and six months ended June 30, 2023 and 2022, we recognized no provision for income taxes in the United States. The provision for foreign income taxes was immaterial for the three and six months ended June 30, 2023 and 2022.
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Table of Contents
SomaLogic, Inc.
Notes to Condensed Consolidated Financial Statements
Unaudited
Utilization of our net operating loss and tax credit carryforwards may be subject to a substantial annual limitation due to the ownership change limitations provided by the Internal Revenue Code and similar state provisions. Such an annual limitation could result in the expiration or elimination of the net operating loss and tax credit carryforwards before utilization. Management believes that the limitation will not limit utilization of the carryforwards prior to their expiration.
Note 14 — Net Loss Per Share
The following table sets forth the computation of basic and diluted net loss per share:
Three Months Ended June 30,Six Months Ended June 30,
(in thousands, except share and per share data) 
2023202220232022
Net loss
$(24,772)$(22,985)$(58,974)$(26,964)
Weighted-average shares outstanding, basic and diluted
186,741,112 183,143,391 186,633,391 182,599,949 
Net loss per share, basic and diluted
$(0.13)$(0.13)$(0.32)$(0.15)