SOMALOGIC, INC. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL POSITION AND OPERATING RESULTS (Form 10-Q)

The following discussion and analysis of SomaLogic's results of operations and
financial condition should be read in conjunction with the information set forth
in Old SomaLogic's audited consolidated financial statements as of and for
the years ended December 31, 2020 and 2019 included in the prospectus, which
constituted a part of the Company's registration statement on Form S-1, filed on
October 18, 2021, and the Company's unaudited condensed consolidated financial
statements as of and for the three and nine months ended September 30, 2021 and
2020, and the related respective notes thereto, included elsewhere in this
Quarterly Report on Form 10-Q. This discussion contains forward-looking
statements based upon SomaLogic's current expectations, estimates and
projections that involve risks and uncertainties. Actual results could differ
materially from those anticipated in these forward-looking statements due to,
among other considerations, the matters discussed under "Cautionary
Note Regarding Forward-Looking Statements" included elsewhere in this Quarterly
Report on Form 10-Q. Unless the context otherwise requires, all references in
this section to the "Company," "we," "us" or "our" refer to the business of Old
SomaLogic prior to the consummation of the Business Combination, and to the
Company and its consolidated subsidiaries following the consummation of the
Business Combination.
Business Overview

SomaLogic is a leading commercial-stage proteomics company. We have built an
integrated proteomics platform capable of robust, high throughput proteomics
analysis with broad proteome coverage, low limits of detection, high
reproducibility and at low costs. We designed our platform with the goal of
being a universal proteomics platform, with the breadth (number of proteins
measured) and precision (accuracy of measurement) important for discovery and
research applications, and both the reproducibility and robustness important for
clinical applications. Our platform is underpinned by our extensive global
patent portfolio protecting our proteomics platform, products and services, our
proprietary assay technology, our proteomics database (which we believe is one
of the largest proteomics databases worldwide), and artificial intelligence and
machine learning capabilities. As of September 30, 2021, our assay can measure
approximately 7,000 protein target measurements in a single sample using only
approximately 55µL of plasma or serum. Our proteomics database matches
proteomics and clinical information and contains over 1.5 billion protein
measurements with over 675,000 participant-years of longitudinal clinical data
from follow-up. Leveraging our artificial intelligence-enabled bioinformatics
capability, we use our database to power diagnostic product development for our
research and clinical customers. We currently run our platform within our own
laboratory, receive samples from customers and provide them proteomics analysis
services. We are also developing an integrated solution comprising kits and
select equipment that would enable customers to perform our proteomics assay at
their own sites and leverage our bioinformatics capabilities to analyze the
data. We have served over 300 customers and collaborators with our proteomics
technology since 2015.

As of 2021, we primarily generate revenue through our assay services, which
consists primarily of a service model whereby we receive samples from
pharmaceutical, biotechnology or academic clients, perform the SomaScan® assay,
and subsequently use bioinformatics and analytics to further refine the
collected data and deliver this back to the customer. In the nine months ended
September 30, 2021 and in the years ended December 31, 2020 and 2019,
approximately 67%, 85%, and 87%, respectively, of our assay services sales were
generated by pharmaceutical customers. In mid-2020, we re-opened a simple
fee-for-service offering, in addition to our previous data-sharing model that
has proven very popular among customers. We expect our customer base to continue
to grow in 2022 as a result of the fee-for-service offering and an expanded
commercial development team.

In addition to the SomaScan® assay, we have developed and released SomaSignal™
tests into an observation market. The SomaSignal™ tests are data-driven
diagnostic tests with high predictive power of biological disease and risks to
patients which have a wide range of potential applications. We are currently
evaluating a variety of different partnerships to drive adoption of SomaSignal™
tests.

We also generate product revenue, which primarily consists of the sale of
SomaScan® kits. Our assay kits are aimed at enabling our customers to bring our
proteomic platform in-house. Historically, we have sold our kits to a limited
number of primarily academic customers. Now, we are establishing agreements for
an upgraded platform with several sites in 2021 to prepare for a future
full-scale launch.

From September 30, 2021, we had approximately 265 employees, including a sales team of more than 35 employees and a research and development team of more than 55 employees. We plan to continue to significantly expand our sales team in the years to come.


Our commercial and product development teams are consistently partnering with
our customers to develop products and services which speed the adoption of
proteomics for our customers, including data analysis, data integration and ease
of use tool sets. We are also actively exploring several potential co-marketing
and new channel and product development opportunities with various partners in
closely aligned scientific verticals, such as genomics.
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We have historically and will continue to invest heavily in new products and
solutions. Our research and development efforts are primarily focused on
developing new proteomic content and additional SomaSignal™ tests as well as
developing new applications for existing technologies.

Since our inception, we have incurred net losses in each year. Our net losses
were $64.2 million and $44.1 million for the nine months ended September 30,
2021 and 2020, respectively. As of September 30, 2021, we had an accumulated
deficit of $475.6 million, cash and cash equivalents of $468.7 million, and
short-term investments of $207.0 million. We expect to continue to incur
significant expenses for the foreseeable future and to incur operating losses.
We expect our expenses will increase in connection with our ongoing activities
as we:

•expand our sales and marketing efforts to further commercialize our products;
•expand our research and development efforts to improve our existing products
and develop and launch new products;
•invest in processes, tools and infrastructure to support the growth of our
business, including incurring costs related to operating as a public company;
•attract, hire and retain qualified personnel; and
•protect and defend our intellectual property.
Business Combination

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

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

Impact of the COVID-19 pandemic


In March 2020, the World Health Organization declared the Coronavirus Disease
2019 (COVID-19) outbreak to be a global pandemic. Since then, COVID-19 has
continued to spread throughout much of the United States and the world causing
uncertainty and disruption to business activities.

The COVID-19 pandemic resulted in delays in our fundraising efforts and revenue
during fiscal year 2020. In response, we took aggressive actions to reduce spend
and contain costs including implementing a hiring freeze, eliminating travel,
executing early lease terminations for two administrative buildings in Boulder,
Colorado, as well as closing our Oxford, United Kingdom laboratory ("Lab
Closure"). The Company experienced notable shifts in research funding in the
pharmaceutical industry to COVID-19 research, largely delaying our revenue from
the first half of 2020 to the second half of 2020. The Company modified its
amended and restated credit agreement ("Amended and Restated Credit Agreement")
in the second and fourth quarters of 2020 in order to avoid noncompliance with
financial and nonfinancial covenants. Despite the economic challenges due to the
COVID-19 pandemic, we ended fiscal year 2020 with revenue growth of 74% year
over year and we ended the first nine months of 2021 with revenue growth of 112%
compared to the same nine months in the prior year. We also benefited from our
cost savings actions which included reduction in travel and non-essential
spending.

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

Factors affecting our performance

The following factors have been important to our business and we expect them to affect our results of operations and financial condition in future periods:

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Continued adoption of our services and products


Our performance depends on our ability to drive adoption of our integrated
platform of proteomic solutions and services, initially in the research and
clinical markets. We have a well-established base of marquee customer and Key
Opinion Leaders ("KOL") relationships in place, and as we grow further, we
expect to win contracts with new customers and expand the scope of existing
contracts with existing customers. To facilitate this growth, we will grow our
commercial organization and raise awareness through all available channels,
including our KOL relationships and relevant publications. We plan to develop
and grow our offering of reagents and corresponding solutions, including both
small and large plex capabilities, site-of-service deployed assay options, and
bioinformatics offerings to attract additional customers and cross-sell to
existing customers. Additionally, we have an ongoing focus on growing our
proteomics database and artificial intelligence and machine learning analytics
to drive value and market opportunities.

Continuous investment in growth


Our significant revenue growth has been driven by rapid innovation towards novel
solutions that command price premiums and quick adoption of our solutions by our
customer base. We intend to continue to make focused investments to increase
revenue and scale operations to support growth and therefore expect expenses in
this area to increase. We have invested, and will continue to invest,
significantly in our laboratory process and commercial infrastructure.
Investments in research and development will include hiring of employees with
the necessary scientific and technical backgrounds to enable enhancements to our
existing services and products and bring new services and products to market.
Additionally, we plan to invest in sales and marketing activities, and expect to
incur additional general and administrative expenses. To support the expansion,
expenditures to develop and mature operational processes, financial and
management information systems are expected to be incurred. As cost of revenue,
operating expenses and capital expenditures fluctuate over time, we may
experience short-term, negative impacts to our results of operations and cash
flows, but we are undertaking such investments in the belief that they will
contribute to long-term growth.

We have made, and intend to continue to make, investments that meet management's
criteria to expand or add key technologies we believe will facilitate the
development and commercialization of new products or services in the future.
Such investments could take the form of an asset acquisition, the acquisition of
a business or the exclusive or non-exclusive license of patented technology. Any
acquisitions we make may affect our future financial results.

Ability to reduce costs associated with performing the test


Reducing the costs associated with performing our assay is both our focus and
strategic objective. Over the long term, our objective is to reduce the cost of
raw materials by improving the output efficiency of our assays and laboratory
processes. Our approach to reducing these costs include, but are not limited to,
modifying our assays and laboratory processes to use materials and technologies
that provide equal or greater quality at lower cost, improving how we manage our
materials and negotiating favorable terms for our materials purchases. We plan
to reduce the cost of performing our SomaScan® assay as we move to either a less
expensive array or Next Generation Sequencing system for our DNA readout of the
protein concentrations present in a sample.

Seasonality


Our revenue can be seasonal dependent upon the spending patterns of our
customers. Seasonality results from a number of factors, including the
procurement and budgeting cycles of many of our customers, especially
government- or grant-funded customers, whose cycles often coincide with
government fiscal year ends. For example, the United States government's fiscal
year end occurs in our third quarter and may result in increased sales of our
products during such quarter if government-funded customers have unused funds
that may be forfeited, or future budgets that may be reduced, if such funds
remain unspent at such fiscal year end. Furthermore, the academic budgetary
cycle similarly requires grantees to "use or lose" their grant funding, which
seems to be tied disproportionately to the end of the calendar year, driving
sales higher during the fourth quarter. Similarly, our biopharmaceutical
customers typically have calendar year fiscal years which also result in a
disproportionate amount of their purchasing activity occurring during our fourth
quarter.

Development and commercialization of clinical diagnostic tests


To facilitate a more complete understanding of human biology and improve human
wellness, we aim to continue to advance our portfolio of clinical diagnostic
tests that leverage our proprietary proteomics platform and artificial
intelligence-enabled bioinformatics. By developing additional tests, the Company
can provide more options to customers and collaborators and further
commercialize our platform driving growth in revenue.

We have released 14 SomaSignal ™ tests under our Clinical Laboratory Improvement Amendments (“CLIA”) Laboratory-Developed Test (“LDT”) license as of
September 30, 2021. We have also developed 20 tests for research

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use only ("RUO") market - most of which are directed at characterizing
individuals in clinical trials. We continue to invest in our SomaSignal™ test
pipeline, largely directed at tests helping to manage chronic disease and will
be of significant interest to health system providers. We anticipate
approximately 4 to 8 additional LDT SomaSignal™ tests and approximately 5 to 10
SomaSignal™ tests for the RUO market to clear our development and validation
process during 2022.

We are working closely with our clinical implementation partners and
prioritizing the test pipeline to have the greatest impact on their business.
Our plan is for these tests to focus on disease management, enabling at home
sample collection and facilitating early intervention in diseases with the
highest morbidity and mortality burden, such as type 2 diabetes, obesity, and
cardiovascular disease.

Working in conjunction with our proteomics database and bioinformatics
capabilities, our broad and versatile foundational assay, SomaScan®, enables the
natural expansion of our test menu given the continuous incorporation of
real-world data into our growing foundational assay. We believe this dynamic
will support continuous and long-term growth of our research and clinical
diagnostics business. Additionally, with our growing foundational assay in place
as the single source for all new test menus, we believe we are well positioned
to expand to additional adjacent markets within proteomics and genomics.

Extension of our proteomics content


As of September 30, 2021, we have a library of slow off-rate modified aptamers,
SOMAmers® reagents against approximately 7,000 protein target measurements of
the 20,000 known canonical proteins encoded in the human genome. The breadth
(number of proteins measured) of our SomaScan® assay is uniquely superior to
other technologies in an aspect that is vital to customers. For each protein, we
typically have a collection of 100's to 1000's of proprietary "monoclonal"
SOMAmer® reagents (reagents with unique and defined sequences) from which we
select and place one, or in some cases several, reagents on our SomaScan® assay.
Any follow-up studies, which are of interest to many of our customers and
partners, are facilitated with these collections of reagents, which is uniquely
possible with our technology. To maintain our competitive advantage, we plan to
increase the number of protein reagents to approximately 10,000 in the next
18 months based on allocated funding, resource availability, and the successful
validation of new reagents. Upon successful commercialization of the new
reagents, the impact to cost of revenue for the new proteomic content is
estimated to be offset by the increased efficiencies we may gain from sample
volume growth and value engineering initiatives.

Components of the results of operations

Returned


We derive our revenue from four primary sources: (1) assay services revenue,
(2) product revenue, (3) collaboration revenue, and (4) other revenue. Customers
include top biopharmaceutical companies and leading academic research
universities.

Revenue from analytics services


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. We expect
assay services revenue to increase over the long-term with new and recurring
sales opportunities. With the enhancement of our proteomic services, we expect
to capture more market opportunities outside of the United States region, as
well as winning contracts with new customers and expanding the scope of sales
with existing customers.

Product revenue

Product revenue primarily consists of kit sales, which enable our customers to
bring the SomaScan® proteomic platform in-house and to build lines of business
based on this technology. In preparation for a full-scale launch, we are
establishing agreements with several sites to deploy kits this year. This will
allow SomaLogic to quickly grow into new geographic regions and expand our
customer base.

Collaboration income


Collaboration revenue consists of fees earned for research and development
services, except for grant revenue research and development services that are
classified in other revenue. Collaboration revenue currently relates to an
arrangement with one customer, NEC Solution Innovators, Ltd. ("NES"), a wholly
owned subsidiary of NEC Corporation ("NEC"). We believe expanding collaborative
arrangements with KOLs will allow for further enhancements of our
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integrated platform, lower barriers to adoption and introduce or expand new
market channels and customers within geographic regions and markets we do not
currently operate in.

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. 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. We
expect other revenue to continue to grow as we expand our commercial team and
they continue to pursue licensing relationships.

Cost of income

Cost of revenue from dosing services


Cost of assay services revenue consists of raw materials and production costs,
salaries and other personnel costs, overhead and other direct costs related to
assay services revenue. It also includes provisions for excess or obsolete
inventory and costs for production variances, such as yield losses, material
usages, spending and capacity variances. Cost of assay services revenue also
includes royalty fees that the Company owes to third parties related to assay
services.

We expect cost of assay services revenue to increase as we grow our sample
volume. We expect the cost per sample to decrease over the long term due to the
efficiencies we may gain as sample volume increases from improved utilization of
our laboratory capacity and other value engineering initiatives. If our sample
volume throughput is reduced as a result of the COVID-19 pandemic or otherwise,
cost of revenue as a percentage of total revenue may be adversely impacted due
to fixed overhead cost.

Cost of product revenue

Cost of product revenue consists of raw materials and production costs, salaries
and other personnel costs, overhead and other direct costs related to product
revenue. Cost of product revenue is recognized in the period the related revenue
is recognized. Shipping and handling costs incurred for product shipments are
included in cost of product revenue in the consolidated statements of operations
and comprehensive loss. Cost of product revenue also includes royalty fees that
the Company owes to third parties related to the sale of products.

Research and development


Research and development expenses consist primarily of salaries and benefits,
laboratory supplies, clinical study costs, consulting fees and related costs. We
believe that our continued investment in research and development is essential
to our long-term competitive position. We plan to continue to invest
significantly in our research and development efforts, including hiring
additional employees, with an expected focus on advancing our assay and our
bioinformatics platform, new clinical studies, as well as lowering the cost of
assays. As a result of these and other initiatives, we expect research and
development expenses will increase in absolute dollars in future periods and
vary from period to period as a percentage of revenue.

Selling, general and administrative expenses


Selling expenses consist primarily of personnel and marketing related costs.
General and administrative expenses consist primarily of personnel costs for our
finance, human resources, business development and general management, as well
as professional services, such as legal and accounting services.

As we continue to introduce new services and products, broaden our customer base
and grow our business, we expect selling, general and administrative expenses to
increase in future periods as the number of sales and marketing and
administrative personnel grows. We also anticipate incurring increased
accounting, audit, legal, regulatory, compliance, director and officer insurance
costs, as well as, investor and public relations expenses associated with
operating as a public company.

Interest and other income, net

Interest and other income, net consists primarily of interest earned on our cash equivalents and investments, which are invested in money market funds, commercial paper, corporate bonds, US Treasury bills, asset-backed securities and international government securities.

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Interest expense

Interest expense is attributable to our borrowings under loan agreements as well as to the change in the fair value of the compound derivative liability.

Change in fair value of liabilities related to warrants


Change in fair value of warrant liabilities consists of changes in fair value
related to the Public Warrant and Private Warrant liabilities. The warrant
liabilities are classified as marked-to-market liabilities pursuant to ASC 815
and the corresponding increase or decrease in value impacts our net loss.

Change in the fair value of the earn-out liability


Change in fair value of earn-out liability consists of changes in the earn-out
liability related to Earn-Out Shares issuable to former stockholders of Old
SomaLogic. The earn-out liability is classified as a marked-to-market liability
pursuant to ASC 815 and the corresponding increase or decrease in value impacts
our net loss.

Loss on extinction of debt, net

Net debt extinction loss consists of a debt extinction loss due to the conversion of convertible debt and repayment of the amended and restated credit agreement and a gain extinguishment of debt due to cancellation of the Paycheck Protection Program (“PPP”) loan during the nine months ended September 30, 2021.

Results of operations


Comparison of the three months ended September 30, 2021 versus the three months
ended September 30, 2020

Revenue
                                      Three Months Ended September 30,                   Change
(in thousands)                               2021                      2020           $           %
Revenue:
Assay services revenue        $         17,499                      $ 11,378      $ 6,121        54  %
Product revenue                             75                           455         (380)      (84) %
Collaboration revenue                      763                           763            -         -  %
Other revenue                            1,655                         1,637           18         1  %
Total revenue                 $         19,992                      $ 14,233      $ 5,759        40  %

Total turnover increased $ 5.8 million, i.e. 40%, for the three months ended
September 30, 2021 compared to the three months ended September 30, 2020.


The $6.1 million, or 54%, increase in assay services revenue for the three
months ended September 30, 2021 compared to the three months ended September 30,
2020 was primarily due to a $6.1 million increase in sample volumes as a result
of the reintroduction of the fee-for-service model in 2020.

Product revenue decreased by $0.4 million, or 84%, for the three months ended
September 30, 2021 compared to the three months ended September 30, 2020
primarily due to a reduction in the volume of kits sold as we discontinue sales
of kits on our previous platform and prepare to re-launch kits on our upgraded
platform.

Cost of revenue
                                                     Three Months Ended September
                                                                  30,                                 Change
(in thousands)                                          2021               2020                $                 %
Cost of assay services revenue                      $    8,737          $  4,750          $  3,987                 84  %
Cost of product revenue                                     33               163              (130)               (80) %
Total cost of revenue                               $    8,770          $  4,913          $  3,857                 79  %

The total cost of revenues increased by $ 3.9 million, or 79%, for the three months ended September 30, 2021 compared to the three months ended September 30, 2020.

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Cost of assay services revenue increased by $4.0 million, or 84%, for the
three months ended September 30, 2021 compared to the three months ended
September 30, 2020. The increase in cost of assay services revenue was primarily
due to an increase in manufacturing costs as a result of volume increases, net
of production efficiencies.

Cost of product revenue decreased by $0.1 million, or 80%, for the three months
ended September 30, 2021 compared to the three months ended September 30, 2020
primarily due to a reduction in the volume of kits sold, partly offset by an
increase in the cost of materials.

Research and development
                                        Three Months Ended September 30,                    Change
(in thousands)                                 2021                       2020           $           %
Research and development       $           15,596                       $ 6,884      $ 8,712       127  %


Research and development increased by $8.7 million, or 127%, for the
three months ended September 30, 2021 compared to the three months ended
September 30, 2020. The increase in research and development was primarily due
to a $6.5 million non-recurring, non-cash stock-based compensation expense
related to the sale of stock and vested options by an employee to an economic
interest holder in excess of fair value, a $1.1 million increase in professional
services and supplies related to projects for reducing costs and content
expansion, a $0.6 million increase in wages and benefits due to increased
headcount in our research and development team and a $0.5 million increase in
stock-based compensation expense due to new option grants and Earn-Out Shares
issued to Earn-Out Service Providers.

Selling, general and administrative expenses

                                                      Three Months Ended September
                                                                   30,                                 Change
(in thousands)                                           2021               2020                $                 %
Selling, general and administrative                  $   20,632          $  8,337          $ 12,295                147  %


Selling, general, and administrative increased by $12.3 million, or 147%, for
the three months ended September 30, 2021 compared to the three months ended
September 30, 2020. The increase in selling, general and administrative was
primarily due to a $4.3 million increase in advisory and management services
incurred in relation to public-readiness preparations and other transactions, a
$3.3 million increase in wages and benefits due to increased headcount in our
commercial team, a $2.1 million increase in services incurred related to market
research and marketing initiatives, a $1.8 million increase in stock-based
compensation expense due to new option grants and Earn-Out Shares issued to
Earn-Out Service Providers and a $0.8 million increase in stock-based
compensation expense for consulting services.

Other (expenses) income

                                                      Three Months Ended September
                                                                   30,                                  Change
(in thousands)                                           2021               2020                $                   %
Other (expense) income:
Interest income and other, net                       $       55          $     13          $      42                 323  %
Interest expense                                             (2)           (1,595)             1,593                 100  %
Change in fair value of warrant liabilities              (8,111)                -             (8,111)               (100) %
Change in fair value of earn-out liability               (5,662)                -             (5,662)               (100) %
Loss on extinguishment of debt, net                      (2,693)                -             (2,693)               (100) %
Total other expense                                  $  (16,413)         $ (1,582)         $ (14,831)               (937) %

Total other expenses increased by $ 14.8 million, or 937%, for the three months ended
September 30, 2021 compared to the three months ended September 30, 2020.


Interest income and other, net increased by less than $0.1 million, or 323%, for
the three months ended September 30, 2021 compared to the three months ended
September 30, 2020 primarily due to an average higher cash equivalents and
investment balances during the three months ended September 30, 2021 compared to
the three months ended September 30, 2020.

Interest expense decreased by $1.6 million, or 100%, for the three months ended
September 30, 2021 compared to the three months ended September 30, 2020. The
decrease in interest expense was primarily due to the repayment of the Amended
and Restated Credit Agreement in April 2021.

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The change in fair value of warrant liabilities of $8.1 million for the three
months ended September 30, 2021 is due to an increase in the fair value of the
warrant liabilities as of September 30, 2021 compared to the Closing Date of the
Business Combination. The warrant liabilities were recorded as part of the
Business Combination and therefore did not exist in the prior year.

The change in fair value of the earn-out liability of $5.7 million for the three
months ended September 30, 2021 is due to an increase in the fair value of the
earn-out liability as of September 30, 2021 compared to the Closing Date of the
Business Combination. The earn-out liability was recorded as part of the
Business Combination and therefore did not exist in the prior year.

Loss on extinguishment of debt, net of $2.7 million for the three months ended
September 30, 2021 is due to a $2.7 million loss on extinguishment of debt as a
result of the conversion of the Convertible Debt in July 2021.

Comparison of the nine months ended September 30, 2021 versus the nine months
ended September 30, 2020

Revenue
                                      Nine Months Ended September 30,                   Change
(in thousands)                              2021                      2020           $            %
Revenue:
Assay services revenue        $         48,308                     $ 22,166      $ 26,142       118  %
Product revenue                            730                        1,144          (414)      (36) %
Collaboration revenue                    2,288                        1,720           568        33  %
Other revenue                            7,306                        2,636         4,670       177  %
Total revenue                 $         58,632                     $ 27,666      $ 30,966       112  %

Total turnover increased by $ 31.0 million, or 112%, for the nine months ended
September 30, 2021 compared to the nine months ended September 30, 2020.


Assay services revenue increased by $26.1 million, or 118%, for the nine months
ended September 30, 2021 compared to the nine months ended September 30, 2020
primarily due to a $21.5 million increase in sample volumes and a $4.6 million
increase related to higher-average price per sample as a result of the
reintroduction of the fee-for-service model in 2020.

Product revenue decreased by $0.4 million, or 36%, for the nine months ended
September 30, 2021 compared to the nine months ended September 30, 2020
primarily due to a reduction in the volume of kits sold as we discontinue sales
of kits on our previous platform and prepare to re-launch kits on our upgraded
platform.

Collaboration revenue increased by $0.6 million, or 33%, for the nine months
ended September 30, 2021 compared to the nine months ended September 30, 2020
primarily due to the modification of our existing collaborative arrangement 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 March 2020. SomaLogic and NEC modified
the collaboration agreement by entering into a new collaborative arrangement
with NES in March 2020 to develop and commercialize SomaScan® services in Japan.

Other income increased by $ 4.7 million, or 177%, for the nine months ended
September 30, 2021 compared to the nine months ended September 30, 2020
mainly due to a $ 4.0 million increase in royalty income related to an exclusive license to provide specific SOMAmers® in certain current and future products and a $ 0.7 million increase linked to new provisions relating to subsidy income.


Cost of revenue
                                                     Nine Months Ended September
                                                                 30,                                 Change
(in thousands)                                          2021              2020                $                 %
Cost of assay services revenue                      $  22,548          $ 11,883          $ 10,665                 90  %
Cost of product revenue                                   452               497               (45)                (9) %
Total cost of revenue                               $  23,000          $ 12,380          $ 10,620                 86  %

The total cost of revenues increased by $ 10.6 million, or 86%, for the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020.

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Cost of assay services revenue increased by $10.7 million, or 90%, for the
nine months ended September 30, 2021 compared to the nine months ended
September 30, 2020. The increase in cost of assay services revenue was primarily
due to an increase in manufacturing costs as a result of volume increases, net
of production efficiencies.

Research and development
                                       Nine Months Ended September 30,                   Change
(in thousands)                               2021                      2020           $           %
Research and development       $         32,304                     $ 23,180      $ 9,124        39  %


Research and development increased by $9.1 million, or 39%, for the nine months
ended September 30, 2021 compared to the nine months ended September 30, 2020.
The increase in research and development was primarily due to an $6.5 million
non-recurring, non-cash stock-based compensation expense related to the sale of
common stock and vested options by an employee to an economic interest holder in
excess of fair value, a $1.1 million increase in professional services and
supplies related to projects for reducing costs and content expansion, a $0.8
million increase in wages and benefits due to increased headcount in our
research and development team and a $0.7 million increase in stock-based
compensation expense due to new option grants and Earn-Out Shares issued to
Earn-Out Service Providers.

Selling, general and administrative expenses

                                                      Nine Months Ended September
                                                                  30,                                 Change
(in thousands)                                           2021              2020                $                 %
Selling, general and administrative                  $  48,274          $ 26,755          $ 21,519                 80  %


Selling, general, and administrative increased by $21.5 million, or 80%, for the
nine months ended September 30, 2021 compared to the nine months ended
September 30, 2020. The increase in selling, general and administrative was
primarily due to a $9.5 million increase in advisory and management services
incurred in relation to public-readiness preparations and other transactions, a
$5.6 million increase in wages and benefits due to increased headcount in our
commercial team, a $2.9 million increase in stock-based compensation expense due
to new option grants, Earn-Out Shares issued to Earn-Out Service Providers and
option modifications, a $2.7 increase in services incurred related to market
research and marketing initiatives and a $0.8 million increase in stock-based
compensation expense for consulting services.

Other (expense) income
                                                     Nine Months Ended September 30,                   Change
(in thousands)                                           2021               2020                $                  %
Other (expense) income:
Interest income and other, net                       $      126          $    138          $    (12)                 (9) %
Interest expense                                         (1,324)           (9,590)            8,266                  86  %
Change in fair value of warrant liabilities              (8,111)                -            (8,111)               (100) %
Change in fair value of earn-out liability               (5,662)                -            (5,662)               (100) %
Loss on extinguishment of debt, net                      (4,323)                -            (4,323)               (100) %
Total other expense                                  $  (19,294)         $ (9,452)         $ (9,842)               (104) %

Total other charges increased by $ 9.8 million, or 104%, for the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020.


Interest income and other, net decreased by less than $0.1 million, or 9%, for
the nine months ended September 30, 2021 compared to the nine months ended
September 30, 2020 primarily due to lower interest rates on investments, partly
offset by an average higher cash equivalents and investment balances during the
nine months ended September 30, 2021 compared to the nine months ended
September 30, 2020.

Interest expense decreased by $8.3 million, or 86%, for the nine months ended
September 30, 2021 compared to the nine months ended September 30, 2020. The
decrease in interest expense was primarily due to a $4.8 million change in the
fair value of the compound derivative liability in the nine months ended
September 30, 2020. In April 2021, the Company repaid the Amended and Restated
Credit Agreement in full and the fair value of the compound derivative liability
was included in the net carrying amount of the debt used to determine the loss
on extinguishment of debt. As a result, interest expense related to the Amended
and Restated Credit Agreement was $3.4 million less during the nine months ended
September 30, 2021 compared to the nine months ended September 30, 2020.

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Change in fair value of warrant liabilities of $8.1 million for the nine months
ended September 30, 2021 is due to an increase in the fair value of the warrant
liabilities as of September 30, 2021 compared to the Closing Date of the
Business Combination. The warrant liabilities were recorded as part of the
Business Combination and therefore did not exist in the prior year.

Change in fair value of the earn-out liability of $5.7 million for the nine
months ended September 30, 2021 is due to an increase in the fair value of the
earn-out liability as of September 30, 2021 compared to the Closing Date of the
Business Combination. The earn-out liability was recorded as part of the
Business Combination and therefore did not exist in the prior year.

Loss on extinguishment of debt, net of $4.3 million for the nine months ended
September 30, 2021 is due to a $5.2 million loss on extinguishment of debt as a
result of the repayment of the Amended and Restated Credit Agreement in
April 2021 and a $2.7 million loss on extinguishment of debt as a result of the
conversion of the Convertible Debt in July 2021, offset by a $3.6 million gain
on extinguishment of debt as of result of the forgiveness of the PPP loan in
June 2021.

Non-GAAP financial measures


We present non-GAAP financial measures in order to assist readers of our
condensed consolidated financial statements in understanding the core operating
results used by management to evaluate and run the business, as well as, for
financial planning purposes. Our non-GAAP financial measure, Adjusted EBITDA,
provides an additional tool for investors to use in comparing our financial
performance over multiple periods.

Adjusted EBITDA is a key performance measure that our management uses to assess
its operating performance. Adjusted EBITDA facilitates internal comparisons of
our operating performance on a more consistent basis, and we use this measure
for business planning, forecasting, and decision-making. We believe that
Adjusted EBITDA enhances an investor's understanding of our financial
performance as it is useful in assessing our operating performance from
period-to-period by excluding certain items that we believe are not
representative of our core business.

Our Adjusted EBITDA may not be comparable to measures with the same name of other companies, as they may not calculate this measure in the same way. Adjusted EBITDA is not prepared in accordance with GAAP and should not be viewed in isolation or as an alternative to measures prepared in accordance with GAAP. When evaluating our performance, you should consider Adjusted EBITDA as well as other measures of financial performance prepared in accordance with GAAP, including net loss.

Adjusted EBITDA


We calculate Adjusted EBITDA as net loss adjusted to exclude interest expense,
net, depreciation and amortization, and other non-recurring items. The other
non-recurring items include the loss on extinguishment of debt, net, and a
one-time non-cash stock-based compensation expense.

The following table is a reconciliation of net loss in accordance with GAAP to
non-GAAP adjusted EBITDA for the three and nine months ended September 30, 2021
and 2020:
                                         Three Months Ended September 30,            Nine Months Ended September 30,
(in thousands)                               2021                2020                   2021                   2020
GAAP net loss                           $   (41,419)         $   (7,483)         $        (64,240)         $  (44,101)
Non-GAAP EBITDA adjustments to net
income:
Interest expense, net                           (53)              1,582                     1,198               9,452
Depreciation and amortization                   532                 671                         -               1,909
EBITDA                                      (40,940)             (5,230)                  (63,042)            (32,740)
Other non-GAAP adjustments:
Loss on extinguishment debt, net (1)          2,693                   -                     4,323                   -
One-time non-cash stock-based
compensation (2)                              6,461                   -                     6,461                   -
Adjusted EBITDA                         $   (31,786)         $   (5,230)         $        (52,258)         $  (32,740)


(1) Represents the $5.2 million loss on extinguishment of debt as a result of
the repayment of the Amended and Restated Credit Agreement in April 2021, the
$2.7 million loss on extinguishment of debt as a result of the conversion of the
Convertible Debt in July 2021, and the $3.6 million gain on extinguishment of
debt as a result of the forgiveness of the PPP loan in June 2021. See Note 10,

Debt.

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(2) Represents a one-time non-cash stock-based compensation expense of $6.5
million related to the sale of stock and vested options by an employee to an
economic interest holder in excess of fair value. See Note 13,   Stock-based
Compensation  , for more details on this secondary sale transaction.

Liquidity and capital resources


Historically, our primary sources of liquidity have been revenue collected from
our customers, net proceeds from sale of our capital stock, and borrowings from
debt facilities. We received net proceeds of $530.1 million from the Business
Combination and PIPE Investment on September 1, 2021. Following the completion
of the Business Combination, we expect that our operating cash flows, in
addition to cash on hand, enable us to make investments in the future. We expect
our operating cash flows to further improve as we increase operational
efficiencies and experience economies of scale.

We believe that our existing cash and cash equivalents and investments will be
sufficient to support working capital and capital expenditure requirements for
at least the next 12 months. Our future capital requirements will depend on many
factors, including our sample volume growth rate, the pace of expansion of sales
and marketing activities, the timing and extent of spending to supporting
research and development efforts, the introduction of new and enhanced products
and services, and the level of costs to operate as a public company following
the reverse recapitalization. We may, in the future, enter into arrangements to
acquire or invest in complementary businesses, products and technologies.

Our borrowings from debt facilities were provided from three different sources.
On April 9, 2021, the Company repaid the Amended and Restated Credit Agreement
in full and the obligation was extinguished. In addition to the outstanding
principal balance of $33.3 million as of that date, the Company also paid a
prepayment penalty of approximately $4.0 million.

In April 2020, we received a loan in the aggregate amount of $3.5 million,
pursuant to the Paycheck Protection Program, established pursuant to the
recently enacted Coronavirus Aid, Relief, and Economic Security Act ("CARES
Act") and administered by the United States Small Business Administration. Under
the terms of the CARES Act, we applied for and received forgiveness on June 21,
2021 for the full amount borrowed under the PPP loan, including less than $0.1
million of accrued interest, which was recognized as a gain on extinguishment of
debt during the nine months ended September 30, 2021.

On July 9, 2021, the holder of the Convertible Debt converted the Convertible
Debt into 682,070 shares of Old SomaLogic Class B common stock. The 682,070
shares of Old SomaLogic Class B common stock that were issued for the conversion
of the Convertible Debt are presented in the condensed consolidated statements
of redeemable convertible preferred stock and stockholders' equity (deficit) as
571,642 shares of Common Stock as a result of the reverse recapitalization. As
of September 30, 2021 no debt obligations are outstanding.

We may be required to seek additional equity or debt financing. In the event the
Company requires additional financing, we may not be able to raise such
financing on terms acceptable to us or at all. If we are unable to raise
additional capital or generate cash flows necessary to expand our operations and
invest in continued innovation, we may not be able to compete successfully,
which would harm our business, operations, and financial condition.

We also have entered into various non-cancelable operating lease agreements for
our current headquarters and laboratory facilities in Boulder, Colorado. In
September 2020, we agreed to terminate the lease agreement for our corporate
headquarters, effective June 2021, and our lease for additional office space
expired in August 2021. In connection with the Lab Closure, we also terminated
the laboratory lease in Oxford, United Kingdom with the lease term is set to
expire on December 31, 2021. As of September 30, 2021, we continued to use the
space for storage of property and equipment. As of September 30, 2021, our total
future minimum lease commitments were $5.2 million, of which $0.4 million is due
during the remainder of 2021.

Cash flow

The following table summarizes our cash flows for the periods presented:

                                                                 Nine Months Ended September 30,
(in thousands)                                                     2021                    2020
Net cash used in operating activities                       $        (22,446)         $    (27,751)
Net cash (used in) provided by investing activities                 (170,337)               30,846
Net cash provided by financing activities                            497,088                 9,335

Effect of exchange rates on cash, cash equivalents and restricted cash

                                                          (11)                  (15)

Net increase in cash, cash equivalents and restricted cash $ 304,294 $ 12,415

Cash flow from operating activities

Cash used in operating activities for the nine months ended September 30, 2021
was $ 22.4 million, which is mainly attributable to a net loss of
$ 64.2 million and was partially offset by non-cash stock-based compensation

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expense of $20.7 million, non-cash change in the fair value of the warrant
liabilities of $8.1 million, non-cash change in the fair value of the earn-out
liability of $5.7 million, loss on extinguishment of debt, net of $4.3 million,
non-cash depreciation and amortization of $1.9 million, non-cash PIK interest
expense of $0.2 million, non-cash provision for excess and obsolete inventory of
$0.6 million, non-cash amortization of premium on available-for-sale securities,
net, of $0.3 million, non-cash amortization of debt issuance costs, discounts
and premiums of $0.3 million. The cash used in operating activities was also
partially offset by a net decrease in our operating assets and liabilities of
$0.2 million.

Cash used in operating activities for the nine months ended September 30, 2020
was $27.8 million, which was primarily attributable to a net loss of $44.1
million and a net decrease in our operating assets and liabilities of $2.0
million, which were partially offset by non-cash stock-based compensation
expense of $9.8 million, non-cash change in fair value of the compound
derivative liability of $4.8 million, non-cash depreciation and amortization of
$2.1 million, non-cash amortization of debt issuance costs, discounts, and
premiums of $1.6 million. The net decrease in our operating assets and
liabilities was primarily due to the $3.5 million increase in accounts
receivable and a $2.3 million increase in deferred costs of services. These
changes were offset by a $2.4 million increase in accounts payable, a $1.0
million increase in accrued and other liabilities, and a $0.7 million increase
in deferred revenue.

Cash flow from investing activities


Cash used in investing activities for the nine months ended September 30, 2021
was $170.3 million, consisting of $167.3 million for the purchase of
available-for-sale securities, net of proceeds from sales and maturities of
available-for-sale securities, and $3.0 million for the purchase of property and
equipment, net of proceeds from the sale of property and equipment.

Cash provided by investing activities for the nine months ended September 30,
2020 was $30.8 million, consisting of $31.5 million from sales and maturities of
available-for-sale securities, net of amounts related to purchases of
available-for-sale securities, offset by $0.7 million for the purchase of
property and equipment.

Cash flow from financing activities


Cash provided by financing activities for the nine months ended September 30,
2021 was $497.1 million, consisting of the $357.2 million in net proceeds from
the PIPE investment, $173.6 million in net proceeds from the Business
Combination, and $2.8 million in proceeds from the exercise of options to
purchase our common stock. The cash provided by financing activities was
partially offset by the $36.5 million repayment of the Amended and Restated
Credit Agreement.

Cash provided by financing activities for the nine months ended September 30,
2020 was $9.3 million, consisting of $5.0 million in proceeds related to the
Simple Agreement for Future Equity ("SAFE"), $3.5 million in proceeds from the
PPP loan, and $0.8 million in proceeds from the exercise of options to purchase
our common stock.


Critical accounting conventions and estimates


Our discussion and analysis of our financial condition and results of operations
are based upon our consolidated financial statements which have been prepared in
accordance with United States generally accepted accounting principles, or
GAAP. The preparation of the consolidated financial statements requires us to
make estimates and judgments that affect the reported amounts of assets,
liabilities, revenue, costs, expenses and related disclosures. We evaluate our
estimates and judgments on an on-going basis. 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. Within the context of these critical accounting policies, we are not
currently aware of any reasonably likely event that would result in materially
different amounts being reported.

While our significant accounting policies are described in more detail in Note
2,   Significant Accounting Policies  , in "Part I. Financial Information - Item
1. Financial Statements", we believe that the following accounting policies are
those most critical as they require difficult, subjective, and/or complex
judgements and estimates used in the preparation of our consolidated financial
statements.

Revenue recognition

We account for revenue from sales to customers under ASC 606, Revenue from Contracts with Customers (“ASC 606”). ASC 606 provides a five-step model for revenue recognition that includes identifying the contract with a customer, identifying performance obligations in the contract, determining the transaction price, assigning the price of performance obligation transaction and revenue recognition when, or as, an entity satisfies a performance obligation.

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We recognize revenue when or as control of promised goods or services is
transferred to the 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 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. We do not adjust revenue for the effects of a
significant financing component for contracts where the period between the
transfer of the goods or services and collection is one year or less. We expense
incremental costs to obtain a contract as incurred since the amortization period
of the asset that would otherwise be recognized is one year or less.

Revenue from analytics services


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. When assay services are included with other products or services
within a customer contract, judgment is required to determine whether the
promises are distinct or should be combined and to determine the transaction
price allocation and standalone selling price. Standalone selling price is
primarily determined based on amounts invoiced to customers in observable
transactions. Standalone selling price varies depending on customer size, volume
and contract length.

Product revenue

Product revenue primarily consists of kit sales to customers who have deployed
the assay in their own laboratories. We receive a fixed price per kit and
revenue from product sales is recognized upon transfer of control to the
customer. Our principal terms of sale are freight on board ("FOB") shipping
point and as such, we transfer control and record revenue for product sales upon
shipment. Shipping and handling costs billed to customers are included in
product revenue in the consolidated statements of operations and comprehensive
loss.

Collaboration revenue

We provide research and development services that are accounted for in
accordance with ASC 808, Collaborative Arrangements, because both parties are
active participants and are exposed to significant risks and rewards depending
on the activity's commercial failure or success. The most critical judgments
used to estimate revenue from collaborative arrangements include the
determination of units of account within the scope of ASC 606, the number of
distinct performance obligations, estimation of transaction price including
allocation to the identified performance obligations, and determination of the
pattern of recognition.

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
the exclusive license to make, use or sell certain licensed products in certain
geographic areas. We recognize revenue for a sales or usage-based royalty
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.

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. For efforts performed under
these grant agreements, our policy is to recognize 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 provided by the Company. Grant revenue is recognized
when the related costs are incurred and recorded in other revenue in the
consolidated statements of operations and comprehensive loss.



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Inventory

Inventory is stated at the lower of cost or net realizable value on a first-in,
first-out basis. Cost is determined using a standard cost system, whereby the
standard costs are updated periodically to reflect current costs. The Company
estimates the recoverability of inventory by referencing estimates of future
demands and product life cycles, including expiration. The Company periodically
analyzes its inventory levels to identify inventory that may expire prior to
expected usage, no longer meets quality specifications, or has a cost basis in
excess of its estimated realizable value and records a charge to cost of revenue
for such inventory as appropriate. In some cases, we have determined a certain
portion of inventories to be in excess or obsolete. In those cases, we write
down the value of those inventories to their net realizable value based upon
judgement and estimates about future demand and market conditions. If actual
market conditions are less favorable than those projected by management,
additional inventory write-downs may be required. Our excess and obsolete
inventory reserve may vary based upon judgments related to evolution of our
products and services, new technologies, emerging competitors, and change in
customer buying patterns. Direct and indirect manufacturing costs incurred
during research and development activities are expensed to research and
development as consumed. Judgment is required in determining the value of
inventory that is not expected to be used in our assay services within 12 months
of the current reporting period and is recorded as non-current inventory on the
consolidated balance sheets.

Stock-based compensation

The Company incurs stock-based compensation expense related to stock options,
and we recognize stock-based employee compensation, net of an estimated
forfeiture rate over the employee's requisite service period, which is generally
the vesting period, on a straight-line basis. Stock-based compensation costs are
estimated at the grant date based on the fair value of the equity for financial
reporting purposes. We utilize the Black-Scholes valuation model for estimating
the fair value of stock options granted. The fair value of each option is
estimated on the date of grant. The model assumptions include expected
volatility, term, dividend yield and the risk-free interest rate. Assumptions
used in applying the Black-Scholes option-pricing model to determine the
estimated fair value of stock options granted are complex, involve inherent
uncertainties and the application of judgment. As a result, if factors or
expected outcomes change and significantly different assumptions or estimates
are used, the Company's equity-based compensation could be materially different.

Below are the assumptions used to value the stock options granted and an analysis of the Company’s methodology to develop each of the assumptions used:


•Expected dividend yield - The Company did not pay regular dividends on its
common stock and does not anticipate paying any dividends in the foreseeable
future. Therefore, the Company used an expected dividend yield of zero in the
option valuation model.
•Expected volatility - Volatility is a measure of the amount by which a
financial variable, such as share price, has fluctuated (historical volatility)
or is expected to fluctuate (expected volatility) during a period. The Company
analyzes the volatility used by similar public companies at a similar stage of
development to estimate expected volatility. The comparable companies are chosen
based on their similar size, stage in the life cycle or area of specialty.
•Risk-free interest rate - We use a range of United States Treasury rates with a
term that most closely resembles the expected life of the option as of the date
of which the option was granted.
•Expected average life of options - The expected life assumption is the expected
time to exercise. The Company uses a simplified method to develop this
assumption, which uses the average of the vesting period and the contractual
terms.

Determination of the fair value of ordinary shares


As there was no public market for the Old SomaLogic common stock prior to the
consummation of the Business Combination, on each grant date, Old SomaLogic
developed an estimate of the fair value of the Old SomaLogic common stock based
on the information known to Old SomaLogic on the date of grant, upon a review of
any recent events and their potential impact on the estimated fair value per
share of the Old SomaLogic common stock, and in part on input from a
third-party valuation firm.

The valuations of the Old SomaLogic common stock were determined in accordance
with the guidelines outlined in the American Institute of Certified Public
Accountants Practice Aid, Valuation of Privately-Held-Company Equity Securities
Issued as Compensation ("Practice Aid"). To determine the fair value of the Old
SomaLogic common stock, Old SomaLogic utilized the probability-weighted expected
return method and incorporated valuations under different scenarios and methods,
included the option pricing, or "backsolve" method, which estimated the fair
value of Old SomaLogic by reference to the value and preferences of its last
round of financing, as well as its capitalization.

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The assumptions used to determine the estimated fair value of the Old SomaLogic
common stock were based on numerous objective and subjective factors, combined
with management's judgment, including:

•the progress of Old SomaLogic's research and development efforts, Old
SomaLogic's stage of development, and business strategy;
•the rights, preferences, and privileges of Old SomaLogic's redeemable
convertible preferred stock relative to those of the Old SomaLogic common stock;
•the prices at which Old SomaLogic sold shares of its redeemable convertible
preferred stock;
•Old SomaLogic's financial condition and operating results, including its levels
of available capital resources;
• equity market conditions affecting comparable public companies; and
•general United States market conditions and the lack of marketability of the
Old SomaLogic common stock.

As the public trading market for our Common Stock has been established in
connection with the consummation of the Business Combination, it is no longer
necessary for our board of directors to estimate the fair value of our Common
Stock in connection with our accounting for granted stock options and other such
awards we may grant, as the fair value of our Common Stock will be determined
based on the quoted market price of our Common Stock.

Liabilities related to warrants


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

Responsibility for price supplement


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

Recently published accounting position papers

Please refer to Note 2, Significant accounting policies – Recent accounting pronouncements, in “Part I. Financial Information – Item 1. Financial Statements” for a discussion of recent accounting pronouncements and their expected effect on our business. .

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