SOMALOGIC, INC. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL POSITION AND OPERATING RESULTS (Form 10-Q)
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The following discussion and analysis ofSomaLogic'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 endedDecember 31, 2020 and 2019 included in the prospectus, which constituted a part of the Company's registration statement on Form S-1, filed onOctober 18, 2021 , and the Company's unaudited condensed consolidated financial statements as of and for the three and nine months endedSeptember 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 uponSomaLogic'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 OldSomaLogic prior to the consummation of the Business Combination, and to the Company and its consolidated subsidiaries following the consummation of the Business Combination. Business OverviewSomaLogic 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 ofSeptember 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 endedSeptember 30, 2021 and in the years endedDecember 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
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 endedSeptember 30, 2021 and 2020, respectively. As ofSeptember 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 OnSeptember 1, 2021 (the "Closing Date"), we consummated the business combination ("the "Business Combination") contemplated by the Merger Agreement (as amended, the "Merger Agreement"), datedMarch 28, 2021 by and among CMLS II,S-Craft Merger Sub, Inc. , aDelaware 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 toSomaLogic, Inc. , and Old SomaLogic changed its name toSomaLogic Operating Co., Inc. Unless the context otherwise requires, the terms "we", "us", "our", "SomaLogic" and "the Company" refer toSomaLogic, 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
InMarch 2020 , theWorld 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 ofthe 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 inBoulder, Colorado , as well as closing ourOxford, 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 â„¢ tests under our Clinical Laboratory Improvement Amendments (“CLIA”) Laboratory-Developed Test (“LDT”) license as of
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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 SomaSignalâ„¢ 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 SomaSignalâ„¢ tests and approximately 5 to 10
SomaSignalâ„¢ 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 ofSeptember 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 ofthe 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 allowSomaLogic 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 30 -------------------------------------------------------------------------------- Table of Contents 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.
31 -------------------------------------------------------------------------------- Table of Contents 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 toEarn-Out Shares issuable to former stockholders of OldSomaLogic . 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
Results of operations
Comparison of the three months endedSeptember 30, 2021 versus the three months endedSeptember 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
The$6.1 million , or 54%, increase in assay services revenue for the three months endedSeptember 30, 2021 compared to the three months endedSeptember 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 endedSeptember 30, 2021 compared to the three months endedSeptember 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
32 -------------------------------------------------------------------------------- Table of Contents Cost of assay services revenue increased by$4.0 million , or 84%, for the three months endedSeptember 30, 2021 compared to the three months endedSeptember 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 endedSeptember 30, 2021 compared to the three months endedSeptember 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 endedSeptember 30, 2021 compared to the three months endedSeptember 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 andEarn-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
Interest income and other, net increased by less than$0.1 million , or 323%, for the three months endedSeptember 30, 2021 compared to the three months endedSeptember 30, 2020 primarily due to an average higher cash equivalents and investment balances during the three months endedSeptember 30, 2021 compared to the three months endedSeptember 30, 2020 . Interest expense decreased by$1.6 million , or 100%, for the three months endedSeptember 30, 2021 compared to the three months endedSeptember 30, 2020 . The decrease in interest expense was primarily due to the repayment of the Amended and Restated Credit Agreement inApril 2021 . 33 -------------------------------------------------------------------------------- Table of Contents The change in fair value of warrant liabilities of$8.1 million for the three months endedSeptember 30, 2021 is due to an increase in the fair value of the warrant liabilities as ofSeptember 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 endedSeptember 30, 2021 is due to an increase in the fair value of the earn-out liability as ofSeptember 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 endedSeptember 30, 2021 is due to a$2.7 million loss on extinguishment of debt as a result of the conversion of the Convertible Debt inJuly 2021 . Comparison of the nine months endedSeptember 30, 2021 versus the nine months endedSeptember 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
Assay services revenue increased by$26.1 million , or 118%, for the nine months endedSeptember 30, 2021 compared to the nine months endedSeptember 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 endedSeptember 30, 2021 compared to the nine months endedSeptember 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 endedSeptember 30, 2021 compared to the nine months endedSeptember 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 bySomaLogic's SomaScan® assay technology inMarch 2020 .SomaLogic and NEC modified the collaboration agreement by entering into a new collaborative arrangement with NES inMarch 2020 to develop and commercialize SomaScan® services inJapan .
Other income increased by
mainly due to a
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
34 -------------------------------------------------------------------------------- Table of Contents Cost of assay services revenue increased by$10.7 million , or 90%, for the nine months endedSeptember 30, 2021 compared to the nine months endedSeptember 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 endedSeptember 30, 2021 compared to the nine months endedSeptember 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 andEarn-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
Interest income and other, net decreased by less than$0.1 million , or 9%, for the nine months endedSeptember 30, 2021 compared to the nine months endedSeptember 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 endedSeptember 30, 2021 compared to the nine months endedSeptember 30, 2020 . Interest expense decreased by$8.3 million , or 86%, for the nine months endedSeptember 30, 2021 compared to the nine months endedSeptember 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 endedSeptember 30, 2020 . InApril 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 endedSeptember 30, 2021 compared to the nine months endedSeptember 30, 2020 . 35 -------------------------------------------------------------------------------- Table of Contents Change in fair value of warrant liabilities of$8.1 million for the nine months endedSeptember 30, 2021 is due to an increase in the fair value of the warrant liabilities as ofSeptember 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 endedSeptember 30, 2021 is due to an increase in the fair value of the earn-out liability as ofSeptember 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 endedSeptember 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 inApril 2021 and a$2.7 million loss on extinguishment of debt as a result of the conversion of the Convertible Debt inJuly 2021 , offset by a$3.6 million gain on extinguishment of debt as of result of the forgiveness of the PPP loan inJune 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 endedSeptember 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 inApril 2021 , the$2.7 million loss on extinguishment of debt as a result of the conversion of the Convertible Debt inJuly 2021 , and the$3.6 million gain on extinguishment of debt as a result of the forgiveness of the PPP loan inJune 2021 . See Note 10,
Debt.
36 -------------------------------------------------------------------------------- Table of Contents (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 andPIPE Investment onSeptember 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. OnApril 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 . InApril 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 theUnited States Small Business Administration . Under the terms of the CARES Act, we applied for and received forgiveness onJune 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 endedSeptember 30, 2021 . OnJuly 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 ofSeptember 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 inBoulder, Colorado . InSeptember 2020 , we agreed to terminate the lease agreement for our corporate headquarters, effectiveJune 2021 , and our lease for additional office space expired inAugust 2021 . In connection with the Lab Closure, we also terminated the laboratory lease inOxford, United Kingdom with the lease term is set to expire onDecember 31, 2021 . As ofSeptember 30, 2021 , we continued to use the space for storage of property and equipment. As ofSeptember 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
Cash flow from operating activities
Cash used in operating activities for the nine months ended
was
37 -------------------------------------------------------------------------------- Table of Contents 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 endedSeptember 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 endedSeptember 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 endedSeptember 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 endedSeptember 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 endedSeptember 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 withUnited 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 606â€). 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.
38 -------------------------------------------------------------------------------- Table of Contents 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 customerswho 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. 39 -------------------------------------------------------------------------------- Table of Contents 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 theAmerican Institute of Certified Public Accountants Practice Aid , Valuation ofPrivately-Held-Company Equity Securities Issued as Compensation ("Practice Aid"). To determine the fair value of the OldSomaLogic 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. 40 -------------------------------------------------------------------------------- Table of Contents 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, OldSomaLogic'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 •generalUnited 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 recognizedEarn-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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