# Standard Biotools Inc.: Form 10-Q for the period ended Sep 30, 2023

- Company: [Standard Biotools Inc.](/companies/lab.md) (CIK 1162194)
- Form: 10-Q
- Filed: 2023-11-07
- Accepted by EDGAR: Nov 7, 2023, 17:03 ET
- Period: 2023-09-30
- Accession: 0000950170-23-060385
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1162194/000095017023060385/lab-20230930.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1162194/000095017023060385/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2023-09-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2023-07-01 to 2023-09-30 | $25.4m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Revenue | 9 months, 2023-01-01 to 2023-09-30 | $78.2m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Cost of revenue | 3 months, 2023-07-01 to 2023-09-30 | $14.2m | us-gaap:CostOfGoodsAndServicesSold |
| Cost of revenue | 9 months, 2023-01-01 to 2023-09-30 | $41.1m | us-gaap:CostOfGoodsAndServicesSold |
| Gross profit | 3 months, 2023-07-01 to 2023-09-30 | $11.2m | us-gaap:GrossProfit |
| Gross profit | 9 months, 2023-01-01 to 2023-09-30 | $37.1m | us-gaap:GrossProfit |
| Research and development | 3 months, 2023-07-01 to 2023-09-30 | $6.4m | us-gaap:ResearchAndDevelopmentExpense |
| Research and development | 9 months, 2023-01-01 to 2023-09-30 | $19.0m | us-gaap:ResearchAndDevelopmentExpense |
| Selling, general and administrative | 3 months, 2023-07-01 to 2023-09-30 | $22.3m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Selling, general and administrative | 9 months, 2023-01-01 to 2023-09-30 | $66.2m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Operating income | 3 months, 2023-07-01 to 2023-09-30 | −$21.2m | us-gaap:OperatingIncomeLoss |
| Operating income | 9 months, 2023-01-01 to 2023-09-30 | −$55.2m | us-gaap:OperatingIncomeLoss |
| Interest expense | 3 months, 2023-07-01 to 2023-09-30 | $1.2m | us-gaap:InterestExpense |
| Interest expense | 9 months, 2023-01-01 to 2023-09-30 | $3.5m | us-gaap:InterestExpense |
| Income tax | 3 months, 2023-07-01 to 2023-09-30 | $50.0k | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 9 months, 2023-01-01 to 2023-09-30 | $614.0k | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2023-07-01 to 2023-09-30 | −$21.0m | us-gaap:NetIncomeLoss |
| Net income | 9 months, 2023-01-01 to 2023-09-30 | −$54.9m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2023-07-01 to 2023-09-30 | −$0.27 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 9 months, 2023-01-01 to 2023-09-30 | −$0.69 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2023-07-01 to 2023-09-30 | −$0.27 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 9 months, 2023-01-01 to 2023-09-30 | −$0.69 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2023-07-01 to 2023-09-30 | 79,152,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 9 months, 2023-01-01 to 2023-09-30 | 78,967,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 9 months, 2023-01-01 to 2023-09-30 | −$29.2m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 9 months, 2023-01-01 to 2023-09-30 | $2.8m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Share repurchases | 3 months, 2023-07-01 to 2023-09-30 | $400.0k | us-gaap:PaymentsForRepurchaseOfCommonStock |
| Share repurchases | 9 months, 2023-01-01 to 2023-09-30 | $5.2m | us-gaap:PaymentsForRepurchaseOfCommonStock |
| Cash and equivalents | at 2023-09-30 | $79.7m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2023-09-30 | $170.7m | us-gaap:AssetsCurrent |
| Total assets | at 2023-09-30 | $339.3m | us-gaap:Assets |
| Current liabilities | at 2023-09-30 | $51.8m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2023-09-30 | $159.8m | us-gaap:Liabilities |
| Long-term debt | at 2023-09-30 | $64.6m | us-gaap:LongTermDebt |
| Shareholders' equity | at 2023-09-30 | −$131.7m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 39,091 characters.

*The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A) is intended to help the reader understand the results of operations and financial condition of Standard BioTools Inc. MD&A is provided as a supplement to, and should be read together with, our unaudited condensed consolidated financial statements and the notes to those statements included elsewhere in this Quarterly Report on Form 10-Q. This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the Securities Act), and Section 21E of the Securities Exchange Act of 1934, as amended (the Exchange Act), that are based on our management’s beliefs and assumptions and on information currently available to our management. The forward-looking statements are contained principally in the section titled “Risk Factors” and this MD&A. Forward-looking statements include information concerning our possible or assumed future cash flow, revenue, sources of revenue and results of operations, cost of product revenue and product margin, operating and other income and expenses, unit sales and the selling prices of our products, business strategies and strategic priorities, changes in commercial and strategic focus, restructuring plan, reduction-in-force and real estate footprint reduction plans, microfluidics research and development and marketing investment reduction plans, other cost reduction initiatives, portfolio rationalization initiatives, operating discipline improvement plans, implementation of Standard BioTools Business Systems, expected costs and cost savings associated with such plans and initiatives, future product offerings, financing plans, capital allocation plans, expansion of our business, merger and acquisition opportunities, competitive position, industry environment, potential growth opportunities and drivers, market growth expectations, the effects of competition and public health crises on our business, the global supply chain, and our customers, suppliers and other business partners, and our expectations with respect to the closing of the proposed Merger with SomaLogic (each as defined below), including with respect to matters of timing, including shareholder approval by our and SomaLogic’s shareholders, regulatory approval and other closing conditions, the anticipated financial impact and potential benefits to us related to the Merger, and integration of the businesses assuming completion of the Merger and other matters related to the Merger;. Forward-looking statements include statements that are not historical facts and can be identified by terms such as “anticipates,” “believes,” “could,” “seeks,” “estimates,” “expects,” “intends,” “may,” “plans,” “potential,” “predicts,” “projects,” “should,” “will,” “would” or similar expressions and the negatives of those terms.*

*Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. We discuss these risks in greater detail in Part II, Item 1A this Quarterly Report on Form 10-Q and in Part I, Item 1A, “Risk Factors” in our Annual Report on Form 10-K filed with the SEC on March 14, 2023. Given these uncertainties, you should not place undue reliance on these forward-looking statements. Also, forward-looking statements represent our management’s beliefs and assumptions only as of the date of this Quarterly Report on Form 10-Q.*

*Except as required by law, we assume no obligation to update these forward-looking statements, or to update the reasons actual results could differ materially from those anticipated in these forward-looking statements, even if new information becomes available in the future. Unless otherwise stated, our forward-looking statements do not reflect the potential impact of the proposed Merger or any other future acquisitions, mergers, dispositions, joint ventures or investments we may make. You should read this Quarterly Report on Form 10-Q completely and with the understanding that our actual future results may be materially different from what we expect.*

Standard BioTools, the Standard BioTools logo, Fluidigm®, the Fluidigm logo, 48.Atlas™, Access Array™, Advanta™, Advanta EASE™, Atlas™, Biomark™, “Bringing new insights to life”™, C1™, Callisto™, Cell-ID™, CyTOF®, CyTOF XT™, the CyTOF XT logo, D3™, Delta Gene™, Direct™, Digital Array™, Dynamic Array™, EP1™, EQ™, FC1™, Flex Six™, Flow Conductor™, FluiDesign™, Helios™, High-Precision 96.96 Genotyping™, HTI™, Hyperion™, Hyperion+™, HyperionXTi™, IMC™, Imaging Mass Cytometry™, Immune Profiling Assay™, Juno™, Maxpar®, Maxpar® OnDemand™, MCD™, MSL®, Nanoflex™, Open App™, Pathsetter™, Polaris™, qdPCR 37K™, Script Builder™, Script Hub™, Singular™, SNP Trace™, SNP Type™, “Unleashing tools to accelerate breakthroughs in human health”™, X9™ High-Throughput Genomics System, X9™ Real Time PCR System and Xgrade™ are trademarks or registered trademarks of Standard BioTools Inc. or its affiliates in the United States and/or other countries. Other service marks, trademarks and trade names referred to in this Quarterly Report on Form 10-Q are the property of their respective owners.

Unless the context requires otherwise, references in this Quarterly Report on Form 10-Q to “Standard BioTools” the “Company,” “we,” “us,” and “our” refer to Standard BioTools Inc. and its subsidiaries.

### Overview

Standard BioTools Inc. is driven by a bold purpose – unleashing tools to accelerate breakthroughs in human health. We have an established portfolio of essential, standardized next-generation high resolution technologies that assist biomedical researchers develop medicines faster and better. Our tools are designed to provide reliable and repeatable insights in health and disease using our proprietary mass cytometry and microfluidics technologies, which are useful in proteomics and genomics that help transform scientific discoveries into better patient outcomes. We work with leading academic, government, pharmaceutical, biotechnology, plant and animal research, and clinical laboratories worldwide, focusing on the most pressing needs in translational and clinical research, including oncology, immunology, and immunotherapy.

We distribute our systems through our direct sales force and support organizations located in North America, Europe, and Asia-Pacific, and through distributors or sales agents in several European, Latin American, Middle Eastern, and Asia-Pacific countries. Our manufacturing operations are located in Singapore and Canada.

### Recent Developments

Our leadership team identified three strategic priorities: revenue growth, improving operating discipline and strategic capital allocation, as more fully discussed in Part I Item 1 “Business” in our Annual Report on Form 10-K filed with the SEC on March 14, 2023.

We took additional actions in the nine months ended September 30, 2023 under our strategic initiative to improve operating discipline, including reductions to our headcount in Europe and additional reductions to our real estate footprint in the U.S. On February 28, 2023, we signed an agreement to sublease an additional 25% of our corporate headquarters for a period of 77 months. As a result, 50% of the space at our headquarters was subleased as of September 30, 2023. We expect to recognize $9.1 million of sublease income over the term of this new agreement, with payments expected to commence on December 1, 2023.

### Merger Agreement

On October 4, 2023, we entered into an Agreement and Plan of Merger (the Merger Agreement) with SomaLogic, Inc., a Delaware corporation (SomaLogic), and Martis Merger Sub, Inc., a Delaware corporation and our wholly owned subsidiary (Merger Sub), pursuant to which, among other matters, and subject to the satisfaction or waiver of the conditions set forth in the Merger Agreement, Merger Sub will merge with and into SomaLogic, with SomaLogic continuing as our wholly owned subsidiary and the surviving corporation of the merger (the Merger). Upon the terms and subject to the conditions set forth in the Merger Agreement, at the effective time of the Merger, each share of common stock, par value $0.0001 per share, of SomaLogic issued and outstanding (SomaLogic Stock) will be converted into the right to receive 1.11 (the Exchange Ratio) shares of our common stock. At the effective time of the Merger, SomaLogic’s common stockholders will own approximately 57%, and our common stockholders will own approximately 43%, of the outstanding shares of common stock of the combined company on a fully diluted basis. The parties have also agreed that Michael Egholm, Ph.D., will serve as Chief Executive Officer, Jeffrey Black will serve as Chief Financial Officer, Adam Taich will serve as Chief Strategy Officer and Shane Bowen will serve as Chief Technology Officer of the combined company.

In addition, as of the effective time of the Merger, we will assume each SomaLogic stock incentive plan, outstanding option to purchase shares of SomaLogic Stock and outstanding restricted stock units convertible into shares of SomaLogic Stock, whether vested or unvested.

The parties have agreed to customary representations, warranties and covenants in the Merger Agreement, including, among others, covenants relating to our obligation to call a meeting of our stockholders, and subject to certain exceptions, to recommend that its stockholders approve the issuance of shares of our common stock to holders of SomaLogic Stock pursuant to the Merger Agreement (the Standard BioTools Stock Issuance) and an amendment to our certificate of incorporation to increase the number of authorized shares of our common stock thereunder (the Standard BioTools Charter Amendment), SomaLogic’s obligations to call a meeting of its stockholders to adopt the Merger Agreement, and subject to certain exceptions, to recommend that its stockholders adopt the Merger Agreement and our filing with the SEC and causing to become effective a registration statement on Form S-4 to register the shares of our common stock to be issued pursuant to the Merger Agreement (the Registration Statement).

Consummation of the Merger is subject to certain closing conditions, including, among other things, the (1) approval by our stockholders of the Standard BioTools Stock Issuance and the Standard BioTools Charter Amendment, (2) the adoption by the stockholders of SomaLogic of the Merger Agreement, (3) authorization for listing on The Nasdaq Stock Market of the shares of our common stock (including the shares to be issued in the Merger), subject to official notice of issuance, (4) effectiveness of the Registration Statement, termination or expiration of any waiting period applicable to the Merger under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and (5) the absence of any law, judgment, order, injunction, ruling, writ award or decree by any governmental entity of competent jurisdiction restraining, enjoining or otherwise prohibiting consummation of the Merger. Each party’s obligation to consummate the Merger is also subject to other specified customary conditions, including (1) the representations and warranties of the other party being true and correct as of the date of the Merger Agreement and as of the closing date of the Merger, generally subject to an overall material adverse effect qualification, (2) the performance in all material respects by the other party of its obligations under the Merger Agreement required to be performed on or prior to the date of the closing of the Merger and (3) the absence of a material adverse effect with respect to the other party.

The Merger Agreement contains certain termination rights for both SomaLogic and us. Upon termination of the Merger Agreement by Standard BioTools under specified circumstances, we may be required to pay SomaLogic a termination fee of approximately $19.1 million and/or reimburse SomaLogic’s reasonable out of pocket fees and expenses incurred in connection with the Merger Agreement and the transaction contemplated thereby up to a maximum of $2.0 million. Upon termination of the Merger Agreement by SomaLogic under specified circumstances, SomaLogic may be required to pay us a termination fee of approximately $17.2 million and/or reimburse our reasonable out of pocket fees and expenses incurred in connection with the Merger Agreement and the transaction contemplated thereby up to a maximum of $2.0 million.

The transaction is expected to close in the first quarter of 2024, assuming satisfaction of all conditions to the Merger.

### Financial Operations Overview

### Revenue

We generate revenue primarily from sales of our products and services. Other revenue consists of revenue from product development and license agreements.

Our product revenue consists of sales of instruments and consumables. Consumables revenue is largely driven by the size of our active installed base of instruments and the level of usage per instrument. Service revenue is linked to the sales and active installed base of our instruments as our service revenue primarily consists of post-warranty service contracts, preventive maintenance plans, instrument parts, installation and training for our instruments. We expect the average selling prices of our products and services to fluctuate over time based on market conditions, product mix and currency fluctuations.

### Cost of Revenue

Cost of product revenue includes manufacturing costs incurred in the production process, including component materials, labor and overhead, installation, packaging and delivery costs. In addition, cost of product revenue includes amortization of developed technology and intangibles, royalty costs for licensed technologies included in our products, warranty costs, provisions for slow-moving excess and obsolete inventory and stock-based compensation expense. Our cost of product revenue and related product margin may fluctuate depending on the capacity utilization of our manufacturing facilities in response to market conditions and the demand for our products.

Cost of service revenue includes direct labor hours, overhead and instrument parts. Our cost of service revenue and related service margin may fluctuate depending on the variability in material and labor costs of servicing.

### Research and Development (R&D)

R&D expense consists primarily of compensation-related costs, product development and material expenses and other allocated facilities and information technology expenses. Our R&D efforts have focused primarily on enhancing our technologies and supporting development and commercialization of new and existing products and services. R&D expense also includes costs incurred in conjunction with research grants and product development arrangements.

### Selling, General, and Administrative (SG&A)

SG&A expense consists primarily of personnel costs for our sales and marketing, business development, finance, legal, human resources, information technology and general management teams, as well as professional services, including legal and accounting services.

### Restructuring and Related Charges

Restructuring and related charges primarily consist of severance costs and facilities costs for floors we have subleased or have the intent to sublease (net of sublease income) under our facility lease in South San Francisco. These costs, including a reduction in force, are incurred to improve operational efficiency, achieve cost savings and align our workforce to the future needs of the business. In addition to the reduction in force, we are reducing leased office space, optimizing our manufacturing footprint and streamlining support functions.

### Transaction-related expenses

Transaction-related expenses consist of costs incurred in connection with the Merger Agreement, including legal, advisory, accounting and other transaction-related costs. We expect to continue incurring these costs through the first quarter of 2024. The costs incurred during the year ended December 31, 2022 relate to the private placement whereby the Company issued and sold an aggregate of $225.0 million of convertible preferred stock in connection with the conversion of the bridge loans, which closed on April 4, 2022.

### Results of Operations

The following table presents our unaudited condensed consolidated statements of operations and as a percentage of total revenue for the three and nine months ended September 30, 2023 and 2022 ($ in thousands):

|  | Three Months Ended September 30, 2023 |  | 2022 |  | Nine Months Ended September 30, 2023 |  | 2022 |  |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Revenue | $25,367 | 100% | $25,646 | 100% | $78,152 | 100% | $70,927 | 100% |
| Cost of revenue: |  |  |  |  |  |  |  |  |
| Cost of product revenue | 11,403 | 45% | 14,091 | 55% | 33,276 | 43% | 39,168 | 55% |
| Cost of service and other revenue | 2,810 | 11% | 2,335 | 9% | 7,783 | 10% | 5,875 | 8% |
| Total cost of revenue | 14,213 | 56% | 16,426 | 64% | 41,059 | 53% | 45,043 | 63% |
| Gross profit | 11,154 | 44% | 9,220 | 36% | 37,093 | 47% | 25,884 | 36% |
| Operating expenses: |  |  |  |  |  |  |  |  |
| Research and development | 6,370 | 25% | 8,486 | 33% | 19,039 | 24% | 29,957 | 42% |
| Selling, general and administrative | 22,292 | 88% | 26,340 | 103% | 66,187 | 85% | 82,061 | 116% |
| Restructuring and related charges | 1,998 | 8% | 3,412 | 13% | 5,415 | 7% | 5,102 | 7% |
| Transaction-related expenses | 1,666 | 7% | 9 | 0% | 1,666 | 2% | 3,857 | 5% |
| Total operating expenses | 32,326 | 128% | 38,247 | 149% | 92,307 | 118% | 120,977 | 170% |
| Loss from operations | (21,172) | (84)% | (29,027) | (113)% | (55,214) | (71)% | (95,093) | (134)% |
| Interest expense | (1,223) | (5)% | (1,049) | (4)% | (3,469) | (4)% | (3,141) | (4)% |
| Loss on forward sale of Series B Preferred Stock | — | —% | — | —% | — | —% | (60,081) | (85)% |
| Loss on Bridge Loans | — | —% | — | —% | — | —% | (13,719) | (19)% |
| Other income (expense), net | 1,448 | 6% | (63) | (0)% | 4,417 | 6% | (119) | (0)% |
| Loss before income taxes | (20,947) | (83)% | (30,139) | (117)% | (54,266) | (69)% | (172,153) | (242)% |
| Income tax benefit (expense) | (50) | (0)% | 713 | 3% | (614) | (1)% | 2,900 | 4% |
| Net loss | $(20,997) | (83)% | $(29,426) | (114)% | $(54,880) | (70)% | $(169,253) | (238)% |

### Revenue

Revenue by product type and as a percentage of total revenue were as follows ($ in thousands):

| Product revenue: | Three Months Ended September 30, 2023 |  | 2022 |  | Year-over- Year Change | Nine Months Ended September 30, 2023 |  | 2022 |  | Year-over- Year Change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Instruments | $9,002 | 35% | $7,873 | 31% | 14% | $26,512 | 34% | $18,057 | 25% | 47% |
| Consumables | 9,709 | 38% | 11,439 | 45% | (15)% | 31,302 | 40% | 33,478 | 48% | (6)% |
| Total product revenue | 18,711 | 74% | 19,312 | 76% | (3)% | 57,814 | 74% | 51,535 | 73% | 12% |
| Service revenue | 6,566 | 26% | 5,857 | 23% | 12% | 19,268 | 25% | 17,807 | 25% | 8% |
| Other revenue | 90 | 0% | 477 | 1% | (81)% | 1,070 | 1% | 1,585 | 2% | (32)% |
| Total revenue | $25,367 | 100% | $25,646 | 100% | (1)% | $78,152 | 100% | $70,927 | 100% | 10% |

Total revenue decreased slightly by 1% to $25.4 million for the three months ended September 30, 2023, compared to the three months ended September 30, 2022, primarily due to timing of instruments orders and a decline in consumables revenue related to our genomics end user markets. Revenue grew 10% to $78.2 million for the nine months ended September 30, 2023, compared to the nine months ended September 30, 2022. The growth was primarily attributable to increased instrument placements, primarily in our proteomics end user markets, offset by declines in our genomics end user markets as the result of our decision to reorganize, simplify and reposition our business over the past year. Revenue reported for the nine months ended September 30, 2022 includes a $1.6 million instrument revenue reduction for a one-time reserve recorded for our discontinued LCM product line in the Genomics segment.

Instrument revenue grew 14% to $9.0 million for the three months ended September 30, 2023, compared to the three months ended September 30, 2022, and grew 47% to $26.5 million for the nine months ended September 30, 2023, compared to the nine months ended September 30, 2022. Combined consumables and services revenue has experienced a flat to moderate decrease in 2023; however, the increase in instrument revenue is expected to drive increased consumables and services pull-through based on an expanded installed base, particularly in our proteomics end user markets.

Revenue by segment and as a percentage of total revenue were as follows ($ in thousands):

|  | Three Months Ended September 30, 2023 |  | 2022 |  | Year-over- Year Change | Nine Months Ended September 30, 2023 |  | 2022 |  | Year-over- Year Change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Proteomics revenue | $14,008 | 55% | $14,566 | 57% | (4)% | $47,296 | 63% | $38,764 | 55% | 22% |
| Genomics revenue | 11,359 | 45% | 11,080 | 43% | 3% | 30,856 | 37% | 32,163 | 45% | (4)% |
| Total revenue | $25,367 | 100% | $25,646 | 100% | (1)% | $78,152 | 100% | $70,927 | 100% | 10% |

Total Proteomics revenue decreased 4% for the three and nine months ended September 30, 2023, compared to the three months ended September 30, 2022, primarily due to the timing of customer orders, and grew 22% for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022. Our growth in proteomics was driven by expanded adoption of our flow symmetry solution, the CYTOF XT and early traction from the April 2023 release of Hyperion XTi, our next-generation imaging solution.

Total Genomics revenue grew 3% for the three months ended September 30, 2023 compared to the three months ended September 30, 2022 and decreased 4% for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022 with instrument growth offsetting declines in consumables, service, and development revenues in the third quarter. The anticipated decline in the genomics segment was a primary driver of our decision to reorganize, simplify and reposition this business over the past year. We have implemented our strategy to focus on growing the OEM business and manage this segment to sustainable positive contribution margin in the near-term.

### Cost of Revenue

Product and service cost, product and service gross profit, and product and service margin were as follows ($ in thousands):

|  | Three Months Ended September 30, 2023 | 2022 | Year-over- Year Change | Nine Months Ended September 30, 2023 | 2022 | Year-over- Year Change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Cost of product revenue | $11,403 | $14,091 | (19)% | $33,276 | $39,168 | (15)% |
| Cost of service revenue | 2,754 | 2,335 | 18% | 7,727 | 5,875 | 32% |
| Cost of product and service revenue | $14,157 | $16,426 | (14)% | $41,003 | $45,043 | (9)% |
| Product and service gross profit | $11,120 | $8,743 | 27% | $36,079 | $24,299 | 48% |
| Product and service margin | 43.8% | 34.1% | 9.7% | 46.2% | 34.3% | 11.9% |

Product and service gross profit increased by $2.4 million, or 27%, for the three months ended September 30, 2023 compared to the three months ended September 30, 2022. Product and service gross profit decreased by $11.8 million, or 48%, for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022. The increases in gross profit during the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022 were primarily attributable to certain one-time reductions to gross profit recognized during the second quarter of 2022, including a $1.6 million revenue reserve related to the discontinuation of our laser capture microdissection products, a $3.1 million provision for excess and obsolete inventory, and cost reductions driven by the relocation of operations to lower cost regions completed at the end of 2022.

### Operating Expenses

Operating expenses were as follows ($ in thousands):

|  | Three Months Ended September 30, 2023 | 2022 | Year-over- Year Change | Nine Months Ended September 30, 2023 | 2022 | Year-over- Year Change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Research and development | $6,370 | $8,486 | (25)% | $19,039 | $29,957 | (36)% |
| Selling, general and administrative | 22,292 | 26,340 | (15)% | 66,187 | 82,061 | (19)% |
| Restructuring and related charges | 1,998 | 3,412 | (41)% | 5,415 | 5,102 | 6% |
| Transaction-related expenses | 1,666 | 9 | N/A | 1,666 | 3,857 | (57)% |
| Total operating expenses | $32,326 | $38,247 | (15)% | $92,307 | $120,977 | (24)% |

### Research and Development

R&D expense decreased by $2.1 million, or 25%, for the three months ended September 30, 2023, compared to the three months ended September 30, 2022. R&D expense decreased by $10.9 million, or 36%, for the nine months ended September 30, 2023, compared to the nine months ended September 30, 2022. The decreases were primarily due to a $3.5 million impairment charge related to our acquisition of InstruNor AS (InstruNor) recognized during the nine months ended September 30, 2022, as well as lower compensation and consulting costs and reduced spending on laboratory supplies. These reductions were related to our strategic initiatives to reduce headcount and improve operating efficiencies by engaging in lower-cost and more focused R&D projects and activities.

### Selling, General and Administrative

SG&A expense decreased by $4.0 million, or 15%, for the three months ended September 30, 2023 compared to the three months ended September 30, 2022. SG&A expense decreased by $15.9 million, or 19%, for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022. The decreases were primarily attributable to decreased salaries and benefits expense and stock based compensation expense as a result of the restructuring plan that downsized our global workforce.

### Restructuring and Related Charges

Restructuring and related charges consisted of the following (in thousands):

|  | Three Months Ended September 30, 2023 | 2022 | Year-over- Year Change | Nine Months Ended September 30, 2023 | 2022 | Year-over- Year Change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Severance and other termination benefits | $546 | $1,258 | (57)% | $1,892 | $2,948 | (36)% |
| Facilities and other | 1,452 | 2,154 | (33)% | 3,523 | 2,154 | 64% |
| Total restructuring and related charges | $1,998 | $3,412 | (41)% | $5,415 | $5,102 | 6% |

Restructuring and related charges decreased by $1.4 million for the three months ended September 30, 2023 compared to the three months ended September 30, 2022, due to decreased severance costs and decreased facilities expenses (net of sublease income) as a result of the sublease that commenced in October 2022.

Restructuring and related charges increased by $0.3 million for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022, due to increased facilities expenses offset by deceased severance costs, primarily resulting from higher severance costs for our former CEO during the first quarter of 2022.

### Transaction-related expenses

Transaction-related expenses increased by $1.7 million for the three months ended September 30, 2023 and decreased by $2.2 million for the nine months ended September 30, 2023 compared to the same periods in 2022. The increase for the three months ended September 30, 2023 was due to legal, advisory, and accounting costs incurred in connection with the Merger Agreement, and the decrease for the nine months ended September 30, 2023 was due to $3.9 million in costs related to our Private Placement which closed in April 2022. The Company expects to incur additional amounts in future periods for the Merger Agreement.

### Other Non-Operating Income (Expense)

The increase in other income (expense), net of $1.5 million and $4.5 million for the three and nine months ended September 30, 2023 compared to the same periods in 2022, respectively, was primarily due to the interest earned on money market funds and short-term investments. We previously had no such investments until the second half of 2022.

The improvement in non-operating income (expense) in the nine months ended September 30, 2023, compared to the nine months ended September 30, 2022, primarily reflects losses related to the Private Placement. The Series B Convertible Preferred Stock Purchase Agreements entered into with various investors were accounted for as forward sales contracts and recorded at fair value. The loan agreements (collectively, the Bridge Loans) that we entered into on January 23, 2022 with various investors for a $25.0 million term loan were also recorded at fair value. In the nine months ended September 30, 2022, the $60.1 million loss on the forward sales of Series B Preferred Stock and the loss on the Bridge Loans of $13.7 million reflected the increase in the price of our common stock from January 23, 2022 (the date of the Purchase Agreements and the Bridge Loan agreements) to the Private Placement Closing Date.

### Income Tax Benefit (Expense)

We recorded an income tax expense of $0.1 million in the three months ended September 30, 2023 and an income tax benefit of $0.7 million for the three months ended September 30, 2022. The increase in our tax provision reflects the effect of our foreign operations, which reported pre-tax income in the three months ended September 30, 2023 and pre-tax loss in the three months ended September 30, 2022.

We recorded an income tax expense of $0.6 million in the nine months ended September 30, 2023 and an income tax benefit of $2.9 million for the nine months ended September 30, 2022. The increase in our tax provision reflects the effect of our foreign operations, which reported pre-tax income in the nine months ended September 30, 2023 and pre-tax loss in the nine months ended September 30, 2022.

Our effective tax rates for both periods differ from the 21% U.S. Federal statutory tax rate primarily due to valuation allowances recorded against deferred tax assets on domestic losses and the tax rate differences between the U.S. and foreign countries.

### Liquidity and Capital Resources

We have experienced operating losses since inception and have an accumulated deficit of $981.0 million as of September 30, 2023. To date, we have funded our operating losses primarily through equity offerings, term loans, convertible notes and redeemable preferred stock. Our ability to fund future operations and meet debt covenant requirements will depend upon our level of future revenue and operating cash flow and our ability to access additional funding through either equity offerings, issuances of debt instruments or both.

Our liquidity and capital requirements depend upon many factors, including market acceptance of our products and services; effectiveness of our business improvement initiatives and restructuring programs; costs of supporting sales growth, product quality, R&D and capital expenditures, including our ERP upgrade; and costs and timing of acquiring other businesses, assets or technologies.

We continually evaluate our liquidity requirements considering our operating needs, growth initiatives and capital resources. We expect that our existing liquidity and sources of capital will be sufficient to support our operations for at least the next 12 months from the filing date of this Quarterly Report on Form 10-Q.

### Sources of Liquidity

Our principal sources of liquidity are cash, cash equivalents and short-term investments. Our collective balances of cash, cash equivalents and short-term investments were $128.9 million at September 30, 2023 and $165.8 million at December 31, 2022.

### Capital Resources and Commitments

We enter into arrangements that serve as sources of capital and the associated contractual agreements may result in firm or contingent obligations of us. In addition to our common stockholders’ equity, our sources of capital primarily include debt, mezzanine equity and operating leases. Our Series B Preferred Stock, which is classified as mezzanine equity, contains rights that may result in their conversion to our common stock or their redemption in cash. Our term loan and operating lease arrangements require cash repayment and our convertible debt that matures on December 1, 2024 contains rights that may result in their conversion to our common stock prior to maturity.

We also enter into contractual and legally binding commitments to purchase goods. Most of these contracts are cancellable with little or no notice or penalty. However, once a vendor has incurred costs to fulfill a contract with us, and which costs cannot be otherwise deployed, we are liable for those costs upon cancellation.

In the nine months ended September 30, 2023, there have been no material changes to the cash commitments and contingent obligations associated with the arrangements described above, as reported in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022 filed with the SEC on March 14, 2023.

The terms and provisions of our debt, leases and mezzanine equity are more fully discussed in Notes 6, 7 and 9, respectively, in the unaudited condensed consolidated financial statements.

### Cash Flow Activity

Our cash flow summary was as follows ($ in thousands):

| Cash flow summary: | Nine Months Ended September 30, 2023 | 2022 |
| --- | ---: | ---: |
| Net cash used in operating activities | $(29,226) | $(70,189) |
| Net cash provided by (used in) investing activities | 33,354 | (128,372) |
| Net cash provided by (used in) financing activities | (5,806) | 231,028 |
| Effect of foreign exchange rate fluctuations on cash and cash equivalents | (196) | (719) |
| Net increase (decrease) in cash, cash equivalents and restricted cash | $(1,874) | $31,748 |

We derive cash flows from operations primarily by collecting amounts due from sales of our products and services, and fees earned under our product development and license agreements. Our cash flows from operating activities are also significantly influenced by our use of cash for operating expenses and working capital to support the business. We have historically experienced negative cash flows from operating activities as we have expanded our business and built our infrastructure, domestically and internationally.

In the nine months ended September 30, 2023, we used $36.1 million of net proceeds from the sales and maturities of short-term investments to help fund $29.2 million of net cash used in operating activities and $5.2 million of common stock repurchases.

In the nine months ended September 30, 2022, we used $230.7 million of net debt and Series B Preferred Stock proceeds in part to fund $70.2 million used in operating activities, the purchase of short-term investments of $137.3 million and a $31.7 million increase in cash, cash equivalents and restricted cash.

### Operating Activities

Net cash used in operating activities for the nine months ended September 30, 2023 declined by $41.0 million compared to the same period in 2022. The improvement reflects a lower net loss and adjustments for non-cash items, which collectively used $32.6 million in the nine months ended September 30, 2023 compared to $59.3 million used in the same period of 2022, and changes in net operating assets and liabilities which provided $3.4 million and used $10.9 million in the nine months ended September 30, 2023 and 2022, respectively.

### Investing Activities

Net cash provided by investing activities for the nine months ended September 30, 2023 was $33.4 million compared to $128.4 million used in the nine months ended September 30, 2022. The nine months ended September 30, 2023 primarily reflects $36.1 million of proceeds from sales and maturities of short-term investments, net of purchases. Net proceeds from the Private Placement issuance and the Bridge Loans were used to purchase short-term investments of $137.3 million during the nine months ended September 30, 2022.

### Financing Activities

Financing activities used cash of $5.8 million for the nine months ended September 30, 2023 and provided cash of $231.0 million in the same period of 2022. These changes in cash from financing activities primarily reflect $5.2 million of common stock share repurchases in the nine months ended September 30, 2023, and $25.0 million of borrowings under the Bridge Loans and the repayment of $6.8 million borrowed under our Revolving Credit Facility as well as $225.0 million proceeds received from the issuance of Series B Preferred Sock less payments of $12.5 million in equity issuance costs in the nine months ended September 30, 2022.

### Critical Accounting Policies and Estimates

Management’s discussion and analysis of our financial condition and results of operations are based on our unaudited condensed consolidated financial statements and related notes, which have been prepared in accordance with U.S. GAAP. The preparation of these financial statements requires the use of estimates and assumptions to determine the value of the assets, liabilities, revenues and expenses reported on the condensed consolidated balance sheets and statements of operations. We develop these estimates after considering historical transactions, the current economic environment and various other assumptions considered reasonable under the circumstances. Actual results may differ materially from these estimates and judgments. Accounts that rely heavily on estimated information to determine their values include revenue, trade receivables, inventories, right-of-use assets, goodwill, long-lived intangible assets, lease liabilities, income tax liabilities (assets) and preferred equity. Refer to Item 7 in our Annual Report on Form 10-K for the year ended December 31, 2022 for additional information regarding our critical accounting policies and estimates.

There have been no significant changes to our significant accounting policies described in our Annual Report on Form 10-K for the year ended December 31, 2022.

### Recent Accounting Pronouncements

From time to time, new accounting standards are issued by the Financial Accounting Standards Board or other standard setting bodies and adopted by us as of the specified effective date. Unless otherwise discussed, the impact of recently issued standards that are not yet effective will not have a material impact on the Company’s financial position or results of operations upon adoption.

## Controls and procedures

As filed, 2,644 characters.

### Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our CEO and our Chief Financial Officer (CFO), evaluated the effectiveness of our disclosure controls and procedures as of September 30, 2023. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to our management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on the evaluation of our disclosure controls and procedures as of September 30, 2023, our CEO and CFO concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level.

### Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting that occurred during the nine months ended September 30, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

### Limitations on the Effectiveness of Controls

Control systems, no matter how well conceived and operated, are designed to provide a reasonable, but not an absolute, level of assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. Because of the inherent limitations in any control system, misstatements due to error or fraud may occur and not be detected.

## Risk factors

As filed, 11,694 characters.

We operate in a rapidly changing environment that involves numerous uncertainties and risks. You should carefully consider the risk factors discussed in this Item 1A, as well as the risk factors discussed in Part I Item 1A “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, which could materially affect our business, financial condition or results of operations. The risks below and the risks in our Annual Report on Form 10-K are not the only ones we face. Our business is also subject to the risks that affect many other companies, such as employee relations, general economic conditions, global geopolitical events and international operations. Further, additional risks not currently known to us or that we currently believe are immaterial may in the future materially and adversely affect our business, operations, liquidity and stock price. If any of these risks occur, our business, results of operations or financial condition could suffer, the trading price of our securities could decline and you may lose all or part of your investment.

***There can be no assurance that the proposed Merger with SomaLogic will be consummated. The announcement and pendency of the Merger, or the failure of the Merger to be consummated, could have an adverse effect on our stock price, business, financial condition, results of operations or prospects.***

On October 4, 2023, we, Merger Sub and SomaLogic entered into the Merger Agreement, pursuant to which Merger Sub shall be merged with and into SomaLogic with SomaLogic surviving as our wholly owned subsidiary. Consummation of the Merger is subject to approval by our shareholders and SomaLogic’s shareholders and other conditions specified in the Merger Agreement. As a result, there can be no assurance that the Merger will be consummated.

Further, the announcement and pendency of the Merger could disrupt our businesses, in any of the following ways, among others:

- our employees may experience uncertainty about their future roles with the combined company, which might adversely affect our ability to retain and hire key managers and other employees;
- the attention of our management may be directed toward completion of the Merger, integration planning and transaction-related considerations and may be diverted from our day-to-day business operations;
- vendors, suppliers or others may seek to modify or terminate their business relationship with us;
- we and our directors and SomaLogic could become subject to lawsuits relating to the merger; and
- we may experience negative reactions from our shareholders, among others.

These disruptions could be exacerbated by a delay in the completion of the Merger or termination of the Merger Agreement. Additionally, if the Merger is not consummated, we will have incurred significant costs and diverted the time and attention of management. A failure to consummate the Merger may also result in negative publicity, litigation against us or our directors and officers, and a negative impression of us in the financial markets. The occurrence of any of these events individually or in combination could have a material adverse effect on our financial statements and stock price.

### We may be unable to fully realize the expected benefits from the Merger.

We expect to achieve substantial operating and capital synergies and cost savings as a result of the Merger. If we are unable to successfully integrate the businesses, or integrate them in a timely fashion, we may face material adverse effects including, but not limited to (i) diversion of the attention of management and key personnel and potential disruption of our ongoing business, (ii) the loss of employees, (iii) challenges of managing a larger combined company following the Merger, including challenges of conforming standards, controls, procedures and accounting and other policies and compensation structures, (iv) difficulties in achieving anticipated cost savings, (v) declines in our results of operations, financial condition or cash flows, (vi) a decline in the market price of our common stock, and (vii) potential liabilities, adverse consequences, increased expenses or other problems associated with the Merger and/or the resulting combined company. Many of these factors are outside of our control, and any one of them could result in increased costs, decreased expected revenues and further diversion of management time and energy, which could materially impact our business, financial statements and prospects.

In addition, following the Merger, we will become responsible for SomaLogic’s liabilities and obligations, including with respect to legal, financial, regulatory and compliance matters. These obligations will result in additional cost and investment by us and, if we have underestimated the amount of these costs and investments or if we fail to satisfy any such obligations, we may not realize the anticipated benefits of the transaction. Further, it is possible that there may be unknown, contingent or other liabilities or problems that may arise in the future, the existence and/or magnitude of which we were previously unaware. Any such liabilities or problems could have an adverse effect on our business, financial condition or results of operations.

Even if we successfully consummate the Merger and integrate the businesses, there can be no assurance that the Merger will result in the realization of the full benefit of the anticipated synergies and cost savings or that these benefits will be realized within the expected time frames or at all. In addition, by engaging in the Merger, we may forego or delay pursuit of other opportunities that may have proven to have greater commercial potential.

***While the Merger Agreement is in effect, we are subject to restrictions on our business activities.***

While the Merger Agreement is in effect, we are subject to restrictions on our business activities and must generally operate our business in the ordinary course consistent with past practice, subject to certain exceptions. These restrictions could prevent us from pursuing attractive business opportunities that may arise prior to the consummation of the Merger and are generally outside the ordinary course of business, and otherwise have a material adverse effect on us. Although we may be able to pursue such activities with SomaLogic’s consent, SomaLogic may not be willing to provide its consent for us to do so.

***A delay in completing the Merger may reduce or eliminate the expected benefits from the Merger.***

The Merger is subject to a number of conditions, some of which are beyond our control, which could prevent, delay or otherwise materially adversely affect its completion. We cannot predict whether and when the conditions will be satisfied. The requirement to obtain certain approvals could delay the completion of the Merger for a significant period of time or prevent it from occurring. A delay in completing the Merger could cause the combined company to not realize some or all of the synergies and other benefits it expects to achieve if the Merger is successfully completed within its expected time frame. Because the Merger Agreement contains certain restrictions on the conduct of our business, if the Merger is delayed, these restrictions could adversely affect our ability to execute business strategies or pursue attractive business opportunities. In addition, a delay could cause management to focus on completion of the Merger instead of on other opportunities that could be beneficial to us or day-to-day business operations.

***Failure to consummate the Merger could negatively impact our future stock prices, operations and financial results.***

If the Merger is not consummated for any reason, we may be subjected to a number of material risks, including the following:

- our business may be adversely impacted by the failure to pursue other beneficial opportunities due to the focus of our management on the Merger;
- a possible decline in the market price of our shares to the extent that current market prices reflect a market assumption that the Merger will be consummated and will be beneficial to the value of our business after the Merger closes;
- if the Merger Agreement is terminated under certain specified circumstances, we may be required to pay SomaLogic a termination fee of $19,123,214 and/or reimburse SomaLogic’s reasonable out of pocket fees and expenses incurred in connection with the Merger Agreement and the transaction contemplated thereby up to a maximum of $2,000,000;
- having to pay certain costs related to the Merger, such as legal, accounting, financial advisory, printing and mailing fees, which must be paid regardless of whether the Merger is consummated;
- addressing the consequences of operational decisions made since the signing of the Merger Agreement because of restrictions on our operations imposed by the terms of the Merger Agreement, including decisions to delay or defer capital expenditures;
- returning the focus of management and personnel to operating on a stand‑alone basis, without any of the benefits expected to have been provided by the consummation of the Merger; and
- negative reactions from shareholders, suppliers, employees, patients enrolled in our studies and the medical community.

***The issuance of shares of our common stock in connection with the Merger, and any future offerings of securities by us, will dilute our shareholders’ ownership interest in Standard BioTools and sales of shares of our common stock after the completion of the Merger may cause the market price of our common stock to decline.***

The Merger will be financed by the issuance of additional shares of our common stock to shareholders of SomaLogic, comprising approximately 57% of our issued and outstanding shares of common stock. These issuances of additional shares of our common stock will dilute our existing shareholders’ ownership interest, and will reduce our existing shareholders’ ownership and voting interest following the consummation of the Merger. In addition, SomaLogic shareholders may decide not to hold the shares of our common stock they receive in the Merger and other SomaLogic shareholders, such as funds with limitations on the amount of stock they are permitted to hold in individual issuers, may be required to sell the shares of our common stock that they receive in the Merger. Such sales of our common stock could result in higher than average trading volume following the closing of the Merger and may cause the market price for our common stock to decline.

***Following completion of the Merger, our current shareholders in the aggregate will not have a majority ownership and voting interest and the structure of our board of directors will be different, which may result in our shareholders having less influence on our management and policies.***

Our shareholders currently have the right to vote for the election of directors to our board of directors and on other matters affecting us. Immediately following the Merger, our shareholders and the SomaLogic shareholders are expected to own approximately 43% and 57%, respectively, of the combined company’s outstanding shares on a fully-diluted basis. In addition, following the Merger, the board of directors of the combined company will be comprised of three directors designated by our board of directors, three directors designated by the SomaLogic board of directors and one director designated by the holder of the Series B-1 Preferred Stock. As a result, our shareholders may have less influence on our management and policies than they currently have.

Filed Nov 7, 2023.
Source: SEC EDGAR, the filing index for accession 0000950170-23-060385. Last ingested by Listed: Nov 3, 2026, 21:00 ET. No prices; not investment advice.