# Standard Biotools Inc.: Form 10-Q for the period ended Mar 31, 2024

- Company: [Standard Biotools Inc.](/companies/lab.md) (CIK 1162194)
- Form: 10-Q
- Filed: 2024-05-09
- Accepted by EDGAR: May 9, 2024, 16:53 ET
- Period: 2024-03-31
- Accession: 0000950170-24-057213
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1162194/000095017024057213/lab-20240331.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1162194/000095017024057213/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2024-03-31.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2024-01-01 to 2024-03-31 | $45.5m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Cost of revenue | 3 months, 2024-01-01 to 2024-03-31 | $21.4m | us-gaap:CostOfGoodsAndServicesSold |
| Gross profit | 3 months, 2024-01-01 to 2024-03-31 | $24.2m | us-gaap:GrossProfit |
| Research and development | 3 months, 2024-01-01 to 2024-03-31 | $16.0m | us-gaap:ResearchAndDevelopmentExpense |
| Selling, general and administrative | 3 months, 2024-01-01 to 2024-03-31 | $46.9m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Operating income | 3 months, 2024-01-01 to 2024-03-31 | −$60.2m | us-gaap:OperatingIncomeLoss |
| Income tax | 3 months, 2024-01-01 to 2024-03-31 | $128.0k | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2024-01-01 to 2024-03-31 | −$32.2m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2024-01-01 to 2024-03-31 | −$0.27 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2024-01-01 to 2024-03-31 | −$0.27 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2024-01-01 to 2024-03-31 | 294,125,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 3 months, 2024-01-01 to 2024-03-31 | −$62.5m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 3 months, 2024-01-01 to 2024-03-31 | $781.0k | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Share repurchases | 3 months, 2024-01-01 to 2024-03-31 | $11.1m | us-gaap:PaymentsForRepurchaseOfCommonStock |
| Cash and equivalents | at 2024-03-31 | $287.1m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2024-03-31 | $547.6m | us-gaap:AssetsCurrent |
| Total assets | at 2024-03-31 | $777.7m | us-gaap:Assets |
| Current liabilities | at 2024-03-31 | $121.6m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2024-03-31 | $200.4m | us-gaap:Liabilities |
| Long-term debt | at 2024-03-31 | $55.0m | us-gaap:LongTermDebt |
| Shareholders' equity | at 2024-03-31 | $577.3m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 32,310 characters.

*You should read the following discussion and analysis of our financial condition and results of operations together with the unaudited financial information and the notes thereto included appearing elsewhere in this Quarterly Report on Form 10-Q, and the audited financial information and the notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2023 filed with the Securities and Exchange Commission on March 1, 2024 (the “Annual Report”). Some of the information contained in this discussion and analysis or set forth elsewhere in this Quarterly Report on Form 10-Q, including information with respect to our plans and strategy for our business, includes forward-looking statements that involve risks and uncertainties. As a result of many factors, including those factors set forth in the “Risk Factors” section of our Annual Report, our actual results could differ materially from the results described in, or implied by, the forward-looking statements contained in the following discussion and analysis.*

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.

On January 5, 2024, we completed the Merger with SomaLogic, Inc. ("SomaLogic"), creating a leading provider of differentiated multi-omics tools for research.

### 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.

### Series B Redeemable Preferred Stock

On March 18, 2024, we entered into an exchange agreement (the “Exchange Agreement”) with Casdin Private Growth Equity Fund II, L.P. and Casdin Partners Master Fund, L.P. (together, "Casdin"), and Viking Global Opportunities Illiquid Investments Sub Master LP and Viking Global Opportunities Drawdown LP (together, “Viking” and, collectively with Casdin, the “Investors”). Pursuant to the Exchange Agreement, the Investors exchanged (the “Exchange”) an aggregate of (i) 127,780 shares of Series B-1 Convertible Preferred Stock, par value $0.001 per share (the “Series B-1 Preferred Stock”), and (ii) 127,779 shares of Series B-2 Convertible Preferred Stock, par value $0.001 per share (the “Series B-2 Preferred Stock” and, together with the Series B-1 Preferred Stock, the “Series B Preferred Stock”), representing all of the outstanding shares of Series B Preferred Stock, for an aggregate of 92,930,553 shares of our common stock. The Exchange was completed on March 18, 2024. Following the closing of the Exchange, no shares of Series B Preferred Stock remained outstanding as of March 31, 2024, and we had no amounts recorded in mezzanine equity.

The Exchange was determined to be an induced conversion due a reduction in the original conversion price. The excess of the fair value of the common stock issued over the fair value of shares issuable under original terms represents an in-substance distribution to the Investors, and increased our net loss per share.

### Merger

On January 5, 2024, we completed the Merger pursuant to an Agreement and Plan of Merger, dated as of October 4, 2023 (the “Merger Agreement”), by and among us, SomaLogic and Martis Merger Sub, Inc. (“Merger Sub”), pursuant to which Merger Sub merged with and into SomaLogic, with SomaLogic surviving as a wholly owned subsidiary of Standard BioTools. Upon the terms and subject to the conditions set forth in the Merger Agreement, at the Effective Time, each share of SomaLogic common stock, par value $0.0001 per share (the “SomaLogic Common Stock”), converted into the right to receive 1.11 shares of our common stock.

In addition, as of the effective time of the Merger (the “Effective Time”), we assumed each SomaLogic stock incentive plan, outstanding option to purchase shares of SomaLogic Common Stock and outstanding RSUs, whether vested or unvested. In addition, as of the Effective Time, each SomaLogic warrant was treated in accordance with its terms.

### Factors Affecting Our Performance

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

- Continued adoption of our services and products:
- We have a well-established base of marquee customer and key opinion leader (“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.
- We continue to focus on growth in instrument placements, including the SomaScan® Certified Sites program, which we expect to drive future growth in sales of consumables, SomaScan® assay kits, and instrument support services.
- We continue to enhance our proteomics offering through continuous improvements to our proteomics instruments, and the commercial release of the LabThread SLX, which is a fully integrated system optimized for running the SomaScan® assay.
- Total revenue may vary from period to period based on, among other things, the timing and size of new contracts, fluctuations in customer consumption of and adoption trends, ramp time and productivity of our salesforce, the impact of significant transactions, and seasonality. Failure to effectively develop and expand our sales and marketing capabilities or improve the productivity of our sales and marketing organization could harm our ability to expand our potential customer and sales pipeline, increase our customer base, and achieve broader market acceptance of our offering.
- Continued investment in growth:
- We 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.
- Ability to lower operating costs:
- As we integrate with SomaLogic, we continue to focus on improving operating discipline through implementation of lean Standard BioTools Business System principles to build more efficient operations and reduce costs.
- We intend to reduce the cost of manufacturing SOMAmer® reagents by, in part, 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 intend to reduce the cost of performing the SomaScan® assay as we move to either a less expensive array or NGS system for our DNA readout of the protein concentrations present in a sample.
- We expect general and administrative expenses to trend downward during 2024 as we reduce headcount and realize synergies from the Merger.
- Seasonality:
- Our revenue can be seasonal dependent upon 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.
- Expansion of our proteomic content:
- To maintain our competitive advantage in the proteomics market, we plan to increase the number of protein reagents for commercial availability based on allocated funding, resource availability, and the successful validation of new reagents.
- We continue to expand our proteomics database and artificial intelligence and machine learning analytics to drive value and market opportunities.

### Financial Operations Overview

### Revenue

We generate our revenue from three primary sources: (1) product revenue, (2) assay services revenue, and (3) instrument support service revenues. We also derive revenue from collaborative arrangements, license agreements, grants, and royalties. Customers include top biopharmaceutical companies and leading academic research universities.

#### Product revenue

We generate product revenue from the sale of instruments, consumables, SomaScan® assay kits and other related items. Consumables revenue is largely driven by the size of our active installed base of instruments and the level of usage per instrument. SomaScan assay kit sales is largely driven by the number of active SomaScan® Certified Sites ("certified sites").

#### Assay services revenue

We generate assay services revenue primarily from the sale of SomaScan® services. SomaScan® service revenue is derived from performing the SomaScan® assay on customer samples to generate data on protein biomarkers. We expect assay services revenue to increase over the long-term with new and recurring sales opportunities. With the enhancement of our proteomic services, we expect to capture more market opportunities outside of the United States region, as well as winning contracts with new customers and expanding the scope of sales with existing customers.

#### Instrument support service revenue

Instrument support service revenue primarily consists of post-warranty service contracts, preventive maintenance plans, 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.

#### Collaboration and other revenue

Collaboration and other revenue consists of fees earned for research and development services, except for grant revenue research and development services that are classified in other revenue. We believe expanding collaborative arrangements with KOLs will allow for further enhancements of our 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.

### Cost of Revenue

#### Cost of product revenue

Cost of product revenue consists primarily of raw materials, equipment and production costs, salaries and other personnel costs, overhead and other direct costs related to product revenue. In addition, cost of product revenue includes amortization of developed technology, royalty costs for licensed technologies included in our products, warranty costs, provisions for excess and obsolete inventory, and stock-based compensation expense, and shipping and handling costs. 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 condensed consolidated statements of operations and comprehensive loss. 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

Cost of service revenue consists of raw materials and production costs, personnel-related costs, overhead and other direct costs. It also includes costs for production variances for SOMAmer® reagents, such as yield losses, material usages, spending and capacity variances. Cost of service revenue is recognized in the period the related revenue is recognized.

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 expenses consist primarily of personnel-related costs related to enhancing our technologies and supporting development and commercialization of new and existing products and services. R&D expenses also consist of laboratory supply costs, clinical study costs, consulting fees, and other allocated overhead expenses. We plan to continue to invest significantly in our R&D efforts, including hiring additional employees, with an expected focus on advancing our proteomics products and services. As a result, we expect R&D expenses will increase in absolute dollars in future periods and vary from period to period as a percentage of revenue.

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

SG&A expenses consist primarily of personnel-related 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 and Integration Expenses

Transaction and integration expenses consist of costs incurred in connection with the Merger, including legal, advisory, accounting and other transaction-related costs including integration costs. We expect to continue incurring these costs throughout 2024.

### Bargain Purchase Gain

Bargain purchase gain represents the excess of fair value of the assets acquired and liabilities assumed over the fair value of the consideration transferred in connection with the Merger. We determined that the bargain purchase gain was primarily attributable to a rapid decline in our stock price in the days following the announcement of the Merger, which persisted through the close of the Merger.

### Results of Operations

The following table presents our unaudited condensed consolidated statements of operations and as a percentage of total revenue for the three months ended March 31, 2024 and 2023 ($ in thousands):

|  | Three Months Ended March 31, 2024 |  | 2023 |  |
| --- | ---: | ---: | ---: | ---: |
| Revenue | $45,540 | 100% | $25,119 | 100% |
| Cost of revenue: |  |  |  |  |
| Cost of product revenue | 12,781 | 28% | 9,990 | 40% |
| Cost of services revenue | 8,509 | 19% | 2,792 | 11% |
| Cost of collaboration and other revenue | 62 | 0% | 56 | 0% |
| Total cost of revenue | 21,352 | 47% | 12,838 | 51% |
| Gross profit | 24,188 | 53% | 12,281 | 49% |
| Operating expenses: |  |  |  |  |
| Research and development | 15,980 | 35% | 6,429 | 26% |
| Selling, general and administrative | 46,943 | 103% | 21,295 | 85% |
| Restructuring and related charges | 4,284 | 9% | 1,150 | 5% |
| Transaction and integration expenses | 17,163 | 38% | — | —% |
| Total operating expenses | 84,370 | 185% | 28,874 | 114% |
| Loss from operations | (60,182) | (132)% | (16,593) | (66)% |
| Bargain purchase gain | 25,213 | 55% | — | —% |
| Interest income, net | 5,174 | 11% | 72 | 0% |
| Other expense, net | (2,234) | (5)% | (59) | (0)% |
| Loss before income taxes | (32,029) | (70)% | (16,580) | (66)% |
| Income tax expense | (128) | (0)% | (263) | (1)% |
| Net loss | $(32,157) | (71)% | $(16,843) | (67)% |

31

### Revenue

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

| Product revenue: | Three Months Ended March 31, 2024 |  |  | 2023 |  | Year-over- Year Change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Instruments | $4,903 |  | 11% | $5,923 | 24% | -17% |
| Consumables | 10,411 | - | 23% | 11,515 | 46% | -10% |
| SomaScan assay kits and related | 8,278 |  | 18% | — | 0% | N/A |
| Total product revenue | 23,592 |  | 52% | 17,438 | 69% | 35% |
| Service revenue: |  |  |  |  |  |  |
| Assay services | 14,862 |  | 33% | — | 0% | N/A |
| Instrument support services | 6,165 |  | 14% | 6,881 | 28% | (10)% |
| Total service revenue | 21,027 |  | 46% | 6,881 | 27% | 206% |
| Collaboration and other revenue | 921 |  | 2% | 800 | 3% | 15% |
| Total revenue | $45,540 |  | 100% | $25,119 | 100% | 81% |

Total revenue grew 81% to $45.5 million for the three months ended March 31, 2024, compared to the three months ended March 31, 2023. Revenue increased by $23.9 million due to the acquisition of SomaLogic, offset by a decrease of $3.5 million in revenues from our legacy business. The decrease attributable to our legacy business was primarily driven by a decrease in the sales of consumables, while instrument revenue remained relatively flat. Service revenue increased by $14.1 million primarily driven by our new assay services offering, resulting from the acquisition of SomaLogic.

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

|  | Three Months Ended March 31, 2024 |  | 2023 |  | Year-over- Year Change |
| --- | ---: | ---: | ---: | ---: | ---: |
| Proteomics revenue | $36,180 | 79% | $15,200 | 61% | 138% |
| Genomics revenue | 9,360 | 21% | 9,919 | 39% | (6)% |
| Total revenue | $45,540 | 100% | $25,119 | 100% | 81% |

Total proteomics revenue grew 138% for the three months ended March 31, 2024 compared to the three months ended March 31, 2023. Our growth in proteomics was driven by the acquisition of SomaLogic, which expanded our proteomics capabilities, products and services.

Total genomics revenue decreased 6% for the three months ended March 31, 2024 compared to the three months ended March 31, 2023. The continued decline in the genomics segment was anticipated, and is a driver of our continued focus on growing the OEM business and managing this segment to sustainable positive contribution margin in the near-term.

### Cost of Revenue

Cost of revenue, gross profit, and gross margin were as follows ($ in thousands):

|  | Three Months Ended March 31, 2024 |  | 2023 | Year-over- Year Change |
| --- | ---: | ---: | ---: | ---: |
| Cost of product revenue | $12,781 |  | $9,990 | 28% |
| Cost of service revenue | 8,509 | — | 2,792 | 205% |
| Cost of collaboration and other revenue | 62 |  | 56 | 11% |
| Total cost of revenue | $21,352 |  | $12,838 | 66% |
| Gross profit | $24,188 |  | $12,281 | 97% |
| Gross margin | 53.1% |  | 48.9% | 4.2% |

Gross profit increased by $11.9 million, or 97%, for the three months ended March 31, 2024 compared to the three months ended March 31, 2023. The increase in gross profit during the three months ended March 31, 2024 compared to the three months ended March 31, 2023 was primarily attributable to the impact from the Merger in the first quarter of 2024 which resulted in increased revenue and improved margins from SomaScan® assay services, as well as increased sales of instruments and consumables.

### Operating Expenses

Operating expenses were as follows ($ in thousands):

|  | Three Months Ended March 31, 2024 | 2023 | Year-over- Year Change |
| --- | ---: | ---: | ---: |
| Research and development | $15,980 | $6,429 | 149% |
| Selling, general and administrative | 46,943 | 21,295 | 120% |
| Restructuring and related charges | 4,284 | 1,150 | 273% |
| Transaction and integration expenses | 17,163 | — | N/A |
| Total operating expenses | $84,370 | $28,874 | 192% |

### Research and Development

R&D expense increased by $9.6 million, or 149%, for the three months ended March 31, 2024, compared to the three months ended March 31, 2023. The increase was primarily due to the impact of the Merger in the first quarter of 2024, which resulted in an increase of $8.5 million in R&D expense from SomaLogic operations and an increase of $0.8 million in stock-based compensation.

### Selling, General and Administrative

SG&A expense increased by $25.6 million, or 120%, for the three months ended March 31, 2024 compared to the three months ended March 31, 2023. The increase was primarily attributable to the impact of the Merger in the first quarter of 2024, which included increased salaries and benefits expense and stock based compensation expense due to the expanded global workforce headcount.

### Restructuring and Related Charges

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

|  | Three Months Ended March 31, 2024 | 2023 | Year-over- Year Change |
| --- | ---: | ---: | ---: |
| Severance and other termination benefits | $3,386 | $292 | 1060% |
| Facilities and other | 898 | 858 | 5% |
| Total restructuring and related charges | $4,284 | $1,150 | 273% |

Restructuring and related charges increased by $3.1 million for the three months ended March 31, 2024 compared to the three months ended March 31, 2023, primarily due to increased severance and termination benefits in connection with the Merger that was consummated in the first quarter of 2024.

### Transaction and Integration Expenses

Transaction and integration expenses increased by $17.2 million for the three months ended March 31, 2024 compared to the same period in 2023. The increase for the three months ended March 31, 2024 was due to legal, advisory, accounting costs, and integration expenses incurred in connection with the Merger. The Company expects to incur additional amounts in future periods for the Merger.

### Bargain purchase gain

Bargain purchase gain increased by $25.2 million for the three months ended March 31, 2024 compared to the same periods in 2023. The increase for the three months ended March 31, 2024 was due to the consummation of the Merger in January 2024, which resulted in the fair value of assets acquired and liabilities assumed from the Merger exceeding the fair value of the consideration transferred due to a decline in our stock price following the announcement of the Merger Agreement.

### Interest Income, net

The increase in other income, net of $5.1 million for the three months ended March 31, 2024 compared to the same period in 2023, was primarily due to the interest earned on increased balances of money market funds and short-term investments and higher interest rates, as well as a decrease in interest expense due to repayment of our term loan in March 2024. Money market funds balances and short-term investments increased as a result of the Merger with SomaLogic.

### Income Tax Expense

We recorded income tax expense of $0.1 million and $0.3 million in the three months ended March 31, 2024 and 2023, respectively. The decrease in our tax provision reflects the effect of our foreign operations, which reported lower pre-tax income in the three months ended March 31, 2024 compared to the three months ended March 31, 2023.

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 United States and foreign countries.

### Liquidity and Capital Resources

We have experienced operating losses since inception and have an accumulated deficit of $1,078.9 million as of March 31, 2024. 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 $462.3 million at March 31, 2024 and $114.9 million at December 31, 2023.

### 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 and operating leases. Our 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. On March 4, 2024, the Company fully repaid all outstanding indebtedness owed pursuant to the Term Loan Facility and terminated the agreement.

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.

Following the SomaLogic Merger on January 5, 2024, we assumed additional cash commitments, including a requirement under the agreement originally entered into by SomaLogic with Illumina Cambridge, Ltd. in December 2021, to engage with two contract manufacturing organizations in order to ensure manufacturing capacity. Specifically, we assumed minimum annual purchase commitments of $2.3 million with IDT who is contracted to manufacture custom products. As the minimum contract term is three years, our total purchase commitment related to the agreement is $6.9 million. As of March 31, 2024, the Company has not yet began placing orders under the agreement with IDT.

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

### Cash Flow Activity

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

| Cash flow summary: | Three Months Ended March 31, 2024 | 2023 |
| --- | ---: | ---: |
| Net cash used in operating activities | $(62,476) | $(8,485) |
| Net cash provided by investing activities | 318,075 | 43,154 |
| Net cash used in financing activities | (19,733) | (2,558) |
| Effect of foreign exchange rate fluctuations on cash and cash equivalents | (21) | 23 |
| Net increase in cash, cash equivalents and restricted cash | $235,845 | $32,134 |

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 three months ended March 31, 2024, we used $38.8 million of net proceeds from the sales and maturities of short-term investments to help fund $62.5 million of net cash used in operating activities, $11.1 million of common stock repurchases, and $8.2 million of repayment of term loan and convertible notes.

In the three months ended March 31, 2023, we used $44.2 million of net proceeds from the sales and maturities of short-term investments to help fund $8.5 million of net cash used in operating activities, $2.5 million of common stock repurchases, and a $32.1 million increase in cash and cash equivalents.

### Operating Activities

Net cash used in operating activities for the three months ended March 31, 2024 increased by $54.0 million compared to the same period in 2023. The increase reflects a higher net loss and adjustments for non-cash items, which collectively used $40.0 million in the three months ended March 31, 2024 compared to $8.8 million used in the same period of 2023, and changes in net operating assets and liabilities which used $22.5 million and provided $0.4 million in the three months ended March 31, 2024 and 2023, respectively.

### Investing Activities

Net cash provided by investing activities for the three months ended March 31, 2024 was $318.1 million compared to $43.2 million used in the three months ended March 31, 2023. The three months ended March 31, 2024 primarily reflects $280.0 million of cash and restricted cash acquired in the Merger, and $38.8 million of proceeds from sales and maturities of short-term investments, net of purchases. The first quarter of 2023 primarily reflects $44.2 million of proceeds from sales and maturities of short-term investments, net of purchases.

### Financing Activities

Financing activities used cash of $19.7 million for the three months ended March 31, 2024 and $2.6 million in the same period of 2023. These changes in cash from financing activities primarily reflect $11.1 million of common stock share repurchases, and $8.2 million of repayment of term loan and convertible notes in the three months ended March 31, 2024. These changes in cash during the first quarter of 2023 primarily reflect $2.5 million of common stock share repurchases.

### 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 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, other than as disclosed in Note 1 to our accompanying financial statements appearing elsewhere in this Quarterly Report on Form 10-Q.

### 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, 2,663 characters.

### Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer ("CEO") and our Chief Financial Officer ("CFO"), evaluated the effectiveness of our disclosure controls and procedures as of March 31, 2024. 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 March 31, 2024, 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 three months ended March 31, 2024 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, 946 characters.

We operate in a rapidly changing environment that involves numerous uncertainties and risks. You should carefully consider the risk factors discussed in Part I Item 1A “Risk Factors” in our Annual Report, which could materially affect our business, financial condition or results of operations. The risks in our Annual Report 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.

Filed May 9, 2024.
Source: SEC EDGAR, the filing index for accession 0000950170-24-057213. Last ingested by Listed: Nov 3, 2026, 21:00 ET. No prices; not investment advice.