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SomaLogic Excludes Software Development Costs From Operating Cash Flow
Life sciences firm understates operating cash burn nearly 30% after classifying key cost as an investing activity.
May 19, 2023
SomaLogic (SLGC), a protein biomarker discovery and clinical diagnostics firm, inflated operating cash flow by classifying a key operating cost as an investing activity. Instead of classifying capitalized software development costs as an operating activity, SomaLogic previously classified the costs as investments on the cash flow statement.
The error resulted in SolaLogic overstating Operating cash flow for the quarter ended March 31, 2022, specifically:
—SomaLogic understated its Operating cash flow burn $1.7 million, or 28.8%
Rather than using $4.1 million in cash during the period, SomaLogic actually used $5.9 million. In correcting the error in the latest quarterly filing, SomaLogic’s cash from investing activities increased commensurately.
Separately, DuDil is also tracking a nearly 4x increase in the company’s bad debt allowance. In the prior year’s first quarter, SomaLogic’s bad receivables allowance was 0.57% of Accounts Receivable.
In the latest quarter, the allowance jumped to 2%.
The company attributed two thirds of the current allowance to the adoption of ASU 2016-13.
Lastly, SomaLogic also revealed it has continued to identify new control deficiencies. The latest is related to ineffective controls over the company’s enterprise resource planning (ERP) system that supports the accounting and reporting processes.
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