References in this report (the "Quarterly Report") to "we," "us" or the
"Company" refer to CM Life Sciences, Inc. References to our "management" or our
"management team" refer to our officers and directors and references to the
"Sponsor" refer to CMLS Holdings LLC. The following discussion and analysis of
the Company's financial condition and results of operations should be read in
conjunction with the condensed financial statements and the notes thereto
contained elsewhere in this Quarterly Report (the "Financial Statements").
Capitalized terms used but not otherwise defined herein have the meaning set
forth in the Financial Statements. Certain information contained in the
discussion and analysis set forth below includes forward-looking statements that
involve risks and uncertainties.
Special Note Regarding Forward-Looking Statements
This Quarterly Report includes "forward-looking statements" within the meaning
of Section 27A of the Securities Act and Section 21E of the Exchange Act that
are not historical facts and involve risks and uncertainties that could cause
actual results to differ materially from those expected and projected. All
statements, other than statements of historical fact included in this Quarterly
Report including, without limitation, statements in this "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
regarding the Company's financial position, business strategy and the plans and
objectives of management for future operations, are forward-looking statements.
Words such as "expect," "believe," "anticipate," "intend," "estimate," "seek"
and variations and similar words and expressions are intended to identify such
forward-looking statements. Such forward-looking statements relate to future
events or future performance, but reflect management's current beliefs, based on
information currently available. A number of factors could cause actual events,
performance or results to differ materially from the events, performance and
results discussed in the forward-looking statements. For information identifying
important factors that could cause actual results to differ materially from
those anticipated in the forward-looking statements, please refer to the Risk
Factors section of the Company's Annual Report on Form 10-K/A filed with the SEC
on May 5, 2021. The Company's securities filings can be accessed on the EDGAR
section of the SEC's website at www.sec.gov. Except as expressly required by
applicable securities law, the Company disclaims any intention or obligation to
update or revise any forward-looking statements whether as a result of new
information, future events or otherwise.
Overview
We are a blank check company incorporated on July 10, 2020 as a Delaware
corporation and formed for the purpose of effecting a merger, capital stock
exchange, asset acquisition, stock purchase, reorganization or similar Business
Combination with one or more target businesses. We intend to effectuate our
Business Combination using cash from the proceeds of our Initial Public
Offering, the sale of the Private Placement Warrants that occurred
simultaneously with the completion of our Initial Public Offering and the sale
of the Forward Purchase Units, shares issued to the owners of the target, debt
issued to bank or other lenders or the owners of the target, or a combination of
the foregoing.
We expect to continue to incur significant costs in the pursuit of our
acquisition plans. We cannot assure you that our plans to complete a Business
Combination will be successful.
Results of Operations
We have neither engaged in any operations nor generated any revenues to date.
Our only activities through June 30, 2021 were organizational activities, the
consummation of the Initial Public Offering, described below, and seeking to
identify a target company for our initial Business Combination. We do not expect
to generate any operating revenues until after the completion of our initial
Business Combination. We generate non-operating income in the form of interest
income on marketable securities held in the Trust Account. We will incur
expenses as a result of being a public company (for legal, financial reporting,
accounting and auditing compliance), as well as for due diligence expenses in
connection with completing our initial Business Combination.
For the three months ended June 30, 2021, we had a net income of $13,009,880,
which consists of change in the value of the warrant liability of $14,276,800
and an interest income on marketable securities held in the Trust Account of
$11,040, offset by operating costs of $1,277,960.
For the six months ended June 30, 2021, we had a net loss of $45,462,043, which
consists of operating costs of $3,123,120 and a change in the value of the
warrant liability of 42,360,882, offset by interest income on marketable
securities held in the Trust Account of $21,959.
Liquidity and Capital Resources
On September 4, 2020, we consummated the Initial Public Offering of 44,275,000
Units, which included the full exercise by the underwriters of the
over-allotment option to purchase an additional 5,775,000 Units, at $10.00 per
Unit, generating gross proceeds of $442,750,000. Simultaneously with the closing
of the Initial Public Offering, we consummated the sale of 7,236,667 Private
Placement Warrants to our Sponsor at a price of $1.50 per warrant, generating
gross proceeds of $10,855,000.
Following the Initial Public Offering, the exercise of the over-allotment option
and the sale of the Private Placement Warrants, a total of $442,750,000 was
placed in the Trust Account. We incurred $24,895,463 in transaction costs,
including $8,855,000 of underwriting fees, $15,496,250 of deferred underwriting
fees and $544,213 of other offering costs.
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For the six months ended June 30, 2021, cash used in operating activities was
$926,722. Net loss of $45,462,043 was affected by change in warrant liabilities
of $42,360,882 and an interest earned on marketable securities held in the Trust
Account of $21,959. Changes in operating assets and liabilities provided
$2,196,398 of cash from operating activities.
As of June 30, 2021, we had cash and marketable securities held in the Trust
Account of $442,785,910. We intend to use substantially all of the funds held in
the Trust Account, including any amounts representing interest earned on the
Trust Account (less taxes payable and deferred underwriting commissions) to
complete our initial Business Combination. To the extent that our capital stock
or debt is used, in whole or in part, as consideration to complete our initial
Business Combination, the remaining proceeds held in the Trust Account will be
used as working capital to finance the operations of the target business or
businesses, make other acquisitions and pursue our growth strategies. During the
period ended June 30, 2021, we did not withdraw any interest income from the
Trust Account.
As of June 30, 2021, we had $167,959 of cash held outside of the Trust Account.
We intend to use the funds held outside the Trust Account primarily to identify
and evaluate target businesses, perform business due diligence on prospective
target businesses, travel to and from the offices, plants or similar locations
of prospective target businesses or their representatives or owners, review
corporate documents and material agreements of prospective target businesses,
and structure, negotiate and complete a Business Combination.
In order to fund working capital deficiencies or finance transaction costs in
connection with our initial Business Combination, our Sponsor or an affiliate of
our Sponsor or certain of our officers and directors may, but are not obligated
to, loan us funds as may be required. If we complete a Business Combination, we
would repay such loaned amounts. In the event that a Business Combination does
not close, we may use a portion of the working capital held outside the Trust
Account to repay such loaned amounts but no proceeds from our Trust Account
would be used for such repayment. Up to $1,500,000 of such loans may be
convertible into warrants identical to the Private Placement Warrants, at a
price of $1.50 per warrant at the option of the lender.
The Company may raise additional capital through loans or additional investments
from the Sponsor or its stockholders, officers, directors, or third parties. The
Company's officers and directors and the Sponsor may but are not obligated to
(except as described above), loan the Company funds, from time to time, in
whatever amount they deem reasonable in their sole discretion, to meet the
Company's working capital needs. Moreover, we may need to obtain additional
financing either to complete our initial Business Combination or because we
become obligated to redeem a significant number of our Public Shares upon
consummation of our initial Business Combination, in which case we may issue
additional securities or incur debt in connection with such Business
Combination. Subject to compliance with applicable securities laws, we would
only complete such financing simultaneously with the completion of our initial
Business Combination. If we are unable to complete our initial Business
Combination because we do not have sufficient funds available to us, we will be
forced to cease operations and liquidate the Trust Account. In addition,
following our initial Business Combination, if cash on hand is insufficient, we
may need to obtain additional financing in order to meet our obligations.
Sema4 Business Combination Announcement
On February 10, 2021, the Company announced that it executed an Agreement and
Plan of Merger (the "Merger Agreement") with Mount Sinai Genomics, Inc., a
Delaware corporation, d/b/a Sema4 ("Sema4") and the other parties thereto (the
transactions contemplated by the Merger Agreement, including the Merger (as
defined below), the "Sema4 Business Combination"). Specifically, the Company
entered into the Merger Agreement with Sema4 and S-IV Sub, Inc., a Delaware
corporation and a direct, wholly-owned subsidiary of the Company ("Merger Sub").
Pursuant to the terms of the Merger Agreement, CMLS will acquire Sema4 through
the merger of Merger Sub with and into Sema4, with Sema4 surviving as a
wholly-owned subsidiary of CMLS (the "Merger")
The Sema4 Business Combination is expected to close in the second quarter of
2021, following the receipt of the required approval by CMLS's stockholders and
the satisfaction of certain other customary closing conditions.
At the effective time of the Merger (the "Effective Time"), each share of Sema4
class B common stock, par value $0.00001 per share ("Sema4 Class B Common
Stock") issued and outstanding as of immediately prior to the Effective Time
will be converted into 1/100th of a share of Sema4 class A common stock, par
value $0.00001 per share ("Sema4 Class A Common Stock", together with Sema4
Class B Common Stock, "Sema4 Common Stock") in accordance with Sema4's
organizational documents.
Immediately thereafter, each share of Sema4 Common Stock and Sema4's series A-1
preferred stock, series A-2 preferred stock, series B preferred stock and series
C preferred stock (collectively, "Sema4 Capital Stock") issued and outstanding
immediately prior to the Effective Time (other than Excluded Shares and
Dissenting Shares (each as defined in the Merger Agreement)) will be converted
into the right to receive a portion of the total closing merger consideration,
with each Sema4 stockholder being entitled to receive the following:
(a) if such stockholder has made a cash election as set forth and in accordance
with the terms of the Merger Agreement, a portion of the specified aggregate
amount of cash consideration payable under the terms of the Merger Agreement
(such aggregate amount not to exceed $343,000,000) and pursuant to the terms
of such stockholder's cash election; and
(b) a number of shares of common stock, par value $0.0001 per share, of CMLS (the
"Common Stock") equal to the quotient of: (i) (A) the product of (x) such
stockholder's total shares of Sema4 Capital Stock multiplied by (y) the per
share amount calculated in accordance with the Merger Agreement minus (B) the
amount of cash payable to such stockholder pursuant to its cash election, if
any, divided by (ii) $10.
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In addition, at the Effective Time, each outstanding option to purchase Sema4
Capital Stock, each outstanding and unsettled restricted stock unit in respect
of shares of Sema4 Capital Stock and each outstanding stock appreciation right
will be rolled over into options to purchase Common Stock, restricted stock
units in respect of Common Stock and stock appreciation rights in respect of
Common Stock, all as further set forth in and in accordance with the terms of
the Merger Agreement.
In addition to the payment of cash, issuance of Common Stock and rollover of
other Sema4 equity awards described above as of the Effective Time, in the event
that the closing sale price of Common Stock exceeds certain price thresholds for
20 out of any 30 consecutive trading days during the period of time commencing
upon the expiration of the lock-up period applicable to the Sponsor under the
Letter Agreement, dated as of August 27, 2021, by and among the Company, Sponsor
and each of the executive officers and directors of the Company and ending on
the second anniversary of the closing of the Merger, an additional number of
shares equal to an amount up to an aggregate of 11% of the shares of Common
Stock that would have been issuable upon closing of the Merger to the
stockholders of the Company if no cash elections were made and the closing cash
payment amount under the Merger Agreement was $0.00 (the "Earn-Out Shares")
shall become issuable, in accordance with the terms of the Merger Agreement
following the achievement of those certain price thresholds, to the stockholders
of Sema4 as of immediately prior to the closing of the Merger; provided that the
board of directors of Sema4 (or a duly authorized committee thereof) may, prior
to the closing of the Merger, allocate a portion of such Earn-Out Shares to be
issued to service providers of Sema4 in the form of restricted stock units of
the Company.
Off-Balance Sheet Financing Arrangements
We have no obligations, assets or liabilities, which would be considered
off-balance sheet arrangements as of June 30, 2021. We do not participate in
transactions that create relationships with unconsolidated entities or financial
partnerships, often referred to as variable interest entities, which would have
been established for the purpose of facilitating off-balance sheet arrangements.
We have not entered into any off-balance sheet financing arrangements,
established any special purpose entities, guaranteed any debt or commitments of
other entities, or purchased any non-financial assets.
Contractual Obligations
We do not have any long-term debt, capital lease obligations, operating lease
obligations or long-term liabilities, other than as described below.
The underwriters are entitled to a deferred fee of $0.35 per Unit, or
$15,496,250 in the aggregate. The deferred fee will become payable to the
underwriter from the amounts held in the Trust Account solely in the event that
the Company completes a Business Combination, subject to the terms of the
underwriting agreement.
In addition, we entered into separate forward purchase agreements with
affiliates of the Sponsor, Casdin and Corvex, in their capacities as investment
advisors on behalf of one or more investment funds, clients or accounts managed
by the Clients, pursuant to which, subject to the conditions described below,
they will cause the Clients to purchase from us up to an aggregate amount of
15,000,000 shares of Class A common stock, or the forward purchase shares, for
$10.00 per forward purchase share, or an aggregate amount of up to $150,000,000,
in a private placement that will close concurrently with the closing of a
Business Combination. The amount of forward purchase shares sold pursuant to the
forward purchase agreements will be determined at our discretion based on our
needs for additional capital to consummate a Business Combination. Under each
forward purchase agreement, we are required to approach Casdin and Corvex if it
proposes to raise additional capital by issuing any equity, or securities
convertible into, exchangeable or exercisable for equity securities in
connection with a Business Combination. The respective obligations of Casdin and
Corvex to purchase forward purchase shares will, among other things, be
conditioned on us completing a Business Combination with a company engaged in a
business that is within the investment objectives of the Clients purchasing
forward purchase shares and on the Business Combination (including the target
assets or business, and the terms of the Business Combination) being reasonably
acceptable to such Clients as determined by Casdin or Corvex, as relevant, as
investment advisors on behalf of such Clients. Each of Casdin and Corvex will
have the right to transfer a portion of its purchase obligation under the
forward purchase agreement to third parties, or upon mutual agreement to each
other, subject to compliance with applicable securities laws. To the extent that
we obtain alternative financing to fund the initial Business Combination and the
Clients participate in such financing, the aggregate commitment under the
forward purchase agreement will be reduced by the amount of such alternative
financing.
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Critical Accounting Policies
The preparation of condensed financial statements and related disclosures in
conformity with accounting principles generally accepted in the United States of
America requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities, disclosure of contingent assets and
liabilities at the date of the condensed financial statements, and income and
expenses during the periods reported. Actual results could materially differ
from those estimates. We have identified the following critical accounting
policies:
Warrant Liability
We account for the warrants issued in connection with our Initial Public
Offering in accordance with the guidance contained in ASC 815 under which the
warrants do not meet the criteria for equity treatment and must be recorded as
liabilities. Accordingly, we classify the warrants as liabilities at their fair
value and adjust the warrants to fair value at each reporting period. This
liability is subject to re-measurement at each balance sheet date until
exercised, and any change in fair value is recognized in our statements of
operations.
Class A Common Stock Subject to Possible Redemption
We account for our Class A common stock subject to possible redemption in
accordance with the guidance in Accounting Standards Codification ("ASC") Topic
480 "Distinguishing Liabilities from Equity." Class A Common stock subject to
mandatory redemption is classified as a liability instrument and is measured at
fair value. Conditionally redeemable common stock (including common stock that
features redemption rights that are either within the control of the holder or
subject to redemption upon the occurrence of uncertain events not solely within
our control) is classified as temporary equity. At all other times, common stock
is classified as stockholders' equity. Our common stock features certain
redemption rights that are considered to be outside of our control and subject
to occurrence of uncertain future events. Accordingly, Class A common stock
subject to possible redemption is presented as temporary equity, outside of the
stockholders' equity section of our condensed balance sheets.
Net Income (Loss) Per Common Share
We apply the two-class method in calculating earnings per share. Net income per
common share, basic and diluted for Class A common stock is calculated by
dividing the interest income earned on the Trust Account, net of applicable
franchise and income taxes, by the weighted average number of Class A common
stock outstanding for the period. Net loss per common share, basic and diluted
for Class B common stock is calculated by dividing the net income, less income
attributable to Class A common stock, by the weighted average number of Class B
common stock outstanding for the period presented.
Recent Accounting Standards
Management does not believe that any recently issued, but not yet effective,
accounting standards, if currently adopted, would have a material effect on our
condensed financial statements.
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