Basis of Presentation and Summary of Significant Accounting Policies

6 Months Ended

Jun. 30, 2022

Basis of Presentation and Summary of Significant Accounting Policies

1. Basis of Presentation and Summary of Significant Accounting Policies

Basis of Presentation and Principles of Consolidation

The accompanying consolidated financial statements include the accounts of the subsidiaries of Sorrento Therapeutics, Inc. (the “Company”). For consolidated entities where the Company owns or is exposed to less than 100% of the economics, the Company records net income (loss) attributable to noncontrolling interests in its consolidated statements of operations equal to the percentage of the economic or ownership interest retained in such entities by the respective noncontrolling parties. All intercompany balances and transactions have been eliminated in consolidation. Certain amounts in the prior period consolidated financial statements have been reclassified to conform with the current period presentation.

These consolidated financial statements should be read in conjunction with the consolidated financial statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021, filed with the Securities and Exchange Commission (the “SEC”) on March 11, 2022. Operating results for interim periods are not expected to be indicative of operating results for the Company’s 2022 fiscal year, or any subsequent period. The unaudited interim financial statements included herein reflect all normal and recurring adjustments that are necessary for a fair presentation of the results for the interim periods presented.

Use of Estimates

To prepare consolidated financial statements in conformity with accounting principles generally accepted in the U.S., management must make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates.

Significant Accounting Policies

During the six months ended June 30, 2022, there have been no changes to the Company’s significant accounting policies as described in its Annual Report on Form 10-K for the fiscal year ended December 31, 2021, filed with the SEC on March 11, 2022.

Revenue Recognition

The following table shows revenue disaggregated by product and service type for the three and six months ended June 30, 2022 and 2021 (in thousands):


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Scilex Pharmaceuticals Inc. product sales	$	7,926	$	7,802	$	14,738	$	14,788
Sorrento Therapeutics, Inc. product revenues		665		52		3,844		89
Net product revenues	$	8,591	$	7,854	$	18,582	$	14,877
Concortis Biosystems Corporation	$	1,983	$	3,468	$	6,617	$	8,930
Bioserv Corporation		592		1,382		1,467		2,581
Other service revenues		295		807		3,179		1,378
Service revenues	$	2,870	$	5,657	$	11,263	$	12,889

The Company recorded $1.8 million in other service revenues associated with Celularity Inc. (“Celularity”) for the six months ended June 30, 2022. The Company held an ownership interest of approximately 14.3% of Celularity on a non-diluted basis at June 30, 2022. See Note 4 for details.

Inventory

The Company had $13.7 million in finished goods and $7.0 million in raw materials and other inventory at June 30, 2022. The Company had $4.7 million in finished goods and $3.3 million in raw materials and other inventory at December 31, 2021.