UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the quarterly period ended September 30, 2022
or
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the transition period from ________ to _________
Commission File Number: 001-39486
(Exact name of registrant as specified in its charter)
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(State or other jurisdiction of incorporation or organization)
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(IRS Employer Identification No.)
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(Address of principal executive offices)
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(Zip Code)
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(203 ) 458-7100
(Registrant’s telephone number, including area code)
Not applicable
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
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Title of each class
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Trading Symbols(s)
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Name of each exchange on which registered
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T
(§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes
☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging
growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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☒
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Accelerated filer
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☐
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Non-accelerated filer
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☐
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Smaller reporting company
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Emerging growth company
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised
financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
As of November 3, 2022, the registrant had 119,881,495
shares of Class A common stock outstanding and 19,937,500 shares of Class B common stock outstanding.
QUANTUM-SI INCORPORATED
FORM 10-Q
For the quarterly period ended September 30, 2022
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Page
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3
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Part I
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4
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Item 1.
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4
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4
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5
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6
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8
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9
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Item 2.
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22
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Item 3.
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30 | |
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Item 4.
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30
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Part II
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32 | |
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Item 1.
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32
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Item 1A.
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32
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Item 2.
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32 | |
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Item 3.
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32
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Item 4.
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32
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Item 5.
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32
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Item 6.
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33
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34
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In this Quarterly Report on Form 10-Q, the terms “we”, “us”, “our”, the “Company” or “Quantum-Si” mean Quantum-Si Incorporated (formerly HighCape Capital Acquisition
Corp.) and our subsidiaries. On June 10, 2021 (the “Closing Date”), HighCape Capital Acquisition Corp., a Delaware corporation (“HighCape” and after the Business Combination described herein, the “Company”), consummated a business combination (the
“Business Combination”) pursuant to the terms of the Business Combination Agreement, dated as of February 18, 2021 (the “Business Combination Agreement”), by and among HighCape, Tenet Merger Sub, Inc., a Delaware corporation (“Merger Sub”), and
Quantum-Si Incorporated, a Delaware corporation (“Legacy Quantum-Si”). Immediately upon the consummation of the Business Combination and the other transactions contemplated by the Business Combination Agreement (collectively, the “Transactions”,
and such completion, the “Closing”), Merger Sub merged with and into Legacy Quantum-Si, with Legacy Quantum-Si surviving the Business Combination as a wholly-owned subsidiary of HighCape (the “Merger”). In connection with the Transactions, HighCape
changed its name to “Quantum-Si Incorporated” and Legacy Quantum-Si changed its name to “Q-SI Operations Inc.”
This Quarterly Report on Form 10-Q includes 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 relate to future events, our future operations or financial performance, or our plans, strategies and prospects. These statements are based on the
beliefs and assumptions of our management team. Although we believe that our plans, intentions and expectations reflected in or suggested by these forward-looking statements are reasonable, we cannot assure that we will achieve or realize these
plans, intentions or expectations. Forward-looking statements are inherently subject to risks, uncertainties and assumptions. Generally, statements that are not historical facts, including statements concerning possible or assumed future actions,
business strategies, events or performance, are forward-looking statements. These statements may be preceded by, followed by or include the words “believes,” “estimates,” “expects,” “projects,” “forecasts,” “may,” “will,” “should,” “seeks,”
“plans,” “scheduled,” “anticipates” or “intends” or the negative of these terms, or other comparable terminology intended to identify statements about the future, although not all forward-looking statements contain these identifying words. The
forward-looking statements are based on projections prepared by, and are the responsibility of, our management. Forward-looking statements contained in this Quarterly Report on Form 10-Q include, but are not limited to, statements about:
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the ability to recognize the benefits of the Business Combination, which may be affected by, among other things, competition and our ability to grow and
manage growth profitably and retain our key employees;
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the ability to maintain the listing of our Class A common stock on The Nasdaq Stock Market LLC (“Nasdaq”);
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changes in applicable laws or regulations;
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our ability to raise financing in the future;
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the success, cost and timing of our product development activities;
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the commercialization and adoption of our existing products and the success of any product we may offer in the future;
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the potential attributes and benefits of our products once commercialized;
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our ability to obtain and maintain regulatory approval for our products, and any related restrictions and limitations of any approved product;
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●
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our ongoing leadership transition;
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our ability to identify, in-license or acquire additional technology;
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our ability to maintain our existing license agreements and manufacturing arrangements;
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our ability to compete with other companies currently marketing or engaged in the development of products and services that serve customers engaged in
proteomic analysis, many of which have greater financial and marketing resources than us;
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the size and growth potential of the markets for our products, and the ability of each product to serve those markets once commercialized, either alone or in
partnership with others;
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our estimates regarding expenses, future revenue, capital requirements and needs for additional financing;
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our financial performance; and
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the impact of the COVID-19 pandemic on our business.
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These forward-looking statements are based on information available as of the date of this report, and current expectations,
forecasts and assumptions, and involve a number of judgments, risks and uncertainties. Important factors could cause actual results, performance or achievements to differ materially from those indicated or implied by forward-looking statements such
as those described under the caption “Risk Factors” in Item 1A of Part I of our Annual Report on Form 10-K for the fiscal year ended December 31, 2021 and in other filings that we make with the Securities and Exchange Commission. The risks
described under the heading “Risk Factors” are not exhaustive. New risk factors emerge from time to time, and it is not possible to predict all such risk factors, nor can we assess the impact of all such risk factors on our business or the extent
to which any factor or combination of factors may cause actual results to differ materially from those contained in any forward-looking statements. Forward-looking statements are not guarantees of performance. You should not put undue reliance on
these statements, which speak only as of the date hereof. All forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the foregoing cautionary statements. We undertake no
obligations to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.
QUANTUM-SI INCORPORATED
(in thousands, except share and per share amounts)
(Unaudited)
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September 30,
2022 |
December 31,
2021 |
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Assets
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||||||||
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Current assets:
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Cash and cash equivalents
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$
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$
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Marketable securities
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||||||||
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Prepaid expenses and other current assets
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Total current assets
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Property and equipment, net
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| Goodwill |
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| Other assets | ||||||||
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Operating lease right-of-use assets
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Total assets
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$
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$
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Liabilities and stockholders’ equity
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Current liabilities:
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Accounts payable
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$
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$
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Accrued expenses and other current liabilities
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Short-term operating lease liabilities
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Total current liabilities
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Long-term liabilities:
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Warrant liabilities
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Other long-term liabilities
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Operating lease liabilities
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Total liabilities
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Commitments and contingencies (Note 14)
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Stockholders’ equity
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Class A Common stock, $
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Class B Common stock, $
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Additional paid-in capital
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||||||
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Accumulated deficit
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(
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)
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(
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)
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||||
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Total stockholders’ equity
|
|
|
||||||
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Total liabilities and stockholders’ equity
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$
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$
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|
||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
QUANTUM-SI INCORPORATED
(in thousands, except share and per share amounts)
(Unaudited)
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Three months ended September 30,
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Nine months ended September 30,
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|||||||||||||||
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2022
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2021
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2022
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2021
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|||||||||||||
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Operating expenses:
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||||||||||||||||
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Research and development
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$
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$
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$
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$
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|
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Selling, general and administrative
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||||||||||||
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Total operating expenses
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||||||||||||
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Loss from operations
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(
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)
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(
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)
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(
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)
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(
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)
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||||||||
| Interest expense | ( |
) | ||||||||||||||
| Dividend income | ||||||||||||||||
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Change in fair value of warrant liabilities
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Other (expense), net
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(
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)
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(
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)
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(
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)
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(
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)
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||||||||
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Loss before provision for income taxes
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(
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)
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(
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)
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(
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)
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(
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)
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||||||||
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Provision for income taxes
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||||||||||||
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Net loss and comprehensive loss
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$
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(
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)
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$
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(
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)
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$
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(
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)
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$
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(
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)
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||||
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Net loss per common share attributable to common stockholders, basic and diluted
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$
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(
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)
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$
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(
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)
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$
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(
|
)
|
$
|
(
|
)
|
||||
|
Weighted-average shares used to compute net loss per share attributable to common stockholders, basic and diluted
|
|
|
|
|
||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
QUANTUM-SI INCORPORATED
STOCKHOLDERS’ EQUITY (DEFICIT)
(in thousands, except share amounts)
(Unaudited)
|
Convertible preferred stock
|
Class A
common stock
|
Class B
common stock
|
Additional paid-in capital
|
Accumulated deficit
|
Total stockholders’
equity (deficit)
|
|||||||||||||||||||||||||||||||
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Shares
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Amount
|
Shares
|
Amount
|
Shares
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Amount
|
|||||||||||||||||||||||||||||||
|
Balance - December 31, 2020
|
|
$
|
|
|
$
|
|
|
$
|
|
$
|
|
$
|
(
|
)
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$
|
(
|
)
|
|||||||||||||||||||
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Net loss
|
-
|
-
|
-
|
|
-
|
|
|
(
|
)
|
(
|
)
|
|||||||||||||||||||||||||
|
Issuance of Series E convertible preferred stock, net of issuance costs
|
|
(
|
)
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||
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Common stock issued upon exercise of stock options and vesting of restricted stock units
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-
|
-
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||
|
Stock-based compensation
|
-
|
-
|
-
|
|
-
|
|
|
|
|
|||||||||||||||||||||||||||
|
Balance - March 31, 2021
|
|
$
|
|
|
$
|
|
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
(
|
)
|
|||||||||||||||||||
|
Net loss
|
-
|
-
|
-
|
|
-
|
|
|
(
|
)
|
(
|
)
|
|||||||||||||||||||||||||
|
Common stock issued upon exercise of stock options and vesting of restricted stock units
|
- | - | ||||||||||||||||||||||||||||||||||
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Conversion of the convertible preferred stock into Class A and Class B common stock
|
( |
) | ( |
) | ||||||||||||||||||||||||||||||||
|
Net equity infusion from the Business Combination
|
- | - | ||||||||||||||||||||||||||||||||||
|
Stock-based compensation
|
-
|
-
|
-
|
|
-
|
|
|
|
|
|||||||||||||||||||||||||||
|
Balance - June 30, 2021
|
|
$
|
|
|
$
|
|
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
|
||||||||||||||||||||
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Net loss
|
-
|
-
|
-
|
|
-
|
|
|
(
|
)
|
(
|
)
|
|||||||||||||||||||||||||
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Common stock issued upon exercise of stock options and vesting of restricted stock units
|
- | - | ||||||||||||||||||||||||||||||||||
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Net equity infusion from the Business Combination
|
- | - | ( |
) | ( |
) | ||||||||||||||||||||||||||||||
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Stock-based compensation
|
-
|
-
|
-
|
|
-
|
|
|
|
|
|||||||||||||||||||||||||||
|
Balance - September 30, 2021
|
|
$
|
|
|
$
|
|
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
|
||||||||||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
QUANTUM-SI INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN CONVERTIBLE PREFERRED STOCK AND
STOCKHOLDERS’ EQUITY (DEFICIT)
(in thousands, except share amounts)
(Unaudited)
|
Class A
common stock
|
Class B
common stock
|
Additional paid-in capital
|
Accumulated deficit
|
Total stockholders’ equity (deficit)
|
||||||||||||||||||||||||
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Shares
|
Amount
|
Shares
|
Amount
|
|||||||||||||||||||||||||
|
Balance - December 31, 2021
|
|
|
$
|
|
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
|
||||||||||||||
|
Net loss
|
-
|
|
-
|
|
|
(
|
)
|
(
|
)
|
|||||||||||||||||||
|
Common stock issued upon exercise of stock options and vesting of restricted stock units
|
|
|
|
|
|
|
|
|||||||||||||||||||||
|
Stock-based compensation
|
-
|
|
-
|
|
(
|
)
|
|
(
|
)
|
|||||||||||||||||||
|
Balance - March 31, 2022
|
|
|
$
|
|
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
|
||||||||||||||
|
Net loss
|
-
|
|
-
|
|
|
(
|
)
|
(
|
)
|
|||||||||||||||||||
|
Common stock issued upon exercise of stock options and vesting of restricted stock units
|
|
|
|
|
|
|
|
|||||||||||||||||||||
|
Stock-based compensation
|
-
|
|
-
|
|
|
|
|
|||||||||||||||||||||
|
Balance - June 30, 2022
|
|
$
|
|
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
|
|||||||||||||||
|
Net loss
|
-
|
|
-
|
|
|
(
|
)
|
(
|
)
|
|||||||||||||||||||
|
Common stock issued upon exercise of stock options and vesting of restricted stock units
|
||||||||||||||||||||||||||||
|
Stock-based compensation
|
-
|
|
-
|
|
|
|
|
|||||||||||||||||||||
|
Balance - September 30, 2022
|
|
$
|
|
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
|
|||||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
QUANTUM-SI INCORPORATED
(in thousands)
(Unaudited)
|
Nine Months Ended September 30,
|
||||||||
|
2022
|
2021
|
|||||||
|
Cash flows from operating activities:
|
||||||||
|
Net loss
|
$
|
(
|
)
|
$
|
(
|
)
|
||
|
Adjustments to reconcile net loss to net cash used in operating activities:
|
||||||||
|
Depreciation
|
|
|
||||||
|
Loss on marketable securities (realized and unrealized)
|
||||||||
|
Loss on disposal of fixed assets
|
||||||||
|
Change in fair value of warrant liabilities
|
(
|
)
|
(
|
)
|
||||
|
Change in fair value of contingent consideration
|
||||||||
|
Stock-based compensation
|
|
|
||||||
|
Changes in operating assets and liabilities:
|
||||||||
|
Prepaid expenses and other current assets
|
(
|
)
|
(
|
)
|
||||
|
Other assets
|
( |
) | ( |
) | ||||
|
Other assets - related party
|
||||||||
| Operating lease right-of-use assets | ( |
) | ( |
) | ||||
|
Accounts payable
|
(
|
)
|
|
|||||
|
Accrued expenses and other current liabilities
|
|
|
||||||
| Operating lease liabilities | ||||||||
|
Net cash used in operating activities
|
$
|
(
|
)
|
$
|
(
|
)
|
||
|
Cash flows from investing activities:
|
||||||||
|
Purchases of property and equipment
|
(
|
)
|
(
|
)
|
||||
| Purchases of marketable securities | ( |
) | ( |
) | ||||
|
Sales of marketable securities
|
||||||||
|
Net cash provided by (used in) investing activities
|
$
|
|
$
|
(
|
)
|
|||
|
Cash flows from financing activities:
|
||||||||
|
Proceeds from exercise of stock options
|
|
|
||||||
|
Net proceeds from equity infusion from the Business Combination
|
||||||||
|
Payment of notes payable
|
( |
) | ||||||
|
Payment of contingent consideration - business acquisition
|
( |
) | ||||||
|
Payment of deferred consideration - business acquisition
|
( |
) | ||||||
|
Stock issuance costs for Series E convertible preferred stock
|
|
( |
) | |||||
|
Principal payments under finance lease obligations
|
|
( |
) | |||||
|
Net cash provided by financing activities
|
$
|
|
$
|
|
||||
|
Net increase in cash and cash equivalents
|
|
|
||||||
|
Cash and cash equivalents at beginning of period
|
|
|
||||||
|
Cash and cash equivalents at end of period
|
$
|
|
$
|
|
||||
|
Supplemental disclosure of cash flow information:
|
||||||||
|
Cash received from exchange of research and development tax credits
|
$
|
|
$
|
|
||||
|
Supplemental disclosure of noncash information:
|
||||||||
|
Noncash acquisition of property and equipment
|
$
|
|
$
|
|
||||
|
Forgiveness of related party promissory notes
|
$
|
|
$
|
|
||||
|
Noncash equity related transaction costs from the Business Combination
|
$ | $ | ||||||
|
Noncash equity related warrants from the Business Combination
|
$ | $ | ||||||
|
Conversion of the convertible preferred stock into Class A and Class B common stock
|
$ | $ | ||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
QUANTUM-SI INCORPORATED
AS OF SEPTEMBER 30, 2022 AND DECEMBER 31, 2021
AND FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2022 AND 2021
(in thousands, except share and per share amounts)
(Unaudited)
1. ORGANIZATION AND DESCRIPTION OF BUSINESS
Quantum-Si Incorporated (including its subsidiaries, the “Company” or
“Quantum-Si”) was originally incorporated in Delaware on June 10, 2020 as a special purpose acquisition company under the name HighCape Capital Acquisition Corp. (“HighCape”) for the purpose of effecting a merger, capital stock exchange, asset
acquisition, stock purchase, reorganization or similar business combination involving HighCape and one or more businesses. On June 10, 2021 (the “Closing”), the Company consummated the transaction contemplated by the Business Combination Agreement,
dated February 18, 2021 (the “Business Combination Agreement”), by and among HighCape, Tenet Merger Sub, Inc., a Delaware corporation (“Merger Sub”) and Quantum-Si Incorporated, a Delaware corporation (“Legacy Quantum-Si”).
Pursuant to the terms of the Business Combination Agreement, a business
combination between HighCape was effected through the merger of Merger Sub with and into Legacy Quantum-Si, with Legacy Quantum-Si surviving as the surviving company and a wholly owned subsidiary of HighCape (the “Merger” and collectively with the
other transaction described in the Business Combination Agreement, the “Business Combination”). Effective as of the Closing, HighCape changed its name to Quantum-Si Incorporated and Legacy Quantum-Si changed its name to Q-SI Operations Inc. The
financial information prior to the Business Combination represents the financial results and condition of Legacy Quantum-Si.
The Company is an innovative life sciences company with the mission of
transforming single-molecule analysis and democratizing its use by providing researchers and clinicians access to the proteome, the set of proteins expressed within a cell. The Company has developed a proprietary universal single-molecule detection
platform that the Company is first applying to proteomics to enable Next-Generation Protein Sequencing (“NGPS”), the ability to sequence proteins in a massively parallel fashion (rather than sequentially, one at a time), and can be used for the
study of nucleic acids. The Company’s platform is comprised of the CarbonTM automated sample preparation instrument, the PlatinumTM NGPS instrument, the Quantum-Si CloudTM software service, and reagent kits and
chips for use with its instruments.
Although the Company has incurred recurring losses each year since its inception,
the Company expects its cash and cash equivalents, and marketable securities will be able to fund its operations for at least the next twelve months.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation and Principles of Consolidation
The accompanying condensed consolidated financial statements include the accounts of the Company and have been prepared in
accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and pursuant to the accounting disclosure rules and regulations of the Securities and Exchange Commission (the “SEC”) regarding interim financial
reporting. All intercompany transactions are eliminated. Certain information and note disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations.
These condensed consolidated financial statements should be read in conjunction with the audited consolidated financial
statements and the notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021. The condensed consolidated balance sheet as of December 31, 2021 included herein was derived from the audited consolidated
financial statements as of that date, but does not include all disclosures, including certain notes required by U.S. GAAP, on an annual reporting basis.
In the opinion of management, the accompanying condensed consolidated financial statements reflect all normal recurring
adjustments necessary to present fairly the financial position, results of operations, and cash flows for the interim periods. The results for the three and nine months ended September 30, 2022 are not necessarily indicative of the results to be
expected for any subsequent quarter, the year ending December 31, 2022, or any other period.
There have been no material changes to the Company’s significant accounting policies as described in the Company’s audited
consolidated financial statements as of and for the years ended December 31, 2021 and 2020.
COVID-19 Outbreak
The outbreak of the novel coronavirus (“COVID-19”), which was declared a pandemic by the World Health Organization on March 11, 2020 and declared a National Emergency
by the President of the United States on March 13, 2020, has led to adverse impacts on the United States and global economies and created uncertainty regarding potential impacts on the Company’s operating results, financial condition and cash
flows. The COVID-19 pandemic had, and is expected to continue to have, an adverse impact on the Company’s operations, particularly as a result of preventive and precautionary measures that the Company, other businesses, and governments are taking.
Governmental mandates related to COVID-19 or other infectious diseases, or public health crises, have impacted, and the Company expects them to continue to impact, its personnel and personnel at third-party manufacturing facilities in the United
States and other countries, and the availability or cost of materials, which would disrupt or delay the Company’s receipt of instruments, components and supplies from the third parties the Company relies on to, among other things, produce its
products currently under development. The COVID-19 pandemic has also had an adverse effect on the Company’s ability to attract, recruit, interview and hire at the pace the Company would typically expect to support its rapidly expanding operations.
To the extent that any governmental authority imposes additional regulatory requirements or changes existing laws, regulations, and policies that apply to the Company’s business and operations, such as additional workplace safety measures, the
Company’s product development plans may be delayed, and the Company may incur further costs in bringing its business and operations into compliance with changing or new laws, regulations, and policies. The full extent to which the COVID-19 pandemic
will directly or indirectly impact the Company’s business, results of operations and financial condition, including expenses and research and development costs, will depend on future developments that are highly uncertain, including as a result of
new information that may emerge concerning COVID-19 and the actions taken to contain or treat COVID-19, as well as the economic impacts, including inflation on product and service costs.
The estimates of the impact on the Company’s business may change based on new information that may emerge concerning COVID-19 and the actions to
contain it or address its impact and the economic impact on local, regional, national and international markets as well as other changes in macroeconomic factors. The COVID-19 pandemic and related economic disruptions have not had a material
adverse impact on the Company’s operations to date. While the Company is unable to predict the full impact that the COVID-19 pandemic will have on the Company’s future results of operations, liquidity and financial condition due to numerous
uncertainties, including the duration of the pandemic, the actions that may be taken by government authorities across the United States, adverse changes in macroeconomic conditions, if sustained or recurrent, could result in significant changes
in costs going forward with material adverse effect on the Company’s operating results, financial condition, and cash flows.
The Company has not incurred any significant impairment losses in the carrying values of the Company’s assets as a result of the COVID-19 pandemic and is not aware of
any specific related event or circumstance that would require the Company to revise its estimates reflected in its condensed consolidated financial statements.
Other Global Developments
In 2022, various central banks around the world (including the Federal Reserve in the United States) raised interest rates. While these rate increases have not had a
significant adverse impact on the Company to date, the impact of such rate increases on the overall financial markets and the economy may adversely impact the Company in the future. In addition, the global economy has experienced and is
continuing to experience high levels of inflation and global supply chain disruptions. The Company continues to monitor these supply chain, inflation and interest rate factors, as well as the uncertainty resulting from the overall economic
environment.
In addition, although the Company has no operations in or direct exposure to Russia, Belarus and Ukraine, the Company has experienced limited
constraints in availability and increasing costs required to obtain some materials and supplies due, in part, to the negative impact of the Russia-Ukraine military conflict on the global economy. To date, the Company’s business has not been
materially impacted by the conflict, however, as the conflict continues or worsens, it may impact the Company’s business, financial condition or results of operations.
Concentration of Credit Risk
Financial instruments that potentially subject the Company to concentration of credit risk consist principally of cash and cash equivalents and marketable securities.
As of September 30, 2022 and December 31, 2021, substantially all of the Company’s cash and cash equivalents and marketable securities were invested in fixed income mutual funds at one financial institution. The Company also maintains balances in
various operating accounts above federally insured limits. After considering dividend income derived from such investments, the Company has not recognized any significant realized losses on such accounts and does not believe it is exposed to any
significant credit risk on cash and cash equivalents and marketable securities.
Reclassifications
Certain prior year amounts have been reclassified for consistency with the current year’s presentation.
Use of Estimates
The preparation of the condensed consolidated financial statements in conformity
with U.S. GAAP requires the Company to make estimates and assumptions about future events that affect the amounts reported in its condensed consolidated financial statements and accompanying notes. Future events and their effects cannot be
determined with certainty. On an ongoing basis, management evaluates these estimates and assumptions. Significant estimates and assumptions include:
| ● |
valuation allowances with respect to deferred tax assets;
|
| ● |
valuation for acquisitions;
|
| ● |
valuation of goodwill;
|
| ● |
assumptions used for leases;
|
| ● |
valuation of warrant liabilities; and
|
| ● |
assumptions underlying the fair value used in the calculation of the stock-based compensation.
|
The Company bases these estimates on historical and anticipated results and trends
and on various other assumptions that the Company believes are reasonable under the circumstances, including assumptions as to future events. Changes in estimates are recorded in the period in which they become known. Actual results could differ
from those estimates, and any such differences may be material to the Company’s condensed consolidated financial statements.
Foreign Currency Translation and Transactions
For the Company’s
international operations, the local currency has been determined to be the functional currency. The results of its non-U.S. dollar-based operations are translated to U.S. dollars at the average exchange rates during the period. Assets and
liabilities are translated at the rate of exchange prevailing on the balance sheet date. Equity is translated at the prevailing rate of exchange at the date of the equity transaction. Translation adjustments are reflected in Stockholders’
equity and are included as a component of Other comprehensive (loss)/income. The translational effects of revaluing non-functional currency assets and liabilities into the functional currency are recorded as Other (expense), net in the
condensed consolidated statements of operations and comprehensive loss.
The Company
realizes foreign currency gains/(losses) in the normal course of business based on movement in the applicable exchange rates. These transactional gains/(losses) are included as a component of Other (expense), net in the condensed
consolidated statements of operations and comprehensive loss. As of September 30, 2022 and for the three and nine months ended September 30, 2022, there was no material effect of foreign currency translation and transactions on the
condensed consolidated financial statements.
Investments in Marketable Securities
The Company’s investments in marketable securities
consist of ownership interests in fixed income mutual funds. The securities are stated at fair value, as determined by quoted market prices. As the securities have readily determinable fair value, unrealized gains and losses are reported as
Other (expense), net on the condensed consolidated statements of operations and comprehensive loss. Subsequent gains or losses realized upon redemption or sale of these securities are also recorded as Other (expense), net on the condensed
consolidated statements of operations and comprehensive loss. The Company considers all of its investments in marketable securities as available for use in current operations and therefore classifies these securities within current assets on
the condensed consolidated balance sheets.
For the three and nine months ended September 30, 2022, the Company reported unrealized losses of $4,240 and $20,384 , respectively, related to securities held
as of September 30, 2022. Realized losses related to securities that matured or were sold during the three and nine months ended September 30, 2022 were $1,348 and $2,399 , respectively. For the three and nine months ended September 30, 2022, the
Company recognized $1,381 and $3,288 ,
respectively, in dividend income from marketable securities. For the three and nine months ended September 30, 2021, the Company reported unrealized losses of $634 no 739 and $741 , respectively, in dividend income from
marketable securities.
Leases
Effective December 31, 2021, the Company lost its emerging growth company status which accelerated the adoption of Accounting Standards Update (“ASU”) 2016-02, Leases (Topic 842). The Company’s adoption of ASU 2016-02 was effective retrospectively to January 1, 2021, the beginning of the year. In
accordance with ASU 2016-02, for arrangements in existence as of January 1, 2021 and any new arrangements entered into thereafter, the Company determines if an arrangement is a lease at inception and records right-of-use (“ROU”) assets and lease
liabilities on the condensed consolidated balance sheets at lease commencement.
The Company’s leases generally do not have a readily determinable implicit
discount rate. As such, the Company uses an incremental borrowing rate based on the information available at the lease commencement date to determine the present value of the lease payments. The Company’s incremental borrowing rate is the
estimated rate that would be required to pay for a collateralized borrowing equal to the total lease payment over the lease term. The Company measures ROU assets based on the corresponding lease liability adjusted for (i) payments made to the
lessor at or before the commencement date, (ii) initial direct costs incurred and (iii) tenant incentives under the lease. The Company’s lease terms may include options to extend or terminate the lease when it is reasonably certain that it
will exercise that option. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term for operating leases. Finance leases will result in a front-loaded expense pattern. With respect to finance leases,
amortization of the ROU asset is presented separately from interest expense related to the finance lease liability. In addition, the Company does not have significant residual value guarantees or restrictive covenants in the lease portfolio.
The Company expenses monthly rental payments as incurred in Selling, general
and administrative and in Research and development in the condensed consolidated statements of operations and comprehensive loss. The Company’s lease agreements contain variable lease costs for common area maintenance, utilities, taxes and
insurance, which are expensed as incurred.
As a result of its adoption of the new lease standard effective January 1, 2021, the Company has implemented new accounting policies and processes which
changed the Company’s internal controls over financial reporting for lease accounting.
Goodwill
Goodwill, which represents the excess of purchase price over the fair value of net assets acquired, is carried at cost. Goodwill is not amortized; rather, it is
subject to a periodic assessment for impairment by applying a fair value-based test. Beginning in 2022, the Company will review goodwill for possible impairment annually during the fourth quarter as of October 1, or whenever events or
circumstances indicate that the carrying amount may not be recoverable. No
In order to test goodwill for impairment, an entity is permitted to first assess qualitative factors to determine whether a quantitative assessment of goodwill
is necessary. The qualitative factors considered by the Company may include, but are not limited to, general economic conditions, the Company’s outlook, market performance of the Company’s industry and recent and forecasted financial
performance. Further testing is only required if the entity determines, based on the qualitative assessment, that it is more likely than not that a reporting unit’s fair value is less than its carrying amount. Otherwise, no further impairment
testing is required. If a quantitative assessment is required, the Company determines the fair value of its reporting unit using a combination of the income and market approaches. If the net book value of the reporting unit exceeds its fair
value, the Company recognizes a goodwill impairment charge for the reporting unit equal to the lesser of (i) the total goodwill allocated to that reporting unit and (ii) the amount by which that reporting unit’s carrying amount exceeds its
fair value. Assumptions and estimates used in the evaluation of impairment which primarily include, but are not limited to, discount rates, terminal growth rates, market
comparables, and capital expenditure and cash flow forecasts, may affect the fair value of goodwill, which could result in impairment charges in future periods.
Impairment of Long-Lived Assets
The Company reviews its long-lived assets for impairment
at least annually or when the Company determines a triggering event has occurred. When a triggering event has occurred, each impairment test is based on a comparison of the future expected undiscounted cash flow to the recorded value of the
asset. If the recorded value of the asset is less than the undiscounted cash flow, the asset is written down to its estimated fair value. No
Warrant Liabilities
The Company’s outstanding warrants include publicly-traded warrants (the “Public Warrants”) which were issued as of one redeemable warrant per unit issued during HighCape’s initial public offering on September 9, 2020, and warrants sold in a private placement (the “Private
Warrants”) to HighCape’s sponsor, HighCape Capital Acquisition LLC (the “Sponsor”). The Company evaluated its warrants under Accounting Standards Codification (“ASC”) 815-40, Derivatives and Hedging-Contracts in
Entity’s Own Equity (“ASC 815-40”), and concluded that they do not meet the criteria to be classified in stockholders’ equity. Since the Public Warrants and Private Warrants meet the definition of a derivative under ASC 815-40, the Company
recorded these warrants as long-term liabilities on the condensed consolidated balance sheet at fair value upon the Closing of the Business Combination, with subsequent changes in their respective fair values recognized in the condensed
consolidated statements of operations and comprehensive loss at each reporting date.
Recently Issued Accounting Pronouncements
Accounting
pronouncements issued but not yet adopted
No new accounting pronouncement issued or effective during the three and nine months ended September 30, 2022 had, or is
expected to have, a material impact on the Company’s condensed consolidated financial statements.
3. BUSINESS COMBINATION
As discussed in Note 1, “Organization and Description of Business,” on June 10, 2021,
the Company consummated the Business Combination, with Legacy Quantum-Si surviving the Merger as a wholly owned subsidiary of the Company.
Pursuant to the Business Combination Agreement, at the effective time of the Merger (the “Effective
Time”), each share of Legacy Quantum-Si capital stock (other than shares of Legacy Quantum-Si Series A preferred stock) that was issued and outstanding was automatically cancelled and extinguished and converted into the right to receive 0.7975 (the “Exchange Ratio”) shares of the Company’s Class A common stock, and each share of Legacy Quantum-Si Series A preferred stock that was issued
and outstanding was automatically cancelled and extinguished and converted into the right to receive the number of shares of the Company’s Class B common stock equal to the Exchange Ratio.
The total number of shares of the Company’s Class A common stock outstanding immediately following the
Closing was 116,463,160 , and the total number of the Company’s Class B common stock outstanding immediately following the Closing was 19,937,500 .
In connection with the Business Combination, certain institutional investors purchased from the Company
an aggregate of 42,500,000 shares of the Company’s Class A common stock for a purchase price of $10.00 per share and an aggregate purchase price of $425,001
pursuant to separate subscription agreements entered into effective as of February 18, 2021. In addition, pursuant to subscription agreements entered into effective as of February 18, 2021, certain affiliates of Foresite Capital Management, LLC
purchased an aggregate of 696,250 shares of the Company’s Class A common stock at a purchase price of $0.001 per share for aggregate purchase price of $1
after a corresponding number of shares of the Company’s Class B common stock was irrevocably forfeited by the Sponsor to HighCape for no consideration and automatically cancelled.
The Business Combination was accounted for as a reverse recapitalization in accordance with U.S. GAAP
primarily due to the fact that Legacy Quantum-Si stockholders continued to control the Company following the Closing of the Business Combination. Under this method of accounting, HighCape was treated as the “acquired” company for accounting
purposes and the Business Combination was treated as the equivalent of Legacy Quantum-Si issuing stock for the net assets of HighCape, accompanied by a recapitalization. The net assets of HighCape were stated at historical cost, with no goodwill or
other intangible assets recorded. Reported shares and earnings per share available to holders of the Company’s capital stock and equity awards prior to the Business Combination were retroactively restated reflecting the Exchange Ratio.
Upon the Closing, the Company’s certificate of incorporation was amended and restated to, among other
things, adopt a dual class structure, comprised of the Company’s Class A common stock, which is entitled to one vote per share, and the
Company’s Class B common stock, which is entitled to 20 votes per share. The Company’s Class B common stock has the same economic terms
as the Company’s Class A common stock, but is subject to a “sunset” provision if Jonathan M. Rothberg, Ph.D., the founder of Legacy Quantum-Si and Chairman of the Company (“Dr. Rothberg”), and other permitted holders of the Company’s Class B common
stock collectively cease to beneficially own at least twenty percent (20 %) of the number of shares of the Company’s Class B common stock
(as such number of shares is equitably adjusted in respect of any reclassification, stock dividend, subdivision, combination or recapitalization of the Company’s Class B common stock) collectively held by Dr. Rothberg and permitted transferees of
the Company’s Class B common stock as of the Effective Time.
4. ACQUISITION
Majelac Technologies LLC
Pursuant to the terms and conditions of an Asset Purchase Agreement by and among the Company, Majelac
Technologies LLC (“Majelac”), and certain other parties, on November 5, 2021 (the “Majelac Closing Date”), the Company acquired certain assets and assumed certain liabilities of Majelac, a privately-owned company providing semiconductor chip
assembly and packaging capabilities located in Pennsylvania, for $4,632 in cash including $132 in reimbursement for certain recently purchased equipment, and 535,715
shares of Class A common stock, valued at $4,232 , issued to Majelac subject to certain restrictions. An additional 59,523 shares of Class A common stock valued at $471
will be issued to Majelac 12 months after the Majelac Closing Date less the number of shares of Class A common stock that may be
required by the buyer indemnitees to satisfy any unresolved claims for indemnification, if any. The Company also assumed the legal fees of Majelac of $50 .
Additional purchase price consideration of $500 in cash was to be paid six months after the Majelac Closing Date less any amount that could be required by the buyer indemnitees to satisfy any unresolved claims for indemnification, if any. The Company agreed to
pay additional milestone-based consideration of up to $800 , which was fair valued at $531 . On May 4, 2022, the Company paid Majelac $900 in cash, which
consisted of $500 for the additional purchase price consideration and $400 (fair value of $348
at the Majelac Closing Date) for the of two milestones that was met.
The acquisition brings semiconductor chip assembly and packaging capabilities in-house to secure the
Company’s supply chain and support scaling commercialization efforts. Prior to the acquisition, Majelac was a vendor of the Company.
The following table summarizes the final purchase price allocation at the Majelac Closing Date as follows:
|
Purchase Price
Allocation
|
||||
|
Prepaid expenses and other current assets
|
$
|
|
||
|
Property and equipment, net
|
|
|||
|
Goodwill
|
|
|||
|
Total
|
$
|
|
||
Goodwill represents the excess of the consideration transferred over the aggregate fair values of
assets acquired and liabilities assumed. The goodwill recorded in connection with this acquisition was based on operating synergies and other benefits expected to result from the combined operations. The goodwill acquired is amortizable for tax
purposes over a period of 15 years.
Acquisition-related costs recognized for the three and nine months ended September 30, 2022 including
transaction costs such as legal, accounting, valuation and other professional services, were $0 and $26 , respectively, and are included in Selling, general and administrative on the condensed consolidated statements of operations and comprehensive loss.
5. FAIR VALUE OF FINANCIAL INSTRUMENTS
Fair value estimates of financial instruments are made at a specific point in time, based on relevant information about financial markets and specific financial
instruments. As these estimates are subjective in nature, involving uncertainties and matters of significant judgment, they cannot be determined with precision. Changes in assumptions can significantly affect estimated fair value.
The Company measures fair value as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an
orderly transaction between market participants at the reporting date. The Company utilizes a three-tier hierarchy, which prioritizes the inputs used in the valuation methodologies in measuring fair value:
| ● |
Level 1 - Valuations based on quoted prices in active markets for identical assets or liabilities that an entity has the ability to access.
|
| ● |
Level 2 - Valuations based on quoted prices for similar assets or liabilities, quoted prices for identical assets or liabilities in markets that are not
active, or other inputs that are observable or can be corroborated by observable data for substantially the full term of the assets or liabilities.
|
| ● |
Level 3 - Valuations based on inputs that are supported by little or no market activity and that are significant to the fair value of the assets or
liabilities.
|
The carrying value of cash and cash equivalents, accounts payable and accrued expenses and other current liabilities approximates their fair values due to the
short-term or on demand nature of these instruments. There were no
The Public Warrants and Private Warrants were carried at fair value as of September 30, 2022. The Public Warrants were valued using Level 1 inputs as they are traded
in an active market. The Private Warrants were valued using a binomial lattice model, which results in a Level 3 fair value measurement. The primary unobservable input utilized in determining the fair value of the Private Warrants was the expected
volatility of the Company’s Class A common stock. The expected volatility was based on consideration of the implied volatility from the Company’s own public warrant pricing and on the historical volatility observed at guideline public companies. As
of September 30, 2022, the significant assumptions used in preparing the binomial lattice model for valuing the Private Warrants liability include (i) volatility of 72.7 %, (ii) risk-free interest rate of 4.10 %, (iii) strike price of $11.50 , (iv) fair value of common stock of $2.75 ,
and (v) expected life of 3.7 years.
Fixed income mutual funds were valued using quoted market prices and accordingly
were classified as Level 1.
The following table summarizes the Company’s assets and liabilities that are measured at fair value on a recurring basis, by level, within the fair value hierarchy:
|
Fair Value Measurement Level
|
||||||||||||||||
|
Total
|
Level 1
|
Level 2
|
Level 3
|
|||||||||||||
|
September 30, 2022:
|
||||||||||||||||
|
Assets:
|
||||||||||||||||
|
Fixed income mutual funds - Cash and cash equivalents
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
|
Marketable securities
|
||||||||||||||||
|
Total assets at fair value on a recurring basis
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
|
|
||||||||||||||||
|
Liabilities:
|
||||||||||||||||
|
Public Warrants
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
|
Private Warrants
|
|
|
|
|
||||||||||||
|
Total liabilities at fair value on a recurring basis
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
|
Fair Value Measurement Level
|
||||||||||||||||
|
Total
|
Level 1
|
Level 2
|
Level 3
|
|||||||||||||
|
December 31, 2021:
|
||||||||||||||||
|
Assets:
|
||||||||||||||||
|
Fixed income mutual funds - Cash and cash equivalents
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
|
Marketable securities
|
||||||||||||||||
|
Total assets at fair value on a recurring basis
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
|
|
||||||||||||||||
|
Liabilities:
|
||||||||||||||||
|
Public Warrants
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
|
Private Warrants
|
|
|
|
|
||||||||||||
|
Total liabilities at fair value on a recurring basis
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
6. PROPERTY AND EQUIPMENT, NET
Property and equipment, net, are recorded at historical cost and consist of the following:
|
September 30,
2022 |
December 31,
2021 |
|||||||
|
Laboratory and production equipment
|
$
|
|
$
|
|
||||
|
Computer equipment
|
|
|
||||||
|
Software
|
|
|
||||||
|
Furniture and fixtures
|
|
|
||||||
| Leasehold improvements | ||||||||
|
Construction in process
|
|
|
||||||
| Property and equipment, gross |
|
|
||||||
|
Less: Accumulated depreciation
|
(
|
)
|
(
|
)
|
||||
|
Property and equipment, net
|
$
|
|
$
|
|
||||
Depreciation expense amounted to $729 and $264 for the three months ended September 30, 2022 and 2021, respectively, and $1,789 and $712 for the nine months ended September 30, 2022 and 2021,
respectively. The Company had disposals of $9 relating to property and equipment of $11 with accumulated depreciation of $2 for the nine months ended
September 30, 2022. There were no disposals for the nine months ended September 30, 2021.
7. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
Accrued expenses and other current liabilities consist of the following:
|
September 30,
2022 |
December 31,
2021 |
|||||||
|
Employee compensation and benefits
|
$
|
|
$
|
|
||||
|
Contracted services
|
|
|
||||||
| Business acquisition costs and contingencies | ||||||||
|
Legal fees
|
|
|
||||||
|
Other
|
|
|
||||||
|
Total accrued expenses and other current liabilities
|
$
|
|
$
|
|
||||
8. LEASES
The Company has commitments under lease arrangements for office and manufacturing space and office equipment. The Company’s leases have initial lease terms ranging from
one year to 10 years. These
leases include options to extend or renew the leases for an additional period of to 10 years.
Operating leases are accounted for on the condensed consolidated balance sheets with ROU assets being recognized in “Operating lease right-of-use assets” and lease
liabilities recognized in “Short-term operating lease liabilities” and “Operating lease liabilities”. Lease-related costs are included in Research and development and Selling, general and administrative in the condensed consolidated statements of
operations and comprehensive loss.
Lease-related costs for the three and nine months ended September 30, 2022 and 2021 are as follows:
|
Three months ended
September 30,
|
Nine months ended
September 30,
|
|||||||||||||||
|
2022
|
2021
|
2022
|
2021
|
|||||||||||||
|
Operating lease cost
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
|
Short-term lease cost
|
|
|
|
|
||||||||||||
|
Variable lease cost
|
|
|
|
|
||||||||||||
|
Total lease cost
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
Other information related to operating leases as of September 30, 2022 and December 31, 2021 is as follows:
|
September 30,
|
December 31,
|
|||||||
|
2022
|
2021
|
|||||||
|
Weighted-average remaining lease term (years)
|
|
|
||||||
|
Weighted-average discount rate
|
|
%
|
|
%
|
||||
The following table provides certain cash flow and supplemental cash flow information related to the Company’s lease liabilities for the nine months ended September 30,
2022 and 2021:
|
Nine months ended September 30,
|
||||||||
|
2022
|
2021
|
|||||||
|
Operating cash paid to settle operating lease liabilities
|
$
|
|
$
|
|
||||
|
Right-of-use assets obtained in exchange for lease liabilities
|
$
|
|
$
|
|
||||
Future minimum lease payments under non-cancellable leases as of September 30, 2022 are as follows:
|
Operating Leases
|
||||
|
Remainder of 2022
|
$
|
|
||
|
2023
|
|
|||
|
2024
|
|
|||
|
2025
|
|
|||
|
2026
|
|
|||
|
Thereafter
|
|
|||
|
Total undiscounted lease payments
|
$
|
|
||
|
Less: Imputed interest
|
|
|||
|
Less: Lease incentives (1)
|
|
|||
|
Total lease liabilities
|
$
|
|
||
|
(1)
|
|
9. EQUITY INCENTIVE PLAN
The Company’s 2013 Employee, Director and Consultant Equity
Incentive Plan, as amended on March 12, 2021 (the “2013 Plan”), was originally adopted by its Board of Directors and stockholders in September 2013. In connection with the Closing of the Business Combination, the Company adjusted the equity
awards as described in Note 3 “Business Combination”. The adjustments to the awards did not result in incremental expense as the equitable adjustments were made pursuant to a preexisting nondiscretionary antidilution provision in the 2013 Plan,
and the fair-value, vesting conditions, and classification are the same immediately before and after the modification. In connection with the Business Combination, HighCape’s stockholders approved and adopted the Quantum-Si Incorporated 2021
Equity Incentive Plan (the “2021 Plan”) and the Company no longer makes issuances under the 2013 Plan. The 2021 Plan provides for grants of stock options, stock appreciation rights, restricted stock, restricted stock units, and other stock or
cash-based awards. Directors, officers and other employees of the Company and its subsidiaries, as well as others performing consulting or advisory services for the Company, are eligible for grants under the 2021 Plan.
Stock option activity
During the nine months ended September 30, 2022, the Company granted 6,903,630 stock option awards to participants with vesting subject to the participant’s continued employment with the Company through the applicable
vesting date, which included 2,000,000 stock options granted to the President and Chief Operating Officer of the Company subject to
service and/or market conditions. The service condition requires the participant’s continued employment with the Company through the applicable vesting date. The market condition requires that the Company’s Class A common stock trades above a
specified level for a defined period of time. Stock-based compensation related to stock options for the three months ended September 30, 2022 and 2021 was $1,868 and $1,556 , respectively. Stock-based compensation related to stock
options for the nine months ended September 30, 2022 and 2021 was $5,169 and $4,608 , respectively.
A summary of the stock option activity under the 2013 Plan and the 2021 Plan is
presented in the table below:
|
Number of
Options
|
Weighted Average
Exercise Price
|
Weighted Average
Remaining
Contractual Term
(Years)
|
Aggregate
Intrinsic Value
|
|||||||||||||
|
Outstanding at December 31, 2021
|
|
$
|
|
|
$
|
|
||||||||||
|
Granted
|
|
|
||||||||||||||
|
Exercised
|
(
|
)
|
|
|||||||||||||
|
Forfeited
|
(
|
)
|
|
|||||||||||||
|
Outstanding at September 30, 2022
|
|
$
|
|
|
$
|
|
||||||||||
|
Options exercisable at September 30, 2022
|
|
|
|
$
|
|
|||||||||||
|
Vested and expected to vest at September 30, 2022
|
|
$
|
|
|
$
|
|
||||||||||
Restricted stock unit activity
During the nine months ended September 30,
2022, the Company granted 66,666 restricted stock unit (“RSU”) awards. On February 8, 2022, John Stark, the Company’s
then-Chief Executive Officer and member of its board of directors, stepped down from all of his positions with the Company. As a result of Mr. Stark not meeting the service conditions of certain awards previously granted to him, 1,731,371 RSU awards were forfeited resulting in a reversal of stock-based compensation for the nine months ended
September 30, 2022 of $4,742 . Stock-based compensation related to RSU awards for the three months ended September 30, 2022 and 2021 was
$2,175 and $5,840 ,
respectively. Stock-based compensation related to RSU awards for the nine months ended September 30, 2022 and 2021 was $1,930 and $13,232 , respectively.
A summary of the RSU activity under the 2013 Plan and the 2021 Plan is presented
in the table below:
|
Number of
Shares
Underlying
RSUs
|
Weighted
Average Grant-
Date Fair Value
|
|||||||
|
Outstanding non-vested RSUs at December 31, 2021
|
|
$ | ||||||
|
Granted
|
|
|
||||||
|
Vested
|
(
|
)
|
|
|||||
|
Forfeited
|
(
|
)
|
|
|||||
|
Outstanding non-vested RSUs at September 30, 2022
|
|
$
|
|
|||||
The Company’s stock-based compensation is allocated to the following operating
expense categories as follows:
|
Three months ended September 30,
|
Nine months ended September 30,
|
|||||||||||||||
|
2022
|
2021
|
2022
|
2021
|
|||||||||||||
|
Research and development
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
|
Selling, general and administrative
|
|
|
|
|
||||||||||||
|
Total stock-based compensation
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
10. NET LOSS PER SHARE
Basic net loss per share is computed by dividing the net loss by the weighted-average number of shares of common stock of the Company outstanding during the period.
Diluted net loss per share is computed by giving effect to all common share equivalents of the Company, including those presented in the table below, to the extent dilutive. Basic and diluted net loss per share was the same for each period
presented as the inclusion of all common share equivalents would have been anti-dilutive.
The following table presents the calculation of basic and diluted net loss per share for the Company’s common stock:
|
|
Three months ended September 30,
|
Nine months ended September 30,
|
||||||||||||||
|
2022
|
2021
|
2022
|
2021
|
|||||||||||||
|
Numerator
|
||||||||||||||||
|
Net loss
|
$
|
(
|
)
|
$
|
(
|
)
|
$
|
(
|
)
|
$
|
(
|
)
|
||||
|
Numerator for basic and diluted EPS - loss attributable to common stockholders
|
$
|
(
|
)
|
$
|
(
|
)
|
$
|
(
|
)
|
$
|
(
|
)
|
||||
|
Denominator
|
||||||||||||||||
|
Common stock
|
||||||||||||||||
|
Denominator for basic and diluted EPS - weighted-average common stock
|
||||||||||||||||
|
Basic and diluted net loss per share
|
$
|
(
|
)
|
$
|
(
|
)
|
$
|
(
|
)
|
$
|
(
|
)
|
||||
Since the Company was in a net loss position for all periods presented, the basic net loss per share calculation excludes preferred stock for the three and nine months
ended September 30, 2021 as it did not participate in net losses of the Company. Additionally, net loss per share attributable to Class A and Class B common stockholders was the same on a basic and diluted basis, as the inclusion of all potential
common equivalent shares outstanding would have been anti-dilutive. Anti-dilutive common equivalent shares were as follows:
|
Three months ended September 30,
|
Nine months ended September 30,
|
||||||||||||||||
|
2022
|
2021
|
2022 |
2021 |
||||||||||||||
|
Outstanding options to purchase common stock
|
|
|
|||||||||||||||
|
Outstanding restricted stock units
|
|
|
|||||||||||||||
|
Outstanding warrants
|
|
|
|||||||||||||||
|
|
|
|
|||||||||||||||
11. WARRANT LIABILITIES
Public Warrants
As of September 30, 2022, there were an aggregate of 3,833,319
outstanding Public Warrants, which entitle the holder to acquire Class A common stock. Each whole warrant entitles the registered holder to purchase one
share of Class A common stock at an exercise price of $11.50 per share, subject to adjustment as discussed below, beginning on September 9,
2021. The warrants will expire on June 10, 2026 or earlier upon redemption or liquidation.
Redemptions
At any time while the warrants are exercisable, the Company may redeem not less than all of the outstanding Public Warrants:
| ● |
in whole and not in part;
|
| ● |
at a price of $
|
| ● |
upon not less than
|
| ● |
if, and only if, the closing price of the Company’s common stock equals or exceeds $
|
If the foregoing conditions are satisfied and the Company issues a notice of redemption of the Public Warrants at $0.01 per warrant, each holder of Public Warrants will be entitled to exercise his, her or its Public Warrants prior to the scheduled redemption date.
If the Company calls the Public Warrants for redemption for $0.01
as described above, the Company’s Board of Directors may elect to require any holder that wishes to exercise his, her or its Public Warrants to do so on a “cashless basis.” If the Company’s Board of Directors makes such election, all holders of
Public Warrants would pay the exercise price by surrendering their warrants for that number of shares of Class A common stock equal to the quotient obtained by dividing (x) the product of the number of shares of Class A common stock underlying the
warrants, multiplied by the excess of the “fair market value” over the exercise price of the warrants by (y) the “fair market value”. For purposes of the redemption provisions of the warrants, the “fair market value” means the average last reported
sale price of the Class A common stock for the 10 trading days ending on the third trading day prior to the date on which the notice of
redemption is sent to the holders of warrants.
The Company evaluated the Public Warrants under ASC 815-40, in conjunction with the SEC Division of Corporation Finance’s April 12, 2021 Public Statement, Staff Statement on Accounting and Reporting Considerations for Warrants Issued by Special Purpose Acquisition Companies (“SPACs”) (the “SEC Statement”), and concluded that they do not meet the criteria to be
classified in stockholders’ equity. Specifically, the exercise of the warrants may be settled in cash upon the occurrence of a tender offer or exchange offer in which the maker of the tender offer or exchange offer, upon completion of the tender
offer or exchange offer, beneficially owns more than 50 % of the outstanding shares of the Company’s Class A common stock, even if it would
not result in a change of control of the Company. This provision would preclude the warrants from being classified in equity and thus the warrants should be classified as a liability.
Private Warrants
As of September 30, 2022, there were 135,000 Private
Warrants outstanding. The Private Warrants are identical to the Public Warrants, except that so long as they are held by the Sponsor or any of its permitted transferees, (i) the Private Warrants and the shares of Class A common stock issuable upon
the exercise of the Private Warrants were not transferable, assignable or saleable until 30 days after the completion of the Business
Combination, (ii) the Private Warrants will be exercisable for cash or on a cashless basis, at the holder’s option, and (iii) the Private Warrants are not subject to the Company’s redemption option at the price of $0.01 per warrant. The Private Warrants are subject to the Company’s redemption option at the price of $0.01 per warrant, provided that the other conditions of such redemption are met, as described above. If the Private Warrants are held by a holder other than the Sponsor or any of
its permitted transferees, the Private Warrants will be redeemable by the Company in all redemption scenarios applicable to the Public Warrants and exercisable by such holders on the same basis as the Public Warrants.
The Company evaluated the Private Warrants under ASC 815-40, in conjunction with the SEC Statement, and concluded that they do
not meet the criteria to be classified in stockholders’ equity. Specifically, the terms of the warrants provide for potential changes to the settlement amounts depending upon the characteristics of the warrant holder, and, because the holder of a
warrant is not an input into the pricing of a fixed-for-fixed option on equity shares, such provision would preclude the warrant from being classified in equity and thus the warrant has been classified as a liability.
The fair value of warrant liabilities was $2,118
and $7,239 as of September 30, 2022 and December 31, 2021, respectively. The Company recognized a gain of $137 and $5,121 as a Change in fair value
of warrant liabilities in the condensed consolidated statements of operations and comprehensive loss for the three and nine months ended September 30, 2022. The Company recognized a gain of $6,975 and $3,442 as a Change in fair value of warrant liabilities
in the condensed consolidated statements of operations and comprehensive loss for the three and nine months ended September 30, 2021. There were no
12. INCOME TAXES
Income taxes for the three and nine months ended September 30, 2022 and 2021 are recorded at the Company’s estimated annual effective income tax
rate, subject to adjustments for discrete events, if they occur. The Company’s estimated annual effective tax rate was 0.0 21.0 0.0
A valuation allowance is required when it is more likely than not that some portion or all of the Company’s deferred tax assets will not be realized. The realization
of deferred tax assets depends on the generation of sufficient future taxable income during the period in which the Company’s related temporary differences become deductible. The Company has recorded a full valuation allowance against its net
deferred tax assets as of September 30, 2022 and 2021 since management believes that based on the earnings history of the Company, it is more likely than not that the benefits of these assets will not be realized.
As a result of the Business Combination, as well as any other equity issuances during the year, the Company is currently evaluating whether an ownership change has
occurred under Section 382 of the Internal Revenue Code of 1986, as amended, and whether the Company’s ability to use its pre-change net operating loss and tax credit carryforwards will be limited in future periods. The Company expects to
complete its analysis during 2022.
13. RELATED PARTY TRANSACTIONS
The Company utilizes and subleases office and laboratory space in a building owned by a related party. The Company paid $80 241
The Company was a party to an Amended and Restated Technology Services Agreement
(the “ARTSA”), most recently amended on November 11, 2020, by and among 4Catalyzer Corporation (“4C”), the Company and other participant companies controlled by the Rothberg family. The Company entered into a First Addendum to the ARTSA on
February 17, 2021 pursuant to which the Company agreed to terminate its participation under the ARTSA no later than immediately prior to the Effective Time of the Business Combination, resulting in the termination of the Company’s participation
under the ARTSA on June 10, 2021. In connection with the termination of the Company’s participation under the ARTSA, the Company terminated its lease agreement with 4C and negotiated an arm’s length lease agreement. Under the ARTSA, the Company
and the other participant companies had agreed to share certain non-core technologies, which means any technologies, information or equipment owned or otherwise controlled by the participant company that are not specifically related to the core
business area of the participant and subject to certain restrictions on use. The ARTSA also provided for 4C to perform certain services for the Company and each other participant company such as monthly administrative, management and technical
consulting services to the Company which were pre-funded approximately once per quarter. The Company incurred expenses of $149 and $203 , which included $44 and $36 under month-to-month sublease arrangements for office and laboratory spaces from 4C, during the three
months ended September 30, 2022 and 2021, respectively. The Company incurred expenses of $517 and $1,782 , which included $141 and $112 under month-to-month sublease arrangements for office and laboratory spaces from 4C, during the nine months ended September 30, 2022 and 2021,
respectively. The amounts advanced and due to 4C at September 30, 2022 and December 31, 2021 related to operating expenses were $99 ,
of which $45 is included in Accrued expenses and other current liabilities and $54 is included in Accounts payable and $128 , which is included in Accounts
payable on the condensed consolidated balance sheets, respectively. The amounts advanced and due from 4C at September 30, 2022 and December 31, 2021, related to operating expenses were $3 and $0 , respectively, and are included in Prepaid expenses and other
current assets on the condensed consolidated balance sheets.
The ARTSA also provided for the participant companies to provide other services to each other. The Company also had transactions with other
entities under common ownership, which included payments made to third parties on behalf of the Company. The amounts remaining payable at September 30, 2022 and December 31, 2021 were $17 2 and $15 ,
respectively, and are reflected in Prepaid expenses and other current assets on the condensed consolidated balance sheets.
On September 20, 2021, the Company entered into a Binders Collaboration (the “Collaboration”) with Protein Evolution, Inc. (“PEI”) to develop
technology and methods in the field of nanobodies and potentially other binders to produce novel biological reagents and related data. The Collaboration was made pursuant to and governed by the Technology and Services Exchange Agreement,
effective as of June 10, 2021, by and among the Company and the participants named therein, including PEI. Dr. Rothberg serves as Chairman of the Board of Directors of PEI and the Rothberg family are controlling stockholders of PEI. Effective
March 31, 2022, the Collaboration with PEI was terminated, and the Company agreed to pay a final payment of $1,135 under the
Collaboration for all services rendered. There was no
Dr. Rothberg and the Company entered into an Executive Chairman Agreement as of June 10, 2021 (the “Executive Chairman Agreement”) in which Dr.
Rothberg provided consulting services to the Company for $400 annually. Effective as of November 1, 2022, the Executive Chairman
Agreement was terminated. For more information, see Note 15 “Subsequent Events”. Dr. Rothberg also receives fees as the Company’s Chairman of the Board of Directors and a member of the Board and Nominating and Corporate Governance Committee. The
Company paid $113 and $341
to Dr. Rothberg for the three and nine months ended September 30, 2022, respectively, for all services provided to the Company. The Company paid $25
14. COMMITMENTS AND CONTINGENCIES
Commitments
Licenses related to certain intellectual property:
The Company licenses certain intellectual property, some of which may be utilized in its future product offering. To preserve the right to use such intellectual
property, the Company is required to make annual minimum fixed payments totaling $220 . Once the Company commercializes its product and
begins to generate revenues, there will be royalties payable by the Company based on the current anticipated utilization.
Other commitments:
The Company sponsors a 401(k) defined contribution plan covering all eligible U.S. employees. Contributions to the 401(k) plan are discretionary. The Company did no
Contingencies
The Company is subject to claims in the ordinary course of business; however, the Company is not currently a party to any pending or threatened litigation, the outcome
of which would be expected to have a material adverse effect on its financial condition or the results of its operations. The Company accrues for contingent liabilities to the extent that the liability is probable and estimable.
The Company enters into agreements that contain indemnification provisions with other parties in the ordinary course of business, including business partners,
investors, contractors, and the Company’s officers, directors and certain employees. The Company has agreed to indemnify and defend the indemnified party claims and related losses suffered or incurred by the indemnified party from actual or
threatened third-party claims because of the Company’s activities or non-compliance with certain representations and warranties made by the Company. It is not possible to determine the maximum potential loss under these indemnification provisions
due to the Company’s limited history of prior indemnification claims and the unique facts and circumstances involved in any particular case. To date, losses recorded in the Company’s condensed consolidated statements of operations and comprehensive
loss in connection with the indemnification provisions have not been material.
15. SUBSEQUENT EVENTS
On October 4, 2022, the Company announced that Jeffrey Hawkins was appointed by the
Company’s board of directors as Chief Executive Officer, effective as of October 10, 2022 (the “Appointment Date”). In connection with Mr. Hawkins’ appointment as Chief Executive Officer, the board of directors also approved an increase in the size
of the board of directors from seven to eight
members and appointed Mr. Hawkins to fill the newly created vacancy, effective as of the Appointment Date, to serve for a term to continue until the Company’s next annual meeting of stockholders. In connection with Mr. Hawkins’ appointment,
Jonathan M. Rothberg, Ph.D., who had been serving as our Interim Chief Executive Officer, stepped down from that role effective as of the Appointment Date.
Effective November 1, 2022, the Executive Chairman Agreement was terminated and the
Company entered into an Advisory Agreement with Dr. Rothberg (the “Advisory Agreement”), pursuant to which Dr. Rothberg advises the Company’s Chief Executive Officer and the board of directors on strategic matters, and provides consulting, business
development and similar services on matters relating to the Company’s current, future and potential scientific and strategic initiatives and such other consulting services reasonably requested from time to time. Pursuant to the Advisory Agreement,
as compensation for the services provided thereunder, the Company will grant to Dr. Rothberg an option to purchase 250,000 shares of the
Company’s Class A common stock pursuant to the Company’s 2021 Equity Incentive Plan as of the date of the second business day following the Company’s earnings call with respect to the fiscal year ended December 31, 2022. In connection with the
Advisory Agreement, Dr. Rothberg’s title was changed from Executive Chairman to Chairman of the Board of Directors.
| Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations
|
The following discussion and analysis provides information which management believes is relevant to an assessment and understanding of our condensed consolidated results of
operations and financial condition. The discussion should be read in conjunction with (i) the unaudited condensed consolidated financial statements and notes thereto contained in this Quarterly Report on Form 10-Q, (ii) the consolidated financial
statements and notes thereto for the year ended December 31, 2021 contained in our Annual Report on Form 10-K for the year ended December 31, 2021, filed with the Securities and Exchange Commission (the “SEC”) on March 1, 2022 and (iii) our other
public reports filed with the SEC. This discussion contains forward looking statements and involves numerous risks and uncertainties, including, but not limited to, those described in the “Risk Factors” section of our Annual Report on Form 10-K for
the year ended December 31, 2021. Actual results may differ materially from those contained in any forward-looking statements. Unless the context otherwise requires, references to “we”, “us”, “our”, the “Company” or “Quantum-Si” are intended to mean
the business and operations of Quantum-Si Incorporated and its consolidated subsidiaries. The unaudited condensed consolidated financial statements for the three and nine months ended September 30, 2022 and 2021, respectively, present the financial
position and results of operations of Quantum-Si Incorporated and its consolidated subsidiaries.
Overview
We are an innovative life sciences company with the mission of transforming single-molecule analysis and democratizing its use by providing researchers
and clinicians access to the proteome, the set of proteins expressed within a cell. We have developed a proprietary universal single-molecule detection platform that we are first applying to proteomics to enable Next-Generation Protein Sequencing
(“NGPS”), the ability to sequence proteins in a massively parallel fashion (rather than sequentially, one at a time), that can be used for the study of nucleic acids. We believe that with the ability to sequence proteins in a massively parallel
fashion and offer a simplified workflow with a faster turnaround time, NGPS has the potential to unlock significant biological information through improved resolution and unbiased access to the proteome at a speed and scale that is not available
today. Traditionally, proteomic workflows to sequence proteins required days or weeks to complete. Our platform is designed to offer a single-day workflow including both sample preparation and sequencing. Our platform is comprised of the Carbon™
automated sample preparation instrument, the Platinum™ NGPS instrument, the Quantum-Si Cloud™ software service, and reagent kits and chips for use with our instruments. We intend to follow a systematic, phased approach to successfully launch our
platform, for research use only (“RUO”). We initiated our early access limited release to enable key thought leaders early access to our platform in 2021. We expect to launch
the PlatinumTM instrument and start to take orders before the end of 2022 and begin shipping product in Q1 2023. We believe we are the first company to successfully enable NGPS on a semiconductor chip, thus digitizing a massive
proteomics opportunity, which allows for a massively parallel solution at the ultimate level of sensitivity —single-molecule detection.
We believe that our platform will offer a differentiated end-to-end workflow solution in a rapidly evolving proteomics tools market. Within our initial focus market of proteomics, our workflow will be
designed to provide users a seamless opportunity to gain key insights into the immediate state of biological pathways and cell state. Our platform aims to address many of the key challenges and bottlenecks with legacy proteomic solutions, such as
mass spectrometry (“MS”), which are complicated and often limited by manual sample preparation workflows, high instrument costs both in terms of acquisition and ownership and complexity with data analysis, which together prevent broad adoption. We
believe our platform, which is designed to streamline sample preparation, sequencing, and data analysis at a lower instrument cost than legacy proteomic solutions, could allow our product to have wide utility across the study of the proteome. For
example, our platform could be used for biomarker discovery and disease detection, pathway analysis, immune response, and vaccine development, among other applications.
In 2021, we introduced our Platinum early access program to sites with participation from leading academic centers and key industry partners. The early access program introduced the Platinum
single-molecule sequencing system to key opinion leaders across the globe, for both expansion and development of applications and workflows. We expect to launch the PlatinumTM
instrument and start to take orders before the end of 2022 and begin shipping product in the first quarter of 2023.
COVID-19 Outbreak
The outbreak of the novel coronavirus (“COVID-19”), which was declared a pandemic by the World Health Organization on March 11, 2020 and declared a National Emergency by the President of the United
States on March 13, 2020, has led to adverse impacts on the United States and global economies and created uncertainty regarding potential impacts on our operating results, financial condition and cash flows. The COVID-19 pandemic had, and is
expected to continue to have, an adverse impact on our operations, particularly as a result of preventive and precautionary measures that we, other businesses, and governments are taking. Governmental mandates related to COVID-19 or other infectious
diseases, or public health crises, have impacted, and we expect them to continue to impact, our personnel and personnel at third-party manufacturing facilities in the United States and other countries, and the availability or cost of materials, which
would disrupt or delay our receipt of instruments, components and supplies from the third parties we rely on to, among other things, produce our products currently under development. The COVID-19 pandemic has also had an adverse effect on our ability
to attract, recruit, interview and hire at the pace we would typically expect to support our rapidly expanding operations. To the extent that any governmental authority imposes additional regulatory requirements or changes existing laws, regulations,
and policies that apply to our business and operations, such as additional workplace safety measures, our product development plans may be delayed, and we may incur further costs in bringing our business and operations into compliance with changing
or new laws, regulations, and policies. The full extent to which the COVID-19 pandemic will directly or indirectly impact our business, results of operations and financial condition, including expenses and research and development costs, will depend
on future developments that are highly uncertain, including as a result of new information that may emerge concerning COVID-19 and the actions taken to contain or treat COVID-19, as well as the economic impacts including inflation on product and
service costs.
The estimates of the impact on our business may change based on new information that may emerge concerning COVID-19 and the actions to contain it or address its impact and the economic impact on local,
regional, national and international markets as well as other changes in macroeconomic factors. The COVID-19 pandemic and related economic disruptions have not had a material adverse impact on our operations to date. While we are unable to predict
the full impact that the COVID-19 pandemic will have on our future results of operations, liquidity and financial condition due to numerous uncertainties, including the duration of the pandemic, the actions that may be taken by government authorities
across the United States, adverse changes in macroeconomic conditions, if sustained or recurrent, could result in significant changes in costs going forward with material adverse effect on our operating results, financial condition, and cash flows.
We have not incurred any impairment losses in the carrying values of our assets as a result of the COVID-19 pandemic and are not aware of any specific related event or circumstance that would require us
to revise our estimates reflected in our condensed consolidated financial statements.
Other Global Developments
In 2022, various central banks around the world (including the Federal Reserve in the United States) raised interest rates. While these rate increases have not had a significant adverse impact on us to date, the impact
of such rate increases on the overall financial markets and the economy may adversely impact us in the future. In addition, the global economy has experienced and is continuing to experience high levels of inflation and global supply chain
disruptions. We continue to monitor these supply chain, inflation and interest rate factors, as well as the uncertainty resulting from the overall economic environment.
In addition, although we have no operations in or direct exposure to Russia, Belarus and Ukraine, we have experienced limited constraints in availability and increasing costs required to obtain some materials and
supplies due, in part, to the negative impact of the Russia-Ukraine military conflict on the global economy. To date, our business has not been materially impacted by the conflict, however, as the conflict continues or worsens, it may impact our
business, financial condition or results of operations.
Business Combination
On June 10, 2021, we consummated the previously announced Business Combination. The Business Combination was approved by HighCape’s stockholders at its special meeting held on June 9,
2021. The transaction resulted in the combined company being renamed “Quantum-Si Incorporated” and Legacy Quantum-Si being renamed “Q-SI Operations Inc.” The combined company’s Class A common stock and warrants to purchase Class A common stock
commenced trading on Nasdaq on June 11, 2021 under the symbol “QSI” and “QSIAW”, respectively. As a result of the Business Combination, we received proceeds of approximately $511.2 million on the day of Closing. See Note 3 “Business
Combination” in our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for further information regarding the Business Combination.
Recent Developments
On October 4, 2022, we announced that Jeffrey Hawkins was appointed by our board of directors as Chief Executive Officer, effective as of October 10, 2022 (the “Appointment Date”). In connection with Mr. Hawkins’
appointment as Chief Executive Officer, the board of directors also approved an increase in the size of the board of directors from seven to eight members and appointed Mr. Hawkins to fill the newly created vacancy, effective as of the Appointment
Date, to serve for a term to continue until our next annual meeting of stockholders. In connection with Mr. Hawkins’ appointment, Jonathan M. Rothberg, Ph.D., who had been serving as our Interim Chief Executive Officer, stepped down from that role
effective as of the Appointment Date.
Effective November 1, 2022, the Executive Chairman Agreement between us and Dr. Rothberg was terminated and we entered into an Advisory Agreement with Dr. Rothberg (the “Advisory Agreement”), pursuant
to which Dr. Rothberg advises our Chief Executive Officer and our board of directors on strategic matters, and provides consulting, business development and similar services on matters relating to our current, future and potential scientific and
strategic initiatives and such other consulting services reasonably requested from time to time. Pursuant to the Advisory Agreement, as compensation for the services provided thereunder, we will grant to Dr. Rothberg an option to purchase 250,000
shares of our Class A common stock pursuant to our 2021 Equity Incentive Plan as of the date of the second business day following our earnings call with respect to the fiscal year ended December 31, 2022. In connection with the Advisory Agreement,
Dr. Rothberg’s title was changed from Executive Chairman to Chairman of the Board of Directors.
Description of Certain Components of Financial Data
Research and development
Research and development expenses primarily consist of personnel costs and benefits, stock-based compensation, lab supplies, consulting and professional services, fabrication services, facilities costs,
software, and other outsourced expenses. Research and development expenses are expensed as incurred. All of our research and development expenses are related to developing new products and services. We expect to continue to make substantial
investments in research and development activities in the future as we continue to prepare for our anticipated commercialization.
Selling, general and administrative
Selling, general and administrative expenses primarily consist of personnel costs and benefits, stock-based compensation, patent and filing fees, consulting and professional services, legal and
accounting services, facilities costs, depreciation expense, insurance and office expenses, product advertising and marketing. We expect our selling, general and administrative expenses to increase in the foreseeable future as we expect to launch the
PlatinumTM instrument and start to take orders before the end of 2022 and begin shipping product in the first quarter of 2023.
Interest expense
Interest expense primarily consists of interest that was paid on our Paycheck Protection Program (“PPP”) loan.
Dividend income
Dividend income primarily consists of dividends earned on fixed income mutual funds classified as marketable securities.
Change in fair value of warrant liabilities
Change in fair value of warrant liabilities primarily consists of the change in the fair value of our publicly traded warrants (the “Public Warrants”) and our warrants sold in a private placement (the
“Private Warrants”).
Other (expense), net
Other (expense), net primarily consists of realized and unrealized losses on fixed income mutual funds in marketable securities.
Provision for income taxes
We utilize the asset and liability method of accounting for income taxes where deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences
between the carrying amounts and the tax basis of assets and liabilities using the enacted statutory tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. A valuation
allowance is established against net deferred tax assets if, based on the weight of available evidence, it is more likely than not that some or all of the net deferred tax assets will not be realized. We recorded a full valuation allowance as of
September 30, 2022 and 2021. Based on the available evidence, we believe that it is more likely than not that we will be unable to utilize all of our deferred tax assets in the future.
Results of Operations
The following is a discussion of our results of operations for the three and nine months ended September 30, 2022 and 2021. Our accounting policies are described in Note 2 “Summary of Significant
Accounting Policies” in our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.
|
Three months ended September 30,
|
Nine months ended September 30,
|
|||||||||||||||||||||||
|
(in thousands, except for % changes)
|
2022
|
2021
|
% Change
|
2022
|
2021
|
% Change
|
||||||||||||||||||
|
Operating expenses:
|
||||||||||||||||||||||||
|
Research and development
|
$
|
16,675
|
$
|
11,104
|
50.2
|
%
|
$
|
53,905
|
$
|
32,190
|
67.5
|
%
|
||||||||||||
|
Selling, general and administrative
|
10,983
|
14,071
|
(21.9
|
)%
|
31,093
|
36,928
|
(15.8
|
)%
|
||||||||||||||||
|
Total operating expenses
|
27,658
|
25,175
|
9.9
|
%
|
84,998
|
69,118
|
23.0
|
%
|
||||||||||||||||
|
Loss from operations
|
(27,658
|
)
|
(25,175
|
)
|
9.9
|
%
|
(84,998
|
)
|
(69,118
|
)
|
23.0
|
%
|
||||||||||||
|
Interest expense
|
-
|
-
|
nm
|
-
|
(5
|
)
|
(100.0
|
)%
|
||||||||||||||||
|
Dividend income
|
1,381
|
739
|
86.9
|
%
|
3,288
|
741
|
343.7
|
%
|
||||||||||||||||
|
Change in fair value of warrant liabilities
|
137
|
6,975
|
(98.0
|
)%
|
5,121
|
3,442
|
48.8
|
%
|
||||||||||||||||
|
Other (expense), net
|
(5,573
|
)
|
(630
|
)
|
784.6
|
%
|
(22,713
|
)
|
(627
|
)
|
nm
|
|||||||||||||
|
Loss before provision for income taxes
|
(31,713
|
)
|
(18,091
|
)
|
75.3
|
%
|
(99,302
|
)
|
(65,567
|
)
|
51.5
|
%
|
||||||||||||
|
Provision for income taxes
|
-
|
-
|
nm
|
-
|
-
|
nm
|
||||||||||||||||||
|
Net loss and comprehensive loss
|
$
|
(31,713
|
)
|
$
|
(18,091
|
)
|
75.3
|
%
|
$
|
(99,302
|
)
|
$
|
(65,567
|
)
|
51.5
|
%
|
||||||||
Comparison of the Three Months Ended September 30, 2022 and 2021
Research and development
|
Three months ended
September 30,
|
Change
|
|||||||||||||||
|
(in thousands, except for % changes)
|
2022
|
2021
|
Amount
|
%
|
||||||||||||
|
Research and development
|
$
|
16,675
|
$
|
11,104
|
$
|
5,571
|
50.2
|
%
|
||||||||
Research and development expenses increased by $5.6 million, or 50.2%, for the three months ended September 30, 2022 compared to the three months ended September 30, 2021. The increase was primarily due
to the following elements: $3.5 million in personnel costs as a result of increased headcount and $2.5 million related to internal and external product development activities. These increases were partially offset by a decrease of $0.4 million of
reduced stock-based compensation due primarily to stock option and restricted stock unit awards granted and vested in connection with the closing of the Business Combination in 2021.
Selling, general and administrative
|
Three months ended
September 30,
|
Change
|
|||||||||||||||
|
(in thousands, except for % changes)
|
2022
|
2021
|
Amount
|
%
|
||||||||||||
|
Selling, general and administrative
|
$
|
10,983
|
$
|
14,071
|
$
|
(3,088
|
)
|
(21.9
|
)%
|
|||||||
Selling, general and administrative expenses decreased by $3.1 million, or 21.9%, for the three months ended September 30, 2022 compared to the three months ended September 30, 2021. The decrease was
primarily due to the following elements: $2.9 million of reduced stock-based compensation due primarily to stock option and restricted stock unit awards granted and vested in connection with the closing of the Business Combination in 2021, and a
reduction of $0.6 million of expenses primarily related to consulting, professional fees and insurance. These decreases were partially offset by an increase of $0.4 million in personnel costs as a result of increased headcount.
Dividend income
|
Three months ended
September 30,
|
Change
|
|||||||||||||||
|
(in thousands, except for % changes)
|
2022
|
2021
|
Amount
|
%
|
||||||||||||
|
Dividend income
|
$
|
1,381
|
$
|
739
|
$
|
642
|
86.9
|
%
|
||||||||
Dividend income increased by $0.6 million, or 86.9%, for the three months ended September 30, 2022 compared to the three months ended September 30, 2021 as a result of higher interest rates earned on
invested balances in marketable securities.
Change in fair value of warrant liabilities
|
Three months ended
September 30,
|
Change
|
|||||||||||||||
|
(in thousands, except for % changes)
|
2022
|
2021
|
Amount
|
%
|
||||||||||||
|
Change in fair value of warrant liabilities
|
$
|
137
|
$
|
6,975
|
$
|
(6,838
|
)
|
(98.0
|
)%
|
|||||||
The fair value of warrant liabilities decreased, which resulted in a gain of $6.8 million for the three months ended September 30, 2022 compared to the three months ended September 30, 2021. The warrant
liabilities were recorded at fair value as part of the Business Combination.
Other (expense), net
|
Three months ended
September 30,
|
Change
|
|||||||||||||||
|
(in thousands, except for % changes)
|
2022
|
2021
|
Amount
|
%
|
||||||||||||
|
Other (expense), net
|
$
|
(5,573
|
)
|
$
|
(630
|
)
|
$
|
(4,943
|
)
|
784.6
|
%
|
|||||
Other (expense), net increased by $4.9 million for the three months ended September 30, 2022 compared to the three months ended September 30, 2021 primarily as a result of reported unrealized and
realized losses on investments in marketable securities, which consist of fixed income mutual funds that are marked to market.
Comparison of the Nine Months Ended September 30, 2022 and 2021
Research and development
|
Nine months ended
September 30,
|
Change
|
|||||||||||||||
|
(in thousands, except for % changes)
|
2022
|
2021
|
Amount
|
%
|
||||||||||||
|
Research and development
|
$
|
53,905
|
$
|
32,190
|
$
|
21,715
|
67.5
|
%
|
||||||||
Research and development expenses increased by $21.7 million, or 67.5%, for the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021. The increase was primarily due
to the following elements: $12.4 million related to internal and external product development activities; $11.1 million in personnel costs as a result of increased headcount; and $1.1 million of collaboration fees with Protein Evolution, Inc. These
increases were partially offset by decreases primarily related to the Business Combination in 2021: $0.9 million of stock-based compensation and $2.0 million of transaction bonuses.
Selling, general and administrative
|
Nine months ended September 30,
|
Change
|
|||||||||||||||
|
(in thousands, except for % changes)
|
2022
|
2021
|
Amount
|
%
|
||||||||||||
|
Selling, general and administrative
|
$
|
31,093
|
$
|
36,928
|
$
|
(5,835
|
)
|
(15.8
|
)%
|
|||||||
Selling, general and administrative expenses decreased by $5.8 million, or 15.8% for the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021. The decrease was
primarily due to the following elements related to the Business Combination in 2021: $3.9 million in consulting and professional fees; $1.0 million of transaction bonuses; and $9.9 million of reduced stock-based compensation due primarily to stock
option and restricted stock unit awards granted and vested in connection with the closing of the Business Combination in 2021. The reduced stock-based compensation of $9.9 million also resulted from a reversal of $4.7 million of restricted stock
unit awards that were forfeited by our former Chief Executive Officer upon his separation. These decreases were partially offset by the following increases: $5.3 million of headcount expenses to scale up our administrative and executive functions and
$3.7 million of expenses primarily due to being a publicly traded company including consulting, professional fees and insurance.
Interest expense
|
Nine months ended
September 30,
|
Change
|
|||||||||||||||
|
(in thousands, except for % changes)
|
2022
|
2021
|
Amount
|
%
|
||||||||||||
|
Interest expense
|
$
|
-
|
$
|
(5
|
)
|
$
|
5
|
(100.0
|
)%
|
|||||||
Interest expense on the PPP loan decreased for the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021 as a result of us repaying the loan in full in June 2021 in
connection with the Business Combination.
Dividend income
|
Nine months ended
September 30,
|
Change
|
|||||||||||||||
|
(in thousands, except for % changes)
|
2022
|
2021
|
Amount
|
%
|
||||||||||||
|
Dividend income
|
$
|
3,288
|
$
|
741
|
$
|
2,547
|
343.7
|
%
|
||||||||
Dividend income increased by $2.5 million for the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021 as a result of higher interest rates earned on invested
balances in marketable securities.
Change in fair value of warrant liabilities
|
Nine months ended
September 30, |
Change
|
|||||||||||||||
|
(in thousands, except for % changes)
|
2022
|
2021
|
Amount
|
%
|
||||||||||||
|
Change in fair value of warrant liabilities
|
$
|
5,121
|
$
|
3,442
|
$
|
1,679
|
48.8
|
%
|
||||||||
The fair value of warrant liabilities decreased, which resulted in a gain of $1.7 million for the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021. The warrant
liabilities were recorded at fair value as part of the Business Combination.
Other (expense), net
|
Nine months ended
September 30,
|
Change
|
|||||||||||||||
|
(in thousands, except for % changes)
|
2022
|
2021
|
Amount
|
%
|
||||||||||||
|
Other (expense), net
|
$
|
(22,713
|
)
|
$
|
(627
|
)
|
$
|
(22,086
|
) |
|
nm
|
|||||
Other (expense), net increased by $22.1 million for the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021 primarily as a result of reported unrealized and
realized losses on investments in marketable securities, which consist of fixed income mutual funds that are marked to market.
Non-GAAP Financial Measures
We present non-GAAP financial measures in order to assist readers of our condensed consolidated financial statements in understanding the core operating results that our management uses to evaluate the
business and for financial planning purposes. Our non-GAAP financial measures, EBITDA and Adjusted EBITDA, provide an additional tool for investors to use in comparing our financial performance over multiple periods.
EBITDA and Adjusted EBITDA are key performance measures that our management uses to assess our operating performance. EBITDA and Adjusted EBITDA facilitate internal comparisons of our operating
performance on a more consistent basis. We use these performance measures for business planning purposes and forecasting. We believe that EBITDA and Adjusted EBITDA enhance an investor’s understanding of our financial performance as it is useful in
assessing our operating performance from period-to-period by excluding certain items that we believe are not representative of our core business.
Our EBITDA and Adjusted EBITDA may not be comparable to similarly titled measures of other companies because they may not calculate these measures in the same manner. EBITDA and Adjusted EBITDA are not
prepared in accordance with U.S. GAAP and should not be considered in isolation of, or as an alternative to, measures prepared in accordance with U.S. GAAP. When evaluating our performance, you should consider EBITDA and Adjusted EBITDA alongside
other financial performance measures prepared in accordance with U.S. GAAP, including net loss.
EBITDA and Adjusted EBITDA
We calculate EBITDA as net loss adjusted to exclude interest expense, dividend income and depreciation. Adjusted EBITDA is calculated as EBITDA adjusted to exclude change in fair value of warrant
liabilities, other expense, net, stock-based compensation, and other non-recurring items. The other non-recurring items include costs related to discretionary transaction bonuses and other costs incurred with the Closing of the Business Combination
on June 10, 2021.
The following table reconciles Adjusted EBITDA to net loss, the most directly comparable financial measure calculated and presented in accordance with U.S. GAAP.
|
Three months ended
September 30,
|
Nine months ended
September 30,
|
|||||||||||||||
|
(in thousands)
|
2022
|
2021
|
2022
|
2021
|
||||||||||||
|
Net loss
|
$
|
(31,713
|
)
|
$
|
(18,091
|
)
|
$
|
(99,302
|
)
|
$
|
(65,567
|
)
|
||||
|
Adjustments to reconcile to EBITDA:
|
||||||||||||||||
|
Interest expense
|
-
|
-
|
-
|
5
|
||||||||||||
|
Dividend income
|
(1,381
|
)
|
(739
|
)
|
(3,288
|
)
|
(741
|
)
|
||||||||
|
Depreciation
|
729
|
264
|
1,789
|
712
|
||||||||||||
|
EBITDA
|
$
|
(32,365
|
)
|
$
|
(18,566
|
)
|
$
|
(100,801
|
)
|
$
|
(65,591
|
)
|
||||
|
Adjustments to reconcile to Adjusted EBITDA:
|
||||||||||||||||
|
Change in fair value of warrant liabilities
|
(137
|
)
|
(6,975
|
)
|
(5,121
|
)
|
(3,442
|
)
|
||||||||
|
Other expense, net
|
5,573
|
630
|
22,713
|
627
|
||||||||||||
|
Stock-based compensation
|
4,043
|
7,396
|
7,099
|
17,840
|
||||||||||||
|
Transaction related costs - business combination
|
-
|
-
|
-
|
6,920
|
||||||||||||
|
Adjusted EBITDA
|
$
|
(22,886
|
)
|
$
|
(17,515
|
)
|
$
|
(76,110
|
)
|
$
|
(43,646
|
)
|
||||
Liquidity and Capital Resources
Since our inception, we have generated no revenue and have funded our operations primarily with proceeds from the issuance of equity to private investors. In addition, on June 10, 2021, we completed the
Business Combination, and as a result we received proceeds of approximately $511.2 million on the day of the Closing. Our primary uses of liquidity have been operating expenses, capital expenditures and our acquisition of certain assets of Majelac
Technologies LLC (“Majelac”). Cash flows from operations have been historically negative as we continue to invest in the development of our technology in NGPS. We expect to incur negative operating cash flows on an annual basis for the foreseeable
future until such time that we can successfully commercialize our products that are currently under development. However, we can provide no assurance that such products will be successfully developed and commercialized in the future.
We expect that the funds raised in connection with the Business Combination will be sufficient to meet our liquidity, capital expenditure, and anticipated working capital requirements and fund our
operations for at least the next 12 months. We expect to use the funds raised in connection with the Business Combination to further invest in the research and development of our products, for other operating expenses, business acquisitions and for
working capital and general corporate purposes.
As of September 30, 2022, we had cash and cash equivalents and investments in marketable securities totaling $372.1 million. Our future capital requirements may vary from those currently planned and
will depend on various factors including the timing of product commercialization.
We expect to launch the PlatinumTM instrument and start to take orders before the end of 2022 and begin shipping product
in the first quarter of 2023. During the ramp up to launch, our business will require an accelerated amount of spending to enhance the sales and marketing teams, continue to drive development, and build inventory. Other factors that could accelerate
cash needs include: (i) delays in achieving scientific and technical milestones; (ii) unforeseen capital expenditures and fabrication costs related to commercialization; (iii) changes we may make in our business or commercialization strategy; (iv)
the impact of the COVID-19 pandemic; (v) costs of running a public company; (vi) other items affecting our forecasted level of expenditures and use of cash resources including potential acquisitions; and (vii) increased product and service costs.
In the future, we may be unable to obtain any required additional financing on terms favorable to us, if at all. If adequate funds are not available to us on acceptable terms or otherwise, we may be
unable to successfully develop or enhance products and services, respond to competitive pressure or take advantage of acquisition opportunities, any of which could have a material adverse effect on our business, financial condition, operating results
and cash flows.
Cash flows
The following table summarizes our cash flows for the periods indicated:
|
Nine months ended
September 30,
|
||||||||
|
(in thousands)
|
2022
|
2021
|
||||||
|
Net cash (used in) provided by:
|
||||||||
|
Net cash used in operating activities
|
$
|
(70,977
|
)
|
$
|
(48,348
|
)
|
||
|
Net cash provided by (used in) investing activities
|
111,684
|
(441,859
|
)
|
|||||
|
Net cash provided by financing activities
|
1,771
|
515,400
|
||||||
|
Net increase in cash and cash equivalents
|
$
|
42,478
|
$
|
25,193
|
||||
Net cash used in operating activities
The net cash used in operating activities represents the cash receipts and disbursements related to our activities other than investing and financing activities. We expect that the cash provided by
financing activities in 2021 will continue to be our primary source of funds to support operating needs and capital expenditures for the foreseeable future.
The net cash used in operating activities of $71.0 million for the nine months ended September 30, 2022 was due primarily to a net loss of $99.3 million and a change in fair value of
warrant liabilities of $5.1 million, partially offset by losses on marketable securities (realized and unrealized) of $22.8 million, stock-based compensation of $7.1 million and net cash inflows from changes in operating assets and
liabilities of $1.6 million.
The net cash used in operating activities of $48.3 million for the nine months ended September 30, 2021 was due primarily to a net loss of $65.6 million and a change in fair value of warrant liabilities of $3.4
million, partially offset by stock-based compensation of $17.8 million and net cash inflows from changes in operating assets and liabilities of $1.5 million.
Net cash provided by (used in) investing activities
The net cash provided by investing activities of $111.7 million in the nine months ended September 30, 2022 was due primarily to sales of marketable securities of $119.8 million, partially offset by
purchases of property and equipment of $7.2 million and marketable securities of $0.8 million.
The net cash used in investing activities of $441.9 million in the nine months ended September 30, 2021 was due to purchases of marketable securities of $438.7 million and property and equipment of $3.1 million.
Net cash provided by financing activities
The net cash provided by financing activities of $1.8 million in the nine months ended September 30, 2022 was due primarily from $2.6 million from proceeds from exercise of stock options, offset by $0.5
million from payment of deferred consideration and $0.3 million from payment of contingent consideration related to the Majelac acquisition.
The net cash provided by financing activities of $515.4 million in the nine months ended September 30, 2021 was primarily from $512.8 million from proceeds from the Business Combination and $4.4 million from proceeds
from exercise of stock options, partially offset by a $1.7 million payment of notes payable.
Contractual Obligations
We lease certain facilities and equipment under non-cancellable lease agreements that expire at various dates through 2032. As of September 30, 2022, the future payments, before adjustments for tenant incentives, under
leases was $35.3 million, which includes a lease we entered into in December 2021 for a facility in New Haven, Connecticut, which commenced in January 2022 and a lease that commenced in April 2022 for a facility in Branford, Connecticut.
Licenses related to certain intellectual property
We license certain intellectual property, some of which may be utilized in our current or future product offerings. To preserve the right to use such intellectual property, there are minimum annual
fixed royalty payments of approximately $0.2 million. Once we commercialize and begin to generate revenue, there will be royalties based on the current anticipated utilization.
Critical Accounting Policies and Significant Judgments and Estimates
Our management’s discussion and analysis of our financial condition and results of operations is based on our condensed consolidated financial statements, which have been prepared in accordance with
U.S. GAAP. The preparation of these condensed consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the
date of the condensed consolidated financial statements, as well as expenses incurred during the reporting periods. Our estimates are based on our historical experience and various other factors that we believe are reasonable under the circumstances,
the results of which form the basis for making judgments about items that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
There have been no material changes to our critical accounting policies and estimates as compared to the critical accounting policies and estimates disclosed in our Annual Report
on Form 10-K for the year ended December 31, 2021, filed with the SEC on March 1, 2022.
Recently Issued Accounting Pronouncements
A description of recently issued accounting pronouncements that may potentially impact our financial position and results of operations is disclosed in Note 2 “Summary of Significant Accounting Policies
– Recently Issued Accounting Pronouncements” in our condensed consolidated financial statements contained in this Quarterly Report on Form 10-Q.
| Item 3. |
Quantitative and Qualitative Disclosures About Market Risk
|
Inflation risk
We do not believe that inflation has had a material effect on our business, financial condition or results of operations, other than its impact on the general economy. Nonetheless, to the extent our
costs are impacted by general inflationary pressures, we may not be able to fully offset such higher costs through price increases or manufacturing efficiencies. Our inability or failure to do so could harm our business, financial condition and
results of operations.
Interest rate risk
Our cash and cash equivalents, and marketable securities are comprised primarily of cash and investments in fixed income mutual funds. The primary objective of our investments is the preservation of
capital to fulfill liquidity needs. We do not enter into investments for trading or speculative purposes. Due to the short-term nature of these investments, we do not expect cash flows to be affected to any significant degree by a sudden change in
market interest rates.
Foreign Currency Risk
We operate our business primarily within the United States and currently execute the majority of our transactions in U.S. dollars. This limited foreign currency translation risk is not expected to
have a material impact on our condensed consolidated financial statements. To date, we have not entered into any hedging arrangements with respect to foreign currency risk. As our international operations grow, we will continue to reassess our
approach to manage our risk relating to fluctuations in currency rates.
| Item 4. |
Controls and Procedures
|
Evaluation of Disclosure Controls and Procedures
Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of the design and operation
of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act.
Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted 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 controls and procedures designed to ensure that information required to be disclosed in our reports filed
under the Exchange Act is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure. Based on the evaluation of our disclosure controls and
procedures, our Chief Executive Officer and Chief Financial Officer concluded that, due to (i) the restatement of our financial statements to reclassify our warrants as described below and in Amendment No. 1 to our Annual Report on Form 10-K/A for
the year ended December 31, 2020 filed with the SEC on May 10, 2021 and (ii) the other material weaknesses described below, our disclosure controls and procedures were not effective as of September 30, 2022.
Material Weakness in Internal Control over Financial Reporting
We have identified two material weaknesses in our internal control over financial reporting. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that
there is a reasonable possibility that a material misstatement of our financial statements will not be prevented or detected on a timely basis.
As previously disclosed in our Amendment No. 1 to our Annual Report on Form 10-K/A for the year ended December 31, 2020, we identified a material weakness in our internal control over financial reporting related to
inaccurate accounting for the Public Warrants and Private Warrants issued in connection with HighCape’s initial public offering. Management identified this error when the SEC issued the SEC Statement. The SEC Statement addresses certain accounting
and reporting considerations related to warrants of a kind similar to those we issued in connection with HighCape’s initial public offering in September 2020. This control deficiency resulted in us having to restate our audited consolidated financial
statements contained in our Annual Report on Form 10-K for the year ended December 31, 2020 and if not remediated, could result in a material misstatement to future annual or interim consolidated financial statements that would not be prevented or
detected. Accordingly, management has determined that this control deficiency constitutes a material weakness.
In connection with Legacy Quantum-Si’s financial statement close process for the years ended December 31, 2020 and 2019, we identified a material weakness in the design and operating effectiveness of our internal
control over financial reporting. Legacy Quantum-Si outsourced its accounting and financial reporting to a third-party service provider, and therefore as of and for the years ended December 31, 2020 and 2019, did not have its own finance function or
finance or accounting professionals that had the requisite experience or were in a position to appropriately perform the supervision and review of the information received from that third-party service provider. As a result, during the three months
ended September 30, 2021, we identified a presentation error of the basic and diluted net loss per share calculation, including the weighted-average common stock for the three and six months ended June 30, 2021, which was prepared by a third-party
service provider. This presentation error was due to the material weakness related to our ability to appropriately perform the supervision and review of the information received from the third-party service provider as discussed above.
Notwithstanding these material weaknesses, management has concluded that our unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q are fairly stated in all material
respects in accordance with U.S. GAAP for each of the periods presented therein.
Plan for Remediation of the Material Weakness in Internal Control over Financial Reporting
In response to these material weaknesses, our management has expended, and will continue to expend, a substantial amount of effort and resources for the remediation of these material weaknesses in internal control over
financial reporting. Our management developed and started to execute a remediation plan. We hired accounting and finance resources of Quantum-Si, which included the Chief Financial Officer and Vice President, Controller, with technical public
company accounting and financial reporting experience, as well as other team members. We also have access to accounting training, literature, research materials and increased communication among our personnel and outsourced third-party professionals
with whom we have consulted and may continue to consult with regarding the application of complex accounting transactions. We have designed controls and deemed them to be effective. We have also tested and will continue to test for operational
effectiveness to validate that the material weaknesses have been remediated and are operating effectively for a reasonable period of time. Our remediation plan can only be accomplished over time and will be continually reviewed to determine that we
are achieving our objectives. There is no assurance that these initiatives will ultimately have the intended effects. The material weaknesses will not be considered remediated until our management designs and implements effective controls that
operate for a sufficient period of time and our management has concluded through testing that these controls are effective.
Changes in Internal Control over Financial Reporting
Except as disclosed above, there were no changes in our internal control over financial reporting during the quarter that have materially affected, or are reasonably likely to materially affect, our
internal control over financial reporting.
| ITEM 1. |
LEGAL PROCEEDINGS.
|
We are not currently a party to any material legal proceedings.
| ITEM 1A. |
RISK FACTORS.
|
Our business, results of operations and financial condition are subject to various risks and uncertainties including the risk factors described under the caption “Risk Factors” in our Annual
Report on Form 10-K for the year ended December 31, 2021, filed with the SEC on March 1, 2022, and there have been no material changes to the risk factors described therein or in any of our subsequently filed reports.
| ITEM 2. |
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
|
Unregistered Sales of Equity Securities
Not applicable.
Issuer Purchases of Equity Securities
Not applicable.
| ITEM 3. |
DEFAULTS UPON SENIOR SECURITIES.
|
Not applicable.
| ITEM 4. |
MINE SAFETY DISCLOSURES.
|
Not applicable.
| ITEM 5. |
OTHER INFORMATION.
|
Not applicable.
| ITEM 6. |
EXHIBITS
|
The following exhibits are filed as part of, or incorporated by reference into, this Quarterly Report on Form 10-Q.
|
Exhibit
Number
|
|
Exhibit Description
|
|
Filed Herewith
|
|
Incorporated by
Reference Herein
from
Form or Schedule
|
|
Filing Date
|
|
SEC File/
Reg. Number
|
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Certification of the Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
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X
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|||||||||
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Certification of the Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
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X
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|||||||||
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Certifications of the Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|
|
X
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|
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|
101.INS
|
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Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document)
|
|
X
|
|
|
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|||
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101.SCH
|
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Inline XBRL Taxonomy Extension Schema Document
|
|
X
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|
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|||
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101.CAL
|
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Inline XBRL Taxonomy Extension Calculation Linkbase Document
|
|
X
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|
|
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|||
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101.DEF
|
Inline XBRL Taxonomy Extension Definition Linkbase Document
|
X
|
||||||||
|
101.LAB
|
Inline XBRL Taxonomy Extension Label Linkbase Document
|
X
|
||||||||
|
101.PRE
|
Inline XBRL Taxonomy Extension Presentation Linkbase Document
|
X
|
||||||||
|
104
|
Cover Page Interactive Data File (embedded within the Inline XBRL document)
|
X
|
| * |
The certifications attached as Exhibit 32 that accompany this Quarterly Report on Form 10-Q are not deemed filed with the Securities and Exchange Commission and are not to be incorporated by reference into any
filing of Quantum-Si Incorporated under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended (whether made before or after the date of such Form 10-Q), irrespective of any general incorporation language
contained in such filing.
|
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly
authorized.
|
QUANTUM-SI INCORPORATED
|
|||
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Date: November 8, 2022
|
By:
|
/s/ Jeffrey Hawkins
|
|
|
Jeffrey Hawkins
|
|||
|
Chief Executive Officer
|
|||
|
Date: November 8, 2022
|
By:
|
/s/ Claudia Drayton
|
|
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Claudia Drayton
|
|||
|
Chief Financial Officer
|
|||
34
Exhibit 31.1
CERTIFICATIONS UNDER SECTION 302
I, Jeffrey Hawkins, certify that:
| 1. |
I have reviewed this quarterly report on Form 10-Q of Quantum-Si Incorporated;
|
| 2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in
light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
| 3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial
condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
| 4. |
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules
13a-15(e) and 15d-15(e)) for the registrant and have:
|
| a) |
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material
information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
| b) |
designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide
reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
| c) |
evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the
disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
| d) |
disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter
(the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
| 5. |
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the
registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
| a) |
all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely
affect the registrant’s ability to record, process, summarize and report financial information; and
|
| b) |
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial
reporting.
|
Date: November 8, 2022
|
/s/ Jeffrey Hawkins
|
|
|
Jeffrey Hawkins
|
|
|
Chief Executive Officer
|
|
|
(Principal Executive Officer)
|
Exhibit 31.2
CERTIFICATIONS UNDER SECTION 302
I, Claudia Drayton, certify that:
| 1. |
I have reviewed this quarterly report on Form 10-Q of Quantum-Si Incorporated;
|
| 2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made,
in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
| 3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial
condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
| 4. |
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act
Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
|
| a) |
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material
information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
| b) |
designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide
reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
| c) |
evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the
disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
| d) |
disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter
(the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
| 5. |
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the
registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
| a) |
all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to
adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
| b) |
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial
reporting.
|
Date: November 8, 2022
|
/s/ Claudia Drayton
|
|
|
Claudia Drayton
|
|
|
Chief Financial Officer
|
|
|
(Principal Financial Officer)
|
Exhibit 32
CERTIFICATIONS UNDER SECTION 906
Pursuant to section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of section 1350, chapter 63 of title 18, United States Code), each of
the undersigned officers of Quantum-Si Incorporated, a Delaware corporation (the “Company”), does hereby certify, to such officer’s knowledge, that:
The Quarterly Report for the quarter ended September 30, 2022 (the “Form 10-Q”) of the Company fully complies with the requirements of Section 13(a) or
15(d) of the Securities Exchange Act of 1934, and the information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
Dated: November 8, 2022
|
/s/ Jeffrey Hawkins
|
|
|
Jeffrey Hawkins
|
||
|
Chief Executive Officer
|
||
|
(Principal Executive Officer)
|
||
|
Dated: November 8, 2022
|
/s/ Claudia Drayton
|
|
|
Claudia Drayton
|
||
|
Chief Financial Officer
|
||
|
(Principal Financial Officer)
|