Singular Genomics Systems(OMIC) - 2021 Q2 - Quarterly Report

Part I Item 1. Financial Statements This section presents the unaudited condensed financial statements, highlighting a $61.4 million net loss for the first six months of 2021 and a significant increase in assets from the June 2021 IPO Condensed Balance Sheets The balance sheet as of June 30, 2021, reflects a significant strengthening of the company's financial position, with total assets increasing to $384.0 million and stockholders' equity turning positive due to IPO proceeds Condensed Balance Sheet Highlights (in thousands) | Account | June 30, 2021 | December 31, 2020 | | :--- | :--- | :--- | | Cash and cash equivalents | $257,268 | $11,688 | | Short-term investments | $114,400 | $15,231 | | Total Assets | $383,980 | $30,502 | | Total Liabilities | $17,402 | $12,873 | | Total stockholders' equity (deficit) | $366,578 | $(51,555) | Condensed Statements of Operations and Comprehensive Loss The company, in a pre-revenue stage, reported a net loss of $61.4 million for the six months ended June 30, 2021, primarily due to increased operating expenses and a non-cash charge for convertible notes Statement of Operations Summary (in thousands) | Metric | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | | :--- | :--- | :--- | | Research and development | $14,289 | $9,351 | | General and administrative | $9,855 | $2,820 | | Loss from operations | $(24,144) | $(12,171) | | Change in fair value of convertible promissory notes | $(35,199) | - | | Net loss | $(61,400) | $(12,100) | | Net loss per share | $(2.83) | $(1.17) | Condensed Statements of Cash Flows For the six months ended June 30, 2021, net cash used in operations was $25.0 million, while financing activities provided $372.6 million, primarily from IPO proceeds, significantly increasing the company's cash position Cash Flow Summary (in thousands) | Activity | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | | :--- | :--- | :--- | | Net cash used in operating activities | $(25,026) | $(11,222) | | Net cash (used in) / provided by investing activities | $(101,827) | $9,803 | | Net cash provided by financing activities | $372,638 | $7,510 | | Increase in cash, cash equivalents and restricted cash | $245,785 | $6,091 | Notes to Condensed Financial Statements These notes provide detailed context for the financial statements, covering the June 2021 IPO, conversion of convertible notes, accounting policies, debt agreements, and commitments - The company completed its IPO on June 1, 2021, selling 11,730,000 shares of common stock and receiving net proceeds of approximately $237.2 million[32] - As of June 30, 2021, the company had an accumulated deficit of $114.5 million and believes its cash balance of $371.7 million is sufficient to fund operations for at least the next 12 months[33] - In February 2021, the company issued $130.5 million in convertible promissory notes, which accrued 6% interest and converted into common stock upon the IPO in June 2021[74][89] - The company has a loan agreement with Silicon Valley Bank (SVB) with a $10.0 million outstanding balance as of June 30, 2021[81][87] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's pre-revenue status, significant increase in operating expenses for the first half of 2021, and enhanced liquidity from the IPO and convertible note financing Overview The company is a life science technology firm developing NGS and multiomics products, with a business model focused on instrument sales and recurring consumable revenue - The company is developing two main products: the G4 Integrated Solution for NGS and the PX Integrated Solution for multiomics[123] - Commercialization plan for the G4 solution includes a beta pilot, an early access program, and a full commercial launch anticipated by the end of 2021, with units shipping in the first half of 2022[125] - The PX Integrated Solution is expected to have an early access program in 2022 and a full commercial launch in 2023[126] Results of Operations This section analyzes operating results, showing R&D expenses rose by 52.8% to $14.3 million and G&A expenses surged by 249.5% to $9.9 million for the six months ended June 30, 2021 Operating Expenses Comparison (Six Months Ended June 30) | Expense Category | 2021 (in thousands) | 2020 (in thousands) | % Change | | :--- | :--- | :--- | :--- | | Research and development | $14,289 | $9,351 | 52.8% | | General and administrative | $9,855 | $2,820 | 249.5% | - The increase in R&D expenses was primarily due to a $2.7 million increase in employee compensation and related costs from higher headcount, along with increased spending on lab materials and facilities[164] - The increase in G&A expenses was driven by a $4.9 million rise in employee compensation and a $1.1 million increase in professional fees for insurance, accounting, and legal services[167] Liquidity and Capital Resources As of June 30, 2021, the company had $371.7 million in cash, cash equivalents, and short-term investments, primarily from the IPO and convertible notes, providing sufficient liquidity for the next twelve months - As of June 30, 2021, the company had cash, cash equivalents, and short-term investments totaling $371.7 million[169] - Financing activities in the first six months of 2021 provided $372.6 million in cash, primarily from the IPO ($238.6 million net) and convertible notes ($130.5 million)[177] - The company has an outstanding loan with Silicon Valley Bank for $10.0 million, with interest-only payments through September 2021, followed by principal and interest payments until maturity in September 2023[178][181] Item 3. Quantitative and Qualitative Disclosures About Market Risk The company discloses its exposure to market risks, including interest rate, foreign currency, and inflation, which management believes are not material due to short-term investments and U.S.-only operations - The company's primary market risks are identified as interest rate, foreign currency exchange, and inflation risk[193] - Management believes there is no material exposure to changes in interest rates due to the short-term nature of its cash and investments[193] - With all operations currently in the United States, the company states there was no material foreign currency risk for the period[194] Item 4. Controls and Procedures Management concluded that the company's disclosure controls and procedures were effective as of June 30, 2021, with no material changes to internal control over financial reporting during the quarter - Management concluded that the company's disclosure controls and procedures were effective as of the end of the reporting period[196] - There were no changes in internal control over financial reporting during the quarter that materially affected, or are reasonably likely to materially affect, internal controls[197] Part II Item 1. Legal Proceedings The company reports that it is not currently a party to any material legal proceedings - As of the filing date, the company is not a party to any material legal proceedings[201] Item 1A. Risk Factors This section outlines significant risks, including the company's limited operating history, substantial losses, pre-revenue status, intense competition, and dependence on the successful commercialization of its G4 Integrated Solution - The company's limited operating history, significant losses since inception ($114.5 million accumulated deficit), and pre-revenue status make it difficult to evaluate future prospects[203][204] - The life sciences technology market is highly competitive, with large, well-resourced competitors like Illumina and Thermo Fisher Scientific[208] - The business is highly dependent on the successful final development and commercialization of the G4 Integrated Solution, which is anticipated by the end of 2021[212] - There is a risk of being sued for infringing on third-party intellectual property, which could be costly and delay or prevent product commercialization[286] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section discloses unregistered sales of equity securities, primarily stock option grants, and confirms the use of approximately $237.2 million net proceeds from the IPO aligns with the prospectus - Between March 31 and May 25, 2021, the company issued shares and granted options under its 2016 Plan in transactions exempt from registration[377][378][379] - The company closed its IPO on June 1, 2021, with net proceeds of approximately $237.2 million. There has been no material change in the planned use of these proceeds[380] Other Required Disclosures (Items 3, 4, 5) The company reported no defaults upon senior securities, no mine safety disclosures, and no other material information for the period - The company reported 'None' for Item 3 (Defaults Upon Senior Securities), Item 4 (Mine Safety Disclosures), and Item 5 (Other Information)[381][382][383] Item 6. Exhibits This section lists all exhibits filed with the Form 10-Q, including corporate governance documents, material contracts, equity plans, and officer certifications - Key exhibits filed include the Amended and Restated Certificate of Incorporation and Bylaws, the 2021 Equity Incentive Plan, lease agreements, and the Loan Agreement with Silicon Valley Bank[385]