QuantumSi(QSI) - 2022 Q1 - Quarterly Report

General Information This section details the company's quarterly report, registered securities, and filer status - The document is a Quarterly Report on Form 10-Q for QUANTUM-SI INCORPORATED, covering the period ended March 31, 2022[1][2] Securities Registered (in thousands) | Title of each class | Symbols(s) | Name of each exchange on which registered | | :------------------ | :--------- | :---------------------------------------- | | Class A common stock, $0.0001 per share | QSI | The Nasdaq Stock Market LLC | | Redeemable warrants, each whole warrant exercisable for one share of Class A common stock, each at an exercise price of $11.50 per share | QSIAW | The Nasdaq Stock Market LLC | - The registrant is classified as a Large accelerated filer[5] Shares Outstanding (as of May 4, 2022) | Class | Shares Outstanding | | :---- | :----------------- | | Class A common stock | 119,025,206 | | Class B common stock | 19,937,500 | Cautionary Note Regarding Forward-Looking Statements Forward-looking statements in this report are subject to risks and uncertainties, with no obligation for public updates - This report includes forward-looking statements based on management's beliefs and assumptions, which are inherently subject to risks, uncertainties, and assumptions[10] - Important factors that could cause actual results to differ materially include competition, ability to grow, regulatory changes, financing, product development success, commercialization, leadership transition, and the impact of the COVID-19 pandemic[11][12] - The Company undertakes no obligation to update or revise publicly any forward-looking statements, except as required by law[11] Part I – Financial Information This part presents the company's unaudited financial statements and management's discussion of operations Item 1. Financial Statements This section provides the unaudited condensed consolidated financial statements, including the balance sheets, statements of operations and comprehensive loss, statements of changes in stockholders' equity, and statements of cash flows, along with detailed notes explaining the company's accounting policies, business combination, acquisitions, fair value measurements, and other financial details Condensed Consolidated Balance Sheets This section presents unaudited balance sheets, detailing assets, liabilities, and equity for Q1 2022 and FY 2021 Condensed Consolidated Balance Sheets (in thousands) | Metric | March 31, 2022 | December 31, 2021 | Change | | :-------------------------------- | :------------- | :---------------- | :----- | | Total current assets | $439,779 | $477,172 | -$37,393 | | Total assets | $476,138 | $503,226 | -$27,088 | | Total current liabilities | $14,045 | $11,528 | +$2,517 | | Total liabilities | $34,263 | $26,192 | +$8,071 | | Total stockholders' equity | $441,875 | $477,034 | -$35,159 | | Accumulated deficit | $(302,407) | $(267,232) | -$35,175 | - Marketable securities decreased by $35,709 thousand from $435,519 thousand at December 31, 2021, to $399,810 thousand at March 31, 2022[15] - Operating lease right-of-use assets increased significantly from $6,973 thousand to $15,035 thousand[15] Condensed Consolidated Statements of Operations and Comprehensive Loss This section presents unaudited statements of operations and comprehensive loss for Q1 2022 and Q1 2021 Condensed Consolidated Statements of Operations and Comprehensive Loss (in thousands) | Metric | Three months ended March 31, 2022 | Three months ended March 31, 2021 | Change | % Change | | :------------------------------------------ | :-------------------------------- | :-------------------------------- | :----- | :------- | | Research and development | $18,771 | $7,972 | +$10,799 | 135.5% | | Selling, general and administrative | $8,369 | $3,807 | +$4,562 | 119.8% | | Total operating expenses | $27,140 | $11,779 | +$15,361 | 130.4% | | Loss from operations | $(27,140) | $(11,779) | $(15,361) | 130.4% | | Dividend income | $855 | $- | +$855 | nm | | Change in fair value of warrant liabilities | $2,647 | $- | +$2,647 | nm | | Other expense, net | $(11,537) | $- | $(11,537) | nm | | Net loss and comprehensive loss | $(35,175) | $(11,779) | $(23,396) | 198.6% | - Net loss per common share (basic and diluted) was $(0.25) for Q1 2022, compared to $(2.13) for Q1 2021, despite a larger absolute net loss, due to a significantly higher weighted-average share count[19] Condensed Consolidated Statements of Changes in Convertible Preferred Stock and Stockholders' Equity (Deficit) This section presents unaudited statements of changes in stockholders' equity for Q1 2022 and Q1 2021 - Total stockholders' equity decreased from $477,034 thousand at December 31, 2021, to $441,875 thousand at March 31, 2022, primarily due to the net loss incurred[25] - The net loss for the three months ended March 31, 2022, was $35,175 thousand[25] - Additional paid-in capital increased slightly due to common stock issued upon exercise of stock options and vesting of restricted stock units ($730 thousand), partially offset by stock-based compensation adjustments ($(714) thousand)[25] Condensed Consolidated Statements of Cash Flows This section presents unaudited statements of cash flows for Q1 2022 and Q1 2021 Summary of Cash Flows (in thousands) | Activity | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :---------------------------------------- | :-------------------------------- | :-------------------------------- | | Net cash used in operating activities | $(23,229) | $(10,736) | | Net cash provided by (used in) investing activities | $21,698 | $(500) | | Net cash provided by financing activities | $730 | $980 | | Net decrease in cash and cash equivalents | $(801) | $(10,256) | | Cash and cash equivalents at end of period | $34,984 | $26,654 | - Net cash provided by investing activities significantly increased in Q1 2022 due to $25,000 thousand from sales of marketable securities[28] Notes to Condensed Consolidated Financial Statements This section provides detailed notes on accounting policies, business combination, acquisitions, and other financial details 1. Organization and Description of Business This note describes the company's formation, NGPS technology focus, and financial outlook for funding operations - Quantum-Si Incorporated was formed through a business combination on June 10, 2021, involving HighCape Capital Acquisition Corp. and Legacy Quantum-Si[30][31] - The company is an innovative life sciences firm focused on transforming single molecule analysis and democratizing access to the proteome using its proprietary platform for Next Generation Protein Sequencing (NGPS)[32] - The platform includes the Carbon™ automated sample preparation instrument, Platinum™ NGPS instrument, Quantum-Si Cloud™ software service, and reagent kits/chips[32] - Despite recurring losses, the company expects its cash and marketable securities to fund operations for at least the next twelve months[33] 2. Summary of Significant Accounting Policies This note outlines significant accounting policies, including U.S. GAAP, COVID-19 impact, credit risk, leases, and warrant classification - The condensed consolidated financial statements are prepared in accordance with U.S. GAAP and SEC interim reporting rules[34] - The COVID-19 pandemic has had, and is expected to continue to have, an adverse impact on operations, supply chain, and hiring, but has not resulted in material adverse impact or significant impairment losses to date[38][39][40] - Substantially all cash, cash equivalents, and marketable securities are invested in fixed income mutual funds at one financial institution, posing a concentration of credit risk[41] - The company adopted ASU 2016-02, Leases (Topic 842), retrospectively to January 1, 2021, recognizing right-of-use (ROU) assets and lease liabilities[47] - Goodwill is not amortized but is subject to annual impairment assessment (starting Q4 2022); no impairments were recorded for Q1 2022[51][52] - Public and Private Warrants are classified as long-term liabilities at fair value, with changes recognized in the statements of operations, due to not meeting equity classification criteria under ASC 815-40[54] 3. Business Combination This note details the June 10, 2021 business combination, its reverse recapitalization accounting, and the dual-class stock structure - The Business Combination was consummated on June 10, 2021, with Legacy Quantum-Si surviving as a wholly-owned subsidiary of the Company[56] - Each share of Legacy Quantum-Si capital stock was converted into 0.7975 shares of the Company's Class A or Class B common stock[57] - The transaction was accounted for as a reverse recapitalization, treating HighCape as the 'acquired' company and Legacy Quantum-Si as the accounting acquirer[60] - The Company adopted a dual-class structure with Class A (one vote) and Class B (20 votes) common stock, with Class B subject to a 'sunset' provision[61] 4. Acquisition This note describes the Majelac Technologies acquisition, its strategic purpose to enhance chip capabilities, and the purchase price allocation - On November 5, 2021, the Company acquired certain assets and assumed liabilities of Majelac Technologies LLC for $4,632 thousand in cash and 535,715 shares of Class A common stock (valued at $4,232 thousand)[63] - The acquisition aimed to bring semiconductor chip assembly and packaging capabilities in-house to secure the supply chain and support commercialization efforts[63] - The preliminary purchase price allocation included $9,483 thousand in goodwill, representing expected operating synergies and other benefits[64][65] - Acquisition-related costs for Q1 2022 were $25 thousand, included in Selling, general and administrative expenses[66] 5. Fair Value of Financial Instruments This note explains the fair value measurement hierarchy and details financial instruments like marketable securities and warrants - The Company measures fair value using a three-tier hierarchy (Level 1, 2, 3) based on the observability of inputs[68] Fair Value Measurement Levels (in thousands) | Asset/Liability | March 31, 2022 Total | Level 1 | Level 3 | | :---------------------------------------- | :------------------- | :------ | :------ | | Fixed income mutual funds - Cash and cash equivalents | $29,117 | $29,117 | $- | | Marketable securities | $399,810 | $399,810 | $- | | Public Warrants | $4,408 | $4,408 | $- | | Private Warrants | $184 | $- | $184 | - Private Warrants are valued using a binomial lattice model (Level 3), with key assumptions including 64.1% volatility, 2.42% risk-free interest rate, $11.50 strike price, $4.68 common stock fair value, and 4.4 years expected life[69] 6. Property and Equipment, Net This note details the composition and changes in net property and equipment, including depreciation expense - Property and equipment, net, increased by $2,243 thousand (25.2%) from December 31, 2021, to March 31, 2022[71] Composition of Property and Equipment, net (in thousands) | Category | March 31, 2022 | December 31, 2021 | | :-------------------------- | :------------- | :---------------- | | Laboratory and production equipment | $9,209 | $7,465 | | Computer equipment | $907 | $637 | | Software | $179 | $156 | | Furniture and fixtures | $172 | $125 | | Leasehold improvements | $970 | $790 | | Construction in process | $4,041 | $3,610 | | Property and equipment, gross | $15,478 | $12,783 | | Less: Accumulated depreciation | $(4,327) | $(3,875) | | Property and equipment, net | $11,151 | $8,908 | - Depreciation expense amounted to $452 thousand for Q1 2022, up from $213 thousand for Q1 2021[71] 7. Accrued Expenses and Other Current Liabilities This note provides a breakdown of accrued expenses and other current liabilities, including compensation, services, and acquisition costs - Total accrued expenses and other current liabilities increased by $1,503 thousand (20.7%) from December 31, 2021, to March 31, 2022[72] Composition of Accrued Expenses and Other Current Liabilities (in thousands) | Category | March 31, 2022 | December 31, 2021 | | :-------------------------------- | :------------- | :---------------- | | Employee compensation and benefits | $2,448 | $2,680 | | Contracted services | $4,395 | $2,606 | | Business acquisition costs and contingencies | $1,351 | $1,331 | | Legal fees | $568 | $636 | | Other | $17 | $23 | | Total accrued expenses and other current liabilities | $8,779 | $7,276 | 8. Leases This note details lease-related costs, weighted-average terms, discount rates, and future minimum undiscounted lease payments Lease-Related Costs (in thousands) | Cost Type | Three months ended March 31, 2022 | Three months ended March 31, 2021 | | :---------------- | :-------------------------------- | :-------------------------------- | | Operating lease cost | $725 | $- | | Short-term lease cost | $104 | $122 | | Variable lease cost | $286 | $- | | Total lease cost | $1,115 | $122 | - The weighted-average remaining lease term increased to 8.0 years (from 5.9 years at Dec 31, 2021), and the weighted-average discount rate is 7.5% (from 7.0%)[75] - Future minimum undiscounted lease payments under non-cancellable leases as of March 31, 2022, total $35,043 thousand[75] 9. Equity Incentive Plan This note describes stock option grants, RSU forfeitures, and the allocation of stock-based compensation expenses - During Q1 2022, the Company granted 4,371,150 stock option awards, and stock-based compensation for stock options increased to $1,494 thousand from $457 thousand in Q1 2021[78] - 1,731,371 Restricted Stock Unit (RSU) awards were forfeited in Q1 2022 due to the former CEO's departure, resulting in a reversal of stock-based compensation of $4,742 thousand[79] Stock-Based Compensation Allocation (in thousands) | Category | Three months ended March 31, 2022 | Three months ended March 31, 2021 | | :-------------------------- | :-------------------------------- | :-------------------------------- | | Research and development | $1,192 | $340 | | Selling, general and administrative | $(1,906) | $117 | | Total stock-based compensation | $(714) | $457 | 10. Net Loss Per Share This note explains basic and diluted net loss per share calculation, noting anti-dilutive common share equivalents due to net loss - Basic and diluted net loss per share were the same for all periods presented because the Company was in a net loss position, making common share equivalents anti-dilutive[81][82] Net Loss Per Share Attributable to Common Stockholders | Metric | Three months ended March 31, 2022 | Three months ended March 31, 2021 | | :------------------------------------------------------------------------------------------------ | :-------------------------------- | :-------------------------------- | | Net loss | $(35,175) | $(11,779) | | Weighted-average shares used to compute net loss per share, basic and diluted | 138,619,929 | 5,528,551 | | Basic and diluted net loss per share | $(0.25) | $(2.13) | - Anti-dilutive common equivalent shares totaled 17,645,158 as of March 31, 2022, including outstanding options, restricted stock units, and warrants[82] 11. Warrant Liabilities This note details outstanding Public and Private Warrants, their classification as long-term liabilities, and fair value changes - As of March 31, 2022, there were 3,833,319 Public Warrants outstanding, exercisable at $11.50 per share, expiring June 10, 2026[83] - Both Public and Private Warrants are classified as long-term liabilities because they do not meet the criteria for equity classification under ASC 815-40, due to potential cash settlement conditions or holder-dependent settlement amounts[86][88] - The fair value of warrant liabilities was $4,592 thousand as of March 31, 2022, and the Company recognized a gain of $2,647 thousand from the change in fair value for Q1 2022[89] 12. Income Taxes This note outlines the effective income tax rate, valuation allowance, and potential Section 382 ownership changes - The Company's estimated annual effective income tax rate was 0.0% for both Q1 2022 and Q1 2021[90] - A full valuation allowance is recorded against net deferred tax assets as management believes it is more likely than not that the benefits of these assets will not be realized, based on the Company's earnings history[91] - The Company is evaluating whether an ownership change under Section 382 of the Internal Revenue Code has occurred due to the Business Combination, which could limit the use of net operating loss and tax credit carryforwards[92] 13. Related Party Transactions This note describes various related party transactions, including office subleases, technology agreements, and consulting services - The Company utilizes and subleases office and laboratory space from a related party, paying $80 thousand for Q1 2022[93] - The Amended and Restated Technology Services Agreement (ARTSA) with 4Catalyzer Corporation (4C) was terminated on June 10, 2021; expenses with 4C were $210 thousand in Q1 2022 (down from $535 thousand in Q1 2021)[94] - A Binders Collaboration with Protein Evolution, Inc. (PEI), where Dr. Rothberg serves as Chairman, was terminated effective March 31, 2022, with a payment of $1,135 thousand made to PEI on May 5, 2022[96] - Dr. Rothberg, Interim CEO and Executive Chairman, receives $400 thousand annually for consulting services, with $114 thousand paid for Q1 2022[97] 14. Commitments and Contingencies This note details annual minimum fixed payments for IP licenses and confirms no material pending or threatened litigation - The Company has annual minimum fixed payments of $220 thousand for intellectual property licenses, with future royalties based on commercialization[99] - No matching contributions were made to the 401(k) plan for Q1 2022 or Q1 2021[100] - The Company is not currently a party to any pending or threatened litigation that would have a material adverse effect on its financial condition or results of operations[101] 15. Subsequent Events This note discloses significant events after the reporting period, including a new facility lease agreement in April 2022 - In April 2022, the Company entered into a lease for a facility in Branford, Connecticut, for approximately 7 years, with future minimum lease payments of $1,156 thousand[103] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's discussion and analysis of financial condition and results of operations Overview This section overviews Quantum-Si's business, NGPS platform, and commercialization plans for its Platinum instrument - Quantum-Si is a life sciences company focused on transforming single molecule analysis and democratizing access to the proteome through its proprietary universal single molecule detection platform[106] - The platform, comprising Carbon™, Platinum™, and Quantum-Si Cloud™ software, is designed to enable Next Generation Protein Sequencing (NGPS) with a single-day workflow[106] - The Company plans an initial commercial launch of its Platinum instrument for research use only (RUO) in the second half of 2022, following an early access program initiated in 2021[106][108] COVID-19 Outbreak This section discusses the COVID-19 pandemic's adverse impacts on operations, supply chain, and product development - The COVID-19 pandemic has led to adverse impacts on global economies and created uncertainty regarding potential impacts on the Company's operating results, financial condition, and cash flows[110] - The pandemic is expected to continue impacting personnel, third-party manufacturing, and the availability/cost of materials, potentially disrupting product development[110] - To date, the COVID-19 pandemic has not had a material adverse impact on the Company's operations or resulted in significant impairment losses[111][112] Business Combination This section summarizes the June 10, 2021 Business Combination, company renaming, and proceeds received - The Business Combination was completed on June 10, 2021, resulting in the combined company being renamed 'Quantum-Si Incorporated' and its Class A common stock and warrants trading on Nasdaq under 'QSI' and 'QSIAW'[113] - The Company received approximately $511.2 million in proceeds on the day of the Closing[113] Recent Developments This section outlines recent leadership changes, including CEO departure, Interim CEO appointment, and other executive transitions - John Stark's employment as Chief Executive Officer and board member ended effective February 8, 2022, resulting in severance and bonuses totaling $1,102,750[114] - Jonathan M. Rothberg, Ph.D., Executive Chairman, assumed the role of Interim Chief Executive Officer without additional compensation[114][115] - Effective May 2022, Michael P. McKenna, Ph.D., transitioned to Executive Vice President, Product Development and Operations, and Patrick Schneider joined as President and Chief Operating Officer[115] Description of Certain Components of Financial Data This section describes key financial data components: R&D, SG&A, dividend income, other expense, and income tax accounting - Research and development expenses are expensed as incurred and are expected to increase significantly as the Company prepares for commercialization[116] - Selling, general and administrative expenses are also expected to increase in the foreseeable future as the Company nears its anticipated commercial launch in the second half of 2022[117] - Dividend income is primarily from dividends earned on fixed income mutual funds in marketable securities[118] - Other expense, net, is primarily consists of unrealized losses on fixed income mutual funds in marketable securities[120] - The Company utilizes the asset and liability method for income taxes and has recorded a full valuation allowance against its net deferred tax assets[121] Results of Operations This section provides a detailed comparison of financial performance for Q1 2022 versus Q1 2021 Comparison of the Three Months Ended March 31, 2022 and 2021 This section offers a detailed comparative analysis of financial results for Q1 2022 and Q1 2021 Research and development This section details the significant increase in R&D expenses for Q1 2022, driven by personnel costs, collaboration fees, and product development - Research and development expenses increased by $10.8 million, or 135.5%, to $18,771 thousand for Q1 2022 compared to Q1 2021[124] - This increase was primarily due to a $5.0 million increase in personnel costs (including $0.9 million stock-based compensation), $1.1 million in collaboration fees with Protein Evolution, Inc., and $4.7 million in other product development activities[124] Selling, general and administrative This section explains the increase in SG&A expenses for Q1 2022, driven by personnel, consulting, and public company costs, offset by RSU forfeitures - Selling, general and administrative expenses increased by $4.6 million, or 119.8%, to $8,369 thousand for Q1 2022 compared to Q1 2021[125] - This increase was driven by a net $0.9 million increase in personnel costs (partially offset by a $4.7 million reversal of stock-based compensation from RSU forfeitures), $1.1 million in consulting, legal, and patent fees, and $2.6 million in other public company-related expenses[125] Dividend income This section highlights the increase in dividend income for Q1 2022, due to higher invested cash balances in marketable securities - Dividend income increased by $0.9 million to $855 thousand for Q1 2022, compared to zero in Q1 2021, due to higher invested cash balances in marketable securities[126] Change in fair value of warrant liabilities This section explains the Q1 2022 gain from decreased warrant liabilities fair value, an item new post-Business Combination - A gain of $2,647 thousand was recognized in Q1 2022 from the decrease in the fair value of warrant liabilities; this item did not exist in Q1 2021 as warrant liabilities were recorded post-Business Combination[127] Other expense, net This section details the increase in other expense, net, for Q1 2022, driven by unrealized losses on fixed income mutual funds - Other expense, net, increased by $11.5 million to $(11,537) thousand for Q1 2022, primarily due to unrealized losses on cash invested in fixed income mutual funds[128] Non-GAAP Financial Measures This section introduces non-GAAP financial measures, specifically Adjusted EBITDA, and its reconciliation to net loss Adjusted EBITDA This section defines Adjusted EBITDA as a non-GAAP measure for performance assessment and financial planning, with its reconciliation - Adjusted EBITDA is a non-GAAP measure used by management to assess operating performance and for financial planning, facilitating internal comparisons[129][130] Adjusted EBITDA Reconciliation (in thousands) | Metric | Three months ended March 31, 2022 | Three months ended March 31, 2021 | | :-------------------------------- | :-------------------------------- | :-------------------------------- | | Net loss | $(35,175) | $(11,779) | | Dividend income | $(855) | $- | | Change in fair value of warrant liabilities | $(2,647) | $- | | Other expense, net | $11,537 | $- | | Stock-based compensation | $(714) | $457 | | Depreciation | $452 | $213 | | Adjusted EBITDA | $(27,402) | $(11,109) | Liquidity and Capital Resources This section discusses the company's liquidity, capital resources, and cash flow activities from operating, investing, and financing Cash flows This section summarizes cash flow activities, detailing net cash from operating, investing, and financing segments Net cash used in operating activities This section explains the increase in net cash used in operating activities for Q1 2022, due to net loss and warrant liability changes - Net cash used in operating activities increased to $23.2 million for Q1 2022 from $10.7 million for Q1 2021[139] - Q1 2022 usage was primarily due to a net loss of $35.2 million and a $2.6 million change in fair value of warrant liabilities, partially offset by $11.5 million in unrealized losses of marketable securities[141] Net cash provided by (used in) investing activities This section details the shift in net cash from investing activities for Q1 2022, driven by marketable securities sales and equipment purchases - Net cash provided by investing activities was $21.7 million in Q1 2022, a significant shift from $0.5 million used in Q1 2021[139] - This was primarily due to $25.0 million from sales of marketable securities, offset by $2.5 million in purchases of property and equipment and $0.8 million in purchases of marketable securities[143] Net cash provided by financing activities This section outlines net cash provided by financing activities for Q1 2022, primarily from stock option exercise proceeds - Net cash provided by financing activities was $0.7 million in Q1 2022, primarily from proceeds from the exercise of stock options, compared to $1.0 million in Q1 2021[139][144] Contractual Obligations This section details future minimum lease payments under non-cancellable agreements, including a new facility lease in New Haven - As of March 31, 2022, future minimum lease payments under non-cancellable lease agreements totaled $35.0 million, expiring at various dates through 2032[145] - This includes a lease for a facility in New Haven, Connecticut, which commenced in January 2022[145] Licenses related to certain intellectual property This section describes minimum annual fixed royalty payments for licensed IP and potential additional royalties upon commercialization - The Company has minimum annual fixed royalty payments of approximately $0.2 million for licensed intellectual property[147] - Additional royalties will be payable once the Company commercializes its products and begins to generate revenue[147] Critical Accounting Policies and Significant Judgments and Estimates This section confirms no material changes to critical accounting policies and estimates since the prior annual report - The preparation of financial statements requires estimates and assumptions, but there have been no material changes to critical accounting policies and estimates since the Annual Report on Form 10-K for December 31, 2021[148][149] Recently Issued Accounting Pronouncements This section states no new accounting pronouncements in Q1 2022 are expected to materially impact financial position or results - No new accounting pronouncements issued or effective during Q1 2022 are expected to have a material impact on the Company's financial position and results of operations[150] Emerging Growth Company This section notes the company ceased to be an emerging growth company on December 31, 2021, changing regulatory requirements - The Company ceased to be an an emerging growth company on December 31, 2021, due to its market value[151] - As a result, it is now required to adopt new or revised accounting standards as required by public companies and can no longer take advantage of reduced regulatory and reporting requirements[151] Item 3. Quantitative and Qualitative Disclosures About Market Risk The company's primary market risk exposure is interest rate fluctuations affecting cash, cash equivalents, and marketable securities Interest rate risk This section explains market risk from interest rate fluctuations on short-term fixed income investments, with no significant cash flow impacts - The Company's market risk exposure is primarily the result of interest rate fluctuations[152] - Cash, cash equivalents, and marketable securities are primarily invested in short-term fixed income mutual funds, with the objective of capital preservation[153] - Due to the short-term nature of these investments, significant cash flow impacts from sudden changes in market interest rates are not expected[153] Item 4. Controls and Procedures Management concluded disclosure controls were ineffective as of March 31, 2022, due to material weaknesses in warrant accounting and financial close Evaluation of Disclosure Controls and Procedures This section states management concluded disclosure controls were ineffective due to warrant reclassification and material weaknesses in internal control - Management concluded that the Company's disclosure controls and procedures were not effective as of March 31, 2022[155] - This ineffectiveness was due to the restatement of financial statements for warrant reclassification and other material weaknesses in internal control over financial reporting[155] Material Weakness in Internal Control over Financial Reporting This section identifies two material weaknesses: inaccurate warrant accounting and deficiencies in the financial statement close process - Two material weaknesses were identified: (1) inaccurate accounting for Public and Private Warrants, leading to a restatement of prior financial statements[157] - (2) A deficiency in the design and operating effectiveness of internal control over financial reporting related to the financial statement close process, specifically insufficient internal finance function and oversight of third-party service providers[158] - Despite these material weaknesses, management concluded that the unaudited condensed consolidated financial statements for Q1 2022 are fairly stated in all material respects[159] Plan for Remediation of the Material Weakness in Internal Control over Financial Reporting This section outlines the remediation plan, including hiring experienced finance personnel, enhancing training, and improving communication with third-party professionals - The Company is actively remediating material weaknesses by hiring experienced accounting and finance personnel, including a Chief Financial Officer and Vice President, Controller[160] - Remediation efforts also include enhancing access to accounting training, literature, research materials, and increased communication with outsourced third-party professionals[160] - The material weaknesses will not be considered remediated until effective controls are designed, implemented, and tested as effective over a sufficient period[160] Changes in Internal Control over Financial Reporting This section confirms no other material changes in internal control over financial reporting during the quarter, except for disclosed weaknesses - Except for the material weaknesses disclosed, there were no other material changes in internal control over financial reporting during the quarter[161] Part II – Other Information This part contains other information not covered in financial statements, including legal proceedings, risk factors, and exhibits Item 1. Legal Proceedings Quantum-Si is not currently involved in any material legal proceedings - The Company is not currently a party to any material legal proceedings[164] Item 1A. Risk Factors There have been no material changes to the risk factors described in the company's Annual Report on Form 10-K - There have been no material changes to the risk factors described in the Company's Annual Report on Form 10-K for the year ended December 31, 2021[165] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section states no unregistered equity sales or repurchases occurred during the three months ended March 31, 2022 - No unregistered sales of equity securities occurred during the three months ended March 31, 2022[166] - The Company did not repurchase any of its equity securities during the three months ended March 31, 2022[167] Item 3. Defaults Upon Senior Securities This item is not applicable to the Company - This item is not applicable to the Company[168] Item 4. Mine Safety Disclosures This item is not applicable to the Company - This item is not applicable to the Company[169] Item 5. Other Information This item is not applicable to the Company - This item is not applicable to the Company[170] Item 6. Exhibits This section lists all exhibits filed with the Quarterly Report on Form 10-Q, including certifications and XBRL documents - The report includes various exhibits, such as the Separation Agreement for John Stark (Exhibit 10.1+), certifications of the Principal Executive Officer and Principal Financial Officer (Exhibits 31.1, 31.2, 32), and Inline XBRL documents (Exhibits 101.INS, 101.SCH, 101.CAL, 101.DEF, 101.LAB, 101.PRE, 104)[173] - Certifications attached as Exhibit 32 are not deemed filed with the SEC and are not to be incorporated by reference into any other filings[174] Signatures This section provides the signatures of the Interim CEO and CFO, confirming the report's submission date - The report was signed on May 9, 2022, by Jonathan M. Rothberg, Ph.D., Interim Chief Executive Officer, and Claudia Drayton, Chief Financial Officer[177]