QuantumSi(QSI) - 2022 Q2 - Quarterly Report

Part I - Financial Information Financial Statements The company reported significant net losses for Q2 and the six months ended June 30, 2022, driven by increased R&D expenses and non-operating items, while maintaining substantial cash and marketable securities Condensed Consolidated Balance Sheets As of June 30, 2022, total assets decreased primarily due to reduced marketable securities, while liabilities slightly increased and stockholders' equity declined reflecting the net loss Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $81,272 | $35,785 | | Marketable securities | $319,398 | $435,519 | | Total current assets | $405,106 | $477,172 | | Total assets | $443,252 | $503,226 | | Liabilities & Equity | | | | Total current liabilities | $11,432 | $11,528 | | Total liabilities | $29,757 | $26,192 | | Total stockholders' equity | $413,495 | $477,034 | Condensed Consolidated Statements of Operations and Comprehensive Loss The company's net loss for Q2 2022 improved due to warrant liability fair value changes, while the six-month net loss widened significantly due to increased R&D and marketable securities losses Statement of Operations Highlights (in thousands) | Metric | Q2 2022 | Q2 2021 | Six Months 2022 | Six Months 2021 | | :--- | :--- | :--- | :--- | :--- | | Research and development | $18,459 | $13,114 | $37,230 | $21,086 | | Selling, general and administrative | $11,741 | $19,050 | $20,110 | $22,857 | | Loss from operations | $(30,200) | $(32,164) | $(57,340) | $(43,943) | | Change in fair value of warrant liabilities | $2,337 | $(3,533) | $4,984 | $(3,533) | | Other (expense) income, net | $(5,603) | $3 | $(17,140) | $3 | | Net loss and comprehensive loss | $(32,414) | $(35,697) | $(67,589) | $(47,476) | | Net loss per share (basic and diluted) | $(0.23) | $(0.97) | $(0.49) | $(2.23) | Condensed Consolidated Statements of Cash Flows Net cash used in operations increased due to higher net loss, offset by significant cash provided by investing activities from marketable securities sales, leading to an overall increase in cash and cash equivalents Cash Flow Summary for Six Months Ended June 30 (in thousands) | Cash Flow Activity | 2022 | 2021 | | :--- | :--- | :--- | | Net cash used in operating activities | $(49,174) | $(29,875) | | Net cash provided by (used in) investing activities | $94,515 | $(1,229) | | Net cash provided by financing activities | $146 | $516,130 | | Net increase in cash and cash equivalents | $45,487 | $485,026 | Notes to Condensed Consolidated Financial Statements The notes detail the company's NGPS platform development, key accounting policies, the Majelac acquisition for supply chain security, and financial instrument fair value measurements - The company is developing a proprietary single-molecule detection platform for Next-Generation Protein Sequencing (NGPS), comprising the Carbon instrument, Platinum instrument, Quantum-Si Cloud software, and consumables[32] - In November 2021, the company acquired assets from Majelac Technologies LLC to bring semiconductor chip assembly and packaging capabilities in-house, securing its supply chain for commercialization[63][64] - Public and Private Warrants are classified as liabilities and measured at fair value, with changes recognized in the income statement. The fair value of warrant liabilities decreased from $7.2 million at year-end 2021 to $2.3 million as of June 30, 2022, resulting in a gain of $5.0 million for the six-month period[55][92] - As a result of the former CEO's departure in February 2022, 1,731,371 RSU awards were forfeited, leading to a reversal of $4.7 million in stock-based compensation expense for the six months ended June 30, 2022[82] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the NGPS platform launch, significant increases in R&D expenses, a decrease in SG&A, and the company's financial position to fund operations for the next 12 months - The company plans to launch its NGPS platform, including the Platinum instrument, for research use only (RUO) in 2022, following an early access program with key opinion leaders in 2021[107][109] - As of June 30, 2022, the company had cash, cash equivalents, and marketable securities totaling $400.7 million. Management expects these funds to be sufficient for operations for at least the next 12 months[150][151] Results of Operations R&D expenses significantly increased due to product development and headcount, while SG&A decreased due to non-recurring costs and stock-based compensation reversal, leading to a wider net loss Operating Expense Comparison (in thousands) | Expense Category | Six Months 2022 | Six Months 2021 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Research and development | $37,230 | $21,086 | $16,144 | 76.6% | | Selling, general and administrative | $20,110 | $22,857 | $(2,747) | (12.0)% | - The increase in R&D expenses for the first six months of 2022 was primarily due to a $10.0 million increase in product development activities and a $7.5 million increase in personnel costs from higher headcount[135] - The decrease in SG&A expenses for the first six months of 2022 was mainly due to a $6.9 million reduction in stock-based compensation (including a $4.7 million reversal from forfeited RSUs) and the absence of $4.9 million in 2021 transaction-related costs[136] Non-GAAP Financial Measures Adjusted EBITDA, a non-GAAP measure, showed a larger loss for the six months ended June 30, 2022, reflecting increased operating expenses, particularly in R&D Reconciliation of Net Loss to Adjusted EBITDA (in thousands) | Metric | Q2 2022 | Q2 2021 | Six Months 2022 | Six Months 2021 | | :--- | :--- | :--- | :--- | :--- | | Net loss | $(32,414) | $(35,697) | $(67,589) | $(47,476) | | Adjusted EBITDA | $(25,822) | $(15,022) | $(53,224) | $(26,131) | Quantitative and Qualitative Disclosures About Market Risk The company's primary market risk is interest rate fluctuations on its short-term fixed-income investments, with capital preservation as the main objective - The company's main market risk is interest rate risk on its cash and marketable securities, which are primarily held in fixed-income mutual funds[169][170] Controls and Procedures Management concluded that disclosure controls were ineffective due to material weaknesses in warrant accounting and the financial close process, with a remediation plan underway - Management concluded that disclosure controls and procedures were not effective as of June 30, 2022[172] - Two material weaknesses were identified: one related to the accounting for public and private warrants, and another related to the financial close process due to insufficient internal oversight of a third-party accounting firm[173][174][175] - A remediation plan is underway, including hiring a CFO, Vice President Controller, and other finance team members to strengthen internal controls[177] Part II - Other Information Legal Proceedings The company is not currently involved in any material legal proceedings - As of the report date, the company is not involved in any material legal proceedings[180] Risk Factors No material changes have occurred to the risk factors previously disclosed in the company's Annual Report on Form 10-K - No material changes have occurred to the risk factors disclosed in the Annual Report on Form 10-K for the year ended December 31, 2021[181] Unregistered Sales of Equity Securities and Use of Proceeds This section is not applicable for the current reporting period Defaults Upon Senior Securities This section is not applicable for the current reporting period Mine Safety Disclosures This section is not applicable for the current reporting period Other Information This section is not applicable for the current reporting period Exhibits The report includes various exhibits, such as employment agreements and certifications from the Principal Executive and Financial Officers - Exhibits filed with the report include certifications from the CEO and CFO pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act[189]