Quantum-Si Incorporated — Q2 2022 Form 10-Q
Reporting period: Three and six months ended June 30, 2022. Dollar amounts below are in millions unless otherwise noted. Quantum-Si is developing a single-molecule detection platform for proteomics and next-generation protein sequencing; it reported no revenue and remains in development and pre-commercialization.
Financial performance
| Metric | Q2 2022 | Q2 2021 | Six months 2022 | Six months 2021 |
|---|---|---|---|---|
| Revenue | None reported | None reported | None reported | None reported |
| Research and development expense | $18.5 | $13.1 | $37.2 | $21.1 |
| Selling, general and administrative expense | $11.7 | $19.1 | $20.1 | $22.9 |
| Total operating expenses | $30.2 | $32.2 | $57.3 | $43.9 |
| Net loss | $(32.4) | $(35.7) | $(67.6) | $(47.5) |
| Basic and diluted loss per share | $(0.23) | $(0.97) | $(0.49) | $(2.23) |
| Adjusted EBITDA, non-GAAP | $(25.8) | $(15.0) | $(53.2) | $(26.1) |
Gross profit and operating margins are not meaningful because the company reported no revenue. Q2 net loss narrowed 9.2% year over year, while six-month net loss widened 42.4%. The Q2 improvement reflected lower SG&A and favorable warrant-liability remeasurement, partly offset by higher R&D and investment losses. Six-month R&D rose 76.6%, principally from product development and increased staffing.
Cash, liquidity and obligations
- At June 30, cash and cash equivalents were $81.3 million and current marketable securities were $319.4 million, totaling approximately $400.7 million. Total assets were $443.3 million.
- Current liabilities were $11.4 million and total liabilities were $29.8 million. The filing reports no outstanding borrowing; liabilities primarily include operating leases and warrant liabilities.
- Operating cash outflow for the first half was $49.2 million, versus $29.9 million in the prior-year period. Investing activities provided $94.5 million, largely from $100.1 million of marketable securities sales; financing activities provided $0.1 million.
- Property and equipment purchases were $5.5 million for the first half. Operating lease liabilities totaled $17.2 million; future undiscounted lease payments were $35.9 million before lease incentives and imputed interest.
- Management said cash and marketable securities should fund operations for at least the next 12 months. It expects negative operating cash flow for the foreseeable future and said additional financing may be needed if plans or cash requirements change.
Material changes and unusual items
- Q2 R&D increased $5.3 million year over year, driven mainly by product development and personnel costs. Six-month R&D also included $1.1 million of collaboration fees with Protein Evolution; that collaboration ended March 31, 2022.
- Q2 SG&A declined $7.3 million year over year, mainly because prior-year expenses included Business Combination-related consulting, bonuses and stock-based compensation. For the first half, lower transaction-related and stock-based compensation was partly offset by added headcount and public-company costs.
- Other expense, net was $5.6 million in Q2 and $17.1 million in the first half, primarily due to realized and unrealized losses on fixed-income mutual funds. The first-half unrealized losses were $16.1 million; dividend income was $1.9 million.
- Warrant fair-value changes generated gains of $2.3 million in Q2 and $5.0 million in the first half. These are non-cash remeasurement items; warrant liabilities were $2.3 million at quarter-end.
- The former CEO left in February 2022; forfeited restricted stock units resulted in a $4.7 million first-half stock-compensation reversal. Patrick Schneider joined as President and COO in May, and the company appointed Vikram Bajaj to its board in June; its Chief Business Officer resigned in June.
Outlook, risks and contingencies
- The company planned an initial 2022 launch of its Platinum instrument for research use only, following a limited early-access program begun in 2021. It anticipated increased spending on sales and marketing, product development and inventory as launch approached; the filing provides no quantified revenue or earnings guidance.
- Management described its Carbon sample-preparation instrument, Platinum sequencing instrument, Quantum-Si Cloud software, reagent kits and chips as components of its platform. Commercial success, product development and adoption remain uncertain.
- Risks include execution and commercialization, dependence on third-party manufacturing and materials, competition, recruiting, inflation and other macroeconomic effects, and possible COVID-19-related delays or cost increases. The company said COVID-19 disruptions had not materially affected operations to date.
- Disclosure controls and procedures were deemed ineffective as of June 30, 2022 because of two material weaknesses: warrant accounting and financial reporting oversight, including a prior-period EPS presentation error involving a third-party provider. Management described remediation efforts, but gave no assurance they would succeed. Management nevertheless stated the current interim financial statements were fairly stated in all material respects.
- The company reported no material pending or threatened litigation and no material changes to previously disclosed risk factors. It has minimum annual intellectual-property license payments of approximately $0.2 million, with royalties expected if products generate revenue. No material adverse-effect litigation was disclosed.
Investor verification priorities
- Track whether the planned 2022 research-use-only launch occurred, and verify subsequent product availability, customer uptake and revenue generation.
- Monitor cash burn against the approximately $400.7 million of cash and marketable securities at quarter-end, including investment losses and lease commitments.
- Assess R&D and operating-expense growth, and distinguish recurring costs from warrant remeasurement, marketable-security losses and stock-compensation adjustments.
- Review progress in remediating the two material weaknesses and restoring effective disclosure controls.
- Check subsequent filings for changes in leadership, financing needs, product timelines, manufacturing capacity and commercialization risks.