Quantum-Si Incorporated — Q2 2021 Form 10-Q
Reporting period: Three and six months ended June 30, 2021. The business combination with HighCape closed on June 10, 2021; prior-period financial results are those of Legacy Quantum-Si. Amounts below are in U.S. dollars unless noted.
Business context and reporting period
Quantum-Si is a pre-commercial life sciences technology company developing a single-molecule platform for next-generation protein sequencing. Its planned offering combines the Carbon sample-preparation instrument, Platinum sequencing instrument, Quantum-Si Cloud software, and reagent kits and chips. The company reported no revenue since inception.
Financial performance and liquidity
| Metric | Q2 2021 | Q2 2020 | Six months 2021 | Six months 2020 |
|---|---|---|---|---|
| Revenue | None | None | None | None |
| Research and development expense | $13.1 million | $6.6 million | $21.1 million | $14.5 million |
| General and administrative expense | $17.8 million | $1.3 million | $21.2 million | $3.5 million |
| Sales and marketing expense | $1.2 million | $0.3 million | $1.6 million | $0.6 million |
| Net loss | $35.7 million | $8.2 million | $47.5 million | $18.5 million |
| Adjusted EBITDA (non-GAAP) | $(14.6) million | $(7.5) million | $(25.7) million | $(17.0) million |
| Operating cash flow | Not separately provided | Not separately provided | $(29.9) million | $(17.2) million |
Gross margin and other revenue-based margins are not meaningful because the company had no revenue. Cash and cash equivalents were $521.9 million at June 30, 2021, including $518.1 million in money market accounts; current assets were $524.1 million and current liabilities were $7.9 million. Total liabilities were $23.0 million, including $15.2 million of warrant liabilities. The company had no notes payable at quarter-end after repaying its $1.7 million PPP loan in June.
For the six months, investing cash outflow was $1.2 million and financing cash inflow was $516.1 million, primarily from the business combination and option exercises. Cash increased by $485.0 million from year-end 2020.
Material changes versus the prior comparable period
- Q2 operating expenses rose to $32.2 million from $8.2 million; six-month operating expenses increased 136% to $43.9 million. The company attributed much of the increase to higher headcount, stock-based compensation, transaction-related costs, and public-company operating costs.
- Q2 and six-month net losses included a $3.5 million non-cash loss from remeasuring warrant liabilities, which arose in connection with the business combination.
- Six-month stock-based compensation expense was $10.4 million, compared with $1.1 million a year earlier.
- The June 10 business combination brought approximately $511.2 million of net proceeds, converted preferred stock into Class A and Class B common stock, and left the company with $503.9 million of stockholders’ equity versus a $159.7 million deficit at December 31, 2020.
Outlook, risks, and unusual items
- Management planned early-access limited release in 2021 and research-use-only commercialization in 2022. This is a product timeline, not quantified financial guidance.
- Management expected cash resources to fund operations for at least 12 months and anticipated continued negative operating cash flows and substantial development spending. It expected increased spending ahead of commercialization, including for sales and marketing, development, and inventory.
- Key risks include product development and launch execution, market adoption, manufacturing and supplier constraints, competition, recruiting and retention, and potential COVID-19-related delays or supply disruption. The company cautioned that commercialization and revenue generation are uncertain.
- Q2 G&A included a $3.8 million payment to a transaction service provider and a $0.7 million write-off of related-party assets following termination of the prior technology services arrangement. Business-combination costs expensed in the quarter and six-month period totaled $7.4 million.
- The company recorded $15.2 million of warrant liabilities and stated that future fair-value changes may create material non-cash earnings volatility. It also disclosed two material weaknesses in internal control over financial reporting: insufficient finance oversight of outsourced accounting and incorrect prior warrant accounting. Management concluded disclosure controls were ineffective as of June 30 and was implementing remediation.
- Other commitments included a San Diego facility lease with $9.2 million of future minimum payments and annual minimum intellectual-property license payments of approximately $0.2 million, with additional royalties anticipated after commercialization. The company reported no material ongoing litigation.
- Following the combination, Class B shares carried 20 votes per share; the founder held approximately 80.4% of combined voting power, making the company a controlled company under Nasdaq rules.
Important facts for investors to verify
- Whether early-access milestones and the planned 2022 research-use-only launch remain achievable, and what evidence supports product performance and customer demand.
- Cash burn, hiring and commercialization spending, and management’s stated liquidity runway as product development progresses.
- Progress in remediating the disclosed material weaknesses and whether future filings report effective controls.
- Warrant-liability valuation changes, potential dilution from warrants, options, and restricted stock units, and the implications of the dual-class voting structure.
- Manufacturing readiness, supplier capacity, and the effects of COVID-19 or other disruptions on development and launch timelines.