Quantum-Si Incorporated — Q1 2022 Form 10-Q
Business context and reporting period
Unaudited results cover the three months ended March 31, 2022, compared with Q1 2021. Quantum-Si is a pre-commercial life sciences company developing a single-molecule detection platform for next-generation protein sequencing, including the Platinum instrument, Carbon sample-preparation system, software, chips and reagents. The company reported no revenue since inception.
Financial results and liquidity
| Metric | Q1 2022 | Q1 2021 or comparison |
|---|---|---|
| Revenue | None reported | None reported |
| Research and development expense | $18.8 million | $8.0 million; up 135.5% |
| Selling, general and administrative expense | $8.4 million | $3.8 million; up 119.8% |
| Total operating expenses | $27.1 million | $11.8 million; up 130.4% |
| Net loss | $35.2 million | $11.8 million; increased 198.6% |
| Basic and diluted loss per share | $0.25 | $2.13 |
| Adjusted EBITDA (non-GAAP) | Loss of $27.4 million | Loss of $11.1 million |
| Cash used in operating activities | $23.2 million | $10.7 million |
At March 31, cash and cash equivalents were $35.0 million and marketable securities were $399.8 million, totaling approximately $434.8 million. Current assets were $439.8 million versus current liabilities of $14.0 million. Total liabilities were $34.3 million, including $16.4 million of operating lease liabilities and $4.6 million of warrant liabilities; the filing reports no borrowings or conventional debt. Stockholders’ equity was $441.9 million.
Investing activities provided $21.7 million, mainly from $25.0 million of marketable-security sales, partly offset by capital spending. Financing activities provided $0.7 million, principally from option exercises. The company stated that available cash and marketable securities were expected to fund operations for at least 12 months.
Material changes and unusual items
- Operating expenses rose as the company expanded research and development, increased headcount and prepared for commercialization. R&D expense included $1.1 million of Protein Evolution collaboration fees and higher product-development costs.
- Other expense, net was $11.5 million, primarily from unrealized losses on fixed-income mutual funds; the filing also reports $50,000 of realized losses. Dividend income was $855,000. A $2.6 million gain from the decline in warrant-liability fair value partly offset the loss.
- Stock-based compensation was a net credit of $714,000, including a $4.7 million reversal after former CEO John Stark forfeited restricted stock units. The company paid him approximately $1.1 million under his separation agreement during the quarter.
- Operating lease right-of-use assets increased to $15.0 million from $7.0 million at year-end. Future minimum payments on leases existing at March 31 were $35.0 million before tenant incentives. A further Branford, Connecticut lease signed in April has approximately $1.2 million of future minimum payments.
- Class A shares outstanding increased to 119.0 million from 118.0 million at year-end; Class B shares remained at 19.9 million. Potential shares from options, RSUs and warrants were excluded from diluted EPS as anti-dilutive.
Outlook, management commentary and risks
Management planned an initial Platinum instrument launch for research use only in the second half of 2022, following an early-access program begun in 2021. It expected spending to accelerate ahead of launch for product development, sales and marketing, and inventory. Management cautioned that commercialization is uncertain and that the company expects negative operating cash flows for the foreseeable future.
Risks highlighted include product-development and commercialization execution, competition, supply-chain and hiring disruption, COVID-19 and macroeconomic effects, future financing needs, and dependence on third-party manufacturing and licensed intellectual property. The company noted that COVID-19 had not materially harmed operations to date, but future effects remained uncertain. Fixed annual minimum intellectual-property payments were approximately $220,000, with royalties expected once products generate revenue.
The CEO departed in February 2022; Executive Chairman Jonathan Rothberg became Interim CEO while the company searched for a replacement. The filing also reports two material weaknesses in internal control over financial reporting, including warrant accounting and financial-close review. Disclosure controls were deemed ineffective as of March 31, 2022; remediation was underway, but the company stated it could not assure the plan would be effective.
Important facts for investors to verify
- Whether the planned second-half 2022 research-use-only launch occurred, and whether instruments, workflows and customer adoption met management’s expectations.
- Cash burn and investment performance: the quarter’s $11.5 million unrealized investment loss was substantial relative to operating cash use, and most liquid resources were held in fixed-income mutual funds at one financial institution.
- Progress in remediating the disclosed material weaknesses and any subsequent control findings or financial-statement corrections.
- Commercialization spending, lease commitments and other obligations, and whether the stated liquidity runway remains adequate as launch costs increase.
- Resolution and financial impact of the former CEO separation, the terminated related-party Protein Evolution collaboration, and the Majelac acquisition’s remaining consideration and milestones.