RAPID MICRO BIOSYSTEMS INC

Previous wording

We have incurred significant losses since our inception. For the three months ended June 30, 2024, we incurred a net loss of $12.6 million. As of June 30, 2024, we had an accumulated deficit of $454.3 million. Based on our enterprise-wide review of opportunities to realize operational efficiencies, we are implementing certain cost-savings actions including a reduction in our current workforce, the closure of open and planned positions and reductions in other non-headcount-related expenses across the business (the “Operational Efficiency Program”). However, in future periods, our operating expenses may continue to increase as we grow our business. Since our inception, we have financed our operations primarily from private placements of equity, the incurrence of indebtedness, our initial public offering, and to a lesser extent, revenue derived from our Growth Direct platform and non-commercial contracts. We have devoted substantially all of our resources to the development and commercialization of our Growth Direct platform and to development activities related to advancing and expanding our technological capabilities. While we are implementing our Operational Efficiency Program with the goal of achieving positive cash flow without additional financing, there can be no assurance that we will attain this goal. Our Operational Efficiency Program and intention to reach positive cash flow are based on our expectations of business performance that are generally consistent with our historical performance, including with respect to revenue and gross margins, which may not be replicated in future periods. Our goal also depends on our ability to realize additional cost savings that we believe are reasonably achievable, but are not guaranteed. We will need to generate significant additional revenue, significantly improve our gross margin and/or further reduce costs to achieve positive cash flow and profitability, and even if achieved, we cannot be sure that we will sustain positive cash flow and profitability for any substantial period of time. While our goal to achieve positive cash flow is underpinned by our recent and historical performance, such performance is not necessarily indicative of our future results.

Current wording

We have incurred significant losses since our inception. For the three months ended September 30, 2024, we incurred a net loss of $11.3 million. As of September 30, 2024, we had an accumulated deficit of $465.6 million. In July 2024, based on our enterprise-wide review of opportunities to realize operational efficiencies, we implemented certain cost-savings actions including a reduction in our workforce, the closure of open and planned positions and reductions in other non-headcount-related expenses across the business (the “Operational Efficiency Program”). However, in future periods, our operating expenses may continue to increase as we grow our business. Since our inception, we have financed our operations primarily from private placements of equity, the incurrence of indebtedness, our initial public offering, and to a lesser extent, revenue derived from our Growth Direct platform and non-commercial contracts. We have devoted substantially all of our resources to the development and commercialization of our Growth Direct platform and to development activities related to advancing and expanding our technological capabilities. While we implemented our Operational Efficiency Program with the goal of achieving positive cash flow without additional financing, there can be no assurance that we will attain this goal. Our Operational Efficiency Program and intention to reach positive cash flow are based on our expectations of business performance that are generally consistent with our historical performance, including with respect to revenue and gross margins, which may not be replicated in future periods. Our goal also depends on our ability to realize additional cost savings that we believe are reasonably achievable, but are not guaranteed. We will need to generate significant additional revenue, significantly improve our gross margin and/or further reduce costs to achieve positive cash flow and profitability, and even if achieved, we cannot be sure that we will sustain positive cash flow and profitability for any substantial period of time. While our goal to achieve positive cash flow is underpinned by our recent and historical performance, such performance is not necessarily indicative of our future results.

Previous wording

Our quarterly and annual operating results have fluctuated significantly in the past and may fluctuate significantly in the future, which makes it difficult for us to predict our future operating results. These fluctuations may occur due to a variety of factors, many of which are outside of our control, including, but not limited to:

Current wording

Our quarterly and annual operating results have fluctuated significantly in the past and may fluctuate significantly in the future, which makes it difficult for us to predict our future operating results. For example, we have recently experienced positive trends in our gross margins, improving from (27)% for the three months ended September 30, 2023 to 8% for the three months ended September 30, 2024, and from (33)% for the nine months ended September 30, 2023 to (5)% for the nine months ended September 30, 2024. Expansion in gross margins in future periods may not be linear and may be subject to variability from period to period. These fluctuations may occur due to a variety of factors, many of which are outside of our control, including, but not limited to:

Previous wording

We expect that our efforts to maintain our position in the MQC industry, including improving our Growth Direct platform and developing new products, will continue to require significant resources. Based upon our current operating plan, we believe our existing cash, cash equivalents, and investments as of June 30, 2024 of approximately $70 million (rounded), and anticipated cash flow from operations, will enable us to fund our operating expenses and capital expenditure requirements for at least twelve months following the date these consolidated financial statements were issued. This estimate and our expectation regarding the sufficiency of our existing cash, cash equivalents, and investments are based on assumptions that may prove to be wrong, and we could use our available capital resources sooner than we currently expect. Until such time, if ever, as we can generate sufficient cashflow, we may finance our cash needs through a combination of equity offerings and debt financings or other sources. We do not currently have any committed external source of funds. While we are implementing our Operational Efficiency Program with the goal of achieving positive cash flow without additional financing, there can be no assurance that we will attain this goal. Our Operational Efficiency Program and intention to reach positive cash flow are based on our expectations of business performance that are generally consistent with our historical performance, including with respect to revenue and gross margins, which may not be replicated in future periods. Our goal also depends on our ability to realize additional cost savings that we believe are reasonably achievable, but are not guaranteed. In addition, we may selectively and opportunistically seek additional capital due to favorable market conditions or strategic considerations, even if we believe that we have sufficient funds for our current or future operating plans.

Current wording

We expect that our efforts to maintain our position in the MQC industry, including improving our Growth Direct platform and developing new products, will continue to require significant resources. Based upon our current operating plan, we believe our existing cash, cash equivalents, and short-term investments as of September 30, 2024 of $60.8 million, and anticipated cash flow from operations, will enable us to fund our operating expenses and capital expenditure requirements for at least twelve months following the date these consolidated financial statements were issued. This estimate and our expectation regarding the sufficiency of our existing cash, cash equivalents, and investments are based on assumptions that may prove to be wrong, and we could use our available capital resources sooner than we currently expect. Until such time, if ever, as we can generate sufficient cash flow, we may finance our cash needs through a combination of equity offerings and debt financings or other sources. We do not currently have any committed external source of funds.

Previous wording

Our future profitability will depend on our ability to successfully execute and maintain a sustainable business model and generate continuous streams of revenue. Our business model is premised on our position as a leader in automated MQC testing and the competitive advantages that such position creates. Our Growth Direct platform, among other things, is designed to reduce the amount of time for MQC testing and the opportunity for human error in what we believe is a more cost-effective manner than traditional MQC testing. However, if competitors develop and commercialize an automated MQC testing platform and are able to obtain traction with customers, we may not be able to maintain our lead position and execute our business strategy. If we are unable to expand or continue to expand our customers in growing areas of drug manufacturing, such as biologics and cell and gene therapies, continue to grow market adoption of our Growth Direct platform, and maintain our position as the industry leader in automated MQC testing, our business, prospects, financial condition and results of operation could be adversely affected.

Current wording

Our future profitability will depend on our ability to successfully execute and maintain a sustainable business model and generate continuous streams of revenue. Our business model is premised on our position as a leader in automated MQC testing and the competitive advantages that such position creates. Our Growth Direct platform, among other things, is designed to reduce the amount of time for MQC testing and the opportunity for human error in what we believe is a more cost-effective manner than traditional MQC testing. However, if competitors develop and commercialize an automated MQC testing platform and are able to obtain traction with customers, we may not be able to maintain our lead position and execute our business strategy. If we are unable to expand or continue to expand our customers in growing areas of drug manufacturing, such as biologics and cell and gene therapies, continue to grow market adoption of our

Previous wording

Even if we are successful in developing new products, it will require us to make significant additional investments in marketing and selling resources in order to commercialize any such products. For example, we recently made generally available for commercial sale our Rapid Sterility application for use on the Growth Direct system, for which we have expended significant time and resources to develop andplaced our first Rapid Sterility system with an existing customer. We continue to scale our manufacturing capabilities for Rapid Sterility in the second half of 2024. In addition, there can be no assurance that we will successfully commercialize this new sterility test, scale our manufacturing capabilities to support customer demand or that this product will achieve broad acceptance by customers. Furthermore, because this is a new application, we may encounter technical or other product challenges as customers adopt and implement Growth Direct Rapid Sterility into their workflows. We may be unsuccessful in commercializing new products that we develop, which could adversely affect our business, financial condition, results of operations and prospects.

Current wording

Even if we are successful in developing new products, it will require us to make significant additional investments in marketing and selling resources in order to commercialize any such products. For example, we recently made generally available for commercial sale our Rapid Sterility application for use on the Growth Direct system, for which we have expended significant time and resources to develop. Weplaced our first Rapid Sterility system with an existing customer in the second quarter of 2024. We plan to continue to scale our manufacturing capabilities for the Rapid Sterility application through the end of 2024. However, there can be no assurance that we will successfully commercialize this new sterility test, scale our manufacturing capabilities to support customer demand or that this product will achieve broad acceptance by customers. Furthermore, because this is a new application, we may encounter technical or other product challenges as customers adopt and implement Growth Direct Rapid Sterility into their workflows. We may be unsuccessful in commercializing new products that we develop, which could adversely affect our business, financial condition, results of operations and prospects.

Previous wording

We are implementing our Operational Efficiency Program, which includes a reduction in our current workforce, the closure of open and planned positions and reductions in other non-headcount-related expenses across the business. While the goal of our Operational Efficiency Program is to achieve positive cash flow by the end of 2027 without additional financing, there can be no assurance that we will attain this goal. Our Operational Efficiency Program and intention to reach positive cash flow are based on our expectations of business performance that are generally consistent with our historical performance, including with respect to revenue and gross margins, which may not be replicated in future periods. Our goal also depends on our ability to realize additional cost savings that we believe are reasonably achievable, but are not guaranteed.

Current wording

While the goal of our Operational Efficiency Program is to achieve positive cash flow by the end of 2027 without additional financing, there can be no assurance that we will attain this goal. Our Operational Efficiency Program and intention to reach positive cash flow are based on our expectations of business performance that are generally consistent with our historical performance, including with respect to revenue and gross margins, which may not be replicated in future periods. Our goal also depends on our ability to realize additional cost savings that we believe are reasonably achievable, but are not guaranteed.

Previous wording

We are highly dependent on our management and directors, including our Chief Executive Officer, Robert Spignesi, among others. Due to the specialized knowledge each of our officers and key employees possesses with respect to our products and services and our operations, the loss of service of any of our officers or directors could delay or prevent the successful sales and expansion of our platform. We do not carry key person life insurance on our Chief Executive Officer or our other officers or directors. In general, the employment arrangements that we have with our executive officers do not prevent them from terminating their employment with us at any time.

Current wording

We are highly dependent on our management and directors, including our Chief Executive Officer, Robert Spignesi, among others. Due to the specialized knowledge each of our officers and key employees possesses with respect to our products and services and our operations, the loss of service of any of our officers or directors could delay or prevent successful sales and the expansion of our platform. We do not carry key person life insurance on our Chief Executive Officer or our other officers or directors. In general, the employment arrangements that we have with our executive officers do not prevent them from terminating their employment with us at any time.

Previous wording

Our Operational Efficiency Program, which includes a reduction in our workforce and the closure of open and planned positions, is intended to reduce our use of cash for operating activities with the goal of enabling us to achieve positive cash flow without additional financing. This action, and any future related actions or announcements, may make it increasingly difficult for us to hire and retain our executive officers, key employees, consultants and advisors. If we are unable to attract qualified personnel and retain our current employees, our ability to develop and sell our products could be limited and our business and customer relationships could be materially harmed.

Current wording

Our Operational Efficiency Program that we implemented in July 2024 includes a reduction in our workforce and the closure of open and planned positions, and is intended to reduce our use of cash for operating activities with the goal of enabling us to achieve positive cash flow without additional financing. This action, and any future related actions or announcements, may make it increasingly difficult for us to hire and retain our executive officers, key employees, consultants and advisors. If we are unable to attract qualified personnel and retain our current employees, our ability to develop and sell our products could be limited and our business and customer relationships could be materially harmed.

Previous wording

The initial period during which we were required to regain compliance with the Bid Price Requirement expired on July 31, 2024. Because we did not regain compliance with the requirement during the initial period, we will transfer the listing of our Class A common stock to the Nasdaq Capital Market, effective at the opening of business on August 5, 2024, in order to secure an additional 180 calendar day compliance period ending on January 27, 2025. As a condition of securing such additional compliance period, we informed Nasdaq that we intend to regain compliance with the Bid Price Requirement during the second compliance period, which may include the implementation of a reverse stock split if necessary. We intend to monitor the closing bid price of our Class A common stock and take such reasonable measures to regain compliance with the Bid Price Requirement. However, there can be no assurance that we will be able to regain compliance with the Bid Price Requirement even during the second compliance period, nor can there be any assurance that we will receive the necessary approvals from our stockholders to effect a reverse stock split. If we do not cure the deficiency during the additional compliance period and regain compliance with the Bid Price Requirement, Nasdaq will provide written notice that our common stock will be subject to delisting. In the event of such notification, we may appeal Nasdaq’s delisting determination. However, there can be no assurance that, if we receive a delisting notice and appeal the delisting determination by Nasdaq, such appeal would be successful. As a result, there can be no assurance that we will be able to continue the listing of our Class A common stock on Nasdaq.

Current wording

The initial period during which we were required to regain compliance with the Bid Price Requirement expired on July 31, 2024. Because we did not regain compliance with the requirement during the initial period, we transferred the listing of our Class A common stock to the Nasdaq Capital Market, in order to secure an additional 180 calendar day compliance period ending on January 27, 2025. As a condition of securing such additional compliance period, we informed Nasdaq that we intend to regain compliance with the Bid Price Requirement during the second compliance period, which may include the implementation of a reverse stock split if necessary. We intend to monitor the closing bid price of our Class A common stock and take such reasonable measures to regain compliance with the Bid Price Requirement. However, there can be no assurance that we will be able to regain compliance with the Bid Price Requirement even during the second compliance period, nor can there be any assurance that we will receive the necessary approvals from our stockholders to effect a reverse stock split. If implemented, a reverse stock split may have undesirable consequences. For example, a reverse stock split would have the effect of combining the outstanding shares of our Class A common stock into a smaller number of outstanding shares, which may adversely affect the liquidity and trading volume in our Class A common stock. In addition, a reverse stock split may be viewed negatively by some investors, analysts and other stock market participants, and some companies that have implemented reverse stock splits have experienced subsequent declines in their share price and corresponding market capitalization. If we do not cure the deficiency during the additional compliance period and regain compliance with the Bid Price Requirement, Nasdaq will provide written notice that our common stock will be subject to delisting. In the event of such notification, we may appeal Nasdaq’s delisting determination. However, there can be no assurance that, if we receive a delisting notice and appeal the delisting determination by Nasdaq, such appeal would be successful. As a result, there can be no assurance that we will be able to continue the listing of our Class A common stock on Nasdaq.

Previous wording

Our ability to use our net operating losses and research and development tax credits to offset future taxable income or income tax liabilities are subject to certain limitations.

Current wording

Our ability to use our net operating losses and research and development tax credits to offset future taxable income or income tax liabilities is subject to certain limitations.

Previous wording

In general, under Sections 382 and 383 of the Internal Revenue Code of 1986, as amended, or the Code, a corporation that undergoes an “ownership change,” generally defined as a greater than 50 percentage point change by value in its equity ownership by one or more stockholders or groups of stockholders owning at least 5% of the corporation’s stock over a rolling three-year period, is subject to limitations on its ability to utilize its pre-ownership change NOLs and tax credits to offset future taxable income or income tax liabilities for U.S. federal income tax purposes. Similar rules may apply under state tax laws. The Company has completed a Section 382 study through July 31, 2020 to assess the limitations on use of NOLs and research and development credits due to changes in control. The study determined that ownership changes materially limited the NOL carryforwards and research and development tax credits available to offset future tax liabilities and the limitations have been reflected in the amounts of NOL carryforwards, research and development tax credits, and deferred tax assets disclosed above. The Company has not completed a Section 382 study for post July 31,

Current wording

In general, under Sections 382 and 383 of the Internal Revenue Code of 1986, as amended, or the Code, a corporation that undergoes an “ownership change,” generally defined as a greater than 50 percentage point change by value in its equity ownership by one or more stockholders or groups of stockholders owning at least 5% of the corporation’s stock over a rolling three-year period, is subject to limitations on its ability to utilize its pre-ownership change NOLs and tax credits to offset future taxable income or income tax liabilities for U.S. federal income tax purposes. Similar rules may apply under state tax laws. The Company has completed a Section 382 study through July 31, 2020 to assess the limitations on use of NOLs and research and development credits due to changes in control. The study determined that ownership changes materially limited the NOL carryforwards and research and development tax credits available to offset future tax liabilities and the limitations have been reflected in the amounts of NOL carryforwards, research and development tax credits, and deferred tax assets disclosed above. The Company has not completed a Section 382 study for post July 31, 2020 transactions which could create an additional limitation although materially all of the current federal NOL carryforwards can be carried forward indefinitely. We have in the past experienced, and we may in the future experience ownership changes, some of which are outside our control. For these reasons, we are not able to utilize a material portion of the NOLs and tax credits even if we attain profitability.