Quantum-Si Inc

Previous wording

The following discussion and analysis provides information which management believes is relevant to an assessment and understanding of our condensed consolidated results of operations and financial condition. The discussion should be read in conjunction with (i) the unaudited Condensed Consolidated Financial Statements and notes thereto contained in this Quarterly Report on Form 10-Q, (ii) the Consolidated Financial Statements and notes thereto for the year ended December 31, 2023 contained in our Annual Report on Form 10-K for the year ended December 31, 2023, filed with the Securities and Exchange Commission (the “SEC”) on February 29, 2024 and (iii) our other public reports filed with the SEC. This discussion contains forward looking statements and involves numerous risks and uncertainties, including, but not limited to, those described in the “Risk Factors” section of our Annual Report on Form 10-K for the year ended December 31, 2023 and this Quarterly Report on Form 10-Q. Actual results may differ materially from those contained in any forward-looking statements. Unless the context otherwise requires, references to “we”, “us”, “our”, the “Company” or “Quantum-Si” are intended to mean the business and operations of Quantum-Si Incorporated and its consolidated subsidiaries. The unaudited Condensed Consolidated Financial Statements for the three months ended March 31, 2024 and 2023 present the financial position and results of operations of Quantum-Si Incorporated and its consolidated subsidiaries.

Current wording

The following discussion and analysis provides information which management believes is relevant to an assessment and understanding of our condensed consolidated results of operations and financial condition. The discussion should be read in conjunction with (i) the unaudited Condensed Consolidated Financial Statements and notes thereto contained in this Quarterly Report on Form 10-Q, (ii) the Consolidated Financial Statements and notes thereto for the year ended December 31, 2023 contained in our Annual Report on Form 10-K for the year ended December 31, 2023, filed with the Securities and Exchange Commission (the “SEC”) on February 29, 2024, and (iii) our other public reports filed with the SEC. This discussion contains forward looking statements and involves numerous risks and uncertainties, including, but not limited to, those described in the “Risk Factors” section of our Annual Report on Form 10-K for the year ended December 31, 2023 and our Quarterly Report on Form 10-Q for the quarter ended March 31, 2024. Actual results may differ materially from those contained in any forward-looking statements. Unless the context otherwise requires, references to “we”, “us”, “our”, the “Company” or “Quantum-Si” are intended to mean the business and operations of Quantum-Si Incorporated and its consolidated subsidiaries. The unaudited Condensed Consolidated Financial Statements for the three and six months ended June 30, 2024 and 2023, respectively, present the financial position and results of operations of Quantum-Si Incorporated and its consolidated subsidiaries.

Previous wording

We are an innovative life sciences company with the mission of transforming single-molecule analysis and democratizing its use by providing researchers and clinicians access to the proteome, the set of proteins expressed within a cell. We have developed a proprietary universal single-molecule detection platform that we are first applying to proteomics to enable NGPS, the ability to sequence proteins in a massively parallel fashion (rather than sequentially, one at a time), that can be used for the study of nucleic acids. Our platform was designed to offer an end-to-end workflow including both sample preparation and sequencing and is comprised of our Platinum® NGPS instrument, the Platinum Analysis Software service, and reagent kits and proprietary semiconductor chips for use with our Platinum® instrument. We began a controlled launch of the Platinum® instrument in December 2022 and subsequently initiated a full commercial launch at the end of the first quarter of 2024.

Current wording

We are an innovative life sciences company with the mission of transforming single-molecule analysis and democratizing its use by providing researchers and clinicians access to the proteome, the set of proteins expressed within a cell. We have developed a proprietary universal single-molecule detection platform that we are first applying to proteomics to enable Next-Generation Protein Sequencing (“NGPS”), the ability to sequence proteins in a massively parallel fashion (rather than sequentially, one at a time), that can be used for the study of nucleic acids. Our platform was designed to offer an end-to-end workflow including both sample preparation and sequencing and is comprised of our Platinum® NGPS instrument, the Platinum Analysis Software service, and reagent kits and proprietary semiconductor chips for use with our Platinum® instrument. We began a controlled launch of the Platinum® instrument in December 2022 and subsequently initiated a full commercial launch at the end of the first quarter of 2024.

Previous wording

Results of Operations for the Three Months Ended March 31, 2024 as Compared to the Three Months Ended March 31, 2023

Current wording

Results of Operations for the Three and Six Months Ended June 30, 2024 as Compared to the Three and Six Months Ended June 30, 2023

Previous wording

The following table presents the unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss for the three months ended March 31, 2024 and 2023 (dollars in thousands):

Current wording

The following table presents the Condensed Consolidated Statements of Operations and Comprehensive Loss for thethree and six months ended June 30, 2024 and 2023 (dollars in thousands):

Previous wording

Cost of revenue primarily consists of product and service costs including material costs, personnel costs and benefits, inbound and outbound freight, packaging, warranty replacement costs, royalty costs, facilities costs, depreciation and amortization expense, and inventory excess and obsolescence reserves.

Current wording

Cost of revenue primarily consists of product and service costs including material costs, personnel costs and benefits, inbound and outbound freight, packaging, warranty replacement costs, royalty costs, facilities costs, depreciation and amortization expense, and inventory write-offs.

Previous wording

Revenue, Cost of revenue and Gross profit for the three months ended March 31, 2024 and 2023 are as follows (dollars in thousands):

Current wording

Revenue, Cost of revenue and Gross profit for thethree and six months ended June 30, 2024 and 2023 are as follows (dollars in thousands):

Previous wording

Total revenue for the three months ended March 31, 2024 increased $0.2 million, or 79.9%, for the sale of Platinum® instruments, related reagent kits and service maintenance contracts as compared to the same period in 2023. Cost of revenue recognized for the three months ended March 31, 2024 increased $0.1 million, or 44.6%, as compared to the same period in 2023. Gross profit increased $0.1 million, or 116.9%, for the three months ended March 31, 2024. We began a controlled launch of the Platinum® instrument and started to take orders in December 2022. We subsequently began limited commercial shipments of Platinum® in January 2023 and subsequently initiated a full commercial launch at the end of the first quarter of 2024.

Current wording

We began a controlled launch of the Platinum® instrument and started to take orders in December 2022. We subsequently began limited commercial shipments of Platinum® in January 2023 and subsequently initiated a full commercial launch at the end of the first quarter of 2024.

Previous wording

Research and development expenses for the three months ended March 31, 2024 and 2023 are as follows (dollars in thousands):

Current wording

Research and development expenses for thethree and six months ended June 30, 2024 and 2023 are as follows (dollars in thousands):

Previous wording

Research and development expenses decreased by $6.1 million, or 33.4%, for the three months ended March 31, 2024 compared to the same period in 2023. This decrease was primarily due to a $4.0 million decrease in fabrication and outsourced services and a $1.7 million decrease in payroll and payroll-related costs, primarily driven by restructuring activities that occurred in 2023 and personnel costs that were capitalized for the three months ended March 31, 2024.

Current wording

Research and development expenses decreased by$1.5 million, or 9.2%, for the three months ended June 30, 2024, when compared to the same period in 2023. This decrease was primarily due to a $2.2 million decrease in payroll and payroll-related costs, primarily driven by restructuring activities that occurred in the three months ended June 30, 2023. The decrease was partially offset by an increase of $0.7 million in laboratory supplies expense.

Previous wording

Selling, general and administrative expenses for the three months ended March 31, 2024 and 2023 are as follows (dollars in thousands):

Current wording

Selling, general and administrative expenses for thethree and six months ended June 30, 2024 and 2023 are as follows (dollars in thousands):

Previous wording

Selling, general and administrative expenses increased $0.4 million, or 3.1%, for the three months ended March 31, 2024 as compared to the same period in 2023. This was primarily due to a $0.9 million increase in legal fees and a $0.4 million increase in marketing expenses incurred as part of our increased commercialization efforts, partially offset by $0.9 million net decrease in personnel costs and a $0.4 million decrease in insurance costs.

Current wording

Selling, general and administrative expenses increased $1.3 million, or 11.6%, for the three months ended June 30, 2024, when compared to the same period in 2023. This increase was primarily due to a $0.9 million increase in stock-based compensation expense, a $0.4 million increase in outsourced services, a $0.3 million increase in legal expense, a $0.3 million increase in tax expense and a $0.2 million increase in trade show and other marketing-related expenses. These increases were partially offset by a $0.9 million decrease in professional services and consulting fees and a $0.3 million decrease in insurance costs.

Previous wording

In 2024, dividend and interest income is derived primarily from fixed income securities and money market funds. In 2023, dividend and interest income was derived from mutual funds.

Current wording

In 2024, dividend and interest income is derived primarily from fixed income securities and money market mutual funds. In 2023, dividend and interest income was derived from mutual funds.

Previous wording

Dividend and interest income for the three months ended March 31, 2024 and 2023 are as follows (dollars in thousands):

Current wording

Dividend and interest income for thethree and six months ended June 30, 2024 and 2023 are as follows (dollars in thousands):

Previous wording

Dividend and interest income increased by $1.4 million, or 61.1%, for the three months ended March 31, 2024 as compared to the same period in 2023. The increase was a result of higher dividends and interest earned on invested balances in marketable securities.

Current wording

Dividend and interest income increased by$0.4 million and$1.8 million for thethree and six months ended June 30, 2024, respectively, as compared to the same periods in 2023. This increase was a result of higher dividends and interest earned on invested balances in marketable securities.

Previous wording

Gain on marketable securities, net, for the three months ended March 31, 2024 and 2023 is as follows (dollars in thousands):

Current wording

(Loss) gain on marketable securities, net, for thethree and six months ended June 30, 2024 and 2023 is as follows (dollars in thousands):

Previous wording

There was no Gain on marketable securities, net, for the three months ended March 31, 2024 as compared to a gain of $2.9 million for the same period in 2023. The prior year gains were primarily related to market adjustments of investments in marketable securities, which consisted of fixed income mutual funds.

Current wording

There was no (Loss) gain on marketable securities, net, for thethree and six months ended June 30, 2024 as compared to a loss of$1.2 million and a gain of $1.8 million for the same periods in 2023, respectively. The prior year losses and gains were primarily related to market adjustments of investments in marketable securities, which consisted of fixed income mutual funds.

Previous wording

Change in warrant liabilities for the three months ended March 31, 2024 and 2023 is as follows (dollars in thousands):

Current wording

Change in warrant liabilities for thethree and six months ended June 30, 2024 and 2023 is as follows (dollars in thousands):

Previous wording

The fair value of warrant liabilities decreased $0.1 million, or 18.4%, for the three months ended March 31, 2024 as compared to the same period in 2023. This decrease was primarily driven by the decrease in the underlying trading price of our Class A common stock experienced during the three months ended March 31, 2024.

Current wording

The change in fair value of warrant liabilities decreased $0.5 million for the three months ended June 30, 2024 compared to an increase of $0.3 million for the same period of 2023. The change in fair value of warrant liabilities decreased $0.8 million for the six months ended June 30, 2024 compared to a decrease of $0.1 million for the same period of 2023. These fluctuations were primarily driven by the change in the underlying trading price of our Class A common stock during the periods reported.

Previous wording

Other (expense) income, net, for the three months ended March 31, 2024 and 2023 are as follows (dollars in thousands):

Current wording

Other (expense) income, net, for thethree and six months ended June 30, 2024 and 2023 is as follows (dollars in thousands):

Previous wording

The following table presents a summary of our consolidated cash flows for operating, investing, and financing activities for the three months ended March 31, 2024 and 2023, (in thousands):

Current wording

The following table presents a summary of our consolidated cash flows for operating, investing, and financing activities for thesix months ended June 30, 2024 and 2023 (in thousands):

Previous wording

The net cash used in operating activities during the three months ended March 31, 2024, was $23.2 million compared to $28.7 million for the same period in 2023. This $5.5 million decrease was primarily driven by our operating results which resulted in a $3.1 million decrease in net cash used year-over-year as well as a decrease of $2.4 million in net cash used resulting from changes in operating assets and liabilities. Timing of cash receipts and cash payments in the ordinary course of business caused operating cash flow to fluctuate from period to period.

Current wording

The net cash used in operating activities during thesix months ended June 30, 2024 was $41.8 million compared to $51.6 million for the same period in 2023. This $9.8 million decrease in cash used was primarily driven by our operating results which resulted in a $4.4 million decrease in net cash used year-over-year as well as a decrease of $5.4 million in net cash used resulting from changes in operating assets and liabilities. Timing of cash receipts and cash payments in the ordinary course of business caused operating cash flow to fluctuate from period to period.

Previous wording

Net cash (used in) provided by investing activities

Current wording

Net cash provided by investing activities

Previous wording

During the three months ended March 31, 2024, net cash used in investing activities was $57.4 million compared to net cash provided by investing activities of $26.0 million for the same period in 2023. This change was due primarily due to an increase in purchases of marketable securities of $78.8 million as well as a $7.0 million decrease in proceeds from the sales of marketable securities.

Current wording

During thesix months ended June 30, 2024, net cash used in investing activities was $32.6 million compared to net cash provided by investing activities of $55.2 million for the same period in 2023. This change was primarily due to an increase in cash used for purchases of marketable securities of $208.8 million as wellas a $118.9 million increase in proceeds from the sales and maturities of marketable securities.

Previous wording

During the three months ended March 31, 2024, net cash used in financing activities was $0.1 million. The net cash used primarily consisted of deferred offering costs paid for the Shelf Registration Statement and the ATM Offering, both of which are defined and described below. There were no financing activities during the three months ended March 31, 2023.

Current wording

During thesix months ended June 30, 2024, net cash used in financing activities was $0.1 million. The net cash used primarily consisted of proceeds from the exercise of stock options offset by deferred offering costs paid for the Shelf Registration Statement and the ATM Offering, both of which are defined and described below. There were no financing activities during thesix months ended June 30, 2023.

Previous wording

As of March 31, 2024, we had cash and cash equivalents and investments in marketable securities totaling $235.4 million. Our future capital requirements may vary from those currently planned and will depend on various factors including the pace and success of product commercialization.

Current wording

As of June 30, 2024, we had cash and cash equivalents and investments in marketable securities totaling $218.1 million. Our future capital requirements may vary from those currently planned and will depend on various factors including the pace and success of product commercialization.

Previous wording

In August 2023, we also entered intoan Equity Distribution Agreement (“EDA”) with an outside placement agent (the “Agent”), under which we may, from time to time, sell shares of our Class A common stock under the ATM Offering. The Shelf Registration Statement includes a prospectus supplement covering the offering, issuance and sale of up to $75 million of our Class A common stock, from time to time, in at-the-market offerings through the Agent (the “ATM Offering”). The shares to be sold under the EDA may be issued and sold pursuant to the Shelf Registration Statement. The EDA also provides that the Agent will be entitled to compensation for its services in an amount up to 3.0% of the gross proceeds from the sales of shares sold through the Agent under the EDA. We have no obligation to sell any shares under the EDA and may at any time suspend solicitation and offers under the EDA. To date, we have not issued or sold any shares of our Class A common stock under the ATM Offering.

Current wording

In August 2023, we also entered into an Equity Distribution Agreement (“EDA”) with an outside placement agent (the “Agent”), under which we may, from time to time, sell shares of our Class A common stock under the ATM Offering (as defined below). The Shelf Registration Statement includes a prospectus supplement covering the offering, issuance and sale of up to $75 million of our Class A common stock, from time to time, in at-the-market offerings through the Agent (the “ATM Offering”). The shares to be sold under the EDA may be issued and sold pursuant to the Shelf Registration Statement. The EDA also provides that the Agent will be entitled to compensation for its services in an amount up to 3.0% of the gross proceeds from the sales of shares sold through the Agent under the EDA. We have no obligation to sell any shares under the EDA and may at any time suspend solicitation and offers under the EDA. To date, we have not issued or sold any shares of our Class A common stock under the ATM Offering.

Previous wording

We lease certain facilities and equipment under non-cancellable lease agreements that expire at various dates through 2032. As of March 31, 2024, the future payments, before adjustments for tenant incentives, under leases was approximately $30.0 million.

Current wording

We lease certain facilities and equipment under non-cancellable lease agreements that expire at various dates through 2032. As of June 30, 2024, future lease payments, before adjustments for tenant incentives, was approximately$28.9 million.

Previous wording

We license certain intellectual property, some of which may be utilized in our current or future product offerings. To preserve the right to use such intellectual property, we are required to make annual minimum fixed payments totaling approximately $0.1 million as well as royalties based on net sales if the royalties exceed annual minimum fixed payments.

Current wording

We license certain intellectual property, some of which may be utilized in our current or future product offerings. Topreserve the right to use such intellectual property, we are required to make annual minimum fixed payments totaling approximately $0.1 million as well as royalties based on net sales if the royalties exceed annual minimum fixed payments.