Quantum-Si Inc [QSI] Filings

10-Q 1 qsi-20240930.htm 10-Q qsi-20240930

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_____________________________________________________________

FORM 10-Q

(Mark One)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2024


o			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ________ to _________

Commission File Number: 001-39486

QUANTUM-SI INCORPORATED

(Exact name of registrant as specified in its charter)

_____________________________________________________________


Delaware						85-1388175
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)


29 Business Park Drive
Branford, Connecticut						06405
(Address of principal executive offices)						(Zip Code)

(866) 688-7374

(Registrant’s telephone number, including area code)

Not applicable

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading

Symbol(s)

Name of each exchange on which registered

Class A common stock, $0.0001 per share

QSI

The Nasdaq Stock Market LLC

Redeemable warrants, each whole warrant exercisable for one share of Class A common stock, each at an exercise price of $11.50 per share

QSIAW

The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

Accelerated filer

Non-accelerated filer

☒

Smaller reporting company

☒

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of November 7, 2024, the registrant had 122,775,352 shares of Class A common stock outstanding and 19,937,500 shares of Class B common stock outstanding.

QUANTUM-SI INCORPORATED

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		Page
	Cautionary Note Regarding Forward-Looking Statements	3

Part I.	Financial Information	4
Item 1.	Financial Statements	4
	Condensed Consolidated Balance Sheets as of September 30, 2024 , and December 31, 2023 (unaudited)	4
	Condensed Consolidated Statements of Operations and Comprehensive Loss for the three and n ine months ended September 30 , 2024 and 2023 (unaudited)	5
	Condensed Consolidated Statements of Changes in Stockholders’ Equity for the three and nine months ended September 30 , 2024 and 2023 (unaudited)	6
	Condensed Consolidated Statements of Cash Flows for the n i ne months ended September 30, 2024 and 2023 (unaudited)	7
	Notes to Condensed Consolidated Financial Statements (unaudited)	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	26
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	33
Item 4.	Controls and Procedures	34

Part II.	Other Information	35
Item 1.	Legal Proceedings	35
Item 1A.	Risk Factors	35
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	35
Item 3.	Defaults Upon Senior Securities	35
Item 4.	Mine Safety Disclosures	35
Item 5.	Other Information	36
Item 6.	Exhibits	36
Signatures		37

In this Quarterly Report on Form 10-Q, the terms “we”, “us”, “our”, the “Company” or “Quantum-Si” mean Quantum-Si Incorporated and our subsidiaries. Quantum-Si Incorporated was incorporated in Delaware on June 10, 2020.

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), that relate to future events, our future operations or financial performance, or our plans, strategies and prospects. These statements are based on the beliefs and assumptions of our management team. Although we believe that our plans, intentions and expectations reflected in or suggested by these forward-looking statements are reasonable, we cannot assure that we will achieve or realize these plans, intentions or expectations. Forward-looking statements are inherently subject to risks, uncertainties and assumptions. Generally, statements that are not historical facts, including statements concerning possible or assumed future actions, business strategies, events or performance, are forward-looking statements. The actual results may differ from its expectations, estimates, and projections and, consequently, you should not rely on these forward-looking statements as predictions of future events. Words such as “expect,” “estimate,” “project,” “budget,” “forecast,” “anticipate,” “intend,” “plan,” “may,” “will,” “could,” “should,” “believes,” “predicts,” “potential,” “continue,” and similar expressions (or the negative versions of such words or expressions) are intended to identify such forward-looking statements. These forward-looking statements include, without limitation, our expectations with respect to future performance and development and commercialization of products and services. The forward-looking statements are based on projections prepared by, and are the responsibility of, management and involve significant risks and uncertainties that could cause the actual results to differ materially from those discussed in the forward-looking statements. Most of these factors are outside our control and are difficult to predict. Forward-looking statements contained in this Quarterly Report on Form 10-Q include, but are not limited to, statements about:

•the impact of international conflicts, pandemics or epidemics on our business;

•the inability to maintain the listing of our Class A common stock on The Nasdaq Stock Market LLC;

•changes in applicable laws or regulations;

•our ability to raise financing in the future;

•the success, cost and timing of our product development and commercialization activities;

•the commercialization and adoption of our existing products, including the Platinum® protein sequencing instrument, and the success of any product we may offer in the future;

•our ability to obtain and maintain regulatory approval for our products, and any related restrictions and limitations of any approved product;

•our ability to identify, in-license or acquire additional technology;

•our ability to maintain our existing lease, license, manufacture and supply agreements;

•our ability to compete with other companies currently marketing or engaged in the development or commercialization of products and services that serve customers engaged in proteomic analysis, many of which have greater financial and marketing resources than us;

•the size and growth potential of the markets for our products and services, and our ability to serve those markets once commercialized, either alone or in partnership with others;

•our estimates regarding future expenses, future revenue, capital requirements and needs for additional financing; and

•our financial performance.

These forward-looking statements are based on information available as of the date of this report, and current expectations, forecasts and assumptions, and involve a number of judgments, risks and uncertainties. Important factors could cause actual results, performance or achievements to differ materially from those indicated or implied by forward-looking statements such as those described in Part I, Item 1A, “Risk Factors” of our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, in Part II, Item 1A of our Quarterly Report on Form 10-Q for the quarter ended March 31, 2024 and this Quarterly Report on Form 10-Q, and in other filings that we make with the Securities and Exchange Commission. The risks described under the heading “Risk Factors” are not exhaustive. New risk factors emerge from time to time, and it is not possible to predict all such risk factors, nor can we assess the impact of all such risk factors on our business or the extent to which any factor or combination of factors may cause actual results to differ materially from those contained in any forward-looking statements. Forward-looking statements are not guarantees of performance. You should not put undue reliance on these statements, which speak only as of the date hereof. All forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the foregoing cautionary statements. We undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

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PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

QUANTUM-SI INCORPORATED

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share and par value amounts)

(unaudited)


	September 30, 2024		December 31, 2023
Assets
Current assets:
Cash and cash equivalents	$	42,268	$	133,860
Marketable securities	154,076		123,876
Accounts receivable, net of allowance of $0 and $0, respectively	1,022		368
Inventory	4,091		3,945
Prepaid expenses and other current assets	4,371		4,261
Total current assets	205,828		266,310
Property and equipment, net	16,254		16,275
Internally developed software, net	—		532
Operating lease right-of-use assets	13,677		14,438
Other assets	695		695
Total assets	$	236,454	$	298,250
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	2,153	$	1,766
Accrued payroll and payroll-related costs	4,603		4,943
Accrued contracted services	2,133		1,519
Accrued expenses and other current liabilities	2,839		1,815
Current portion of operating lease liabilities	3,614		1,566
Total current liabilities	15,342		11,609
Warrant liabilities	357		1,274
Operating lease liabilities	10,211		13,737
Other long-term liabilities	24		11
Total liabilities	25,934		26,631

Commitments and contingencies (Note 15)

Stockholders’ equity
Class A Common stock, $0.0001 par value; 600,000,000 shares authorized as of September 30, 2024 and December 31, 2023; 122,775,352 and 121,832,417 shares issued and outstanding as of September 30, 2024 and December 31, 2023, respectively	12		12
Class B Common stock, $0.0001 par value; 27,000,000 shares authorized as of September 30, 2024 and December 31, 2023; 19,937,500 shares issued and outstanding as of September 30, 2024 and December 31, 2023	2		2
Additional paid-in capital	773,873		767,239
Accumulated other comprehensive loss	153		—
Accumulated deficit	(563,520)		(495,634)
Total stockholders’ equity	210,520		271,619
Total liabilities and stockholders’ equity	$	236,454	$	298,250

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

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QUANTUM-SI INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(in thousands, except per share amounts)

(unaudited)


	Three months ended September 30,				Nine months ended September 30,
	2024		2023		2024		2023
Revenue:
Product	$	764	$	216	$	1,776	$	654
Service	23		7		90		28
Total revenue	787		223		1,866		682

Cost of revenue	420		115		876		372

Gross profit	367		108		990		310
Operating expenses:
Research and development	16,171		16,587		42,653		50,588
Selling, general and administrative	12,284		10,696		36,236		33,010
Total operating expenses	28,455		27,283		78,889		83,598
Loss from operations	(28,088)		(27,175)		(77,899)		(83,288)
Dividend and interest income	2,688		2,572		9,149		7,274
Unrealized gain on trading securities	—		1,953		—		8,302
Realized loss on trading securities	—		(1,901)		—		(6,489)
Change in fair value of warrant liabilities	121		(162)		917		(81)
Other income (expense), net	9		(15)		(10)		370
Loss before provision for income taxes	(25,270)		(24,728)		(67,843)		(73,912)
Provision for income taxes	(43)		—		(43)		—
Net loss	$	(25,313)	$	(24,728)	$	(67,886)	$	(73,912)

Net loss per common share attributable to common stockholders, basic and diluted	$	(0.18)	$	(0.17)	$	(0.48)	$	(0.52)
Weighted-average shares used to compute net loss per share attributable to common stockholders, basic and diluted	142,399		141,660		142,039		141,154

Other comprehensive gain (loss):
Net unrealized gain on marketable securities, net of tax	$	163	$	—	$	163	$	—
Foreign currency translation adjustment	(3)		—		(10)		—
Total other comprehensive gain, net of tax	160		—		153		—
Comprehensive loss	$	(25,153)	$	(24,728)	$	(67,733)	$	(73,912)

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

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QUANTUM-SI INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(in thousands, except share amounts)

(unaudited)


	Class A common stock			Class B common stock			Additional paid-in capital		Accumulated other comprehensive (loss) gain		Accumulated deficit		Total stockholders’ equity
	Shares	Amount		Shares	Amount
Balance - December 31, 2023	121,832,417	$	12	19,937,500	$	2	$	767,239	$	—	$	(495,634)	$	271,619
Common stock issued upon vesting of restricted stock units	46,572	—		—	—		—		—		—		—
Stock-based compensation	—	—		—	—		1,645		—		—		1,645
Net unrealized loss on marketable securities, net of tax	—	—		—	—		—		(28)		—		(28)
Refund of issuance costs from 2021 Business Combination	—	—		—	—		14		—		—		14
Foreign currency translation	—	—		—	—		—		(5)		—		(5)
Net loss	—	—		—	—		—		—		(19,474)		(19,474)
Balance - March 31, 2024	121,878,989	$	12	19,937,500	$	2	$	768,898	$	(33)	$	(515,108)	$	253,771
Common stock issued upon exercise of stock options	96,069	—		—	—		136		—		—		136
Common stock issued upon vesting of restricted stock units	407,274	—		—	—		—		—		—		—
Stock-based compensation	—	—		—	—		2,426		—		—		2,426
Net unrealized gain on marketable securities, net of tax	—	—		—	—		—		28		—		28
Foreign currency translation	—	—		—	—		—		(2)		—		(2)
Net loss	—	—		—	—		—		—		(23,099)		(23,099)
Balance - June 30, 2024	122,382,332	$	12	19,937,500	$	2	$	771,460	$	(7)	$	(538,207)	$	233,260
Common stock issued upon exercise of stock options	41,470	—		—	—		2		—		—		2
Common stock issued upon vesting of restricted stock units	351,550	—		—	—		—		—		—		—
Stock-based compensation	—	—		—	—		2,411		—		—		2,411
Net unrealized gain on marketable securities, net of tax	—	—		—	—		—		163		—		163
Foreign currency translation	—	—		—	—		—		(3)		—		(3)
Net loss	—	—		—	—		—		—		(25,313)		(25,313)
Balance - September 30, 2024	122,775,352	$	12	19,937,500	$	2	$	773,873	$	153	$	(563,520)	$	210,520


	Class A common stock			Class B common stock			Additional paid-in capital		Accumulated deficit		Total stockholders’ equity
	Shares	Amount		Shares	Amount
Balance - December 31, 2022	120,006,757	$	12	19,937,500	$	2	$	758,366	$	(399,674)	$	358,706
Common stock issued upon exercise of stock options and vesting of restricted stock units	1,552,583	—		—	—		—		—		—
Stock-based compensation	—	—		—	—		3,908		—		3,908
Net loss	—	—		—	—		—		(23,611)		(23,611)
Balance - March 31, 2023	121,559,340	$	12	19,937,500	$	2	$	762,274	$	(423,285)	$	339,003
Common stock issued upon exercise of stock options and vesting of restricted stock units	74,273	—		—	—		—		—		—
Stock-based compensation	—	—		—	—		1,865		—		1,865
Net loss	—	—		—	—		—		(25,573)		(25,573)
Balance - June 30, 2023	121,633,613	$	12	19,937,500	$	2	$	764,139	$	(448,858)	$	315,295
Common stock issued upon exercise of stock options and vesting of restricted stock units	156,921	—		—	—		357		—		357
Stock-based compensation	—	—		—	—		1,141		—		1,141
Net loss	—	—		—	—		—		(24,728)		(24,728)
Balance - September 30, 2023	121,790,534	$	12	19,937,500	$	2	$	765,637	$	(473,586)	$	292,065

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

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QUANTUM-SI INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)


	Nine Months Ended September 30,
	2024		2023
Cash flows from operating activities:
Net loss	$	(67,886)	$	(73,912)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	3,606		3,063
Non-cash lease expense	1,808		1,486
Unrealized (gain) loss on trading securities, net	—		(8,302)
Realized (gain) loss on trading securities, net	—		6,489
(Accretion) amortization on marketable securities	(6,517)		—
Gain on disposal of fixed assets	—		(8)
Write-down of inventory	2,391		—
Change in fair value of warrant liabilities	(917)		81
Change in fair value of contingent consideration	—		(400)
Stock-based compensation	6,482		6,914
Other	23		—
Changes in operating assets and liabilities:
Accounts receivable, net	(654)		(466)
Inventory	(1,625)		(2,325)
Prepaid expenses and other current assets	(545)		(236)
Operating lease right-of-use assets	—		(83)
Other assets	—		(4)
Accounts payable	89		(732)
Accrued expenses and other current liabilities	1,343		(2,656)
Other long-term liabilities	(2,525)		19
Operating lease liabilities	13		(1,995)
Net cash used in operating activities	(64,914)		(73,067)
Cash flows from investing activities:
Purchases of property and equipment	(3,148)		(4,877)
Internally developed software - capitalized costs	(59)		(763)
Purchases of marketable securities	(262,043)		—
Sales and maturities of marketable securities	238,500		88,000
Net cash (used in) provided by investing activities	(26,750)		82,360
Cash flows from financing activities:
Proceeds from exercise of stock options	138		357
Deferred offering costs	(70)		(147)
Refund of issuance costs from 2021 Business Combination	14		—
Net cash provided by financing activities	82		210
Effect of exchange rate changes on cash and cash equivalents	(10)		—
Net (decrease) increase in cash and cash equivalents	(91,592)		9,503
Cash and cash equivalents at beginning of period	133,860		84,319
Cash and cash equivalents at end of period	$	42,268	$	93,822
Supplemental disclosure of non-cash investing and financing activities:
Property and equipment purchased but not paid	$	497	$	59
Deferred offering costs payable	$	75	$	136

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

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QUANTUM-SI INCORPORATED

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share amounts)

(Unaudited)

Note 1. Organization and Description of Business

Quantum-Si Incorporated (including its subsidiaries, the “Company” or “Quantum-Si”) was incorporated in Delaware on June 10, 2020 as HighCape Capital Acquisition Corp. (“HighCape”). The Company’s legal name became Quantum-Si Incorporated following a business combination on June 10, 2021 between the Company and Q-SI Operations Inc. (formerly Quantum-Si Incorporated) (the “Business Combination”), which was founded in 2013.

The Company is 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. The Company has developed a proprietary universal single-molecule detection platform that the Company is 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), and can be used for the study of nucleic acids. The Company’s platform is currently comprised of the Platinum® NGPS instrument, the Platinum Analysis Software service, reagent kits and semiconductor chips for use with its instruments.

Liquidity and Capital Resources

The Company has historically financed its operations primarily with proceeds from the issuance of equity to private investors, as well as with the proceeds received from the closing of the Business Combination on June 10, 2021. The Company has incurred significant losses and negative cash flows from operations in all periods since inception and had an accumulated deficit of $563.5 million as of September 30, 2024. The Company has incurred significant operating losses, including net losses of $67.9 million and $73.9 million for the nine months ended September 30, 2024 and 2023, respectively. As of September 30, 2024, the Company had cash, cash equivalents and investments in marketable securities of $196.3 million. Management believes that the Company’s current cash, cash equivalents and marketable securities, together with revenue from the sales of its products and services, will be sufficient to fund its planned operations for at least the next twelve months from the date of the issuance of the accompanying Condensed Consolidated Financial Statements.

Until such time as the Company can generate significant revenue from product sales, if ever, it expects to finance its operations through private and public equity offerings, debt financings, and/or potential future collaboration, license and development agreements. However, there can be no assurance that the Company will be able to complete any such transactions on acceptable terms or otherwise, and the Company may be unable to obtain sufficient additional capital when needed. The inability to raise capital as and when needed would have a negative impact on the Company’s financial condition and its ability to pursue its business strategy. The Company will need to generate significant revenue to achieve profitability and it may never do so.

Note 2. Summary of Significant Accounting Policies

Basis of Presentation and Principles of Consolidation

The accompanying Condensed Consolidated Financial Statements include the accounts of the Company and have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and pursuant to the accounting disclosure rules and regulations of the Securities and Exchange Commission (the “SEC”). All intercompany transactions are eliminated.

These Condensed Consolidated Financial Statements should be read in conjunction with the audited Consolidated Financial Statements and the notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023. The Condensed Consolidated Balance Sheet as of December 31, 2023 included herein was derived from the audited Consolidated Financial Statements as of that date, but does not include all disclosures, including certain notes required by U.S. GAAP, on an annual reporting basis.

In the opinion of management, the accompanying Condensed Consolidated Financial Statements reflect all normal recurring adjustments necessary to fairly state the financial position, results of operations, and cash flows for the interim

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periods. The results for the three and nine months ended September 30, 2024 are not necessarily indicative of the results to be expected for any subsequent quarter, the year ending December 31, 2024, or any other period.

There have been no material changes to the Company’s significant accounting policies as described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023.

Global Developments

Throughout 2023, various central banks around the world, including the Federal Reserve in the United States, raised interest rates. While these rate increases have not had a significant adverse impact on the Company to date, the impact of such rate increases on the overall financial markets and the economy may adversely impact the Company in the future. In addition, the global economy has experienced, and is continuing to experience, high levels of inflation and global supply chain disruptions. The Company continues to monitor these supply chain, inflation and interest rate factors, as well as the uncertainty resulting from the overall economic environment.

Although the Company does not expect to be significantly impacted by the ongoing conflicts in Ukraine or Israel and Gaza, the Company has experienced some constraints in product and material availability and increasing costs required to obtain some materials and supplies as a result of these conflicts on the global economy. To date, the Company’s business has not been materially impacted by the conflicts, however, as the conflicts continue or worsen, it may adversely impact the Company’s business, financial condition, results of operations and/or cash flows.

Concentration of Business Risk

Financial instruments that potentially subject the Company to concentration of credit risk consist principally of cash and cash equivalents and marketable securities. As of September 30, 2024 and December 31, 2023, the Company’s marketable securities consist of money market mutual funds, U.S. Treasury securities and commercial paper. The Company also maintains balances in certain operating accounts above federally insured limits and, as a result, the Company is exposed to credit risk in the event of default by the financial institutions to the extent account balances exceed the amount insured by the Federal Deposit Insurance Corporation.

The Company sources certain key materials and components utilized in the Company’s products from single or limited suppliers. Historically, the Company has not experienced significant issues sourcing these materials and components. However, if these suppliers were not able to supply the requested amount of materials or components, it could take a considerable length of time to obtain alternative sources, which could affect the Company’s development efforts and commercial operations.

Segment Reporting

The Company’s Chief Operating Decision Maker, its Chief Executive Officer, reviews the Company’s financial information on a consolidated basis for purposes of allocating resources and evaluating its financial performance. Accordingly, the Company has determined that it operates as a single reportable segment.

Reclassifications

Certain prior year amounts have been reclassified for consistency with the current year’s presentation.

Use of Estimates

The preparation of the Condensed Consolidated Financial Statements in conformity with U.S. GAAP requires the Company to make estimates and assumptions about future events that may affect the amounts recorded in its Condensed Consolidated Financial Statements and accompanying notes. Future events and their effects cannot be determined with certainty. On an ongoing basis, management evaluates these estimates and assumptions. Significant estimates and assumptions include:

•valuation allowances with respect to deferred tax assets;

•inventory valuation;

•assumptions used for leases;

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•valuation of warrant liabilities;

•assumptions associated with revenue recognition; and

•assumptions underlying the fair value used in the calculation of stock-based compensation.

The Company bases these estimates on historical and anticipated results and trends and on various other assumptions the Company believes are reasonable under the circumstances, including assumptions as to future events. Changes in estimates are recorded in the period in which they become known. Actual results could differ from those estimates, and any such differences may be material to the Condensed Consolidated Financial Statements.

Inventory

Inventory is stated at the lower of cost or net realizable value with cost determined using the first-in, first-out method. Materials that may be utilized for either commercial or, alternatively, for research and development purposes, are classified as inventory. Amounts in inventory used for research and development purposes are charged to research and development expense when the product enters the research and development process and can no longer be used for commercial purposes and, therefore, does not have an “alternative future use” as defined in authoritative guidance.

Inventory valuation is established based on a number of factors including, but not limited to, finished goods not meeting product specifications, product excess and obsolescence, or application of the lower of cost or net realizable value concepts. The determination of events requiring the establishment of inventory valuation, together with the calculation of the amount of such adjustments may require judgment. The Company performs an assessment of the recoverability of capitalized inventory during each reporting period and, if needed, records a write-down of inventory to its estimated net realizable value in the period it is identified. For further discussion related to inventory, please refer to Note 5. Inventory.

Warrant Liabilities

The Company’s outstanding warrants include publicly traded warrants (the “Public Warrants”) and warrants sold in a private placement (the “Private Warrants”). The Public Warrants and Private Warrants meet the definition of a derivative, and the Company recorded these warrants as long-term liabilities in the Condensed Consolidated Balance Sheets at fair value upon initial recognition, with subsequent changes in their respective fair values recognized in the Condensed Consolidated Statements of Operations and Comprehensive Loss at each reporting date. For further discussion related to the Public Warrants and Private Warrants, please refer to Note 11. Warrant Liabilities.

Revenue Recognition

The Company’s revenue is derived from sales of products and services. Product revenue is primarily generated from the sales of instruments and consumables used in protein sequencing and analysis. Service revenue is primarily generated from service maintenance contracts including access to analysis software and advanced training for instrument use. The Company recognizes revenue when or as a customer obtains control of the promised goods and services. The amount of revenue recognized reflects the consideration to which the Company expects to be entitled in exchange for these goods and services. This process involves identifying the contract with a customer, determining the performance obligations in the contract, determining the contract price, allocating the contract price to the distinct performance obligations in the contract, and recognizing revenue as the performance obligations have been satisfied. The Company has made the accounting policy election allowed for under ASC 606-10-32-2A to exclude all sales taxes from transaction price. Revenue recognition for contracts with multiple deliverables is based on the separate satisfaction of each distinct performance obligation within the contract. A performance obligation is considered distinct from other obligations in a contract when it provides a benefit to the customer either on its own or together with other resources that are readily available to the customer and is separately identified in the contract. The Company allocates the transaction price to the performance obligations in a contract with a customer based on the relative standalone selling price of each performance obligation. The Company determines standalone selling price based on the price at which the performance obligation is sold separately. If the standalone selling price is not observable through past transactions, the Company estimates the standalone selling price taking into account available information and specific factors such as competitive positioning, internal costs, profit objectives, and internally approved pricing guidelines related to the performance obligation.

The Company considers the performance obligation for sales of products satisfied upon shipment of the goods to the customer in accordance with the shipping terms (either upon shipment or delivery), which is when control of the product is deemed to be transferred; this includes instruments and consumables. Customers generally do not have a right to return products, except for defective or damaged products during the warranty period or unless prior written consent is provided.

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In instances where right of payment or transfer of title is contingent upon the customer’s acceptance of the product, revenue is deferred until all acceptance criteria have been met. Revenues for service maintenance contracts, which start after the first year of purchase and are considered as service type warranties that effectively extend the standard first-year service coverage at the customer’s option, are recognized ratably over the contract service period as these services are performed evenly over time. Revenues for advanced training is recognized at a point in time upon satisfaction of the underlying performance obligation. The Company typically provides a standard one-year warranty, which covers defects in materials, workmanship and manufacturing or performance conditions under normal use and service. The first year of the warranty of the products is considered an assurance-type warranty and is recorded as Cost of revenue within the Condensed Consolidated Statements of Operations and Comprehensive Loss. The Company has determined the standard first-year warranty is not a distinct performance obligation.

The Company disaggregates revenue from contracts with customers by type of revenue. The Company believes product revenue and service revenue aggregate the customer types by nature, amount, timing and uncertainty of its revenue streams. Total revenue generated from domestic sales was $0.4 million and $0.2 million for the three months ended September 30, 2024 and 2023, respectively, and $0.8 million and $0.6 million for the nine months ended September 30, 2024 and 2023, respectively. Total revenue generated from international sales was $0.4 million and immaterial for the three months ended September 30, 2024 and 2023, respectively, and $1.1 million and $0.1 million for the nine months ended September 30, 2024 and 2023, respectively.

Deferred Revenue

Deferred revenue is a contract liability that consists of customer payments received in advance of performance or billings in excess of revenue recognized, net of revenue recognized from the balance at the beginning of the period.

Deferred revenue primarily consists of billings and payments received in advance of revenue recognition from service maintenance contracts including software subscription and advanced training and is reduced as the revenue recognition criteria are met. Deferred revenue that will be recognized as revenue within the succeeding 12-month period is recorded as current and is included within Accrued expenses and other current liabilities in the Company’s Condensed Consolidated Balance Sheets. The portion of deferred revenue where revenue is expected to be recognized beyond 12 months from the reporting date is recorded as non-current deferred revenue and is included in Other long-term liabilities in the Company’s Condensed Consolidated Balance Sheets.

As of both September 30, 2024 and December 31, 2023, the Company recorded $0.1 million of deferred revenue within Accrued expenses and other current liabilities in the Company’s Condensed Consolidated Balance Sheets. As of both September 30, 2024 and December 31, 2023, amounts recorded within Other long-term liabilities in the Company’s Condensed Consolidated Balance Sheets were immaterial. The Company expects to recognize approximately 38% of its remaining performance obligations as revenue for the remainder of the year ending December 31, 2024.

Stock-Based Compensation

Stock-based compensation expense for stock option grants with only service conditions is recognized on a straight-line basis over the requisite service period of the individual grants, which is generally the vesting period, based on the estimated grant date fair values. Stock-based compensation expense for stock option grants subject to performance conditions is recognized on an accelerated basis is recognized as though each vesting portion of the award was, in substance, a separate award.

After the completion of the Business Combination, the Company measures compensation expense for stock-based awards to employees, non-employees and directors based upon the awards’ initial grant-date fair values. Stock-based compensation expense for stock options, restricted stock units and performance-based stock awards is recorded over the requisite service period. For awards with only a service condition, the Company expenses stock-based compensation using the straight-line method over the requisite service period for the entire award. For awards with a market condition, the Company expenses the grant date fair value at the target over the vesting period regardless of the value the award recipients ultimately receive. The fair value of restricted stock unit awards without a market condition is estimated using the current market price of the Company’s Class A common stock on the date of grant. The fair value of stock option grants with a market condition is estimated at the date of grant using the Monte Carlo simulation model (“Monte Carlo”). The fair values of stock option grants with a service condition are estimated as of the date of grant by applying the Black-Scholes option valuation model (“Black-Scholes”). The Monte Carlo and Black-Scholes models incorporate assumptions as to stock price volatility, the

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expected life of the underlying stock options, a risk-free interest rate and dividend yield. The effect of forfeiture in compensation costs is recognized based on actual forfeitures when they occur.

Black-Scholes is affected by the stock price on the date of the grant as well as assumptions regarding a number of highly complex and subjective variables. These variables include the expected term of the option, expected risk-free interest rate, the expected volatility of Class A common stock, and expected dividend yield; each of which is described below. The assumptions for expected term and expected volatility are the two assumptions that significantly affect the grant date fair value.

•Expected Term: The expected term using the “simplified” method, which is the simple average of the vesting period and the contractual term.

•Risk-free Interest Rate: The risk-free interest rate for periods within the expected term of the awards is based on the U.S. Treasury yield curve in effect at the time of the grant.

•Expected Stock Price Volatility: The Company determined expected annual equity volatility based on a weighted average of the historical volatility of its Class A common stock and that of a selected peer group of comparable companies as the Company does not have a sufficient historical trading history of its own Class A common stock.

•Dividend Yield: Because the Company has never paid a dividend and does not expect to begin doing so in the foreseeable future, the Company assumes no dividend yield in valuing the stock-based awards.

•Exercise Price: The exercise price is taken directly from the grant notice issued to employees and nonemployees.

Recently Issued Accounting Pronouncements

In November 2024, the FASB issued ASU No. 2024-03, Disaggregation of Income Statement Expenses (“DISE”), which requires additional disclosure of the nature of expenses included in the income statement. The ASU requires disclosures about specific types of expenses included in the expense captions presented on the face of the income statement as well as disclosures about selling expenses. The amendments in this update are effective for annual reporting periods beginning after December 15, 2026 and interim reporting periods beginning after December 15, 2027, with early adoption permitted. The ASU is required to be applied prospectively with the option for retrospective application. The Company is currently evaluating the impact ASU 2024-03 may have on its Consolidated Financial Statements and disclosures.

In March 2024, the FASB issued ASU No. 2024-02, Codification Improvements - Amendments to Remove References to the Concepts Statements, which contains amendments to the Codification that remove references to various Concepts Statements. The amendments in ASU 2024-02 are not intended to result in significant accounting changes for most entities. The amendments in this update are effective for fiscal years beginning after December 15, 2024, with early adoption permitted. The Company is currently evaluating the impact ASU 2024-02 may have on its Consolidated Financial Statements and disclosures.

In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which expands income tax disclosure requirements to include additional information related to the rate reconciliation of effective tax rates to statutory rates, as well as additional disaggregation of taxes paid in both U.S. and foreign jurisdictions. The amendments in ASU 2023-09 also remove disclosures related to certain unrecognized tax benefits and deferred taxes. The amendments are effective for fiscal years beginning after December 31, 2024, with early adoption permitted. The amendments may be applied prospectively or retrospectively. The Company is currently evaluating the impact ASU 2023-09 may have on its Consolidated Financial Statements and disclosures.

In November 2023, the FASB issued ASU No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which requires enhanced disclosures about significant segment expenses. In addition, the ASU clarified that single reportable segment entities must apply Topic 280 in its entirely. The ASU does not change how an entity identifies its operating segments, aggregates those operating segments, or applies the quantitative thresholds to determine its reportable segments. The ASU is required to be applied retrospectively to all periods presented in the financial statements and is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. The Company is currently evaluating the impact ASU 2023-07 may have on its financial position and results of operations upon adoption but does not expect the adoption will have a material impact on the Company’s Consolidated Financial Statements and disclosures.

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Note 3. Investments in Marketable Securities

As of September 30, 2024 and December 31, 2023, the Company’s investments in marketable securities were determined to be available-for-sale securities.

Dividend and interest income from marketable securities related to the Company’s available-for-sale securities for the three and nine months ended September 30, 2024 and dividend income from marketable securities, unrealized gain and realized loss on trading securities for the three and nine months ended September 30, 2023 were as follows (in thousands):


	Three months ended September 30,				Nine months ended September 30,
	2024		2023		2024		2023
Dividend income from marketable securities	$	233	$	2,572	$	1,576	$	7,274
Interest income from marketable securities	$	2,455	$	—	$	7,573	$	—
Unrealized gain on trading securities	$	—	$	1,953	$	—	$	8,302
Realized loss on trading securities	$	—	$	(1,901)	$	—	$	(6,489)

The following is a summary of the Company’s available-for-sale securities recorded within Marketable securities in the Condensed Consolidated Balance Sheets as of September 30, 2024 and December 31, 2023 (in thousands):


	September 30, 2024
	Amortized Costs		Gross Realized Gains		Gross Unrealized Gains		Fair Value
Financial Assets:
Short-term marketable securities:
U.S. Treasury securities	$	118,940	$	—	$	109	$	119,049
Commercial paper	34,974		—		53		35,027
Total	$	153,914	$	—	$	162	$	154,076


	December 31, 2023
	Amortized Costs		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Financial Assets:
Short-term marketable securities:
U.S. Treasury securities	$	82,625	$	15	$	—	$	82,640
Commercial paper	41,229		7		—		41,236
Total	$	123,854	$	22	$	—	$	123,876

The fair values of the Company’s available-for-sale securities included within Marketable securities in the Condensed Consolidated Balance Sheets as of September 30, 2024 and December 31, 2023, by remaining contractual maturity, are as follows (in thousands):

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	September 30, 2024
	One Year or Less		Over One Year Through Five Years		Over Five Years		Total
Financial Assets:
Short-term marketable securities:
U.S. Treasury securities	$	119,049	$	—	$	—	$	119,049
Commercial paper	35,027		—		—		35,027
Total	$	154,076	$	—	$	—	$	154,076


	December 31, 2023
	One Year or Less		Over One Year Through Five Years		Over Five Years		Total
Financial Assets:
Short-term marketable securities:
U.S. Treasury securities	$	82,640	$	—	$	—	$	82,640
Commercial paper	41,236		—		—		41,236
Total	$	123,876	$	—	$	—	$	123,876

Note 4. Fair Value of Financial Instruments

Fair value estimates of financial instruments are made at a specific point in time, based on relevant information about financial markets and specific financial instruments. As these estimates are subjective in nature, involving uncertainties and matters of significant judgment, they cannot be determined with precision. Changes in assumptions can significantly affect estimated fair value.

The Company measures fair value as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the reporting date. The Company utilizes a three-tier hierarchy, which prioritizes the inputs used in the valuation methodologies in measuring fair value:

•Level 1: Valuations based on quoted prices in active markets for identical assets or liabilities that an entity has the ability to access.

•Level 2: Valuations based on quoted prices for similar assets or liabilities, quoted prices for identical assets or liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable data for substantially the full term of the assets or liabilities.

•Level 3: Valuations based on inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

The carrying value of cash and cash equivalents, accounts payable and accrued expenses and other current liabilities approximates their fair values due to the short-term or on demand nature of these instruments. At September 30, 2024 and December 31, 2023, the Company’s investment portfolio included available-for-sale securities which were comprised of money market funds, U.S. treasury bills and commercial paper. The Company has U.S. Treasury bills and commercial papers that are classified as Level 2 due to the fair value for these instruments being determined by utilizing observable inputs in similar assets or identical assets in non-active markets. The fair value of certain of the U.S. Treasury bills transferred to Level 2 from Level 1 of the fair value hierarchy due to trading activity, observability and accessibility of the pricing information from the most active market of the investment.

Warrants are recorded as Warrant liabilities in the Condensed Consolidated Balance Sheets. The warrant liabilities are measured at fair value at inception and on a recurring basis, with changes in fair value presented as Change in fair value of warrant liabilities in the Condensed Consolidated Statements of Operations and Comprehensive Loss.

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The Public Warrants and Private Warrants were carried at fair value as of September 30, 2024 and December 31, 2023. The Public Warrants were valued using Level 1 inputs as they are traded in an active market. The Private Warrants were valued using a binomial lattice model. The primary unobservable input utilized in determining the fair value of the Private Warrants was the expected volatility of the Company’s Class A common stock. The expected volatility was based on consideration of the implied volatility from the Company’s own Public Warrant pricing and on the historical volatility observed at guideline public companies. As of September 30, 2024, the significant assumptions used in preparing the binomial lattice model for valuing the Private Warrants liability include (i) volatility of 121.2%, (ii) risk-free interest rate of 3.7%, (iii) strike price of $11.50, (iv) fair value of Class A common stock of $0.88, and (v) expected life of 1.7 years. As of December 31, 2023, the significant assumptions used in preparing the binomial lattice model for valuing the Private Warrants liability include (i) volatility of 92.1%, (ii) risk-free interest rate of 4.10%, (iii) strike price of $11.50, (iv) fair value of Class A common stock of $2.01, and (v) expected life of 2.4 years.

There were no exercises or redemptions of the Public Warrants or Private Warrants during the three and nine months ended September 30, 2024 and 2023.

The following table summarizes the Company’s assets and liabilities in the Condensed Consolidated Balance Sheets as of September 30, 2024 and December 31, 2023, that are measured at fair value on a recurring basis, by level, within the fair value hierarchy (in thousands):


	September 30, 2024
	Level 1		Level 2		Level 3		Total
Financial Assets:
Cash equivalents:
Money market funds	$	14,265	$	—	$	—	$	14,265
Commercial paper	24,126		—		—		24,126
Marketable securities:
U.S. Treasury securities	—		119,049		—		119,049
Commercial paper	—		35,027		—		35,027
Total assets at fair value on a recurring basis	$	38,391	$	154,076	$	—	$	192,467

Liabilities:
Public Warrants	$	345	$	—	$	—	$	345
Private Warrants	—		—		12		12
Total liabilities at fair value on a recurring basis	$	345	$	—	$	12	$	357

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	December 31, 2023
	Level 1		Level 2		Level 3		Total
Financial Assets:
Cash equivalents:
Money market funds	$	50,226	$	—	$	—	$	50,226
U.S. Treasury securities	59,654		—		—		59,654
Commercial paper	—		19,436		—		19,436
Marketable securities:
U.S. Treasury securities	82,640		—		—		82,640
Commercial paper	—		41,236		—		41,236
Total assets at fair value on a recurring basis	$	192,520	$	60,672	$	—	$	253,192

Liabilities:
Public Warrants	$	1,227	$	—	$	—	$	1,227
Private Warrants	—		—		47		47
Total liabilities at fair value on a recurring basis	$	1,227	$	—	$	47	$	1,274

Note 5. Inventory

Inventory consists of the following as of September 30, 2024 and December 31, 2023 (in thousands):


	September 30, 2024		December 31, 2023
Raw materials	$	1,666	$	1,608
Work in progress	1,433		779
Finished goods	992		1,558
Total inventory	$	4,091	$	3,945

For the three and nine months ended September 30, 2024, the Company recorded charges for inventory write-downs of $0.8 million and $2.4 million, respectively, in Research and Development expenses in the Condensed Consolidated Statements of Operations and Comprehensive Loss. There were no charges for inventory write-downs during the three and nine months ended September 30, 2023.

Note 6. Property and Equipment, Net

Property and equipment, net, consists of the following as of September 30, 2024 and December 31, 2023 (in thousands):


	September 30, 2024		December 31, 2023
Laboratory and production equipment	$	16,491	$	14,727
Computer equipment	1,733		1,707
Purchased software	188		188
Furniture and fixtures	325		310
Leasehold improvements	7,226		6,948
Construction in process	3,698		2,438
Subtotal	29,661		26,318
Less: Accumulated depreciation and amortization	(13,407)		(10,043)
Property and equipment, net	$	16,254	$	16,275

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Depreciation and amortization expense is included within Cost of revenue and Selling, general and administrative expenses in the Condensed Consolidated Statements of Operations and Comprehensive Loss. Depreciation and amortization expense was $1.2 million and $1.1 million for the three months ended September 30, 2024 and 2023, respectively, and $3.6 million and $2.9 million for the nine months ended September 30, 2024 and 2023, respectively. No impairments were recorded for the three and nine months ended September 30, 2024 or 2023.

Note 7. Leases

Lease-related costs for the three and nine months ended September 30, 2024 and 2023 are as follows (in thousands):


	Three months ended September 30,				Nine months ended September 30,
	2024		2023		2024		2023
Operating lease cost	$	865	$	864	$	2,593	$	2,613
Variable lease cost	497		545		1,325		1,226
Total lease cost	$	1,362	$	1,409	$	3,918	$	3,839

Future minimum lease payments under non-cancellable leases as of September 30, 2024 are as follows (dollars in thousands):


	Remaining Lease Payments
Remainder of 2024	$	1,127
2025	4,527
2026	4,585
2027	4,549
2028	2,975
Thereafter	10,052
Total remaining undiscounted lease payments	$	27,815
Less: Imputed interest	(4,886)
Less: Lease incentives(1)	(9,104)
Total lease liabilities	13,825
Less: current portion	(3,614)
Long-term operating lease liabilities	$	10,211
Weighted-average remaining lease term (in years)	5.8
Weighted-average discount rate	7.9		%

(1)Includes lease incentives that are estimated to be realized in 2026 and 2027 for the costs of leasehold improvements.

The following table provides certain cash flow and supplemental cash flow information related to the Company’s right-of-use assets and lease liabilities for the nine months ended September 30, 2024 and 2023 (in thousands):


	Nine months ended September 30,
	2024		2023
Operating cash paid to settle operating lease liabilities	$	3,310	$	3,201
Right-of-use assets obtained in exchange for lease liabilities(2)	$	1,047	$	83

(2) The nine months ended September 30, 2024 includes an increase in right-of-use assets due to the change in estimated timing of receipt of reimbursements for tenant improvements.

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In December 2021, the Company signed a 10-year lease for approximately 67,000 square feet of space in New Haven, Connecticut. The lease commenced on January 8, 2022 with rent payments beginning on July 7, 2022. Under the lease, the landlord contractually agreed to reimburse the Company for up to $9.1 million in improvements to the space, to be used for such improvements as the Company deems “necessary or desirable”. On September 13, 2022, the Company filed a lawsuit against the landlord, alleging that the landlord has: (i) refused to reimburse the Company for costs related to improvements already incurred and submitted, (ii) delayed the Company’s completion of improvements, in order to avoid reimbursing the costs of those improvements, and (iii) improperly rejected the Company’s proposed improvement plans. The Company accounted for these lease incentives as an offset to the lease liability recorded at the inception of the lease. In September 2024, the Company determined there was a change in the estimated timing of receipt of reimbursements for the improvements. This resulted in an increase of the carrying value of the right-of-use asset and the corresponding lease liabilities of $1.0 million. Although the Company believes it is contractually entitled to the $9.1 million of lease incentives, based on the current status of the litigation, the Company cannot determine the likely outcome or estimate the impact on such carrying values.

As of September 30, 2024 and December 31, 2023, the Company incurred and recognized total leasehold improvements of approximately $1.2 million and $1.6 million, respectively, related to reimbursable construction costs which are included in construction in progress within Property and equipment, net, on the Condensed Consolidated Balance Sheets.

Note 8. Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consist of the following (in thousands):


	September 30, 2024		December 31, 2023


Restructuring costs	$	—	$	519
Severance costs	206		—
Legal fees	1,008		979
Royalties	110		123
Other	1,515		194
Total accrued expenses and other current liabilities	$	2,839	$	1,815

Note 9. Stock-based Compensation

Equity Incentive Plan

The Quantum-Si Incorporated 2021 Equity Incentive Plan (the “2021 Plan”) provides for grants of stock options, stock appreciation rights, restricted stock, restricted stock units, and other stock or cash-based awards. Directors, officers and other employees of the Company and its subsidiaries, as well as others performing consulting or advisory services for the Company, are eligible for grants under the 2021 Plan. As of September 30, 2024, there were 13,204,915 shares available for future grant under the 2021 Plan.

Inducement Equity Incentive Plan

On May 8, 2023, the Company adopted the 2023 Inducement Equity Incentive Plan (the “2023 Inducement Plan”) to reserve 3,000,000 shares of its Class A common stock to be used exclusively for grants of awards to individuals that were not previously employees or directors of the Company as a material inducement to such individuals’ entry into employment with the Company within the meaning of Rule 5635(c)(4) of the Nasdaq Listing Rules. On August 23, 2024, the Company amended the 2023 Inducement Plan to reserve an additional 3,000,000 shares of its Class A common stock under the 2023 Inducement Plan. As of September 30, 2024, there were 2,268,867 shares available for future issuance under the 2023 Inducement Plan, as amended. The terms and conditions of the 2023 Inducement Plan, as amended, are substantially similar to those of the 2021 Plan.

Stock Options

The Company recorded $1.7 million and $1.1 million for stock-based compensation related to stock options for the three months ended September 30, 2024 and 2023, respectively, and $4.8 million and $5.7 million for stock-based compensation related to stock options for the nine months ended September 30, 2024 and 2023, respectively.

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The Company estimates and records the compensation cost associated with the grants described above with an offsetting entry to paid-in capital. The Company utilized the Black-Scholes option pricing model for determining the estimated fair value for service or performance-based stock awards where performance is not tied to market conditions. The Black-Scholes option pricing model requires the use of subjective assumptions which determine the fair value of stock-based awards.

The fair value of each stock option award granted during the nine months ended September 30, 2024 was estimated as of the grant date using a Black-Scholes model with the following assumptions:


						Nine months ended September 30, 2024
Expected term (in years)						4.6 - 5.0
Risk-free interest rate						3.4% - 5.2%
Expected volatility						82.4% - 90.6%
Expected dividend yield						—
Weighted average grant date fair value per share						$1.03

A summary of the stock option activity for the nine months ended September 30, 2024 is presented in the table below:


	Number of Options	Weighted Average Exercise Price (per share)		Weighted Average Remaining Contractual Term (in years)	Aggregate Intrinsic Value (in thousands)
Outstanding at December 31, 2023	22,511,900	$	2.79	8.2	$	3,194
Granted	2,282,600	1.51
Exercised	(137,539)	1.00
Forfeited	(2,385,526)	3.06
Expired	(115,262)	2.45
Outstanding at September 30, 2024	22,156,173	$	2.64	8.0	$	51
Options exercisable at September 30, 2024	9,292,622	$	3.27	6.8	$	51
Vested and expected to vest at September 30, 2024	19,025,789	$	2.72	7.8	$	51

Modification of Performance Stock Options

In November 2022 and May 2023, the Company granted 2,780,000 and 1,000,000 performance-based stock option awards to its Chief Executive Officer and Chief Financial Officer, respectively. The vesting of these awards are subject to continued service to the Company and certain market conditions. The market conditions require the Company’s Class A common stock trade above specified levels for certain periods of time. The fair values of the awards were estimated at the grant date using the Monte Carlo simulation model.

On March 15, 2024, the market conditions that trigger the vesting of these performance-based stock option awards were modified. The modified market conditions require the Company’s Class A common stock to trade above specified levels for certain defined periods of time that are different from the original awards. The Company accounted for the modifications as modifications of market conditions. The total incremental stock-based compensation expense to be recognized for these awards is approximately $2.4 million within Selling, general and administrative operating expenses in the Condensed Consolidated Statements of Operations and Comprehensive Loss. Incremental stock-based compensation expense for the three and nine months ended September 30, 2024 was $0.2 million and $0.4 million, respectively. There were no such modifications to performance-based stock option awards for the three and nine months ended September 30, 2023.

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Restricted Stock Units

The Company recorded $0.7 million of stock-based compensation expense related to restricted stock unit (“RSU”) awards for the three months ended September 30, 2024. Stock-based compensation expense related to RSU awards for the three months ended September 30, 2023 was immaterial. The Company recorded $1.7 million and $1.2 million of stock-based compensation expense related to RSU awards for the nine months ended September 30, 2024 and 2023, respectively. The nine months ended September 30, 2023 included a reversal of stock-based compensation expense for the Company’s former Chief Financial Officer and certain members of the Company’s board of directors (the “Board”) as the service conditions of certain awards previously granted were not met.

A summary of the RSU activity for the nine months ended September 30, 2024 is presented in the table below:


	Number of Shares Underlying RSUs	Weighted Average Grant-Date Fair Value
Outstanding non-vested RSUs at December 31, 2023	847,169	$	2.68
Granted	8,380,356	1.51
Vested	(805,396)	2.55
Forfeited	(972,207)	1.74
Outstanding non-vested RSUs at September 30, 2024	7,449,922	$	1.51

The Company’s stock-based compensation is allocated to the following operating expense categories as follows (in thousands):


	Three months ended September 30,				Nine months ended September 30,
	2024		2023		2024		2023
Research and development	$	754	$	479	$	2,012	$	2,531
Selling, general and administrative	1,657		662		4,470		4,383
Total stock-based compensation	$	2,411	$	1,141	$	6,482	$	6,914

Note 10. Net Loss Per Share

The Company presents both basic earnings per share (“EPS”) and diluted EPS. Basic net loss per share is computed by dividing net loss by the weighted-average number of shares of common stock outstanding for the period. Diluted net loss per share is computed by giving effect to all common share equivalents to the extent they are dilutive. Basic and diluted net loss per share was the same for each period presented as the inclusion of all common share equivalents would have been anti-dilutive.

The following table presents the calculations for the three and nine months ended September 30, 2024 and 2023 of basic and diluted net loss per share for the Company’s common stock (in thousands, except per share amounts):

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	Three months ended September 30,				Nine months ended September 30,
	2024		2023		2024		2023
Numerator
Net loss	$	(25,313)	$	(24,728)	$	(67,886)	$	(73,912)
Numerator for basic and diluted EPS - loss attributable to common stockholders	$	(25,313)	$	(24,728)	$	(67,886)	$	(73,912)
Denominator
Common stock	142,399		141,660		142,039		141,154
Denominator for basic and diluted EPS - weighted-average common stock	142,399		141,660		142,039		141,154
Basic and diluted net loss per share	$	(0.18)	$	(0.17)	$	(0.48)	$	(0.52)

Net loss per share attributable to Class A and Class B common stockholders was the same on a basic and diluted basis, as the inclusion of all potential common equivalent shares outstanding would have been anti-dilutive.

The following potential dilutive shares were excluded from the calculation of diluted net loss per share because their effect would be anti-dilutive for the three and nine months ended September 30, 2024 and 2023 (in thousands):


	September 30,
	2024	2023
Outstanding options to purchase common stock	22,156,173	23,621,828
Outstanding restricted stock units	7,449,922	640,674
Outstanding warrants	3,968,319	3,968,319
	33,574,414	28,230,821

Note 11. Warrant Liabilities

Public Warrants

As of September 30, 2024 and December 31, 2023, there were an aggregate of 3,833,319 outstanding Public Warrants, which entitle the holder to acquire Class A common stock. Each whole warrant entitles the registered holder to purchase one share of Class A common stock at an exercise price of $11.50 per share, subject to adjustment as discussed below, beginning on September 9, 2021. The warrants will expire on June 10, 2026 or earlier upon redemption or liquidation.

Redemptions

At any time while the warrants are exercisable, the Company may redeem not less than all of the outstanding Public Warrants:

• in whole and not in part;

•at a price of $0.01 per warrant;

•upon not less than 30 days’ prior written notice of redemption (the “30-day redemption period”) to each warrant holder; and

•if, and only if, the closing price of the Company’s Class A common stock equals or exceeds $18.00 per share (as adjusted for stock splits, stock capitalizations, reorganizations, recapitalizations and the like) for any 20 trading days within a 30-trading day period ending three business days before the Company sends the notice of redemption to the warrant holders.

If the foregoing conditions are satisfied and the Company issues a notice of redemption of the Public Warrants at $0.01 per warrant, each holder of Public Warrants will be entitled to exercise their Public Warrants held prior to the scheduled redemption date.

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If the Company calls the Public Warrants for redemption for $0.01 as described above, the Board may elect to require any holder that wishes to exercise his, her or its Public Warrants to do so on a “cashless basis.” If the Board makes such election, all holders of Public Warrants would pay the exercise price by surrendering their warrants for that number of shares of Class A common stock equal to the quotient obtained by dividing (x) the product of the number of shares of Class A common stock underlying the warrants, multiplied by the excess of the “fair market value” over the exercise price of the warrants by (y) the “fair market value”. For purposes of the redemption provisions of the warrants, the “fair market value” means the average last reported sale price of the Class A common stock for the 10 trading days ending on the third trading day prior to the date on which the notice of redemption is sent to the holders of warrants.

The Public Warrants do not meet the criteria to be classified in stockholders’ equity as the exercise of the Public Warrants may be settled in cash upon the occurrence of a tender offer or exchange offer in which the maker of the tender offer or exchange offer, upon completion of the tender offer or exchange offer, beneficially owns more than 50% of the outstanding shares of the Company’s Class A common stock, even if it would not result in a change of control of the Company. This provision precludes the Public Warrants from being classified in equity and thus they are classified as long-term liabilities in the Condensed Consolidated Balance Sheets.

Private Warrants

As of September 30, 2024 and December 31, 2023, there were 135,000 Private Warrants outstanding. The Private Warrants are identical to the Public Warrants, except that so long as they are held by HighCape Capital Acquisition LLC or any of its permitted transferees, (i) the Private Warrants and the shares of Class A common stock issuable upon the exercise of the Private Warrants were not transferable, assignable or saleable until 30 days after the completion of the Business Combination, (ii) the Private Warrants will be exercisable for cash or on a cashless basis, at the holder’s option, and (iii) the Private Warrants are not subject to the Company’s redemption option at the price of $0.01 per warrant. The Private Warrants are subject to the Company’s redemption option at the price of $0.01 per warrant, provided that the other conditions of such redemption are met, as described above. If the Private Warrants are held by a holder other than HighCape Capital Acquisition LLC or any of its permitted transferees, the Private Warrants will be redeemable by the Company in all redemption scenarios applicable to the Public Warrants and exercisable by such holders on the same basis as the Public Warrants.

The Private Warrants do not meet the criteria to be classified in stockholders’ equity as the terms of the warrants provide for potential changes to the settlement amounts depending upon the characteristics of the warrant holder, and, because the holder of a warrant is not an input into the pricing of a fixed-for-fixed option on equity shares. This provision precludes the Private Warrants from being classified in equity and thus they are classified as long-term liabilities in the Condensed Consolidated Balance Sheets.

The fair value of warrant liabilities was $0.4 million and $1.3 million as of September 30, 2024 and December 31, 2023, respectively. The Company recognized a gain of $0.1 million and a loss of $0.2 million as a Change in fair value of warrant liabilities in the Condensed Consolidated Statements of Operations and Comprehensive Loss for the three months ended September 30, 2024 and 2023, respectively. The Company recognized a gain of $0.9 million and a loss of $0.1 million as a Change in fair value of warrant liabilities in the Condensed Consolidated Statements of Operations and Comprehensive Loss for the nine months ended September 30, 2024 and 2023, respectively. There were no exercises or redemptions of the Public Warrants or Private Warrants during the three and nine months ended September 30, 2024 or 2023.

Note 12. Restructuring

The Company committed to organizational restructurings during the first and third quarters of 2023, designed to decrease its costs and create a more streamlined organization to support its business. As of December 31, 2023, the Company recorded a restructuring liability of $0.5 million which is included in Accrued expenses and other current liabilities in the Condensed Consolidated Balance Sheets. As of September 30, 2024, the Company had no remaining restructuring liability.

The Company’s restructuring costs, primarily for cash severance and other severance costs, are allocated to the following operating expense categories as follows (in thousands):

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	Research and development		Selling, general and administrative		Total
Balance as of December 31, 2023	$	513	$	6	$	519
Restructuring charges incurred(1)	131		—		131
Cash payments and other adjustments(1)	(422)		(6)		(428)
Balance as of March 31, 2024	222		—		222
Cash payments and other adjustments(1)	(216)		—		(216)
Balance as of June 30, 2024	6		—		6
Cash payments and other adjustments(1)	(6)		—		(6)
Balance as of September 30, 2024	$	—	$	—	$	—
Current liabilities					$	—
Long-term liabilities					—
Total liabilities as of September 30, 2024					$	—

(1) Restructuring charges incurred and Cash payments and other adjustments include non-cash charges related to stock-based compensation expenses.

The Company’s restructuring activities were complete as of March 31, 2024. The Company does not expect to incur additional charges associated with these activities.

Note 13. Income Taxes

Income taxes for the three and nine months ended September 30, 2024 and 2023 were recorded at the Company’s estimated annual effective income tax rate, subject to adjustments for discrete events, if they occur. The Company’s estimated annual effective tax rate for the three and nine months ended September 30, 2024 was (0.17)% and (0.06)%, respectively. The Company’s estimated annual effective tax rate for each of the three and nine months ended September 30, 2023 was 0.0%. The primary reconciling items between the federal statutory rate of 21.0% and the Company’s overall effective tax rate for these periods were related to stock-based compensation, the valuation allowance recorded against the full amount of the Company’s net deferred tax assets and foreign taxes.

A valuation allowance is required when it is more likely than not that some portion or all of the Company’s deferred tax assets will not be realized. The realization of deferred tax assets depends on the generation of sufficient future taxable income during the period in which the Company’s related temporary differences become deductible. Management believes that based on the earnings history of the Company, it is more likely than not that the benefits of these assets will not be realized, and therefore, a full valuation allowance has been recorded against the Company’s net deferred tax assets as of September 30, 2024 and December 31, 2023.

Note 14. Related Party Transactions

Effective as of February 17, 2021, legacy Quantum-Si entered into a Master Services Agreement (“MSA”) with 4Catalyzer Corporation (“4C”), a company controlled by Dr. Jonathan Rothberg, a member of the Board, pursuant to which the Company may engage 4C to provide services such as general administration, facilities, information technology, financing, legal, human resources and other services, through future statements of work and under terms and conditions to be determined by the parties with respect to any services to be provided. The Company incurred expenses payable to 4C of $0.1 million for both the three months ended September 30, 2024 and 2023, and $0.2 million and $0.3 million for the nine months ended September 30, 2024 and 2023, respectively. These expenses included amounts for month-to-month sublease arrangements for office and laboratory spaces from 4C and certain administrative expenses. These amounts are included in Selling, general and administrative expenses in the Condensed Consolidated Statements of Operations and Comprehensive Loss.

Effective October 1, 2022, the Company entered into a Protein Engineering Collaboration (the “New Collaboration”) with Protein Evolution, Inc. (“PEI”) to develop technology and methods in the field of nanobodies and potentially other binders to produce novel biological reagents and related data. Dr. Rothberg serves as a member of the board of directors of PEI and the Rothberg family are controlling stockholders of PEI. As of September 30, 2024 there was no amount due from PEI to

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the Company related to the New Collaboration. As of December 31, 2023, the amount due from PEI to the Company related to the New Collaboration was $0.3 million. The New Collaboration was terminated effective May 1, 2024.

Effective November 1, 2022, the Company entered into an Advisory Agreement with Dr. Rothberg (the “Advisory Agreement”), pursuant to which Dr. Rothberg serves as a member of the Board, advises the Chief Executive Officer and the Board on strategic matters, and provides consulting, business development and similar services on matters relating to the Company’s current, future and potential scientific and strategic initiatives and such other consulting services reasonably requested from time to time. Pursuant to the Advisory Agreement, as compensation for the services provided thereunder, in March 2023, the Company granted Dr. Rothberg an option to purchase 250,000 shares of Class A common stock pursuant to the 2021 Plan.

Note 15. Commitments and Contingencies

Commitments

Licenses related to certain intellectual property:

The Company licenses certain intellectual property, some of which may be utilized in its current or future product offerings. To preserve the right to use such intellectual property, the Company is 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. As of September 30, 2024 and December 31, 2023, the Company had accrued royalties of approximately $0.1 million included in Accrued expenses and other current liabilities in the Condensed Consolidated Balance Sheets.

Other commitments:

The Company sponsors a 401(k) defined contribution plan covering all eligible U.S. employees (the “401(k) Plan”). Contributions to the 401(k) Plan are discretionary. The Company did not make any matching contributions to the 401(k) Plan for the three and nine months ended September 30, 2024 and 2023.

Contingencies

The Company is subject to claims in the ordinary course of business. The Company accrues contingent liabilities to the extent the liability is probable and estimable.

On May 16, 2024, a punitive class action lawsuit was filed in the Delaware Court of Chancery, styled Farzad v. HighCape Capital, et al. (the “Delaware Stockholder Litigation”). The Delaware Stockholder Litigation asserts breach of fiduciary duty claims against the former officers and directors of HighCape, including Kevin Rakin, Matt Zuga, David Colpman, Robert Taub and Antony Loebel, HighCape Capital Acquisition LLC and HighCape Capital L.P., aiding and abetting breach of fiduciary duty claims against Foresite Capital Management, LLC and Dr. Rothberg, and unjust enrichment claims against all defendants related to the Business Combination. The Delaware Stockholder Litigation complaint alleges that the transactions contemplated by the Business Combination were a product of an unfair process which was allegedly impacted by conflicts of interest, resulting in mispricing of the Business Combination. The complaint seeks, among other things, unspecified damages and attorneys’ fees and costs. On July 29, 2024, the defendants filed motions to dismiss the Delaware Stockholder Litigation complaint. There is no assurance that defendants will be successful in the defense of the litigation or that insurance will be available or adequate to fund any potential settlement or judgment or the litigation costs of the action. At the time of this filing the outcome of this matter is not estimable or probable.

In April 2023, the Company informed the contract manufacturer that had manufactured its Platinum® and Carbon™ instruments that it intended to wind down the relationship and transition to a different contract manufacturer. In October 2023, the former contract manufacturer filed a complaint against the Company in the State of Texas alleging breach of contract and made claims for economic damage and attorney costs. In January 2024, the suit was withdrawn and refiled in the State of Minnesota alleging similar claims. Although it is not possible to determine the potential financial exposure associated with the alleged claim at this time given its early stage, the Company believes it has a meritorious defense and intends to vigorously defend against all claims asserted in the complaint. At the time of this filing the outcome of this matter is not estimable or probable.

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The Company enters into agreements that contain indemnification provisions with other parties in the ordinary course of business, including business partners, investors, contractors, and the Company’s officers, directors and certain employees. The Company has agreed to indemnify and defend the indemnified party claims and related losses suffered or incurred by the indemnified party from actual or threatened third-party claims because of the Company’s activities or non-compliance with certain representations and warranties made by the Company. It is not possible to determine the maximum potential loss under these indemnification provisions due to the Company’s limited history of prior indemnification claims and the unique facts and circumstances involved in any particular case. To date, losses recorded in the Condensed Consolidated Statements of Operations and Comprehensive Loss in connection with the indemnification provisions have not been material.

Note 16. Subsequent Event

Nasdaq Deficiency Notice

On November 4, 2024, the Company received a notice (the “Notice”) from the Listing Qualifications Staff of The Nasdaq Stock Market LLC (“Nasdaq”) notifying the Company that, for the last 30 consecutive business days, the bid price of the Company’s Class A common stock had closed below $1.00 per share, the minimum closing bid price required by the continued listing requirements of Nasdaq Listing Rule 5450(a)(1) (the “Bid Price Requirement”). While the Notice has no immediate effect on the listing or trading of the Company’s Class A common stock on The Nasdaq Global Select Market, the Company has until May 5, 2025 to regain compliance. If the Company does not regain compliance with the Bid Price Requirement by the Compliance Date, the Company may be eligible for an additional 180 calendar day compliance period.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

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, our Quarterly Report on Form 10-Q for the quarter ended March 31, 2024 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 and nine months ended September 30, 2024 and 2023 present the financial position and results of operations of Quantum-Si Incorporated and its consolidated subsidiaries.

Overview

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.

Now that our Platinum® and Platinum Analysis Software system has launched, we intend to follow a systematic, phased approach to continue to successfully launch updates to our platform. We believe we are the first company to successfully enable NGPS on a semiconductor chip, thus digitizing a massive proteomics opportunity, which allows for a massively parallel solution at the ultimate level of sensitivity - single-molecule detection. We believe our platform, which is designed to streamline sequencing and data analysis at a lower instrument cost than legacy proteomic solutions, could allow our product to have wide utility across the study of the proteome. For example, we believe our platform could be used for biomarker discovery and disease detection, pathway analysis, immune response, vaccine development, quality assurance and quality control, among other applications.

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

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


	Three months ended September 30,								Nine months ended September 30,
	2024		2023		$ Change		% Change		2024		2023		$ Change	% Change
Revenue:
Product	$	764	$	216	$	548	253.7	%	$	1,776	$	654

Quantum-Si Inc [QSI] Filings
Quantum-Si Inc [QSIAW] Filings
10-Q	[2024-11-12]
10-Q	[2024-08-07]
10-Q	[2024-05-09]
10-K	[2024-02-29]
10-Q	[2023-11-09]
10-Q	[2023-08-07]
10-Q	[2023-05-11]
10-K	[2023-03-17]
10-Q	[2022-11-08]
10-Q	[2022-08-08]
10-Q	[2022-05-10]
10-K	[2022-03-01]
10-Q	[2021-11-15]
10-Q	[2021-08-16]
S-1	[2021-07-02]
10-Q	[2021-05-24]
10-K	[2021-03-30]
10-Q	[2020-11-13]
S-1	[2020-08-03]

Quantum-Si Inc [QSI] Filings

Quantum-Si Inc [QSIAW] Filings