SEQLL INC. You should read the following discussion of our financial condition and results
of operations in conjunction with our audited consolidated financial statements
for the year ended
Overview
This overview and outlook provide a high-level discussion of our operating results and significant known trends that affect our business. We believe that an understanding of these trends is important to understanding our financial results for the periods being reported herein as well as our future financial performance. This summary is not intended to be exhaustive, nor is it intended to be a substitute for the detailed discussion and analysis provided elsewhere in this report.
AboutSeqLL
We are an early commercial-stage life sciences instrumentation and research services company engaged in the development of scientific assets and novel intellectual property across multiple "omics" fields. We leverage our expertise with True Single Molecule Sequencing (tSMS) technology enabling researchers and clinicians to contribute major advancements to scientific research and development.
Our customers are primarily the early adopters of genomics technology and tSMS in academic research, biomarker discovery, and molecular diagnostic product development.
Our financial results have been, and will continue to be, impacted by several significant trends, which are described below. While these trends are important to understanding and evaluating our financial results, this discussion should be read in conjunction with our consolidated financial statements and the notes thereto within the Consolidated Financial Statements section of this report, and trends discussed in "Risk Factors" within the Business& Market Information section of this report.
We incurred net losses of
Results of operations may be adversely affected by various factors that could
cause economic uncertainty and volatility in the financial markets, many of
which are beyond our control. Our business could be impacted by, among other
things, downturns in the financial markets or in economic conditions, inflation,
increases in interest rates, the ongoing effects of the COVID-19 pandemic,
including resurgences and the emergence of new variants, and geopolitical
instability, such as the military conflict in the
Our financial results have been, and will continue to be, impacted by several significant trends, which are described below. While these trends are important to understanding and evaluating our financial results, this discussion should be read in conjunction with our consolidated financial statements and the notes thereto within the Consolidated Financial Statements section of this report, and trends discussed in "Risk Factors" in Item 1-A of Part I of this report.
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Results of Operations
Comparison of the Years Ended
The following table summarizes our results of operations for the years ended
SeqLL Inc.
Consolidated Statements of Operations and Comprehensive Loss
December 31,
2022 2021
Revenue
Sales $ 1,177 $ 48,021
Grant revenue 77,482 161,974
Total revenue 78,659 209,995
Cost of sales 690 57,690
Gross profit 77,969 152,305
Operating expenses
Research and development 1,568,266 530,076
General and administrative 2,506,851 2,170,857
Total operating expenses 4,075,117 2,700,933
Operating loss (3,997,148 ) (2,548,628 )
Other (income) and expenses
Interest and dividend income (44,879 ) (36,463 )
Other income - (190,193 )
Unrealized (gain)/loss on marketable equity securities (54,508 ) 43,078
Realized loss on marketable equity securities 106,324 -
Change in fair value of convertible notes - 195,962
Loss on extinguishment of convertible notes - 934,257
Interest expense 90,748 208,289
Net loss (4,094,833 ) (3,703,558 )
Other comprehensive income
Unrealized gain on marketable debt securities 22,451 -
Total comprehensive loss $ (4,072,382 ) $ (3,703,558 )
Net loss per share - basic and diluted $ (0.34 ) $ (0.51 )
Weighted average common shares - basic and diluted 11,886,379 7,216,001
Revenues
Our revenues during the year ended
Gross Profit
Gross profit for the year ended
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Research and Development Expenses
Research and development expenses increased by
General and Administrative Expenses
General and administrative expenses increased by
Interest and Other Income/Loss
We recognized
We recognized zero other income in the year ended
We recognized
We recognized
We recognized interest expense of
Net Loss
Overall, the net loss increased by
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Liquidity and Capital Resources
The accompanying consolidated financial statements have been prepared on a going
concern basis, which contemplates the realization of assets and the satisfaction
of liabilities in the normal course of business. Even though we experienced
negative cash flows from operations of
Cash and cash equivalents decreased
Since inception, we have funded our operations primarily through equity and debt
financings, as well as from modest sales of products and research services. As
of
On
We believe our cash on hand, together with our cash generated from commercial sales and research activity, will enable us to fund our operations for at least one year from the date of this Report. However, our forecast of the period of time through which our financial resources will be adequate to support our operations is a forward-looking statement that involves risks and uncertainties, and actual results could vary materially. We have based this estimate on assumptions that may prove to be wrong, and we could use our capital resources sooner than we expect.
Our future capital requirements will depend on many factors, including:
? our ability to successfully further develop our technologies and create
innovative products in our markets, including the costs associated with the
development of our tSMS platform across multiple market segments, for which we
have budgeted approximately
collaborative efforts in detection tools for heart disease and cancer, and
chromatin mapping in genome biology;
? scientific progress in research and development of our collaborative programs,
including the costs of obtaining, maintaining and enforcing our patents and
other intellectual property rights, as well as the costs associated with any
product or technology that we may in-license or acquire; and
? the terms and timing of establishing and maintaining collaborations, licenses
and other similar arrangements; including the need to enter into other
collaborations to enhance or complement our product and service offerings.
We plan to continue seeking additional financing sources from time to time to meet our working capital requirements, make continued investment in research and development and make capital expenditures needed for us to maintain and expand our business. We may not be able to obtain additional financing on terms favorable to us, if at all. If we are unable to obtain adequate financing or financing on terms satisfactory to us when we require it, or if we expend capital on projects that are not successful, our ability to continue to support our business growth and to respond to business challenges could be significantly limited. In addition, if we raise additional funds through further issuances of equity or debt securities, our existing stockholders could suffer significant dilution, and any new equity securities we issue could have rights, preferences and privileges superior to those of holders of our common stock.
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Cash Flows
The following table sets forth the primary sources and uses of cash and cash equivalents for each of the periods presented.
For the Years Ended
December 31,
2022 2021
Cash proceeds provided by (used in):
Operating activities $ (3,662,568 ) $ (1,989,877 )
Investing activities 1,827,965 (5,990,912 )
Financing activities - 11,995,917
Net (decrease) increase in cash and cash equivalents
Net cash used in operating activities
Net cash used in operating activities was approximately
We anticipate our research and development efforts and on-going general and administrative costs will generate negative cash flows from operating activities for the foreseeable future.
Net cash used provided by/used in investing activities
Net cash provided by investing activities was approximately
Net cash provided by financing activities
Net cash provided by financing activities was
Recent Accounting Pronouncements
In
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In
We do not believe that any other recently issued but not yet effective accounting pronouncements are expected to have a material effect on our consolidated financial statements.
Critical Accounting Policies and Estimates
Stock-based Compensation
Our share-based compensation program grant awards include stock options and restricted stock awards to employees, directors and consultants. The fair value of stock option grants is estimated as of the date of the grant using the Black-Scholes option pricing model. The fair value of restricted stock awards is based on the fair value of our common stock on the date of the grant. The fair value of the stock-based awards is then expensed over the requisite service period, generally the vesting period, for each award.
Our expected stock price volatility assumption is based on the volatility of
comparable public companies. The expected term of a stock option granted to
employees and directors (including non-employee directors) is based on the
average of the contractual term (generally 10 years) and the vesting period. For
non-employee options, the expected term is the contractual term. The risk-free
interest rate is based on the yield of
We have periodically granted stock options and restricted stock awards to consultants for services, pursuant to our stock plans at the fair market value on the respective dates of grant. Should we terminate any of our consulting agreements, the unvested options underlying the agreements would be cancelled. For awards granted to consultants and non-employees, compensation expense is recognized over the vesting period of the awards, which is generally the period services are rendered by such consultants and non-employees.
We granted stock options to purchase an aggregate of 1,085,000 and 100,000
shares of common stock in the years ended
Revenue Recognition
Our revenue is generated primarily from the sale of products and gene sequencing services. Product revenue primarily consists of sales of genetic sequencing equipment and sequencing reagent kits.
We recognize revenue in accordance with Accounting Standards Codification ("ASC") Topic 606, Revenue from Contracts with Customers ("ASC 606"). Under ASC 606, we recognize revenue when control of our products and services is transferred to our customers in an amount that reflects the consideration we expect to receive from our customers in exchange for those products and services. To determine the appropriate amount of revenue to be recognized for arrangements determined to be within the scope of ASC 606, we follow the five-step process. 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 when (or as) the performance obligations have been satisfied. 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. We only apply the five-step process to contracts when it is probable that we will collect consideration we expect to be entitled to in exchange for the goods or services we transfer to the customer.
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We evaluate contingent payments to estimate the amount which is not probable of a material reversal to include in the transaction price using the most likely amount method. Future payments that are not within our control and are not considered probable of being achieved until the contingencies are resolved.
Revenue from product sales, including customized sequencing instruments and sequencing reagent kits and off-the-shelf consumables, is recognized generally upon delivery, which is when control of the product is deemed to be transferred.
Revenue from gene sequencing services, using the tSMS platform, is recognized generally as the services are provided to the customer. The components of the sequencing process, including reagent kits and off-the-shelf consumables, sample loader and sequencer, are not distinct within the context of the genetic sequencing service contract. This is because in a gene sequencing service contract the reagent kits and other components, such as off-the-shelf consumables, used in the sequencing process become required inputs to achieve the specified gene sequencing analysis, and the components in the sequencing process are sequential in nature and highly interrelated as they work together to generate sample-specific data.
As our standard payment terms are less than one year, we have elected the practical expedient under ASC 606-10-32-18 to not assess whether a contract has a significant financing component.
We have elected to exclude sales tax from revenue. We generally have no
obligations for returns, refunds and other similar obligations and do not
provide separate equipment warranties. We recognized
Grant Revenue
Our grant revenues are derived from research programs by various departments of
the
Grants awarded to us for research and development by government entities are outside the scope of the contracts with customers and contributions guidance. This is because these granting entities are not considered to be customers and are not receiving reciprocal value for their grant support provided to us. These grants provide us with payments for certain types of expenditures in return for research and development activities over a contractually defined period.
We recognize
Investments in marketable securities
We account for our investments in debt securities in accordance with Accounting
Standards Codification ("ASC") 320, Investments -
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We account for our investments in equity securities in accordance with ASC
321, Investments -
We may sell our debt or equity securities in response to changes in interest rates, risk/reward characteristics, liquidity needs or other factors.
JOBS Act
Section 107 of the JOBS Act provides that an "emerging growth company" can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In other words, an emerging growth company can delay the adoption of new or revised accounting standards until those standards would otherwise apply to private companies. We have irrevocably elected to avail ourselves of this exemption from new or revised accounting standards and, therefore, we will not be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies.
For as long as we remain an emerging growth company under the recently-enacted JOBS Act, we will, among other things:
? be permitted to have only two years of audited financial statements and only
two years of related selected financial data and management's discussion and
analysis of financial condition and results of operations disclosure;
? be entitled to rely on an exemption from compliance with the auditor
attestation requirement in the assessment of our internal control over
financial reporting pursuant to the Sarbanes-Oxley Act;
? be entitled to reduced disclosure obligations about executive compensation
arrangements in our periodic reports, registration statements and proxy
statements; and
? be exempt from the requirements to seek non-binding advisory votes on executive
compensation or golden parachute arrangements.
We currently intend to take advantage of some or all of the reduced regulatory and reporting requirements that will be available to us so long as we qualify as an "emerging growth company." Among other things, this means that our independent registered public accounting firm will not be required to provide an attestation report on the effectiveness of our internal control over financial reporting so long as we qualify as an emerging growth company, which may increase the risk that weaknesses or deficiencies in our internal control over financial reporting go undetected.
Likewise, so long as we qualify as an emerging growth company, we may elect not
to provide certain information, including certain financial information and
certain information regarding compensation of our executive officers, that we
would otherwise have been required to provide in filings we make with the
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