Circle8 Group Inc 10-Q for FY2023 Q3
Circle8 Group Inc (CIRC)
About this 10-Q
Circle8 Group Inc filed this 10-Q on November 20, 2023, covering the quarter ended September 30, 2023 (FY2023 Q3).
Headline figures
Quarter ended September 30, 2023, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Net loss
- $1.27M
- compared with a net loss of $925.95K a year earlier
- Diluted EPS
- -$3.33
- compared with -$2.80 a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
For the quarterly period ended
or
For the transition period from ______________ to ______________
Commission File No.
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of | (I.R.S. Employer | |
| incorporation or organization) | Identification No.) |
| (Address of principal executive office) | (Zip Code) |
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
| The | ||||
| The |
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.
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).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, 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 | ☐ | ||
| ☒ | 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.
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 17, 2023, there were
TABLE OF CONTENTS
| i |
EXPLANATORY NOTE
In this Quarterly Report on Form 10-Q, and unless the context otherwise requires, the “Company,” “we,” “us,” and “our” refer to SeqLL Inc. and its wholly owned Subsidiaries taken as a whole.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains “forward-looking statements.” Forward-looking statements include, but are not limited to, statements that express our intentions, beliefs, expectations, strategies, predictions or any other statements relating to our future activities or other future events or conditions. These statements are based on current expectations, estimates and projections about our business based, in part, on assumptions made by management. These statements are not guarantees of future performance and involve risks, uncertainties and assumptions that are difficult to predict. Therefore, actual outcomes and results may, and are likely to, differ materially from what is expressed or forecasted in the forward-looking statements due to numerous factors discussed from time to time in this report and in other documents which we file with the Securities and Exchange Commission. In addition, such statements could be affected by risks and uncertainties related to:
| ● | our ability to consummate the transactions contemplated by the Merger Agreement or the Asset Purchase Agreement, each as defined in Note 1 to the condensed consolidated financial statements included in this report; |
| ● | our ability to relist our securities on the Nasdaq stock market; |
| ● | the success, cost and timing of our product development activities, including statements regarding the timing of initiation and completion of our research and development programs; |
| ● | developments regarding next generation sequencing technologies; |
| ● | our expectations regarding the market size and growth potential for our business; |
| ● | our ability to generate sustained revenue or achieve profitability; |
| ● | the potential for our identified research priorities to advance our technology; |
| ● | the pricing and expected gross margin for our products; and |
| ● | the other factors discussed in the “Risk Factors” section and elsewhere in this report. |
Any forward-looking statements speak only as of the date on which they are made, and except as may be required under applicable securities laws, we do not undertake any obligation to update any forward-looking statement to reflect events or circumstances after the filing date of this report.
| ii |
PART I. FINANCIAL INFORMATION
Item 1: Financial Statements
SeqLL Inc.
Condensed Consolidated Balance Sheets
| September 30, | December 31, | |||||||
| 2023 | 2022 | |||||||
| Assets | (Unaudited) | |||||||
| Current assets | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Marketable securities | ||||||||
| Accounts receivable, net of allowance for doubtful accounts of $ | ||||||||
| Other receivables | ||||||||
| Inventory | ||||||||
| Prepaid expenses | ||||||||
| Total current assets | ||||||||
| Other assets | ||||||||
| Property and equipment, net | ||||||||
| Operating lease right-of-use asset | ||||||||
| Other assets | ||||||||
| Total assets | $ | $ | ||||||
| Liabilities and Stockholders’ Equity | ||||||||
| Current liabilities | ||||||||
| Accounts payable | $ | $ | ||||||
| Accrued expenses | ||||||||
| Current portion of finance lease liability | ||||||||
| Current portion of operating lease liability | ||||||||
| Total current liabilities | ||||||||
| Non-current liabilities | ||||||||
| Finance lease liability, less current portion | ||||||||
| Operating lease liability, less current portion | ||||||||
| Non-convertible promissory notes - long-term | ||||||||
| Total non-current liabilities | ||||||||
| Total liabilities | ||||||||
| Commitments and contingencies (Note 9) | ||||||||
| Stockholders’ equity | ||||||||
| Preferred stock, $ | ||||||||
| Common stock, $ | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Accumulated other comprehensive income | ||||||||
| Total stockholders’ equity | ||||||||
| Total liabilities and stockholders’ equity | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
Reflects a 1-for-40 reverse stock split effective August 30, 2023
| 1 |
SeqLL Inc.
Condensed Consolidated Statements of Comprehensive Loss
(Unaudited)
| Three months ended September 30, | Nine months ended September 30, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| Revenue | ||||||||||||||||
| Sales | $ | $ | $ | $ | ||||||||||||
| Grant revenue | ||||||||||||||||
| Total revenue | ||||||||||||||||
| Cost of sales | ||||||||||||||||
| Gross profit | ||||||||||||||||
| Operating expenses | ||||||||||||||||
| Research and development | ||||||||||||||||
| General and administrative | ||||||||||||||||
| Total operating expenses | ||||||||||||||||
| Operating loss | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other (income) and expenses | ||||||||||||||||
| Investment income | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Unrealized loss (gain) on marketable securities | ( | ) | ||||||||||||||
| Realized loss on marketable securities | ||||||||||||||||
| Interest expense | ||||||||||||||||
| Net loss | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other comprehensive income | ||||||||||||||||
| Reclassification adjustment for net gains included in net loss | ( | ) | ||||||||||||||
| Net change | ( | ) | ||||||||||||||
| Total comprehensive loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
Reflects a 1-for-40 reverse stock split effective August 30, 2023
| 2 |
SeqLL Inc.
Condensed Consolidated Statements of Changes in Stockholders’ Equity
(Unaudited)
| Preferred Stock | Common Stock | Additional Paid-In | Accumulated Other Comprehensive | Accumulated | Total Stockholders’ | |||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Income (Loss) | Deficit | Equity | |||||||||||||||||||||||||
| Balance as of December 31, 2022 | $ | $ | | $ | $ | $ | ( | ) | ||||||||||||||||||||||||
| Stock-based compensation expense | - | - | ||||||||||||||||||||||||||||||
| Issuance of common stock, net of issuance costs of $ | ||||||||||||||||||||||||||||||||
| Other comprehensive income | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Net loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Balance as of March 31, 2023 | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||||||
| Stock-based compensation expense | - | - | ||||||||||||||||||||||||||||||
| Other comprehensive income | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Net loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Balance as of June 30, 2023 | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||||||
| Stock-based compensation expense | - | - | ||||||||||||||||||||||||||||||
| Net loss | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||
| Balance as of September 30, 2023 | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||||||
| Preferred Stock | Common Stock | Accumulated Other Comprehensive | Accumulated | Total Stockholders’ | ||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Income (Loss) | Deficit | Equity | |||||||||||||||||||||||||
| Balance as of December 31, 2021 | $ | $ | | $ | $ | $ | ( | ) | ||||||||||||||||||||||||
| Stock-based compensation expense | - | - | ||||||||||||||||||||||||||||||
| Net loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Balance as of March 31, 2022 | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||||||
| Stock-based compensation expense | - | - | ||||||||||||||||||||||||||||||
| Net loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Balance as of June 30, 2022 | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||||||
| Stock-based compensation expense | - | - | ||||||||||||||||||||||||||||||
| Net loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Balance as of September 30, 2022 | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
Reflects a 1-for-40 reverse stock split effective August 30, 2023
| 3 |
SeqLL Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
| Nine months ended September 30, | ||||||||
| 2023 | 2022 | |||||||
| Cash Flows from Operating Activities | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustment to reconcile net loss to net cash used in operating activities: | ||||||||
| Depreciation | ||||||||
| Write-off of obsolete inventory | ||||||||
| Unrealized gain on marketable equity securities | ( | ) | ||||||
| Realized (gain)/loss on marketable debt and equity securities | ( | ) | ||||||
| Provision for bad debts | ||||||||
| Stock-based compensation | ||||||||
| Non-cash lease expense | ||||||||
| Changes in operating assets and liabilities | ||||||||
| Accounts receivable, net | ||||||||
| Other receivables | ( | ) | ||||||
| Prepaid expenses | ( | ) | ||||||
| Inventory | ( | ) | ||||||
| Other assets | ( | ) | ||||||
| Accounts payable | ( | ) | ( | ) | ||||
| Accrued expenses | ( | ) | ( | ) | ||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| Cash Flows from Investing Activities | ||||||||
| Purchases of lab equipment | ( | ) | ( | ) | ||||
| Purchases of marketable debt securities | ( | ) | ( | ) | ||||
| Proceeds from sales of marketable equity securities | ||||||||
| Maturity of marketable debt securities | ||||||||
| Net cash provided by investing activities | ||||||||
| Cash Flows from Financing Activities | ||||||||
| Proceeds from issuance of common stock, gross | ||||||||
| Payment for issuance costs of common stock | ( | ) | ||||||
| Repayments of finance lease liability | ( | ) | ||||||
| Net cash provided by financing activities | ||||||||
| Net increase in cash and cash equivalents | ||||||||
| Cash and cash equivalents, beginning of period | ||||||||
| Cash and cash equivalents, end of period | $ | $ | ||||||
| Supplemental disclosure of cash flow information and non-cash financing transactions | ||||||||
| Right-of-use asset acquired through operating lease | $ | $ | ||||||
| Fixed assets acquired through finance lease | $ | $ | ||||||
| Leasehold improvements financed through tenant improvement allowance | $ | - | $ | |||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
| 4 |
SeqLL Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Note 1 – Nature of Operations and Basis of Presentation
SeqLL Inc. was incorporated as a Delaware corporation
on April 3, 2014. On April 8, 2014, SeqLL Inc. acquired a
On April 26, 2023, SeqLL Merger LLC (“SeqLL Merger Sub”) was formed in the State of Delaware as a wholly-owned subsidiary of the Company. SeqLL Merger Sub was formed solely for the purpose of completing the Merger (defined below). SeqLL Merger Sub has not carried on any activities as of September 30, 2023, except for activities incidental to its formation and activities undertaken in connection with the Merger Agreement (defined below) and the Merger.
On August 30, 2023, the Company executed one-for-40 reverse stock split. Please refer to the below for further detail.
Proposed Merger
On May 29, 2023, the Company, SeqLL Merger LLC, a Delaware limited liability company and a wholly-owned subsidiary of the Company (“Purchaser Sub”), Atlantic Acquisition Corp, a Delaware corporation (“Atlantic”), Atlantic Merger LLC, a Delaware limited liability company and a majority-owned subsidiary of Atlantic (“Atlantic Merger Sub”), Lyneer Investments, LLC, a Delaware limited liability company (“Lyneer”), IDC Technologies, Inc., a California corporation (“IDC”), and Lyneer Management Holdings LLC, a Delaware limited liability company (“Lyneer Management”), entered into an Agreement and Plan of Reorganization (as amended, the “Merger Agreement”), pursuant to which (i) Atlantic Merger Sub will be merged with and into Lyneer, with Lyneer continuing as the surviving entity (the “Lyneer Merger”), and (ii) Purchaser Sub will subsequently be merged with and into Lyneer, with Lyneer continuing as the surviving entity and as a wholly-owned subsidiary of the Company (the “SeqLL Merger” and, together with the Lyneer Merger, the “Mergers”).
The Merger Agreement contains customary representations and warranties from the parties, and each party has agreed to customary covenants applicable to such party, including, among others, covenants relating to (i) the conduct of their respective businesses in the ordinary course prior to the effective time of the Mergers and (ii) the requirement of each party to maintain and preserve intact their respective business organizations, assets, properties and material business relations.
The obligation of each of the Company, Atlantic and Lyneer, and their respective subsidiaries, to complete the Mergers is subject to the fulfillment (or waiver, to the extent permissible under applicable law) of certain customary closing conditions, plus the conditions that (i) the stockholders of the Company shall have approved the issuance of the shares of the Company’s common stock in the Mergers, (ii) the Company completes the Capital Raise to certain amount of gross proceeds as defined in the Merger Agreement, part of which will be used to pay the Cash Consideration, and (iii) the continued listing of the Company’s common stock on the Nasdaq Capital Market following the Mergers.
The Merger Agreement, as amended to the date hereof, contains certain termination rights, including (i) by mutual consent of the Company, Atlantic, IDC and Lyneer Management, (ii) by any of the Company, Atlantic, IDC or Lyneer Management upon a material breach of the representations or of any covenants or agreements of certain other parties, (iii) by any of the Company, Atlantic, IDC or Lyneer Management if the Mergers have not been consummated by November 30, 2023 (the “Termination Date”), (iv) by any of the Company, Atlantic, IDC or Lyneer Management if any governmental authority shall have issued an order or taken any other action permanently enjoining, restraining or otherwise prohibiting the transactions contemplated by the Merger Agreement, (v) by any of the Company, Atlantic, IDC or Lyneer Management if the special meeting of the Company’s stockholders has been held and the approval of the issuance of the common stock of the Company in the Mergers and the change of control of the Company that will be effected as a result of such issuance and certain other proposals contemplated by the related proxy statement was not approved, or (vi) by Atlantic, IDC or Lyneer Management if the Company is in breach of the rules and regulations of the Nasdaq Stock Market LLC (“Nasdaq”) or has received a notice from Nasdaq relating to the delisting or maintenance of listing of the Company’s common stock on Nasdaq and the Company fails to cure and maintain its listing on Nasdaq prior to the closing of the Mergers.
The terms of the Merger Agreement as further disclosed and described in the Company’s filings with the Securities and Exchange Commission (the “SEC”), which can be accessed by the public over the Internet at the SEC’s website at http:/www.sec.gov or on the Company’s website at www.seqll.com/.
| 5 |
Reverse Stock Split
On August 29, 2023, the
Company filed a Certificate of Amendment (the “Certificate of Amendment”) to the Company’s Third Amended and Restated
Certificate of Incorporation to (i) effect a reverse stock split of its issued common stock, par value $
The Reverse Stock Split and the Capital Stock Increase were approved by the stockholders as part of the Special Meeting. No fractional shares were issued as a result of the Reverse Stock Split. Instead, any fractional shares that would have resulted from the Reverse Stock Split were rounded up to the nearest whole number. The Reverse Stock Split affected all stockholders uniformly and did not alter any stockholder’s percentage interest in the Company’s outstanding Common Stock, except for adjustments that may have resulted from the treatment of fractional shares.
All of the Company’s historical share and per share information related to issued and outstanding common stock and outstanding options and warrants exercisable for common stock in these financial statements have been adjusted, on a retroactive basis, to reflect this 1-for-40 reverse stock split.
Asset Purchase Agreement
In connection with the execution and delivery of the Merger Agreement,
the Company entered into an asset purchase agreement (“Asset Purchase Agreement”) with SeqLL Omics, Inc., a Delaware corporation
(“SeqLL Omics”) on May 29, 2023. SeqLL Omics was formed by Daniel Jones, the Chairman of the Board and Chief Executive Officer
of the Company, and certain other Company employees, for the purpose of carrying on the Company’s pre-Merger business after the
Mergers. Subject to the terms and conditions of the Asset Purchase Agreement, SeqLL Omics has agreed to purchase from the Company, and
the Company has agreed to sell to SeqLL Omics, for a purchase price of $
| ● | all inventory; |
| ● | all leasehold interests in real estate; |
| ● | all contracts with customers, vendors and suppliers and all technology license agreements; |
| ● | all intellectual property and general intangibles; |
| ● | all equipment and other tangible assets used in, or related to, its business operations; and |
| ● | all accounts receivable. |
In addition to keeping its cash and cash equivalents in order to make a cash dividend to the Company’s stockholders, the Company will not sell or transfer, and SeqLL Omics will not acquire, certain contracts unrelated to the Company’s pre-Merger business operations, the Company’s corporate records or its rights under the Merger Agreement.
Pursuant to the Asset Purchase Agreement, SeqLL Omics will assume from the Company all obligations or liabilities of the Company related to its pre-Merger business operations, including those under the contracts and leases that it will purchase, other than the following:
| ● | obligations to pay any rent pursuant to the Company’s real estate lease prior to the first anniversary of the closing under the Asset Purchase Agreement; |
| ● | all obligations of the Company under the Merger Agreement; |
| ● | obligations of the Company that are not related to the Company’s current business operations and arise following the closing; |
| ● | amounts payable under the promissory note of the Company in the principal amount of $ |
| ● | any obligations under the excluded contracts. |
The Company will be responsible for the payment of transfer taxes, if any, related to the transfer of the transferred assets.
| 6 |
Common Stock Issuance
On February 15, 2023, the Company issued
Delisting from the Nasdaq Stock Market
On September
8, 2023, the Company received a letter from the Staff regarding compliance with Nasdaq Listing Rule 5550(a)(4) (the “Rule”),
which requires the Company to have a minimum of
On October 17, 2023, Nasdaq granted the Company a final extension until October 31, 2023 to regain compliance with this Rule. On November 10, 2023, the Company received a letter from Nasdaq advising the Company that in light of the Company’s inability to meet the terms of the Panel’s amended decision of October 17, 2023, the Panel had determined to delist the Company’s securities from Nasdaq and suspend trading in those securities effective at the open of trading on November 13, 2023. The letter further advised that Nasdaq will complete the delisting by filing a Form 25 Notice of Delisting with the Securities and Exchange Commission, after applicable appeal periods have lapsed. The Company has appealed the decision of the Panel and paid the applicable filing fee for such appeal. On November 17, 2023, Nasdaq advised the Company that the decision of the Panel will be reviewed by the Nasdaq Listing and Hearing Review Council, and that the Company may submit a memorandum in support of its appeal no later than December 1, 2023.
As previously disclosed, in connection with the transactions contemplated by the Merger Agreement, the Company has filed a registration statement on Form S-1 for the sale of its securities in connection with the closing of the transactions contemplated by the Merger Agreement. As previously reported, the Company had intended to cure its Nasdaq listing deficiency by consummating the transactions contemplated by the Merger Agreement and the proposed public offering by October 31, 2023. The Company has advised Nasdaq that it intends to proceed with such transactions and the proposed public offering of its securities and that it intends to relist its securities on Nasdaq in connection with the closing of such transactions and such public offering. There can be no assurance that the Company will be able to consummate the Mergers and relist its securities on Nasdaq.
| 7 |
Risks and Uncertainties
The Company is subject to a number of risks similar to other companies in its industries, including rapid technological change, competition from larger pharmaceutical and biotechnology companies and dependence on key personnel.
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 the Company’s control. The Company’s business could be impacted by, among other things, downturns in the financial markets or in economic conditions, inflation, increases in interest rates, and geopolitical instability, such as the military conflicts in Ukraine and the Israel-Hamas war. The Company cannot at this time fully predict the likelihood of one or more of the above events, their duration or magnitude or the extent to which they may negatively impact the Company’s business.
Basis of Presentation
The unaudited condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, SeqLL, LLC and SeqLL Merger Sub. All intercompany accounts and transactions have been eliminated in consolidation. The accompanying unaudited condensed consolidated financial statements of the Company have been prepared on the same basis as the annual audited consolidated financial statements and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary for the fair presentation of the Company’s condensed consolidated financial position as of September 30, 2023 and its results of operations for the three- and nine-months ended September 30, 2023 and 2022, and changes in stockholders’ equity and cash flows for the periods presented. The results disclosed in the condensed consolidated statements of operations and comprehensive loss for the three- and nine-months ended September 30, 2023 are not necessarily indicative of the results that may be expected for the year ending December 31, 2023. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto for the year ended December 31, 2022 filed with the Securities and Exchange Commission.
Note 2 – Significant Accounting Policies
During the nine-month period ended September 30, 2023, there were no changes to the significant accounting policies in relation to what was described in the Annual Report on Form 10-K for the year ended December 31, 2022, other than the items noted in the Recently Adopted Accounting Standards section below.
Use of Estimates
The preparation of the financial statements in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”), requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. Significant estimates include but are not limited to stock-based compensation expense and discount rates used to establish operating and finance lease liabilities. Actual results could differ from those estimates and changes in estimates may occur.
Inventory
Inventory consists of finished goods, work-in-process
and raw materials and is valued at the lower of cost or net realizable value, determined by the first-in, first-out (“FIFO”)
method. As the Company manufactures the finished goods and work-in-process materials, overhead costs are included in inventory. The Company
evaluates the carrying cost of finished goods, work-in-process, and raw materials items. To the extent that such costs exceed future demand
estimates and/or exhibit historical turnover at rates less than current inventory levels, the Company reduces the carrying value of the
applicable inventories.
| September 30, | December 31, | |||||||
| 2023 | 2022 | |||||||
| Raw materials | $ | $ | ||||||
| Work in process | ||||||||
| Total inventory | $ | $ | ||||||
In March 2023, the Company performed a detailed evaluation of its inventory and given the lack of sales activity in prior periods, the Company has written off its remaining inventory.
| 8 |
Stock-based Compensation
The Company’s stock-based compensation program awards include stock options and restricted stock units. 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 units is based on the fair value of the Company’s common stock on the date of the grant. The fair value of the awards are then expensed over the requisite service period, generally the vesting period, for each award.
The Company’s 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
The Company has periodically granted stock options and restricted stock units to non-employees for services pursuant to the Company’s stock plans at the fair market value on the respective dates of grant. Should the Company terminate any of its consulting agreements, the unvested options underlying the agreements would be cancelled. For awards granted to non-employees, compensation expense is recognized over the service period of the awards.
| September 30, | ||
| 2023 | ||
| Risk-free interest rate | ||
| Expected option life | ||
| Expected dividend yield | ||
| Expected stock price volatility |
Segments
The Company operates in a single business segment that includes the design, development and manufacturing of genetic analysis technologies.
Leases
In the first quarter of 2022, the Company adopted ASU No. 2016-02, Leases (Topic 842). The Company assesses its contracts at inception to determine whether the contract contains a lease, including evaluation of whether the contract conveys the right to control an explicitly or implicitly identified asset for a period of time. The Company classifies its leases as either finance or operating leases, with classification affecting the pattern of expense recognition in the Company’s condensed consolidated financial statements. The Company accounts for the leases of less than 12 months as short-term leases.
The Company recognizes right-of-use assets and lease liabilities that represent the net present value of future lease payments utilizing the discount rate implicit in the lease. If the implicit rate is not available, the Company uses incremental borrowing rate. The Company amortizes the right-of-use assets over the remaining terms of the specific lease.
The Company’s operating lease is included in Operating lease right-of-use asset, and Current portion of operating lease liability and Operating lease liability, less current portion in the condensed consolidated balance sheets.
The Company’s finance lease is included in Property and equipment, net, Current portion of finance lease liability and Finance lease liability, less current portion in the condensed consolidated balance sheets.
| 9 |
Net Loss per Share
Basic net loss per share is computed by dividing the net loss by the weighted-average number of shares of common stock outstanding for the period, without consideration for potentially dilutive securities if their effect is antidilutive. Diluted net loss per share is computed by dividing the net loss by the weighted average number of shares of common stock and dilutive common stock equivalents outstanding for the period determined using the treasury stock and if-converted methods. Dilutive common stock equivalents are comprised of restricted stock units, options outstanding under the Company’s stock option plan, and warrants. For all periods presented, there is no difference in the number of shares used to calculate basic and diluted shares outstanding as inclusion of the potentially dilutive securities would be antidilutive.
| September 30, | ||||||||
| 2023 | 2022 | |||||||
| Restricted stock units | ||||||||
| Stock options | ||||||||
| Warrants for common stock | ||||||||
Recently Adopted Accounting Standards
In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-13, Financial Instruments-Credit Losses: Measurement of Credit Losses on Financial Instruments. ASU 2016-13 requires measurement and recognition of expected credit losses for financial assets. In April 2019, the FASB issued clarification to ASU 2016-13 within ASU 2019-04, Codification Improvements to Topic 326, Financial Instruments-Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments, or ASU 2016-13. The guidance is effective for fiscal years beginning after December 15, 2022. The Company adopted this standard on January 1, 2023, which had no material impact on the Company’s condensed consolidated financial statements.
Recently Issued Accounting Standards
The Company does not believe that any recently issued but not yet effective accounting pronouncements will have a material effect on the accompanying condensed consolidated financial statements.
Note 3 – Accrued Expenses
| September 30, | December 31, | |||||||
| 2023 | 2022 | |||||||
| Accrued interest | $ | $ | ||||||
| Accrued bonuses | ||||||||
| Other | ||||||||
| $ | $ | |||||||
| 10 |
Note 4 – Fair Value Measurements
The accounting guidance defines fair value, establishes a consistent framework for measuring fair value and requires disclosure for each major asset and liability category measured at fair value on either a recurring or non-recurring basis. Fair value is defined as an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, the accounting guidance establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:
| Level 1: | Observable inputs such as quoted prices in active markets. |
| Level 2: | Inputs, other than the quoted prices in active markets that are observable either directly or indirectly. |
| Level 3: | Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions. |
There were no assets measured at fair value on a recurring basis as of September 30, 2023.
| Fair Value Measurements Using | ||||||||||||||||
| Fair Value | Level 1 | Level 2 | Level 3 | |||||||||||||
| U.S. government and agency obligations | $ | $ | ||||||||||||||
There were no assets or liabilities measured at fair value on a non-recurring basis during the three- and nine- month periods ended September 30, 2023 or 2022.
The carrying values of financial instruments such as accounts receivable, net, other receivables, prepaid expenses, accounts payable, and accrued expenses approximated fair value as of September 30, 2023 and December 31, 2022 due to their short-term maturities. The carrying value of the Company’s Non-Convertible Promissory Note approximated its fair value as of September 30, 2023 and December 31, 2022.
Note 5 – Stock-based Compensation
The Company’s 2014 Equity Incentive Plan
(the “2014 Plan”) permits the grant of options and restricted stock units for its common stock and shares of common stock
to its employees, board members and consultants for up to
As of September 30, 2023, there were
| Number of Options | Weighted- Average Exercise Price per Share | Weighted Average Remaining Contractual Term (in Years) | ||||||||||
| Outstanding as of December 31, 2022 | $ | |||||||||||
| Granted | $ | |||||||||||
| Outstanding as of September 30, 2023 | $ | |||||||||||
| Exercisable at September 30, 2023 | $ | |||||||||||
| 11 |
| Number of Shares | Weighted- Average Exercise Price per Share | Weighted Average Remaining Contractual Term (in Years) | ||||||||||
| Outstanding as of December 31, 2022 | $ | |||||||||||
| Granted | $ | |||||||||||
| Outstanding of September 30, 2023 | $ | |||||||||||
| Exercisable at September 30, 2023 | $ | |||||||||||
During the three-month periods ended September
30, 2023 and 2022, the Company recorded $
During the nine-month periods ended September
30, 2023 and 2022, the Company recorded $
As of September 30, 2023, there was approximately
$
Note 6 – Related Party Transactions
| September 30, | December 31, | |||||||
| 2023 | 2022 | |||||||
| Genomic Diagnostic Technologies | $ | $ | ||||||
| St. Laurent Institute | ||||||||
| St. Laurent Realty, Inc. | ||||||||
| $ | $ | |||||||
The above entities are affiliated with (1) William C. St. Laurent, a former member of the Company’s board of directors, (2) relatives of Mr. St. Laurent or (3) entities controlled by the St. Laurent family. St. Laurent Realty, Inc. and Genomic Diagnostic Technologies assisted the Company by previously providing corporate accounting support; St. Laurent Institute, a non-for-profit company, provided bioinformatics specialist support for certain sequencing services.
| 12 |
Note 7 – Notes Payable
From April 29, 2019 to April 29, 2020, the Company
entered into a series of non-convertible promissory notes (the “Promissory Notes”) with St. Laurent Investments LLC amounting
to $
For the three months ended September 30, 2023
and 2022, interest expense on the Promissory Notes was $
For the nine months ended September 30, 2023 and
2022, interest expense on the Promissory Notes was $
Note 8 – Common Stock Warrants
| Number of | ||||||||||
| Shares | ||||||||||
| Issuable | ||||||||||
| Upon | ||||||||||
| Exercise of | ||||||||||
| Outstanding | Exercise | |||||||||
| Issuance Date | Warrants | Price | Expiration Date | |||||||
| $ | ||||||||||
| $ | ||||||||||
| $ | ||||||||||
| $ | ||||||||||
| $ | ||||||||||
| $ | ||||||||||
| $ | ||||||||||
| $ | ||||||||||
| $ | ||||||||||
| $ | ||||||||||
| $ | ||||||||||
| $ | ||||||||||
| $ | ||||||||||
| $ | ||||||||||
| $ | ||||||||||
| $ | ||||||||||
| $ | ||||||||||
| $ | ||||||||||
| $ | ||||||||||
| $ | ||||||||||
| $ | ||||||||||
| $ | ||||||||||
During the nine-month period September 30, 2023, warrants to purchase
During the nine-month period September 30, 2022, warrants to purchase
| 13 |
Note 9 – Commitments and Contingencies
Operating Leases
The Company’s office space lease in Woburn,
Massachusetts (the “Woburn Lease”) for the Company’s corporate headquarters was on a month-to-month basis since November
2020 and was terminated in February 2022. The rent expense for this lease was $
On February 2, 2022, the Company entered into
a lease agreement for approximately
The Billerica Lease is classified as an operating
lease. At the inception date of the Billerica Lease, the Company recorded a right-of-use asset of $
In August 2022, the Company received the tenant
improvement allowance from the landlord, which totaled approximately $
As of September 30, 2023, the remaining lease
term was
The Company recorded expense related to the Billerica
Lease in the amount of $
The Company made cash payments of $
As of September 30, 2023, the Company has presented
$
Finance Lease
On May 1, 2023, the Company entered into a lease
agreement for laboratory equipment (the “Equipment Lease”). The Equipment Lease has a term of
As of September 30, 2023, the remaining lease
term was
The Company recorded expense related to the Equipment
Lease in the amount of $
The Company made cash payments of $
| 14 |
Interest expense related to the Equipment Lease
totaled $
Depreciation expense related to finance lease
assets totaled $
As of September 30, 2023, the Company has presented
$
| Operating Lease | Finance Lease | |||||||
| 2023 (remaining) | $ | $ | ||||||
| 2024 | ||||||||
| 2025 | ||||||||
| 2026 | ||||||||
| 2027 | ||||||||
| Thereafter | ||||||||
| Total undiscounted lease liabilities | $ | $ | ||||||
| Less effects of discounting | ||||||||
| Total lease liabilities | $ | $ | ||||||
| 15 |
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
You should read the following discussion of our financial condition and results of operations in conjunction with our unaudited condensed consolidated financial statements for the three and nine months ended September 30, 2023, and related notes included elsewhere in this filing. This discussion and analysis and other parts of this filing contain forward-looking statements based upon current beliefs, plans and expectations that involve risks, uncertainties and assumptions. Our actual results and the timing of selected events could differ materially from those anticipated in these forward-looking statements as a result of several factors, including those set forth under “Risk Factors” and elsewhere in this filing. You should carefully read the “Risk Factors” section of this filing to gain an understanding of the important factors that could cause actual results to differ materially from our forward-looking statements. Please also see the section entitled “Cautionary Note Regarding Forward-Looking Statements” in this filing.
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.
About SeqLL
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 condensed consolidated financial statements and the notes thereto within the Condensed Consolidated Financial Statements section of this report, and trends discussed in “Risk Factors” in Item 1-A of Part II of this report.
Proposed Merger Agreement
Terms used and not defined in the following discussion have the respective meanings set forth in Note 1 to our unaudited condensed consolidated financial statements included in Part I to this report.
On May 29, 2023, we entered into the Merger Agreement with Atlantic, Atlantic Merger Sub, SeqLL Merger Sub, Lyneer, and the Sellers subject to the approval of our stockholders at a special meeting, which approval has been obtained. Pursuant to the Merger Agreement and subject to the terms and conditions set forth therein, Atlantic Merger Sub will initially be merged into Lyneer, and SeqLL Merger Sub will then be merged into Lyneer, with Lyneer continuing as the surviving entity and as our wholly-owned subsidiary. In connection with the consummation of the Merger, we will be renamed “Atlantic International Corp.”
Lyneer, through its subsidiaries, specializes in the placement of temporary and temporary-to-permanent labor across various industries within the United States. Lyneer primarily places individuals in accounting and finance, administrative and clerical, information technology, legal, light industrial, and medical roles. It is also a leading provider of productivity consulting and workforce management solutions. Lyneer is headquartered in Lawrenceville, New Jersey and has more than 100 locations in the U.S.
For further description of the terms of the Merger Agreement, please refer to Note 1 to the condensed consolidated financial statements.
Results of operations
We incurred net losses of $1,267,668 and $925,949 for the three months ended September 30, 2023 and 2022, respectively, and net losses of $4,386,148 and $2,858,818 for the nine months ended September 30, 2023 and 2022, respectively. We had negative cash flow from operating activities of $3,984,869 and $2,913,571 for the nine months ended September 30, 2023 and 2022, respectively, and had an accumulated deficit of $22,894,832 as of September 30, 2023.
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, and geopolitical instability, such as the military conflict in Ukraine and the Israel-Hamas war. We cannot at this time fully predict the likelihood of one or more of the above events, their duration or magnitude or the extent to which they may negatively impact our business.
| 16 |
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 II of this report.
Comparison of the Three Months Ended September 30, 2023 and 2022
The following table summarizes our results of operations for the three months ended September 30, 2023 and 2022:
| Three months ended September 30, | ||||||||
| 2023 | 2022 | |||||||
| Revenue | ||||||||
| Sales | $ | - | $ | - | ||||
| Grant revenue | - | - | ||||||
| Total revenue | - | - | ||||||
| Cost of sales | - | - | ||||||
| Gross profit | - | - | ||||||
| Operating expenses | ||||||||
| Research and development | 411,332 | 428,771 | ||||||
| General and administrative | 877,612 | 489,729 | ||||||
| Total operating expenses | 1,288,944 | 918,500 | ||||||
| Operating loss | (1,288,944 | ) | (918,500 | ) | ||||
| Other (income) and expenses | ||||||||
| Investment income | (43,613 | ) | (9,981 | ) | ||||
| Unrealized loss (gain) on marketable securities | - | 242 | ||||||
| Realized loss on marketable securities | - | - | ||||||
| Interest expense | 22,337 | 17,188 | ||||||
| Net loss | (1,267,668 | ) | (925,949 | ) | ||||
| Other comprehensive income | ||||||||
| Reclassification adjustment for net gains included in net loss | - | - | ||||||
| Net change | - | - | ||||||
| Total comprehensive loss | $ | (1,267,668 | ) | $ | (925,949 | ) | ||
| Net loss per share - basic and diluted | $ | (3.33 | ) | $ | (2.80 | ) | ||
| Weighted average common shares - basic and diluted | 380,648 | 330,648 | ||||||
Revenues
Our revenues during the three-month periods ended September 30, 2023 and 2022, were $0. The Company does not expect to recognize revenues until a market for its sequencing technology further develops.
Research and Development Expenses
Research and development expenses decreased by $17,439, or 4%, from $428,771 for the three-month period ended September 30, 2022 compared to $411,332 for the three-month period ended September 30, 2023. The slight decrease in expenses was a result of the Company’s cost saving efforts in order to ensure that the Merger with Lyneer can occur. The Company expects to continue to incur expenses of a similar amount until the closing of the Merger with Lyneer.
| 17 |
General and Administrative Expenses
General and administrative expenses increased by $387,883, or 79%, from $489,729 for the three-month period ended September 30, 2022 compared to $877,612 for the three-month period ended September 30, 2023. The increase was attributable to additional legal and accounting fees associated with the Merger. General and administrative expenditures will continue to increase until the closing of the Merger with Lyneer.
Other Income/Loss
We recognized $43,613 of investment income related to cash invested in money market accounts and cash that is held in investments that have a maturity date of less three months during the three-month period ended September 30, 2023 as compared to $9,981 of income earned from money market accounts during the three-month period ended September 30, 2022. This increase in investment income was attributable to additional funds being held within income generating bank accounts during the three-months ended September 30, 2023, as well as the rise in interest rates. The Company expects to continue to earn interest income associated with its funds held in money market accounts. Interest expense was comparable for the three months ended September 30, 2023 and 2022.
Net Loss
Overall, the net loss increased by $341,719, or 37%, to $1,267,668 as compared to $925,949 for the three-month period ended September 30, 2022, primarily due to increased expenses associated with the Merger in the three-month period ended September 30, 2023.
Comparison of the Nine Months Ended September 30, 2023 and 2022
The following table summarizes our results of operations for the nine months ended September 30, 2023 and 2022:
| Nine months ended September 30, | ||||||||
| 2023 | 2022 | |||||||
| Revenue | ||||||||
| Sales | $ | - | $ | 1,177 | ||||
| Grant revenue | - | 77,482 | ||||||
| Total revenue | - | 78,659 | ||||||
| Cost of sales | - | 690 | ||||||
| Gross profit | - | 77,969 | ||||||
| Operating expenses | ||||||||
| Research and development | 1,769,770 | 1,129,286 | ||||||
| General and administrative | 2,721,405 | 1,700,340 | ||||||
| Total operating expenses | 4,491,175 | 2,829,626 | ||||||
| Operating loss | (4,491,175 | ) | (2,751,657 | ) | ||||
| Other (income) and expenses | ||||||||
| Investment income | (167,018 | ) | (18,457 | ) | ||||
| Unrealized loss (gain) on marketable securities | - | (54,266 | ) | |||||
| Realized loss on marketable securities | - | 106,324 | ||||||
| Interest expense | 61,991 | 73,560 | ||||||
| Net loss | (4,386,148 | ) | (2,858,818 | ) | ||||
| Other comprehensive income | ||||||||
| Reclassification adjustment for net gains included in net loss | (22,451 | ) | - | |||||
| Net change | (22,451 | ) | - | |||||
| Total comprehensive loss | $ | (4,408,599 | ) | $ | (2,858,818 | ) | ||
| Net loss per share - basic and diluted | $ | (11.78 | ) | $ | (8.65 | ) | ||
| Weighted average common shares - basic and diluted | 372,406 | 330,648 | ||||||
| 18 |
Revenues
Our revenues during the nine-month period ended September 30, 2023, were $0 as compared to revenues of $78,659 during the nine-month period ended September 30, 2022, representing a decrease of $78,659, or 100%. During the nine-month period ended September 30, 2023, we had no revenues from product sales, grants or research services as compared to revenue in the same period of 2022 of $77,482 from grants and $1,177 of revenue related to product sales. The decrease in revenue was due to the fact that we do not currently have any active grants under which we are providing services. The Company does not expect to recognize revenues until a market for its sequencing technology is fully established.
Gross Profit
Gross profit for the nine-month period ended September 30, 2023 was $0, as compared to gross profit of $77,969 for the nine-month periods ended September 30, 2022, which represented a 100% decrease due to the fact that we did not have any revenue-generating transactions in the nine-month period ended September 30, 2023. The Company, similar to revenues, does not expect to recognize gross profit until a market for its sequencing technology further develops.
Research and Development Expenses
Research and development expenses increased by $640,484, or 57%, from $1,129,286 for the nine-month period ended September 30, 2022 compared to $1,769,770 for the nine-month period ended September 30, 2023. The increase in expenses was a result of our progressive return to research and development activities to pre-COVID-19 levels prior to entering into the Merger agreement with Lyneer. Going forward, we expect to incur less expenses related to research and development activities until after the closing of the Merger with Lyneer.
General and Administrative Expenses
General and administrative expenses increased by $1,021,065 or 60%, from $1,700,340 for the nine-month period ended September 30, 2022 compared to $2,721,405 for the nine-month period ended September 30, 2023. The increase was primarily attributable to approximately $475,000 in legal and professional fees related to the Merger, increased operating expenses of approximately $180,000 related to accounting, legal, insurance and audit related expenses, approximately $170,000 of additional incremental expenses incurred associated with the Merger with Lyneer, and approximately $78,000 related to the write-off of uncollectible receivables. General and administrative expenditures will continue to increase until the closing of the Merger with Lyneer.
Other Income/Loss
We recognized $167,018 of investment income, of which $106,051 related to investment income associated with marketable debt securities and $60,967 of investment income related to cash invested in money market accounts and cash that was held in investments that have a maturity date of less three months during the three-month period ended September 30, 2023 as compared to $0 of investment of income related to marketable debt securities and $18,457 of income earned from money market accounts during the nine-month period ended September 30, 2022. This increase in investment income was primarily attributable to the maturity of marketable debt securities during the nine-months ended September 30, 2023. We recognized $52,058 in net realized and unrealized losses on the marketable equity securities during the nine-month period ended September 30, 2022. We expect to continue to earn interest income associated with our funds held in money market accounts. Interest expense was comparable for the nine months ended September 30, 2023 and 2022.
| 19 |
Net Loss
Overall, the net loss increased by $1,527,330, or 53%, to $4,386,148 for the nine-month period ended September 30, 2023 as compared to $2,858,818 for the nine-month period ended September 30, 2022, primarily due to increased expenses associated with the Merger in the nine-month period ended September 30, 2023.
Liquidity and Capital Resources
The accompanying condensed 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. We experienced negative cash flows from operations of $3,984,869 for the nine-month period ended September 30, 2023, which included our costs and expenses related to the transactions contemplated by the Merger Agreement. As a result of our recent common stock offerings in August 2021 and February of 2023 and the maturity of our marketable debt securities, we had cash and cash equivalents of $3,727,154 at September 30, 2023. Therefore, we estimate that, if the Merger is not consummated and we no longer have the ongoing costs and expenses associated with that transaction, our available cash resources will be sufficient to fund our operations for at least one year from the date this report is filed with the SEC.
As of September 30, 2023, we had approximately $3.7 million in cash and cash equivalents. 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 September 30, 2023, we had an accumulated deficit of $22,894,832.
On February 15, 2023, we issued 50,000 shares of common stock to investors at a price of $36.00 per share (after the Reverse Stock Split). The gross proceeds of the issuance were $1.8 million. We incurred offering expenses of approximately $0.3 million, which were paid with proceeds from the common stock issuance.
We believe the net proceeds from our February 2023 common stock issuance will enable us to fund our operations for at least one year from the date this report is filed with the SEC. However, our forecast of the period of time through which our financial resources will be adequate to support our operations is a forward-looking estimate 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 and 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 $1.5 million in 2023 in support of our 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. |
If the Merger is not consummated, 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 experience significant dilution, and any new equity securities we issue could have rights, preferences and privileges superior to those of holders of our common stock.
| 20 |
Cash Flows
The following table sets forth the primary sources and uses of cash and cash equivalents for each of the periods presented.
| Nine Months Ended | ||||||||
| September 30, | ||||||||
| 2023 | 2022 | |||||||
| Cash proceeds (used in) provided by: | ||||||||
| Operating activities | $ | (3,984,869 | ) | $ | (2,913,571 | ) | ||
| Investing activities | 4,057,625 | 3,351,964 | ||||||
| Financing activities | 1,473,873 | - | ||||||
| Net increase in cash and cash equivalents | $ | 1,546,629 | $ | 438,393 | ||||
Net cash used in operating activities
Net cash used in operating activities was approximately $3.9 million and $2.9 million for the nine months ended September 30, 2023 and 2022, respectively. The increase in operating spending was a result of our progressive return to research and development activities to levels of pre-COVID-19 pandemic, prior to the announcement of the Merger. In addition, we experienced an increase in our general and administrative associated with legal, accounting, and consulting fees in connection with the Merger with Lyneer. The Company expects to continue to incur additional expenses until the closing of the Merger with Lyneer.
Net cash provided by investing activities
Net cash provided by investing activities was approximately $4.1 million and $3.4 million for the nine months ended September 30, 2023 and 2022, respectively. The increase was primarily attributable to the increase in sales and maturities of marketable securities during the nine months ended September 30, 2023 as compared to the nine month period ended September 30, 2022. The Company currently does not have investments in marketable securities, but instead will realize income from funds held in money market accounts until the conclusion of the Merger with Lyneer.
Net cash provided by financing activities
Net cash provided by financing activities was $1.5 million, and $0, for the nine-month periods ended September 30, 2023 and 2022, respectively. We issued 50,000 shares of common stock to investors at a price of $36.00 per share during the nine-month period ended September 30, 2023 (after the effect of the Reverse Stock Split). The gross proceeds of the issuance was $1.8 million. We incurred offering costs of approximately $0.3 million, which were paid with proceeds from the common stock issuance. No such transaction occurred during the nine-month period ended September 30, 2022.
Recent Accounting Pronouncements
In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-13, Financial Instruments-Credit Losses: Measurement of Credit Losses on Financial Instruments. ASU 2016-13 requires measurement and recognition of expected credit losses for financial assets. In April 2019, the FASB issued clarification to ASU 2016-13 within ASU 2019-04, Codification Improvements to Topic 326, Financial Instruments-Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments, or ASU 2016-13. The guidance is effective for fiscal years beginning after December 15, 2022. We adopted this standard on January 1, 2023, which had no material impact on our condensed consolidated financial statements.
We do not believe that any other recently issued but not yet effective accounting pronouncements will have a material effect on the accompanying consolidated financial statements.
| 21 |
Critical Accounting Policies and Estimates
We prepare our financial statements and accompanying notes in conformity with accounting principles generally accepted in the United States of America, which require management to make estimates and assumptions about future events that affect reported amounts. Estimations are considered critical accounting estimates based on, among other things, its impact on the portrayal of our financial condition, results of operations, or liquidity, as well as the degree of difficulty, subjectivity, and complexity in its deployment. Critical accounting estimates address accounting matters that are inherently uncertain due to unknown future resolution of such matters. Management routinely discusses the development, selection, and disclosure of each critical accounting estimates.
Other than those noted within Note 2 to our unaudited condensed consolidated financial statements, there have been no significant changes to our critical accounting policies and estimates during the three- and nine-month periods ended September 30, 2023 as compared to the information contained in our 2022 Annual Report on Form 10-K for the year ended December 31, 2022 filed with the SEC. Reference should be made to the consolidated financial statements and related notes included in the 2022 Form 10-K for a full description of other significant accounting policies.
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 SEC, which may make it more difficult for investors and securities analysts to evaluate our company. As a result, investor confidence in our company and the market price of our common stock may be materially and adversely affected.
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Item 3. Quantitative and Qualitative Disclosures about Market Risk
Not required under Regulation S-K for smaller reporting companies.
Item 4. Controls and Procedures.
Evaluation of disclosure controls and procedures
Our Chief Executive Officer (who is our principal executive officer) and Chief Financial Officer (who is our principal financial officer), conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”) as of September 30, 2023. As of September 30, 2023, based upon the evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective. Disclosure controls and procedures designed to reasonably ensure that information required to be disclosed in our reports filed under the Exchange Act, such as this report, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.
Changes in Internal Control Over Financial Reporting
There was no change in our internal control over financial reporting that occurred during the most recent fiscal quarter that materially affected, or were reasonably likely to materially affect, our internal control over financial reporting.
Inherent Limitations on Effectiveness of Controls
Our disclosure controls and procedures and internal control over financial reporting are designed to reasonably ensure that designed control objectives are achieved. Our management recognizes that any control system, no matter how well designed and operated, is based upon certain judgments and assumptions and cannot provide absolute assurance that its objectives will be met. Similarly, an evaluation of controls cannot provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, have been detected.
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PART II - OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 1A. Risk Factors
There have been no material changes to the risk factors set forth in the section titled “Risk Factors” included in our Annual Report on Form 10-K for the year ended December 31, 2022 filed with the SEC on March 16, 2023 (our “Annual Report”), except for the risk factors relating to the Merger, the Merger Agreement and the Asset Sale Agreement set forth in our Information Statement dated August 10, 2023 filed with the SEC on August 10, 2023 (the “Information Statement”) and except as follows:
Our securities were recently delisted by Nasdaq and our failure to relist our securities in the future, could limit investors’ ability to effect transactions in our securities and subject us to additional trading restrictions.
As previously reported, on September 8, 2023, we received a letter from the Listing Qualifications Staff ( the “Staff”) of The Nasdaq Stock Market LLC (“Nasdaq”) regarding compliance with Nasdaq Listing Rule 5550(a)(4) (the “Rule”), which required us to have a minimum of 500,000 publicly held shares, exclusive of shares held by officers, directors and 10% stockholders. On November 10, 2023, we received a letter from Nasdaq advising us that in light of our inability to meet the requirements of the Rule by October 31, 2023, Nasdaq had determined to delist our securities from Nasdaq and suspend trading in those securities effective at the open of trading on November 13, 2023. The letter further advised that Nasdaq will complete the delisting by filing a Form 25 Notice of Delisting with the Securities and Exchange Commission, after applicable appeal periods have lapsed. We have appealed the decision of Nasdaq and paid the applicable filing fee for such appeal. On November 17, 2023, Nasdaq advised us that the decision to delist our securities will be reviewed by the Nasdaq Listing and Hearing Review Council, and that we may submit a memorandum in support of our appeal no later than December 1, 2023.
As previously disclosed, in connection with the transactions contemplated by the Merger Agreement, we have filed a registration statement on Form S-1 for the sale of our securities in connection with the closing of the transactions contemplated by the Merger Agreement. As previously reported, we had intended to cure our Nasdaq listing deficiency by consummating the transactions contemplated by the Merger Agreement and the proposed public offering by October 31, 2023. We have advised Nasdaq that we intends to proceed with such transactions and the proposed public offering of our securities and that we intend to relist our securities on Nasdaq in connection with the closing of such transactions and such public offering.
There can be no assurance that our re-listing application will be approved or that we will be able to relist our securities on the Nasdaq exchange. Even if our securities are listed on Nasdaq following the Merger, we may be unable to maintain the listing of our securities in the future.
If our re-listing application is not approved, there could be significant material adverse consequences to us, including:
| ● | the possibility that Atlantic or Lyneer will terminate the Merger Agreement due to our failure to meet a material condition to the consummation of the Merger; |
| ● | a limited availability of market quotations for our securities; |
| ● | a limited amount of news and analyst coverage for our company; and |
| ● | a decreased ability to obtain capital or pursue acquisitions by issuing additional equity or convertible securities. |
Our business involves significant risks. You should carefully consider the risks and uncertainties described in the Annual Report and the Information Statement, together with all of the other information in this Quarterly Report on Form 10-Q, as well as our audited consolidated financial statements and related notes as included in our Annual Report. The risks and uncertainties described in our Annual Report, the Information Statement and this report are not the only ones we face. Additional risk and uncertainties that we are unaware of or that we deem immaterial may also become important factors that adversely affect our business. The realization of any of these risks and uncertainties could have a material adverse effect on our reputation, business, financial condition, results of operations, growth and future prospects as well as our ability to accomplish our strategic objectives. In that event, the market price of our common stock could decline and you could lose part or all of your investment.
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Item 2. Unregistered Securities Sales of Equity Securities and Use of Proceeds
Sales of Unregistered Securities
There have been no sales of unregistered securities within the period covered by this report that would be required to be disclosed pursuant to Item 701 of Regulation S-K.
Repurchases of Shares or of Company Equity Securities
None.
Item 3. Default Upon Senior Securities
None
Item 4. Mine Safety Disclosures.
Not applicable.
Item 5. Other Information
None.
Item 6. Exhibits
The following documents are filed as a part of this report or incorporated herein by reference:
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SIGNATURES
Pursuant to the requirements of Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| SEQLL INC. | |
| Date: November 20, 2023 | /s/ Daniel Jones |
| Daniel Jones | |
| Chief Executive Officer | |
| (Principal Executive Officer) | |
| Date: November 20, 2023 | /s/ Frances Scally |
| Frances Scally | |
| Chief Financial Officer | |
| (Principal Financial and Accounting Officer) |
26
Exhibit 31.1
SEQLL INC.
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
PURSUANT TO RULE 13A-14(A)
I, Daniel Jones, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of SeqLL, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: November 20, 2023
| By: | /s/ Daniel Jones | ||
| Name: | Daniel Jones | ||
| Title: | Chief Executive Officer | ||
Exhibit 31.2
SEQLL INC.
CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER
PURSUANT TO RULE 13A-14(A)
I, Frances Scally, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of SeqLL, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: November 20, 2023
| By: | /s/ Frances Scally | ||
| Name: | Frances Scally | ||
| Title: | Chief Financial Officer | ||
Exhibit 32.1
SEQLL INC.
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of SeqLL, Inc. (the “Company”) on Form 10-Q for the period ended September 30, 2023, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Daniel Jones, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. ss.1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:
(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.
| By: | /s/ Daniel Jones | |
| Name: | Daniel Jones | |
| Title: | Chief Executive Officer | |
| Date: | November 20, 2023 |
Exhibit 32.2
SEQLL INC.
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of SeqLL, Inc. (the “Company”) on Form 10-Q for the period ended September 30, 2023, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Frances Scally, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. ss.1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:
(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.
| By: | /s/ Frances Scally | |
| Name: | Frances Scally | |
| Title: | Chief Financial Officer | |
| Date: | November 20, 2023 |