QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) | |
(Address of Principal Executive Offices) |
(Zip Code) |
Title of each class |
Trading symbol(s) |
Name of each exchange on which registered | ||
QNGY W S |
Large accelerated filer | ☐ | Accelerated filer | ☐ | |||
☒ | Smaller reporting company | |||||
Emerging growth company |
Page |
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1 |
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ITEM 1. |
1 |
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1 |
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2 |
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3 |
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4 |
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6 |
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7 |
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ITEM 2. |
28 |
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ITEM 3. |
41 |
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ITEM 4. |
41 |
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43 |
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ITEM 1. |
43 |
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ITEM 1A. |
44 |
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ITEM 2. |
75 |
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ITEM 3. |
75 |
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ITEM 4. |
75 |
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ITEM 5. |
75 |
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ITEM 6. |
75 |
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79 |
March 31, 2022 |
December 31, 2021 |
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Assets |
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Current assets: |
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Cash and cash equivalents |
$ | $ | ||||||
Restricted cash |
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Accounts receivable, net of allowance for doubtful accounts of $ |
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Inventory |
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Prepaid expenses and other current assets |
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Total current assets |
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Property and equipment, net |
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Other long-term assets |
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Total assets |
$ | $ | ||||||
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Liabilities and stockholders’ equity / (deficit) |
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Current liabilities |
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Accounts payable |
$ | $ | ||||||
Accrued expenses |
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Accrued settlement liability |
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Other current liabilities |
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Short-term debt |
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Related party payable |
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Total current liabilities |
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Long-term debt |
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Long-term debt - related party |
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Derivative liability |
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Other long-term liabilities |
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Total liabilities |
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Commitments and contingencies (Note 15) |
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Stockholders’ equity / (deficit): |
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Common stock, $ |
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Additional paid-in capital |
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Accumulated other comprehensive loss |
( |
) | ( |
) | ||||
Accumulated deficit |
( |
) | ( |
) | ||||
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Total stockholders’ equity / (deficit) |
( |
) | ||||||
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|
|||||
Total liabilities and stockholders’ equity / (deficit) |
$ | $ | ||||||
|
|
|
|
Three Months Ended March 31, |
||||||||
2022 |
2021 |
|||||||
Net sales |
$ | $ | ||||||
Cost of goods sold |
||||||||
Gross loss |
( |
) | ( |
) | ||||
Operating expenses: |
||||||||
Research and development |
||||||||
Sales and marketing |
||||||||
General and administrative |
||||||||
Operating expenses |
||||||||
Loss from operations |
( |
) | ( |
) | ||||
Other income (expense): |
||||||||
Interest expense, net |
( |
) | ( |
) | ||||
Other expense, net |
( |
) | ( |
) | ||||
Loss before income taxes |
( |
) | ( |
) | ||||
Income tax provision |
( |
) | ( |
) | ||||
Net loss |
$ | ( |
) | $ | ( |
) | ||
Net loss attributable per share to common stockholders, basic and diluted |
$ | ( |
) | $ | ( |
) | ||
Weighted-average shares used to compute net loss attributable per share to common stockholders, basic and diluted |
Three Months Ended March 31, |
||||||||
2022 |
2021 |
|||||||
Net loss |
$ | ( |
) | $ | ( |
) | ||
Other comprehensive loss (net of tax): |
||||||||
Foreign currency translation gain (loss) |
( |
) | ||||||
Comprehensive loss |
$ | ( |
) | $ | ( |
) | ||
Convertible |
Common |
Accumulated Other Comprehensive Loss |
Total Stockholders’ Deficit |
|||||||||||||||||||||||||||||
Preferred Stock |
Stock |
Additional Paid-in Capital |
Accumulated Deficit |
|||||||||||||||||||||||||||||
Shares |
Amount |
Shares |
Amount |
|||||||||||||||||||||||||||||
Balance at December 31, 2021 (as previously reported) |
$ | $ | $ | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||||||||||||||||||
Retroactive application of recapitalization (Note 2) |
( |
) | ( |
) | ||||||||||||||||||||||||||||
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Balance at December 31, 2021, as adjusted (Note 2) |
( |
) | ( |
) | ( |
) | ||||||||||||||||||||||||||
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Conversion of 2023 Notes into common stock |
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Issuance of common stock upon the reverse capitalization, net of offering costs |
— | — | ( |
) | — | — | ( |
) | ||||||||||||||||||||||||
Offering cost in connection with Business Combination and PIPE financing |
— | — | — | — | ( |
) | — | — | ( |
) | ||||||||||||||||||||||
Issuance of PIPE shares |
— | — | — | — | — | |||||||||||||||||||||||||||
Subsequent issuance of shares for offering costs incurred in connection with Business Combination and PIPE financing |
— | — | — | — | ||||||||||||||||||||||||||||
Issuance of common stock upon vesting of restricted stock units (“RSUs”) |
— | — | — | — | — | |||||||||||||||||||||||||||
Issuance of common stock warrants |
— | — | — | — | — | — | ||||||||||||||||||||||||||
Stock-based compensation |
— | — | — | — | — | — | ||||||||||||||||||||||||||
Shares issued upon exercise of options |
— | — | — | — | — | |||||||||||||||||||||||||||
Shares issued upon exercise of common stock warrants |
— | — | — | — | — | |||||||||||||||||||||||||||
Other comprehensive loss |
— | — | — | — | — | — | ( |
) | ( |
) | ||||||||||||||||||||||
Net loss |
— | — | — | — | — | ( |
) | — | ( |
) | ||||||||||||||||||||||
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Balance at March 31, 2022 |
$ | $ | $ | $ | ( |
) | $ | ( |
) | $ | ||||||||||||||||||||||
|
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|
|
|
|
|
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|
|
|
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Convertible |
Common |
Accumulated Other Comprehensive Loss |
Total Stockholders’ Deficit |
|||||||||||||||||||||||||||||
Preferred Stock |
Stock |
Additional Paid-in Capital |
Accumulated Deficit |
|||||||||||||||||||||||||||||
Shares |
Amount |
Shares |
Amount |
|||||||||||||||||||||||||||||
Balance at December 31, 2020 (as previously reported) |
$ | $ | $ | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||||||||||||||||||
Retroactive application of recapitalization (Note 2) |
( |
) | ( |
) | — | — | ||||||||||||||||||||||||||
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Balance at December 31, 2020, as adjusted (Note 2) |
— | — | ( |
) | ( |
) | ( |
) | ||||||||||||||||||||||||
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Shares issued upon exercise of options |
— | — | — | — | — | |||||||||||||||||||||||||||
Issuance of common stock warrants |
— | — | — | — | — | — | ||||||||||||||||||||||||||
Issuance of Restricted Stock Awards (“RSAs”) |
— | — | — | — | — | |||||||||||||||||||||||||||
Stock-based compensation |
— | — | — | — | — | — | ||||||||||||||||||||||||||
Other comprehensive gain |
— | — | — | — | — | — | ||||||||||||||||||||||||||
Net loss |
— | — | — | — | — | ( |
) | — | ( |
) | ||||||||||||||||||||||
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Balance at March 31, 2021 |
$ | $ | $ | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||||||||||||||||||
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|
Three Months Ended March 31, |
||||||||
2022 |
2021 |
|||||||
Cash flows from operating activities |
||||||||
Net loss |
$ | ( |
) | $ | ( |
) | ||
Adjustments to reconcile net loss to net cash used in operating activities: |
||||||||
Stock-based compensation |
||||||||
Non-cash interest expense |
||||||||
Change in fair value of derivative liabilities |
||||||||
Non-cash bonus expense |
||||||||
Depreciation and amortization |
||||||||
Non-cash lease expense |
||||||||
Paid-in-kind interest and accrued interest on repayment of 2022 Notes |
( |
) | ||||||
Other |
||||||||
Changes in operating assets and liabilities: |
||||||||
Accounts receivable |
( |
) | ||||||
Inventory |
( |
) | ||||||
Prepaid expenses and other current assets |
( |
) | ||||||
Other long-term assets |
( |
) | ( |
) | ||||
Accounts payable |
||||||||
Accrued expenses |
( |
) | ( |
) | ||||
Other current liabilities |
( |
) | ( |
) | ||||
Other long-term liabilities |
( |
) | ||||||
|
|
|
|
|||||
Net cash used in operating activities |
( |
) | ( |
) | ||||
|
|
|
|
|||||
Cash flows from investing activities |
||||||||
Purchases of property and equipment |
( |
) | ||||||
|
|
|
|
|||||
Net cash used in investing activities |
( |
) | ||||||
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|
|
|
|||||
Cash flows from financing activities |
||||||||
Related party proceeds from PIPE financing |
||||||||
Proceeds from Business Combination and PIPE financing |
||||||||
Payments of offering costs |
( |
) | ||||||
Repayment of 2022 Notes |
( |
) | ||||||
Proceeds from exercise of stock options |
||||||||
Proceeds from exercise of common stock warrants |
||||||||
Proceeds from issuance of convertible notes |
||||||||
Proceeds from issuance of convertible notes to related parties |
||||||||
|
|
|
|
|||||
Net cash provided by financing activities |
||||||||
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|
|
|
|||||
Effect of exchange rate changes on cash, cash equivalents and restricted cash |
( |
) | ||||||
Net increase (decrease) in cash, cash equivalents and restricted cash |
( |
) | ||||||
Cash, cash equivalents and restricted cash at beginning of period |
||||||||
|
|
|
|
|||||
Cash, cash equivalents and restricted cash at end of period |
$ | $ | ||||||
|
|
|
|
|||||
Supplemental disclosures of cash flow information: |
||||||||
Cash paid during the period for interest |
$ | $ | ||||||
Supplemental schedule of noncash investing and financing activities: |
||||||||
Conversion of redeemable convertible preferred stock to common stock |
$ | $ | ||||||
Conversion of 2023 Notes into equity |
$ | $ | ||||||
Issuance of common stock warrants |
$ | $ | ||||||
Assumption of net liabilities from Business Combination |
$ | $ | ||||||
Offering costs paid in common stock |
$ | $ | ||||||
GEMS commitment fee |
|
$ |
|
|
|
$ |
|
|
Unpaid offering costs |
$ | $ | ||||||
Fair value of debt derivative liabilities related to issuance of convertible notes |
$ | $ | ||||||
Unpaid debt issuance costs |
$ | $ |
• | All outstanding shares of Legacy Quanergy common stock were cancelled and converted into shares of Quanergy using a conversion ratio of |
• | All outstanding shares of Legacy Quanergy convertible preferred stock were cancelled and converted into shares of Quanergy’s common stock (all preferred stock except for Series B and Series C were cancelled and converted using a ratio of |
• | All outstanding stock options, Restricted Stock (“RSAs”), Restricted Stock Unit Awards (“RSUs”) and common stock warrants of Legacy Quanergy, whether vested or unvested, were assumed by the Company and converted into stock options, Restricted Stock, Restricted Stock Unit Awards and common stock warrants of Quanergy; |
• | The Note Financing Agreement issued in 2020 (the “2023 Initial Notes) and 2021 (the “Extension Notes”, and together with 2023 Initial Notes, referred to as the “2023 Notes”) converted into shares of Legacy Quanergy common stock, that subsequently converted into shares of common stock of Quanergy at the rate consistent with the terms of the note agreement; |
• | Legacy Quanergy’s indebtedness under the Note Financing Agreement issued in 2018 was paid off; |
• | All outstanding CCAC Class A and Class B Ordinary Shares were cancelled and converted into shares of common stock of Quanergy; |
• | All outstanding warrants of CCAC converted automatically into warrants to purchase Quanergy common stock at a ratio of |
Cash - CCAC’s trust and cash (net of redemption) |
$ | |||
Cash - PIPE |
||||
Less: transaction costs and advisory fees paid |
( |
) | ||
|
|
|||
Net cash from Business Combination and PIPE Financing |
||||
Less non-cash net liabilities assumed from CCAC |
( |
) | ||
|
|
|||
Net contributions from Business Combination and PIPE Financing |
$ | |||
|
|
CCAC Class A Ordinary Shares, outstanding prior to Business Combination |
||||
CCAC Class B Ordinary Shares, outstanding prior to Business Combination |
||||
Less: redemption of CCAC Class A Ordinary Shares |
( |
) | ||
Shares issued from PIPE Financing |
||||
|
|
|||
Total Shares from Business Combination and PIPE Financing |
||||
Legacy Quanergy shares (1) |
||||
|
|
|||
Total shares of common stock immediately after Business Combination |
||||
|
|
(1) | The number of Legacy Quanergy shares was determined as follows: |
Quanergy shares |
Quanergy shares, effected for Exchange Ratio |
|||||||
Balance at December 31, 2020 |
||||||||
Recapitalization applied to Convertible Preferred Stock outstanding at December 31, 2020 |
||||||||
Shares issued upon exercise of options - 2021 |
||||||||
Shares issued upon exercise of common stock warrants - 2021 |
||||||||
Issuance of restricted stock awards |
||||||||
Conversion of 2023 Notes (2) |
||||||||
|
|
|||||||
Total |
||||||||
|
|
(2) |
The 2023 Notes convert into shares of common stock of Quanergy at the rate consistent with the terms of note agreement. |
March 31, 2022 |
December 31, 2021 |
|||||||
Raw materials |
$ | $ | ||||||
Work in progress |
||||||||
Finished goods |
||||||||
|
|
|
|
|||||
Total inventory |
$ | $ | ||||||
|
|
|
|
March 31, 2022 |
December 31, 2021 |
|||||||
Sensata prepaid services |
$ | $ | ||||||
Prepaid business insurance |
||||||||
Prepaid other |
||||||||
|
|
|
|
|||||
Total prepaid expenses and other current assets |
$ | $ | ||||||
|
|
|
|
March 31, 2022 |
December 31, 2021 |
|||||||
Machinery and equipment |
$ | $ | ||||||
Furniture and fixtures |
||||||||
Computer equipment |
||||||||
Computer software |
||||||||
Leasehold improvements |
||||||||
|
|
|
|
|||||
Total property and equipment |
||||||||
Less: accumulated depreciation and amortization |
( |
) | ( |
) | ||||
|
|
|
|
|||||
Total property and equipment, net |
$ | $ | ||||||
|
|
|
|
March 31, 2022 |
December 31, 2021 |
|||||||
Sensata prepaid services |
$ | $ | ||||||
Deferred cost s |
||||||||
ROU asset |
||||||||
Security deposit |
||||||||
|
|
|
|
|||||
Total other long-term assets |
$ | $ | ||||||
|
|
|
|
March 31, 2021 |
December 31, 2021 |
|||||||
GEM commitment fee |
$ | $ | ||||||
Lease liability |
||||||||
Restructuring liability |
||||||||
Customer deposits |
||||||||
Deferred revenue |
||||||||
Derivative liability |
||||||||
|
|
|
|
|||||
Total other current liabilities |
$ | $ | ||||||
|
|
|
|
March 31, 2022 |
December 31, 2021 |
|||||||
Transaction fees payable |
$ | $ | |
|||||
Customer deposits |
||||||||
Deferred revenue |
||||||||
Other long-term liabilities |
||||||||
|
|
|
|
|||||
Total other long-term liabilities |
$ | $ | ||||||
|
|
|
|
• | Level 1 inputs: Unadjusted quoted prices in active markets for identical assets or liabilities accessible to the reporting entity at the measurement date. |
• | Level 2 inputs: Other than quoted prices included in Level 1 inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the asset or liability. |
• | Level 3 inputs: Unobservable inputs for the asset or liability used to measure fair value to the extent that observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity for the asset or liability at the measurement date. |
As of March 31, 2022 |
||||||||||||||||
Level 1 |
Level 2 |
Level 3 |
Total |
|||||||||||||
Financial Assets |
||||||||||||||||
Cash and cash equivalents: |
||||||||||||||||
Money market funds |
$ | $ | — | $ | — | $ | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total assets |
$ | $ | — | $ | — | $ | ||||||||||
Financial Liabilities |
||||||||||||||||
Private placement warrant liability |
$ | — | $ | — | $ | $ | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total liabilities |
$ | — | $ | — | $ | $ | ||||||||||
|
|
|
|
|
|
|
|
As of December 31, 2021 |
||||||||||||||||
Level 1 |
Level 2 |
Level 3 |
Total |
|||||||||||||
Financial Assets |
||||||||||||||||
Cash and cash equivalents: |
||||||||||||||||
Money market funds |
$ | $ | — | $ | — | $ | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total assets |
$ | $ | — | $ | — | $ | ||||||||||
Financial Liabilities |
||||||||||||||||
Debt derivative liabilities |
$ | — | $ | — | $ | $ | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total liabilities |
$ | — | $ | — | $ | $ | ||||||||||
|
|
|
|
|
|
|
|
February 8, 2022 |
||||||||||||
(Closing Date) |
||||||||||||
Preferred Stock Shares |
Exchange Ratio |
Common Stock Shares |
||||||||||
Series Seed Convertible Preferred Stock (Legacy Quanergy) |
||||||||||||
Series Seed-2 Convertible Preferred Stock (Legacy Quanergy) |
||||||||||||
Series A Convertible Preferred Stock (Legacy Quanergy) |
||||||||||||
Series A Plus Convertible Preferred Stock (Legacy Quanergy) |
||||||||||||
Series B Convertible Preferred Stock (Legacy Quanergy) |
||||||||||||
Series C Convertible Preferred Stock (Legacy Quanergy) |
||||||||||||
|
|
|
|
|||||||||
Total |
||||||||||||
|
|
|
|
Exercise |
||||||||||
Shares |
Price |
Expiration | ||||||||
Public Warrants |
$ | |||||||||
Private Placement Warrants |
||||||||||
GEM Warrants |
||||||||||
2023 Notes Warrants |
||||||||||
Sensata Warrants |
||||||||||
|
|
|||||||||
Total |
||||||||||
|
|
Input |
March 31, 2022 |
February 8, 2022 |
||||||
Risk-free interest rate |
% | % | ||||||
Expected term (years) |
||||||||
Expected volatility |
% | % | ||||||
Dividend yield |
% | % | ||||||
Exercise price |
$ | $ | ||||||
Price of underlying common stock |
$ | $ |
Warrant |
||||
Fair value at February 8, 2022 |
$ | |||
Change in fair value of Private Placement Warrants |
( |
) | ||
Fair value at March 31, 2022 |
$ | |||
Options outstanding |
||||||||||||||||
Number of shares |
Weighted average exercise price per share |
Weighted average contractual term (in years) |
Aggregate intrinsic value (in thousands) |
|||||||||||||
Outstanding - December 31, 2021 |
$ | $ | ||||||||||||||
Options granted |
||||||||||||||||
Options exercised |
( |
) | ||||||||||||||
Options cancelled |
( |
) | ||||||||||||||
Options expired |
||||||||||||||||
Outstanding at March 31, 2022 |
||||||||||||||||
Vested and exercisable - March 31, 2022 |
$ | $ | ||||||||||||||
Vested and expected to vest - March 31, 2022 |
$ | $ | ||||||||||||||
Restricted Stock Units (“RSUs”) |
||||||||
Number of |
Weighted average |
|||||||
shares |
grant date fair value |
|||||||
Outstanding as of December 31, 2021 |
$ | |||||||
Granted |
||||||||
Vested |
( |
) | ||||||
Forfeited or cancelled |
( |
) | ||||||
Outstanding as of March 31, 2022 |
$ | |||||||
Three months ended March 31, |
||||||||
2022 |
2021 |
|||||||
Cost of goods sold |
$ | $ | ||||||
Research and development |
||||||||
Sales and marketing |
||||||||
General and administrative |
||||||||
Total stock-based compensation expense |
$ | $ | ||||||
Embedded Derivative Liability |
||||
Fair value as of December 31, 2021 |
$ | |||
Change in fair value |
||||
|
|
|||
Fair value prior to Closing |
||||
Payoff of 2022 Notes |
( |
) | ||
|
|
|||
Fair value as of March 31, 2022 |
$ | |||
|
|
Embedded Derivative Liability |
||||
Fair value as of December 31, 2021 |
$ | |||
Change in fair value |
||||
|
|
|||
Fair value prior to Closing |
||||
Conversion of 2023 Notes |
( |
) | ||
|
|
|||
Fair value as of March 31, 2022 |
$ | |||
|
|
Three Months Ended March 31, |
||||||||
2022 |
2021 |
|||||||
Contractual interest expense |
$ | $ | ||||||
Accretion of debt discount |
||||||||
Accretion of debt issuance costs |
||||||||
|
|
|
|
|||||
$ | $ | |||||||
|
|
|
|
Three Months Ended March 31, 2022 |
||||
Cash paid for amounts included in the measurement of lease liabilities |
||||
Operating leases |
$ | |||
Weighted average lease term |
||||
Operating leases |
||||
Weighted average discount rate |
||||
Operating leases |
% |
Years ending December 31, |
Operating Leases |
|||
2022 (remaining nine months) |
$ | |||
2023 |
||||
Total undiscounted lease payments |
$ | |||
Less: imputed interest |
( |
) | ||
Total lease liabilities |
$ | |||
Operating Leases |
Lease Termination Agreement |
|||||||
2022 |
$ | $ | ||||||
2023 |
||||||||
Total minimum payments |
$ | $ | ||||||
Three months ended March 31, |
||||||||
2022 |
2021 |
|||||||
Americas |
$ | $ | ||||||
Asia |
||||||||
Europe, Middle East and Africa |
||||||||
Total net sales |
$ | $ | ||||||
Three months ended March 31, |
||||||||
2022 |
2021 |
|||||||
Numerator: |
||||||||
Net loss attributable to common stockholder, basic and diluted |
$ | ( |
) | $ | ( |
) | ||
Denominator: |
||||||||
Weighted average shares of common stock outstanding, basic and diluted |
||||||||
Net loss per share attributable to common stockholder, basic and diluted |
$ | ( |
) | $ | ( |
) |
As of March 31, |
||||||||
2022 |
2021 |
|||||||
Public warrants |
||||||||
Private placement warrants |
||||||||
GEM warrants |
||||||||
Stock options and RSUs issued and outstanding |
||||||||
Convertible notes |
||||||||
Potential common shares excluded from diluted net loss per share |
||||||||
ITEM 2. |
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
Three months ended March 31, |
||||||||
2022 |
2021 |
|||||||
($ in thousands) |
||||||||
Adjusted EBITDA |
||||||||
Net loss |
$ | (104,682 | ) | $ | (14,714 | ) | ||
Stock-based compensation expense |
51,561 | 1,581 | ||||||
Depreciation and amortization |
228 | 251 | ||||||
Interest expense |
40,046 | 3,685 | ||||||
Interest income |
(2 | ) | (1 | ) | ||||
Change in fair value of derivative liability |
2,337 | 2,317 | ||||||
Income tax provision |
3 | 4 | ||||||
|
|
|
|
|||||
Adjusted EBITDA |
$ | (10,509 | ) | $ | (6,877 | ) | ||
|
|
|
|
Three months ended March 31, |
||||||||||||||||
2022 |
2021 |
$ Change |
% Change |
|||||||||||||
($ in thousands) |
||||||||||||||||
Net sales |
$ | 1,367 | $ | 383 | $ | 984 | 257 | % | ||||||||
Cost of goods sold (1) |
1,853 | 497 | 1,356 | 273 | % | |||||||||||
|
|
|
|
|
|
|
|
|||||||||
Gross profit (loss) |
(486 | ) | (114 | ) | (372 | ) | -326 | % | ||||||||
Research and development (1) |
12,824 | 4,357 | 8,467 | 194 | % | |||||||||||
Sales and marketing (1) |
7,196 | 1,745 | 5,451 | 312 | % | |||||||||||
General and administrative (1) |
41,792 | 2,493 | 39,299 | 1576 | % | |||||||||||
|
|
|
|
|
|
|
|
|||||||||
Operating expenses |
61,812 | 8,595 | 53,217 | 619 | % | |||||||||||
|
|
|
|
|
|
|
|
|||||||||
Operating loss |
(62,298 | ) | (8,709 | ) | (53,589 | ) | -615 | % | ||||||||
Other income (expense): |
||||||||||||||||
Interest income (expense), net |
(40,044 | ) | (3,684 | ) | (36,360 | ) | -987 | % | ||||||||
Other income (expense), net |
(2,337 | ) | (2,317 | ) | (20 | ) | -1 | % | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Loss before income taxes |
(104,679 | ) | (14,710 | ) | (89,969 | ) | -612 | % | ||||||||
Provision for income taxes |
(3 | ) | (4 | ) | 1 | 25 | % | |||||||||
|
|
|
|
|
|
|
|
|||||||||
Net loss |
$ | (104,682 | ) | $ | (14,714 | ) | $ | (89,968 | ) | -611 | % | |||||
|
|
|
|
|
|
|
|
(1) | Includes stock-based compensation expense (unaudited) as follows, in thousands: |
Three months ended March 31, |
||||||||
2022 |
2021 |
|||||||
Cost of goods sold |
$ | 683 | $ | 20 | ||||
Research and development |
7,677 | 441 | ||||||
Sales and marketing |
4,598 | 212 | ||||||
General and administrative |
38,603 | 908 | ||||||
|
|
|
|
|||||
$ | 51,561 | $ | 1,581 | |||||
|
|
|
|
Three months ended March 31, |
||||||||||||||||
2022 |
2021 |
$ Change |
% Change |
|||||||||||||
($ in thousands) |
||||||||||||||||
Net Sales |
$ | 1,367 | $ | 383 | $ | 984 | 257 | % |
Three months ended March 31, |
||||||||||||||||
2022 |
2021 |
$ Change |
% Change |
|||||||||||||
($ in thousands) |
||||||||||||||||
Americas |
$ | 276 | $ | 171 | 105 | 61 | % | |||||||||
Asia |
744 | 149 | 595 | 399 | % | |||||||||||
Europe, Middle East and Africa |
347 | 63 | 284 | 451 | % | |||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total net sales |
$ | 1,367 | $ | 383 | 984 | 257 | % | |||||||||
|
|
|
|
|
|
|
|
Three months ended March 31, |
||||||||||||||||
2022 |
2021 |
$ Change |
% Change |
|||||||||||||
($ in thousands) |
||||||||||||||||
Cost of goods sold |
$ | 1,853 | $ | 497 | $ | 1,356 | 273 | % | ||||||||
Gross margin |
(486 | ) | (114 | ) | (372 | ) | -326 | % | ||||||||
Gross margin % |
-36 | % | -30 | % |
Three months ended March 31, |
||||||||||||||||
2022 |
2021 |
$ Change |
% Change |
|||||||||||||
($ in thousands) |
||||||||||||||||
Research and development |
$ | 12,824 | $ | 4,357 | $ | 8,467 | 194 | % | ||||||||
Sales and marketing |
7,196 | 1,745 | 5,451 | 312 | % | |||||||||||
General and administrative |
41,792 | 2,493 | 39,299 | 1,576 | % | |||||||||||
|
|
|
|
|
|
|
|
|||||||||
$ | 61,812 | $ | 8,595 | $ | 53,217 | 619 | % | |||||||||
|
|
|
|
|
|
|
|
Three months ended March 31, |
||||||||||||||||
2022 |
2021 |
$ Change |
% Change |
|||||||||||||
($ in thousands) |
||||||||||||||||
Interest expense, net |
$ | (40,044 | ) | $ | (3,684 | ) | $ | (36,360 | ) | 987 | % | |||||
Other income (expense), net |
(2,337 | ) | (2,317 | ) | (20 | ) | 1 | % |
Three months ended March 31, |
||||||||||||||||
2022 |
2021 |
$ Change |
% Change |
|||||||||||||
($ in thousands) |
||||||||||||||||
Loss before income taxes |
$ | (104,679 | ) | $ | (14,710 | ) | $ | (89,969 | ) | 612 | % | |||||
Provision for income taxes |
(3 | ) | (4 | ) | 1 | 25 | % |
Three months ended March 31, |
||||||||
2022 |
2021 |
|||||||
($ In thousands) |
||||||||
Net cash provided by (used in) |
||||||||
Operating activities |
$ | (22,746 | ) | $ | (6,618 | ) | ||
Investing activities |
(202 | ) | — | |||||
Financing activities |
18,029 | 48,735 | ||||||
Effect of exchange rate changes |
(11 | ) | 5 | |||||
|
|
|
|
|||||
$ | (4,930 | ) | $ | 42,122 | ||||
|
|
|
|
ITEM 3. |
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
ITEM 4. |
CONTROLS AND PROCEDURES |
ITEM 1. |
LEGAL PROCEEDINGS |
ITEM 1A. |
RISK FACTORS |
• | We have incurred operating losses in the past, expect to incur operating losses in the future and may never achieve or maintain profitability. |
• | We will require additional capital to meet our financial obligations and support planned business growth, and this capital might not be available on acceptable terms or at all. |
• | We operate in evolving markets, which make it difficult to evaluate our business and prospects. If markets for LiDAR products, including autonomous driving, security & smart spaces, mapping, robotics, industrial and other commercial applications, develop more slowly than we expect, or long- term end-customer adoption rates and demand are slower than we expect, our operating results and growth prospects could be harmed. |
• | Product integration could face complications or unpredictable difficulties, which may adversely impact customer adoption of our products and our financial performance. |
• | The market for LiDAR sensors is highly competitive and many companies are actively focusing on LiDAR technology or competing technologies based on camera, radar or other technologies. If we fail to differentiate ourselves and compete successfully with these companies, many of which have substantially greater resources, our products may become obsolete and it will be difficult for us to attract customers and our business will be harmed. |
• | Our Optical Phased Array (“OPA”) based product could fail to meet industry requirements for range, resolution or general performance or we could fall short of our cost objectives for OPA-based LiDAR, thereby limiting our revenue potential. |
• | Developments in alternative non-LiDAR technologies may adversely affect the demand for LiDAR sensors. |
• | If we are not able to effectively grow our global sales and marketing organization, or maintain or grow an effective network of distributors, value-added resellers, and integrators, our business prospects, results of operations and financial condition could be adversely affected. |
• | We continue to implement strategic initiatives designed to grow our business. These initiatives may prove more costly than we currently anticipate and we may not succeed in increasing our revenue in an amount sufficient to offset the costs of these initiatives and to achieve and maintain profitability. |
• | We have limited manufacturing capacity and intend to depend primarily on a small number of contract manufacturers and manufacturing partners in the future. Our operations could be disrupted if we encounter delays or other problems with these contract manufacturers. |
• | We may incur significant direct or indirect liabilities in connection with our product warranties which could adversely affect our business and operating results. |
• | We have been and may continue to be subject to litigation regarding intellectual property rights that could be costly, including claims that we are infringing third-party intellectual property, whether successful or not, and could result in the loss of rights important to our products or otherwise harm our business. |
• | We are subject to, and must remain in compliance with, numerous laws and governmental regulations across various jurisdictions concerning the manufacturing, use, distribution and sale of our products. |
• | The effects of the COVID-19 pandemic have had and could continue to have a material adverse effect on our business prospects, financial results, and results of operations. |
• | We have a global supply chain and the COVID-19 pandemic, Russia’s aggression in Ukraine and other macroeconomic factors may adversely affect our ability to source components in a timely or cost-effective manner from our third-party suppliers due to, among other things, work stoppages or interruptions. |
• | We identified a material weakness in our internal control over financial reporting as of December 31, 2021. If we are unable to develop and maintain an effective system of internal control over financial reporting, we may not be able to accurately report our financial results in a timely manner, which may adversely affect investor confidence in us and materially and adversely affect our business and operating results. |
• | We may issue additional shares of Common Stock, including under the GEM Agreement, the GEM Warrant, the 2022 Equity Incentive Plan and the 2022 Employee Stock Purchase Plan. Any such issuances would dilute the interest of our shareholders and likely present other risks. |
• | continue to hire additional personnel and make investments in research and development in order to develop technology and related software; |
• | increase our sales and marketing functions, including expansion of our customer support and distribution capabilities; |
• | hire additional personnel to support compliance requirements in connection with being a public company; and |
• | expand operations and manufacturing. |
• | the accuracy of our forecasts for market requirements beyond near term visibility; |
• | our ability to anticipate and react to new technologies and evolving consumer trends; |
• | our development, licensing or acquisition of new technologies; |
• | our timely completion of new designs and development; |
• | the ability of our contract manufacturers to cost-effectively manufacture our new sensing solutions; |
• | the availability of materials and key components used in the manufacture of our new sensing solutions; and |
• | our ability to attract and retain world-class research and development personnel. |
• | differing regulatory requirements, including tax laws, trade laws, labor regulations, tariffs, export quotas, custom duties or other trade restrictions; |
• | greater difficulty supporting and localizing our products; |
• | challenges inherent in efficiently managing an increased number of employees over large geographic distances, including the need to implement appropriate systems, policies, compensation and benefits and compliance programs; |
• | differing legal and court systems, including limited or unfavorable intellectual property protection; |
• | risk of change in international political or economic conditions; |
• | restrictions on the repatriation of earnings; and |
• | working capital constraints. |
• | investing in research and development; |
• | expanding our sales and marketing efforts to attract new customers across industries; |
• | investing in new applications and markets for our products; |
• | further enhancing our manufacturing processes and partnerships; and |
• | investing in legal, accounting, and other administrative functions necessary to support our operations as a public company. |
• | supplier capacity constraints; |
• | price increases; |
• | timely delivery; |
• | component quality; and |
• | delays in, or the inability to execute on, a supplier roadmap for components and technologies. |
• | manage a larger organization; |
• | hire more employees, including engineers with relevant skills and experience; |
• | expand our manufacturing and distribution capacity; |
• | increase our sales and marketing efforts; |
• | broaden our customer support capabilities; |
• | implement appropriate operational and financial systems; |
• | support the requirements of being a public company; |
• | expand internationally; and |
• | maintain effective financial disclosure controls and procedures. |
• | the realization of any of the risk factors presented in this Quarterly Report; |
• | actual or anticipated fluctuations in our quarterly financial results or the quarterly financial results of companies perceived to be similar to us; |
• | changes in the market’s expectations about our operating results; |
• | our operating results failing to meet the expectation of securities analysts of investors in a particular period; |
• | operating and share price performance of other companies that investors deem comparable to us; |
• | the volume of shares of Common Stock available for public sale; |
• | future issuances, sales, resales or repurchases or anticipated issuances, sales, resales or repurchases of our securities; |
• | our ability to effectively service any current and future outstanding debt obligations; |
• | the announcement of new services or enhancements by us or our competitors; |
• | developments concerning intellectual property rights; |
• | changes in legal, regulatory and enforcement frameworks impacting our business; |
• | changes in the prices of our services; |
• | announcements by us or our competitors of significant business developments, acquisitions or new offerings; |
• | our involvement in any litigation; |
• | changes in senior management or key personnel; |
• | changes in the anticipated future size and growth rate of our market; |
• | actual or perceived data security incidents or breaches; |
• | any delisting of our Common Stock or warrants from NYSE due to any failure to meet listing requirements; |
• | actual or anticipated variations in quarterly operating results; |
• | our failure to meet the estimates and projections of the investment community or that we may otherwise provide to the public; |
• | publication of research reports about us or our industry or positive or negative recommendations or withdrawal of research coverage by securities analysts; |
• | changes in the market valuations of similar companies; |
• | overall performance of the equity markets; |
• | speculation in the press or investment community; |
• | sales of Common Stock by us or our stockholders in the future; |
• | the effectiveness of our internal control over financial reporting; |
• | general political and economic conditions, including health pandemics, such as COVID-19; and |
• | other events or factors, many of which are beyond our control. |
• | a limited availability of market quotations for our securities; |
• | reduced liquidity for our securities; |
• | a determination that our Common Stock is a “penny stock” which will require brokers trading in the Common Stock to adhere to more stringent rules and possibly result in a reduced level of trading activity in the secondary trading market for our securities; |
• | a limited amount of news and analyst coverage; and |
• | a decreased ability to issue additional securities or obtain additional financing in the future. |
• | may significantly dilute the equity interests of our investors; |
• | may subordinate the rights of holders of Common Stock if preferred stock is issued with rights senior to those afforded our Common Stock; |
• | could cause a change in control if a substantial number of shares of our Common Stock are issued, which may affect, among other things, our ability to use our net operating loss carry forwards, if any, and could result in the resignation or removal of our present officers and directors; and |
• | may adversely affect prevailing market prices for our Common Stock and/or warrants. |
• | providing for a classified board of directors with staggered, three-year terms which could delay the ability of stockholders to change the membership of a majority of our board of directors; |
• | the ability of our board of directors to issue shares of preferred stock, including “blank check” preferred stock and to determine the price and other terms of those shares, including preferences and voting rights, without stockholder approval, which could be used to significantly dilute the ownership of a hostile acquirer; |
• | our Charter prohibits cumulative voting in the election of directors, which limits the ability of minority stockholders to elect director candidates; |
• | the limitation of the liability of, and the indemnification of, our directors and officers; |
• | the right of our board of directors to elect a director to fill a vacancy created by the expansion of our board of directors or the resignation, death or removal of a director, which prevents stockholders from being able to fill vacancies on our board of directors; |
• | the ability of our board of directors to amend the Bylaws, which may allow our board of directors to take additional actions to prevent an unsolicited takeover and inhibit the ability of an acquirer to amend the Bylaws to facilitate an unsolicited takeover attempt; and |
• | advance notice procedures with which stockholders must comply to nominate candidates to our board of directors or to propose matters to be acted upon at a stockholders’ meeting, which could preclude stockholders from bringing matters before annual or special meetings of stockholders and delay changes in our board of directors and also may discourage or deter a potential acquirer from conducting a solicitation of proxies to elect the acquirer’s own slate of directors or otherwise attempting to obtain control of the Company. |
ITEM 2. |
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS |
ITEM 3. |
DEFAULTS UPON SENIOR SECURITIES |
ITEM 4. |
MINE SAFETY DISCLOSURES |
ITEM 5. |
OTHER INFORMATION |
ITEM 6. |
EXHIBITS |
Incorporated by Reference | ||||||||||
Exhibit No. |
Description |
Schedule/Form |
File No. |
Exhibit |
Filing Date | |||||
31.2* | Certification of the Principal Financial Officer pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |||||||||
32.1** | Certifications of the Principal Executive Officer and Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |||||||||
101.INS | Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document) | |||||||||
101.SCH | Inline XBRL Taxonomy Extension Schema Document | |||||||||
101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document | |||||||||
101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document | |||||||||
101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document | |||||||||
101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document | |||||||||
104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) |
† | Certain exhibits and schedules to this Exhibit have been omitted in accordance with Regulation S-K Item 601(a)(5). The Registrant hereby agrees to furnish a copy of any omitted exhibits and schedules to the SEC upon its request. |
+ | Indicates a management contract or compensatory plan. |
* | Filed herewith. |
** | The certifications attached as Exhibit 32.1 that accompany this Quarterly Report on Form 10-Q are deemed furnished and not filed with the SEC and are not to be incorporated by reference into any filing of the Company under the Securities Act or the Exchange Act, whether made before or after the date of this Quarterly Report on Form 10-Q, irrespective of any general incorporation language contained in such filing. |
QUANERGY SYSTEMS, INC. | ||||||||
Date: May 16, 2022 | By: | /s/ Kevin J. Kennedy | ||||||
Name: | Kevin J. Kennedy | |||||||
Title: | Chief Executive Officer | |||||||
(Principal Executive Officer) | ||||||||
Date: May 16, 2022 | By: | /s/ Patrick Archambault | ||||||
Name: | Patrick Archambault | |||||||
Title: | Chief Financial Officer | |||||||
(Principal Financial Officer and | ||||||||
Principal Accounting Officer) |