Item 1A. Risk Factors.
You should carefully consider all of the following risk factors
and all other information contained in this Report including the financial statements. If any of the following risks occur, our
business, financial condition or results of operations may be materially and adversely affected. In that event, the trading price
of our securities could decline, and you could lose all or part of your investment. The risk factors described below are not necessarily
exhaustive and you are encouraged to perform your own investigation
Risk Factors Relating to HighCape and the Business Combination
Our search for a business combination, and any target business
with which we ultimately consummate a business combination, may be materially adversely affected by the recent coronavirus (COVID-19)
outbreak.
In December 2019, a novel strain of coronavirus
was reported to have surfaced in Wuhan, China, which has and is continuing to spread throughout China and other parts of the world,
including the United States. On January 30, 2020, the World Health Organization declared the outbreak of the coronavirus disease
(COVID-19) a “Public Health Emergency of International Concern.” On January 31, 2020, U.S. Health and Human Services
Secretary Alex M. Azar II declared a public health emergency for the United States to aid the U.S. healthcare community in responding
to COVID-19, and on March 11, 2020 the World Health Organization characterized the outbreak as a “pandemic”. A significant
outbreak of COVID-19 and other infectious diseases could result in a widespread health crisis that could adversely affect the
economies and financial markets worldwide, and the business of any potential target business with which we consummate a business
combination could be materially and adversely affected. Furthermore, we may be unable to complete a business combination
if continued concerns relating to COVID-19 restrict travel, limit the ability to have meetings with potential investors or the
target company’s personnel, vendors and services providers are unavailable to negotiate and consummate a transaction in
a timely manner. The extent to which COVID-19 impacts our search for a business combination will depend on future developments,
which are highly uncertain and cannot be predicted, including new information which may emerge concerning the severity of COVID-19
and the actions to contain COVID-19 or treat its impact, among others. If the disruptions posed by COVID-19 or other matters of
global concern continue for an extensive period of time, our ability to consummate a business combination, or the operations of
a target business with which we ultimately consummate a business combination, may be materially adversely affected."
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Directors and officers of HighCape have potential conflicts
of interest in recommending that stockholders vote in favor of approval of the Business Combination and approval of the other proposals
described in the Company’s proxy statement/prospectus filed as part of the Company’s Form S-4 on March 1, 2021 (the
“Form S-4”).
When considering the recommendation of the HighCape
Board that the HighCape stockholders vote in favor of approval of the Business Combination, HighCape stockholders should be aware
that HighCape’s initial stockholders, including its directors and officers, have interests in the Business Combination that
may be different from, or in addition to, the interests of HighCape stockholders and warrant holders generally. These interests
include, among other things, the interests listed below:
23
The existence of financial and personal interests
of the HighCape officers or directors and entities affiliated with them may have influenced their decision to approve the Business
Combination. You should consider these interests when evaluating the Business Combination and the recommendation of the HighCape
Board to vote in favor of the Business Combination Proposal and other proposals to be presented to the stockholders.
24
HighCape’s initial stockholders and its other directors
and officers at the time of its initial public offering have agreed to vote in favor of the Business Combination, regardless of
how our public stockholders vote.
In connection with our initial public offering,
our Sponsor and our initial stockholders and our other directors and officers at the time of our initial public offering entered
into a letter agreement to vote their founder shares and any public shares acquired by them during or after the initial public
offering in favor of the Business Combination Proposal being presented at the Special Meeting, which was unanimously recommended
by the HighCape Board. In addition, concurrently with the execution of the Business Combination Agreement, the Sponsor, David Colpman,
Antony Loebel, Robert Taub, HighCape, Deerfield Partners, L.P., and Quantum-Si entered into the Sponsor Letter Agreement, pursuant
to which the Sponsor, each other holder of HighCape Class B common stock and Deerfield Partners, L.P. have agreed to, among
other things, vote in favor of the Transaction Proposals (including the Business Combination Proposal). The shares held by our
Sponsor, our other initial stockholders, our other directors and officers and Deerfield Partners, L.P. that are obligated to vote
in favor of the Business Combination represent approximately 27% of the voting power of HighCape.
Accordingly, it is more likely that the necessary
stockholder approval for the Business Combination will be received than would be the case if the Sponsor, our initial stockholders,
our directors and officers and Deerfield Partners, L.P. had agreed to vote their shares in accordance with the majority of the
votes cast by our public stockholders.
Neither the HighCape Board nor any committee thereof obtained
a third-party valuation in determining whether or not to pursue the Business Combination.
Neither the HighCape Board nor any committee
thereof is required to obtain an opinion from an independent investment bank that is a member of the Financial Industry Regulatory
Authority, Inc. or from an independent accounting firm that the price that HighCape is paying for Quantum-Si is fair to HighCape
from a financial point of view. Neither the HighCape Board nor any committee thereof obtained a third party valuation in connection
with the Business Combination. In analyzing the Business Combination, the HighCape Board and management conducted due diligence
on Quantum-Si and researched the industry in which Quantum-Si operates. The HighCape Board reviewed, among other things, financial
due diligence materials prepared by HighCape management and professional advisors, including trading multiples and other valuation
metrics for comparable companies, market opportunity studies conducted by an independent consulting firm engaged to assess the
size and scope of the market for Quantum-Si’s products, Quantum-Si’s financial projections and the various factors
that may cause the company to miss or exceed its projections and the financial terms set forth in the Business Combination Agreement,
and concluded that the Business Combination was in the best interest of its stockholders. Accordingly, investors will be relying
solely on the judgment of the HighCape Board and management in valuing Quantum-Si, and the HighCape Board and management may not
have properly valued Quantum-Si’s business. The lack of a third-party valuation may also lead an increased number of stockholders
to vote against the Business Combination or demand redemption of their shares, which could potentially impact our ability to consummate
the Business Combination.
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HighCape’s initial stockholders, directors, officers,
advisors and their affiliates may elect to purchase shares or public warrants from public stockholders, which may influence a vote
on the Business Combination and reduce the public “float” of our common stock.
HighCape’s initial stockholders, directors,
officers, advisors or any of their affiliates may purchase shares and/or warrants from investors, or they may enter into transactions
with such investors and others to provide them with incentives to acquire public shares, vote their public shares in favor of
the Business Combination Proposal or not redeem their public shares. The purpose of any such transaction could be to (i) vote
such shares in favor of the Business Combination and thereby increase the likelihood of obtaining stockholder approval of the
Business Combination, (ii) increase the likelihood that the Aggregate Transaction Proceeds Condition is satisfied, or (iii) reduce
the number of public warrants outstanding or to vote such warrants on any matters submitted to the warrant holders for approval
in connection with the Business Combination. Any such stock purchases and other transactions may thereby increase the likelihood
of obtaining stockholder approval of the Business Combination. This may result in the completion of the Business Combination in
a way that may not otherwise have been possible. While the exact nature of any such incentives has not been determined as of the
date of this Form 10-K, they might include, without limitation, arrangements to protect such investors or holders against potential
loss in value of their shares, including the granting of put options and the transfer to such investors or holders of shares or
rights owned by HighCape’s initial stockholders for nominal value. However, other than as expressly stated herein, they
have no current commitments, plans or intentions to engage in such transactions and have not formulated any terms or conditions
for any such transactions. None of the funds in the Trust Account will be used to purchase shares or public warrants in such transactions.
Entering into any such arrangements may have
a depressive effect on public shares. For example, as a result of these arrangements, an investor or holder may have the ability
to effectively purchase shares at a price lower than market and may therefore be more likely to sell the shares it owns, either
prior to or immediately after the Special Meeting.
If such transactions are effected, the consequence
could be to cause the Business Combination to be approved in circumstances where such approval could not otherwise be obtained.
Purchases of public shares by the persons described above would allow them to exert more influence over the approval of the proposals
to be presented at the Special Meeting and would likely increase the chances that such proposals would be approved. In addition,
if such purchases are made, the public “float” of our common stock or warrants may be reduced and the number of beneficial
holders of our securities may be reduced, possibly making it difficult to maintain or obtain the quotation, listing or trading
of our securities on a national securities exchange.
HighCape’s outstanding warrants will become exercisable
for New Quantum-Si Class A common stock following the Business Combination, which will increase the number of shares eligible
for future resale in the public market and result in dilution to our stockholders.
Following the Business Combination, there will
be 3,833,333 outstanding public warrants to purchase 3,833,333 shares of New Quantum-Si Class A common stock at an exercise
price of $11.50 per share, which warrants will become exercisable commencing the later of 30 days following the Closing and
12 months from the closing of our initial public offering, which occurred on September 9, 2020. In addition, there will
be 135,000 private placement warrants outstanding exercisable for 135,000 shares of New Quantum-Si Class A common stock at
an exercise price of $11.50 per share. In certain circumstances, the public warrants and private placement warrants may be exercised
on a cashless basis. To the extent such warrants are exercised, additional shares of New Quantum-Si Class A common stock will
be issued, which will result in dilution to the holders of New Quantum-Si Class A common stock and increase the number of
shares eligible for resale in the public market. Sales of substantial numbers of such shares in the public market could adversely
affect the market price of New Quantum-Si Class A common stock, the impact of which is increased as the value of our stock
price increases.
Even if we consummate the Business Combination, there can
be no assurance that the warrants will be in the money at the time they become exercisable, and they may expire worthless.
The exercise price for the outstanding warrants
is $11.50 per share of New Quantum-Si Class A common stock. There can be no assurance that the warrants will be in the money
following the time they become exercisable and prior to their expiration, and as such, the warrants may expire worthless.
Our stockholders will experience immediate dilution as a consequence
of the issuance of shares of New Quantum-Si Class A common stock in the Transactions. Having a minority share position may
reduce the influence that our current stockholders have on the management of New Quantum-Si.
Assuming that no public stockholders exercise
their redemption rights in connection with the Business Combination, immediately after the consummation of the Business Combination
based on an assumed Closing Date of May 15, 2021 and Quantum-Si shares outstanding as of February 1, 2021, HighCape’s
public stockholders will hold 11,500,000 shares of New Quantum-Si Class A common stock, or approximately 8.5% of the total
outstanding New Quantum-Si common stock representing 2.2% of the voting power following the Business Combination.
26
There are currently outstanding an aggregate
of 3,968,333 warrants to acquire shares of HighCape Class A common stock, which comprise 135,000 private placement warrants
held by HighCape’s initial stockholders at the time of HighCape’s initial public offering and 3,833,333 public warrants.
Each of HighCape’s outstanding whole warrants is exercisable commencing the later of 30 days following the Closing and
12 months from the closing of our initial public offering, which occurred on September 9, 2020, for one share of HighCape
Class A common stock in accordance with its terms.
Subsequent to the consummation of the Business Combination,
we may be required to take write-downs or write-offs, restructuring and impairment or other charges that could have a significant
negative effect on our financial condition, results of operations and stock price, which could cause you to lose some or all of
your investment.
Although HighCape has conducted due diligence
on Quantum-Si, HighCape cannot assure you that this diligence revealed all material issues that may be present in its business,
that it would be possible to uncover all material issues through a customary amount of due diligence, or that factors outside of
HighCape’s, New Quantum-Si’s or Quantum-Si’s control will not later arise. As a result, New Quantum-Si may incur
additional costs and expenses and may be forced to later write-down or write-off assets, restructure its operations or incur impairment
or other charges that could result in losses. Even if the due diligence successfully identifies certain risks, unexpected risks
may arise and previously known risks may materialize in a manner not consistent with our preliminary risk analysis. Even though
these charges may be non-cash items and not have an immediate impact on our liquidity, the fact that New Quantum-Si reports charges
of this nature could contribute to negative market perceptions about New Quantum-Si or its securities. In addition, charges of
this nature may cause New Quantum-Si to violate net worth or other covenants to which it may be subject. Accordingly, any HighCape
stockholders or warrant holders could suffer a reduction in the value of their securities.
If the benefits of the Business Combination do not meet the
expectations of investors or securities analysts, the market price of our securities may decline.
If the benefits of the Business Combination do
not meet the expectations of investors or securities analysts, the market price of HighCape’s securities prior to the Closing
may decline. The market values of HighCape’s securities at the time of the Business Combination may vary significantly from
their prices on the date the Business Combination Agreement was executed or the date on which HighCape stockholders vote on the
Business Combination. The number of shares to be issued pursuant to the Business Combination Agreement is based on the Exchange
Ratio, which is assumed to be 0.8028 shares of New Quantum-Si common stock per share of Quantum-Si common stock based on an assumed
Closing Date of May 15, 2021 and Quantum-Si shares outstanding as of February 1, 2021, and will not be adjusted based
on any changes in the market price of HighCape Class A common stock.
In addition, following the release of cash from
the Trust Account in connection with the Closing, fluctuations in the price of New Quantum-Si’s securities could contribute
to the loss of all or part of your investment. Prior to the Business Combination, there has not been a public market for the stock
of Quantum-Si and trading in the shares of HighCape Class A common stock has not been active. Accordingly, the valuation ascribed
to Quantum-Si in the Business Combination may not be indicative of the price that will prevail in the trading market following
the Business Combination. If an active market for our securities develops and continues, the trading price of New Quantum-Si securities
following the Business Combination could be volatile and subject to wide fluctuations in response to various factors, some of which
are beyond our control. Any of the factors listed below could have a material adverse effect on your investment in HighCape securities
and New Quantum-Si securities may trade at prices significantly below the price you paid for them. In such circumstances, the trading
price of our securities may not recover and may experience a further decline.
Factors affecting the trading price of New Quantum-Si’s securities
may include:
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● changes in the market’s expectations about New Quantum-Si’s operating results;
● success of competitors;
● the commercial launch of New Quantum-Si’s products on expected timelines;
● ability to market new and enhanced products and services on a timely basis;
● changes in laws and regulations affecting New Quantum-Si’s business;
● commencement of, or involvement in, litigation involving New Quantum-Si;
● any major change in New Quantum-Si’s board or management or to key personnel;
Broad market and industry factors may materially
harm the market price of our securities irrespective of our operating performance. The stock market in general, and Nasdaq specifically,
have experienced extreme volatility that has often been unrelated to the operating performance of particular companies. As a result
of this volatility, you may not be able to sell your securities at or above the price at which they were acquired. A loss of investor
confidence in the market for the stocks of other companies which investors perceive to be similar to New Quantum-Si could depress
its stock price regardless of New Quantum-Si’s business, prospects, financial conditions or results of operations. A decline
in the market price of New Quantum-Si’s securities also could adversely affect its ability to issue additional securities
and its ability to obtain additional financing in the future.
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Our ability to successfully effect the Business Combination
and to be successful thereafter will be dependent upon the efforts of key personnel of New Quantum-Si, some of whom may be from
HighCape and Quantum-Si, and some of whom may join New Quantum-Si following the Business Combination. The loss of key personnel
or the hiring of ineffective personnel after the Business Combination could negatively impact the operations and profitability
of New Quantum-Si.
Our ability to successfully effect the Business
Combination and be successful thereafter will be dependent upon the efforts of our key personnel. Although some of HighCape’s
key personnel may remain with New Quantum-Si in advisory positions following the Business Combination, we expect New Quantum-Si’s
current management to remain in place. We cannot assure you that we will be successful in integrating and retaining such key personnel,
or in identifying and recruiting additional key individuals we determine may be necessary following the Business Combination.
New Quantum-Si’s actual financial position and results
of operations may differ materially from the unaudited pro forma financial information included in the Form S-4, filed with
the SEC on March 1, 2021.
The unaudited pro forma condensed combined
financial information included in the Company’s Form S-4 is presented for illustrative purposes only and is not necessarily
indicative of what New Quantum-Si’s actual financial position or results of operations would have been had the Business Combination
been completed on the dates indicated. Accordingly, such pro forma financial information may not be indicative of New Quantum-Si’s
future operating or financial performance and New Quantum-Si’s actual financial condition and results of operations may vary
materially from our pro forma results of operations and balance sheet contained elsewhere in the Company’s Form S-4,
including as a result of such assumptions not being accurate. Additionally, the final acquisition accounting adjustments could
differ materially from the unaudited pro forma adjustments presented in the Company’s Form S-4. Any increase or decrease
in the fair value of the assets acquired and liabilities assumed, as compared to the information shown herein, could also change
the portion of the purchase consideration allocable to goodwill and could impact the operating results of New Quantum-Si following
the Business Combination due to differences in the allocation of the purchase consideration, depreciation and amortization related
to some of these assets and liabilities. The unaudited pro forma condensed combined financial information does not give effect
to any anticipated synergies, operating efficiencies or cost savings that may be associated with the Business Combination. See
“Unaudited Pro Forma Condensed Combined Financial Information” for more information.
We are an emerging growth company and a smaller reporting
company within the meaning of the Securities Act, and if we take advantage of certain exemptions from disclosure requirements available
to “emerging growth companies” or “smaller reporting companies,” this could make our securities less attractive
to investors and may make it more difficult to compare our performance with other public companies.
We are an “emerging growth company”
within the meaning of the Securities Act, as modified by the JOBS Act, and we may take advantage of certain exemptions from various
reporting requirements that are applicable to other public companies that are not “emerging growth companies” including,
but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley
Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions
from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute
payments not previously approved. As a result, our stockholders may not have access to certain information they may deem important.
We could be an emerging growth company for up to five years, although circumstances could cause us to lose that status earlier,
including if the market value of our common stock held by non-affiliates exceeds $700 million as of the end of any second
quarter of a fiscal year, in which case we would no longer be an emerging growth company as of the last day of such fiscal year.
We cannot predict whether investors will find our securities less attractive because we will rely on these exemptions. If some
investors find our securities less attractive as a result of our reliance on these exemptions, the trading prices of our securities
may be lower than they otherwise would be, there may be a less active trading market for our securities and the trading prices
of our securities may be more volatile.
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Further, Section 102(b)(1) of the JOBS Act
exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private
companies (that is, those that have not had a registration statement under the Securities Act declared effective or do not have
a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards.
The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that
apply to non-emerging growth companies but any such election to opt out is irrevocable. We have elected not to opt out of such
extended transition period, which means that when a standard is issued or revised and it has different application dates for public
or private companies, we, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt
the new or revised standard. This may make comparison of our financial statements with another public company that is not an emerging
growth company or is an emerging growth company which has opted out of using the extended transition period difficult or impossible
because of the potential differences in accounting standards used.
Additionally, we are a “smaller reporting
company” as defined in Item 10(f)(1) of Regulation S-K. Smaller reporting companies may take advantage of certain
reduced disclosure obligations, including, among other things, providing only two years of audited financial statements. We
will remain a smaller reporting company until the last day of the fiscal year in which (i) the market value of our common
stock held by non-affiliates is greater than or equal to $250 million as of the end of that fiscal year’s second fiscal
quarter, and (ii) our annual revenues are greater than or equal to $100 million during the last completed fiscal year
and the market value of our common stock held by non-affiliates exceeds $700 million as of the end of that fiscal year’s
second fiscal quarter. To the extent we take advantage of such reduced disclosure obligations, it may also make comparison of our
financial statements with other public companies difficult or impossible.
There can be no assurance that the New Quantum-Si Class A
common stock issued in connection with the Business Combination will be approved for listing on Nasdaq, or that we will be able
to comply with the continued listing standards of Nasdaq.
New Quantum-Si Class A common stock and
warrants are expected to be listed on Nasdaq following the Business Combination. New Quantum-Si’s continued eligibility for
listing may depend on the number of our shares that are redeemed. If, after the Business Combination, Nasdaq delists New Quantum-Si
Class A common stock from trading on its exchange for failure to meet the listing standards, we and our stockholders could
face significant material adverse consequences including:
● a limited availability of market quotations for our securities;
● a limited amount of analyst coverage; and
If New Quantum-Si fails to maintain an effective system of
internal control over financial reporting, New Quantum-Si may not be able to accurately report its financial results or prevent
fraud. As a result, New Quantum-Si stockholders could lose confidence in New Quantum-Si’s financial and other public reporting,
which would harm its business and the trading price of the New Quantum-Si Class A common stock.
Effective internal control over financial reporting
is necessary for New Quantum-Si to provide reliable financial reports and, together with adequate disclosure controls and procedures,
is designed to prevent fraud. Any failure to implement required new or improved controls, or difficulties
encountered in their implementation, could cause New Quantum-Si to fail to meet its reporting obligations. In addition, any testing
by New Quantum-Si, as and when required, conducted in connection with Section 404 of the Sarbanes-Oxley Act (“Section 404”)
or any subsequent testing by New Quantum-Si’s independent registered public accounting firm, as and when required, may reveal
deficiencies in New Quantum-Si’s internal control over financial reporting that are deemed to be significant deficiencies
or material weaknesses or that may require prospective or retroactive changes to its financial statements or identify other areas
for further attention or improvement. Inferior internal controls could also cause investors to lose confidence in the New Quantum-Si’s
reported financial information, which could have a negative effect on the trading price of the New Quantum-Si Class A common
stock.
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Pursuant to Section 404, New Quantum-Si
will be required to furnish a report by its management on New Quantum-Si’s internal control over financial reporting. However,
while New Quantum-Si remains an emerging growth company, New Quantum-Si will not be required to include an attestation report on
internal control over financial reporting issued by its independent registered public accounting firm. To achieve compliance with
Section 404 within the prescribed period, New Quantum-Si will be engaged in a process to document and evaluate its internal
control over financial reporting, which is both costly and challenging. In this regard, New Quantum-Si will need to dedicate internal
resources, potentially engage outside consultants and adopt a detailed work plan to assess and document the adequacy of internal
control over financial reporting, take steps to improve control processes as appropriate, validate through testing that controls
are functioning as documented and implement a continuous reporting and improvement process for internal control over financial
reporting. Despite its efforts, there is a risk that neither New Quantum-Si, nor New Quantum-Si’s independent registered
public accounting firm once New Quantum-Si is required to obtain an attestation report on internal control over financial reporting
from such firm, will be able to conclude within the prescribed timeframe that New Quantum-Si’s internal control over financial
reporting is effective as required by Section 404. This could result in an adverse reaction in the financial markets due to
a loss of confidence in the reliability of the New Quantum-Si’s financial statements.
If third parties bring claims against us, the proceeds held
in the Trust Account could be reduced and the per share redemption amount received by stockholders may be less than $10.00 per
share (which was the offering price in our initial public offering).
Our placing of funds in the Trust Account may
not protect those funds from third-party claims against us. Although we will seek to have all vendors, service providers (other
than our independent registered public accounting firm), prospective target businesses and other entities with which we do business
execute agreements with us waiving any right, title, interest or claim of any kind in or to any monies held in the Trust Account
for the benefit of our public stockholders, such parties may not execute such agreements, or even if they execute such agreements
they may not be prevented from bringing claims against the Trust Account, including, but not limited to, fraudulent inducement,
breach of fiduciary responsibility or other similar claims, as well as claims challenging the enforceability of the waiver, in
each case in order to gain an advantage with respect to a claim against our assets, including the funds held in the Trust Account.
If any third party refuses to execute an agreement waiving such claims to the monies held in the Trust Account, our management
will perform an analysis of the alternatives available to it and will only enter into an agreement with a third party that has
not executed a waiver if management believes that such third party’s engagement would be significantly more beneficial to
us than any alternative.
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Examples of possible instances where we may
engage a third party that refuses to execute a waiver include the engagement of a third party consultant whose particular expertise
or skills are believed by management to be significantly superior to those of other consultants that would agree to execute a
waiver or in cases where management is unable to find a service provider willing to execute a waiver. In addition, there is no
guarantee that such entities will agree to waive any claims they may have in the future as a result of, or arising out of, any
negotiations, contracts or agreements with us and will not seek recourse against the Trust Account for any reason. Upon redemption
of our public shares, if we are unable to complete the Business Combination within the prescribed time frame, or upon the exercise
of a redemption right in connection with the Business Combination, we will be required to provide for payment of claims of creditors
that were not waived that may be brought against us within the ten years following redemption. Accordingly, the per share
redemption amount received by public stockholders could be less than the $10.00 per share initially held in the Trust Account,
due to claims of such creditors. We have not independently verified whether the Sponsor has sufficient funds to satisfy its indemnity
obligations to us and believe that the Sponsor’s only assets are securities of HighCape and, therefore, the Sponsor may
not be able to satisfy those obligations. We have not asked the Sponsor to reserve for such obligations. As a result, if any such
claims were successfully made against the Trust Account, the funds available for the Business Combination and redemptions could
be reduced to less than $10.00 per public share. In such event, we may not be able to complete the Business Combination, and you
would receive such lesser amount per public share in connection with any redemption of your public shares. None of our officers
or directors will indemnify us for claims by third parties including, without limitation, claims by vendors and prospective target
businesses.
Our directors may decide not to enforce the indemnification
obligations of our Sponsor, resulting in a reduction in the amount of funds in the Trust Account available for distribution to
our public stockholders.
Our Sponsor has agreed that it will be liable
to us if and to the extent any claims by a third party for services rendered or products sold to us, or a prospective target business
with which we have discussed entering into a transaction agreement, reduce the amount of funds in the Trust Account to below (i) $10.00
per public share and (ii) such lesser amount per public share held in the Trust Account as of the date of the liquidation
of the Trust Account due to reductions in the value of the trust assets, in each case net of the interest which may be withdrawn
to pay franchise and income taxes (less up to $100,000 of interest to pay dissolution expenses), except as to any claims by a third
party who executed a waiver of any and all rights to seek access to the Trust Account and except as to any claims under our indemnity
of the underwriters of our initial public offering against certain liabilities, including liabilities under the Securities Act.
Moreover, in the event that an executed waiver is deemed to be unenforceable against a third party, our Sponsor will not be responsible
to the extent of any liability for such third party claims. While we currently expect that our independent directors would take
legal action on our behalf against the Sponsor to enforce its indemnification obligations to us, it is possible that our independent
directors in exercising their business judgment and subject to their fiduciary duties may choose not to do so in certain instances.
If our independent directors choose not to enforce these indemnification obligations, the amount of funds in the Trust Account
available for distribution to our public stockholders may be reduced below $10.00 per share.
If, before distributing the proceeds in the Trust Account
to our public stockholders, we file a bankruptcy petition or an involuntary bankruptcy petition is filed against us that is not
dismissed, the claims of creditors in such proceeding may have priority over the claims of our stockholders and the per share amount
that would otherwise be received by our stockholders in connection with our liquidation may be reduced.
If, before distributing the proceeds in the Trust
Account to our public stockholders, we file a bankruptcy petition or an involuntary bankruptcy petition is filed against us that
is not dismissed, the proceeds held in the Trust Account could be subject to applicable bankruptcy law, and may be included in
our bankruptcy estate and subject to the claims of third parties with priority over the claims of our stockholders. To the extent
any bankruptcy claims deplete the Trust Account, the per share amount that would otherwise be received by our stockholders in connection
with our liquidation would be reduced.
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If, after we distribute the proceeds in
the Trust Account to our public stockholders, we file a bankruptcy petition or an involuntary bankruptcy petition is filed against
us that is not dismissed, a bankruptcy court may seek to recover such proceeds, and the members of the HighCape Board may be viewed
as having breached their fiduciary duties to our creditors, thereby exposing members of the HighCape Board and us to claims of
punitive damages.
The Current Charter states that we must complete
our initial business combination by September 9, 2022. If we have not completed an initial business combination by then (or
such later date as our stockholders may approve in accordance with the Current Charter), we will: (i) cease all operations
except for the purpose of winding up; (ii) as promptly as reasonably possible but not more than 10 business days thereafter,
redeem 100% of the public shares, at a per share price, payable in cash, equal to the aggregate amount then on deposit in the
Trust Account, including interest earned on the funds held in the Trust Account and not previously released to us to pay our franchise
and income taxes (less up to $100,000 of interest to pay dissolution expenses), divided by the number of then outstanding public
shares, which redemption will completely extinguish public stockholders’ rights as stockholders (including the right to
receive further liquidating distributions, if any); and (iii) as promptly as reasonably possible following such redemption,
subject to the approval of our remaining stockholders and the HighCape Board, liquidate and dissolve, subject in each case to
our obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law. In such case,
our public stockholders may only receive approximately $10.00 per share and our warrants will expire worthless.
If, after we distribute the proceeds in the Trust
Account to our public stockholders, we file a bankruptcy petition or an involuntary bankruptcy petition is filed against us that
is not dismissed, any distributions received by stockholders could be viewed under applicable debtor/creditor and/or bankruptcy
laws as either a “preferential transfer” or a “fraudulent conveyance.” As a result, a bankruptcy court
could seek to recover some or all amounts received by our stockholders. In addition, the HighCape Board may be viewed as having
breached its fiduciary duty to our creditors and/or having acted in bad faith by paying public stockholders from the Trust Account
prior to addressing the claims of creditors, thereby exposing itself and us to claims of punitive damages.
Our stockholders may be held liable for claims by third parties
against us to the extent of distributions received by them upon redemption of their shares.
Our stockholders may be held liable for claims
by third parties against us to the extent of distributions received by them upon redemption of their shares. Under the DGCL, stockholders
may be held liable for claims by third parties against a corporation to the extent of distributions received by them in a dissolution.
The pro rata portion of our Trust Account distributed to our public stockholders upon the redemption of our
public shares in the event we do not complete our initial business combination within 24 months from the closing of our initial
public offering may be considered a liquidating distribution under Delaware law. If a corporation complies with certain procedures
set forth in Section 280 of the DGCL intended to ensure that it makes reasonable provision for all claims against it, including
a 60-day notice period during which any third-party claims can be brought against the corporation, a 90-day period during which
the corporation may reject any claims brought, and an additional 150-day waiting period before any liquidating distributions are
made to stockholders, any liability of stockholders with respect to a liquidating distribution is limited to the lesser of such
stockholder’s pro rata share of the claim or the amount distributed to the stockholder, and any liability
of the stockholder would be barred after the third anniversary of the dissolution. However, it is our intention to redeem our public
shares as soon as reasonably possible following the 24th month from the closing of our initial public offering in the event
we do not complete our initial business combination and, therefore, we do not intend to comply with those procedures.
Because we do not intend to comply with Section 280,
Section 281(b) of the DGCL requires us to adopt a plan, based on facts known to us at such time that will provide for our
payment of all existing and pending claims or claims that may be potentially brought against us within the 10 years following
our dissolution. However, because we are a blank check company, rather than an operating company, and our operations are limited
to searching for prospective target businesses to acquire, the only likely claims to arise would be from our vendors (such as lawyers,
investment bankers, consultants, etc.) or prospective target businesses. If our plan of distribution complies with Section 281(b)
of the DGCL, any liability of stockholders with respect to a liquidating distribution is limited to the lesser of such stockholder’s pro rata share
of the claim or the amount distributed to the stockholder, and any liability of the stockholder would likely be barred after the
third anniversary of the dissolution.
We cannot assure you that we will properly assess
all claims that may be potentially brought against us. As such, our stockholders could potentially be liable for any claims to
the extent of distributions received by them (but no more) and any liability of our stockholders may extend beyond the third anniversary
of such date. Furthermore, if the pro rata portion of our Trust Account distributed to our public stockholders
upon the redemption of our public shares in the event we do not complete our initial business combination within 24 months
from the closing of our initial public offering is not considered a liquidating distribution under Delaware law and such redemption
distribution is deemed to be unlawful, then pursuant to Section 174 of the DGCL, the statute of limitations for claims of
creditors could then be six years after the unlawful redemption distribution, instead of three years, as in the case
of a liquidating distribution.
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If our stockholders fail to comply with the redemption requirements
specified in the Company’s Form S-4, they will not be entitled to redeem their shares of HighCape Class A common stock
for a pro rata portion of the Trust Account.
Holders of public shares are not required to
affirmatively vote against the Business Combination Proposal in order to exercise their rights to redeem their shares for a pro rata portion
of the Trust Account. In order to exercise their redemption rights, they are required to submit a request in writing and deliver
their stock (either physically or electronically) to the Transfer Agent. Stockholders electing to redeem their shares will receive
their pro rata portion of the funds held in the Trust Account, including interest earned on the funds held
in the Trust Account and not previously released to us to pay our franchise and income taxes, calculated as of two business days
prior to the anticipated consummation of the Business Combination.
The ability of HighCape stockholders to exercise redemption
rights with respect to a large number of shares could increase the probability that the Business Combination would be unsuccessful
and that stockholders would have to wait for liquidation in order to redeem their stock.
At the time we entered into the Business Combination
Agreement and related agreements for the Business Combination, we did not know how many stockholders would exercise their redemption
rights, and therefore we structured the Business Combination based on our expectations as to the number of shares that will be
submitted for redemption. The Business Combination Agreement requires us to have at least $160.0 million of aggregate cash
proceeds comprising (i) the aggregate cash proceeds available for release to any HighCape Party from the Trust Account in
connection with the transactions contemplated by the Business Combination Agreement (after giving effect to any redemptions of
public shares, if any) and (ii) the aggregate cash proceeds actually received by HighCape with respect to the PIPE Financing.
The above considerations may limit our ability to complete the Business Combination or optimize our capital structure.
If you or a “group” of stockholders of which you
are a part are deemed to hold in excess of 20% of the HighCape Class A common stock, you (or, if a member of such a group,
all of the members of such group in the aggregate) will lose the ability to redeem all such shares in excess of 20% of HighCape
Class A common stock.
A public stockholder, together with any of his,
her or its affiliates or any other person with whom such stockholder is acting in concert or as a “group” (as
defined under Section 13 of the Exchange Act), will be restricted from redeeming its shares with respect to more than an aggregate
of 20% of the HighCape Class A common stock, or the “Excess Shares,” without HighCape’s prior consent. However,
the stockholders’ ability to vote all of their shares (including Excess Shares) for or against the Business Combination will
not be restricted. Your inability to redeem the Excess Shares will reduce your influence over HighCape’s ability to consummate
the Business Combination and you could suffer a material loss on your investment in HighCape if you sell such Excess Shares in
open market transactions. Additionally, you will not receive redemption distributions with respect to such Excess Shares if HighCape
consummates the Business Combination. As a result, you will continue to hold that number of shares exceeding 20% of the Class A
common stock and, in order to dispose of such Excess Shares, would be required to sell your stock in open market transactions,
potentially at a loss.
HighCape does not have a specified maximum redemption threshold.
The absence of such a redemption threshold may make it possible for us to complete the Business Combination even if a substantial
majority of HighCape’s stockholders do not agree.
HighCape’s existing governance documents
do not provide a specified maximum redemption threshold, except that HighCape will only redeem public shares so long as, after
payment of the deferred underwriting commissions and after such redemptions, HighCape’s net tangible assets will be at least
$5,000,001 after giving effect to the Transactions (as determined in accordance with Rule 3a51-1(g)(1) of the Exchange Act).
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As a result, HighCape may be able to complete
the Business Combination even though a substantial majority of public stockholders do not agree with the transaction and have redeemed
their shares or have entered into privately negotiated agreements to sell their shares to the Sponsor, officers, directors, advisors
or any of their affiliates. HighCape will file or submit a Current Report on Form 8-K to disclose any material arrangements entered
into or significant purchases made by any of the aforementioned persons that would affect the vote on the proposals to be put to
the Special Meeting or the redemption threshold. Any such report will include descriptions of any arrangements entered into or
significant purchases by any of the aforementioned persons. In the event the aggregate cash consideration we would be required
to pay for all shares of HighCape common stock that are validly submitted for redemption plus any amount required to satisfy the
Aggregate Transaction Proceeds Condition pursuant to the terms of the Business Combination Agreement exceeds the aggregate amount
of cash available to us, we will not complete the Business Combination or redeem any shares, all shares of common stock submitted
for redemption will be returned to the holders thereof, and we instead may search for an alternate business combination.
The Business Combination is subject to conditions, including
certain conditions that may not be satisfied on a timely basis, if at all.
The completion of the Business Combination is
subject to a number of conditions. The completion of the Business Combination is not assured and is subject to risks, including
the risk that approval of the Business Combination by HighCape stockholders is not obtained or that there are not sufficient funds
in the Trust Account, in each case subject to certain terms specified in the Business Combination Agreement (as described under
“The Business Combination Agreement — Conditions to Closing”), or that other Closing conditions
are not satisfied. If HighCape does not complete the Business Combination, HighCape could be subject to several risks, including:
The exercise of HighCape’s directors’ and executive
officers’ discretion in agreeing to changes or waivers in the terms of the Business Combination may result in a conflict
of interest when determining whether such changes to the terms of the Business Combination or waivers of conditions are appropriate
and in HighCape’s stockholders’ best interest.
In the period leading up to the Closing of the
Business Combination, events may occur that, pursuant to the Business Combination Agreement, would require HighCape to agree to
amend the Business Combination Agreement, to consent to certain actions taken by Quantum-Si or to waive rights that HighCape is
entitled to under the Business Combination Agreement. Such events could arise because of changes in the course of Quantum-Si’s
business, a request by Quantum-Si to undertake actions that would otherwise be prohibited by the terms of the Business Combination
Agreement or the occurrence of other events that would entitle HighCape to terminate the Business Combination Agreement. In any
of such circumstances, it would be at HighCape’s discretion, acting through the HighCape Board, to grant its consent or
waive those rights. The existence of financial and personal interests of one or more of the directors or officers described in
the preceding risk factors may result in a conflict of interest on the part of such director(s) or officer(s) between what he
or they may believe is best for HighCape and its stockholders and what he or they may believe is best for himself or themselves
in determining whether or not to take the requested action. As of the date of this Form 10-K, HighCape does not believe there
will be any changes or waivers that HighCape’s directors and executive officers would be likely to make after stockholder
approval of the Business Combination Proposal has been obtained. While certain changes could be made without further stockholder
approval, HighCape will circulate a new or amended proxy statement/prospectus and resolicit HighCape’s stockholders if changes
to the terms of the transaction that would have a material impact on its stockholders are required prior to the vote on the Business
Combination Proposal.
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Because New Quantum-Si will be a “controlled company”
within the meaning of the Nasdaq rules, our stockholders may not have certain corporate governance protections that are available
to stockholders of companies that are not controlled companies.
So long as more than 50% of the voting power
for the election of directors of New Quantum-Si is held by an individual, a group or another company, New Quantum-Si will qualify
as a “controlled company” within the meaning of the Nasdaq corporate governance standards. Following the completion
of the Business Combination, Dr. Rothberg will control over 80.5% of the voting power of our outstanding capital stock. As
a result, New Quantum-Si will be a “controlled company” within the meaning of the Nasdaq corporate governance standards
and will not be subject to the requirements that would otherwise require us to have: (i) a majority of independent directors;
(ii) a nominating committee comprised solely of independent directors; (iii) compensation of our executive officers determined
by a majority of the independent directors or a compensation committee comprised solely of independent directors; and (iv) director
nominees selected, or recommended for the Board’s selection, either by a majority of the independent directors or a nominating
committee comprised solely of independent directors.
Dr. Rothberg may have his interest in New
Quantum-Si diluted due to future equity issuances or his own actions in selling shares of New Quantum-Si Class B common stock,
in each case, which could result in a loss of the “controlled company” exemption under the Nasdaq listing rules. New
Quantum-Si would then be required to comply with those provisions of the Nasdaq listing requirements.
The dual class structure of New Quantum-Si common stock will
have the effect of concentrating voting power with New Quantum-Si’s Chairman of the Board and Founder, which will limit an
investor’s ability to influence the outcome of important transactions, including a change in control.
Shares of New Quantum-Si Class B common
stock will have 20 votes per share, while shares of New Quantum-Si Class A common stock will have one vote per share. Upon
the consummation of the Business Combination, Dr. Rothberg will hold all of the issued and outstanding shares of New Quantum-Si
Class B common stock. Accordingly, upon the consummation of the Business Combination, Dr. Rothberg will hold over 80.5%
of the voting power of New Quantum-Si’s capital stock and will be able to control matters submitted to our stockholders for
approval, including the election of directors, amendments of our organizational documents and any merger, consolidation, sale of
all or substantially all of our assets or other major corporate transactions. Dr. Rothberg may have interests that differ
from yours and may vote in a way with which you disagree and which may be adverse to your interests. This concentrated control
may have the effect of delaying, preventing or deterring a change in control of New Quantum-Si, could deprive our stockholders
of an opportunity to receive a premium for their capital stock as part of a sale of New Quantum-Si, and might ultimately affect
the market price of shares of New Quantum-Si Class A common stock. For information about our dual class structure, see the
section titled “Description of New Quantum-Si Securities.”
We cannot predict the impact New Quantum-Si’s dual class
structure may have on the stock price of New Quantum-Si Class A common stock.
We cannot predict whether New Quantum-Si’s
dual class structure will result in a lower or more volatile market price of New Quantum-Si Class A common stock or in adverse
publicity or other adverse consequences. For example, certain index providers have announced restrictions on including companies
with multiple-class share structures in certain of their indexes. Under these policies, our dual class capital structure would
make us ineligible for inclusion in certain indices, and as a result, mutual funds, exchange-traded funds and other investment
vehicles that attempt to passively track those indices will not be investing in our stock. It is unclear what effect, if any,
these policies will have on the valuations of publicly traded companies excluded from such indices, but it is possible that they
may depress valuations, as compared to similar companies that are included. As a result, the market price of shares of New Quantum-Si
Class A common stock could be adversely affected.
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Delaware law and provisions in New Quantum-Si’s certificate
of incorporation and bylaws could make a takeover proposal more difficult.
If the Business Combination is consummated, New
Quantum-Si’s organizational documents will be governed by Delaware law. Certain provisions of Delaware law and of New Quantum-Si’s
certificate of incorporation and bylaws could discourage, delay, defer or prevent a merger, tender offer, proxy contest or other
change of control transaction that a stockholder might consider in its best interest, including those attempts that might result
in a premium over the market price for the shares of New Quantum-Si Class A common stock held by New Quantum-Si’s stockholders.
These provisions provide for, among other things:
● certain limitations on convening special stockholder meetings;
These anti-takeover provisions as well as certain
provisions of Delaware law could make it more difficult for a third party to acquire New Quantum-Si, even if the third party’s
offer may be considered beneficial by many of New Quantum-Si’s stockholders. As a result, New Quantum-Si’s stockholders
may be limited in their ability to obtain a premium for their shares. If prospective takeovers are not consummated for any reason,
New Quantum-Si may experience negative reactions from the financial markets, including negative impacts on the price of New Quantum-Si
common stock. These provisions could also discourage proxy contests and make it more difficult for New Quantum-Si’s stockholders
to elect directors of their choosing and to cause New Quantum-Si to take other corporate actions that New Quantum-Si’s stockholders
desire.
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New Quantum-Si’s certificate of
incorporation designates the Court of Chancery of the State of Delaware as the sole and exclusive forum for certain types of actions
and proceedings and the federal district courts as the sole and exclusive forum for other types of actions and proceedings, in
each case, that may be initiated by New Quantum-Si’s stockholders, which could limit New Quantum-Si’s stockholders’
ability to obtain what such stockholders believe to be a favorable judicial forum for disputes with New Quantum-Si or New Quantum-Si’s
directors, officers or other employees.
If the Business Combination is consummated,
New Quantum-Si’s certificate of incorporation will provide that, unless New Quantum-Si consents to the selection of an alternative
forum, any (i) derivative action or proceeding brought on behalf of New Quantum-Si; (ii) action asserting a claim of
breach of a fiduciary duty owed by, or any other wrongdoing by, any current or former director, officer or other employee or stockholder
of New Quantum-Si; (iii) action asserting a claim against New Quantum-Si or any director or officer arising pursuant to any
provision of the DGCL or New Quantum-Si’s certificate of incorporation or New Quantum-Si’s bylaws; or (iv) action
to interpret, apply, enforce, or determine the validity of any provisions in the certificate of incorporation of bylaws; or (v) action
asserting a claim against New Quantum-Si or any director or officer of New Quantum-Si governed by the internal affairs doctrine,
shall, to the fullest extent permitted by law, be exclusively brought in the Court of Chancery of the State of Delaware or, if
such court does not have subject matter jurisdiction thereof, the federal district court of the State of Delaware. Subject to
the foregoing, the federal district courts of the United States are the exclusive forum for the resolution of any action, suit
or proceeding asserting a cause of action under the Securities Act. The exclusive forum provision does not apply to suits brought
to enforce any liability or duty created by the Exchange Act. Any person or entity purchasing or otherwise acquiring an interest
in any shares of New Quantum-Si’s capital stock shall be deemed to have notice of and to have consented to the forum provisions
in New Quantum-Si’s certificate of incorporation. These choice-of-forum provisions may limit a stockholder’s ability
to bring a claim in a judicial forum that he, she or it believes to be favorable for disputes with New Quantum-Si or New Quantum-Si’s
directors, officers or other employees or stockholders, which may discourage such lawsuits. We note that there is uncertainty
as to whether a court would enforce these provisions and that investors cannot waive compliance with the federal securities laws
and the rules and regulations thereunder. Section 22 of the Securities Act creates concurrent jurisdiction for state and
federal courts over all suits brought to enforce any duty or liability created by the Securities Act or the rules and regulations
thereunder.
Alternatively, if a court were to find these
provisions of New Quantum-Si’s certificate of incorporation inapplicable or unenforceable with respect to one or more of