snce-20220331

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


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

For the quarterly period ended March 31, 2022


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

For the transition period from ______ to ______

Commission file number 001-39727

SCIENCE 37 HOLDINGS, INC.

(Exact name of registrant as specified in its charter)


Delaware			84-4278203
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)
800 Park Offices Drive, Suite 3606 Research Triangle Park, North Carolina			27709
(Address of Principal Executive Offices)			(Zip Code)

Registrant's telephone number, including area code: (984) 377-3737

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


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Shares of Common Stock, $0.0001 par value per share	SNCE	The Nasdaq Stock Market LLC

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).Yes x No o

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


Large accelerated filer	o	Accelerated filer	o
Non-accelerated filer	x	Smaller reporting company	x
		Emerging growth company	x

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

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

As of May 2, 2022, there were 115,996,390 shares of common stock, par value $0.0001 per share, issued and outstanding.


			Page
Part I	Financial Information
	Item 1.	Financial Statements	5
		Condensed Consolidated Balance Sheets as of March 31, 2022 and December 31,2021 (unaudited)	5
		Condensed Consolidated Statements of Operations for the three months ended March 31, 2022 and 2021 (unaudited)	6
		Condensed Consolidated Statements of Redeemable Convertible Preferred Stock and Stockholders’ Equity (Deficit) for the three months ended March 31, 2022 and 2021 (unaudited)	7
		Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2022 and 2021 (unaudited)	8
		Notes to Condensed Consolidated Financial Statements (unaudited)	9
	Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	18
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	26
	Item 4.	Controls and Procedures	26
Part II	Other Information
	Item 1.	Legal Proceedings	28
	Item 1A.	Risk Factors	28
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	28
	Item 3.	Defaults Upon Senior Securities	28
	Item 4.	Mine Safety Disclosures	28
	Item 5.	Other Information	28
	Item 6.	Exhibits	29
Signatures			30


	(unaudited)
(In thousands, except share data)	March 31, 2022		December 31, 2021
Assets
Current assets:
Cash and cash equivalents	$	179,551	$	214,601
Accounts receivable and unbilled services, net (including amounts with related parties)	10,133		10,699
Prepaid expenses and other current assets	7,991		7,403
Total current assets	197,675		232,703
Property and equipment, net	1,374		1,393
Operating lease right-of-use assets	1,805		2,086
Capitalized software, net	32,122		24,290
Other assets	325		326
Total assets	$	233,301	$	260,798
Liabilities, redeemable convertible preferred stock and stockholders’ equity
Current liabilities:
Accounts payable	$	10,764	$	12,819
Accrued expenses and other liabilities	14,680		17,073
Deferred revenue	5,433		5,130
Total current liabilities	30,877		35,022
Long-term liabilities:
Long-term deferred revenue	2,030		2,478
Operating lease liabilities	1,176		1,322
Other long-term liabilities	1,637		1,477
Long-term earn-out liability	23,400		98,900
Total liabilities	59,120		139,199
Commitments and contingencies (Note 9)
Redeemable convertible preferred stock:
Redeemable convertible preferred stock, $0.0001 par value; 100,000,000 shares authorized, 0 issued and outstanding at March 31, 2022 and December 31, 2021, respectively	—		—
Stockholders’ equity:
Common stock, $0.0001 par value; 400,000,000 shares authorized, 115,713,623 and 114,991,026 issued and outstanding at March 31, 2022 and December 31, 2021, respectively	12		11
Additional paid-in capital	331,353		323,666
Accumulated deficit	(157,184)		(202,078)
Total stockholders’ equity	174,181		121,599
Total liabilities, redeemable convertible preferred stock and stockholders’ equity	$	233,301	$	260,798


	Three Months Ended March 31,
(In thousands, except per share data)	2022		2021
Revenues (including amounts with related parties)	$	18,686	$	12,438
Operating expenses:
Cost of revenues (including amounts with related parties)	15,986		8,638
Selling, general and administrative	30,153		9,164
Depreciation and amortization	3,469		1,497
Total operating expenses	49,608		19,299
Loss from operations	(30,922)		(6,861)
Other income (expense):
Interest income	94		1
Sublease income	239		33
Change in fair value of earn-out liability	75,500		—
Other income (expense)	(18)		1
Total other income	75,815		35
Income (loss) before income taxes	44,893		$	(6,826)
Income tax (benefit) expense	(1)		—
Net income (loss)	$	44,894	$	(6,826)
Earnings (loss) per share:
Basic	$	0.39	$	(1.28)
Diluted	$	0.35	$	(1.28)
Weighted average common shares outstanding:
Basic	115,387		5,319
Diluted	126,462		5,319


	Redeemable Convertible Preferred Stock			Common Stock			Additional Paid-In Capital		Accumulated Deficit		Total Stockholders’ Equity
(In thousands)	Shares	Amount		Shares	Amount
Balances at December 31, 2021	—	$	—	114,991	$	11	$	323,666	$	(202,078)	$	121,599
Stock-based compensation expense	—	—		—	—		7,557		—		7,557
Proceeds from option exercises	—	—		723	1		130		—		131
Net income	—	—		—	—		—		44,894		44,894
Balances at March 31, 2022	—	$	—	115,714	$	12	$	331,353	$	(157,184)	$	174,181


(In thousands)	March 31, 2022		December 31, 2021
Accounts receivable	$	8,724	$	8,143
Unbilled services	1,589		2,825
Total accounts receivable and unbilled services	10,313		10,968
Allowance for doubtful accounts	(180)		(269)
Total accounts receivable and unbilled services, net	$	10,133	$	10,699


(In thousands)	Operating Leases
Remainder of 2022	$	922
2023	674
2024	599
2025	138
2026	11
2027 and thereafter	—
Total future minimum lease payments	2,344
Less imputed interest	(185)
Total	$	2,159
Components of lease liability reported as of March 31, 2022:
Accrued expenses and other liabilities	$	983
Operating lease liabilities	1,176
Total	$	2,159


(In thousands)	Level 1		Level 2		Level 3		Total
Assets:
Money market funds	$	175,729	$	—	$	—	$	175,729
Total	$	175,729	$	—	$	—	$	175,729
Liabilities:
Earn-out liability related to shareholders	$	—	$	—	$	23,400	$	23,400
Total	$	—	$	—	$	23,400	$	23,400


(In thousands, except per share amounts)	2022		2021
Numerator:
Net income (loss)	$	44,894	$	(6,826)
Denominator:
Basic weighted average common shares outstanding	115,387		5,319
Effect of dilutive securities:
Stock options outstanding	11,075		—
Diluted weighted average common shares outstanding	126,462		5,319
Earnings (loss) per share:
Basic	$	0.39	$	(1.28)
Diluted	$	0.35	$	(1.28)


	March 31, 2022			December 31, 2021
Stock price	$	5.35		$	12.47
Expected volatility	70.0		%	55.0		%
Risk-free interest rate	2.37		%	0.91		%
Forecast period (in years)	2.5			2.8


(In thousands)	Earn-Out Liability
Balance at December 31, 2021	$	98,900
Change in fair value related to option holder forfeitures	166
Change in fair value related to share valuation inputs	(75,666)
Total change in fair value recognized in earnings	$	(75,500)
Balance at March 31, 2022	$	23,400


(In thousands, except per share amounts)	Number of Options	Weighted Average Exercise Price
Outstanding at December 31, 2021	25,425	$5.30
Granted	3,961	11.25
Exercised	(723)	0.66
Forfeited	(451)	7.90
Outstanding at March 31, 2022	28,213	$6.21


(In thousands)	2022		2021		Change
Backlog	$	175,750	$	87,865	$	87,885	100.0	%


(In thousands)	2022		2021		Change
Net cash used in operating activities	$	(27,983)	$	(7,087)	$	(20,896)
Net cash used in investing activities	(7,181)		(2,409)		(4,772)
Net cash provided by financing activities	114		63		51


Statement of Operations classification	Three Months Ended March 31,
(In thousands)	2022		2021
Cost of revenues (stock options)	$	514	$	55
Selling, general and administrative (stock options)	5,168		170
Selling, general and administrative (earn-out shares)	1,875		—
Total stock-based compensation expense	$	7,557	$	225

SEC Form 10-Q filed by Science 37 Holdings Inc.