TIDMMXCT
RNS Number : 7157X
MaxCyte, Inc.
10 May 2016
MaxCyte, Inc.
("MaxCyte" or the "Company")
MaxCyte Reports Maiden Results for the Year Ended 31 December
2015
Maryland, USA - 10 May 2016: MaxCyte (LSE: MXCT), the developer
and supplier of cell engineering technology to biotechnology and
pharmaceutical firms engaged in cell therapy, drug discovery and
development, biomanufacturing, gene editing and immuno-oncology,
today announces its maiden full year audited results for the year
ended 31 December 2015.
HIGHLIGHTS (including post-period end highlights)
Financial Highlights
-- Successful Initial Public Offering on the AIM market of the
London Stock Exchange on 29 March 2016 ("IPO"), raising GBP10.0
million (before expenses) for the Company
-- MaxCyte generated revenues of $9.3 million in 2015, a 30%
increase over 2014 revenues of $7.2 million
-- Gross margins of 89% in 2015, compared to 87% in 2014
-- Operating Expenses increased to $9.0 million in 2015, compared to $7.5 million in 2014
-- Net loss was $1.4 million in 2015, compared to $1.8 million in 2014
-- Total assets were $6.4 million at the end of 2015, compared
to $6.2 million at the end of 2014
-- Cash, cash equivalents and short term investments totaled
$2.4 million at the end of 2015, compared to $3.4 million at the
end of 2014. Immediately following the Company's IPO, the company's
cash balance was $14.7 million, net of incurred offering
expenses
Operational and Corporate Highlights
-- Strategic research collaboration entered into with the Johns
Hopkins Kimmel Cancer Center to develop MaxCyte's CARMA platform
and related pipeline of next generation cell therapies
-- Expanded customer base to more than 50 leading pharmaceutical
and biotechnology companies, including nine of the top ten global
biopharmaceutical companies by revenue
-- Increased engagement in high value cell therapy partnered
programs, growing to more than 35 programs covering a diverse range
of fields, including immuno-oncology, gene editing and regenerative
medicine. More than ten of these programs are licensed for
clinical-stage use
-- Continued collaboration with world leaders in the CAR field,
with seven clinical trials using our technology initiated to
date
-- Bolstered global distribution network through appointment of
distribution partners to serve customers in China, South Korea, and
India
-- Appointment of John Johnston as Non-executive Director,
bringing more than 25 years of leadership experience to the
Company's board
-- Presentation of scientific findings at a number of
conferences worldwide, including the American Society of Gene and
Cell Therapy (ASGCT) 18(th) Annual Meeting
Commenting on the Maiden Annual Results, Doug Doerfler, CEO of
MaxCyte, said: "We were delighted to achieve a successful listing
for MaxCyte on AIM and I would like to thank our current and new
shareholders for their support. The financial period under review
has been a very positive one for MaxCyte as we have made
significant progress in the development of our high-value CARMA
immuno-oncology platform. Equally, our work with new and existing
partners on programs across a diverse range of fields, including
immuno-oncology, gene editing and regenerative medicine, continues
to progress as our customer base expands. 2016 has started well and
we look forward to robust progress for shareholders, partners and
patients."
The Company will host a presentation and live conference call
for analysts at 11.00 a.m. BST at the offices of Consilium
Strategic Communications, 41 Lothbury, London, EC2R 7HG.
Dial-in Details:
United Kingdom 0800 6940257
Standard International Dial-In: +44 (0) 1452 555566
Conference ID 7338812
For further information please contact:
MaxCyte +1 301 944 1660
Doug Doerfler, Chief Executive
Officer
Ron Holtz, Chief Financial
Officer
Nominated Adviser and Broker
Panmure Gordon
Freddy Crossley (Corporate
Finance)
Fabien Holler
Duncan Monteith
Tom Salvesen (Corporate Broking) +44 (0) 20 7886 2500
Financial PR Adviser +44 (0)203 709 5700
Consilium Strategic Communications maxcyte@consilium-comms.com
Mary-Jane Elliott
Chris Welsh
Lindsey Neville
About MaxCyte
MaxCyte is an established and revenue generating US-based
developer and supplier of cell engineering technology to
biotechnology and pharmaceutical firms engaged in cell therapy,
drug discovery and development, biomanufacturing, gene editing and
immuno-oncology, markets which the Directors estimate to be, in
aggregate, in excess of $35 billion in 2015. The Company's patented
flow electroporation technology enables its products to deliver
fast, reliable and scalable cell engineering to drive the research
and clinical development of a new generation of cell-based
medicines.
MaxCyte's high performance platform allows transfection with any
molecule or multiple molecules and is compatible with nearly all
cell types, including hard-to-transfect human primary cells. It
also provides a high degree of consistency and minimal cell
disturbance, thereby facilitating rapid, large scale, commercial
and clinical grade cell engineering in a non-viral system and with
low toxicity concerns. The Company's cell engineering technology
platform is CE-marked and FDA-accredited, providing MaxCyte's
customers with an established regulatory path.
MaxCyte is developing CARMA, its proprietary platform in
immuno-oncology, to deliver a validated non-viral approach to CAR
therapies in a number of cancer indications, including solid tumors
where existing CAR-T approaches face significant challenges.
For more information visit http://www.maxcyte.com/
Chairman and Chief Executive Officer'S REVIEW
In 2015, MaxCyte had a remarkable year of achievements and
developments that promise to deliver further growth in exciting,
groundbreaking areas of immuno-oncology, cell therapy and cellular
engineering.
Using its proprietary flow electroporation technology platform,
the Company has made many advances in developing a revolutionary
platform, called CARMA, to generate the next class of immunotherapy
for cancer, aiming to improve on existing Chimeric Antigen Receptor
therapy in T-cells (CAR-T). CARMA, our patented approach to CAR-T
therapy, engineers immune cells to seek and destroy cancer cells,
and is in development via a strategic collaboration with the Johns
Hopkins Kimmel Cancer Center in Baltimore, Maryland. CARMA offers
the potential to deliver precise therapies for patients against a
range of cancers, without the cost and complexity of centralized
manufacturing and adverse effects seen in first generation,
viral-based CAR therapies. We believe the promising preclinical
results to date from this collaboration along with studies underway
will result in an investigational new drug (IND) filing with the
U.S. Food and Drug Administration in 2017.
MaxCyte is also enabling a new generation of cancer therapy
growing out of the convergence of technological advances, such as
various immunotherapy approaches and CRISPR-Cas9 gene editing,
which allows precise deletion, addition or alteration of specific
sites in a gene, altering that gene's function.
To fund further advances in our technology and research, the
Company successfully completed an Initial Public Offering of common
stock on the London Stock Exchange's Alternative Investment Market
(AIM) in March 2016, raising GBP10.0m before expenses.
Further significant accomplishments achieved in the 2015
financial year and 2016 year-to-date have included:
-- The Company generated revenues in 2015 of $9.3 million, from
sales of instruments and disposables for drug discovery and
development and biomanufacturing, as well as from licensing of
instruments and disposable sales for cell therapy development. This
represents a 30% percent increase over 2014. Gross margins were 89
percent in 2015, compared to 87 percent in 2014.
-- Expanding our customer base, which presently consists of more
than 50 leading pharmaceutical and biotechnology companies,
including nine of the top ten global biopharmaceutical companies by
revenue. In addition, the Company is currently engaged in more than
35 cell therapy partnered programs covering a diverse range of
fields, including immuno-oncology, CAR based immune-oncology, gene
editing and regenerative medicine. More than ten of these programs
are licensed for clinical stage use.
-- Collaborating with world leaders in the CAR field in applying
our proprietary flow electroporation technology platform to develop
novel therapies through the use of non-viral loading of CAR mRNA,
seeking to overcome many of the challenges associated with current
viral-based CAR therapies. To date, seven clinical trials for
indications which include solid tumors have been initiated, and
some have shown early indications of anti-tumor activity with no
overt evidence of on-target off-tumor toxicity.
-- Bolstering our distribution network worldwide by appointing
distribution partners to serve customers in China, Korea, and
India. These partners will help meet growing demand for our
products in Asia.
-- Appointing industry veteran John Johnston to our Board of
Directors. Mr. Johnston has more than 25 years of leadership
experience in sales, trading and financial portfolio management in
the U.K. and the U.S., and is a director of a number of
high-growth, London-listed companies.
-- Presenting our scientific findings at a number of conferences
worldwide, including the American Society of Gene and Cell Therapy
(ASGCT) 18(th) Annual Meeting, demonstrating the potential of
messenger RNA transfections as a means for enabling genome
editing.
Looking forward, we remain focused on progressing our CARMA
program in preclinical development and driving top-line growth from
expanding sales and licensing of our technology. We see our
technology becoming more widely adopted in drug
discovery/development and cell therapy including advances into new
therapeutic areas. Our team is firmly dedicated to MaxCyte's
technology for the advancement of the revolutionary immuno-oncology
and gene editing fields, and our technology is continuing to make
key advancements possible.
We sincerely thank our original investors, board members and
collaborators who shared our vision of a new way to engineer cells
to treat disease, and who have helped us drive to our present
success. We welcome our new investors, and Iook forward to forming
new partnerships and collaborations with our users as we continue
to develop technology and products which advance a new generation
of cell-based medicines.
Doug Doerfler
President and Chief Executive Officer
J. Stark Thompson, Ph.D.
Non-executive Chairman
10 May 2016
OPERATIONAL REVIEW
CARMA
MaxCyte is developing a revolutionary class of immunotherapy,
known as CARMA, which aims to improve on Chimeric Antigen Receptor
therapy in T-cells (CAR-T) by utilizing MaxCyte's proprietary cell
engineering platform to enable the targeting of solid cancer tumors
while delivering low-cost, close-to-the-patient manufacturing. In
April 2015, MaxCyte entered a strategic research collaboration with
the Johns Hopkins Kimmel Cancer Center to develop its CARMA cell
therapy. This preclinical work will support a future planned
Investigational New Drug (IND) filing with the U.S. Food & Drug
Administration for a CAR therapy targeting solid tumors.
Cell Therapeutics
MaxCyte is currently partnering with commercial and academic
cell therapy developers in more than 35 licensed programs covering
a diverse range of fields, including immuno-oncology, gene editing
and regenerative medicine. More than ten of these programs are
licensed for clinical-stage use with the goal of providing new
therapies to individuals facing diseases including cancers (such as
triple negative breast cancer, Hodgkins lymphoma, pediatric
leukaemia and other blood cancers), HIV and sickle cell
disease.
The technology licenses and instrument leases provided to
partners in MaxCyte's cell therapeutics business provide high-value
recurring annual fees, which are complemented by an attractive and
growing recurring revenue stream from the sale of its proprietary
single-use disposable processing assemblies. As these programs
progress in the clinic and to commercialization, we believe they
will create significant value for the Company.
Within the cell therapy business, we are collaborating with
world leaders in the CAR field in applying our proprietary flow
electroporation technology platform to develop novel therapies
through the use of non-viral loading of CAR mRNA, seeking to
overcome many of the challenges associated with current viral-based
CAR therapies. To date, seven clinical trials for indications that
include solid tumors have been initiated by our partners, and a
subset of those seven have shown early indications of anti-tumor
activity with no overt evidence of on-target off-tumor
toxicity.
Drug Discovery Tools
MaxCyte's instruments and technology are sold in the
biopharmaceutical markets for discovery and development of small
molecule drugs, biologics and vaccines. To date, the Company has
sold or leased more than 100 instruments for drug discovery
globally, and its customer base includes nine of the top ten
biopharmaceutical companies.
In 2015, MaxCyte bolstered its distribution network by
appointing distribution partners to serve customers in China, South
Korea, and India. These partners will help meet growing demand for
the Company's products and services in Asia.
Scientific Focus
MaxCyte researchers and our partners have continued to present
scientific findings, supported by the use of MaxCyte's technology
in CAR and other areas, at conferences worldwide. Those
presentations include a recent presentation at the American Society
of Gene and Cell Therapy (ASGCT), which demonstrated potential
therapeutic levels of gene correction achieved in Hematopoietic
Stem Cells obtained from X-linked Chronic granulomatous disease
(CGD) patients. In May 2015, scientists also described at the ASGCT
meeting the use of messenger RNA as a means for both transient
therapeutic protein expression and genome editing-based approaches
to enhancing biological activity of primary cells and stem cells to
levels that may be clinically relevant.
Team
MaxCyte recently appointed to its Board of Directors John
Johnston, an industry veteran with 25 plus years of leadership
experience in the U.K and the U.S. in sales, trading and financial
portfolio management. Mr. Johnston is currently a non-executive
director of Flowgroup plc and Midatech Pharma plc, and
non-executive chairman of Constellation Healthcare Technologies
Inc.
Outlook
In the Instrument business, our results year to date in 2016 are
very much in line with our internal plans for the year. Both the
Drug Discovery business and Cell Therapy markets remain on track
against internal plans and the total number of cell therapy
partnered programs is now more than 35, also in line with internal
expectations.
Douglas Doerfler
10 May 2016
FINANCIAL REVIEW
During 2015, the Company focused on expanding its partnered
programs supporting cell therapy product developers, growing its
user base in drug discovery, and supporting the activities of its
current customers. The Company also initiated a collaboration with
the Johns Hopkins Kimmel Cancer Center for preclinical animal
studies of its CARMA immunotherapy.
During the year, the Company also focused on preparations for an
offering of its shares on AIM. The Company's IPO was successfully
completed on March 29, 2016, at which time the Company issued
approximately 14.3 million shares of its common stock at a placing
price of 70 pence per share, generating gross proceeds of GBP10.0
million. The Company plans to use the proceeds principally for
investments in:
-- Further developing its CARMA platform;
-- Expanding the reach of the Company's cell therapy business to
Europe, Asia and other global markets; and
-- Expanding the Company's direct sales teams in the U.S. and
Europe, and expanding its network of distributors in Asia and
globally.
The Directors believe that Admission will also enhance MaxCyte's
profile and product awareness amongst current and prospective
customers, partners, suppliers and academic institutions.
Results for the year ended December 31, 2015
The Company maintains its accounts under U.S. GAAP and the
following information is provided on that basis:
Income Statement and Operations
Revenues were $9.3 million in 2015, compared to $7.2 million in
2014
Net loss was $1.4 million in 2015, compared to a net loss in
2014 of $1.8 million.
Gross Margins were 89% in 2015, compared to 87% in 2014.
Operating Expenses were $9.0 million in 2015, compared to $7.5
million in 2014
Employee headcount was 25 as of 31 December 2015.
Balance Sheet and Capital Structure:
Total assets on the balance sheet were $6.4 million at the end
of 2015, compared to $6.2 million at the end of 2014.
Cash, cash equivalents and short term investments totaled $2.4
million, compared to $3.4 million at the end of 2014. Immediately
following the Company's March 2016 IPO, the company's cash balance
was $14.7 million, net of incurred offering costs.
At the end of 2015, Other Current Assets included $1.0 million
in deferred costs related to the 2016 AIM IPO.
Deferred revenues increased from $1.4 million in 2014 to $2.0
million in 2015 due principally to growth in instrument leases.
The principal balance of the Company's credit facility at
December 31, 2015 was $5.1 million.
As of December 31, 2015, the Company had five classes of
preferred stock and one class of common stock. Upon the occurrence
of the March 2016 IPO, all preferred classes of stock were
converted into the Company's single class of common stock.
Immediately following the IPO, 43,470,461 shares of common stock
were outstanding.
Ron Holtz
10 May 2016
Independent Auditor's Report
We have audited the accompanying financial statements of
MaxCyte, Inc., which comprise the Balance Sheets as of December 31,
2015 and 2014, and the related Statements of Operations, Redeemable
Convertible Preferred Stock and Stockholders' Deficit, and Cash
Flows for the years then ended, and the related notes to the
financial statements.
Management's Responsibility for the Financial Statements
Management is responsible for the preparation and fair
presentation of these financial statements in accordance with
accounting principles generally accepted in the United States of
America; this includes the design, implementation, and maintenance
of internal control relevant to the preparation and fair
presentation of financial statements that are free from material
misstatement, whether due to fraud or error.
Auditor's Responsibility
Our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits in
accordance with auditing standards generally accepted in the United
States of America. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the
financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence
about the amounts and disclosures in the financial statements. The
procedures selected depend on the auditor's judgment, including the
assessment of the risks of material misstatement of the financial
statements, whether due to fraud or error. In making those risk
assessments, the auditor considers internal control relevant to the
entity's preparation and fair presentation of the financial
statements in order to design audit procedures that are appropriate
in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the entity's internal control.
Accordingly, we express no such opinion. An audit also includes
evaluating the appropriateness of accounting policies used and the
reasonableness of significant accounting estimates made by
management, as well as evaluating the overall presentation of the
financial statements.
We believe that the audit evidence we have obtained is
sufficient and appropriate to provide a basis for our audit
opinion.
Opinion
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position of
MaxCyte, Inc. as of December 31, 2015 and 2014, and the results of
its operations and its cash flows for the years then ended in
accordance with accounting principles generally accepted in the
United States of America.
Aronson LLC
805 King Farm Blvd
Suite 300
Rockville, Maryland 20850
Audited 2015 Financial Statements and Notes
MaxCyte, Inc.
Balance Sheets
as of December 31,
2015 2014
------------------ -------------------
Assets
Current assets:
Cash and cash
equivalents $ 2,411,900 $ 3,409,000
Accounts receivable 1,451,300 1,401,900
Inventory 1,085,900 941,100
Other current
assets 1,244,600 194,000
------------------ -------------------
Total current
assets 6,193,700 5,946,000
Property and equipment,
net 207,300 236,200
Total
Assets $ 6,401,000 $ 6,182,200
================== ===================
Liabilities and
stockholders' deficit
Current liabilities:
Current portion
of note payable $ 805,700 $ 1,444,000
Current portion of capital lease obligations 16,600 26,300
Accounts payable
and accrued expenses 2,257,000 1,372,600
Deferred revenue 2,011,800 1,354,400
------------------ -------------------
Total current
liabilities 5,091,100 4,197,300
Note payable, net
of current portion 4,203,900 3,409,400
Preferred stock
warrant liabilities 85,400 105,400
Capital lease obligations, net of current
portion 17,500 34,000
Other liabilities 85,600 83,300
------------------ -------------------
Total Liabilities 9,483,500 7,829,400
Commitments and contingencies (Note
11)
Redeemable convertible preferred stock:
Redeemable Convertible Series E Preferred
Stock, $0.01 par, 1,700,000 shares
authorized, issued and outstanding
at December 31, 2015 and 2014; aggregate
liquidation preference $2,730,700 and
$2,560,700 at December 31, 2015 and
2014, respectively 1,633,100 1,633,100
Redeemable Convertible Series D Preferred
Stock, $0.01 par, 1,602,500 shares
authorized, 1,500,000 shares issued
and outstanding at December 31, 2015
and 2014; aggregate liquidation preference
$6,935,900 and $6,785,900 at December
31, 2015 and 2014, respectively 3,339,500 3,339,500
Redeemable Convertible Series C Preferred
Stock, $0.01 par, 2,500,000 shares
authorized, 2,225,968 shares issued
and outstanding at December 31, 2015
and 2014; aggregate liquidation preference
$8,307,500 and $8,084,900 at December
31, 2015 and 2014, respectively 3,977,400 3,977,400
Redeemable Convertible Series B Preferred
Stock, $0.01 par, 22,000,000 shares
authorized, 19,125,475 shares issued
and outstanding at December 31, 2015
and 2014; carrying amount approximates
liquidation preference 35,299,100 33,769,100
Redeemable Convertible Series A-1 Preferred
Stock, $0.01 par, 4,000,000 shares
authorized, 3,129,406 shares issued
and outstanding at December 31, 2015
and 2014 1,028,100 1,028,100
------------------ -------------------
Total Redeemable Convertible Preferred
Stock 45,277,200 43,747,200
Stockholders'
Deficit
Common stock, $0.01 par; 34,000,000
shares authorized, 1,947,302 and 1,897,980
shares issued and outstanding at December
31, 2015 and 2014, respectively 19,500 18,800
Additional - -
paid in capital
Accumulated
deficit (48,379,200) (45,413,200)
------------------ -------------------
Total stockholders'
deficit (48,359,700) (45,394,400)
Total Liabilities and Stockholders'
Deficit $ 6,401,000 $ 6,182,200
================== ===================
See accompanying notes to the financial statements.
MaxCyte, Inc.
Statements of Operations
For the Years Ended December 31,
2015 2014
------------------- --------------------
Revenue $ 9,290,300 $ 7,164,400
Costs of goods
sold 1,031,800 957,500
------------------- --------------------
Gross
profit 8,258,500 6,206,900
------------------- --------------------
Operating
expenses:
Research and development 3,008,100 2,490,200
Sales and
marketing 3,344,400 2,524,200
General and administrative 2,667,100 2,468,200
------------------- --------------------
Total operating expenses 9,019,600 7,482,600
Operating
loss (761,100) (1,275,700)
------------------- --------------------
Other Income
(expense):
Interest expense (704,400) (561,300)
Other income 20,000 -
------------------- --------------------
Total other
expense (684,400) (561,300)
Net loss (1,445,500) (1,837,000)
Cumulative preferred stock
dividends (2,072,600) (1,916,300)
Net loss attributable to
common stock $ (3,518,100) $(3,753,300)
=================== ====================
Basic and diluted net loss
per share $ (1.86) $ (15.18)
=================== ====================
Weighted average shares outstanding,
basic and diluted 1,887,765 247,225
=================== ====================
See accompanying notes to the financial statements.
Statements of Redeemable Convertible Preferred Stock and Stockholders'
Deficit
For the Years Ended December 31,
Additional Total
Redeemable Convertible Preferred Common Paid-in Accumulated Stockholders'
Stock Preferred Stock Stock Capital Deficit Deficit
------------------------------------------------------------------------------------------------------------------------------- ------------------------------------------------------- ------------------------------------- ------------------- --------------------------- ----------------------------
Series Series Series Series Series Series Series Series Shares Amount
E D C B A-1 D C A-1
Balance
January $ $ $
1, 2014 $ - - $ - $32,239,100 $ - $15,000 $22,300 $ 31,300 68,280 700 - $(33,851,600) $(33,782,300)
Stock-based
compensation
expense - - - - - - - - - - 95,600 - 95,600
Issuance
of warrants - - - - - - - - - - 21,700 - 21,700
Issuance 1,633,100 - - - - - - - - - - - -
of preferred
stock, net
Exercise
of stock
options - - - - - - - - 1,811,700 18,100 54,400 - 72,500
Accretion of
redeemable
preferred
stock - - - 1,530,000 - - - - - - (125,600) (1,404,400) (1,530,000)
Reclassification of
preferred stock to
temporary equity 3,339,500 3,977,400 - 1,028,100 (15,000) (22,300) (31,300) - - - (8,276,500) (8,345,100)
Modification
of warrants - - - - - - - - - - (46,100) (43,700) (89,800)
Net
loss - - - - - - - - - - - (1,837,000) (1,837,000)
------------------------ ---------------------- ----------------------- ------------------------- ------------------------- --------------- --------------- --------------------- ------------------- ---------------- ------------------- --------------------------- ----------------------------
Balance
December
31, 2014 1,633,100 3,339,500 3,977,400 33,769,100 1,028,100 - - - 1,879,980 18,800 - (45,413,200) (45,394,400)
Stock-based
compensation
expense - - - - - - - - - - 1,200 - 1,200
Exercise
of stock
options - - - - - - - - 67,322 700 8,300 - 9,000
Accretion of
redeemable
preferred
stock - - - 1,530,000 - - - - - - (9,500) (1,520,500) (1,530,000)
Net
loss - - - - - - - - - - - (1,445,500) (1,445,500)
Balance
December $ $ $
31, 2015 $1,633,100 $3,339,500 $3,977,400 $35,299,100 $1,028,100 - - $ - $1,947,302 $19,500 - $(48,379,200) $(48,359,700)
======================== ====================== ======================= ========================= ========================= =============== =============== ===================== =================== ================ =================== =========================== ============================
See accompanying notes to the financial statements.
MaxCyte, Inc.
Statements of Cash Flow
For the Years ended December 31,
2015 2014
-------------------- -------------------
Cash flows from operating activities:
Net loss $ (1,445,500) $ (1,837,000)
Adjustments to reconcile net loss
to cash used in operating activities:
Depreciation and amortization 93,300 92,000
Net book value of consigned 30,100 -
equipment sold
Stock-based compensation 1,200 95,600
Change in fair value of derivative (20,000) -
liability
Non-cash interest expense 79,000 77,900
Changes in operating assets and
liabilities:
Accounts receivable (49,400) (634,800)
Inventory (144,800) (214,300)
Other current assets (15,300) (129,900)
Accounts payable and accrued
expenses 525,800 (21,800)
Deferred revenue 657,400 563,400
Other liabilities 107,700 83,300
-------------------- -------------------
Net cash used in operating
activities (180,500) (1,925,600)
-------------------- -------------------
Cash flows from investing activities:
Purchases of property and equipment (94,500) (147,000)
Net cash used in investing
activities (94,500) (147,000)
-------------------- -------------------
Cash flows from financing activities:
Proceeds from issuance of notes
payable and warrants, net of issuance
costs 121,800 4,813,000
Proceeds from exercise of stock
options 9,000 72,500
Principal payments on notes payable (150,000) (1,775,600)
Principal payments on capital leases (26,200) (26,300)
Proceeds from preferred equity
issuance, net of issuance costs - 1,633,100
Costs of anticipated offering paid (676,700) -
in advance
-------------------- -------------------
Net cash (used in) provided
by financing activities (722,100) 4,716,700
-------------------- -------------------
Net (decrease) increase in cash
and cash equivalents (997,100) 2,644,100
Cash and cash equivalents, beginning
of period 3,409,000 764,900
Cash and cash equivalents, end
of period $ 2,411,900 $ 3,409,000
==================== ===================
Supplemental cash flow information:
Cash paid for interest $ 518,200 $ 399,900
Cash paid for income taxes - -
See accompanying notes to the financial statements.
1. Organization and Description of Business
MaxCyte, Inc. (the "Company" or "MaxCyte") was incorporated as a
majority owned subsidiary of EntreMed, Inc. ("EntreMed") on July
31, 1998, under the laws and provisions of the state of Delaware,
and commenced operations on July 1, 1999. In November 2002, MaxCyte
was recapitalized and EntreMed was no longer deemed to control the
Company.
MaxCyte is a developer and supplier of proprietary
electroporation technology to biotechnology and pharmaceutical
firms engaged in cell therapy, including gene editing and
immuno-oncology and in drug discovery and development and
biomanufacturing. The Company licenses its instruments and
technology and sells its consumables to developers of cell
therapies. The Company also sells and leases its instruments and
sells its consumables to pharmaceutical and biotechnology companies
for use in drug discovery and development and biomanufacturing.
The Company incurred significant losses during the years ended
December 31, 2015 and 2014 and has an accumulated deficit of $48.4
million at December 31, 2015. During 2014 and through December 31,
2015, the Company raised net proceeds of approximately $6.6 million
in debt and equity financings (of which approximately $1.9 million
was used to pay off existing borrowings). The Company is currently
implementing an operating plan that includes generating cash from
significant revenue growth. There can be no assurances that the
Company will be successful in its growth plan. On March 29, 2016,
the Company completed its initial public offering of its common
stock on the AIM market of the London Stock Exchange. The Company
issued approximately 14.3 million shares of its common stock at an
initial price of 0.70 British Pounds per share, generating gross
proceeds of approximately 10 million British Pounds.
2. Summary of Significant Accounting Policies
Basis of Presentation
The accompanying financial statements have been prepared in
accordance with accounting principles generally accepted in the
United States of America ("U.S. GAAP").
The Company operates in a single business segment.
Use of Estimates
The preparation of financial statements in conformity with U.S.
GAAP requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amount of revenues and
expenses during the reporting period. In the accompanying financial
statements, estimates are used for, but not limited to, stock-based
compensation, allowance for doubtful accounts, allowance for
inventory obsolescence, valuation of derivative liabilities and
other financial instruments, accruals for contingent liabilities,
fair value of long-lived assets, deferred taxes and valuation
allowance, and the depreciable lives of fixed assets. Actual
results could differ from those estimates.
Concentration
During the years ended December 31, 2015 and 2014, one customer
represented 17% and 18% of net revenues, respectively. As of
December 31, 2015 and 2014, accounts receivable from this customer
totaled 2% and 7% of net accounts receivable, respectively.
During each of the years ended December 31, 2015 and 2014, the
Company purchased approximately 65% of total costs of goods sold
from one supplier. As of December 31, 2015 and 2014, amounts
payable to this supplier totaled 27% and 20% of total accounts
payable, respectively.
Foreign Currency
The Company's functional currency is the U.S. dollar;
transactions denominated in foreign currencies are translated at
the exchange rate in effect at the date of each transaction.
Differences in exchange rates during the period between the date a
transaction denominated in foreign currency is consummated and the
date on which it is either settled or translated for inclusion in
the balance sheet are recognized in the Statement of Operations for
that period. The foreign currency transaction loss included in
operations was $50,100 and $21,700 for the years ended December 31,
2015 and 2014, respectively.
Fair Value
Fair value is the price that would be received from the sale of
an asset or paid to transfer a liability assuming an orderly
transaction in the most advantageous market at the measurement
date. U.S. GAAP establishes a hierarchical disclosure framework
which prioritizes and ranks the level of observability of inputs
used in measuring fair value. These tiers include:
-- Level 1-Quoted prices (unadjusted) in active markets that are
accessible at the measurement date for identical assets or
liabilities. The fair value hierarchy gives the highest priority to
Level 1 inputs.
-- Level 2-Observable market-based inputs other than quoted
prices in active markets for identical assets or liabilities.
-- Level 3-Unobservable inputs are used when little or no market
data is available. The fair value hierarchy gives the lowest
priority to Level 3 inputs.
See Note 9 for additional information regarding fair value.
Cash and Cash Equivalents
Cash and cash equivalents consist of financial instruments with
original maturities of less than three months. At times the
Company's cash balances may exceed federally insured limits. The
Company does not believe that this results in any significant
credit risk.
Inventory
The Company sells or leases products to customers. The Company
uses the average cost method of accounting for its inventory and
adjustments resulting from periodic physical inventory counts are
reflected in costs of goods sold in the period of the adjustment.
Inventory consisted of the following as of December 31:
2015 2014
Raw materials inventory $ 192,300 $ 119,800
Work-in-process
inventory 266,400 173,000
Finished goods
inventory 627,200 648,300
Total Inventory $ 1,085,900 $ 941,100
================== =====================
Accounts Receivable
Accounts receivable are reduced by an allowance for doubtful
accounts, if needed. The allowance for doubtful accounts reflects
the best estimate of probable losses determined principally on the
basis of historical experience and specific allowances for known
troubled accounts. All accounts or portions thereof that are deemed
to be uncollectible or to require an excessive collection cost are
written off to the allowance for doubtful accounts. The Company
determined that no allowance was necessary at December 31, 2015 or
2014.
Property and Equipment
Property and equipment are stated at cost. Depreciation is
computed using the straight-line method. Office equipment
(principally computers) is depreciated over an estimated useful
life of three years. Laboratory equipment is depreciated over an
estimated useful life of five years. Furniture is depreciated over
a useful life of seven years. Leasehold improvements are amortized
over the shorter of the estimated lease term or its useful life.
Consigned instruments represent equipment held at a customer's site
that is typically leased to customers on a short-term basis and is
depreciated over an estimated useful life of five years. Property
and equipment consist of the following at December 31:
2015 2014
Furniture and equipment $ 1,012,700 $ 959,200
Consigned
instruments 339,900 337,000
Leasehold improvements 72,500 72,500
Accumulated depreciation
and amortization (1,217,800) (1,132,500)
Property and equipment,
net $ 207,300 $ 236,200
================ ==============
For the years ended December 31, 2015 and 2014, the Company
incurred depreciation and amortization expense of $93,300 and
$92,000, respectively. Maintenance and repairs are charged to
expense as incurred.
Management reviews property and equipment for impairment
whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. Recoverability
of the long-lived asset is measured by a comparison of the carrying
amount of the asset to future undiscounted net cash flows expected
to be generated by the asset. If such assets are considered to be
impaired, the impairment to be recognized is measured by the amount
by which the carrying amount of the assets exceeds the estimated
fair value of the assets. Assets held for disposal are reportable
at the lower of the carrying amount or fair value, less costs to
sell. Management determined that no assets were impaired and no
assets were held for disposal as of December 31, 2015 and 2014.
Redeemable Convertible Preferred Stock
The Company's Series B redeemable convertible preferred stock
has been classified since issuance as temporary equity since it is
redeemable in certain circumstances outside of the Company's
control. The Series B redeemable convertible preferred stock is
increased by the accretion of any related discounts and accrued but
unpaid dividends so that the carrying amount equals the redemption
amount at the estimated redemption date (see Note 5).
The Company's Series E convertible preferred stock issued in
December 2014 was classified at issuance as temporary equity as a
result of an embedded contingent conversion option that is
potentially settleable by issuing a variable number of shares (see
Note 5).
The Company's Series A-1 convertible preferred stock and the
Series C perpetual preferred stock and Series D perpetual preferred
stock were initially classified as permanent equity. As part of the
adoption of the Plan of Conditional Recapitalization (see Note 5)
in December 2014, the Company's Series A-1, C and D preferred stock
were modified to include an embedded contingent conversion option
that is potentially settleable by issuing a variable number of
shares; as a result, the Series A-1, C and D preferred stock were
reclassified to temporary equity upon modification (see Note
5).
Revenue Recognition
Revenue is recognized when there is persuasive evidence that an
arrangement exists, delivery has occurred, the sales price is fixed
and determinable, and collection is reasonably assured.
Revenue is principally from the sale or lease of instruments and
processing assemblies, as well as from warranties, installation and
maintenance. In some arrangements, product and services have been
sold together in multiple element arrangements. In such
arrangements, when the elements have standalone value to the
customer, the Company allocates the sale price to the various
elements in the arrangement on a relative selling price basis.
Under this basis, the Company determines the estimated selling
price of each element in a manner that is consistent with that used
to determine the price to sell the deliverable on a standalone
basis.
Revenue from the sale of instruments and disposables is
recognized at the time of shipment to the customer, provided no
significant vendor obligations remain and collectability is
probable. Revenue from equipment leases is recognized ratably over
the contractual term of the lease agreement. Licensing fee revenue
is recognized ratably over the license period.
Research and Development Costs
Research and development costs consist of independent
proprietary research and development costs, and the costs
associated with work performed for fees from third parties.
Research and development costs are expensed as incurred.
Stock-Based Compensation
The Company has a stock-based compensation plan for stock
options awarded in exchange for employee and non-employee director
services. The value of the award that is ultimately expected to
vest is recognized as expense on a straight-line basis over the
employee's requisite service period.
The Company utilizes the Black-Scholes model for estimating fair
value of its stock options granted. Option valuation models,
including the Black-Scholes model, require the input of highly
subjective assumptions, and changes in the assumptions used can
materially affect the grant-date fair value of an award. These
assumptions include the risk-free rate of interest, expected
dividend yield, expected volatility and the expected life of the
award. A discussion of management's methodology for developing each
of the assumptions used in the Black-Scholes model is as
follows:
Fair value of common stock
Given the lack of an active public market for the common stock,
the Company's board of directors determined the fair value of the
common stock. In the absence of a public market, the Company
believes that it is appropriate to consider a range of factors to
determine the fair value of the common stock at each grant date.
The factors include, but are not limited to: (1) the achievement of
operational milestones by the Company; (2) the status of strategic
relationships with collaborators; (3) the significant risks
associated with the Company's stage of development; (4) capital
market conditions for life science and medical diagnostic
companies, particularly similarly situated, privately held,
early-stage companies; (5) the Company's available cash, financial
condition and results of operations; (6) the most recent sales of
the Company's preferred stock; and (7) the preferential rights of
the outstanding preferred stock.
Expected volatility
Volatility is a measure of the amount by which a financial
variable such as a share price has fluctuated (historical
volatility) or is expected to fluctuate (expected volatility)
during a period. The Company does not maintain an internal market
for its shares and its shares are not traded publicly. The Company
has been able to identify several public entities of similar size,
complexity and stage of development; accordingly, historical
volatility has been calculated at 40% for both 2015 and 2014 using
the volatility of these companies.
Expected dividend yield
The Company has never declared or paid dividends and has no
plans to do so in the foreseeable future.
Risk-free interest rate
This approximates the U.S. Treasury rate for the day of each
option grant during the year, having a term that closely resembles
the expected term of the option. The risk-free interest rate was
1.9% and 1.8%-1.9% for stock options granted during 2015 and 2014,
respectively.
Expected term
This is the period of time that the options granted are expected
to remain unexercised. Options granted have a maximum term of 10
years. The Company estimates the expected term of the option to be
6.25 years for options with a standard four-year vesting period,
using the simplified method. Over time, management intends to track
estimates of the expected term of the option term so that estimates
will approximate actual behavior for similar options.
Expected forfeiture rate
The forfeiture rate is the estimated percentage of options
granted that is expected to be forfeited or canceled on an annual
basis before becoming fully vested. The Company estimates the
forfeiture rate based on turnover data with further consideration
given to the class of the employees to whom the options were
granted. The Company estimated the annual forfeiture rate to be 10%
for both 2015 and 2014.
Income Taxes
The Company uses the asset and liability method of accounting
for income taxes. Deferred tax assets and liabilities are
determined based on differences between the financial reporting and
tax basis of assets and liabilities and are measured using the
enacted tax rates and laws that are expected to be in effect when
the differences are expected to reverse. The effect on deferred tax
assets and liabilities of a change in tax rates is recognized in
the period that such tax rate changes are enacted. The measurement
of a deferred tax asset is reduced, if necessary, by a valuation
allowance if it is more-likely-than-not that all or a portion of
the deferred tax asset will not be realized.
Management uses a recognition threshold and a measurement
attribute for the financial statement recognition and measurement
of tax positions taken or expected to be taken in a tax return, as
well as guidance on derecognition, classification, interest and
penalties and financial statement reporting disclosures. For those
benefits to be recognized, a tax position must be more-likely-
than-not to be sustained upon examination by taxing authorities.
The Company recognizes interest and penalties accrued on any
unrecognized tax exposures as a component of income tax expense.
The Company has not identified any uncertain income tax positions
that could have a material impact to the financial statements.
The Company is subject to taxation in various jurisdictions in
the United States and remains subject to examination by taxing
jurisdictions for 2012 and all subsequent periods. The Company's
net operating loss carryforwards remain subject to examinations for
all periods.
Loss Per Share
Basic loss per share is computed by dividing net loss available
to common shareholders by the weighted average number of shares of
common stock outstanding during the period.
For periods of net income, and when the effects are not
anti-dilutive, diluted earnings per share is computed by dividing
net income available to common shareholders by the weighted-average
number of shares outstanding plus the impact of all potential
dilutive common shares, consisting primarily of common stock
options and stock purchase warrants using the treasury stock
method, and convertible preferred stock using the if-converted
method.
For periods of net loss, diluted loss per share is calculated
similarly to basic loss per share because the impact of all
dilutive potential common shares is anti-dilutive. The number of
anti-dilutive shares, consisting of (i) common stock options, (ii)
stock purchase warrants, and (iii) convertible preferred stock
exchangeable into common stock which has been excluded from the
computation of diluted loss per share, was 31.9 and 32.0 million as
of December 31, 2015 and 2014, respectively.
The Company's convertible preferred stock, prior to its
conversion, contains non-forfeitable rights to dividends, and
therefore is considered to be a participating security; the
calculation of basic and diluted income (loss) per share excludes
net income (but not net loss) attributable to the convertible
preferred stock from the numerator and excludes the impact of those
shares from the denominator.
Recent Accounting Pronouncements
In May 2014, the Financial Accounting Standards Board, or FASB,
issued guidance for revenue recognition for contracts, superseding
the previous revenue recognition requirements, along with most
existing industry-specific guidance. The guidance requires an
entity to review contracts in five steps: 1) identify the contract,
2) identify performance obligations, 3) determine the transaction
price, 4) allocate the transaction price, and 5) recognize revenue.
The new standard will result in enhanced disclosures regarding the
nature, amount, timing and uncertainty of revenue arising from
contracts with customers. The standard currently is effective for
the Company's reporting year beginning January 1, 2019 and early
adoption is permitted starting January 1, 2018. The Company is
currently evaluating the impact, if any, that this new accounting
pronouncement will have on its financial statements.
In August 2014, the FASB issued guidance requiring management to
evaluate on a regular basis whether any conditions or events have
arisen that could raise substantial doubt about the entity's
ability to continue as a going concern. The guidance 1) provides a
definition for the term "substantial doubt," 2) requires an
evaluation every reporting period, interim periods included, 3)
provides principles for considering the mitigating effect of
management's plans to alleviate the substantial doubt, 4) requires
certain disclosures if the substantial doubt is alleviated as a
result of management's plans, 5) requires an express statement, as
well as other disclosures, if the substantial doubt is not
alleviated, and 6) requires an assessment period of one year from
the date the financial statements are available to be issued. The
standard is effective for the Company's reporting year beginning
January 1, 2017 and early adoption is permitted. The Company is
currently evaluating the impact, if any, that this new accounting
pronouncement will have on its financial statements.
In April 2015, the FASB issued accounting guidance requiring
that debt issuance costs related to a recognized liability be
presented on the balance sheet as a direct reduction from the
carrying amount of that debt liability, consistent with debt
discounts. The recognition and measurement guidance for debt
issuance costs are not affected. The standard is effective for
reporting periods beginning after December 15, 2015. The Company
early adopted this guidance retrospectively in accordance with the
guidance. The adoption of this new guidance resulted in a
reclassification of $82,000 of Other Current Assets to Current
Portion of Note Payable and $37,000 of Other Noncurrent Assets to
the noncurrent liability, Note Payable, Net of Current Portion at
December 31, 2014.
In July 2015, the FASB issued guidance for inventory requiring
an entity to measure inventory within the scope of this guidance at
the lower of cost or net realizable value, except when inventory is
measured using LIFO or the retail inventory method. Net realizable
value is the estimated selling price in the ordinary course of
business, less reasonably predictable costs of completion,
disposal, and transportation. In addition, the FASB has amended
some of the other inventory guidance to more clearly articulate the
requirements for the measurement and disclosure of inventory. The
guidance is effective for reporting periods beginning after
December 15, 2016 and early adoption is permitted. The Company is
currently evaluating the impact, if any, that this new accounting
pronouncement will have on its financial statements.
The Company has evaluated all other issued and unadopted
Accounting Standards Updates and believes the adoption of these
standards will not have a material impact on its results of
operations, financial position, or cash flows.
3. Related Party Transactions - Assignment of License Agreement from EntreMed
On May 30, 2000, EntreMed assigned to the Company all of its
rights under a license agreement (the Agreement) with Boston
Children's Hospital, formerly Immune Disease Institute, Inc. The
assignment included the worldwide exclusive license to certain
patents and patent applications. The Company agreed to carry out
the obligations of the Agreement, which includes the annual payment
of royalties based on net sales of licensed products. Effective
January 1, 2009, the Company extended the Agreement on its own
behalf and settled all outstanding amounts due thereunder. The
Agreement required a minimum annual fee of $50,000 which was
applied against any royalties due for the annual period, provided
for contingent cash and equity payments based on qualifying sales,
and is cancellable by the Company with 90 days written notice. The
Company recognized royalty expense associated with the Agreement of
$37,200 for the year ended December 31, 2014 (none in 2015). All of
the patents which are the subject of the license expired in March
2014.
4. Debt
In March 2014, the Company entered into a credit facility with
MidCap Financial SBIC, LP ("MidCap") which provides for a total
facility of up to $4,000,000, plus an additional $1,000,000 subject
to certain performance requirements. The facility carries a
variable interest rate equal to the greater of (i) 1.50% above the
LIBOR then in effect, or (ii) 10.00%. The credit facility is
collateralized by substantially all tangible assets of the Company
and matures in March 2017. The Company borrowed the initial
$4,000,000 in March 2014 (and used a portion of the proceeds pay in
full the outstanding balance on the prior facility from Square 1
Bank).
In connection with this facility, in 2014 the Company issued a
stock purchase warrant to MidCap to purchase 40,000 shares of
Series D Preferred at an exercise price of $1.00 per share. This
warrant expires in March 2024 and is recorded as a debt discount at
its estimated fair value of $21,700 which is being amortized as
interest expense over the term of the debt using the effective
interest method. The warrant was initially classified as equity;
upon the adoption of the Plan of Conditional Recapitalization in
December 2014 (see Note 5) the warrant was reclassified to a
liability at its then fair value.
The Company amended the MidCap facility in December 2014,
February 2015 and June 2015, and has accounted for the amendments
as a "modification of debt." Accordingly, the Company has deferred
additional fees incurred and paid to the lender in connection with
the amendments and expensed all fees paid to third parties. The
deferred fees are being amortized using the effective interest
method over the remaining term of the amended debt. Unamortized
deferred financing costs were approximately $82,100 and $118,700 at
December 31, 2015 and 2014, respectively, and are included as
reductions to the note payable balance.
In December 2014 and after the adoption of the Plan of
Conditional Recapitalization, certain terms of the MidCap credit
facility were amended and the additional $1,000,000 term loan was
drawn. In consideration for the amendment and waiver, the Company
issued an additional warrant to purchase 10,000 shares of Series D
Preferred, with the same terms and conditions as the initial
warrant. The warrant was recorded as a debt discount at its
estimated fair value of $15,600 which is being amortized as
interest expense over the term of the debt using the effective
interest method. The warrant is classified as a liability.
The Company amended the MidCap facility in February 2015 and in
June 2015, to, among other things, (i) waive certain existing
events of default, (ii) allow certain otherwise prohibited
investments, (iii) extend the maturity date to July 1, 2019, (iv)
revise principal amortization payments and other contingent
payments, and (v) increase the principal amount to $5,105,400.
The credit facility contains a minimum sales financial covenant
for rolling twelve month sales each month. The Company was not in
compliance with the covenant requirement as of December 31, 2014.
The Company received a waiver from MidCap for the noncompliance as
of December 31, 2014.
The total balance of the MidCap credit facility at December 31,
2015 was $5,105,400, with an interest rate of 10%; the balance of
the unamortized debt discount at December 31, 2015 and 2014 was
$13,800 and $27,600, respectively. Future minimum principal
payments under the MidCap credit facility are expected to be
approximately $850,000 in 2016, approximately $1,702,000 in 2017
and 2018, and approximately $850,000 in 2019.
5. Preferred Stock
The Company has outstanding Series A-1 convertible preferred
stock (the "Series A-1 Preferred"), Series B redeemable convertible
preferred stock (the "Series B Preferred"), series C and D
perpetual preferred stock (the "Series C Preferred" and "Series D
Preferred") and Series E convertible preferred stock (the "Series E
Preferred"), each with various rights and preferences, as discussed
further below.
Rights to Nominate Directors
In accordance with the Company's restated certificate of
incorporation, and prior to the effect of the Plan of Conditional
Recapitalization (see discussion below), rights to elect members of
the Board of Directors consists of eight directors designated as
follows: (i) three individuals to be selected by the holders of the
Series B Preferred, (ii) one individual to be selected by holders
of the Series C Preferred, (iii) two individuals to be elected by
the holders of Series B Preferred and common stock, voting together
as a single class, and (iv) two individuals selected by the holders
of the common stock. After the Plan of Conditional Recapitalization
is effective, directors are elected by the common shareholders.
Liquidation Preferences
In the event of any liquidation, dissolution or winding up of
the Company prior to the effect of the Plan of Conditional
Recapitalization, each share of Series E Preferred is entitled to
receive, prior and in preference to all other capital stock of the
Company, an amount equal to $1.50 (one and one-half times the
Series E purchase price) plus all accrued and unpaid Series E
accruing dividends. After paying the Series E preference, the
remaining preferred stockholders are entitled to (in order of
preference):
-- each share of Series D Preferred is entitled to receive,
prior and in preference to all other capital stock of the Company,
an amount equal to $4.00 (four times the Series D purchase price)
plus all accrued and unpaid Series D accruing dividends;
-- each share of Series C Preferred is entitled to receive an
amount equal to $3.00 (three times the Series C Purchase Price)
plus all accrued and unpaid Series C accruing dividends;
-- each share of Series B Preferred will be entitled to receive,
prior and in preference to all other capital stock of the Company,
an amount equal to $1.00 (the Series B Purchase Price) plus all
accrued and unpaid Series B accruing dividends (the Series B
Preferential Amount);
-- the assets of the Company legally available for distribution
in such liquidation event (or the consideration received in such
transaction), if any, are to be distributed ratably to the holders
of the Series E Preferred, the Series B Preferred, Series A-1
Preferred, and common stock at the time outstanding on an
as-if-converted-to-common-stock basis until such time as such
holders have received an aggregate amount of $100,000,000;
-- the holders of the Series A-1 Preferred shall be entitled to
share in the distribution of up to $6,000,000 of the remaining
assets of the Company on a pro rata basis; and
-- thereafter, all remaining assets of the Company will be
distributed pro rata among the holders of the Series E Preferred,
Series B Preferred, Series A-1 Preferred, and common stock on an
as-converted-into-common-stock pro rata basis.
Other Provisions of the Series A-1 Preferred
Prior to the effect of the Plan of Conditional Recapitalization,
the Series A-1 Preferred has the following specific provisions:
Voting
Holders are entitled to vote on an as-converted basis with
Series E Preferred, Series B Preferred and common holders.
Dividends
The holders of the Series A-1 Preferred shall be entitled to
receive dividends each time the Company declares or pays any
dividend in an amount equal to the amount of dividends that would
have been received if the shares of Series A-1 Preferred had been
converted to common stock. No dividends were declared during the
periods presented.
Conversion
Each share of Series A-1 Preferred is convertible to one share
of common stock at any time, subject to adjustments. If the Company
consummates a public offering, which does not trigger the Plan of
Conditional Recapitalization, from which the Company receives gross
proceeds of at least $35,000,000 at a price not less than $6.00 per
share, the conversion becomes mandatory. Also, the conversion
becomes mandatory if the holders of at least two-thirds of the then
outstanding shares of Series A-1 elect to covert.
Other Provisions of the Series B Preferred
Prior to the effect of the Plan of Conditional Recapitalization,
the Series B Preferred has the following specific provisions:
Voting
Holders are entitled to vote on an as-converted basis with
Series E Preferred, Series A-1 Preferred and common holders, and
have separate voting rights on specified matters.
Dividends
The holders of Series B Preferred will be entitled to receive
cumulative dividends, when and as declared by the Board of
Directors, payable in cash or in kind, and in preference to any
dividend on any other capital stock other than the Series C
Preferred, Series D Preferred and Series E Preferred at a rate of
8% per annum (as adjusted for stock splits, stock dividends,
re-capitalizations, and re-combinations). In the event of certain
defaults by the Company, the dividend for the Series B Preferred
shall increase to 12% per annum until such default is corrected, at
which point the dividend rate returns to 8%. The Board of Directors
has not declared any dividends.
Redemption
The Series B Preferred may be redeemed upon the election of the
holders of two-thirds of the then-outstanding Series B Preferred.
However, no shares can be redeemed unless approved by a vote or
written consent of the holders of at least a majority in interest
of the outstanding Series E Preferred, Series D Preferred, the
Series C Preferred, each voting as a separate class. The redemption
price is the greater of original issue price plus accrued and
unpaid dividends or the fair market value as determined by the
Board of Directors.
Conversion
Each share of Series B Preferred (including any accrued and
unpaid dividends) may be converted at the holder's option at any
time into one share of common stock, subject to adjustments. If the
Company consummates a public offering, which does not trigger the
Plan of Conditional Recapitalization, from which the Company
receives gross proceeds of at least $35,000,000 at a price not less
than $6.00 per share, the conversion becomes mandatory. Also, the
conversion becomes mandatory if the holders of at least two-thirds
of the then outstanding shares of Series B elect to covert.
Anti-dilution Adjustments
The conversion price of the Series B Preferred is subject to
adjustment to prevent dilution, on a weighted-average basis, in the
event that the Company issues additional shares of capital stock
(or the right to acquire shares of capital stock) at a price per
share that is less than the then-applicable conversion price of the
Series B Preferred.
Other Provisions of the Series C Preferred
Prior to the effect of the Plan of Conditional Recapitalization,
the Series C Preferred has the following specific provisions:
Voting
In addition to any other vote required by law, the vote or
written consent of the holders of at least a majority of the
outstanding Series C Preferred shares is necessary for effecting or
validating (i) any action that alters or changes any of the powers,
preferences, or other special rights, privileges or restrictions of
the Series C Preferred, (ii) any authorization or any designation
of any class or series of stock or any other securities convertible
into equity securities of the Company ranking on a parity with or
senior to the Series C Preferred in right of redemption,
liquidation preference, voting or dividends, or (iii) any action
that results in the payment or declaration of a dividend or
distribution of property on any shares of Common Stock or Preferred
Stock other than the Series C Preferred.
Dividends
The holders of Series C Preferred are entitled to receive
cumulative dividends, when and as declared by the Board of
Directors, payable in cash and in preference to any dividend on any
other capital stock other than the Series E Preferred and Series D
Preferred at a rate of 10% per annum (as adjusted for stock splits,
stock dividends, re-capitalizations, and re-combinations). The
Board of Directors has not declared any dividends.
Conversion
Prior to the Plan of Conditional Recapitalization, the Series C
Preferred was not convertible. The Plan of Conditional
Recapitalization provides that in the event that an AIM IPO closes
before December 31, 2015, the Series C Preferred is automatically
converted into common stock based on a formula of value (with
multiples of existing liquidation preferences) and on a discount
from the AIM IPO price. In January 2016, the Board approved an
amended Plan which among other things, extended the time for the
closing of an AIM IPO to June 30, 2016. The Board may further
extend the AIM IPO date to December 31, 2016 at its discretion
without shareholder consent.
Other Provisions of the Series D Preferred
Prior to the effect of the Plan of Conditional Recapitalization,
the Series D Preferred has the following specific provisions:
Voting
In addition to any other vote required by law, the vote or
written consent of the holders of at least a majority in interest
of the outstanding Series D Preferred, voting together as a
separate class, shall be necessary for effecting or validating (i)
any action that alters or changes any of the powers, preferences,
or other special rights, privileges or restrictions of the Series D
Preferred (whether by merger, consolidation, or the like), (ii) any
authorization or any designation, whether by reclassification or
otherwise, of any class or series of stock or any other securities
convertible into equity securities of the Company ranking on a
parity with or senior to the Series D Preferred in right of
redemption, liquidation preference, voting or dividends, or (iii)
any action that results in the payment or declaration of a dividend
or distribution of property.
Dividends
The holders of Series D Preferred are entitled to receive
cumulative dividends, when and as declared by the Board of
Directors, payable in cash, and in preference to any dividend on
any other capital stock other than the Series E Preferred, at a
rate of 10% per annum (as adjusted for stock splits, stock
dividends, re-capitalizations, and re-combinations). The Board of
Directors has not declared any dividends.
Conversion
Prior to the Plan of Conditional Recapitalization, the Series D
Preferred was not convertible. The Plan of Conditional
Recapitalization provides that in the event that an AIM IPO closes
before December 31, 2015, the Series D Preferred is automatically
converted into common stock based on a formula of value (with
multiples of existing liquidation preferences) and on a discount
from the AIM IPO price. In January 2016, the Board approved an
amended Plan which among other things, extended the time for the
closing of an AIM IPO to June 30, 2016. The Board may further
extend the AIM IPO date to December 31, 2016 at its discretion
without shareholder consent.
Other Provisions of the Series E Preferred
Prior to the effect of the Plan of Conditional Recapitalization,
the Series E Preferred has the following specific provisions:
Voting
Holders are entitled to vote on an as-converted basis with
Series A-1 Preferred, Series B Preferred and common holders, and
have separate voting rights on specified matters. Also, and in
addition to any other vote required by law, the vote or written
consent of the holders of at least a majority interest of the
outstanding Series E Preferred, voting together as a separate
class, shall be necessary for effecting or validating (i) any
action that alters or changes any of the powers, preferences, or
other special rights, privileges or restrictions of the Series E
Preferred (whether by merger, consolidation, or the like), (ii) any
authorization or any designation, whether by reclassification or
otherwise, of any class or series of stock or any other securities
convertible into equity securities of the Company ranking on a
parity with or senior to the Series E Preferred in right of
redemption, liquidation preference, voting or dividends, or (iii)
any action that results in the payment or declaration of a dividend
or distribution of property.
Dividends
The holders of Series E Preferred are entitled to receive
cumulative dividends, when and as declared by the Board of
Directors, payable in cash, and in preference to any dividend on
any other capital stock, at a rate of 10% per annum (as adjusted
for stock splits, stock dividends, re-capitalizations, and
re-combinations). The Board of Directors has not declared any
dividends.
Conversion
Each share of Series E Preferred is convertible to one share of
common stock at any time, subject to adjustments. If the Company
consummates a public offering in any jurisdiction prior to December
31, 2016, the conversion becomes mandatory at a conversion price
calculated at a 15% discount from the applicable offering
price.
Plan of Conditional Recapitalization
In December 2014, in contemplation of a potential public
offering of shares on the AIM market of the London Stock Exchange
(such offering, or in its place an initial public offering on an
exchange acceptable to the Board of Directors, are referred to
herein as an "AIM IPO"), the Board of Directors approved a Plan of
Conditional Recapitalization whose effectiveness is conditioned
upon (i) stockholder approval (which approval was received in
December 2014) and (ii) the closing of an AIM IPO. Along with the
Plan of Conditional Recapitalization, the Board approved a
conditional Twelfth Amended and Restated Certificate of
Incorporation and the conditional termination of various
shareholder rights agreements.
The Plan of Conditional Recapitalization provides that in the
event that an AIM IPO closes before December 31, 2015 (i) all
outstanding Series D preferred stock purchase warrants
automatically are exchanged for common shares based on a formula
and on the AIM IPO price, and (ii) all Series A-1, B, C and D
preferred stock are automatically converted into common stock based
on a formula of value (with multiples of existing liquidation
preferences) and on a discount from the AIM IPO price.
As a result of the Plan of Conditional Recapitalization, the
Series A-1, B, C and D preferred stock now contain a contingent
conversion option settleable by issuance of a variable number of
shares; as such, the Series A-1, C and D preferred stock were
reclassified to temporary equity upon the adoption of the Plan of
Conditional Recapitalization (at their then fair value). Also upon
adoption, the Series D warrants were reclassified from permanent
equity to liability (at their then fair value) and will be
marked-to-market at each balance sheet date until settlement.
In January 2016, the Board approved an amended Plan which among
other things, extended the time for the closing of an AIM IPO to
June 30, 2016. The Board may further extend the AIM IPO date to
December 31, 2016 at its discretion without shareholder
consent.
6. Stock Options and Stock Purchase Warrants
Stock Options
The Company adopted the MaxCyte, Inc. 1999 Long-Term Incentive
Plan (the "1999 Option Plan") and the MaxCyte, Inc. 2000 Long-Term
Incentive Plan (the "2000 Option Plan" and, together with the 1999
Option Plan, the "Option Plans") to provide for the granting of
stock options to employees, officers, and directors of the Company
and to other individuals as determined by the Board of Directors. A
total of 6,184,489 shares of common stock are reserved by the
Company to accommodate the exercise of options under the Option
Plans of which 148,172 remained available for grant as of December
31, 2015.
Stock options granted under the Option Plans may be either
incentive stock options as defined by the Internal Revenue Code or
non-qualified stock options. The Board of Directors determines who
will receive options under the Option Plans and determines the
vesting period, which generally has been three years for grants
prior to August 2007 and four years thereafter. The options have a
maximum term of no more than 10 years. The exercise price of the
options granted under the Option Plans must be at least equal to
the fair market value of the common stock on the date of grant. The
Board of Directors determines the exercise price of non-qualified
options.
A summary of stock option transactions for the years ended
December 31, 2015 and 2014 is as follows:
Number Weighted Weighted-Average Aggregate
of Options Average Remaining Intrinsic
Exercise Contractual Value
Price Life (in
years)
--------------------- ---------- ---------------------- ------------
Outstanding at January
1, 2014 6,014,654 $ 0.18 2.7 $ -
Granted 5,859,840 $ 0.04
Exercised (1,811,700) $ 0.04 $ -
Forfeited (5,763,091) $ 0.18
---------------------
Outstanding at December
31, 2014 4,299,703 $ 0.05 9.3 $ -
Granted 15,000 $ 0.04
Exercised (67,322) $ 0.13 $ 46,907
Forfeited (126,755) $ 0.15
Outstanding at December
31, 2015 4,120,626 $ 0.05 8.5 $ 3,227,804
=====================
Exercisable at December
31, 2015 4,077,610 $ 0.05 8.5 $ 3,193,821
=====================
Vested and expected
to vest 4,116,324 $ 0.05 8.5 $ 3,224,406
=====================
The weighted-average fair values of the options granted during
2015 and 2014 were estimated to be $0.01 and $0.02,
respectively.
In 2014, the Company cancelled certain outstanding awards and
issued new awards with reduced exercise prices and revised exercise
periods, resulting in a charge of $91,800 in the fourth quarter of
2014. As of December 31, 2015, total unrecognized stock-based
compensation expense was $900 which will be recognized over the
next two years.
Stock-based compensation expense is reflected in the Statements
of Operations for the years ended December 31 as shown below:
2015 2014
General and administrative $ - $ 55,600
Sales and marketing 800 15,400
Research and development 400 24,600
Total $ 1,200 $ 95,600
=============== =============
Stock Purchase Warrants
At December 31, 2015 the Company had outstanding warrants to
purchase 102,500 shares of the Company's Series D Preferred at
$1.00 per share, which expire beginning in 2022. The warrants are
classified as liabilities (see Note 4).
7. Income Taxes
As a result of its operating losses, the Company did not
recognize a provision (benefit) for income taxes in 2015 and 2014.
Based on the Company's historical operating performance, the
Company has provided a full valuation allowance against its net
deferred tax assets.
Net deferred tax assets as of December 31, 2015 and 2014 are
presented in the table below:
2015 2014
Deferred tax
assets:
Net operating loss
carryforwards $ 8,358,100 $ 8,287,000
Research and development
credits 410,600 347,900
Stock-based compensation 249,800 240,600
Deferred revenue 844,200 548,300
Accruals and
other 397,500 121,400
Deferred tax
liabilities:
Depreciation (28,700) (25,000)
---------------- ----------------
10,231,500 9,520,200
Valuation
allowance (10,231,500) (9,520,200)
Net deferred $ - $ -
tax assets
================ ================
The Federal net operating loss carryforwards of approximately
$19.4 million as of December 31, 2015 will begin to expire in
various years beginning in 2025. The use of NOL carryforwards is
limited on an annual basis under Internal Revenue Code Section 382
when there is a change in ownership (as defined by this code
section). Based on changes in Company ownership in the past, the
Company believes that the use of its NOL carryforwards generated
prior to the date of the change is limited on an annual basis; NOL
carryforwards generated subsequent to the date of change in
ownership can be used without limitation. The use of the Company's
net operating loss carryforwards may be restricted further if there
are future changes in Company ownership. Additionally, despite the
net operating loss carryforwards, the Company may have a future tax
liability due to alternative minimum tax or state tax
requirements.
Income tax expense reconciled to the tax computed at statutory
rates for the years ended December 31 is as follows:
2015 2014
Federal income taxes (benefit)
at statutory rates $ (491,300) $ (517,100)
State income taxes (benefit),
net of Federal benefit (115,000) (98,600)
Permanent differences
and rate changes (105,000) (278,800)
Change in valuation
allowance 711,300 894,500
$ - $ -
============== ==============
8. Capital Leases
The Company leases computer equipment under agreements that are
classified as capital leases. The assets under capital leases are
recorded at the lower of net present value of the related lease
payments or the fair value of the asset. The assets are amortized
over their economic useful life.
The following is a schedule of future minimum lease payments
under the capital lease obligations together with the net present
value of the minimum lease payments as of December 31, 2015:
2016 $ 19,500
2017 15,500
2018 3,300
------------------
Total 38,300
Less: amount representing
interest (4,200)
Net present value of future
minimum lease payments $ 34,100
==================
The net present value of the minimum lease payments related to
the leased equipment is included in the balance sheet at December
31, 2015 as follows:
Current portion $ 16,600
Long-term
portion 17,500
Total Capital lease
obligations $ 34,100
============
The following is summary of property held under capital leases
as of December 31:
2015 2014
Original asset
value $ 99,800 $ 120,000
Less: accumulated
amortization (72,900) (69,300)
Net book value $ 26,900 $ 50,700
================ ================
The Company recognized $23,700 and $29,700 of related
amortization expense in 2015 and 2014, respectively.
9. Fair Value
The Company's Balance Sheet includes various financial
instruments (primarily cash and cash equivalents, accounts
receivable, accounts payable and accrued expenses, and other
current liabilities) that are carried at cost, which approximates
fair value due to the short-term nature of the instruments. Notes
payable and capital lease obligations are reflective of fair value
based on market comparable instruments with similar terms.
Financial Assets and Liabilities Measured at Fair Value on a
Recurring Basis
After the adoption of the Plan of Conditional Recapitalization,
the Company's stock purchase warrants are exchangeable into Series
D Preferred which may be required to be settled by issuance of a
variable number of shares; as such, the warrants are classified as
liabilities, are measured at fair value and are marked to market
each reporting period until settlement. The fair value of the
warrants is measured using Level 3 inputs and was determined based
on the value of the warrants relative to the value of the Company's
other equity securities assuming an AIM IPO and effectiveness of
the Plan of Conditional Recapitalization. The primary Level 3
unobservable inputs included various assumptions about the
potential AIM IPO.
The following table presents the Company's financial assets and
liabilities that were accounted for at fair value on a recurring
basis by level within the fair value hierarchy at December 31:
Level Level
Fair Value 1 2 Level 3
At December
31, 2014
Warrant liabilities $ 105,400 $ - $ - $ 105,400
At December
31, 2015
$
Warrant liabilities $ 85,400 $ - - $ 85,400
The following table presents a summary of changes in the fair
value of Level 3 warrant liabilities measured at fair value on a
recurring basis for the years ended December 31:
Description Balance Reclassified Established Change Balance
at January from Additional in 2014 in fair at December
1, 2014 paid-in value 31, 2014
capital in 2014
Warrant
liabilities $ - $ 89,800 $ 15,600 $ - $ 105,400
Description Balance Reclassified Established Change Balance
at January from Additional in 2015 in fair at December
1, 2015 paid-in value 31, 2015
capital in 2015
Warrant
liabilities $ 105,400 $ - $ - $ (20,000) $ 85,400
Financial Assets and Liabilities Measured at Fair Value on a
Non-Recurring Basis
During 2014, the Company issued Series D warrants as part of a
debt financing, and recognized the fair value of the warrants as a
debt discount. The warrants were initially classified as equity and
were measured at fair value using Level 3 unobservable inputs. The
fair value of stock purchase warrants was determined using the
Black-Scholes option pricing model, which requires the use of
unobservable inputs such as fair value of the Company's Series D
Preferred, expected term, anticipated volatility, and interest
rates. These warrants were reclassified to liabilities in
connection with the December 2014 Plan of Conditional
Recapitalization.
Also during 2014, upon the adoption of the Plan of Conditional
Recapitalization, the Series A-1,
C and D preferred stock contain a contingent conversion option
settleable by issuance of a variable number of shares; as such, the
Series A-1, C and D preferred stock were reclassified to temporary
equity upon the adoption of the Plan of Conditional
Recapitalization at their then fair value using Level 3
unobservable inputs. The fair value of the preferred stock is
measured using Level 3 inputs and was determined by management
based on the value of the specific series of preferred stock
relative to the value of the Company's other equity securities
assuming an AIM IPO and effectiveness of the Plan of Conditional
Recapitalization. The primary Level 3 unobservable inputs included
various assumptions about the potential AIM IPO and the impact of
the Series E Preferred issuance.
Non-Financial Assets and Liabilities Measured at Fair Value on a
Recurring Basis
The Company has no non-financial assets and liabilities that are
measured at fair value on a recurring basis.
Non-Financial Assets and Liabilities Measured at Fair Value on a
Non-Recurring Basis
The Company measures its long-lived assets, including property
and equipment, at fair value on a non-recurring basis. These assets
are recognized at fair value when they are deemed to be impaired.
No such fair value impairment was recognized in the years ended
December 31, 2015 or 2014.
10. Employee Benefit Plan
The Company has a defined contribution plan (the Plan) under
Internal Revenue Code Section 401(k) which is managed through
Fidelity Investments. All United States resident employees are
eligible for participation in the Plan. Participants may elect to
contribute a proportion of their compensation up to the maximum
amount of their annual pretax earnings allowed under the Employee
Retirement Income Security Act of 1974 (ERISA) regulations.
Participant contributions vest immediately. The Company has not
made contributions to the Plan and has no plans in the near term to
make any employer contribution to the 401(k) plan.
11. Commitments and Contingencies
The Company entered into a five-year non-cancelable operating
lease agreement for office and laboratory space in February 2009
with an expiration of January 31, 2014. In 2013, the Company
executed a five year extension to the lease whereby monthly rent
starts at $16,129 and increases each year by 3%. In addition to
base rent, the Company pays a pro-rated share of common area
maintenance (CAM) costs for the entire building, which was adjusted
annually based on actual expenses incurred. Following is a schedule
by year of the estimated future minimum payments under the
operating lease:
Year ending December
31,
2016 $ 204,800
2017 211,000
2018 217,300
2019 18,200
2020 -
thereafter -
$ 651,300
=====================
Total rent expense, including base rent and CAM for the years
ended December 31, 2015 and 2014, was $296,500 and $292,700,
respectively. Rent expense is recognized on a straight-line basis
in the accompanying financial statements.
The Board has also approved, in recognition of reduced salaries
agreed to by certain executives during the period between 2007 and
2009, the payment of approximately $151,700 to such executives upon
the occurrence of a change of control of the Company. As of
December 31, 2015, such amount is included in Accounts payable and
accrued expenses in the accompanying Balance Sheet.
12. Subsequent Events
Management has evaluated subsequent events for disclosure in
these financial statements through date the financial statements
were available to be issued. On March 15, 2016, the Company entered
into binding agreements to complete an initial public offering of
its common stock on the AIM market of the London Stock Exchange.
The Offering was completed on March 29, 2016, with the Company
issuing approximately 14.3 million shares of its common stock at an
initial price of 0.70 British Pounds per share, generating gross
proceeds of approximately 10 million British Pounds.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR UGUGPAUPQPGB
(END) Dow Jones Newswires
May 10, 2016 02:00 ET (06:00 GMT)
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