TIDMMXCT TIDMTTM
RNS Number : 2678K
MaxCyte, Inc.
21 April 2020
MaxCyte, Inc.
("MaxCyte" or the "Company")
MaxCyte Reports Final Results for Year Ended 31 December
2019
Gaithersburg, Maryland - 21 April 2020: MaxCyte (LSE: MXCT), the
global clinical-stage cell-based therapies and life sciences
company, today announces its full-year audited results for the year
ended 31 December 2019.
HIGHLIGHTS (including post-period-end highlights)
Financial
Key metrics 2019 2018 % change
Revenue $21.6m $16.7m 29.7%
--------- --------- ---------
Gross margin 88.4% 89.0% (0.6%)
--------- --------- ---------
CARMA investment ($11.7m) ($6.5m) 79.3%
--------- --------- ---------
Total operating expenses ($31.5m) ($23.3m) 35.7%
--------- --------- ---------
EBITDA before CARMA* $1.3m ($0.8m) N/A
--------- --------- ---------
Net profit (loss) before
CARMA investment ($1.2m) ($2.3m) (50.0%)
--------- --------- ---------
Total assets $30.0m $24.3m 23.6%
--------- --------- ---------
Cash and cash equivalents,
including short-term investments $16.7m $14.4m 15.7%
--------- --------- ---------
Information above is as of 31 December 2019 and 31 December
2018, respectively.
* Excluding associated non-cash stock-based compensation of
$0.8m and $1.5m in 2018 and 2019, respectively. CARMA investment
includes additional stock-based compensation of
$0.5m and $0.3m in 2018 and 2019, respectively.
-- 2019 revenues increased nearly 30% year over year, ahead of prior market expectations:
-- Revenue growth accelerated by emergence of milestone revenue
as fastest growing revenue stream
-- Revenue accelerated in the second half of 2019, totalling
$13.2m, an increase of 36% over the second half of 2018 ($9.7m)
-- The Company's first positive operating results for the Life
Sciences business, substantially ahead of expectations: $1.3m
EBITDA before CARMA
-- Significant medium and long-term upside from potential
pre-commercial milestone payments resulting from partnered
therapeutic programmes: currently nine commercial deals in place
and more than $800m in potential milestones plus a share of
commercial value
-- Five-year revenue compounded annual growth rate ("CAGR") now 25%
-- Successful fundraise of GBP10.0m (before expenses) completed
on 01 March 2019. Cash at 31 December 2019, was $16.7m
Operational
-- Significant commercial momentum in transformative therapies:
-- Five new clinical/commercial licences signed in 2019,
including with industry leaders Kite (a Gilead Company), Editas
Medicine, Vor Biopharma and KSQ Therapeutics
-- Allogene Therapeutics clinical/commercial licence signed on
24 March 2020, bringing total to nine
-- More than 100 cell therapy programmes licensed, more than 70 licensed for clinical use
-- Leadership position further established in clinical non-viral
cell engineering for off-the-shelf CAR-T immuno-oncology medicines
and for inherited genetic diseases:
-- MaxCyte technology has enabled more than 15 clinical cell
therapy programmes to-date for diseases spanning from blood cancers
to solid tumors to inherited diseases and disorders
-- Of the first five US clinical trials utilising CRISPR
gene-editing approaches for ex vivo gene modified cell therapy,
four are using MaxCyte technology, creating new treatments for
cancer and inherited genetic diseases
-- Launched next generation ExPERT(TM) brand series of instruments and consumables:
-- Three instrument formats with enhanced design and
functionality to support users from early research through
commercial manufacture of approved therapeutics
-- Wider range of consumables that offer expanded utility from
early research to clinical and commercial use
-- MaxCyte's Phase I dose-escalation trial with MCY-M11, a
wholly-owned, non-viral, mRNA-based cell therapy candidate under
development by MaxCyte's CARMA(TM) Cell Therapies subsidiary,
progressing well:
-- F ourth dosing cohort commenced according to plan in the first quarter of 2020
-- Clinical development of MCY-M11 will continue, however
timelines may be impacted due to the COVID-19 global pandemic and
the current deprioritisation of non-COVID-19 clinical trials and
restrictions on patient recruitment at clinical trial sites.
Preliminary clinical results are expected to be announced in H2
2020
-- Appointment of adviser to facilitate independent investment
and new partnerships for the CARMA platform
Commenting on the annual results, Doug Doerfler, CEO of MaxCyte,
said: "2019 was a year of outstanding progress across all areas of
our business. Our Life Sciences business continued to exhibit
strong growth, reflecting MaxCyte's leadership as an enabler of
next-generation cell-based therapies and resulting in a period of
financial outperformance.
"Over the year we maintained progress with our lead CARMA
candidate, MCY-M11, which is advancing through a Phase I clinical
trial, demonstrating the feasibility of our one-day cell therapy
manufacturing process. We remain fully committed to the MCY-M11
clinical development programme, though are prepared for an impact
on timelines due to delays caused by COVID-19 restrictions. In
March 2020, dosing in the 4(th) cohort commenced according to
schedule and at the higher dosing level. I am really proud of this
achievement and would like to thank everyone involved in the trial
to date.
"With unprecedented restrictions in place due to COVID-19, we
remain mindful of the potential impact on revenues through
slowdowns in customer operations or delays in clinical trials.
However, we remain confident that MaxCyte has a resilient business
model underpinned by strong recurring revenues and prospects for
continued growth.
"We have every reason to remain highly optimistic for the
future. I believe we will continue to see long-term momentum in
MaxCyte's business as a whole and, notwithstanding the COVID-19
situation, I look forward to updating the market with our continued
positive progress."
Conference call and webcast for analysts
A conference call for analysts and investors with Q&A will
be held at 11:00 a.m. BST on Tuesday, 21 April 2020. The
presentation will be available on the Investors section of
MaxCyte's website at https://www.maxcyte.com/investors/
Dial-in details:
UK Participant dial-in: 0800 279 6619
International dial-in: +44 (0) 2071 928338
Participant code: 5093946
A replay file will be made available shortly afterwards via the
Company website.
The Company anticipates mailing of the 2019 MaxCyte Annual
Report in mid-May 2020.
This announcement contains inside information for the purposes
of Article 7 of Regulation (EU) No. 596/2014.
About MaxCyte
MaxCyte, the clinical-stage global cell-based therapies and life
sciences company, uses its proprietary next-generation cell and
gene therapies to revolutionise medical treatments and ultimately
save lives. The Company's premier cell engineering enabling
technology is currently being deployed by leading drug developers
worldwide, including all of the top ten global biopharmaceutical
companies. MaxCyte licences have been granted to more than 100 cell
therapy programmes, with more than 70 licensed for clinical use,
and the Company has now entered into nine clinical/commercial
license partnerships with leading cell therapy and gene editing
developers. MaxCyte was founded in 1998, is listed on the London
Stock Exchange (AIM:MXCT) and is headquartered in Gaithersburg ,
Maryland, US. For more information, visit www.maxcyte.com .
For further information, please contact:
MaxCyte Inc.
Doug Doerfler, Chief Executive Officer
Ron Holtz, Chief Financial Officer +1 301 944 1660
Nominated Adviser and Joint Corporate
Broker
Panmure Gordon
Emma Earl
Freddy Crossley
Corporate Broking
James Stearns +44 (0)20 7886 2500
Joint Corporate Broker
Numis Securities Limited
James Black
Duncan Monteith +44 (0)20 7260 1000
Financial PR Adviser
Consilium Strategic Communications +44 (0)203 709 5700
Mary-Jane Elliott maxcyte@consilium-comms.
Chris Welsh com
Sukaina Virji
--------------------------------------------------------------
CHAIRMAN AND CHIEF EXECUTIVE OFFICER'S REVIEW
MaxCyte holds a global leadership position in the large drug
discovery and rapidly-growing cell therapy markets. We are proud to
help the world's leading pharmaceutical and biotechnology companies
reach their discovery, development, manufacturing and
commercialisation goals, particularly as the industry works
together during the current coronavirus ("COVID-19") global
pandemic. Our broad global customer base includes all ten of the
top-ten pharma companies by revenue, and 20 of the top 25. MaxCyte
has become the partner of choice for leading cellular therapy and
gene-editing companies and is the industry standard non-viral
approach to cell and gene therapy. Our technology, with the
ExPERT(TM) brand series of commercially-oriented instruments and
consumables at its core, continues to enable new therapies, which
have the potential to transform the treatment of many challenging
diseases.
Strong financial performance
MaxCyte had another strong financial year with a 30% increase in
reported revenues over the previous year, positive EBITDA before
CARMA in the Life Sciences business, and gross margins of
approximately 88%. Our cash position was bolstered by a successful
fundraise of GBP10.0m (before expenses) through a placing of new
shares, ending the year with cash of $16.7m.
Inspiring partnerships
Using MaxCyte technology, our partners are exploring new methods
of treatment for leukaemias, solid tumor cancers and genetic
disorders such as sickle cell disease, as well as new approaches
for patients suffering from autoimmune diseases. We are proud of
our partnerships with industry-leading companies that are advancing
new drugs, including cell-based and gene-edited therapies for
patients with high unmet medical needs. With our ExPERT platform,
we enable the advancements of premier cell therapy and gene-editing
leaders such as Kite Pharma (a Gilead Company), CRISPR
Therapeutics, Precision BioSciences, Editas Medicine and Allogene
Therapeutics. Of the first five US clinical trials with a CRISPR
gene-editing approach for ex vivo gene modified cell therapy , four
are using MaxCyte's technology to create new treatments for cancer
and inherited genetic diseases. This demonstrates the value of
MaxCyte's enablement of CRISPR/Cas9 therapies as a new class of
transformative medicines to treat serious diseases.
There have been some notable examples of progress in recent
months. In November 2019, MaxCyte partners, CRISPR Therapeutics and
Vertex Pharmaceuticals, reported positive interim data at the
American Society of Hematology (ASH) meeting from the first two
patients enrolled in two Phase I/II trials assessing their
CRISPR/Cas9 gene-edited therapy CTX001 for beta thalassaemia and
sickle cell disease.
In December 2019, Precision BioSciences presented updated
interim clinical data on its lead programme, PBCAR0191, a novel
CD19-targeted allogeneic CAR-T therapy candidate. In January,
Precision announced the acceptance of an investigational new drug
application ("IND") by the US Food and Drug Administration (FDA)
for a BCMA-targeted genome edited allogeneic CAR-T therapy
candidate for multiple myeloma that is scheduled to begin dosing
patients in 2020. With this IND approval, Precision BioSciences now
has three genome edited allogeneic therapies in clinical-stage
development.
An additional MaxCyte partner, Editas Medicine, also presented
data at the ASH meeting in December 2019 on its EDIT-301 programme,
an ex vivo gene editing-based asset for sickle cell disease. The
data showed a clean off-target editing profile and robust (50%)
fetal haemoglobin (HbF) induction upon engraftment in mice. The
Company continues to rapidly advance this lead programme through
IND-enabling activities.
All three of the above programmes are enabled by MaxCyte
technology.
Value of licensing deals
MaxCyte licences have been granted to 100+ cell therapy
programmes, 70+ for clinical use. Among the nine MaxCyte clinical
and commercial licensing deals, seven were signed within the 14
months ending in December 2019. Our partnerships are structured for
optimal benefit to both parties, with licenses - and relationships
- that may last for 20 years and longer. Under the terms of our
enabling-technology license agreements, the biological and cellular
therapies our partners are developing deliver a series of milestone
payments as those programmes enter the clinic and continue through
clinical development and into the commercialisation of the therapy.
For MaxCyte, milestone revenue streams have expanded significantly
since our first commercial gene editing license in 2017, and are
expected to continue to increase rapidly as our fastest-growing
revenue stream. Of particular note, MaxCyte is set to receive
significant milestones as anticipated clinical progress is made for
the programmes of MaxCyte partners. Overall, MaxCyte has the
potential to receive more than $800m in pre-commercial milestones,
plus a share of commercial value.
Expertise and understanding
MaxCyte continues to meet and support the unique needs of each
of our partners as they develop therapies from the research stage
to commercialisation to transform patient lives. Partners depend on
our best-in-class suite of technology and capabilities, from the
next generation ExPERT brand series of commercially-oriented
instruments and disposables, to comprehensive field support,
regulatory know-how, process control and more. We offer deep
knowledge of what it takes to bring valuable and unique therapies
to market. Because of our technology, expertise, and commitment,
our partners have confidence that we can help them reduce risk and
timelines, increase efficiency, and optimise the success of the
therapies they are dedicated to delivering.
CARMA: Proprietary therapeutic platform
MaxCyte technology also drives our own therapeutic development
programmes through CARMA, our proprietary therapeutic platform for
next-generation CAR-based cancer treatments. At the start of 2020,
MaxCyte established CARMA Cell Therapies as a wholly-owned
subsidiary to facilitate independent investment and new
partnerships to advance the CARMA platform. In support of this
initiative, MaxCyte has retained Locust Walk, a global life science
strategic advisory and transaction firm. The Company expects CARMA
to be self-funded by end of 2020.
The fourth dosing cohort of the Phase I trial of MCY-M11 trial
commenced in March 2020 as expected. CARMA Cell Therapies remains
fully committed to the MCY-M11 clinical development programme,
however timelines may be impacted due to global COVID-19 pandemic
and the current deprioritisation of non-COVID-19 clinical trials
and restrictions on patient recruitment at the two clinical trial
sites. We currently anticipate preliminary clinical results in H2
2020.
We have great belief in the potential of MCY-M11 as a new,
effective therapeutic in solid tumors, especially for individuals
with limited treatment options. The clinical trial of MCY-M11 is
designed to establish CARMA as a new autologous cell therapy
platform for next-generation targeted cell-based immune therapies
and, crucially, demonstrates the feasibility of our rapid clinical
manufacturing process. We are enthusiastic about the overall
potential of the CARMA programme to address some of the most
significant issues with current CAR-T therapies, including
challenging side effects as well as the complex, expensive, and
time-consuming manufacturing processes found in viral-based CAR
therapies.
During 2019, we made important additions to our CARMA team. In
December, Shruti Abbato joined the Company as Executive Vice
President, Business Development for CARMA Cell Therapies. Ms.
Abbato is leading the development of new partnerships for the
Company's CARMA platform programmes. We were also pleased to
welcome Dr. Dhana Chinnasamy, as Vice President, Non-Clinical and
Translational Studies in July. Dr. Chinnasamy, an expert in the
research and translation of gene and immunotherapies with more than
20 years of experience in the field, oversees all non-clinical and
translational activities for MaxCyte's CARMA platform working
closely with the clinical, regulatory, manufacturing, and business
development teams in support of MaxCyte's clinical-stage
therapeutic development.
COVID-19
MaxCyte's key priority in the current COVID-19 global pandemic
is to ensure the health and safety of its employees, and to
continue supporting its customers and partners. Since February
2020, we have successfully implemented business continuity plans,
by adapting working protocols and shifts at our labs and
facilities, as well as focusing on essential production and
shipping activities to safeguard our employees and their dependents
while maintaining service and support for customers.
Due to the unprecedented restrictions put in place around
COVID-19, including global lockdowns, we have noted the potential
negative impact on operations, as defined in our recent COVID-19
Business Update. This includes a potential impact on revenues for
the Life Sciences business, and possible delays to the progress of
our CARMA MCY-M11 Phase I clinical trial. However, we remain
confident that, notwithstanding the emerging global slowdown in
customer and hospital operations, MaxCyte has a resilient business
model supported by a high proportion of recurring revenues and
continuing opportunities for growth.
The opportunities to drive a new generation of cell
therapies
We believe in the power of reprogramming cells to create
therapies to revolutionise medical treatment and ultimately save
lives. We are on the cusp of a new world of cell-based and
gene-edited therapies, with a burgeoning of drug candidates in this
space in the last two years alone. As the inventors of the premier
cell engineering enabling technology, we are humbled by the
opportunity to work in such an important area of human health with
the leading scientists and clinicians in the world. Clearly, we are
poised to continue our mission of helping to drive a new generation
of cell therapies, bringing the promise of transformative
treatments to life.
Outlook
In light of the global COVID-19 pandemic, we are working
diligently to keep our team, partners and their families safe,
while continuing to support our customers to enable important
medical advancements with the potential to make significant impact
on the lives of patients. Despite the current pandemic disruption
we are well positioned, through a resilient business model
delivering strong recurring revenues through licenses and
consumables, to deliver revenue growth in the Life Sciences
business in 2020. We have demonstrated our position as the
non-viral transfection delivery platform of choice for the world's
leading cell therapy companies in their development of commercial
treatments. For all our markets, we believe there will continue to
be opportunities to invest in and pursue expansion of our products
and technologies within the Life Sciences business. In the coming
period management will remain focused on delivering the potential
of our CARMA programme as we advance a new generation of CAR-based
cancer treatments through the clinic and continue our plan to
secure independent funding for the CARMA platform. MaxCyte's Board
remains highly optimistic for the future.
Doug Doerfler
President and Chief Executive Officer
J. Stark Thompson, PhD
Non-Executive Chairman
21 April 2020
FINANCIAL REVIEW
The Company reported revenues of $21.6m in 2019, representing a
30% increase over the previous year and including 36% growth in the
second half of 2019 compared to H2 2018. That growth extended our
run of double-digit revenue growth, yielding a compound average
revenue growth of 25% since 2014.
Gross margins remained stable at approximately 88% and EBITDA
loss in 2019 remained in line with expectations at $10.1m. EBITDA
before CARMA expenses and non-cash stock-based compensation was
$1.3m, the Company's first positive operating result for the Life
Sciences business. This significant improvement over prior years
(2018 EBIDTA before CARMA loss of $0.8m) was driven by strong
overall revenue growth, particularly from growth in milestone
payments, which have no associated costs, and disciplined control
of expenses.
Operating expenses increased to $31.5m reflecting the maturation
of the CARMA programme, which accounted for $11.7m of 2019
operating expenses, compared to $6.5M in 2018, as the Company's
first CARMA candidate MCY-M11 advanced in a Phase 1 trial through
multiple patient cohorts. Operating expenses excluding CARMA
increased 19% (compared to 30% revenue growth) to $19.8m compared
to $16.7m in 2018 as the Company invested in field application
scientist and product design and manufacturing staff, sales and
marketing team, and marketing expenses. Hiring was weighted towards
the second half of 2019, lessening cost increases in 2019, and
which will have a full-year impact in 2020. The outlook for
controlling costs to allow for breakeven EBITDA before CARMA in the
coming year remains positive.
At year end 2019, total assets of the Company were $30.0m,
compared to $24.3m in 2018. The increase in total assets was
principally associated with a) the adoption of accounting guidance
that requires the fair value of leases be presented on the balance
sheet as offsetting Right-of-Use Asset and Lease Liability
accounts, b) capital investments including those related to
development of the ExPERT branded instruments and consumables, c)
the associated increase in inventory for those new offerings, and
d) proceeds from the March 2019 capital raise.
Cash and cash equivalents, including short-term investments,
totalled $16.7m in 2019, compared to $14.4m in 2018. The Company
successfully raised GBP10.0m (before expenses) through a placing of
new shares which completed on 01 March 2019.
Ron Holtz
Chief Financial Officer
21 April 2020
Report of Independent Registered Public Accounting Firm
The Board of Directors and Stockholders
MaxCyte, Inc.
Opinion on the Financial Statements
We have audited the accompanying balance sheets of MaxCyte, Inc.
(the "Company") as of 31 December 2019 and 2018, and the related
statements of operations, changes in stockholders' equity, and cash
flows for the years then ended and the related notes (collectively
referred to as the "financial statements"). In our opinion, the
financial statements referred to above present fairly, in all
material respects, the financial position of the Company as of 31
December 2019 and 2018, and the results of its operations and its
cash flows for the years then ended in conformity with accounting
principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion
on the Company's financial statements based on our audits. We are a
public accounting firm registered with the Public Company
Accounting Oversight Board (United States) ("PCAOB") and are
required to be independent with respect to the Company in
accordance with the US federal securities laws and the applicable
rules and regulations of the Securities and Exchange Commission and
the PCAOB.
We conducted our audits in accordance with the standards of the
PCAOB. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial
statements are free of material misstatement whether due to error
or fraud. The Company is not required to have, nor were we engaged
to perform, an audit of its internal control over financial
reporting. As part of our audit, we are required to obtain an
understanding of internal control over financial reporting but not
for the purpose of expressing an opinion on the effectiveness of
the Company's internal control over financial reporting.
Accordingly, we express no such opinion. Our audits included
performing procedures to assess the risks of material misstatement
of the financial statements, whether due to error or fraud, and
performing procedures that respond to those risks. Such procedures
included examining, on a test basis, evidence regarding the amounts
and disclosures in the financial statements. Our audits also
included evaluating the accounting principles used and significant
estimates made by management, as well as evaluating the overall
presentation of the financial statements. We believe that our
audits provide a reasonable basis for our opinion.
/s/CohnReznick LLP
We have served as the Company's auditor since 2018.
Tysons, Virginia
21 April 2020
MaxCyte, Inc.
Balance Sheets
(amounts in US dollars, except share amounts)
31 December 31 December
2019 2018
-------------------- ---------------------------
Assets
Current assets:
Cash and cash equivalents $ 15,210,800 $ 11,248,000
Short-term investments,
at amortised cost 1,497,800 3,191,000
Accounts receivable, net 3,244,500 4,904,500
Inventory 3,701,800 2,242,800
Other current assets 797,100 863,700
-------------------- ---------------------------
Total current assets 24,452,000 22,450,000
Property and equipment,
net 3,280,100 1,817,900
Right-of-use assets 2,253,300 -
Total assets $ 29,985,400 $ 24,267,900
==================== ===========================
Liabilities and stockholders' equity
Current liabilities:
Accounts payable $ 2,089,400 $ 1,032,100
Accrued expenses and other 3,551,600 3,091,200
Lease liability, current 508,900 -
Deferred revenue 3,193,200 2,449,300
-------------------- ---------------------------
Total current liabilities 9,343,100 6,572,600
Note payable, net of discount and deferred fees 4,895,300 5,056,300
Lease liability, net of
current portion 1,807,100 -
Other liabilities 338,100 357,300
-------------------- ---------------------------
Total liabilities 16,383,600 11,986,200
-------------------- ---------------------------
Commitments and contingencies (Note 9)
Stockholders' equity
Common stock, $0.01 par; 200,000,000 shares authorised,
57,403,583 and 51,332,764 shares issued and outstanding
at 31 December 2019 and 2018, respectively. 574,000 513,300
Additional paid-in capital 96,433,700 82,279,300
Accumulated deficit (83,405,900) (70,510,900)
-------------------- ---------------------------
Total stockholders' equity 13,601,800 12,281,700
-------------------- ---------------------------
Liabilities and stockholders' equity $ 29,985,400 $ 24,267,900
==================== ===========================
See accompanying notes to the financial statements.
MaxCyte, Inc.
Statements of Operations
For the Years Ended 31 December,
(amounts in US dollars,
except
share amounts)
2019 2018
------------------------------------ ------------------
Revenue $ 21,620,700 $ 16,667,000
Costs of goods sold 2,499,200 1,840,000
------------------------------------ ------------------
Gross profit 19,121,500 14,827,000
------------------------------------ ------------------
Operating expenses:
Research and development 17,601,200 11,244,000
Sales and marketing 7,852,100 6,723,700
General and administrative 6,088,200 5,284,200
------------------------------------ ------------------
Total operating expenses 31,541,500 23,251,900
Operating loss (12,420,000) (8,424,900)
------------------------------------ ------------------
Other income (expense):
Interest and other
expense (681,100) (614,600)
Interest and other
income 206,100 170,300
------------------------------------ ------------------
Total other income (expense) (475,000) (444,300)
------------------------------------ ------------------
Net loss $ (12,895,000) $ (8,869,200)
==================================== ==================
Basic and diluted net loss per common share $ (0.23) $ (0.17)
==================================== ==================
Weighted average common shares outstanding, basic
and diluted 56,397,524 51,182,402
==================================== ==================
See accompanying notes to the financial statements.
MaxCyte, Inc.
Statement of Changes in Stockholders' Equity
For the Years Ended 31 December,
(amounts in US dollars)
Additional
Paid-in Accumulated Total Stockholders'
Common Stock Capital Deficit Equity
-------------------------------------------- --------------------- --------------------- --------------------
Shares Amount
Balance 01
January
2018 50,896,376 $ 509,000 $80,729,400 $ (61,641,700) $ 19,596,700
Stock-based
compensation
expense - - 1,324,200 - 1,324,200
Exercise of
stock
options 436,388 4,300 225,700 - 230,000
Net loss - - - (8,869,200) (8,869,200)
--------------------- --------------------- --------------------- --------------------- --------------------
Balance 31
December
2018 51,332,764 $ 513,300 $ 82,279,300 $ (70,510,900) $ 12,281,700
===================== ===================== ===================== ===================== ====================
Additional
Paid-in Accumulated Total Stockholders'
Common Stock Capital Deficit Equity
---------------------------------------------- ---------------------- ------------------------ --------------------
Shares Amount
Balance 01
January
2019 51,332,764 $ 513,300 $ 82,279,300 $ (70,510,900) $ 12,281,700
Issuance of
stock
in public
offering 5,908,319 59,100 12,271,200 - 12,330,300
Stock-based
compensation
expense - - 1,752,100 - 1,752,100
Exercise of
stock
options 162,500 1,600 131,100 - 132,700
Net loss - - - (12,895,000) (12,895,000)
---------------------- ---------------------- ---------------------- ------------------------ --------------------
Balance 31
December
2019 57,403,583 $ 574,000 $ 96,433,700 $ (83,405,900) $ 13,601,800
====================== ====================== ====================== ======================== ====================
See accompanying notes to the financial statements.
MaxCyte, Inc.
Statements of Cash Flow
For the Years Ended 31 December,
(amounts in US dollars)
2019 2018
----------------------- -----------------------
Cash flows from operating activities:
Net loss $ (12,895,000) $ (8,869,200)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortisation 613,500 344,000
Net book value of consigned equipment
sold 25,000 45,600
Loss on disposal of fixed assets 1,700 -
Fair value adjustment of liability classified
warrant 14,000 -
Stock-based compensation 1,752,100 1,324,200
Bad debt expense 54,200 164,000
Amortisation of discounts on short-term
investments (32,600) (67,600)
Non-cash interest expense 51,900 29,100
Changes in operating assets and liabilities:
Accounts receivable 1,592,000 (1,947,900)
Inventory (1,890,200) (1,289,700)
Other current assets 66,600 (197,900)
Right-of-use and other assets 474,600 -
Accounts payable and accrued expenses 1,160,200 (464,000)
Lease liability 68,600 -
Deferred revenue 795,900 469,200
Other liabilities (655,000) (27,200)
----------------------- -----------------------
Net cash used in operating activities (8,802,500) (10,487,400)
----------------------- -----------------------
Cash flows from investing activities:
Purchases of short-term investments (7,424,100) (12,673,400)
Maturities of short-term investments 9,149,900 9,550,000
Purchases of property and equipment (1,271,300) (709,700)
----------------------- -----------------------
Net cash provided by (used in) investing
activities 454,500 (3,833,100)
----------------------- -----------------------
Cash flows from financing activities:
Net proceeds from sale of common stock 12,330,300 -
Borrowings under notes payable 4,953,300 283,700
Principal payments on notes payable (5,105,500) (283,700)
Proceeds from exercise of stock options 132,700 230,000
Principal payments on capital leases - (3,200)
Net cash provided by financing activities 12,310,800 226,800
----------------------- -----------------------
Net (decrease) increase in cash and cash
equivalents 3,962,800 (14,093,700)
Cash and cash equivalents, beginning of
year 11,248,000 25,341,700
Cash and cash equivalents, end of year $ 15,210,800 $ 11,248,000
======================= =======================
Supplemental cash flow information:
Cash paid for interest $ 669,600 $ 784,400
Supplemental non-cash information:
Property and equipment purchases included
in accounts payable $ 399,900 $ 256,300
Issuance of warrants in conjunction with
debt transaction $ 60,700 $ -
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 31 July
1998, under the laws and provisions of the state of Delaware, and
commenced operations on 01 July 1999. In November 2002, MaxCyte was
recapitalised and EntreMed was no longer deemed to control the
Company.
MaxCyte is a global life sciences company utilizing its
proprietary cell engineering technology to enable the programmes of
its biotechnology and pharmaceutical company customers who are
engaged in cell therapy, including gene editing and
immuno-oncology, and in drug discovery and development and
biomanufacturing. The Company licenses and sells its instruments
and technology, and sells its consumables to developers of cell
therapies and to pharmaceutical and biotechnology companies for use
in drug discovery and development and biomanufacturing. In early
2020, the Company established a wholly owned subsidiary as part of
its continued development of CARMA, MaxCyte's proprietary,
mRNA-based, clinical-stage, immuno-oncology cell therapy.
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 ("US GAAP"). Certain prior period amounts
have been reclassified to conform with current period
presentation.
Use of Estimates
The preparation of financial statements in conformity with US
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, revenue
recognition, stock-based compensation, allowance for doubtful
accounts, allowance for inventory obsolescence, accruals for
contingent liabilities, accruals for clinical trials, deferred
taxes and valuation allowance, and the depreciable lives of fixed
assets. Actual results could differ from those estimates.
Concentration
During the year ended 31 December 2019, one customer represented
10% of revenue and 1% of net accounts receivable at 31 December
2019. During the year ended 31 December 2018, one customer
represented 11% of revenue and 14% of net accounts receivable at 31
December 2018.
During the year ended 31 December 2019, the Company purchased
approximately 56% of its inventory from a single supplier. During
the year ended 31 December 2018, the Company purchased
approximately 73% of its inventory from two suppliers. As of 31
December 2019, and 2018, amounts payable to these suppliers
totalled 25% and 26% of total accounts payable, respectively.
Foreign Currency
The Company's functional currency is the US dollar; transactions
denominated in foreign currencies are transacted 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 at the reporting date are recognised
in the Statements of Operations as general and administrative
expenses. The Company recognised $24,700 and $8,000 of foreign
currency transaction losses for the years ended 31 December 2019
and 2018, 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. US GAAP establishes a hierarchical disclosure framework which
prioritises 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 6 for additional information regarding fair value.
Cash, Cash Equivalents and Short-term Investments
Cash and cash equivalents consist of financial instruments
including money market funds and commercial paper with original
maturities of less than 90 days. Short-term investments consist of
commercial paper with original maturities greater than 90 days and
less than 1 year. All money market funds, and commercial paper are
recorded at amortised cost unless they are deemed to be impaired on
an other-than-temporary basis, at which time they are recorded at
fair value using Level 2 inputs.
The following table summarises the Company's investments at 31
December 2019:
Gross unrecognised Gross unrecognised
Amortised holding holding Aggregate
Description Classification cost gains losses fair value
Money market Cash
funds equivalents $ 10,037,000 $ - $ - $ 10,037,000
Commercial Cash
Paper equivalents 1,399,700 - - 1,399,700
Commercial Short-term
Paper investments 1,497,800 400 - 1,498,200
------------------- ------------------------- ----------------------- -----------------
Total Investments $ 12,934,500 $ 400 $ - $ 12,934,900
=================== ========================= ======================= =================
The following table summarises the Company's investments at 31
December 2018:
Gross unrecognised Gross unrecognised
Amortised holding holding Aggregate
Description Classification cost gains losses fair value
Money market
funds Cash equivalents $ 5,945,200 $ - $ - $ 5,945,200
Commercial
Paper Cash equivalents 3,455,700 500 - 3,455,700
Commercial Short-term
Paper investments 3,191,000 500 - 3,191,000
-------------- ------------------- ------------------- -----------------
Total Investments $ 12,591,900 $ 1,000 $ - $ 12,592,900
============== =================== =================== =================
At times the Company's cash balances may exceed federally
insured limits and cash may also be deposited in foreign bank
accounts that are not covered by federal deposit insurance. The
Company does not believe that this results in any significant
credit risk.
Inventory
The Company sells or licenses 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 at:
31 December 31 December
2019 2018
-------------- -----------------
Raw materials inventory $ 1,318,600 $ 884,200
Finished goods inventory 2,383,200 1,358,600
Total Inventory $ 3,701,800 $ 2,242,800
============== =================
The Company determined no allowance for obsolescence was
necessary at 31 December 2019 or 2018.
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
recorded an allowance of $117,200 and $239,000 at 31 December 2019
and 2018, respectively.
Property and Equipment
Property and equipment is 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 amortised
over the shorter of the estimated lease term or useful life.
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 includes capitalised costs to develop
internal-use software. Applicable costs are capitalised during the
development stage of the project and include direct internal costs,
third-party costs and allocated interest expenses as
appropriate.
Property and equipment consist of the following:
31 December 31 December
2019 2018
------------- ---------------
Furniture and equipment $ 2,311,800 $ 1,743,200
Instruments 1,223,700 735,600
Leasehold improvements 635,100 280,600
Internal-use software under
development 30,300 666,700
Internal-use software 1,277,300 28,300
Accumulated depreciation
and amortisation (2,198,100) (1,636,500)
Property and equipment,
net $ 3,280,100 $ 1,817,900
============= ===============
For the years ended 31 December 2019 and 2018, the Company
transferred $571,000 and $393,900, respectively, of instruments
previously classified as inventory to property and equipment leased
to customers.
For the years ended 31 December 2019 and 2018, the Company
incurred depreciation and amortisation expense of $613,500 and
$344,000 respectively. Maintenance and repairs are charged to
expense as incurred.
In the years ended 31 December 2019 and 2018, the Company
capitalised approximately $13,800 and $17,300, respectively, of
interest expense related to capitalised software development
projects.
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 recognised is measured by the amount
by which the carrying amount of the assets exceeds the estimated
fair value of the assets. The Company recognised no impairment in
either of the years ended 31 December 2019 or 2018.
Revenue Recognition
The Company analyses contracts to determine the appropriate
revenue recognition using the following steps: (i) identification
of contracts with customers, (ii) identification of distinct
performance obligations in the contract, (iii) determination of
contract transaction price, (iv) allocation of contract transaction
price to the performance obligations and (v) determination of
revenue recognition based on timing of satisfaction of the
performance obligations.
In some arrangements, product and services have been sold
together representing distinct performance obligations. In such
arrangements the Company allocates the sale price to the various
performance obligations in the arrangement on a relative selling
price basis. Under this basis, the Company determines the estimated
selling price of each performance obligation in a manner that is
consistent with that used to determine the price to sell the
deliverable on a standalone basis.
The Company recognises revenue upon the satisfaction of its
performance obligation (generally upon transfer of control of
promised goods or services to its customers) in an amount that
reflects the consideration to which it expects to be entitled in
exchange for those goods or services.
The Company defers incremental costs of obtaining a customer
contract and amortises the deferred costs over the period that the
goods and services are transferred to the customer. The Company had
no material incremental costs to obtain customer contracts in any
period presented.
Deferred revenue results from amounts billed in advance to
customers or cash received from customers in advance of services
being provided.
Research and Development Costs
Research and development costs consist of independent
proprietary research and development costs and the costs associated
with work performed by third parties. Research and development
costs are expensed as incurred.
Stock-Based Compensation
The Company grants stock-based awards in exchange for employee,
consultant and non-employee director services. The value of the
award is recognised as expense on a straight-line basis over the
requisite service period.
The Company utilises the Black-Scholes option pricing 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 expected volatility,
expected dividend yield, risk-free rate of interest 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:
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 currently have sufficient
history with its common stock subsequent to its 2016 initial public
offering to determine its actual volatility. 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 between 48% and 50% for the year
ended 31 December 2019 and between 47% and 48% for the year ended
31 December 2018 using the volatility of these companies.
Expected dividend yield
The Company has never declared or paid common stock dividends
and has no plans to do so in the foreseeable future. Additionally,
the Company's long-term debt agreement restricts the payment of
cash dividends.
Risk-free interest rate
This approximates the US 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
between 1.6% and 2.6% for the year ended 31 December 2019 and 2.7%
and 3.0% for the years ended 31 December 2018.
Expected term
This is the period that the options granted are expected to
remain unexercised. Options granted have a maximum term of ten
years. The Company estimates the expected term of the options 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 behaviour for similar options.
Expected forfeiture rate
The Company records forfeitures as they occur.
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 recognised 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 realised.
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 recognised, a tax position must be
more-likely-than-not to be sustained upon examination by taxing
authorities. The Company recognises interest and penalties accrued
on any unrecognised 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 abroad and remains subject to examination by
taxing jurisdictions for 2015 and all subsequent periods. The
Company had a Federal Net Operating Loss ("NOL") carry forward of
$48.9m as of 31 December 2019, which was generally available as a
deduction against future income for US federal corporate income tax
purposes, subject to applicable carryforward limitations. As a
result of the March 2016 initial public offering, the Company's
NOLs are limited on an annual basis, subject to certain
carryforward provisions, pursuant to Section 382 of the Internal
Revenue Code of 1986, as amended, as a result of a greater than 50%
change in ownership that occurred in the three-year period ending
at the time of the March AIM IPO. The Company has calculated that
for the period ending 31 December 2022, the cumulative limitation
amount exceeds the NOLs subject to the limitation.
Leases
Right-of-use ("ROU") assets represent the Company's right to use
an underlying asset for the lease term and lease liabilities
represent its obligation to make lease payments arising from the
lease. In transactions where the Company is the lessee, at the
inception of a contract, the Company determines if the arrangement
is, or contains, a lease. Operating lease ROU assets and
liabilities are recognised at commencement date based on the
present value of lease payments over the lease term. Rent expense
is recognised on a straight-line basis over the lease term.
The Company has made certain accounting policy elections for
leases where it is the lessee whereby the Company (i) does not
recognise ROU assets or lease liabilities for short-term leases
(those with original terms of 12-months or less) and (ii) combines
lease and non-lease elements of its operating leases. Operating
lease liabilities are included in other current and non-current
liabilities in the Company's balance sheet at 31 December 2019. As
of 31 December 2019, the Company did not have any finance leases.
See Note 9 for further discussion.
All transactions where the Company is the lessor are short-term
(one year or less) and have been classified as operating leases.
All leases require upfront payments covering the full period of the
lease and thus, there are no future payments expected to be
received from existing leases. See Note 3 for details over revenue
recognition related to lease agreements.
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.
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 stock options and stock
purchase warrants, which has been excluded from the computation of
diluted loss per share, was 10.4m and 8.4m for the years ended 31
December 2019 and 2018, respectively.
Recent Accounting Pronouncements
Recently Adopted
On 01 January 2019, the Company adopted new guidance addressing
the accounting for leases. The Company adopted this guidance using
a modified retrospective method. The Company elected certain
practical expedients including retaining the original lease
classification and historical accounting for initial direct costs
for leases existing prior to the adoption date. Additionally, the
Company made ongoing accounting policy elections whereby the
Company does not recognise ROU assets or lease liabilities for
short-term leases (those with original terms of 12-months or less)
and combines lease and non-lease elements of its operating leases.
As a result of the adoption, the Company recognised ROU assets of
$518,700 and lease liabilities of $565,500 on the date of adoption.
The adoption did not have any effect on the Company's equipment
leases where it is the lessor.
On 01 January 2019, the Company adopted new guidance simplifying
the accounting for nonemployee stock-based compensation awards. The
guidance aligned the measurement and classification for employee
stock-based compensation awards to nonemployee stock-based
compensation awards. Under the guidance, nonemployee awards will be
measured at their grant date fair value. Upon transition, the
existing nonemployee awards were measured at fair value as of the
adoption date. The adoption did not have a material effect on the
Company's financial statements.
Unadopted
In June 2016, the FASB issued guidance with respect to measuring
credit losses on financial instruments, including trade
receivables. The guidance eliminates the probable initial
recognition threshold that was previously required prior to
recognising a credit loss on financial instruments. The credit loss
estimate can now reflect an entity's current estimate of all future
expected credit losses. Under the previous guidance, an entity only
considered past events and current conditions.
The guidance is effective for fiscal years beginning after 15
December 2022, including interim periods within those fiscal years.
Early adoption is permitted for fiscal years beginning after 15
December 2018, including interim periods within those fiscal years.
The adoption of certain amendments of this guidance must be applied
on a modified retrospective basis and the adoption of the remaining
amendments must be applied on a prospective basis. The Company is
currently evaluating the impact, if any, that this new accounting
pronouncement will have on its financial statements.
In August 2018, the FASB issued guidance addressing the
accounting for implementation, setup and other upfront costs paid
by a customer in a cloud computing or hosting arrangement. The
guidance aligns the accounting treatment of these costs incurred in
a hosting arrangement treated as a service contract with the
requirements for capitalisation and amortisation costs to develop
or obtain internal-use software. The guidance is effective for
fiscal years beginning after 15 December 2019. The guidance can be
adopted either retrospectively or prospectively. Early adoption is
permitted. The Company is currently evaluating the impact, if any,
that this guidance will have on the financial statements.
In August 2018, the FASB issued guidance addressing the
disclosure requirements for fair value measurements. The guidance
intends to improve the effectiveness of the disclosures relating to
recurring and nonrecurring fair value measurements. The guidance is
effective for fiscal years beginning after 15 December 2019.
Portions of the guidance are to be adopted prospectively while
other portions are to be adopted retrospectively. Early adoption is
permitted. The Company is currently evaluating the impact, if any,
that this guidance will have on the 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. Revenue
Revenue is principally from the sale or lease of instruments and
processing assemblies, as well as from extended warranties. In some
arrangements, product and services have been sold together
representing distinct performance obligations. In such arrangements
the Company allocates the sale price to the various performance
obligations in the arrangement on a relative selling price basis.
Under this basis, the Company determines the estimated selling
price of each performance obligation in a manner that is consistent
with that used to determine the price to sell the deliverable on a
standalone basis.
Revenue is recognised at the time control is transferred to the
customer and the performance obligation is satisfied. Revenue from
the sale of instruments and processing assemblies is generally
recognised at the time of shipment to the customer, provided no
significant vendor obligations remain and collectability is
reasonably assured. Revenue from equipment leases are recognised
ratably over the contractual term of the lease agreement and when
specific milestones are achieved by a customer. Licensing fee
revenue is recognised ratably over the licence period. Revenue from
fees for research services is recognised when services have been
provided.
Disaggregated revenue for the year ended 31 December 2019 is as
follows:
Revenue Revenue
from Contracts from Lease Total
with Customers Elements Revenue
--------------------
Product Sales $ 12,917,800 $ - $ 12,917,800
Leased Elements - 8,363,500 8,363,500
Other 339,400 - 339,400
Total $ 13,257,200 $ 8,363,500 $ 21,620,700
==================== ============== ================
Disaggregated revenue for the year ended 31 December 2018 is as
follows:
Revenue Revenue
from Contracts from Lease Total
with Customers Elements Revenue
-------------------
Product Sales $ 0,459,200 $ - $ 10,459,200
Leased Elements - 5,884,100 5,884,100
Other 264,500 59,200 59,200
Total $ 10,723,700 $ 5,943,300 $16,667,000
=================== ============= =============
Additional disclosures relating to Revenue from Contracts with
Customers
Changes in deferred revenue for the year ended 31 December 2019
were as follows:
Balance at 01 January 2019 $2,770,100
Revenue recognised in the current
period from
amounts included in the beginning
balance 2,435,000
Current period deferrals, net
of amounts
recognised in the current period 3,117,700
Balance at 31 December
2019 $ 3,452,800
==========================
Changes in deferred revenue for the year ended 31 December 2018
were as follows:
Balance at 01 January 2018 $2,222,900
Revenue recognised in the current
period from
amounts included in the beginning
balance 2,051,100
Current period deferrals, net of amounts
recognised in the current period 2,598,200
Balance at 31 December 2018 $2,770,100
============
Remaining contract consideration for which revenue has not been
recognised due to unsatisfied performance obligations with a
duration greater than one year was approximately $363,600 at 31
December 2019 of which the Company expects to recognise
approximately $104,100 in 2020, $104,000 in 2021, $50,900 in 2022,
$36,700 in 2023, and $67,900 thereafter.
In the years ended 31 December 2019 and 2018, the Company did
not incur, and therefore did not defer, any material incremental
costs to obtain contracts or costs to fulfill contracts.
4. Debt
The Company originally entered into a credit facility with
Midcap Financial SBIC, LP ("MidCap") in March 2014. In February
2019, the Company paid off the MidCap credit facility in full in
accordance with its terms and conditions.
In November 2019, the Company entered into a new credit facility
with MidCap. The credit facility provided for a $5m-term loan
maturing on 1 November 1 2024. The term loan provides for (i) an
interest rate of one-month Libor plus 6.5% with a 1.5% Libor floor,
(ii) monthly interest payments, (iii) 30 monthly principal payments
of approximately $166,700 beginning June 2022 and (iv) a 3% final
payment fee. The Company used the proceeds from the credit facility
for general operating purposes. The debt is collateralised by
substantially all assets of the Company.
In conjunction with the credit facility the Company issued the
lender a warrant to purchase 71,168 shares of Common Stock at a
price of GBP1.09081. The warrant is exercisable at any time through
the tenth anniversary of issuance (see Note 5). In connection with
the credit facility, the Company also incurred expenses of
approximately $47,300. The warrant and expenses resulted in
recording a debt discount which is amortised as interest expense
over the term of the loan. At 31 December 2019, the term loan had
an outstanding principal balance of $5m and $104,700 of unamortised
debt discount.
5. Stockholders' Equity
Common Stock
In March 2019, the Company completed an equity capital raise
issuing approximately 5.9m shares of Common Stock at a price of
LIR1.70 (or approximately $2.25) per share. The transaction
generated gross proceeds of approximately LIR10m (or approximately
$13.3m). In conjunction with the transaction, the Company incurred
costs of approximately $1.0m which resulted in the Company
receiving net proceeds of approximately $12.3m.
During the year ended 31 December 2019, the Company issued
162,500 shares of Common Stock as a result of stock option
exercises, receiving gross proceeds of $132,700. During the year
ended 31 December 2018, the Company issued 436,388 shares of Common
Stock as a result of stock option exercises, receiving gross
proceeds of $230,000.
Warrant
In connection with the November 2019 credit facility the Company
issued the lender a warrant to purchase 71,168 shares of common
stock at an exercise price of GBP 1.09081. The warrant is
exercisable at any time through the tenth anniversary of issuance.
The warrant is classified as a liability as its strike price is in
a currency other than the Company's functional currency. The
warrant is recorded at fair value each reporting period with
changes going through the statement of operations (see Note 6).
Stock Options
The Company adopted the MaxCyte, Inc. Long-Term Incentive Plan
(the "Plan") in January of 2016 to amend and restate the MaxCyte
2000 Long-Term Incentive Plan to provide for the awarding of (i)
stock options, (ii) restricted stock, (iii) incentive shares, and
(iv) performance awards to employees, officers, and Directors of
the Company and to other individuals as determined by the Board of
Directors. Under the Plan, as amended, the maximum number of shares
of Common Stock of the Company that the Company may issue is (a)
6,264,682 shares plus (b) ten percent (10%) of the shares that are
issued and outstanding at the time awards are made under the
Plan.
On 21 February 2018 and 10 December 2019, the Company's Board
resolved to increase the number of stock options under the Plan by
2,000,000 and 3,000,000, respectively to provide sufficient shares
to allow competitive equity compensation in its primary markets for
staff and consistent with practices of comparable companies.
The Company has not issued any restricted stock, incentive
shares, or performance awards under the Plan. Stock options granted
under the Plan 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 Plan and
determines the vesting period. The options can have a maximum term
of no more than ten years. The exercise price of options granted
under the Plan is determined by the Board of Directors and must be
at least equal to the fair market value of the Common Stock of the
Company on the date of grant.
A summary of stock option activity for the years ended 31
December 2019 and 2018 is as follows:
. Weighted-Average
Remaining
Weighted Contractual Aggregate
Number of Average Exercise Life (in Intrinsic
Options Price years) Value
--------------------- ------------------ ---------------------- -------------
Outstanding at 01 January
2018 7,241,219 $ 1.01 7.8 $ 16,266,800
Granted 1,983,200 $ 3.24
Exercised (436,388) $ 0.52 $ 1,266,300
Forfeited (399,531) $ 2.49
---------------------
Outstanding at 31 December
2018 8,388,500 $ 1.49 7.4 $ 10,354,900
Granted 2,538,500 $ 2.17
Exercised (162,500) $ 0.82 $ 217,600
Forfeited (465,215) $ 2.48
Outstanding at 31 December
2019 10,299,285 $ 1.63 7.0 $ 6,471,500
=====================
Exercisable at 31 December
2019 6,689,402 $ 1.13 6.1 $ 6,371,600
=====================
The weighted-average fair values of the options granted during
2019 and 2018 were estimated to be $1.08 and $1.60,
respectively.
As of 31 December 2019, total unrecognised compensation expense
was $4,551,000 which will be recognised over the following four
years.
Stock-based compensation expense for the years ended 31 December
was as follows:
2019 2018
------------
General and administrative $ 827,500 $ 458,200
Sales and marketing 325,700 194,100
Research and development 598,900 671,900
Total $1,752,100 $ 1,324,200
============ ==============
6. Fair Value
The Company's Balance Sheets include various financial
instruments (primarily cash and cash equivalents, short-term
investments, accounts receivable and accounts payable) that are
carried at cost, which approximates fair value due to the
short-term nature of the instruments. Notes payable 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
At 31 December 2019, the Company had a warrant originally issued
in connection with the November 2019 debt financing (see Note 4)
that is accounted for as a liability whose fair value is determined
using Level 3 inputs. The following table identifies the carrying
amounts of this warrant at 31 December 2019:
Level Level Level 3 Total
1 2
Liabilities
Liability classified
warrant $ - $ - $ 74,700 $ 74,700
-------- -------- --------- ---------
Total at 31 December
2019 $ - $ - $ 74,700 $ 74,700
======== ======== ========= =========
The following table presents the activity for those items
measured at fair value on a recurring basis using Level 3 inputs
for the year ended 31 December 2019:
Mark-to-market
liabilities
- warrant
Balance at 31 December $ -
2018
Issuance 60,700
Change in fair value 14,000
---------------------
Balance at 31 December
2019 $ 74,700
=====================
The gains and losses resulting from the changes in the fair
value of the liability classified warrant are classified as other
income or expense in the accompanying statements of operations. The
fair value of the Common Stock purchase warrants is determined
based on the Black-Scholes option pricing model or other option
pricing models as appropriate and includes the use of unobservable
inputs such as the expected term, anticipated volatility and
expected dividends. Changes in any of the assumptions related to
such unobservable inputs identified above may change the embedded
conversion options' fair value. For example, increases in expected
term, anticipated volatility and expected dividends generally
result in increases in fair value, while decreases in these
unobservable inputs generally result in decreases in fair
value.
The Company has no other financial assets or liabilities
measured at fair value on a recurring basis.
Financial Assets and Liabilities Measured at Fair Value on a
Non-Recurring Basis
Money market funds and commercial paper classified as
held-to-maturity are measured at fair value on a non-recurring
basis when they are deemed to be impaired on an
other-than-temporary basis. No such fair value impairment was
recognised during the years ended 31 December 2019 or 2018.
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 recognised at fair value when they are deemed to be impaired.
No such fair value impairment was recognised during the years ended
31 December 2019 or 2018.
7. Retirement Plan
The Company sponsors a defined-contribution 401(k) retirement
plan covering eligible employees. Participating employees may
voluntarily contribute up to limits provided by the Internal
Revenue Code. The Company matches employee contributions equal to
50% of the salary deferral contributions, with a maximum Company
contribution of 3% of the employees' eligible compensation. In the
years ended 31 December 2019 and 2018, Company matching
contributions amounted to $277,700 and $199,900, respectively.
8. Income Taxes
The Company did not recognise a provision (benefit) for income
taxes in 2019 or 2018. 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 31 December are presented in the
table below:
2019 2018
Deferred tax
assets:
Net operating loss carryforwards $ 12,842,100 $ 10,431,600
Research and development
credits 875,400 875,400
Stock-based compensation 1,146,200 666,400
Deferred revenue 965,800 746,000
Lease liability 647,800 -
Accruals and
other 652,700 124,200
Deferred tax
liabilities:
ROU asset (630,300) -
Depreciation (25,200) (45,700))
------------------- --------------------------
16,474,500 12,797,900
Valuation allowance (16,474,500) (12,797,900))
Net deferred $ - $ -
tax assets
=================== ==========================
The Federal net operating loss carryforwards ("NOL") of
approximately $48.9m as of 31 December 2019 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 state tax requirements.
Income tax expense reconciled to the tax computed at statutory
rates for the years ended 31 December is as follows:
2019 2018
Federal income taxes (benefit) at statutory
rates $ (2,707,900) $ (1,862,500)
State income taxes (benefit), net of
Federal benefit (898,800) (526,100)
Windfall tax benefits (40,200) (314,900)
Permanent differences, rate
changes and other (29,700) (188,900)
Change in valuation allowance 3,676,600 2,892,400
Total Income Tax Expense $ - $ -
============== ================
9. 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 initial expiration of 31 January 2014 which was
subsequently extended to January 2020. In April 2017, the Company
entered into leases for additional office and laboratory space. In
September 2019, the Company entered into agreements to increase the
amount of space leased and to extend the expiration date on all its
operating leases to October 2023. A member of the Company's Board
of Directors is the CEO and Board member of the lessor of certain
of these operating leases for which the rent payments totalled
$416,800 and $371,600 in 2019 and 2018, respectively.
All the Company's office and laboratory leases expire in October
2023 and provide for annual increases to the base rent of between
3% and 5%. The current monthly base lease payment for all leases is
approximately $54,300. In addition to base rent, the Company pays a
pro-rated share of common area maintenance ("CAM") costs for the
entire building, which is adjusted annually based on actual
expenses incurred. None of the Company's current operating leases
contain any renewal provisions.
As of 31 December 2019, all the Company's existing leases are
classified as operating leases. The Company used a discount rate of
8% in calculating its lease liability under its operating leases.
The September 2019 lease agreements resulted in the Company
establishing approximately $2,209,200 of ROU assets and $2,247,400
of lease liabilities.
At 31 December 2019, the Company had a $2,253,300 ROU asset, a
$508,900 short-term lease liability and $1,807,100 long-term lease
liability.
Total rent expense, including base rent and CAM for the years
ended 31 December 2019 and 2018, was $768,800 and $692,300,
respectively. Rent expense is recognised on a straight-line basis
in the accompanying financial statements.
Lease costs for the year ended 31 December 2019, consisted of
the following:
Operating lease
cost $ 551,100
Variable lease costs 217,700
Total $ 768,800
============
Estimated future minimum payments at 31 December 2019 under the
operating leases are as follows:
Total $ 2,703,900
Discount factor (387,900)
Lease liability 2,316,000
Current lease liability (508,900)
Non-current lease
liability $1,807,100
Estimated future minimum payments at 31 December 2019 are
$675,400 for 2020, $696,300 for 2021, $717,400 for 2022, and
$614,800 for 2023.
10. Subsequent Events
The COVID-19 pandemic has disrupted economic markets and the
economic impact, duration and spread of related effects is
uncertain at this time and difficult to predict. It is not possible
to ascertain the overall impact of COVID-19 on the Company's
business and, depending upon the extent and severity of such
effects, the pandemic could have a material adverse effect on the
Company's business, results of operations, financial condition and
cash flows.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
FR PPUPPCUPUPUU
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