TIDMMXCT TIDMTTM
RNS Number : 9571V
MaxCyte, Inc.
20 April 2021
MaxCyte, Inc.
("MaxCyte" or the "Company")
MaxCyte Reports Final Results for the Year Ended 31 December
2020
Gaithersburg, Maryland -20 April 2021: MaxCyte (LSE: MXCT, MXCL,
MXCN), a leading provider of cell-engineering platform technologies
for next generation cell-based therapies, today announced its
full--year audited results for the year ended 31 December 2020.
HIGHLIGHTS (including post--period--end highlights)
Financial
2020 2019 % Change
Revenue $26.2m $21.6m 21%
-------- -------- --------
Gross margin 89% 88% 1%
-------- -------- --------
CARMA investment $11.1m $11.7m (5%)
-------- -------- --------
Total operating expenses $34.5m $31.5m 9%
-------- -------- --------
EBITDA before CARMA investment* $2.9m $1.3m 121%
-------- -------- --------
Net loss before CARMA investment ($0.7m) ($1.2m) (42%)
-------- -------- --------
Total assets $51.8m $30.0m 73%
-------- -------- --------
Cash and cash equivalents, including
short-term investments (31 Dec) $34.8m $16.7m 108%
-------- -------- --------
* Excluding associated non--cash stock--based compensation of
$1.5m in 2019 and $2.1m in 2020, respectively.
-- 2020 revenues increased 21% year over year, despite the
challenges of the worldwide COVID-19 pandemic:
o Revenue growth was fueled by recurring high-margin revenues
from both instrument leases and disposable sales in cell therapy,
which was further accelerated by milestone payments from
progression of our partners' programmes further into the clinic
o H2 2020 revenue grew approximately 15% to $15.3m (H2 2019 :
$13.2m) despite the impact of the pandemic, which affected existing
and potential customers' operations
-- Significant medium- and long--term upside from potential
pre--commercial milestone
payments resulting from 12 strategic platform licences
o Potential pre-commercial milestones from these partnerships
now represent more than $950m in the aggregate
o Partnership agreements provide licences for more than 140
therapeutic programmes, of which over 100 are licensed for clinical
use
-- Five-year revenue (2016-2020) compounded annual growth rate ("CAGR") 23%
-- EBITDA grew 121% to $2.9m before CARMA expenses driven
primarily by higher milestone revenues and pandemic-related
reductions in travel and marketing expenses. Gross margins improved
by 100 basis points, primarily attributable to increased milestone
revenue
-- Aggregate gross proceeds of $85.9m (before expenses ) raised
in two private placements completed in February 2021 ($55.3m with a
mix of new and existing crossover investors led by D1 Capital
Partners, Funds and accounts advised by T. Rowe Price Associates,
Inc., ArrowMark Partners, Baron Capital Group and First Light Asset
Management with Casdin Capital and Sofinnova Partners) and May 2020
($30.5m led by Casdin Capital and Sofinnova Partners )
-- Cash, cash equivalents and short-term investments as of 31
December 2020 were $34.8m, which excludes the $55.3m gross proceeds
raised from the private placement in February 2021
Operational
-- Continued to expand capabilities and applications data
supporting use of MaxCyte technology in new therapeutic approaches
being developed by cellular therapy and gene-editing companies
-- Significant commercial momentum in transformative therapies -
three new strategic platform licences signed during 2020, including
with leading cell-therapy developers Allogene Therapeutics and
Caribou Biosciences, and novel therapy company APEIRON Biologics,
and a fourth clinical and commercial licence signed with Myeloid
Therapeutics in January 2021
-- Continued to introduce new processing assemblies within the ExPERT(TM) brand series of commercially--oriented instruments and disposables to meet customer demands
-- Following review announced in January 2021, MaxCyte is now
focusing on out-licensing CARMA(R) platform manufacturing
processes, pre-clinical and clinical data, and intellectual
property (IP) as well as continuing its efforts to make new
introductions for potential CARMA partnerships without further
clinical or pre-clinical investment
Commenting on the annual results, Doug Doerfler, CEO of MaxCyte,
said: "MaxCyte delivered impressive financial and operational
results and also secured significant additional funding from a
number of notable investors in 2020 and early 2021. Importantly, we
finished the year with revenues ahead of expectations: expanding
our number of partnerships and establishing our largest pipeline of
potential partnerships to date, which mirrors the industry's
diverse cell therapy pipeline. Our continued steady growth is a
testament to our team's innovative approach to serving partners and
customers as well as the Company's position as a leading provider
of cell-engineering platform technologies for next-generation
cell-based therapies .
"As our performance in 2020 demonstrated, MaxCyte has a
resilient business model based on strong recurring revenues. Our
approach combined with our impressive pipeline afford robust
prospects for continued growth , giving us 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."
This announcement contains inside information for the purposes
of Article 7 of Regulation (EU) No. 596/2014, which is part of UK
law by virtue of the European Union (Withdrawal) Act 2018.
About MaxCyte
MaxCyte is a leading provider of cell-engineering platform
technologies that are driving the next--generation of cell-based
therapies and making a meaningful difference for patients. The
Company's technology is employed by leading drug developers
worldwide, including all of the top ten global biopharmaceutical
companies. MaxCyte has granted 12 strategic platform licences to
leading cell-based therapy developers. Through 2020, MaxCyte has
granted licenses for more than 140 cell therapy programmes, with
over 100 licences for clinical use. MaxCyte was founded in 1998 and
is headquartered in Gaithersburg, Maryland, US. For more
information, visit www.maxcyte.com .
For further information, please contact:
MaxCyte Inc. + 1 301 944 1660
Doug Doerfler, President and Chief Executive Officer
Amanda Murphy, Chief Financial Officer
Nominated Adviser and Joint Corporate Broker +44 (0)20 7886 2500
Panmure Gordon
Emma Earl / Freddy Crossley
Corporate Broking
Rupert Dearden
Joint Corporate Broker
Numis Securities Limited +44 (0)20 7260 1000
James Black / Duncan Monteith / Matthew O'Dowd
Joint Corporate Broker
Stifel Nicolaus Europe Limited +44 (0) 20 7710 7600
Healthcare Investment Banking
Nicholas Moore / Ben Maddison / Samira Essebiyea
Corporate Broking
Nick Adams
Financial PR Adviser + 44 (0)203 709 5700
Consilium Strategic Communications
maxcyte@consilium--comms.com
Mary-Jane Elliott
Chris Welsh
CHAIRMAN AND CHIEF EXECUTIVE OFFICER'S REVIEW
Overview
MaxCyte is a leading provider of cell-engineering platform
technologies focused on advancing the discovery, development and
commercialisation of next-generation cell-based medicines.
MaxCyte's proprietary flow electroporation platform technology,
branded as ExPERT(TM), is a non-viral delivery platform that leads
the industry due to its high performance (measured by efficiency
and viability), scalability, and flexibility.
The ExPERT(TM) system enables our customers to safely,
efficiently, and with high reproducibility engineer cells while
maintaining high cell viability and potency, which advances the
scaled therapeutic application of cell therapies. Our technology
has been particularly impactful in supporting our partners ' goals
to develop and commercialise next-generation cell therapies to
address significant unmet needs in oncology and inherited
disorders. Through the use of our technology, efficacy is improved,
patients receive life-saving treatments sooner, and the overall
cost to the healthcare system is lower.
The market opportunity
Our goal is to establish the MaxCyte ExPERT(TM) platform as the
standard non-viral cell engineering system for the growing,
next-generation cell therapy market via:
1. the leading technology platform that facilitates efficient
and reproducible delivery of molecules,
2. serving as a trusted partner to our customers to overcome
technological challenges and enable previously unfeasible
cell-engineering applications,
3. enabling customers to scale production on our ExPERT(TM)
platform in a GMP-compliant environment, and
4. mitigating regulatory risk and potentially expediting
approval timelines, thereby delivering therapeutic options to
patients faster than alternatives.
Our existing blue-chip customer base ranges from large-cap
pharma companies, including 20 of the top 25 companies based on
2020 global revenue, to smaller cell and gene therapy biotechnology
companies and leading academic centres. Our platform has been
adopted by hundreds of biopharma and academic customers globally.
As of December 31, 2020, we have placed more than 400 of our flow
electroporation instruments worldwide.
Moreover, our strategic partnership model allows us to build
collaborative relationships with our customers as we work together
to bring critical cell-based medicines to the market. We provide
our unique ExPERT(TM) platform technology, intellectual property
and expertise to help our customers reduce regulatory risk and
accelerate timelines, increase efficacy, and optimise the
likelihood of the success for their drug candidates. Our license
agreements include participation in the potential downstream
success of these programmes by providing for a share of commercial
value. As of 31 December 2020, MaxCyte research licences have been
granted for more than 140 partnered academic and industry cell
therapy programmes and over 100 licences have been granted for
clinical use. The Company has now entered into 12 strategic
partnership licences with leading cell therapy companies. In
aggregate, MaxCyte has the potential to receive at least $950m in
pre-commercial milestone payments across the more than 100 clinical
programmes currently allocated for clinical use under existing
license agreements.
Strong financial performance
MaxCyte reported another strong financial year in 2020, with a
21% increase in revenues over the previous year and gross margins
of 89%. Our cash position was bolstered by another successful
fundraising totaling $55.3m (before expenses) in February 2021,
which added to capital generated by the fundraising completed in
May 2020. Both raises principally involved top-tier US specialist
life science investors. Cash and cash equivalents, together with
short-term investments, on 31 December 2020, was $34.8m, which does
not include the February capital raise.
Growth of cell therapy partnerships
Since 2017, when we signed our first licence to enable
commercial gene editing, m ilestone revenue streams have expanded
significantly. Between the start of 2020 and the end of January
2021, we forged four new partnerships - Allogene Therapeutics,
Caribou Biosciences, APEIRON and Myeloid Therapeutics, all of which
include commercialisation milestones, bringing MaxCyte's total to
12 strategic platform licences.
Bolstered leadership team
In September 2020, Amanda L. Murphy, CFA, joined the Company as
Chief Financial Officer having previously served as a Managing
Director of BTIG, LLC. Prior to BTIG, Ms. Murphy was a Partner and
Healthcare Analyst at William Blair & Company, focused on
diagnostic services and life sciences. Ms. Murphy has specialised
in gene therapy, gene editing and cell therapy equity research for
both private and established public healthcare companies.
Concurrent with Ms. Murphy joining the Company, Ron Holtz, who had
served as MaxCyte's Chief Financial Officer since 2005, became
Senior Vice President and Chief Accounting Officer.
MaxCyte also continued to bolster the leadership team in 2020
with two senior leadership promotions and appointments of three key
vice presidents. Brad Calvin, formerly Executive Vice President,
Global Commercial Operations, was promoted to Chief Commercial
Officer. In addition, Maher Masoud, who previously served as Vice
President, Legal, was named Executive Vice President and General
Counsel. MaxCyte's three vice president hires in 2020 included
Kevin Gutshall, Vice President, Corporate Development; Sarah
Haecker Meeks, PhD, Vice President, Business Development; and Steve
Nardi, Vice President, Manufacturing and Engineering
Operations.
2021 Outlook
MaxCyte has solidified its position as the non--viral
transfection delivery platform of choice for the world's leading
cellular therapy companies in their development of commercial
treatments. We expect strong revenue growth in 2021, driven by the
continuing progress of our existing strategic partners into and
through the clinic and subsequent generation of increased milestone
revenues.
We are also confident that throughout the coming year we will
continue to build our customer base and continue to secure further
high-value licensing agreements, driving ongoing growth. The
strategic partnership pipeline coming into 2021 is the largest that
the Company has experienced to date.
Following the $55.3m fundraising in February 2021, the Company
is well positioned to invest in and expand its offering of products
and technologies. Future investment is being focused on high value
expansion opportunities to support partners' clinical advancement
and commercial launches of therapies enabled by MaxCyte.
Overall, the MaxCyte Board and leadership team continue to be
highly optimistic for the future and we look forward to providing
further updates on our progress throughout the remainder of the
year.
Doug Doerfler
President and Chief Executive Officer
J. Stark Thompson, PhD
Non-Executive Chairman
20 April 2021
FINANCIAL REVIEW
The Company reported revenues of $26.2m in 2020, representing a
21% increase over the previous year and including 15% growth in the
second half of 2020 compared to the second half of 2019. Revenue
growth was fueled by recurring high-margin revenues from both
instrument leases and disposable sales in cell therapy and was
accelerated by the receipt of milestone payments under strategic
platform licences. As a result, our 2020 growth extended our run of
double--digit revenue growth, yielding a five-year compound average
revenue growth rate of 23% for the period from 2016 to 2020.
Gross margins remained stable at 89% and EBITDA loss in 2020
remained in line with expectations at $7.6m.
EBITDA before CARMA expenses and non--cash stock--based
compensation was $2.9m. This significant improvement over prior
years (2019 EBITDA before CARMA investment was $1.3m) was driven by
strong overall revenue growth, particularly from milestone
payments, which have no associated costs, and disciplined control
of expenses, including pandemic-driven cost reductions.
For 2021, we expect that the winding down of CARMA activities
will contribute a total of $4m to operating expenses in the first
half of the year.
Operating expenses increased to $34.5m, which includes CARMA
programme expenses of $11.1m (2019: $11.7m), compared to a total of
$31.5m of operating expenses in 2019. Exclusive of CARMA, operating
expenses increased 20% (compared to 21% revenue growth) to $23.8m
compared to $19.8m in 2019 as the Company invested in hiring new
talent and internal promotions. During the year, the Company made
adjustments to its operating, sales and marketing practices to
mitigate the effects of COVID-related restrictions, which reduced
planned spending, particularly on travel and marketing.
At year-end 2020, total assets were $51.8m, compared to $30.0m
in 2019. The increase in total assets was primarily due to the May
2020 capital raise as well as increases in capital invested in
fixed assets and disposables inventory.
Cash and cash equivalents, including short--term investments,
totaled $34.8m in 2020, compared to $16.7m in 2019. The Company
raised $55.3m of gross proceeds (before expenses) from a private
placement of common stock in February 2021 and in March 2021 repaid
in full the Company's $5.0m term loan that had been entered into in
2019.
Amanda Murphy
Chief Financial Officer
20 April 2021
Report of Independent Registered Public Accounting Firm
The Board of Directors and Stockholders
MaxCyte, Inc.
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of
MaxCyte, Inc. and Subsidiary (the "Company") as of 31 December 2020
and 2019, and the related consolidated statements of operations,
changes in stockholders' equity, and cash flows for the years then
ended and the related notes (collectively referred to as the
"consolidated financial statements"). In our opinion, the
consolidated financial statements referred to above present fairly,
in all material respects, the financial position of the Company as
of 31 December 2020 and 2019, 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 consolidated financial statements are the responsibility
of the Company's management. Our responsibility is to express an
opinion on the Company's consolidated 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 consolidated
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 consolidated 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
consolidated 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 consolidated 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
20 April 2021
MaxCyte, Incorporated
Consolidated Financial Statements
as of 31 December 2020 and 2019
and for the years ended
31 December 2020 and 2019
MaxCyte, Inc.
Consolidated Balance Sheets
(amounts in US dollars)
31 December 31 December
2020 2019
-------------- --------------
Assets
Current assets:
Cash and cash equivalents $18,755,200 $15,210,800
Short-term investments, at
amortised cost 16,007,500 1,497,800
Accounts receivable, net 5,171,900 3,244,500
Inventory 4,315,800 3,701,800
Other current assets 1,003,000 797,100
-------------- --------------
Total current assets 45,253,400 24,452,000
Property and equipment, net 4,546,200 3,280,100
Right of use asset - operating
leases 1,728,300 2,253,300
Right of use asset - finance
leases 218,300 -
Other assets 33,900 -
Total assets $51,780,100 $29,985,400
============== ==============
Liabilities and stockholders' equity
Current liabilities:
Accounts payable $890,200 $2,089,400
Accrued expenses and other 5,308,500 3,551,600
Operating lease liability,
current 572,600 508,900
Deferred revenue 4,843,000 3,193,200
-------------- --------------
Total current liabilities 11,614,300 9,343,100
Note payable, net of discount and deferred fees 4,917,000 4,895,300
Operating lease liability,
net of current portion 1,234,600 1,807,100
Other liabilities 788,800 338,100
-------------- --------------
Total liabilities 18,554,600 16,383,600
-------------- --------------
Commitments and contingencies (Note 9)
Stockholders' equity
Common stock, $0.01 par; 200,000,000 shares authorised,
77,382,473 and 57,403,583 shares issued and outstanding
at 31 December 2020 and 2019, respectively 773,800 574,000
Additional paid-in capital 127,673,900 96,433,700
Accumulated deficit (95,222,300) (83,405,900)
-------------- --------------
Total stockholders' equity 33,225,400 13,601,800
-------------- --------------
Liabilities and stockholders' equity $51,780,100 $29,985,400
============== ==============
See accompanying notes to the consolidated financial
statements.
MaxCyte, Inc.
Consolidated Statements of Operations
For the Years Ended 31 December
(amounts in US dollars)
2020 2019
-------------- ---------------
Revenue $26,168,900 $21,620,700
Costs of goods sold 2,767,000 2,499,200
-------------- ---------------
Gross profit 23,401,900 19,121,500
-------------- ---------------
Operating expenses:
Research and development 17,744,300 17,601,200
Sales and marketing 8,328,700 7,852,100
General and administrative 8,385,600 6,088,200
-------------- ---------------
Total operating expenses 34,458,600 31,541,500
Operating loss (11,056,700) (12,420,000)
-------------- ---------------
Other income (expense):
Interest and other
expense (825,600) (681,100)
Interest and other
income 65,900 206,100
-------------- ---------------
Total other income (expense) (759,700) (475,000)
-------------- ---------------
Net loss $(11,816,400) $(12,895,000)
============== ===============
Basic and diluted net loss per common share $(0.17) $(0.23)
============== ===============
Weighted average common shares outstanding, basic
and diluted 69,464,751 56,397,524
============== ===============
See accompanying notes to the consolidated financial
statements.
MaxCyte, Inc.
Consolidated Statements 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 1 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
=========== ========== ============== =============== ====================
Additional
Paid-in Accumulated Total Stockholders'
Common Stock Capital Deficit Equity
----------------------- -------------- -------------- --------------------
Shares Amount
Balance 1 January
2020 57,403,583 $574,000 $96,433,700 $(83,405,900) 13,601,800
Issuance of stock
in public offering 19,181,423 191,800 28,375,400 - 28,567,200
Stock-based compensation
expense - - 2,471,800 - 2,471,800
Exercise of stock
options 797,467 8,000 393,000 - 401,000
Net loss - - - (11,816,400) (11,816,400)
----------- ---------- -------------- -------------- --------------------
Balance 31 December
2020 77,382,473 $773,800 $127,673,900 $(95,222,300) $33,225,400
=========== ========== ============== ============== ====================
See accompanying notes to the consolidated financial
statements.
MaxCyte, Inc.
Consolidated Statements of Cash Flow
For the Years Ended 31 December (amounts in US dollars)
2020 2019
---------------- ---------------
Cash flows from operating activities:
Net loss $(11,816,400) $(12,895,000)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortisation on property
and equipment, net 1,047,700 613,500
Net book value of consigned equipment
sold 79,900 25,000
Loss on disposal of fixed assets 25,900 1,700
Fair value adjustment of liability classified
warrant 366,500 14,000
Stock-based compensation 2,471,800 1,752,100
Bad debt (recovery) expense (117,200) 54,200
Amortisation of discounts on short-term
investments (3,800) (32,600)
Noncash interest expense 21,700 51,900
Changes in operating assets and liabilities:
Accounts receivable (1,810,200) 1,592,000
Inventory (890,600) (1,890,200)
Other current assets (205,900) 66,600
Right of use asset - operating leases 525,000 474,600
Right of use asset - finance lease 83,400 -
Other assets (33,900) -
Accounts payable, accrued expenses and
other 391,000 1,160,200
Operating lease liability (508,800) 68,600
Deferred revenue 1,649,800 795,900
Other liabilities (58,000) (655,000)
---------------- ---------------
Net cash used in operating activities (8,782,100) (8,802,500)
---------------- ---------------
Cash flows from investing activities:
Purchases of short-term investments (22,505,900) (7,424,100)
Maturities of short-term investments 8,000,000 9,149,900
Purchases of property and equipment (2,072,100) (1,271,300)
---------------- ---------------
Net cash (used in) provided by investing
activities (16,578,000) 454,500
---------------- ---------------
Cash flows from financing activities:
Net proceeds from sale of common stock 28,567,200 12,330,300
Borrowings under notes payable 1,440,000 4,953,300
Principal payments on notes payable (1,440,000) (5,105,500)
Proceed from exercise of stock options 401,000 132,700
Principal payments on finance leases (63,700) -
Net cash provided by financing activities 28,904,500 12,310,800
---------------- ---------------
Net increase in cash and cash equivalents 3,544,400 3,962,800
Cash and cash equivalents, beginning of
year 15,210,800 11,248,000
Cash and cash equivalents, end of year $18,755,200 $15,210,800
================ ===============
Supplemental cash flow information:
Cash paid for interest $421,400 $669,600
Supplemental noncash information:
Property and equipment purchases included
in accounts payable $70,900 $399,900
Issuance of warrant in conjunction with
debt transaction - $60,700
See accompanying notes to the consolidated financial
statements.
1. Organisation 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 focused on advancing
the discovery, development and commercialisation of next-generation
cell therapies. MaxCyte leverages its proprietary cell engineering
technology platform to enable the programmes of its biotechnology
and pharmaceutical company customers who are engaged in cell
therapy, including gene editing and immuno-oncology, as well as 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, CARMA Cell Therapies, Inc.
("CCTI"), as part of its development of CARMA, MaxCyte's
proprietary, mRNA-based, clinical-stage, immuno-oncology cell
therapy.
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. As a result, it is
not possible to ascertain the overall future impact of COVID-19 on
the Company's business and, depending upon the extent and severity
of such effects, including, but not limited to potential slowdowns
in customer operations, extension of sales cycles, shrinkage in
customer capital budgets or delays in customers' clinical trials,
the pandemic could have a material adverse effect on the Company's
business, results of operations, financial condition and cash
flows. In 2020, the Company made adjustments to its operating,
sales and marketing practices to mitigate the effects of COVID-19
restrictions which reduced planned spending, particularly on travel
and marketing expenditures. In addition, COVID-19 restrictions may
have delayed or slowed the research activities of some existing and
prospective customers. It is not possible to quantify the impact of
COVID-19 on the Company's revenues and expenses in 2020 or its
expected impact on future periods.
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").
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
consolidated 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.
Principles of Consolidation
The consolidated financial statements include the accounts of
the Company and its wholly owned subsidiary, CCTI. All significant
intercompany balances have been eliminated in consolidation.
Concentration
During the year ended 31 December 2020, one customer represented
15% of revenue, in part due to certain one-time milestone events.
During the year ended 31 December 2019, one customer represented
10% of revenue.
During the year ended 31 December 2020, the Company purchased
approximately 47% of its inventory from a single supplier. During
the year ended 31 December 2019, the Company purchased
approximately 56% of its inventory from a single supplier. At 31
December 2020, amounts payable to three suppliers totalled 62% of
total accounts payable. At 31 December 2019, amounts payable to a
single supplier totalled 25% of total accounts payable.
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 consolidated statements of operations as general and
administrative expense. The Company recognised an $81,800 foreign
currency transaction gain and a $24,700 foreign currency
transaction loss for the years ended 31 December 2020 and 2019,
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 one 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 2020:
Gross unrecognised Gross unrecognised
Amortised holding holding Aggregate
Description Classification cost gains losses fair value
Money market
funds Cash equivalents $8,702,200 - - $8,702,200
Commercial
Paper Cash equivalents 6,523,500 - - 6,523,500
Commercial
Paper Short-term investments 13,996,800 1,800 - 13,998,600
Corporate
Debt Short-term investments 2,010,700 - (100) 2,010,600
------------ ------------------- ------------------- ------------
Total Investments $31,233,200 $1,800 $(100) $31,234,900
============ =================== =================== ============
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
funds Cash equivalents $10,037,000 - - $10,037,000
Commercial
Paper Cash equivalents 1,399,700 - - 1,399,700
Commercial
Paper Short-term investments 1,497,800 400 - 1,498,200
------------- ------------------- ------------------- ------------
Total Investments $12,934,500 $400 - $12,934,900
============= =================== =================== ============
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 is carried at the lower of cost or net realisable value.
Inventory consisted of the following at:
31 December 31 December
2020 2019
------------ ------------
Raw materials inventory $1,771,300 $1,318,600
Finished goods inventory 2,544,500 2,383,200
Total Inventory $4,315,800 $3,701,800
============ ============
The Company determined no allowance for obsolescence was
necessary at 31 December 2020 or 2019.
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 no allowance was necessary at 31 December 2020. The
Company recorded an allowance of $117,200 at 31 December 2019. This
amount was subsequently collected and the allowance was reversed in
the year ended 31 December 2020.
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 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 include 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
2020 2019
------------- ------------
Furniture and equipment $3,492,900 $2,311,800
Instruments 1,424,600 1,223,700
Leasehold improvements 641,400 635,100
Internal-use software under
development - 30,300
Internal-use software 1,963,000 1,277,300
Accumulated depreciation
and amortisation (2,975,700) (2,198,100)
Property and equipment,
net $4,546,200 $3,280,100
============= ============
For the years ended 31 December 2020 and 2019, the Company
transferred $276,600 and $571,000, respectively, of instruments
previously classified as inventory to property and equipment leased
to customers.
For the years ended 31 December 2020 and 2019, the Company
incurred depreciation and amortisation expense of $1,047,700 and
$613,500, respectively. Maintenance and repairs are charged to
expense as incurred.
In the years ended 31 December 2020 and 2019, the Company
capitalised approximately $16,700 and $13,800 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 2020 or 2019.
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 for fees from third parties. Research and
development costs are expensed as incurred. Research costs
performed for fees paid by customers are included in cost of goods
sold.
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 own common stock 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
49% and 55% for the year ended 31 December 2020 and between 48% and
50% for the year ended 31 December 2019 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 0.4% and 1.7% for the year ended 31 December 2020 and 1.6%
and 2.6% for the year ended 31 December 2019.
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
approximately six 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 consolidated
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 2016 and all subsequent periods. The
Company had a Federal Net Operating Loss ("NOL") carry forward of
$57.8 million as of 31 December 2020, 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 public offering of
common stock and listing on the AIM market of the London Stock
Exchange, 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 AIM listing and public
offering. The Company has calculated that for the period ending 31
December 2022, the cumulative limitation amount exceeds the NOLs
subject to the limitation. In addition, the Company's NOLs may also
be limited as a result of ownership changes subsequent to the 2016
AIM listing. The Company has not yet calculated such subsequent
limitations.
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. Lease 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. See Note 9
for additional details over leases where the Company is the
lessee.
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 12.9 million and 10.4 million for the
years ended 31 December 2020 and 2019, respectively.
Recent Accounting Pronouncements
Recently Adopted
On January 1, 2020, the Company adopted new 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 adoption did not have a
material effect on the Company's consolidated financial
statements.
Unadopted
In June 2016, the Financial Accounting Standards Board ("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
consolidated financial statements.
In August 2020, the FASB issued guidance with respect to (i)
accounting for convertible instruments, (ii) accounting for
contracts in an entity's own equity as derivatives and (iii)
earnings per share calculations. The guidance attempts to simplify
the accounting for convertible instruments by eliminating the
requirement to separate embedded conversion options in certain
circumstances. The guidance also provides for updated disclosure
requirements for convertible instruments. The guidance further
updates the criteria for determining whether a contract in an
entity's own equity can be classified as equity. Lastly, the
guidance specifically addresses how to account for the effect of
convertible instruments and potential cash settled instruments in
calculating diluted earnings per share. The guidance is effective
for fiscal years beginning after 15 December 2021, including
interim periods within those fiscal years. Early adoption is
permitted for fiscal years beginning after 15 December 2020,
including interim periods within those fiscal years. The adoption
of this guidance may be applied on a modified retrospective basis
or a full retrospective basis. The Company is currently evaluating
the impact, if any, that this new accounting pronouncement will
have on its consolidated 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 2020 is as
follows:
Revenue from Revenue
Contracts from Lease
with Customers Elements Total Revenue
Product Sales $14,850,200 - $14,850,200
Leased Elements - 10,717,400 10,717,400
Other 601,300 - 601,300
---------------- ------------ --------------
Total $15,451,500 $10,717,400 $26,168,900
================ ============ ==============
Disaggregated revenue for the year ended 31 December 2019 is as
follows:
Revenue from Revenue
Contracts from Lease
with Customers Elements Total 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
================ ============ ==============
Additional disclosures relating to Revenue from Contracts with
Customers
Changes in deferred revenue for the year ended 31 December 2020
were as follows:
Balance at 1 January 2020 $3,452,800
Revenue recognised in the current
period from
amounts included in the beginning
balance 3,191,200
Current period deferrals, net of
amounts
recognised in the current period 4,752,700
Balance at 31 December 2020 $5,014,300
===========
Changes in deferred revenue for the year ended 31 December 2019
were as follows:
Balance at 1 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
===========
Remaining contract consideration for which revenue has not been
recognised due to unsatisfied performance obligations with a
duration greater than one year was approximately $227,500 at 31
December 2020 of which the Company expects to recognise
approximately $56,200 in 2021, $56,200 in 2022, $41,900 in 2023
$22,000 in 2024 and $51,200 thereafter.
In the years ended 31 December 2020 and 2019, the Company did
not incur, and therefore did not defer, any material incremental
costs to obtain contracts or costs to fulfil 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 $5 million term
loan maturing on 01 November 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 per share. 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 2020,
the term loan had an outstanding principal balance of $5 million
and $83,000 of unamortised debt discount.
In April 2020, the Company received a loan from Silicon Valley
Bank in the amount of $1,440,000 under the US Small Business
Administration's Paycheck Protection Program ("PPP"). The PPP was
established as part of the US Coronavirus Aid, Relief, and Economic
Security ("CARES") Act and provides for potential forgiveness of
the loan upon the Company meeting certain conditions as to the use
of the proceeds. The loan provided for interest at 1% and a
maturity date of April 2022. In May 2020, subsequent to the
Company's 2020 equity raise (see Note 5), the Company repaid the
loan in full.
5. Stockholders' Equity
Common Stock
In March 2019, the Company completed an equity capital raise
issuing approximately 5.9 million shares of Common Stock at a price
of LIR1.70 (or approximately $2.25) per share. The transaction
generated gross proceeds of approximately LIR10 million (or
approximately $13.3 million). In conjunction with the transaction,
the Company incurred costs of approximately $1.0 million which
resulted in the Company receiving net proceeds of approximately
$12.3 million.
In May 2020, the Company completed an equity capital raise
issuing 19,181,423 shares of its common stock at a price of LIR1.31
(or approximately $1.60) per share in an unregistered offering. The
transaction generated gross proceeds of approximately LIR25.1
million (or $30.5 million). In conjunction with the transaction,
the Company incurred costs of approximately $1.9 million which
resulted in the Company receiving net proceeds of approximately
$28.6 million.
During the year ended 31 December 2020, the Company issued
797,467 shares of Common Stock as a result of stock option
exercises, receiving gross proceeds of $401,000. 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.
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 per share. 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 at the end of each reporting
period with changes from the prior balance sheet date recorded on
the consolidated statement of operations (see Note 6).
Stock Options
The Company adopted the MaxCyte, Inc. Long-Term Incentive Plan
(the "Plan") in January 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
increased by ten percent (10%) of the shares that are issued and
outstanding at the time awards are made under the Plan. On 10
December 2019 and 27 October 2020, the Company's Board resolved to
increase the number of stock options under the Plan by 3,000,000
and 1,500,000, respectively to provide sufficient shares to allow
competitive equity compensation in its primary markets for staff
and consistent with practices of comparable companies.
At 31 December 2020 there were 4,175,737 awards available to be
issued under the Plan.
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 2020 and 2019 is as follows
. Weighted-Average
Remaining
Weighted Contractual Aggregate
Number of Average Exercise Life (in Intrinsic
Options Price years) Value
---------- ------------------ ----------------- -----------
Outstanding at 1 January
2019 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
Granted 3,849,448 $3.00
Exercised (797,467) $0.52 $2,198,300
Forfeited (487,036) $2.59
Outstanding at 31 December
2020 12,864,230 $2.11 7.1 $65,576,300
==========
Exercisable at 31 December
2020 7,609,667 $1.53 5.9 $43,196,900
==========
The weighted-average fair value of the options granted during
the years ended 31 December 2020 and 2019 was estimated to be $1.39
and $1.08, respectively.
As of 31 December 2020, total unrecognised compensation expense
was $7,130,900 which will be recognised over the next 2.9
years.
Stock-based compensation expense for the years ended 31 December
was classified as follows on the consolidated statement of
operations:
2020 2019
-----------
General and administrative $1,230,700 $827,500
Sales and marketing 484,700 325,700
Research and development 756,400 598,900
Total $2,471,800 $1,752,100
=========== ===========
6. Fair Value
The Company's consolidated 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
The Company has an outstanding 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 2020:
Level Level Level 3 Total
1 2
Liabilities
Liability classified
warrant - - $441,200 $441,200
-------- -------- --------- ---------
Total at 31 December
2020 - - $441,200 $441,200
======== ======== ========= =========
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 2020:
Mark-to-market
liabilities
- warrant
Balance at 31 December
2019 $74,700
Change in fair value 366,500
---------------
Balance at 31 December
2020 $441,200
===============
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 consolidated 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; 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 2020 or 2019.
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 2020 or 2019.
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 2020 and 2019, Company matching
contributions amounted to $351,500 and $277,700, respectively.
8. Income Taxes
The Company did not recognise a provision (benefit) for income
taxes in 2020 or 2019. 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:
2020 2019
Deferred tax
assets:
Net operating loss carryforwards $14,998,000 $12,842,100
Research and development
credits 875,400 875,400
Stock-based compensation 1,662,600 1,146,200
Deferred revenue 1,387,200 965,800
Lease liability 566,900 647,800
Accruals and
other 971,700 652,700
Deferred tax
liabilities:
ROU asset (538,500) (630,300)
Depreciation - (25,300))
------------ --------------
19,923,300 16,474,500
Valuation allowance (19,923,300) (16,474,500))
Net deferred - -
tax assets
============ ==============
The Federal net operating loss ("NOL") carryforwards of
approximately $57.8 million as of 31 December 2020 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 NOL 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:
2020 2019
Federal income taxes (benefit) at statutory
rates $(2,481,400) $(2,707,900)
State income taxes (benefit), net of
Federal benefit (787,600) (898,800)
Windfall tax benefits (556,900) (40,200)
Permanent differences, rate
changes and other 377,100 (29,700)
Change in valuation allowance 3,448,800 3,676,600
Total Income Tax Expense - -
============ ============
9. Commitments and Contingencies
Operating Leases
From 2009 through September 2019 the Company entered into
various new and amended leases for office and laboratory space. A
member of the Company's Board of Directors is the CEO and Board
member of the lessor of certain of these leases for which the rent
payments totalled $623,000 and $416,800 in 2020 and 2019,
respectively.
All the Company's long-term 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 office and laboratory leases is approximately $56,100. 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.
All the Company's long-term office and laboratory 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 and modifications resulted in
the Company establishing approximately $2,209,200 of ROU assets and
$2,247,400 of lease liabilities.
At 31 December 2020, the Company had a $1,728,300 ROU asset, a
$572,500 short-term lease liability and $1,234,600 long-term lease
liability related to its operating leases.
In July 2020, the Company commenced a one-year office lease
providing for monthly payments of $2,900. The Company applied the
practical expedient and consequently, no ROU asset or lease
liability were recognised for this short-term lease.
At 31 December 2020 the weighted average remaining lease term
for our operating leases was 2.8 years.
Finance Leases
In 2020, the Company entered into a three-year laboratory
equipment lease that expires in April 2023. The lease provides for
monthly payments of approximately $9,200 per month and includes an
end of lease bargain purchase option. The lease is classified as a
finance lease. The Company used a discount rate of 5.5% in
calculating its lease liability under this finance lease resulting
in the establishment of approximately a $301,700 ROU asset and
offsetting lease liabilities.
At 31 December 2020, the Company had a $218,300 ROU asset, a
$100,000 short-term lease liability included in "Accrued expenses
and other" and $142,200 long-term lease liability included in
'Other liabilities' related to its finance lease.
All Leases
Lease costs for the years ended 31 December are as follows:
2020 2019
Finance lease cost
Amortisation of ROU asset $83,400 -
Interest on expense 14,400 -
Operating lease cost 673,900 551,100
Short-term lease cost 19,100 -
Variable lease cost 289,500 217,700
Total lease cost $1,080,300 $768,800
========== ========
Maturities of lease liabilities as of 31 December 2020 were as
follows:
Operating Finance Leases
Leases
2021 $696,300 $110,800
2022 717,400 110,800
2023 614,800 36,900)
---------- --------------
Total lease payments 2,028,500 258,500
Discount factor (221,400) (16,300)
Present value of lease
liabilities $1,807,100 $242,200
========== ==============
10. Subsequent Events
In preparing these consolidated financial statements, the
Company has evaluated events and transactions for potential
recognition or disclosure through 20 April 2021, the date the
consolidated financial statements were available to be issued.
In February 2021, the Company completed a private placement
offering of 5,740,000 shares of its Common Stock. The shares were
sold at a price of LIR7.00 (or approximately $9.64) per share
generating approximately LIR40.2 million (or approximately $55.3
million) of gross proceeds.
In March 2021, the Company paid off, in full, all amounts due
under its $5 million Midcap term loan in accordance with its
terms.
In the first quarter of 2021, the Company elected to conclude
all pre-clinical and clinical activities related to the CARMA
platform which were substantially completed by March 2021.
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END
FR ILMLTMTMBBJB
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