Maiden Results for the Year Ended 31 Dec 2015
MaxCyte, Inc.
("MaxCyte" or the "Company")
MaxCyte Reports Maiden Results for the Year Ended 31 December 2015
Maryland, USA - 10 May 2016: MaxCyte (LSE: MXCT), the developer and supplier of cell engineering technology to biotechnology and pharmaceutical firms engaged in cell therapy, drug discovery and development, biomanufacturing, gene editing and immuno-oncology, today announces its maiden full year audited results for the year ended 31 December 2015.
HIGHLIGHTS (including post-period end highlights)
Financial Highlights
· Successful Initial Public Offering on the AIM market of the London Stock Exchange on 29 March 2016 ("IPO"), raising £10.0 million (before expenses) for the Company
· MaxCyte generated revenues of $9.3 million in 2015, a 30% increase over 2014 revenues of $7.2 million
· Gross margins of 89% in 2015, compared to 87% in 2014
· Operating Expenses increased to $9.0 million in 2015, compared to $7.5 million in 2014
· Net loss was $1.4 million in 2015, compared to $1.8 million in 2014
· Total assets were $6.4 million at the end of 2015, compared to $6.2 million at the end of 2014
· Cash, cash equivalents and short term investments totaled $2.4 million at the end of 2015, compared to $3.4 million at the end of 2014. Immediately following the Company's IPO, the company's cash balance was $14.7 million, net of incurred offering expenses
Operational and Corporate Highlights
· Strategic research collaboration entered into with the Johns Hopkins Kimmel Cancer Center to develop MaxCyte's CARMA platform and related pipeline of next generation cell therapies
· Expanded customer base to more than 50 leading pharmaceutical and biotechnology companies, including nine of the top ten global biopharmaceutical companies by revenue
· Increased engagement in high value cell therapy partnered programs, growing to more than 35 programs covering a diverse range of fields, including immuno-oncology, gene editing and regenerative medicine. More than ten of these programs are licensed for clinical-stage use
· Continued collaboration with world leaders in the CAR field, with seven clinical trials using our technology initiated to date
· Bolstered global distribution network through appointment of distribution partners to serve customers in China, South Korea, and India
· Appointment of John Johnston as Non-executive Director, bringing more than 25 years of leadership experience to the Company's board
· Presentation of scientific findings at a number of conferences worldwide, including the American Society of Gene and Cell Therapy (ASGCT) 18th Annual Meeting
Commenting on the Maiden Annual Results, Doug Doerfler, CEO of MaxCyte, said: "We were delighted to achieve a successful listing for MaxCyte on AIM and I would like to thank our current and new shareholders for their support. The financial period under review has been a very positive one for MaxCyte as we have made significant progress in the development of our high-value CARMA immuno-oncology platform. Equally, our work with new and existing partners on programs across a diverse range of fields, including immuno-oncology, gene editing and regenerative medicine, continues to progress as our customer base expands. 2016 has started well and we look forward to robust progress for shareholders, partners and patients."
The Company will host a presentation and live conference call for analysts at 11.00 a.m. BST at the offices of Consilium Strategic Communications, 41 Lothbury, London, EC2R 7HG.
Dial-in Details:
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United Kingdom |
0800 6940257 |
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Standard International Dial-In: |
+44 (0) 1452 555566 |
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Conference ID |
7338812 |
For further information please contact:
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MaxCyte |
+1 301 944 1660 |
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Doug Doerfler, Chief Executive Officer Ron Holtz, Chief Financial Officer |
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Nominated Adviser and Broker Panmure Gordon Freddy Crossley (Corporate Finance) Fabien Holler Duncan Monteith Tom Salvesen (Corporate Broking)
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+44 (0) 20 7886 2500
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Financial PR Adviser Consilium Strategic Communications |
+44 (0)203 709 5700 |
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Mary-Jane Elliott Chris Welsh Lindsey Neville |
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About MaxCyte
MaxCyte is an established and revenue generating US-based developer and supplier of cell engineering technology to biotechnology and pharmaceutical firms engaged in cell therapy, drug discovery and development, biomanufacturing, gene editing and immuno-oncology, markets which the Directors estimate to be, in aggregate, in excess of $35 billion in 2015. The Company's patented flow electroporation technology enables its products to deliver fast, reliable and scalable cell engineering to drive the research and clinical development of a new generation of cell-based medicines.
MaxCyte's high performance platform allows transfection with any molecule or multiple molecules and is compatible with nearly all cell types, including hard-to-transfect human primary cells. It also provides a high degree of consistency and minimal cell disturbance, thereby facilitating rapid, large scale, commercial and clinical grade cell engineering in a non-viral system and with low toxicity concerns. The Company's cell engineering technology platform is CE-marked and FDA-accredited, providing MaxCyte's customers with an established regulatory path.
MaxCyte is developing CARMA, its proprietary platform in immuno-oncology, to deliver a validated non-viral approach to CAR therapies in a number of cancer indications, including solid tumors where existing CAR-T approaches face significant challenges.
For more information visit http://www.maxcyte.com/
Chairman and Chief Executive Officer'S REVIEW
In 2015, MaxCyte had a remarkable year of achievements and developments that promise to deliver further growth in exciting, groundbreaking areas of immuno-oncology, cell therapy and cellular engineering.
Using its proprietary flow electroporation technology platform, the Company has made many advances in developing a revolutionary platform, called CARMA, to generate the next class of immunotherapy for cancer, aiming to improve on existing Chimeric Antigen Receptor therapy in T-cells (CAR-T). CARMA, our patented approach to CAR-T therapy, engineers immune cells to seek and destroy cancer cells, and is in development via a strategic collaboration with the Johns Hopkins Kimmel Cancer Center in Baltimore, Maryland. CARMA offers the potential to deliver precise therapies for patients against a range of cancers, without the cost and complexity of centralized manufacturing and adverse effects seen in first generation, viral-based CAR therapies. We believe the promising preclinical results to date from this collaboration along with studies underway will result in an investigational new drug (IND) filing with the U.S. Food and Drug Administration in 2017.
MaxCyte is also enabling a new generation of cancer therapy growing out of the convergence of technological advances, such as various immunotherapy approaches and CRISPR-Cas9 gene editing, which allows precise deletion, addition or alteration of specific sites in a gene, altering that gene's function.
To fund further advances in our technology and research, the Company successfully completed an Initial Public Offering of common stock on the London Stock Exchange's Alternative Investment Market (AIM) in March 2016, raising £10.0m before expenses.
Further significant accomplishments achieved in the 2015 financial year and 2016 year-to-date have included:
· The Company generated revenues in 2015 of $9.3 million, from sales of instruments and disposables for drug discovery and development and biomanufacturing, as well as from licensing of instruments and disposable sales for cell therapy development. This represents a 30% percent increase over 2014. Gross margins were 89 percent in 2015, compared to 87 percent in 2014.
· Expanding our customer base, which presently consists of more than 50 leading pharmaceutical and biotechnology companies, including nine of the top ten global biopharmaceutical companies by revenue. In addition, the Company is currently engaged in more than 35 cell therapy partnered programs covering a diverse range of fields, including immuno-oncology, CAR based immune-oncology, gene editing and regenerative medicine. More than ten of these programs are licensed for clinical stage use.
· Collaborating with world leaders in the CAR field in applying our proprietary flow electroporation technology platform to develop novel therapies through the use of non-viral loading of CAR mRNA, seeking to overcome many of the challenges associated with current viral-based CAR therapies. To date, seven clinical trials for indications which include solid tumors have been initiated, and some have shown early indications of anti-tumor activity with no overt evidence of on-target off-tumor toxicity.
· Bolstering our distribution network worldwide by appointing distribution partners to serve customers in China, Korea, and India. These partners will help meet growing demand for our products in Asia.
· Appointing industry veteran John Johnston to our Board of Directors. Mr. Johnston has more than 25 years of leadership experience in sales, trading and financial portfolio management in the U.K. and the U.S., and is a director of a number of high-growth, London-listed companies.
· Presenting our scientific findings at a number of conferences worldwide, including the American Society of Gene and Cell Therapy (ASGCT) 18th Annual Meeting, demonstrating the potential of messenger RNA transfections as a means for enabling genome editing.
Looking forward, we remain focused on progressing our CARMA program in preclinical development and driving top-line growth from expanding sales and licensing of our technology. We see our technology becoming more widely adopted in drug discovery/development and cell therapy including advances into new therapeutic areas. Our team is firmly dedicated to MaxCyte's technology for the advancement of the revolutionary immuno-oncology and gene editing fields, and our technology is continuing to make key advancements possible.
We sincerely thank our original investors, board members and collaborators who shared our vision of a new way to engineer cells to treat disease, and who have helped us drive to our present success. We welcome our new investors, and Iook forward to forming new partnerships and collaborations with our users as we continue to develop technology and products which advance a new generation of cell-based medicines.
Doug Doerfler
President and Chief Executive Officer
J. Stark Thompson, Ph.D.
Non-executive Chairman
10 May 2016
OPERATIONAL REVIEW
CARMA
MaxCyte is developing a revolutionary class of immunotherapy, known as CARMA, which aims to improve on Chimeric Antigen Receptor therapy in T-cells (CAR-T) by utilizing MaxCyte's proprietary cell engineering platform to enable the targeting of solid cancer tumors while delivering low-cost, close-to-the-patient manufacturing. In April 2015, MaxCyte entered a strategic research collaboration with the Johns Hopkins Kimmel Cancer Center to develop its CARMA cell therapy. This preclinical work will support a future planned Investigational New Drug (IND) filing with the U.S. Food & Drug Administration for a CAR therapy targeting solid tumors.
Cell Therapeutics
MaxCyte is currently partnering with commercial and academic cell therapy developers in more than 35 licensed programs covering a diverse range of fields, including immuno-oncology, gene editing and regenerative medicine. More than ten of these programs are licensed for clinical-stage use with the goal of providing new therapies to individuals facing diseases including cancers (such as triple negative breast cancer, Hodgkins lymphoma, pediatric leukaemia and other blood cancers), HIV and sickle cell disease.
The technology licenses and instrument leases provided to partners in MaxCyte's cell therapeutics business provide high-value recurring annual fees, which are complemented by an attractive and growing recurring revenue stream from the sale of its proprietary single-use disposable processing assemblies. As these programs progress in the clinic and to commercialization, we believe they will create significant value for the Company.
Within the cell therapy business, we are collaborating with world leaders in the CAR field in applying our proprietary flow electroporation technology platform to develop novel therapies through the use of non-viral loading of CAR mRNA, seeking to overcome many of the challenges associated with current viral-based CAR therapies. To date, seven clinical trials for indications that include solid tumors have been initiated by our partners, and a subset of those seven have shown early indications of anti-tumor activity with no overt evidence of on-target off-tumor toxicity.
Drug Discovery Tools
MaxCyte's instruments and technology are sold in the biopharmaceutical markets for discovery and development of small molecule drugs, biologics and vaccines. To date, the Company has sold or leased more than 100 instruments for drug discovery globally, and its customer base includes nine of the top ten biopharmaceutical companies.
In 2015, MaxCyte bolstered its distribution network by appointing distribution partners to serve customers in China, South Korea, and India. These partners will help meet growing demand for the Company's products and services in Asia.
Scientific Focus
MaxCyte researchers and our partners have continued to present scientific findings, supported by the use of MaxCyte's technology in CAR and other areas, at conferences worldwide. Those presentations include a recent presentation at the American Society of Gene and Cell Therapy (ASGCT), which demonstrated potential therapeutic levels of gene correction achieved in Hematopoietic Stem Cells obtained from X-linked Chronic granulomatous disease (CGD) patients. In May 2015, scientists also described at the ASGCT meeting the use of messenger RNA as a means for both transient therapeutic protein expression and genome editing-based approaches to enhancing biological activity of primary cells and stem cells to levels that may be clinically relevant.
Team
MaxCyte recently appointed to its Board of Directors John Johnston, an industry veteran with 25 plus years of leadership experience in the U.K and the U.S. in sales, trading and financial portfolio management. Mr. Johnston is currently a non-executive director of Flowgroup plc and Midatech Pharma plc, and non-executive chairman of Constellation Healthcare Technologies Inc.
Outlook
In the Instrument business, our results year to date in 2016 are very much in line with our internal plans for the year. Both the Drug Discovery business and Cell Therapy markets remain on track against internal plans and the total number of cell therapy partnered programs is now more than 35, also in line with internal expectations.
Douglas Doerfler
10 May 2016
FINANCIAL REVIEW
During 2015, the Company focused on expanding its partnered programs supporting cell therapy product developers, growing its user base in drug discovery, and supporting the activities of its current customers. The Company also initiated a collaboration with the Johns Hopkins Kimmel Cancer Center for preclinical animal studies of its CARMA immunotherapy.
During the year, the Company also focused on preparations for an offering of its shares on AIM. The Company's IPO was successfully completed on March 29, 2016, at which time the Company issued approximately 14.3 million shares of its common stock at a placing price of 70 pence per share, generating gross proceeds of £10.0 million. The Company plans to use the proceeds principally for investments in:
• Further developing its CARMA platform;
• Expanding the reach of the Company's cell therapy business to Europe, Asia and other global markets; and
• Expanding the Company's direct sales teams in the U.S. and Europe, and expanding its network of distributors in Asia and globally.
The Directors believe that Admission will also enhance MaxCyte's profile and product awareness amongst current and prospective customers, partners, suppliers and academic institutions.
Results for the year ended December 31, 2015
The Company maintains its accounts under U.S. GAAP and the following information is provided on that basis:
Income Statement and Operations
Revenues were $9.3 million in 2015, compared to $7.2 million in 2014
Net loss was $1.4 million in 2015, compared to a net loss in 2014 of $1.8 million.
Gross Margins were 89% in 2015, compared to 87% in 2014.
Operating Expenses were $9.0 million in 2015, compared to $7.5 million in 2014
Employee headcount was 25 as of 31 December 2015.
Balance Sheet and Capital Structure:
Total assets on the balance sheet were $6.4 million at the end of 2015, compared to $6.2 million at the end of 2014.
Cash, cash equivalents and short term investments totaled $2.4 million, compared to $3.4 million at the end of 2014. Immediately following the Company's March 2016 IPO, the company's cash balance was $14.7 million, net of incurred offering costs.
At the end of 2015, Other Current Assets included $1.0 million in deferred costs related to the 2016 AIM IPO.
Deferred revenues increased from $1.4 million in 2014 to $2.0 million in 2015 due principally to growth in instrument leases.
The principal balance of the Company's credit facility at December 31, 2015 was $5.1 million.
As of December 31, 2015, the Company had five classes of preferred stock and one class of common stock. Upon the occurrence of the March 2016 IPO, all preferred classes of stock were converted into the Company's single class of common stock. Immediately following the IPO, 43,470,461 shares of common stock were outstanding.
Ron Holtz
10 May 2016
Independent Auditor's Report
We have audited the accompanying financial statements of MaxCyte, Inc., which comprise the Balance Sheets as of December 31, 2015 and 2014, and the related Statements of Operations, Redeemable Convertible Preferred Stock and Stockholders' Deficit, and Cash Flows for the years then ended, and the related notes to the financial statements.
Management's Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.
Auditor's Responsibility
Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of MaxCyte, Inc. as of December 31, 2015 and 2014, and the results of its operations and its cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America.
Aronson LLC
805 King Farm Blvd
Suite 300
Rockville, Maryland 20850
Audited 2015 Financial Statements and Notes
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MaxCyte, Inc. Balance Sheets as of December 31, |
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2015 |
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2014 |
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Assets |
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Current assets: |
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Cash and cash equivalents |
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$ 2,411,900 |
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$ 3,409,000 |
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Accounts receivable |
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1,451,300 |
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1,401,900 |
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Inventory |
|
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1,085,900 |
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941,100 |
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Other current assets |
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1,244,600 |
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194,000 |
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Total current assets |
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6,193,700 |
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5,946,000 |
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Property and equipment, net |
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207,300 |
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236,200 |
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Total Assets |
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$ 6,401,000 |
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$ 6,182,200 |
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Liabilities and stockholders' deficit |
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Current liabilities: |
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Current portion of note payable |
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$ 805,700 |
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$ 1,444,000 |
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Current portion of capital lease obligations |
16,600 |
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26,300 |
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Accounts payable and accrued expenses |
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2,257,000 |
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1,372,600 |
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Deferred revenue |
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2,011,800 |
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1,354,400 |
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Total current liabilities |
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5,091,100 |
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4,197,300 |
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Note payable, net of current portion |
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4,203,900 |
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3,409,400 |
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Preferred stock warrant liabilities |
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85,400 |
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105,400 |
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Capital lease obligations, net of current portion |
17,500 |
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34,000 |
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Other liabilities |
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85,600 |
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83,300 |
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Total Liabilities |
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9,483,500 |
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7,829,400 |
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Commitments and contingencies (Note 11) |
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Redeemable convertible preferred stock: |
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Redeemable Convertible Series E Preferred Stock, $0.01 par, 1,700,000 shares authorized, issued and outstanding at December 31, 2015 and 2014; aggregate liquidation preference $2,730,700 and $2,560,700 at December 31, 2015 and 2014, respectively |
1,633,100 |
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1,633,100 |
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Redeemable Convertible Series D Preferred Stock, $0.01 par, 1,602,500 shares authorized, 1,500,000 shares issued and outstanding at December 31, 2015 and 2014; aggregate liquidation preference $6,935,900 and $6,785,900 at December 31, 2015 and 2014, respectively |
3,339,500 |
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3,339,500 |
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Redeemable Convertible Series C Preferred Stock, $0.01 par, 2,500,000 shares authorized, 2,225,968 shares issued and outstanding at December 31, 2015 and 2014; aggregate liquidation preference $8,307,500 and $8,084,900 at December 31, 2015 and 2014, respectively |
3,977,400 |
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3,977,400 |
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Redeemable Convertible Series B Preferred Stock, $0.01 par, 22,000,000 shares authorized, 19,125,475 shares issued and outstanding at December 31, 2015 and 2014; carrying amount approximates liquidation preference |
35,299,100 |
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33,769,100 |
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Redeemable Convertible Series A-1 Preferred Stock, $0.01 par, 4,000,000 shares authorized, 3,129,406 shares issued and outstanding at December 31, 2015 and 2014 |
1,028,100 |
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1,028,100 |
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Total Redeemable Convertible Preferred Stock |
45,277,200 |
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43,747,200 |
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Stockholders' Deficit |
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Common stock, $0.01 par; 34,000,000 shares authorized, 1,947,302 and 1,897,980 shares issued and outstanding at December 31, 2015 and 2014, respectively |
19,500 |
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18,800 |
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Additional paid in capital |
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- |
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- |
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Accumulated deficit |
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(48,379,200) |
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(45,413,200) |
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Total stockholders' deficit |
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(48,359,700) |
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(45,394,400) |
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Total Liabilities and Stockholders' Deficit |
$ 6,401,000 |
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$ 6,182,200 |
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See accompanying notes to the financial statements.
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MaxCyte, Inc. Statements of Operations For the Years Ended December 31, |
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2015 |
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2014 |
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Revenue |
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$ 9,290,300 |
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$ 7,164,400 |
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Costs of goods sold |
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1,031,800 |
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957,500 |
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Gross profit |
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8,258,500 |
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6,206,900 |
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Operating expenses: |
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Research and development |
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3,008,100 |
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2,490,200 |
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Sales and marketing |
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3,344,400 |
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2,524,200 |
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General and administrative |
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2,667,100 |
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2,468,200 |
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Total operating expenses |
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9,019,600 |
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7,482,600 |
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Operating loss |
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(761,100) |
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(1,275,700) |
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|
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Other Income (expense): |
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Interest expense |
(704,400) |
(561,300) |
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Other income |
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20,000 |
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- |
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Total other expense |
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(684,400) |
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(561,300) |
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Net loss |
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(1,445,500) |
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(1,837,000) |
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Cumulative preferred stock dividends |
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(2,072,600) |
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(1,916,300) |
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Net loss attributable to common stock |
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$ (3,518,100) |
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$(3,753,300) |
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Basic and diluted net loss per share |
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$ (1.86) |
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$ (15.18) |
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Weighted average shares outstanding, basic and diluted |
1,887,765 |
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247,225 |
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See accompanying notes to the financial statements.
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Statements of Redeemable Convertible Preferred Stock and Stockholders' Deficit For the Years Ended December 31, |
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Redeemable Convertible Preferred Stock |
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Preferred Stock |
Common Stock |
Additional Paid-in Capital |
Accumulated Deficit |
Total Stockholders' Deficit |
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Series E |
Series D |
Series C |
Series B |
Series A-1 |
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Series D |
Series C |
Series A-1 |
Shares |
Amount |
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Balance January 1, 2014 |
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$ - |
$ - |
$ - |
$32,239,100 |
$ - |
|
$15,000 |
$22,300 |
$ 31,300 |
68,280 |
$ 700 |
$ - |
$(33,851,600) |
$(33,782,300) |
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|
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Stock-based compensation expense |
- |
- |
- |
- |
- |
|
- |
- |
- |
- |
- |
95,600 |
- |
95,600 |
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Issuance of warrants |
|
- |
- |
- |
- |
- |
|
- |
- |
- |
- |
- |
21,700 |
- |
21,700 |
|
|
Issuance of preferred stock, net |
|
1,633,100 |
- |
- |
- |
- |
|
- |
- |
- |
- |
- |
- |
- |
- |
|
|
Exercise of stock options |
|
- |
- |
- |
- |
- |
|
- |
- |
- |
1,811,700 |
18,100 |
54,400 |
- |
72,500 |
|
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Accretion of redeemable preferred stock |
- |
- |
- |
1,530,000 |
- |
|
- |
- |
- |
- |
- |
(125,600) |
(1,404,400) |
(1,530,000) |
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Reclassification of preferred stock to temporary equity |
3,339,500 |
3,977,400 |
- |
1,028,100 |
|
(15,000) |
(22,300) |
(31,300) |
- |
- |
- |
(8,276,500) |
(8,345,100) |
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Modification of warrants |
|
- |
- |
- |
- |
- |
|
- |
- |
- |
- |
- |
(46,100) |
(43,700) |
(89,800) |
|
|
Net loss |
|
|
- |
- |
- |
- |
- |
|
- |
- |
- |
- |
- |
- |
(1,837,000) |
(1,837,000) |
|
Balance December 31, 2014 |
|
1,633,100 |
3,339,500 |
3,977,400 |
33,769,100 |
1,028,100 |
|
- |
- |
- |
1,879,980 |
18,800 |
- |
(45,413,200) |
(45,394,400) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based compensation expense |
- |
- |
- |
- |
- |
|
- |
- |
- |
- |
- |
1,200 |
- |
1,200 |
||
|
Exercise of stock options |
|
- |
- |
- |
- |
- |
|
- |
- |
- |
67,322 |
700 |
8,300 |
- |
9,000 |
|
|
Accretion of redeemable preferred stock |
- |
- |
- |
1,530,000 |
- |
|
- |
- |
- |
- |
- |
(9,500) |
(1,520,500) |
(1,530,000) |
||
|
Net loss |
|
|
- |
- |
- |
- |
- |
|
- |
- |
- |
- |
- |
- |
(1,445,500) |
(1,445,500) |
|
Balance December 31, 2015 |
|
$1,633,100 |
$3,339,500 |
$3,977,400 |
$35,299,100 |
$1,028,100 |
|
$ - |
$ - |
$ - |
$1,947,302 |
$19,500 |
$ - |
$(48,379,200) |
$(48,359,700) |
|
See accompanying notes to the financial statements.
|
MaxCyte, Inc. |
|
|
|
|
|
Statements of Cash Flow |
|
|
|
|
|
For the Years ended December 31, |
|
|
|
|
|
|
|
|
|
|
|
|
|
2015 |
|
2014 |
|
Cash flows from operating activities: |
|
|
|
|
|
Net loss |
$ (1,445,500) |
|
$ (1,837,000) |
|
|
Adjustments to reconcile net loss to cash used in operating activities: |
|
|
|
|
|
|
Depreciation and amortization |
93,300 |
|
92,000 |
|
|
Net book value of consigned equipment sold |
30,100 |
|
- |
|
|
Stock-based compensation |
1,200 |
|
95,600 |
|
|
Change in fair value of derivative liability |
(20,000) |
|
- |
|
|
Non-cash interest expense |
79,000 |
|
77,900 |
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
Accounts receivable |
(49,400) |
|
(634,800) |
|
|
Inventory |
(144,800) |
|
(214,300) |
|
|
Other current assets |
(15,300) |
|
(129,900) |
|
|
Accounts payable and accrued expenses |
525,800 |
|
(21,800) |
|
|
Deferred revenue |
657,400 |
|
563,400 |
|
|
Other liabilities |
107,700 |
|
83,300 |
|
|
Net cash used in operating activities |
(180,500) |
|
(1,925,600) |
|
|
|
|
|
|
|
Cash flows from investing activities: |
|
|
|
|
|
Purchases of property and equipment |
(94,500) |
|
(147,000) |
|
|
|
Net cash used in investing activities |
(94,500) |
|
(147,000) |
|
|
|
|
|
|
|
Cash flows from financing activities: |
|
|
|
|
|
Proceeds from issuance of notes payable and warrants, net of issuance costs |
121,800 |
|
4,813,000 |
|
|
Proceeds from exercise of stock options |
9,000 |
|
72,500 |
|
|
Principal payments on notes payable |
(150,000) |
|
(1,775,600) |
|
|
Principal payments on capital leases |
(26,200) |
|
(26,300) |
|
|
Proceeds from preferred equity issuance, net of issuance costs |
- |
|
1,633,100 |
|
|
Costs of anticipated offering paid in advance |
(676,700) |
|
- |
|
|
|
Net cash (used in) provided by financing activities |
(722,100) |
|
4,716,700 |
|
|
|
|
|
|
|
Net (decrease) increase in cash and cash equivalents |
(997,100) |
|
2,644,100 |
|
|
Cash and cash equivalents, beginning of period |
3,409,000 |
|
764,900 |
|
|
Cash and cash equivalents, end of period |
$ 2,411,900 |
|
$ 3,409,000 |
|
|
|
|
|
|
|
|
Supplemental cash flow information: |
|
|
|
|
|
Cash paid for interest |
$ 518,200 |
|
$ 399,900 |
|
|
Cash paid for income taxes |
- |
|
- |
|
See accompanying notes to the financial statements.
1. Organization and Description of Business
MaxCyte, Inc. (the "Company" or "MaxCyte") was incorporated as a majority owned subsidiary of EntreMed, Inc. ("EntreMed") on July 31, 1998, under the laws and provisions of the state of Delaware, and commenced operations on July 1, 1999. In November 2002, MaxCyte was recapitalized and EntreMed was no longer deemed to control the Company.
MaxCyte is a developer and supplier of proprietary electroporation technology to biotechnology and pharmaceutical firms engaged in cell therapy, including gene editing and immuno-oncology and in drug discovery and development and biomanufacturing. The Company licenses its instruments and technology and sells its consumables to developers of cell therapies. The Company also sells and leases its instruments and sells its consumables to pharmaceutical and biotechnology companies for use in drug discovery and development and biomanufacturing.
The Company incurred significant losses during the years ended December 31, 2015 and 2014 and has an accumulated deficit of $48.4 million at December 31, 2015. During 2014 and through December 31, 2015, the Company raised net proceeds of approximately $6.6 million in debt and equity financings (of which approximately $1.9 million was used to pay off existing borrowings). The Company is currently implementing an operating plan that includes generating cash from significant revenue growth. There can be no assurances that the Company will be successful in its growth plan. On March 29, 2016, the Company completed its initial public offering of its common stock on the AIM market of the London Stock Exchange. The Company issued approximately 14.3 million shares of its common stock at an initial price of 0.70 British Pounds per share, generating gross proceeds of approximately 10 million British Pounds.
2. Summary of Significant Accounting Policies
Basis of Presentation
The accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP").
The Company operates in a single business segment.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. In the accompanying financial statements, estimates are used for, but not limited to, stock-based compensation, allowance for doubtful accounts, allowance for inventory obsolescence, valuation of derivative liabilities and other financial instruments, accruals for contingent liabilities, fair value of long-lived assets, deferred taxes and valuation allowance, and the depreciable lives of fixed assets. Actual results could differ from those estimates.
Concentration
During the years ended December 31, 2015 and 2014, one customer represented 17% and 18% of net revenues, respectively. As of December 31, 2015 and 2014, accounts receivable from this customer totaled 2% and 7% of net accounts receivable, respectively.
During each of the years ended December 31, 2015 and 2014, the Company purchased approximately 65% of total costs of goods sold from one supplier. As of December 31, 2015 and 2014, amounts payable to this supplier totaled 27% and 20% of total accounts payable, respectively.
Foreign Currency
The Company's functional currency is the U.S. dollar; transactions denominated in foreign currencies are translated at the exchange rate in effect at the date of each transaction. Differences in exchange rates during the period between the date a transaction denominated in foreign currency is consummated and the date on which it is either settled or translated for inclusion in the balance sheet are recognized in the Statement of Operations for that period. The foreign currency transaction loss included in operations was $50,100 and $21,700 for the years ended December 31, 2015 and 2014, respectively.
Fair Value
Fair value is the price that would be received from the sale of an asset or paid to transfer a liability assuming an orderly transaction in the most advantageous market at the measurement date. U.S. GAAP establishes a hierarchical disclosure framework which prioritizes and ranks the level of observability of inputs used in measuring fair value. These tiers include:
· Level 1-Quoted prices (unadjusted) in active markets that are accessible at the measurement date for identical assets or liabilities. The fair value hierarchy gives the highest priority to Level 1 inputs.
· Level 2-Observable market-based inputs other than quoted prices in active markets for identical assets or liabilities.
· Level 3-Unobservable inputs are used when little or no market data is available. The fair value hierarchy gives the lowest priority to Level 3 inputs.
See Note 9 for additional information regarding fair value.
Cash and Cash Equivalents
Cash and cash equivalents consist of financial instruments with original maturities of less than three months. At times the Company's cash balances may exceed federally insured limits. The Company does not believe that this results in any significant credit risk.
Inventory
The Company sells or leases products to customers. The Company uses the average cost method of accounting for its inventory and adjustments resulting from periodic physical inventory counts are reflected in costs of goods sold in the period of the adjustment. Inventory consisted of the following as of December 31:
|
|
|
2015 |
|
2014 |
|
Raw materials inventory |
$ 192,300 |
|
$ 119,800 |
|
|
Work-in-process inventory |
266,400 |
|
173,000 |
|
|
Finished goods inventory |
627,200 |
|
648,300 |
|
|
|
Total Inventory |
$ 1,085,900 |
|
$ 941,100 |
Accounts Receivable
Accounts receivable are reduced by an allowance for doubtful accounts, if needed. The allowance for doubtful accounts reflects the best estimate of probable losses determined principally on the basis of historical experience and specific allowances for known troubled accounts. All accounts or portions thereof that are deemed to be uncollectible or to require an excessive collection cost are written off to the allowance for doubtful accounts. The Company determined that no allowance was necessary at December 31, 2015 or 2014.
Property and Equipment
Property and equipment are stated at cost. Depreciation is computed using the straight-line method. Office equipment (principally computers) is depreciated over an estimated useful life of three years. Laboratory equipment is depreciated over an estimated useful life of five years. Furniture is depreciated over a useful life of seven years. Leasehold improvements are amortized over the shorter of the estimated lease term or its useful life. Consigned instruments represent equipment held at a customer's site that is typically leased to customers on a short-term basis and is depreciated over an estimated useful life of five years. Property and equipment consist of the following at December 31:
|
|
|
|
|
2015 |
2014 |
|
Furniture and equipment |
|
$ 1,012,700 |
$ 959,200 |
||
|
Consigned instruments |
|
|
339,900 |
337,000 |
|
|
Leasehold improvements |
|
72,500 |
72,500 |
||
|
Accumulated depreciation and amortization |
(1,217,800) |
(1,132,500) |
|||
|
|
Property and equipment, net |
$ 207,300 |
$ 236,200 |
||
For the years ended December 31, 2015 and 2014, the Company incurred depreciation and amortization expense of $93,300 and $92,000, respectively. Maintenance and repairs are charged to expense as incurred.
Management reviews property and equipment for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of the long-lived asset is measured by a comparison of the carrying amount of the asset to future undiscounted net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the estimated fair value of the assets. Assets held for disposal are reportable at the lower of the carrying amount or fair value, less costs to sell. Management determined that no assets were impaired and no assets were held for disposal as of December 31, 2015 and 2014.
Redeemable Convertible Preferred Stock
The Company's Series B redeemable convertible preferred stock has been classified since issuance as temporary equity since it is redeemable in certain circumstances outside of the Company's control. The Series B redeemable convertible preferred stock is increased by the accretion of any related discounts and accrued but unpaid dividends so that the carrying amount equals the redemption amount at the estimated redemption date (see Note 5).
The Company's Series E convertible preferred stock issued in December 2014 was classified at issuance as temporary equity as a result of an embedded contingent conversion option that is potentially settleable by issuing a variable number of shares (see Note 5).
The Company's Series A-1 convertible preferred stock and the Series C perpetual preferred stock and Series D perpetual preferred stock were initially classified as permanent equity. As part of the adoption of the Plan of Conditional Recapitalization (see Note 5) in December 2014, the Company's Series A-1, C and D preferred stock were modified to include an embedded contingent conversion option that is potentially settleable by issuing a variable number of shares; as a result, the Series A-1, C and D preferred stock were reclassified to temporary equity upon modification (see Note 5).
Revenue Recognition
Revenue is recognized when there is persuasive evidence that an arrangement exists, delivery has occurred, the sales price is fixed and determinable, and collection is reasonably assured.
Revenue is principally from the sale or lease of instruments and processing assemblies, as well as from warranties, installation and maintenance. In some arrangements, product and services have been sold together in multiple element arrangements. In such arrangements, when the elements have standalone value to the customer, the Company allocates the sale price to the various elements in the arrangement on a relative selling price basis. Under this basis, the Company determines the estimated selling price of each element in a manner that is consistent with that used to determine the price to sell the deliverable on a standalone basis.
Revenue from the sale of instruments and disposables is recognized at the time of shipment to the customer, provided no significant vendor obligations remain and collectability is probable. Revenue from equipment leases is recognized ratably over the contractual term of the lease agreement. Licensing fee revenue is recognized ratably over the license period.
Research and Development Costs
Research and development costs consist of independent proprietary research and development costs, and the costs associated with work performed for fees from third parties. Research and development costs are expensed as incurred.
Stock-Based Compensation
The Company has a stock-based compensation plan for stock options awarded in exchange for employee and non-employee director services. The value of the award that is ultimately expected to vest is recognized as expense on a straight-line basis over the employee's requisite service period.
The Company utilizes the Black-Scholes model for estimating fair value of its stock options granted. Option valuation models, including the Black-Scholes model, require the input of highly subjective assumptions, and changes in the assumptions used can materially affect the grant-date fair value of an award. These assumptions include the risk-free rate of interest, expected dividend yield, expected volatility and the expected life of the award. A discussion of management's methodology for developing each of the assumptions used in the Black-Scholes model is as follows:
Fair value of common stock
Given the lack of an active public market for the common stock, the Company's board of directors determined the fair value of the common stock. In the absence of a public market, the Company believes that it is appropriate to consider a range of factors to determine the fair value of the common stock at each grant date. The factors include, but are not limited to: (1) the achievement of operational milestones by the Company; (2) the status of strategic relationships with collaborators; (3) the significant risks associated with the Company's stage of development; (4) capital market conditions for life science and medical diagnostic companies, particularly similarly situated, privately held, early-stage companies; (5) the Company's available cash, financial condition and results of operations; (6) the most recent sales of the Company's preferred stock; and (7) the preferential rights of the outstanding preferred stock.
Expected volatility
Volatility is a measure of the amount by which a financial variable such as a share price has fluctuated (historical volatility) or is expected to fluctuate (expected volatility) during a period. The Company does not maintain an internal market for its shares and its shares are not traded publicly. The Company has been able to identify several public entities of similar size, complexity and stage of development; accordingly, historical volatility has been calculated at 40% for both 2015 and 2014 using the volatility of these companies.
Expected dividend yield
The Company has never declared or paid dividends and has no plans to do so in the foreseeable future.
Risk-free interest rate
This approximates the U.S. Treasury rate for the day of each option grant during the year, having a term that closely resembles the expected term of the option. The risk-free interest rate was 1.9% and 1.8%-1.9% for stock options granted during 2015 and 2014, respectively.
Expected term
This is the period of time that the options granted are expected to remain unexercised. Options granted have a maximum term of 10 years. The Company estimates the expected term of the option to be 6.25 years for options with a standard four-year vesting period, using the simplified method. Over time, management intends to track estimates of the expected term of the option term so that estimates will approximate actual behavior for similar options.
Expected forfeiture rate
The forfeiture rate is the estimated percentage of options granted that is expected to be forfeited or canceled on an annual basis before becoming fully vested. The Company estimates the forfeiture rate based on turnover data with further consideration given to the class of the employees to whom the options were granted. The Company estimated the annual forfeiture rate to be 10% for both 2015 and 2014.
Income Taxes
The Company uses the asset and liability method of accounting for income taxes. Deferred tax assets and liabilities are determined based on differences between the financial reporting and tax basis of assets and liabilities and are measured using the enacted tax rates and laws that are expected to be in effect when the differences are expected to reverse. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the period that such tax rate changes are enacted. The measurement of a deferred tax asset is reduced, if necessary, by a valuation allowance if it is more-likely-than-not that all or a portion of the deferred tax asset will not be realized.
Management uses a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return, as well as guidance on derecognition, classification, interest and penalties and financial statement reporting disclosures. For those benefits to be recognized, a tax position must be more-likely- than-not to be sustained upon examination by taxing authorities. The Company recognizes interest and penalties accrued on any unrecognized tax exposures as a component of income tax expense. The Company has not identified any uncertain income tax positions that could have a material impact to the financial statements.
The Company is subject to taxation in various jurisdictions in the United States and remains subject to examination by taxing jurisdictions for 2012 and all subsequent periods. The Company's net operating loss carryforwards remain subject to examinations for all periods.
Loss Per Share
Basic loss per share is computed by dividing net loss available to common shareholders by the weighted average number of shares of common stock outstanding during the period.
For periods of net income, and when the effects are not anti-dilutive, diluted earnings per share is computed by dividing net income available to common shareholders by the weighted-average number of shares outstanding plus the impact of all potential dilutive common shares, consisting primarily of common stock options and stock purchase warrants using the treasury stock method, and convertible preferred stock using the if-converted method.
For periods of net loss, diluted loss per share is calculated similarly to basic loss per share because the impact of all dilutive potential common shares is anti-dilutive. The number of anti-dilutive shares, consisting of (i) common stock options, (ii) stock purchase warrants, and (iii) convertible preferred stock exchangeable into common stock which has been excluded from the computation of diluted loss per share, was 31.9 and 32.0 million as of December 31, 2015 and 2014, respectively.
The Company's convertible preferred stock, prior to its conversion, contains non-forfeitable rights to dividends, and therefore is considered to be a participating security; the calculation of basic and diluted income (loss) per share excludes net income (but not net loss) attributable to the convertible preferred stock from the numerator and excludes the impact of those shares from the denominator.
Recent Accounting Pronouncements
In May 2014, the Financial Accounting Standards Board, or FASB, issued guidance for revenue recognition for contracts, superseding the previous revenue recognition requirements, along with most existing industry-specific guidance. The guidance requires an entity to review contracts in five steps: 1) identify the contract, 2) identify performance obligations, 3) determine the transaction price, 4) allocate the transaction price, and 5) recognize revenue. The new standard will result in enhanced disclosures regarding the nature, amount, timing and uncertainty of revenue arising from contracts with customers. The standard currently is effective for the Company's reporting year beginning January 1, 2019 and early adoption is permitted starting January 1, 2018. The Company is currently evaluating the impact, if any, that this new accounting pronouncement will have on its financial statements.
In August 2014, the FASB issued guidance requiring management to evaluate on a regular basis whether any conditions or events have arisen that could raise substantial doubt about the entity's ability to continue as a going concern. The guidance 1) provides a definition for the term ''substantial doubt,'' 2) requires an evaluation every reporting period, interim periods included, 3) provides principles for considering the mitigating effect of management's plans to alleviate the substantial doubt, 4) requires certain disclosures if the substantial doubt is alleviated as a result of management's plans, 5) requires an express statement, as well as other disclosures, if the substantial doubt is not alleviated, and 6) requires an assessment period of one year from the date the financial statements are available to be issued. The standard is effective for the Company's reporting year beginning January 1, 2017 and early adoption is permitted. The Company is currently evaluating the impact, if any, that this new accounting pronouncement will have on its financial statements.
In April 2015, the FASB issued accounting guidance requiring that debt issuance costs related to a recognized liability be presented on the balance sheet as a direct reduction from the carrying amount of that debt liability, consistent with debt discounts. The recognition and measurement guidance for debt issuance costs are not affected. The standard is effective for reporting periods beginning after December 15, 2015. The Company early adopted this guidance retrospectively in accordance with the guidance. The adoption of this new guidance resulted in a reclassification of $82,000 of Other Current Assets to Current Portion of Note Payable and $37,000 of Other Noncurrent Assets to the noncurrent liability, Note Payable, Net of Current Portion at December 31, 2014.
In July 2015, the FASB issued guidance for inventory requiring an entity to measure inventory within the scope of this guidance at the lower of cost or net realizable value, except when inventory is measured using LIFO or the retail inventory method. Net realizable value is the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. In addition, the FASB has amended some of the other inventory guidance to more clearly articulate the requirements for the measurement and disclosure of inventory. The guidance is effective for reporting periods beginning after December 15, 2016 and early adoption is permitted. The Company is currently evaluating the impact, if any, that this new accounting pronouncement will have on its financial statements.
The Company has evaluated all other issued and unadopted Accounting Standards Updates and believes the adoption of these standards will not have a material impact on its results of operations, financial position, or cash flows.
3. Related Party Transactions - Assignment of License Agreement from EntreMed
On May 30, 2000, EntreMed assigned to the Company all of its rights under a license agreement (the Agreement) with Boston Children's Hospital, formerly Immune Disease Institute, Inc. The assignment included the worldwide exclusive license to certain patents and patent applications. The Company agreed to carry out the obligations of the Agreement, which includes the annual payment of royalties based on net sales of licensed products. Effective January 1, 2009, the Company extended the Agreement on its own behalf and settled all outstanding amounts due thereunder. The Agreement required a minimum annual fee of $50,000 which was applied against any royalties due for the annual period, provided for contingent cash and equity payments based on qualifying sales, and is cancellable by the Company with 90 days written notice. The Company recognized royalty expense associated with the Agreement of $37,200 for the year ended December 31, 2014 (none in 2015). All of the patents which are the subject of the license expired in March 2014.
4. Debt
In March 2014, the Company entered into a credit facility with MidCap Financial SBIC, LP ("MidCap") which provides for a total facility of up to $4,000,000, plus an additional $1,000,000 subject to certain performance requirements. The facility carries a variable interest rate equal to the greater of (i) 1.50% above the LIBOR then in effect, or (ii) 10.00%. The credit facility is collateralized by substantially all tangible assets of the Company and matures in March 2017. The Company borrowed the initial $4,000,000 in March 2014 (and used a portion of the proceeds pay in full the outstanding balance on the prior facility from Square 1 Bank).
In connection with this facility, in 2014 the Company issued a stock purchase warrant to MidCap to purchase 40,000 shares of Series D Preferred at an exercise price of $1.00 per share. This warrant expires in March 2024 and is recorded as a debt discount at its estimated fair value of $21,700 which is being amortized as interest expense over the term of the debt using the effective interest method. The warrant was initially classified as equity; upon the adoption of the Plan of Conditional Recapitalization in December 2014 (see Note 5) the warrant was reclassified to a liability at its then fair value.
The Company amended the MidCap facility in December 2014, February 2015 and June 2015, and has accounted for the amendments as a "modification of debt." Accordingly, the Company has deferred additional fees incurred and paid to the lender in connection with the amendments and expensed all fees paid to third parties. The deferred fees are being amortized using the effective interest method over the remaining term of the amended debt. Unamortized deferred financing costs were approximately $82,100 and $118,700 at December 31, 2015 and 2014, respectively, and are included as reductions to the note payable balance.
In December 2014 and after the adoption of the Plan of Conditional Recapitalization, certain terms of the MidCap credit facility were amended and the additional $1,000,000 term loan was drawn. In consideration for the amendment and waiver, the Company issued an additional warrant to purchase 10,000 shares of Series D Preferred, with the same terms and conditions as the initial warrant. The warrant was recorded as a debt discount at its estimated fair value of $15,600 which is being amortized as interest expense over the term of the debt using the effective interest method. The warrant is classified as a liability.
The Company amended the MidCap facility in February 2015 and in June 2015, to, among other things, (i) waive certain existing events of default, (ii) allow certain otherwise prohibited investments, (iii) extend the maturity date to July 1, 2019, (iv) revise principal amortization payments and other contingent payments, and (v) increase the principal amount to $5,105,400.
The credit facility contains a minimum sales financial covenant for rolling twelve month sales each month. The Company was not in compliance with the covenant requirement as of December 31, 2014. The Company received a waiver from MidCap for the noncompliance as of December 31, 2014.
The total balance of the MidCap credit facility at December 31, 2015 was $5,105,400, with an interest rate of 10%; the balance of the unamortized debt discount at December 31, 2015 and 2014 was $13,800 and $27,600, respectively. Future minimum principal payments under the MidCap credit facility are expected to be approximately $850,000 in 2016, approximately $1,702,000 in 2017 and 2018, and approximately $850,000 in 2019.
5. Preferred Stock
The Company has outstanding Series A-1 convertible preferred stock (the "Series A-1 Preferred"), Series B redeemable convertible preferred stock (the "Series B Preferred"), series C and D perpetual preferred stock (the "Series C Preferred" and "Series D Preferred") and Series E convertible preferred stock (the "Series E Preferred"), each with various rights and preferences, as discussed further below.
Rights to Nominate Directors
In accordance with the Company's restated certificate of incorporation, and prior to the effect of the Plan of Conditional Recapitalization (see discussion below), rights to elect members of the Board of Directors consists of eight directors designated as follows: (i) three individuals to be selected by the holders of the Series B Preferred, (ii) one individual to be selected by holders of the Series C Preferred, (iii) two individuals to be elected by the holders of Series B Preferred and common stock, voting together as a single class, and (iv) two individuals selected by the holders of the common stock. After the Plan of Conditional Recapitalization is effective, directors are elected by the common shareholders.
Liquidation Preferences
In the event of any liquidation, dissolution or winding up of the Company prior to the effect of the Plan of Conditional Recapitalization, each share of Series E Preferred is entitled to receive, prior and in preference to all other capital stock of the Company, an amount equal to $1.50 (one and one-half times the Series E purchase price) plus all accrued and unpaid Series E accruing dividends. After paying the Series E preference, the remaining preferred stockholders are entitled to (in order of preference):
· each share of Series D Preferred is entitled to receive, prior and in preference to all other capital stock of the Company, an amount equal to $4.00 (four times the Series D purchase price) plus all accrued and unpaid Series D accruing dividends;
· each share of Series C Preferred is entitled to receive an amount equal to $3.00 (three times the Series C Purchase Price) plus all accrued and unpaid Series C accruing dividends;
· each share of Series B Preferred will be entitled to receive, prior and in preference to all other capital stock of the Company, an amount equal to $1.00 (the Series B Purchase Price) plus all accrued and unpaid Series B accruing dividends (the Series B Preferential Amount);
· the assets of the Company legally available for distribution in such liquidation event (or the consideration received in such transaction), if any, are to be distributed ratably to the holders of the Series E Preferred, the Series B Preferred, Series A-1 Preferred, and common stock at the time outstanding on an as-if-converted-to-common-stock basis until such time as such holders have received an aggregate amount of $100,000,000;
· the holders of the Series A-1 Preferred shall be entitled to share in the distribution of up to $6,000,000 of the remaining assets of the Company on a pro rata basis; and
· thereafter, all remaining assets of the Company will be distributed pro rata among the holders of the Series E Preferred, Series B Preferred, Series A-1 Preferred, and common stock on an as-converted-into-common-stock pro rata basis.
Other Provisions of the Series A-1 Preferred
Prior to the effect of the Plan of Conditional Recapitalization, the Series A-1 Preferred has the following specific provisions:
Voting
Holders are entitled to vote on an as-converted basis with Series E Preferred, Series B Preferred and common holders.
Dividends
The holders of the Series A-1 Preferred shall be entitled to receive dividends each time the Company declares or pays any dividend in an amount equal to the amount of dividends that would have been received if the shares of Series A-1 Preferred had been converted to common stock. No dividends were declared during the periods presented.
Conversion
Each share of Series A-1 Preferred is convertible to one share of common stock at any time, subject to adjustments. If the Company consummates a public offering, which does not trigger the Plan of Conditional Recapitalization, from which the Company receives gross proceeds of at least $35,000,000 at a price not less than $6.00 per share, the conversion becomes mandatory. Also, the conversion becomes mandatory if the holders of at least two-thirds of the then outstanding shares of Series A-1 elect to covert.
Other Provisions of the Series B Preferred
Prior to the effect of the Plan of Conditional Recapitalization, the Series B Preferred has the following specific provisions:
Voting
Holders are entitled to vote on an as-converted basis with Series E Preferred, Series A-1 Preferred and common holders, and have separate voting rights on specified matters.
Dividends
The holders of Series B Preferred will be entitled to receive cumulative dividends, when and as declared by the Board of Directors, payable in cash or in kind, and in preference to any dividend on any other capital stock other than the Series C Preferred, Series D Preferred and Series E Preferred at a rate of 8% per annum (as adjusted for stock splits, stock dividends, re-capitalizations, and re-combinations). In the event of certain defaults by the Company, the dividend for the Series B Preferred shall increase to 12% per annum until such default is corrected, at which point the dividend rate returns to 8%. The Board of Directors has not declared any dividends.
Redemption
The Series B Preferred may be redeemed upon the election of the holders of two-thirds of the then-outstanding Series B Preferred. However, no shares can be redeemed unless approved by a vote or written consent of the holders of at least a majority in interest of the outstanding Series E Preferred, Series D Preferred, the Series C Preferred, each voting as a separate class. The redemption price is the greater of original issue price plus accrued and unpaid dividends or the fair market value as determined by the Board of Directors.
Conversion
Each share of Series B Preferred (including any accrued and unpaid dividends) may be converted at the holder's option at any time into one share of common stock, subject to adjustments. If the Company consummates a public offering, which does not trigger the Plan of Conditional Recapitalization, from which the Company receives gross proceeds of at least $35,000,000 at a price not less than $6.00 per share, the conversion becomes mandatory. Also, the conversion becomes mandatory if the holders of at least two-thirds of the then outstanding shares of Series B elect to covert.
Anti-dilution Adjustments
The conversion price of the Series B Preferred is subject to adjustment to prevent dilution, on a weighted-average basis, in the event that the Company issues additional shares of capital stock (or the right to acquire shares of capital stock) at a price per share that is less than the then-applicable conversion price of the Series B Preferred.
Other Provisions of the Series C Preferred
Prior to the effect of the Plan of Conditional Recapitalization, the Series C Preferred has the following specific provisions:
Voting
In addition to any other vote required by law, the vote or written consent of the holders of at least a majority of the outstanding Series C Preferred shares is necessary for effecting or validating (i) any action that alters or changes any of the powers, preferences, or other special rights, privileges or restrictions of the Series C Preferred, (ii) any authorization or any designation of any class or series of stock or any other securities convertible into equity securities of the Company ranking on a parity with or senior to the Series C Preferred in right of redemption, liquidation preference, voting or dividends, or (iii) any action that results in the payment or declaration of a dividend or distribution of property on any shares of Common Stock or Preferred Stock other than the Series C Preferred.
Dividends
The holders of Series C Preferred are entitled to receive cumulative dividends, when and as declared by the Board of Directors, payable in cash and in preference to any dividend on any other capital stock other than the Series E Preferred and Series D Preferred at a rate of 10% per annum (as adjusted for stock splits, stock dividends, re-capitalizations, and re-combinations). The Board of Directors has not declared any dividends.
Conversion
Prior to the Plan of Conditional Recapitalization, the Series C Preferred was not convertible. The Plan of Conditional Recapitalization provides that in the event that an AIM IPO closes before December 31, 2015, the Series C Preferred is automatically converted into common stock based on a formula of value (with multiples of existing liquidation preferences) and on a discount from the AIM IPO price. In January 2016, the Board approved an amended Plan which among other things, extended the time for the closing of an AIM IPO to June 30, 2016. The Board may further extend the AIM IPO date to December 31, 2016 at its discretion without shareholder consent.
Other Provisions of the Series D Preferred
Prior to the effect of the Plan of Conditional Recapitalization, the Series D Preferred has the following specific provisions:
Voting
In addition to any other vote required by law, the vote or written consent of the holders of at least a majority in interest of the outstanding Series D Preferred, voting together as a separate class, shall be necessary for effecting or validating (i) any action that alters or changes any of the powers, preferences, or other special rights, privileges or restrictions of the Series D Preferred (whether by merger, consolidation, or the like), (ii) any authorization or any designation, whether by reclassification or otherwise, of any class or series of stock or any other securities convertible into equity securities of the Company ranking on a parity with or senior to the Series D Preferred in right of redemption, liquidation preference, voting or dividends, or (iii) any action that results in the payment or declaration of a dividend or distribution of property.
Dividends
The holders of Series D Preferred are entitled to receive cumulative dividends, when and as declared by the Board of Directors, payable in cash, and in preference to any dividend on any other capital stock other than the Series E Preferred, at a rate of 10% per annum (as adjusted for stock splits, stock dividends, re-capitalizations, and re-combinations). The Board of Directors has not declared any dividends.
Conversion
Prior to the Plan of Conditional Recapitalization, the Series D Preferred was not convertible. The Plan of Conditional Recapitalization provides that in the event that an AIM IPO closes before December 31, 2015, the Series D Preferred is automatically converted into common stock based on a formula of value (with multiples of existing liquidation preferences) and on a discount from the AIM IPO price. In January 2016, the Board approved an amended Plan which among other things, extended the time for the closing of an AIM IPO to June 30, 2016. The Board may further extend the AIM IPO date to December 31, 2016 at its discretion without shareholder consent.
Other Provisions of the Series E Preferred
Prior to the effect of the Plan of Conditional Recapitalization, the Series E Preferred has the following specific provisions:
Voting
Holders are entitled to vote on an as-converted basis with Series A-1 Preferred, Series B Preferred and common holders, and have separate voting rights on specified matters. Also, and in addition to any other vote required by law, the vote or written consent of the holders of at least a majority interest of the outstanding Series E Preferred, voting together as a separate class, shall be necessary for effecting or validating (i) any action that alters or changes any of the powers, preferences, or other special rights, privileges or restrictions of the Series E Preferred (whether by merger, consolidation, or the like), (ii) any authorization or any designation, whether by reclassification or otherwise, of any class or series of stock or any other securities convertible into equity securities of the Company ranking on a parity with or senior to the Series E Preferred in right of redemption, liquidation preference, voting or dividends, or (iii) any action that results in the payment or declaration of a dividend or distribution of property.
Dividends
The holders of Series E Preferred are entitled to receive cumulative dividends, when and as declared by the Board of Directors, payable in cash, and in preference to any dividend on any other capital stock, at a rate of 10% per annum (as adjusted for stock splits, stock dividends, re-capitalizations, and re-combinations). The Board of Directors has not declared any dividends.
Conversion
Each share of Series E Preferred is convertible to one share of common stock at any time, subject to adjustments. If the Company consummates a public offering in any jurisdiction prior to December 31, 2016, the conversion becomes mandatory at a conversion price calculated at a 15% discount from the applicable offering price.
Plan of Conditional Recapitalization
In December 2014, in contemplation of a potential public offering of shares on the AIM market of the London Stock Exchange (such offering, or in its place an initial public offering on an exchange acceptable to the Board of Directors, are referred to herein as an "AIM IPO"), the Board of Directors approved a Plan of Conditional Recapitalization whose effectiveness is conditioned upon (i) stockholder approval (which approval was received in December 2014) and (ii) the closing of an AIM IPO. Along with the Plan of Conditional Recapitalization, the Board approved a conditional Twelfth Amended and Restated Certificate of Incorporation and the conditional termination of various shareholder rights agreements.
The Plan of Conditional Recapitalization provides that in the event that an AIM IPO closes before December 31, 2015 (i) all outstanding Series D preferred stock purchase warrants automatically are exchanged for common shares based on a formula and on the AIM IPO price, and (ii) all Series A-1, B, C and D preferred stock are automatically converted into common stock based on a formula of value (with multiples of existing liquidation preferences) and on a discount from the AIM IPO price.
As a result of the Plan of Conditional Recapitalization, the Series A-1, B, C and D preferred stock now contain a contingent conversion option settleable by issuance of a variable number of shares; as such, the Series A-1, C and D preferred stock were reclassified to temporary equity upon the adoption of the Plan of Conditional Recapitalization (at their then fair value). Also upon adoption, the Series D warrants were reclassified from permanent equity to liability (at their then fair value) and will be marked-to-market at each balance sheet date until settlement.
In January 2016, the Board approved an amended Plan which among other things, extended the time for the closing of an AIM IPO to June 30, 2016. The Board may further extend the AIM IPO date to December 31, 2016 at its discretion without shareholder consent.
6. Stock Options and Stock Purchase Warrants
Stock Options
The Company adopted the MaxCyte, Inc. 1999 Long-Term Incentive Plan (the "1999 Option Plan") and the MaxCyte, Inc. 2000 Long-Term Incentive Plan (the "2000 Option Plan" and, together with the 1999 Option Plan, the "Option Plans") to provide for the granting of stock options to employees, officers, and directors of the Company and to other individuals as determined by the Board of Directors. A total of 6,184,489 shares of common stock are reserved by the Company to accommodate the exercise of options under the Option Plans of which 148,172 remained available for grant as of December 31, 2015.
Stock options granted under the Option Plans may be either incentive stock options as defined by the Internal Revenue Code or non-qualified stock options. The Board of Directors determines who will receive options under the Option Plans and determines the vesting period, which generally has been three years for grants prior to August 2007 and four years thereafter. The options have a maximum term of no more than 10 years. The exercise price of the options granted under the Option Plans must be at least equal to the fair market value of the common stock on the date of grant. The Board of Directors determines the exercise price of non-qualified options.
A summary of stock option transactions for the years ended December 31, 2015 and 2014 is as follows:
|
|
|
Number of Options |
Weighted Average Exercise Price |
Weighted-Average Remaining Contractual Life (in years) |
Aggregate Intrinsic Value |
|||
|
|
|
|
|
|
|
|
|
|
|
Outstanding at January 1, 2014 |
|
6,014,654 |
|
$ 0.18 |
|
2.7 |
|
$ - |
|
Granted |
|
5,859,840 |
|
$ 0.04 |
|
|
|
|
|
Exercised |
|
(1,811,700) |
|
$ 0.04 |
|
|
|
$ - |
|
Forfeited |
|
(5,763,091) |
|
$ 0.18 |
|
|
|
|
|
Outstanding at December 31, 2014 |
|
4,299,703 |
|
$ 0.05 |
|
9.3 |
|
$ - |
|
|
|
|
|
|
|
|
|
|
|
Granted |
|
15,000 |
|
$ 0.04 |
|
|
|
|
|
Exercised |
|
(67,322) |
|
$ 0.13 |
|
|
|
$ 46,907 |
|
Forfeited |
|
(126,755) |
|
$ 0.15 |
|
|
|
|
|
Outstanding at December 31, 2015 |
|
4,120,626 |
|
$ 0.05 |
|
8.5 |
|
$ 3,227,804 |
|
Exercisable at December 31, 2015 |
|
4,077,610 |
|
$ 0.05 |
|
8.5 |
|
$ 3,193,821 |
|
Vested and expected to vest |
|
4,116,324 |
|
$ 0.05 |
|
8.5 |
|
$ 3,224,406 |
The weighted-average fair values of the options granted during 2015 and 2014 were estimated to be $0.01 and $0.02, respectively.
In 2014, the Company cancelled certain outstanding awards and issued new awards with reduced exercise prices and revised exercise periods, resulting in a charge of $91,800 in the fourth quarter of 2014. As of December 31, 2015, total unrecognized stock-based compensation expense was $900 which will be recognized over the next two years.
Stock-based compensation expense is reflected in the Statements of Operations for the years ended December 31 as shown below:
|
|
|
2015 |
2014 |
|
|
|
|
|
|
General and administrative |
$ - |
$ 55,600 |
|
|
Sales and marketing |
800 |
15,400 |
|
|
Research and development |
400 |
24,600 |
|
|
Total |
|
$ 1,200 |
$ 95,600 |
Stock Purchase Warrants
At December 31, 2015 the Company had outstanding warrants to purchase 102,500 shares of the Company's Series D Preferred at $1.00 per share, which expire beginning in 2022. The warrants are classified as liabilities (see Note 4).
7. Income Taxes
As a result of its operating losses, the Company did not recognize a provision (benefit) for income taxes in 2015 and 2014. Based on the Company's historical operating performance, the Company has provided a full valuation allowance against its net deferred tax assets.
Net deferred tax assets as of December 31, 2015 and 2014 are presented in the table below:
|
|
|
|
|
2015 |
2014 |
|
Deferred tax assets: |
|
|
|
|
|
|
Net operating loss carryforwards |
|
$ 8,358,100 |
$ 8,287,000 |
||
|
Research and development credits |
|
410,600 |
347,900 |
||
|
Stock-based compensation |
|
249,800 |
240,600 |
||
|
Deferred revenue |
|
|
844,200 |
548,300 |
|
|
Accruals and other |
|
|
397,500 |
121,400 |
|
|
Deferred tax liabilities: |
|
|
|
|
|
|
Depreciation |
|
|
(28,700) |
(25,000) |
|
|
|
|
|
|
10,231,500 |
9,520,200 |
|
Valuation allowance |
|
|
(10,231,500) |
(9,520,200) |
|
|
Net deferred tax assets |
|
|
$ - |
$ - |
|
The Federal net operating loss carryforwards of approximately $19.4 million as of December 31, 2015 will begin to expire in various years beginning in 2025. The use of NOL carryforwards is limited on an annual basis under Internal Revenue Code Section 382 when there is a change in ownership (as defined by this code section). Based on changes in Company ownership in the past, the Company believes that the use of its NOL carryforwards generated prior to the date of the change is limited on an annual basis; NOL carryforwards generated subsequent to the date of change in ownership can be used without limitation. The use of the Company's net operating loss carryforwards may be restricted further if there are future changes in Company ownership. Additionally, despite the net operating loss carryforwards, the Company may have a future tax liability due to alternative minimum tax or state tax requirements.
Income tax expense reconciled to the tax computed at statutory rates for the years ended December 31 is as follows:
|
|
|
|
|
|
2015 |
2014 |
|
Federal income taxes (benefit) at statutory rates |
$ (491,300) |
$ (517,100) |
||||
|
State income taxes (benefit), net of Federal benefit |
(115,000) |
(98,600) |
||||
|
Permanent differences and rate changes |
|
(105,000) |
(278,800) |
|||
|
Change in valuation allowance |
|
|
711,300 |
894,500 |
||
|
|
|
|
|
|
$ - |
$ - |
8. Capital Leases
The Company leases computer equipment under agreements that are classified as capital leases. The assets under capital leases are recorded at the lower of net present value of the related lease payments or the fair value of the asset. The assets are amortized over their economic useful life.
The following is a schedule of future minimum lease payments under the capital lease obligations together with the net present value of the minimum lease payments as of December 31, 2015:
|
2016 |
|
|
|
|
$ 19,500 |
|
2017 |
|
|
|
|
15,500 |
|
2018 |
|
|
|
|
3,300 |
|
Total |
|
|
|
|
38,300 |
|
Less: amount representing interest |
|
|
(4,200) |
||
|
Net present value of future minimum lease payments |
$ 34,100 |
||||
The net present value of the minimum lease payments related to the leased equipment is included in the balance sheet at December 31, 2015 as follows:
|
Current portion |
|
$ 16,600 |
|
Long-term portion |
|
17,500 |
|
Total Capital lease obligations |
$ 34,100 |
|
The following is summary of property held under capital leases as of December 31:
|
|
|
|
2015 |
2014 |
|
Original asset value |
|
$ 99,800 |
$ 120,000 |
|
|
Less: accumulated amortization |
(72,900) |
(69,300) |
||
|
Net book value |
|
$ 26,900 |
$ 50,700 |
|
The Company recognized $23,700 and $29,700 of related amortization expense in 2015 and 2014, respectively.
9. Fair Value
The Company's Balance Sheet includes various financial instruments (primarily cash and cash equivalents, accounts receivable, accounts payable and accrued expenses, and other current liabilities) that are carried at cost, which approximates fair value due to the short-term nature of the instruments. Notes payable and capital lease obligations are reflective of fair value based on market comparable instruments with similar terms.
Financial Assets and Liabilities Measured at Fair Value on a Recurring Basis
After the adoption of the Plan of Conditional Recapitalization, the Company's stock purchase warrants are exchangeable into Series D Preferred which may be required to be settled by issuance of a variable number of shares; as such, the warrants are classified as liabilities, are measured at fair value and are marked to market each reporting period until settlement. The fair value of the warrants is measured using Level 3 inputs and was determined based on the value of the warrants relative to the value of the Company's other equity securities assuming an AIM IPO and effectiveness of the Plan of Conditional Recapitalization. The primary Level 3 unobservable inputs included various assumptions about the potential AIM IPO.
The following table presents the Company's financial assets and liabilities that were accounted for at fair value on a recurring basis by level within the fair value hierarchy at December 31:
|
|
|
Fair Value |
Level 1 |
Level 2 |
Level 3 |
|
|
|
|
|
|
|
|
At December 31, 2014 |
|
|
|
|
|
|
Warrant liabilities |
$ 105,400 |
$ - |
$ - |
$ 105,400 |
|
|
|
|
|
|
|
|
|
At December 31, 2015 |
|
|
|
|
|
|
Warrant liabilities |
$ 85,400 |
$ - |
$ - |
$ 85,400 |
|
The following table presents a summary of changes in the fair value of Level 3 warrant liabilities measured at fair value on a recurring basis for the years ended December 31:
|
Description |
Balance at January 1, 2014 |
Reclassified from Additional paid-in capital |
Established in 2014 |
Change in fair value in 2014 |
Balance at December 31, 2014 |
|
|
|
|
|
|
|
|
Warrant liabilities |
$ - |
$ 89,800 |
$ 15,600 |
$ - |
$ 105,400 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Description |
Balance at January 1, 2015 |
Reclassified from Additional paid-in capital |
Established in 2015 |
Change in fair value in 2015 |
Balance at December 31, 2015 |
|
|
|
|
|
|
|
|
Warrant liabilities |
$ 105,400 |
$ - |
$ - |
$ (20,000) |
$ 85,400 |
Financial Assets and Liabilities Measured at Fair Value on a Non-Recurring Basis
During 2014, the Company issued Series D warrants as part of a debt financing, and recognized the fair value of the warrants as a debt discount. The warrants were initially classified as equity and were measured at fair value using Level 3 unobservable inputs. The fair value of stock purchase warrants was determined using the Black-Scholes option pricing model, which requires the use of unobservable inputs such as fair value of the Company's Series D Preferred, expected term, anticipated volatility, and interest rates. These warrants were reclassified to liabilities in connection with the December 2014 Plan of Conditional Recapitalization.
Also during 2014, upon the adoption of the Plan of Conditional Recapitalization, the Series A-1,
C and D preferred stock contain a contingent conversion option settleable by issuance of a variable number of shares; as such, the Series A-1, C and D preferred stock were reclassified to temporary equity upon the adoption of the Plan of Conditional Recapitalization at their then fair value using Level 3 unobservable inputs. The fair value of the preferred stock is measured using Level 3 inputs and was determined by management based on the value of the specific series of preferred stock relative to the value of the Company's other equity securities assuming an AIM IPO and effectiveness of the Plan of Conditional Recapitalization. The primary Level 3 unobservable inputs included various assumptions about the potential AIM IPO and the impact of the Series E Preferred issuance.
Non-Financial Assets and Liabilities Measured at Fair Value on a Recurring Basis
The Company has no non-financial assets and liabilities that are measured at fair value on a recurring basis.
Non-Financial Assets and Liabilities Measured at Fair Value on a Non-Recurring Basis
The Company measures its long-lived assets, including property and equipment, at fair value on a non-recurring basis. These assets are recognized at fair value when they are deemed to be impaired. No such fair value impairment was recognized in the years ended December 31, 2015 or 2014.
10. Employee Benefit Plan
The Company has a defined contribution plan (the Plan) under Internal Revenue Code Section 401(k) which is managed through Fidelity Investments. All United States resident employees are eligible for participation in the Plan. Participants may elect to contribute a proportion of their compensation up to the maximum amount of their annual pretax earnings allowed under the Employee Retirement Income Security Act of 1974 (ERISA) regulations. Participant contributions vest immediately. The Company has not made contributions to the Plan and has no plans in the near term to make any employer contribution to the 401(k) plan.
11. Commitments and Contingencies
The Company entered into a five-year non-cancelable operating lease agreement for office and laboratory space in February 2009 with an expiration of January 31, 2014. In 2013, the Company executed a five year extension to the lease whereby monthly rent starts at $16,129 and increases each year by 3%. In addition to base rent, the Company pays a pro-rated share of common area maintenance (CAM) costs for the entire building, which was adjusted annually based on actual expenses incurred. Following is a schedule by year of the estimated future minimum payments under the operating lease:
|
Year ending December 31, |
|
||
|
|
|
|
|
|
2016 |
|
|
$ 204,800 |
|
2017 |
|
|
211,000 |
|
2018 |
|
|
217,300 |
|
2019 |
|
|
18,200 |
|
2020 |
|
|
- |
|
thereafter |
|
|
- |
|
|
|
|
$ 651,300 |
Total rent expense, including base rent and CAM for the years ended December 31, 2015 and 2014, was $296,500 and $292,700, respectively. Rent expense is recognized on a straight-line basis in the accompanying financial statements.
The Board has also approved, in recognition of reduced salaries agreed to by certain executives during the period between 2007 and 2009, the payment of approximately $151,700 to such executives upon the occurrence of a change of control of the Company. As of December 31, 2015, such amount is included in Accounts payable and accrued expenses in the accompanying Balance Sheet.
12. Subsequent Events
Management has evaluated subsequent events for disclosure in these financial statements through date the financial statements were available to be issued. On March 15, 2016, the Company entered into binding agreements to complete an initial public offering of its common stock on the AIM market of the London Stock Exchange. The Offering was completed on March 29, 2016, with the Company issuing approximately 14.3 million shares of its common stock at an initial price of 0.70 British Pounds per share, generating gross proceeds of approximately 10 million British Pounds.
This information is provided by RNS
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