TIDMMXCT
RNS Number : 8786K
MaxCyte, Inc.
27 September 2016
MaxCyte, Inc.
("MaxCyte" or the "Company")
Financial Results for the Six Months ended 30 June 2016
Maryland, USA - 27 September - MaxCyte, Inc. (LSE: MXCT), an
established and revenue generating US-based developer and supplier
of cell engineering products and services to biopharmaceutical
firms engaged in cell therapy, drug discovery and development,
biomanufacturing, gene editing and immuno-oncology, announced today
its financial results for the six months ended 30 June 2016.
HIGHLIGHTS (including post-period end highlights)
Financial Highlights
-- Revenues of $5.5 million for the six months ended 30 June
2016, a 30.3% increase over $4.2 million for the same period of
2015
-- Gross margins remained stable over the six months ended 30
June 2016 and 2015 at 89.5% and 89.0%, respectively
-- Operating expenses increased to $5.9 million compared to $4.3
million for the same period of 2015
-- CARMA investment totaled $0.5 million for the six months
ended 30 June 2016, compared to $0.1 million for the same period of
2015
-- Net loss before CARMA expenses was $0.8 million for the six
months ended 30 June 2016, (including $0.3 million in expenses
newly arising from the Company's position as a public company),
compared to net loss before CARMA expenses of $0.9 million for the
same period of 2015
-- Deferred revenues increased from $2.0 million at the end of
2015 to $2.6 million at 30 June 2016 due principally to growth in
technology licenses
-- Cash balance of $12.2 million at 30 June 2016, compared to $2.4 million at the end of 2015
-- Completed restructuring of Company's existing $5.1 million
debt facility in June 2016 to extend it by approximately two years,
increasing the interest-only period to July 2018 and maturity to
June 2021, providing additional financial flexibility
-- Successful Initial Public Offering on the AIM market of the
London Stock Exchange on 29 March 2016 ("IPO"), raising GBP10.0
million (before expenses) for the Company
Corporate/Operational Highlights
-- MaxCyte's strategic research collaboration with the Johns
Hopkins Kimmel Cancer Center progresses, generating preclinical
data to support the Company's CARMA platform and related pipeline
of next-generation cell therapies
-- High-value cell therapy partnered programs accelerated,
covering a diverse range of fields, including immuno-oncology, gene
editing and regenerative medicine
o 35+ partnered programs; 10+ of these programs licensed for
clinical-stage use
o 7 clinical trials (which include solid tumour targets) have
been initiated in CAR-based therapies, to date, using MaxCyte's
technology
-- As the convergence between gene editing technologies and
immuno-oncology therapeutic advances, MaxCyte is poised to foster
the next-generation of therapies
-- Expanded investment in sales and field scientist teams in US and Europe
-- Global distribution network continued to expand through
appointment of distribution partners to serve customers in
Singapore and Japan, adding to established distribution partners in
China, South Korea, and India
-- John Johnston appointed as Non-Executive Director
-- Scientific findings presented at a number of conferences
worldwide, including the American Society of Gene and Cell Therapy
(ASGCT) 18(th) Annual Meeting
Commenting on MaxCyte's interim financial results, Doug
Doerfler, Chief Executive Officer, said: "Our successful IPO in
March of 2016 has provided MaxCyte with the fuel for accelerating
our growth in the engineered cell products and services market -
where the world's top companies leveraging cells for drug
discovery, cells for biologics/vaccine development and manufacture,
and cells as drugs (in immuno-oncology and gene editing) use
MaxCyte's cell engineering technology.
"Our IPO has also allowed us to advance CARMA, our exciting, new
generation of immuno-oncology treatments, from incubation to
pre-clinical work that is laying the foundation for an initial U.S.
regulatory submission that is expected to allow clinical trials to
begin in 2017. Based on our proprietary non-viral cell engineering
technology, CARMA rapidly and effectively delivers cancer
treatments that utilize a patient's own immune system combined with
Chimeric Antigen Receptor (CAR) technology.
"With consistently increasing revenue performance and the
careful management of investments in sales, marketing and
operations to drive growth, as well as a high degree of revenue
visibility, we are trading in-line with expectations for the full
year as both our partnered cell therapy and CARMA programs
progress. We continue to look forward to the future with great
confidence and to building value for our shareholders."
Conference call for analysts
A briefing for analysts will be held at 11.00am BST on 27
September 2016 at the offices of Panmure Gordon & Co., One New
Change, London, EC4M 9AF. There will be a simultaneous live
conference call with Q&A and the presentation will be available
on MaxCyte's website at http://www.maxcyte.com/
Dial-in details:
Participant dial-in: 08006940257
International dial-in: +44 (0) 1452 555566
Participant code: 86595211
An audio replay file will be made available shortly afterwards
via the Company website:
http://www.maxcyte.com/
About MaxCyte
MaxCyte is an established and revenue generating US-based
developer and supplier of cell engineering products and services to
biopharmaceutical firms engaged in cell therapy, drug discovery and
development, biomanufacturing, gene editing and immuno-oncology
markets, which independent market analyses 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 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, clinical and
commercial 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 and partners with an established regulatory path.
Using the unique capabilities of its technology, MaxCyte is
developing CARMA, its proprietary platform in immuno-oncology, to
deliver a validated non-viral approach to CAR therapies across a
broad range 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 LETTER
We are pleased to report to shareholders today on the Company's
financial results for the six months to 30 June 2016.
Progress to date
In the first half of 2016, MaxCyte successfully completed an IPO
of common stock on the London Stock Exchange's AIM market, raising
GBP10.0 million before expenses, which has provided the Company the
means to fund further advances in its technology and research.
As the convergence between gene editing technologies and
immuno-oncology therapeutic advances occurs, MaxCyte is poised to
foster the next-generation of more potent and differentiated
therapies.
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 and HIV.
Technology licenses and instrument leases provide high-value
recurring annual fees, complemented by an attractive and growing
recurring revenue stream from the sale of its proprietary
disposable processing assemblies. As these programs progress in the
clinic and to commercialization, MaxCyte believes they will create
significant value for the Company.
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.
MaxCyte advanced its ground-breaking CARMA platform (which uses
proprietary flow electroporation technology) from incubation to
preclinical research via a strategic collaboration with the Johns
Hopkins Kimmel Cancer Center in Baltimore, Maryland. Researchers
are investigating the use of CARMA, the Company's patented approach
to CAR, to generate the next class of immunotherapy for cancer,
aiming to improve on existing CAR therapy in T-cells ("CAR-T"),
especially in solid tumour cancers. CARMA-engineered immune cells
seek and destroy cancer cells with 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. The Company
believes that the promising preclinical results obtained from the
collaboration with the Johns Hopkins Kimmel Cancer Center, along
with further studies, will result in an investigational new drug
("IND") filing with the US Food and Drug Administration ("FDA") in
2017. The Company continues to explore new targets and additional
collaborators to advance the CARMA platform.
Financial Review
Revenues for the period totaled $5.5 million, representing a
30.3% increase over the same period of 2015 with gross margins
remaining stable over the period. This strong growth in sales
reflects the increasing use of MaxCyte's technology in both drug
discovery and development and cell therapy. Deferred revenues
increased to $2.6 million at period close due principally to growth
in technology licenses.
The Company's operating expenses for the period increased to
$5.9 million compared to $4.3 million for the same period of 2015
with increased spending on research and development including
CARMA, sales and marketing, and general and administrative expenses
focused on driving and supporting MaxCyte's growth.
MaxCyte's net loss before taking into consideration expenses
from the CARMA programme was $0.8 million over the period,
including $0.3 million in expenses arising from the Company's
public listing, compared to net loss of $0.9 million (also before
taking into consideration expenses from the CARMA period) for the
same period of 2015. The Company's investment in CARMA was $0.5
million for the current period. The net loss to the Company was
$1.3 million over the period, an increase from $1.0 million for the
same period of 2015.
The Company completed the restructuring of its existing $5.1
million debt facility in June 2016 to extend it by approximately
two years, increasing the interest-only period to July 2018 and
maturity to June 2021, providing additional financial flexibility.
Interest expense for the facility was $0.3 million for the first
six months of 2016. As of 30 June 2016, MaxCyte held cash and cash
equivalents amounting to $12.2 million (31 December 2015: $2.4
million).
Strategy
The Company continues to pursue the following key strategies to
drive its future revenue growth:
-- Expanding the Company's established customer base through
growing sales and leasing of its existing and new instruments and
its technologies;
-- Expanding the Company's direct sales teams in the US and
Europe, and expanding its network of distributors in Asia and
globally;
-- Extending the applications of its STX and VLX instruments to
transient large-scale biopharmaceutical protein manufacturing;
-- Expanding the reach of the Company's cell therapy business to
Europe, Asia and other markets;
-- Entering into high value clinical and commercial partnerships
as its existing and new cell therapy partners progress their
programs from research and early-stage clinical development towards
therapeutic product approval and commercialization; and
-- Licensing its CARMA-based therapeutic products and/or
platforms as the Company develops data for individual therapeutic
applications through its pre-clinical and clinical development
programs with key collaborators.
The Company's focus on these strategies, as well as investing in
CARMA and in sales and marketing across broad markets and
geographies, continues to deliver consistent high margins and
strong revenue growth.
Events Post Period End and Outlook
Earlier this month, the Company announced the appointment of
distributors in Japan and Singapore, and the hiring of additional
staff, to support growing market demand for the MaxCyte STX(R)
Scalable Transfection System and MaxCyte VLX(R) Large Scale
Transfection System in Asia. Kiko Tech Co., Ltd., a leading biotech
instrument distributor in Japan, will serve throughout Japan as the
authorized distributor for MaxCyte transfection systems. In
addition, Bio Laboratories Pte Ltd will serve as the authorized
distributor of MaxCyte transfection systems in Singapore.
Looking forward, the Company remains focused on progressing its
CARMA program in preclinical development and driving top-line
growth from expanding licensing and sales of its technology in
particular as cell therapy partnered programs progress through
clinical development. We see the technology becoming more widely
adopted in drug discovery/development and cell therapy including
advances into new therapeutic areas. The MaxCyte team remains
firmly dedicated to making possible key advancements for patients
in the revolutionary fields of immuno-oncology and gene editing
based on the Company's technology. As the Company continues to
increase its revenue visibility and performance, it is trading
in-line with expectations for the full year as both of the
Company's partnered cell therapy and sales of instruments for drug
discovery progress.
MaxCyte's leadership team offers sincere thanks to the Company's
original investors, Board members and collaborators who have helped
the Company drive to its present level of success, and who shared
the vision of a new way to engineer cells to treat disease, and to
its new investors who supported its IPO on AIM. MaxCyte continues
to look forward to new partnership and collaboration opportunities
as the Company develops technologies and products that advance a
new generation of cell-based medicines.
Doug Doerfler
President and Chief Executive Officer
J. Stark Thompson, Ph.D.
Non-executive Chairman
27 September 2016
This announcement contains inside information for the purposes
of Article 7 of Regulation (EU) No 596/2014 (MAR).
For further information, please contact:
MaxCyte +1 301 944 1660
Doug Doerfler, Chief Executive
Officer
Ron Holtz, Chief Financial
Officer
Nominated Adviser and Broker
Panmure Gordon
Freddy Crossley (Corporate
Finance)
Fabien Holler
Duncan Monteith
Tom Salvesen (Corporate Broking) +44 (0) 20 7886 2500
Financial PR Adviser +44 (0)203 709 5700
Consilium Strategic Communications maxcyte@consilium-comms.com
Mary-Jane Elliott
Chris Welsh
Lindsey Neville
###
Unaudited Condensed Financial Statements as and for the six
months ended June 30, 2016 and 2015
The Company prepares its accounts under U.S. GAAP. Information
is provided on that basis.
MaxCyte, Inc.
Unaudited Condensed Balance Sheets
June 30, Dec 31,
2016 2015
----------------------------- ----------------------
US$ US$
Assets
Current assets:
Cash and cash
equivalents $ 12,180,600 $ 2,411,900
Accounts
receivable 2,227,300 1,451,300
Inventory 1,237,100 1,085,900
Other current
assets 549,600 1,244,600
----------------------------- ----------------------
Total current
assets 16,194,600 6,193,700
Property and equipment,
net 226,900 207,300
Total Assets $ 16,421,500 $ 6,401,000
============================= ======================
Liabilities and stockholders' equity
(deficit)
Current liabilities:
Current portion
of note payable $ - $ 805,700
Current portion of capital lease obligations 13,400 16,600
Accounts payable and accrued expenses 1,584,800 2,257,000
Deferred
revenue 2,646,300 2,011,800
----------------------------- ----------------------
Total current
liabilities 4,244,500 5,091,100
Note payable, net of current portion,
discount and deferred fees 4,970,100 4,203,900
Preferred stock
warrant liabilities - 85,400
Capital lease obligations, net of
current portion 10,600 17,500
Other liabilities 128,300 85,600
----------------------------- ----------------------
Total liabilities 9,353,500 9,483,500
Commitments and contingencies (Note
7)
Redeemable convertible preferred stock:
Redeemable Convertible Series E
Preferred Stock, $0.01 par, 1,700,000
shares authorized, issued and outstanding
at December 31, 2015; aggregate
liquidation preference $2,730,700
at December 31, 2015. No shares
authorized or issued and outstanding
at June 30, 2016. - 1,633,100
Redeemable Convertible Series D
Preferred Stock, $0.01 par, 1,602,500
shares authorized, 1,500,000 shares
issued and outstanding at December
31, 2015; aggregate liquidation
preference $6,935,900 at December
31, 2015. No shares authorized
or issued and outstanding at June
30, 2016. - 3,339,500
Redeemable Convertible Series C
Preferred Stock, $0.01 par, 2,500,000
shares authorized, 2,225,968 shares
issued and outstanding at December
31, 2015; aggregate liquidation
preference $8,307,500 at December
31, 2015. No shares authorized
or issued and outstanding at June
30, 2016. - 3,977,400
Redeemable Convertible Series B
Preferred Stock, $0.01 par, 22,000,000
shares authorized, 19,125,475 shares
issued and outstanding at December
31, 2015; carrying amount approximates
liquidation preference. No shares
authorized or issued and outstanding
at June 30, 2016. - 35,299,100
Redeemable Convertible Series A-1
Preferred Stock, $0.01 par, 4,000,000
shares authorized, 3,129,406 shares
issued and outstanding at December
31, 2015. No shares authorized
or issued and outstanding at June
30, 2016. - 1,028,100
--------------------------------- ----------------------
Total redeemable convertible preferred
stock - 45,277,200
Stockholders'
equity (deficit)
Common stock, $0.01 par; 200,000,000
and 34,000,000 shares authorized,
43,508,429 and 1,947,302 shares issued
and outstanding at June 30, 2016 and
December 31, 2015, respectively. 435,100 19,500
Additional paid-in 56,278,800 -
capital
Accumulated
deficit (49,645,900) (48,379,200)
----------------------------- ----------------------
Total stockholders'
equity (deficit) 7,068,000 (48,359,700)
Total liabilities and stockholder's
equity (deficit) $ 16,421,500 $ 6,401,000
============================= ======================
See accompanying notes to the unaudited condensed financial
statements.
MaxCyte, Inc.
Unaudited Condensed Statements of Operations
For the Six Months Ended June 30,
2016 2015
------------------ ------------------
US$ US$
Revenue $ 5,467,200 $ 4,197,100
Costs of goods
sold 571,600 462,300
------------------ ------------------
Gross profit 4,895,600 3,734,800
------------------ ------------------
Operating
expenses:
Research and development 2,052,900 1,439,700
Sales and
marketing 1,977,000 1,519,500
General and administrative 1,821,100 1,364,200
------------------ ------------------
Total operating expenses 5,851,000 4,323,400
Operating
loss (955,400) (588,600)
------------------ ------------------
Other income (expense):
Interest expense (327,000) (373,000)
Other income 15,700 -
------------------ ------------------
Total other income (expense) (311,300) (373,000)
Net
loss (1,266,700) (961,600)
Cumulative preferred stock
dividends (505,400) (1,027,800)
Net loss attributable to
common stock $ (1,772,100) $ (1,989,400)
================== ==================
Basic and diluted net loss
per share $ (0.08) $ (1.06)
================== ==================
Weighted average shares outstanding,
basic and diluted 23,411,270 1,879,980
================== ==================
See accompanying notes to the unaudited condensed financial
statements.
Unaudited Condensed Statements of Redeemable Convertible Preferred
Stock and Stockholders' Equity (Deficit)
For the Six Months Ended June 30, 2016
Total
Additional Stockholders'
Redeemable Convertible Preferred Paid-in Accumulated Equity
Stock Common Stock Capital Deficit (Deficit)
---------------------------------------------------------------- ----------------------- ------------ ------------- -------------
Series Series Series Series Series Shares Amount
E D C B A-1
US$ US$ US$ US$ US$ US$ US$ US$ US$
Balance
January
1, 2016 $ 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)
Stock-based compensation
expense - - - - - - 65,500 - 65,500
Exercise of
stock
options - - - - - 37,968 400 6,400 - 6,800
Issuance of common
stock upon IPO - - - - 14,285,714 142,800 11,116,700 - 11,259,500
Accretion of
preferred
stock 222,200 972,500 1,683,900 373,100 - - - (3,251,700) - (3,251,700)
Conversion of preferred
stock upon IPO
(1,855,300) (4,312,000) (5,661,300) (35,672,200) (1,028,100) 27,151,531 271,500 48,257,400 - 48,528,900
Exchange of
warrant
upon
IPO - - - - - 85,914 900 84,500 - 85,400
Net
loss - - - - - - - - (1,266,700) (1,266,700)
Balance
June
30, 2016 $ - $ - $ - $ - $ - 43,508,429 $ 435,100 $ 56,278,800 $(49,645,900) $ 7,068,000
=========== =========== =========== ============ =========== ========== =========== ============ ============= =============
See accompanying notes to the unaudited condensed financial
statements.
MaxCyte, Inc.
Unaudited Condensed Statements of Cash Flows
For the Six Months Ended June 30,
2016 2015
----------------- ----------------
US$ US$
Cash flows from operating activities:
Net loss $ (1,266,700) $ (961,600)
Adjustments to reconcile net loss to
cash used in operating activities:
Depreciation and amortization 50,800 46,000
Net book value of consigned
equipment sold 9,100 26,400
Stock-based compensation 65,500 600
Non-cash interest expense 23,400 120,700
Changes in operating assets and
liabilities:
Accounts receivable (776,000) 169,000
Inventory (184,000) (35,900)
Other current assets (340,300) (72,000)
Accounts payable and accrued
expenses (313,600) 12,600
Deferred revenue 634,500 502,000
Other liabilities 42,700 -
----------------- ----------------
Net cash used in operating
activities (2,054,600) (192,200)
----------------- ----------------
Cash flows from investing activities:
Purchases of property and equipment (46,700) (38,600)
----------------- ----------------
Net cash used in investing
activities (46,700) (38,600)
----------------- ----------------
Cash flows from financing activities:
Proceeds from issuance of notes
payable and warrants, net of issuance
costs - 121,800
Issuance costs related to debt (62,900) -
amendment
Proceeds from exercise of stock 6,800 -
options
Principal payments on notes payable - (150,000)
Principal payments on capital leases (10,100) (13,900)
Costs of anticipated offering paid
in advance - (122,600)
Net proceeds from issuance of common 11,936,200 -
stock in IPO
Net cash provided by (used
in) financing activities 11,870,000 (164,700)
----------------- ----------------
Net increase (decrease) in cash
and cash equivalents 9,768,700 (395,500)
Cash and cash equivalents, beginning
of period 2,411,900 3,409,000
Cash and cash equivalents, end
of period $ 12,180,600 $ 3,013,500
================= ================
Supplemental cash flow information:
Cash paid for interest $ 264,020 $ 252,000
Supplemental disclosure of non-cash investing
and financing activities:
Conversion of preferred stock in $ 48,528,900 $ -
conjunction with IPO
Exchange of stock warrants in conjunction $ 85,400 $ -
with IPO
See accompanying notes to the unaudited condensed 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.
On March 29, 2016, the Company completed its initial public
offering ("IPO") of its Common Stock on the Alternative Investments
Market ("AIM") of the London Stock Exchange ("AIM IPO"). The
Company issued approximately 14.3 million shares of its Common
Stock at an initial price of LIR0.70 per share (or approximately
$1.01 per share), generating gross proceeds of approximately LIR10
million (or approximately $14.4 million). See Note 5.
In January 2016, the Board of Directors approved an amended Plan
of Recapitalization (the "Plan of Recapitalization," which replaced
the previous Plan of Conditional Recapitalization which had been
approved in December 2014). The Plan of Recapitalization provided
that, immediately prior to completion of an AIM IPO, (i) all Series
A-1, B, C and D preferred stock shall be converted automatically
into Common Stock based on a formula set out in and otherwise in
accordance with the terms of the Recapitalization and (ii) the
Series E preferred stock shall be converted automatically into
Common Stock at a discount from the AIM IPO placing price.
Additionally, holders of the outstanding Series D Preferred Stock
Warrants shall have confirmed that such warrants would be exchanged
for Common Stock based on a formula as set out in, and otherwise in
accordance with, the terms of the warrants and the Plan of
Recapitalization. The Plan of Recapitalization was effective on
March 29, 2016 upon the Company's completion of its AIM IPO.
2. Summary of Significant Accounting Policies
Basis of Presentation
The accompanying interim unaudited condensed financial
statements have been prepared in accordance with accounting
principles generally accepted in the United States of America
("U.S. GAAP"). These unaudited interim condensed financial
statements do not include all the information and footnotes
required by U.S. GAAP for complete audited financial statements.
These unaudited interim condensed financial statements should be
read in conjunction with the audited financial statements and
accompanying notes for the year ended December 31, 2015. In the
opinion of management, the unaudited interim condensed financial
statements reflect all the adjustments (consisting of normal
recurring adjustments) necessary to state fairly the Company's
financial position as of June 30, 2016 and the results of
operations for the six months ended June 30, 2016 and 2015. The
interim condensed results of operations are not necessarily
indicative of the results that may occur for the full fiscal year.
The December 31, 2015 balance sheet included herein was derived
from the audited financial statements, but do not include all
disclosures including notes required by U.S. GAAP for complete
audited financial statements.
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,
deferred taxes and valuation allowance, and the depreciable lives
of fixed assets. Actual results could differ from those
estimates.
Concentration
During the six months ended June 30, 2016 and 2015, one customer
represented 13% and 18% of net revenues, respectively. As of June
30, 2016, accounts receivable from this customer totaled 5% of net
accounts receivable.
During each of the six months ended June 30, 2016 and 2015, the
Company purchased approximately 56% and 55%, respectively of
inventory from one supplier. As of June 30, 2016, amounts payable
to this supplier totaled 22% of total accounts payable.
Foreign Currency
The Company's functional currency is the U.S. dollar;
transactions denominated in foreign currencies are transacted at
the exchange rate in effect at the date of each transaction.
Differences in exchange rates during the period between the date a
transaction denominated in foreign currency is consummated and the
date on which it is either settled or at the reporting date are
recognized in the Statement of Operations. The foreign currency
transaction loss was $33,000 and $35,000 for the six months ended
June 30, 2016 and 2015, respectively.
Fair Value
Fair value is the price that would be received from the sale of
an asset or paid to transfer a liability assuming an orderly
transaction in the most advantageous market at the measurement
date. U.S. GAAP establishes a hierarchical disclosure framework
which prioritizes and ranks the level of observability of inputs
used in measuring fair value. These tiers include:
-- Level 1-Quoted prices (unadjusted) in active markets that are
accessible at the measurement date for identical assets or
liabilities. The fair value hierarchy gives the highest priority to
Level 1 inputs.
-- Level 2-Observable market-based inputs other than quoted
prices in active markets for identical assets or liabilities.
-- Level 3-Unobservable inputs are used when little or no market
data is available. The fair value hierarchy gives the lowest
priority to Level 3 inputs.
See Note 6 for additional information regarding fair value.
Cash and Cash Equivalents
Cash and cash equivalents consist of financial instruments with
original maturities of less than three months. At times the
Company's cash balances may exceed federally insured limits. The
Company does not believe that this results in any significant
credit risk.
Inventory
The Company sells or leases products to customers. The Company
uses the average cost method of accounting for its inventory and
adjustments resulting from periodic physical inventory counts are
reflected in costs of goods sold in the period of the adjustment.
Inventory consisted of the following:
June 30, December
31, 2015
2016
---------------- -------------------
US$ US$
Raw materials inventory $ 271,100 $ 192,300
Work-in-process
inventory 376,300 266,400
Finished goods
inventory 589,700 627,200
Total Inventory $ 1,237,100 $ 1,085,900
================ ===================
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 June 30, 2016 or
December 31, 2015.
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:
June December
30, 31, 2015
2016
-------------- ----------------
US$ US$
Furniture and equipment $ 1,059,400 $ 1,012,700
Consigned instruments 362,400 339,900
Leasehold improvements 72,500 72,500
Accumulated depreciation
and amortization (1,267,400) (1,217,800)
Property and equipment,
net $ 226,900 $ 207,300
============== ================
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 did not identify any such events or changes in
circumstances during the six months ended June 30, 2016 and 2015.
No assets were held for disposal as of June 30, 2016.
Redeemable Convertible Preferred Stock
Upon the completion of the Company's AIM IPO, all shares of the
Company's preferred stock were converted into shares of the
Company's Common Stock in accordance with the Plan of
Recapitalization. See Note 1.
Prior to the AIM IPO the Company's preferred stock was accounted
for as follows:
The Company's Series B redeemable convertible preferred stock
was classified since issuance as temporary equity since it was
redeemable in certain circumstances outside of the Company's
control. The Series B redeemable convertible preferred stock was
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.
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.
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 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.
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,
services 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
generally 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. Research
costs performed for fees from third parties are included in cost of
goods sold.
Stock-Based Compensation
The Company grants stock-based awards in exchange for employee,
consultants 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 requisite service period.
The Company utilizes the Black-Scholes option pricing model for
estimating fair value of its stock options granted. Option
valuation models, including the Black-Scholes model, require the
input of highly subjective assumptions, and changes in the
assumptions used can materially affect the grant-date fair value of
an award. These assumptions include the risk-free rate of interest,
expected dividend yield, expected volatility and the expected life
of the award.
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 abroad and remains subject to examination by
taxing jurisdictions for 2012 and all subsequent periods. The
Company had a Net Operating Loss ("NOL") carry forward of
$19,472,000 as of December 31, 2015, which was generally available
as a deduction against future income for US federal corporate
income tax purposes, subject to applicable carryforward
limitations. As a result of the March AIM IPO, the Company's NOLs
are limited on an annual basis, subject to certain carryforward
provisions, pursuant to Section 382 of the Internal Revenue Code of
1986, as amended, as a result of a greater than fifty percent
change in ownership that occurred in the three-year period ending
at the time of the March AIM IPO. The Company has calculated that
for the period ending on December 31, 2022, the cumulative
limitation amount is in excess of the NOLs subject to the
limitation.
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 5.4 million and 32.0
million for the six months ended June 30, 2016 and 2015,
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 ("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. In August 2015, the FASB issued guidance
approving a one-year deferral, making the standard effective for
reporting periods beginning after December 15, 2017, with early
adoption permitted only for reporting periods beginning after
December 15, 2016. In March 2016, the FASB issued guidance to
clarify the implementation guidance on principal versus agent
considerations for reporting revenue gross rather than net, with
the same deferred effective date. In April 2016, the FASB issued
guidance to clarify the identification of performance obligations
and licensing arrangements. In May 2016, the FASB issued guidance
addressing the presentation of sales and other similar taxes
collected from customers, providing clarification of the
collectibility criterion assessment, as well as clarifying certain
transition requirements. The Company is currently evaluating the
impact, if any, that this guidance 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, 2016.
In April 2015, the FASB issued guidance as to whether a cloud
computing arrangement (e.g., software as a service, platform as a
service, infrastructure as a service, and other similar hosting
arrangements) includes a software license and, based on that
determination, how to account for such arrangements. If a cloud
computing arrangement includes a software license, then the
customer should account for the software license element of the
arrangement consistent with the acquisition of other software
licenses. If a cloud computing arrangement does not include a
software license, the customer should account for the arrangement
as a service contract. The guidance is effective for reporting
periods beginning after December 15, 2015, and can be adopted on
either a prospective or retrospective basis. The Company adopted
this guidance for the year ended December 31, 2016, on a
prospective basis. The adoption of this new guidance did not have a
material impact on the Company's financial statements.
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.
In February 2016, the FASB issued guidance for the accounting
for leases. The guidance requires lessees to recognize assets and
liabilities related to long-term leases on the balance sheet and
expands disclosure requirements regarding leasing arrangements. The
guidance is effective for reporting periods beginning after
December 15, 2018 and early adoption is permitted. The guidance
must be adopted on a modified retrospective basis and provides for
certain practical expedients. The Company is currently evaluating
the impact, if any, that this new accounting pronouncement will
have on its financial statements.
In March 2016, the FASB issued guidance to clarify the
requirements for assessing whether contingent call or put options
that can accelerate the payment of principal on debt instruments
are clearly and closely related to their debt hosts. The guidance
is effective for reporting periods beginning after December 15,
2016, and early adoption is permitted. Entities are required to
apply the guidance to existing debt instruments using a modified
retrospective transition method as of the beginning of the fiscal
year of adoption. The Company is currently evaluating the impact,
if any, that this new accounting pronouncement will have on its
financial statements.
In March 2016, the FASB issued guidance simplifying the
accounting for and financial statement disclosure of stock-based
compensation awards. Under the guidance, all excess tax benefits
and tax deficiencies related to stock-based compensation awards are
to be recognized as income tax expenses or benefits in the income
statement and excess tax benefits should be classified along with
other income tax cash flows in the operating activities section of
the statement of cash flows. Under the guidance, companies can also
elect to either estimate the number of awards that are expected to
vest or account for forfeitures as they occur. In addition, the
guidance amends some of the other stock-based compensation awards
guidance to more clearly articulate the requirements and cash flow
presentation for withholding shares for tax-withholding purposes.
The guidance is effective for reporting periods beginning after
December 15, 2016 and early adoption is permitted, though all
amendments of the guidance must be adopted in the same period. The
adoption of certain amendments of the guidance must be applied
prospectively, and adoption of the remaining amendments must be
applied either on a modified retrospective basis or retrospectively
to all periods presented. 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. Debt
In March 2014, the Company entered into a credit facility with
Midcap Financial SBIC, LP ("MidCap") which provided 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 was originally set to mature in March 2017. The Company
borrowed the initial $4,000,000 in March 2014 (and used a portion
of the proceeds to pay in full the outstanding balance on a prior
facility). The facility was amended in December 2014, at which time
the additional $1,000,000 was drawn.
In connection with this facility, in March 2014 and December
2014, the Company issued stock purchase warrants to MidCap to
purchase shares of its series D perpetual preferred stock at an
exercise price of $1.00 per share. The warrants were recorded as a
liability with an offsetting debt discount at their estimated fair
value and such discount was being amortized as interest expense
over the term of the debt using the effective interest method (see
Note 6). The warrants were exercised in whole in March 2016 in
conjunction with the Company's AIM IPO (see Note 5).
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.
Additionally, the Company amended the MidCap facility in June 2016,
to, among other things, (i) revise certain covenants, (ii) extend
the maturity date to June 1, 2021, (iii) extend the interest only
period to July 1, 2018 and increase the exit fee to 6.75%. The
Company accounted for all amendments as "modifications" to the
facility.
The Company incurred fees and expenses in conjunction with the
various amendments. 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 $125,000 and $82,100 at
June 30, 2016 and December 31, 2015, respectively, and are included
as reductions to the note payable balance.
The total balance of the MidCap credit facility at both June 30,
2016 and December 31, 2015 was $5,105,400, with an interest rate of
10%; the balance of the unamortized debt discount at June 30, 2016
and December 31, 2015 was $10,200 and $13,800, respectively. Future
minimum principal payments under the MidCap credit facility are
expected to be approximately $850,000 in 2018, approximately
$1,702,000 in 2019 and 2020, and approximately $850,000 in
2021.
4. Preferred Stock
All of the Company's outstanding preferred stock was converted
to Common Stock in accordance with the Company's Plan of
Recapitalization in conjunction with the Company's AIM IPO in March
2016 as follows:
-- Series A-1 Preferred converted into 961,893 shares of common stock;
-- Series B Preferred converted into 16,844,615 shares of common stock;
-- Series C Preferred converted into 3,855,283 shares of common stock;
-- Series D Preferred converted into 3,214,720 shares of common stock;
-- Series E Preferred converted into 2,275,020 shares of common stock.
Prior to the conversion in March 2016, the Company had
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, 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.
Liquidation Preferences
In the event of any liquidation, dissolution or winding up of
the Company, 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.
Specific Provisions of the Series A-1 Preferred
Prior to the effect of the Plan of Recapitalization, the Series
A-1 Preferred had 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
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.
Specific Provisions of the Series B Preferred
Prior to the effect of the Plan of Recapitalization, the Series
B Preferred had 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 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.
Specific Provisions of the Series C Preferred
Prior to the effect of the Plan of Recapitalization, the Series
C Preferred had 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 Recapitalization, the Series C Preferred
was not convertible. The Plan of Recapitalization provides that in
the event that an AIM IPO closes before June 30, 2016, 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.
Specific Provisions of the Series D Preferred
Prior to the effect of the Plan of Recapitalization, the Series
D Preferred had 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 Recapitalization, the Series D Preferred
was not convertible. The Plan of Recapitalization provides that in
the event that an AIM IPO closes before June 30, 2016, 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.
Specific Provisions of the Series E Preferred
Prior to the effect of the Plan of Recapitalization, the Series
E Preferred had 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.
5. Stockholders' Equity
Common Stock
On March 29, 2016, the Company completed its initial public
offering ("IPO") of its Common Stock on the Alternative Investments
Market of the London Stock Exchange. The Company issued
approximately 14.3 million shares of its Common Stock at an initial
price of LIR0.70 per share (or approximately $1.01 per share),
generating gross proceeds of approximately LIR10 million (or
approximately $14.4 million). In conjunction with the transaction
the Company incurred costs of approximately $3.1 million which
resulted in the Company receiving net proceeds of approximately
$11.3 million.
In conjunction with the AIM IPO and in accordance with the Plan
of Recapitalization, the Company issued 27,151,531 shares of Common
Stock upon the conversion of all of its outstanding shares of
preferred stock. The Company also issued 85,914 shares of Common
Stock upon the exchange of all outstanding stock purchase
warrants.
During the first six months of 2016, the Company issued 37,968
shares of Common Stock as a result of stock option exercises,
receiving gross proceeds of $6,800.
Stock Options
The Company adopted the MaxCyte, Inc. Long-Term Incentive Plan
(the "Plan") in January of 2016 to amend and restate the MaxCyte
2000 Long Term Incentive Plan to provide for the awarding of (i)
stock options, (ii) restricted stock, (iii) incentive shares, and
(iv) performance awards to employees, officers, and directors of
the Company and to other individuals as determined by the Board of
Directors. Under the Plan, the maximum number of shares of common
stock of the Company that the Company may issue is (a) 6,264,682
shares plus (b) ten percent (10%) of the shares that are issued and
outstanding at the time awards are made under the Plan.
The Company has not issued any restricted stock, incentive
shares, or performance awards under the Plan. Stock options granted
under the Plan may be either incentive stock options as defined by
the Internal Revenue Code or non-qualified stock options. The Board
of Directors determines who will receive options under the Plan and
determines the vesting period. The options can have a maximum term
of no more than 10 years. The exercise price of options granted
under the Plan is determined by the Board of Directors and must be
at least equal to the fair market value of the Common Stock of the
Company on the date of grant.
In the six months ended June 30, 2016, the Company awarded
1,341,565 stock options with an average exercise price of $1.10 per
share and a weighted average grant date fair value of $0.39 per
share.
At June 30, 2016, the Company had issued 1,953,659 shares of
Common Stock of the Company to option holders upon exercise of
stock options awarded under the Plan, at an average price of $0.05
per share, and there were 5,389,243 stock options outstanding with
an average exercise price of $0.31 per share. As of June 30, 2016,
total unrecognized compensation expense was $463,000 which will be
recognized over the next four years.
Stock-based compensation expense for the six months ended June
30 was as follows:
2016 2015
US$ US$
------------- -------------
General and administrative $ 1,000 $ -
Sales and marketing 63,800 400
Research and development 700 200
Total $ 65,500 $ 600
============= =============
Stock Purchase Warrants
In conjunction with the Company's AIM IPO and pursuant to the
Plan of Recapitalization, on March 29, 2016 all stock purchase
warrants were exchanged for 85,914 shares of Common Stock. Prior to
such exercise, the warrants were classified as liabilities. At June
30, 2016, the Company had no outstanding stock purchase
warrants.
6. Fair Value
The Company's Balance Sheet includes various financial
instruments (primarily cash and cash equivalents, accounts
receivable and accounts payable and accrued expenses 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
and prior to their exercise in March 2016, the Company's stock
purchase warrants were exchangeable into Series D Preferred which
could have been required to be settled by issuance of a variable
number of shares; as such, the warrants were classified as
liabilities, measured at fair value and marked to market each
reporting period until settlement. The fair value of the warrants
was 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 warrants were exchanged for 85,914 shares of Common Stock on
March 29, 2016.
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,
2015:
Fair Value Level Level Level
1 2 3
US$ US$ US$ US$
At December 31, 2015
Warrant liabilities $ 85,400 $ - $ - $ 85,400
The Company had no financial assets or liabilities measured at
fair value on a recurring basis at June 30, 2016.
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 six months ended June 30, 2016 and
2015:
Description Balance
at January Balance
1, at
Change
in fair
Established value June 30,
2015 in 2015 in 2015 2015
US$ US$ US$ US$
Warrant
liabilities $ 105,400 $ - $ - $ 105,400
Description Balance
at January Balance
1, at
Exchanged Change
for Common in fair
Stock in value June 30,
2016 2016 in 2016 2016
US$ US$ US$ US$
Warrant
liabilities $ 85,400 $ (85,400) $ - $ -
Financial Assets and Liabilities Measured at Fair Value on a
Non-Recurring Basis
The Company has no financial assets and liabilities that are
measured at fair value on a non-recurring basis.
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 six months
ended June 30, 2016 or 2015.
7. Commitments and Contingencies
The Company entered into a five-year non-cancelable operating
lease agreement for office and laboratory space in February 2009
with an initial expiration of January 31, 2014. In 2013, the
Company executed a five-year extension to the lease pursuant to
which 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 is adjusted annually based on actual expenses incurred.
Total rent expense, including base rent and CAM for the six
months ended June 30, 2016 and 2015, was $166,600, and $159,900,
respectively. Rent expense is recognized on a straight-line basis
in the accompanying financial statements.
In recognition of reduced salaries agreed to by certain
executives during the period between 2007 and 2009, the Board
approved the payment of $75,900 to such executives in the first
half of 2016 and an additional $75,900 to be paid on or about March
30, 2017.
8. Subsequent Events
In preparing these financial statements, the Company has
evaluated events and transactions for potential recognition or
disclosure through September 26, 2016 the date the financial
statements were available to be issued.
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR AKADPDBKBFCB
(END) Dow Jones Newswires
September 27, 2016 02:01 ET (06:01 GMT)
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