08:00 Tue 19 Sep 2017
MaxCyte, Inc. - Interim Results
("
Results for the Six Months ended 30
HIGHLIGHTS (including post-period end highlights)
Financial Highlights
· Revenues of
· Gross margins remained stable over the six months ended
· Operating expenses increased to
· Net loss before the CARMA investment was
· Short-term and long-term deferred revenues increased from
· The cash balance for the Company increased to
First Half Corporate and Operational Highlights
· Non-exclusive commercial license agreement signed
· Expansion to more than 45 high-value cell therapy partnered programmes covering cutting-edge fields of immuno-oncology, gene editing and regenerative medicine, delivering high-value recurring licensing revenue, with more than 15 programmes licensed for clinical use
· Continued advancement of CARMA collaborations with
· Presentation at the
·
· Presentation at the
· Continued investments in sales and marketing capabilities to grow our customer base, comprised of leading pharmaceutical and biotechnology companies, including nine of the top ten global biopharmaceutical companies by revenue
· Continued collaboration with world leaders in the CAR field in both solid cancers and haematological malignancies, with nine academic clinical trials using
Commenting on
"
Conference call for analysts
A briefing for analysts will be held at
Dial-in details:
Participant dial-in: 08006940257
International dial-in: +44 (0) 1452 555566
Participant code: 86361241
An audio replay file will be made available shortly afterwards via the Company website:
About
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 2017, which we believe represents another strong period of growth and progress across all areas of the business. In April,
· Accelerating its growth strategy and executing on the significant commercial opportunities available, including those related to the advancement and expansion of the CARMA platform;
· Increasing engagement in high-value research, clinical and commercial licenses in a diverse range of fields, including immuno-oncology, gene editing and regenerative medicine, through expansion of business development for the cell therapy market;
· Continuing collaboration with leaders in the CAR-based immuno-oncology field;
· Continuing investment in global sales and marketing efforts;
· Expanding the use of its platform in large-scale biopharmaceutical transient protein manufacturing; and
· Leveraging its Asian distribution network to meet growing market demand for its products and technology.
During the period,
The Company intends to build on this progress and we believe that the Company's performance, progress and investment during the six months ended
Financial Review
Revenues for the period totaled
The Company's operating expenses for the period increased to
The Company completed a successful fund raise on the London AIM market on
Events Post Period End and Outlook
In August, the Company announced the appointment of biopharmaceutical industry veteran
Looking forward, the Company remains focused on progressing its CARMA programme to clinical development and expects to file the IND later this year leading to a clinical trial and first in human study using CARMA commencing during 2018. Developments in immuno-oncology CAR-T space continue apace with the rapid evolution of the landscape both regulatory and corporate, resulting in Gilead's recent purchase of Kite Pharma demonstrating the value and opportunity in this area of cancer therapy. However, toxicity using the current CAR methods continues to be a well-publicised problem. CARMA, however, has exhibited in both animal models and in vitro cell studies anti-tumour activity without toxicity owing to the transient nature of
President and Chief Executive Officer
Non-executive Chairman
19 September 2017
This announcement contains inside information for the purposes of Article 7 of Regulation (EU) No 596/2014 (MAR).
For further information, please contact:
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+1 301 944 1660 |
Nominated Adviser and Broker |
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+44 (0) 20 7886 2500
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Financial PR Adviser |
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+44 (0)203 709 5700 |
MaxCyte, Incorporated
Unaudited Condensed Financial Statements
as of
and for the six months ended
Unaudited Condensed Balance Sheets (amounts in
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30 June 2017 |
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31 December 2016 |
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Assets |
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Current assets: |
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Cash and cash equivalents |
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Accounts receivable |
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3,742,000 |
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2,410,700 |
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Inventory |
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1,519,800 |
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1,334,600 |
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Prepaid expenses |
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1,194,600 |
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318,400 |
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Total current assets |
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36,619,300 |
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15,790,700 |
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Property and equipment, net |
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341,000 |
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281,500 |
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Total Assets |
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Liabilities and stockholders' equity |
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Current liabilities: |
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Accounts payable and accrued expenses |
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Deferred revenue |
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3,538,800 |
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2,463,100 |
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Current portion of capital lease obligations |
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10,500 |
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14,400 |
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Total current liabilities |
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6,783,700 |
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5,652,000 |
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Note payable, net of discount and deferred fees |
5,008,100 |
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4,989,100 |
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Capital lease obligations, net of current portion |
- |
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3,100 |
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Other liabilities |
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361,500 |
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344,600 |
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Total liabilities |
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12,153,300 |
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10,988,800 |
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Commitments and contingencies (Note 6) |
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Stockholders' equity |
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Common stock, |
508,400 |
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435,400 |
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Additional paid-in capital |
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80,323,900 |
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56,372,700 |
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Accumulated deficit |
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(56,025,300) |
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(51,724,700) |
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Total stockholders' equity |
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24,807,000 |
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5,083,400 |
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Total liabilities and stockholder's equity |
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See accompanying notes to the unaudited condensed financial statements.
Unaudited Condensed Statements of Operations For the Six Months Ended 30 June, |
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(amounts in |
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2017 |
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2016 |
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Revenue |
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Costs of goods sold |
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648,900 |
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571,600 |
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Gross profit |
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5,561,200 |
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4,895,600 |
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Operating expenses: |
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Research and development |
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4,192,600 |
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2,052,900 |
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Sales and marketing |
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2,948,000 |
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1,977,000 |
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General and administrative |
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2,405,900 |
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1,821,100 |
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Total operating expenses |
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9,546,500 |
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5,851,000 |
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Operating loss |
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(3,985,300) |
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(955,400) |
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Other income (expense): |
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Interest expense |
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(315,300) |
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(327,000) |
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Other income |
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- |
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15,700 |
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Total other income (expense) |
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(315,300) |
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(311,300) |
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Net loss |
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(4,300,600) |
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(1,266,700) |
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Cumulative preferred stock dividends |
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- |
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(505,400) |
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Net loss attributable to common stock |
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Basic and diluted net loss per share |
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$ (0.09) |
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$ (0.08) |
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Weighted average shares outstanding, basic and diluted |
46,401,189 |
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23,411,270 |
See accompanying notes to the unaudited condensed financial statements.
Unaudited Condensed Statements of Cash Flows For the Six Months Ended 30 June, (amounts in |
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2017 |
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2016 |
Cash flows from operating activities: |
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Net loss |
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Adjustments to reconcile net loss to cash used in operating activities: |
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Depreciation and amortization |
56,400 |
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50,800 |
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Net book value of consigned equipment sold |
27,000 |
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9,100 |
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Stock-based compensation |
120,600 |
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65,500 |
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Non-cash interest expense |
19,000 |
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23,400 |
Changes in operating assets and liabilities: |
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Accounts receivable |
(1,331,300) |
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(776,000) |
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Inventory |
(185,200) |
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(184,000) |
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Prepaid expenses |
(876,200) |
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(340,300) |
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Accounts payable and accrued expenses |
59,900 |
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(313,600) |
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Deferred revenue |
1,075,700 |
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634,500 |
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Other liabilities |
16,900 |
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42,700 |
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Net cash used in operating activities |
(5,317,800) |
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(2,054,600) |
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Cash flows from investing activities: |
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Purchases of property and equipment |
(142,900) |
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(46,700) |
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Net cash used in investing activities |
(142,900) |
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(46,700) |
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Cash flows from financing activities: |
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Issuance costs related to debt amendment |
- |
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(62,900) |
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Proceeds from exercise of stock options |
4,000 |
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6,800 |
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Principal payments on capital leases |
(7,000) |
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(10,100) |
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Net proceeds from issuance of common stock |
23,899,600 |
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11,936,200 |
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Net cash provided by financing activities |
23,896,600 |
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11,870,000 |
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Net increase in cash and cash equivalents |
18,435,900 |
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9,768,700 |
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Cash and cash equivalents, beginning of period |
11,727,000 |
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2,411,900 |
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Cash and cash equivalents, end of period |
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Supplemental cash flow information: |
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Cash paid for interest |
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Supplemental disclosure of non-cash investing and financing activities: |
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Conversion of preferred stock in conjunction with IPO |
$ - |
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Exchange of stock warrants in conjunction with IPO |
$ - |
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$ 85,400 |
See accompanying notes to the unaudited condensed financial statements.
1. Organization and Description of Business
On
In
2. Summary of Significant Accounting Policies
Basis of Presentation
The accompanying unaudited interim condensed financial statements have been prepared in accordance with accounting principles generally accepted in
The Company operates in a single business segment.
Use of Estimates
The preparation of financial statements in conformity with
Concentration
During the six months ended
During each of the six months ended
Foreign Currency
The Company's functional currency is the
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.
· 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 5 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:
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30 June 2017 |
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US$ |
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US$ |
Raw materials inventory |
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$ 426,000 |
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Finished goods inventory |
973,600 |
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908,600 |
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Total Inventory |
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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
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:
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30 June 2017 |
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Furniture and equipment |
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Consigned instruments |
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419,700 |
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443,900 |
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Leasehold improvements |
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100,000 |
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72,500 |
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Accumulated depreciation and amortization |
(1,310,700) |
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(1,319,000) |
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Property and equipment, net |
$ 341,000 |
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$ 281,500 |
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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 30 June 2017 and 2016. No assets were held for disposal as of 30 June 2017.
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 delivered 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 are 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. Costs for research projects performed in exchange 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 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. 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
Fair value of the Company's common stock subsequent to the IPO is based on quoted market prices. Prior to the IPO, the Company's Board of Directors determined the fair value of the common stock. In the absence of a public market, the Company believed that it was appropriate to consider a range of factors to determine the fair value of the common stock at each grant date. The factors included, but were 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 currently have enough history with its common stock post its 2016 IPO. The Company has been able to identify several public entities of similar size, complexity and stage of development; accordingly, historical volatility has been calculated at between 47% and 48% for 2017 and 35% and 48% for 2016 using the volatility of these companies.
Expected dividend yield
The Company has never declared or paid common stock dividends and has no plans to do so in the foreseeable future.
Risk-free interest rate
This approximates the
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
Prior to the adoption of new accounting guidance on 1 January 2017, the Company estimated forfeitures based on turnover data with further consideration given to the class of the employees to whom the options were granted. With the adoption of the new accounting guidance, the Company no longer estimates forfeiture rates in calculating expense; all forfeitures are recognized as incurred. The cumulative effect of the adjustment for this change in accounting was immaterial to the Company's financial statements.
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
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) for periods prior to conversion, convertible preferred stock exchangeable into Common Stock, which has been excluded from the computation of diluted loss per share, was 5.9 million and 5.4 million for the six months ended 30 June 2017 and 2016, 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
Recently Adopted
In July 2015, the FASB issued guidance for inventory requiring an entity to measure inventory 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 15 December 2016 and early adoption is permitted. The Company adopted this guidance on 1 January 2017. The adoption of this new guidance did not have a material impact on the Company's 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 15 December 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 adopted this guidance on 1 January 2017. The adoption of this new guidance did not have a material impact on the Company's 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 15 December 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 adopted this guidance for the year ended 31 December 2017 and elected to account for forfeitures as they occur. The adoption of this new guidance did not have a material impact on the Company's financial statements.
Unadopted
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 15 December 2017 for public business entities, with early adoption permitted only for reporting periods beginning after 15 December 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 collectability 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 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 15 December 2018 for public business entities 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 June 2016, the FASB issued guidance with respect to measuring credit losses on financial instruments, including trade receivables. The guidance eliminates the probable initial recognition threshold that was previously required prior to recognising a credit loss on financial instruments. The credit loss estimate can now reflect an entity's current estimate of all future expected credit losses. Under the previous guidance, an entity only considered past events and current conditions. The guidance is effective for fiscal years beginning after 15 December 2020 for public business entities, including interim periods within those fiscal years. Early adoption is permitted for fiscal years beginning after 15 December 2018, including interim periods within those fiscal years. The adoption of certain amendments of this guidance must be applied on a modified retrospective basis and the adoption of the remaining amendments must be applied on a prospective basis. The Company is currently evaluating the impact, if any, that this new accounting pronouncement will have on its financial statements.
In May 2017, the FASB issued guidance clarifying when changes in the terms or conditions of share-based payment awards should be accounted for as modifications. This guidance is effective for fiscal years beginning after 15 December 2017 and early adoption is permitted. This guidance must be applied prospectively to awards modified after the adoption date. The Company is currently evaluating the impact, if any, that this new accounting pronouncement will have on its financial statements.
In July 2017, the FASB issued guidance addressing several issues involving financial instruments. Part I of the guidance simplifies the accounting for certain equity-linked financial instruments and embedded features with down round features that reduce the exercise price when the pricing of a future round of financing is lower ("down round protection"). Current accounting guidance provides that instruments with down round protection be classified as derivative liabilities with changes in fair value recorded through earnings. The updated guidance provides that instruments with down round protection are no longer precluded from being classified as equity. This guidance is effective for fiscal years beginning after 15 December 2018 for public business entities and early adoption is permitted. This guidance must be applied retrospectively. 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
The Company entered into a credit facility in March 2014 with Midcap Financial SBIC, LP ("MidCap") and subsequently amended the facility in 2015 and 2016; the facility now provides up to $5,105,400 in total borrowing capacity. All amendments have been accounted for as "debt modifications." 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 facility is collateralized by substantially all tangible assets of the Company. The facility also provides the following terms: (i) maturity date of 1 June 2021 (ii) interest only payments through 1 July 2018 and (iii) an exit fee of 6.75%.
Deferred fees incurred in conjunction with the amendments are being amortized using the effective interest method over the remaining term of the amended debt. Unamortized deferred financing costs were approximately $90,100 and $107,700 at 30 June 2017 and 31 December 2016, respectively, and are included as reductions to the note payable balance.
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 5). The warrants were exercised in whole in March 2016 in conjunction with the Company's AIM IPO (see Note 4).
The total balance of the MidCap credit facility at both 30 June 2017 and 31 December 2016 was $5,105,400, with an interest rate of 10%; the balance of the unamortized debt discount at 30 June 2017 and 31 December 2016 was $7,200 and $8,700, 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 $851,000 in 2021.
4. Stockholders' Equity
Common Stock
On 29 March 2016, the Company completed its initial public offering ("IPO") of its Common Stock on the AIM sub-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 per share (or approximately $1.01 per share), generating gross proceeds of approximately ₤10 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.
On 21 April 2017, the Company completed an equity capital raise issuing 7,275,000 shares of Common Stock to new and existing investors at a price of ₤2.75 per share (or approximately $3.51 per share). The transaction generated gross proceeds of approximately ₤20 million (or approximately $25.5 million). In conjunction with the transaction the Company incurred costs of approximately $1.6 million which resulted in the Company receiving net proceeds of approximately $23.9 million.
During the first six months of 2017, the Company issued 22,435 shares of Common Stock as a result of stock option exercises, receiving gross proceeds of approximately $4,000.
Stock Options
The Company adopted the
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 30 June 2017, the Company awarded 140,000 stock options with an average exercise price of $3.17 per share and a weighted average grant date fair value of $1.51 per share.
At 30 June 2017, there were 5,873,297 stock options outstanding with an average exercise price of $0.46 per share. As of 30 June 2017, total unrecognized compensation expense was $742,300, which will be recognized over the next 3.5 years.
Stock-based compensation expense for the six months ended 30 June was as follows:
|
|
2017 |
|
2016 |
|
|
US$ |
|
US$ |
General and administrative |
$ 45,700 |
|
$ 1,000 |
|
Sales and marketing |
32,700 |
|
63,800 |
|
Research and development |
42,200 |
|
700 |
|
Total |
|
$ 120,600 |
|
$ 65,500 |
Stock Purchase Warrants
Immediately prior to the Company's AIM IPO and pursuant to the Plan of Recapitalization, on 29 March 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 30 June 2017, the Company had no outstanding stock purchase warrants.
5. Fair Value
The Company's Balance Sheets include 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 29 March 2016.
The Company had no financial assets or liabilities measured at fair value on a recurring basis at 30 June 2017 or 31 December 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 30 June 2016:
Description |
Balance at 1 January 2016 |
Exchanged for Common Stock in 2016 |
Change in fair value in 2016 |
Balance at 30 June 2016 |
|
|
|
|
|
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 30 June 2017 or 2016.
6. Commitments and Contingencies
The Company entered into a five-year non-cancelable operating lease agreement for office and laboratory space in February 2009 with an initial expiration of 31 January 2014 which was subsequently extended in 2013. In April 2017, the Company entered into leases for additional office and laboratory space. All of the Company's office and laboratory leases expire in January 2020 and provide for annual 3% increases to the based rent. The current monthly base lease payment for all leases is approximately $41,000. 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 30 June 2017 and 2016, was $222,600, and $166,600, respectively. Rent expense is recognized on a straight-line basis in the accompanying financial statements.
7. Subsequent Events
In preparing these financial statements, the Company has evaluated events and transactions for potential recognition or disclosure through 18 September 2017 the date the financial statements were available to be issued.
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