Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

You should read the following discussion and analysis of our financial condition and results of operations in conjunction with our consolidated financial statements and related notes thereto included elsewhere in this Annual Report on Form 10-K,as well as the other information provided from time to time in our other filings with the SEC. Some of the information contained in this discussion and analysis or set forth elsewhere in this annual report, including information with respect to our plans and strategy for our business, includes forward-looking statements that involve risks and uncertainties. As a result of many factors,our actual results could differ materially from those discussed in or implied by these forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed in the section of this Annual Report on Form 10-K titled “Risk factors.” Please also see the section titled “Special note regarding forward-looking statements.”

Overview

We are a leading commercial cell engineering company focused on providing enabling platform technologies to advance innovative cell-based research as well as next-generation cell therapeutic discovery, development and commercialization. Over the past twenty years, we have developed and commercialized our proprietary Flow Electroporation platform, which facilitates complex engineering of a wide variety of cells. Electroporation is a method of transfection, or the process of deliberately introducing molecules into cells, that involves applying an electric field in order to temporarily increase the permeability of the cell membrane. This precisely controlled increase in permeability allows the intracellular delivery of molecules, such as genetic material and proteins, that would not normally be able to cross the cell membrane as easily.

Our ExPERT platform, which is based on our Flow Electroporation technology, has been designed to address this rapidly expanding cell therapy market and can be utilized across the continuum of the high-growth cell therapy sector, from discovery and development through commercialization of next-generation, cell-based medicines. The ExPERT family of products includes: three instruments, which we call the ATx, STx and GTx, respectively and related software protocols, as well as a portfolio of proprietary related disposables and consumables (as well as the VLx instrument for very large-scale cell engineering made available for sale in December 2021). These include processing assemblies, or PAs, designed for use with our instruments, as well as accessories supporting PAs such as electroporation buffer solution and software protocols. We have garnered meaningful expertise in cell engineering via our internal research and development efforts as well as our customer-focused commercial approach, which includes a growing application scientist team. The platform is also supported by a robust intellectual property portfolio with more than 130 granted U.S. and foreign patents and more than 60 pending patent applications worldwide.

From leading commercial cell therapy drug developers and top biopharmaceutical companies to top academic and government research institutions, including the U.S. National Institutes of Health, or NIH, our customers have extensively validated our technology. We believe the features and performance of our platform have led to sustained customer engagement. Our existing customer base ranges from large biopharmaceutical companies, including all of the top 10, and 20 of the top 25, pharmaceutical companies based on 2021 global revenue, to hundreds of biotechnology companies and academic centers focused on translational research. As of December 31, 2021, we have placed more than 500 of our electroporation instruments worldwide.

We have financed our operations primarily from the issuance and sale of equity securities, previous debt borrowings and cash flows from operations. Our registration statement on Form S-1 related to our initial public offering of common stock in the United States was declared effective on July 29, 2021, and our common stock began trading on the Nasdaq Global Select Market on July 30, 2021. On August 3, 2021, we issued and sold 15,525,000 shares of common stock in the IPO at a price to the public of $13.00 per share, inclusive of 2,025,000 shares issued pursuant to the full exercise of the underwriters’ option to purchase additional shares. The IPO generated gross proceeds to us of $201.8 million. We received aggregate net proceeds of $184.3 million after deducting aggregate underwriting commissions and offering costs of $17.6 million. We believe that the net proceeds from the IPO, together with our existing cash, will enable us to fund our operating expenses and capital expenditure requirements for the foreseeable future. We have based this estimate on assumptions that may prove to be wrong, however, and we could exhaust our available capital resources sooner than we expect. See “Liquidity and Capital Resources” below for more information about our current capital resources.

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Since our inception, we have incurred significant operating losses. Our ability to generate revenue sufficient to achieve profitability will depend on the successful further development and commercialization of our products. We generated revenue of $33.9 million, $26.2 million and $21.6 million for the years ended December 31, 2021, 2020 and 2019, respectively, and incurred net losses of $19.1 million, $11.8 million and $12.9 million for those same years. As of December 31, 2021, we had an accumulated deficit of $114.3 million. We expect to continue to incur net losses as we focus on growing commercial sales of our products in both the United States and international markets, including growing our sales teams, scaling our manufacturing operations, continuing research and development efforts to develop new products and further enhance our existing products. Further, we expect to incur additional costs associated with operating as a public company in the United States.

We believe we have a diversified revenue model with revenue generated from multiple sources including instrument leases with recurring license fees, sales of instruments and related disposables and participation in the clinical and commercial success of some of our customers through milestone and sales-based payments under agreements that we refer to as Strategic Platform Licenses, or SPLs. In addition to our ExPERT products, we previously developed CARMA, a proprietary therapeutic platform based on transfecting mRNA into unstimulated cells for the development of immune cell therapies. In the first quarter of 2021, we conducted a strategic review of our CARMA activities and made the decision to cease further research and clinical development activities with respect to the CARMA platform for our own internal purposes and instead focus on out-licensing the CARMA platform manufacturing processes and associated intellectual property to third-party customers. During the years ended December 31, 2021, 2020 and 2019, our CARMA-related expenses were $4.1 million, $11.1 million and $11.7 million, respectively. As a result of our strategic decision to focus on out-licensing this platform, we will no longer incur these expenses in future periods.

Impact of COVID-19 on Our Business

We continue to closely monitor the impact of the novel coronavirus, or COVID-19, pandemic on our business and the geographic regions where we operate. The impact of this pandemic has been and will likely continue to be extensive in many aspects of society, which has resulted in and will likely continue to result in significant disruptions to the global economy, as well as businesses and capital markets around the world.

Impacts to our business as a result of COVID-19 have included disruptions to our manufacturing operations and supply chain caused by facility closures, reductions in operating hours, staggered shifts and other social distancing efforts, decreased productivity and unavailability of materials or components, limitations on our employees’ and customers’ ability to travel, and delays in product installations, demonstrations, trainings or shipments to and from affected countries and within the United States. In light of the uncertain and rapidly evolving situation relating to the spread of COVID-19, we have taken precautionary measures intended to minimize the risk of the virus to our employees, our customers and the communities in which we operate, including temporarily closing our offices to visitors and limiting the number of employees in our offices to those that are deemed essential for manufacturing and research purposes, as well as virtualizing, postponing or canceling customer, employee and industry events.

Disruptions in our customers’ operations have impacted and may continue to impact our business. For example, customers have experienced delays in the progress of their clinical programs, shutdowns or slowdowns in their research laboratory operations, cessation of equipment purchases, and closing of their facilities to outsiders, which have disrupted our ability to conduct product demonstrations that are a key part of our selling process. We are focused on navigating the challenges presented by the COVID-19 pandemic, which includes increased focus on inventory levels of finished goods and parts to reduce the risk of COVID-19 related supply constraints.

We do not yet know the net impact that the COVID-19 pandemic may have on our business and cannot guarantee that it will not be materially negative. Although we continue to monitor the situation and may adjust our current policies as more information and public health guidance become available, the ongoing effects of the COVID-19 pandemic and/or the precautionary measures that we or our customers have implemented or may adopt may create operational and other challenges, any of which could harm our business and results of operations. While we maintain an inventory of finished products and raw materials used in our products, a prolonged pandemic could lead to shortages and/or extended lead times for the raw materials necessary to manufacture our products. If we experience a prolonged disruption in our manufacturing, supply chains or commercial operations, or if demand for our products is significantly reduced as a result

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of the COVID-19 pandemic, we would expect to experience a material adverse impact on our business, financial condition, results of operations and prospects.

Historically, a significant portion of our field sales, product demonstrations and user support have been conducted in person, and the marketing of our products, sourcing of potential new customers and rollout of our new products has historically been supported by our participation at industry conferences. Currently, as a result of the work and travel restrictions related to the COVID-19 pandemic, and the precautionary measures that we have adopted, substantially all of our field sales and professional services activities are being conducted remotely, which has resulted in a decrease in our travel and conference-related marketing expenditures. However, we expect these expenditures to increase in the future, which could negatively impact our financial condition and results of operations. As of the date of this Annual Report on Form 10-K, we do not yet know the extent of the negative impact of such restrictions and precautionary measures on our ability to attract new customers or retain and expand our relationships with existing customers over the near and long term.

Key Factors Affecting Our Performance

We believe that our financial performance has been, and in the foreseeable future will continue to be, primarily driven by the following factors. While each of these factors presents significant opportunities for our business, they also pose challenges that we must successfully address in order to sustain our growth and improve our results of operations. Our ability to successfully address the factors below is subject to various risks and uncertainties, including those described in this Annual Report under the heading “Risk Factors.”

Sales and Leases of Instruments

Our financial performance has largely been driven by, and in the future will continue to be impacted by, the rate of sales and leases of our ExPERT family of proprietary Flow Electroporation instruments to existing and new customers. We currently market three versions of our instruments, the ATx, the STx, and the GTx, and we introduced a fourth version called the VLx under the EXPERT brand in December 2021. The ATx is primarily sold in all our markets. The STx is primarily sold to end users for research and drug discovery purposes, and the GTx is leased to customers for research, clinical or commercial use or sold for research use in certain circumstances or sold to academic centers for research or clinical use. We view the demand for our instruments, whether in the form of sales or leases, as an indicator of the health of our current business and as a predictor of future instrument sale and lease revenue. As described below, we separately sell proprietary single-use disposables, which we call processing assemblies, or PAs, that are necessary for our customers to use our electroporation instruments. Therefore, depending on the number of instruments that have been sold or are under active lease, we have insight into the demand for PAs that will also translate to future revenue for us.

Our sales model varies based on the activity of the end customer, such as whether they are a translational research center, an academic center, a company focused on drug discovery, or a company engaged in cell therapy development, and the customer’s intended use of our platform. If our customer intends to use our platform for research or drug discovery only, we typically sell the instrument outright. Each of the ATx, STx and GTx instruments have different prices based on the instrument’s features, with the GTx being the most expensive. When we sell an instrument, we also provide a non-exclusive license to our intellectual property for the customer to use the instrument broadly for research or drug discovery, as applicable. In the case of a sale, title to the instrument conveys to the buyer, but we retain ownership of intellectual property rights and software and protocols loaded onto the instruments.

The sales cycle for our cell engineering instruments varies widely and typically ranges from approximately six to approximately 12 months, with the actual period depending on project stage, budget process, equipment prioritization and the general financial status of the customer or the market in general. As a result of this lengthy and unpredictable sales cycle, we expect that we will be prone to quarterly fluctuations in our instrument sales revenue.

For cell therapy customers who use our technology to develop engineered cells for human therapeutic use in clinical trials or, if approved by regulatory authorities, for commercial sale, we license our platform on a non-exclusive basis in exchange for an annual fee per instrument licensed. This license fee varies based on whether the instrument is being used for pre-clinical or clinical purposes. Once we have leased an instrument to a customer, we generally have high visibility

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into future lease revenue from this customer. It is possible, however, that our future lease revenue could be impacted by failure of the customer therapeutic candidates to progress through clinical development for reasons unrelated to the successful use of our instruments, such as drug toxicity, lack of efficacy, funding constraints, changes in development priorities, patient access limitations or regulatory challenges. For any of these reasons, a customer could determine not to renew or to enter into additional instrument leases with us.

Our installed base of electroporation instruments has grown from over 125 instruments as of December 31, 2015, to over 500 instruments as of December 31, 2021. This installed base includes both instruments sold to customers and instruments licensed for research and clinical use. Because of the size of the drug discovery market and our long history in that market, the installed base of instruments is currently weighted more heavily towards instruments sold for drug discovery and research applications. However, since each licensed instrument provides us with ongoing license revenues, the share of revenues from licensed instruments may grow as a share of our total revenue mix.

We plan to further grow our installed base of ExPERT instruments through additional sales and leases to our current customers and through the sale or lease of instruments to new cell therapy, drug discovery and academic customers. To achieve this goal, we intend to further expand our commercial infrastructure, including through the expansion of our sales force and field application scientists. We have expanded our sales force and field application scientist count over the past several years and now have over 20 dedicated field sales and application scientist professionals globally. Our candidate identification and hiring process is stringent, and there can be no assurance that we will be able to continue to recruit the high level of candidates that make up our current team.

In addition, we have numerous collaborations in place with academic and commercial institutions to further expand our capabilities and supporting data in new cell engineering applications. Recent sales efforts have also focused on expanding our presence in translational academic centers, which we view as a potentially meaningful source of installed base expansion given the increased industry focus on, and government funding allocated to, cell therapy. Academic translational centers have been a strong source of cell therapy innovation and commercial spinouts in the cell therapy sector.

We expect revenue from instruments leased to cell therapy customers to continue to grow as those customers move their existing drug development programs into later-stage clinical trials and advance their preclinical pipeline programs into clinical development. In addition, we expect new customers to emerge and contribute to these revenues, particularly given the underlying growth in the cell therapy pipeline among companies in this industry, availability of capital to support such companies, and in particular the switch by some of these cell therapy companies away from viral approaches to non-viral approaches.

Sales of Processing Assemblies

In addition to instrument sales, our current and future revenue is dependent on sales of our proprietary PAs, as well as the sale of our proprietary electroporation buffer solution, for use with our instruments. We sell PAs that are intended either to support research use or use in current good manufacturing practices, or cGMP, clinical research applications. The PAs differ in terms of their volume capacities and the associated numbers of cells that can be processed in each electroporation sequence with a particular PA, as well as the number of transfection experiments that can be performed in a single electroporation process. Our PA pricing varies based on the volume of cells processed and the number of transfections per PA.

We expect that as our installed instrument base grows, our sales of PAs and electroporation buffer solutions will grow accordingly, especially as cell therapy programs continue to progress through the clinic and potentially become commercial-stage, thereby increasing the number of PAs needed by customers. We are also developing and intend to launch new PAs that target previously unserved subsegments across the bioprocessing and cell therapy markets, which could further increase our PA sales. However, both the number of PAs used per instrument, as well as the specific PA used, is highly variable across our customer base and depends on several factors, including:

•Purpose for which the customer is using the platform;

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•Relative pricing of our PAs;

•Progression of cell therapy products through preclinical and clinical development;

•Whether the cell therapy customer uses a centralized or decentralized manufacturing process;

•Customer’s target indication, which can result in variations in patient numbers needed for clinical trials; and

•Whether the cells to be processed using our platform are patient-derived, donor-derived or cell line-derived.

With considerable variability of processes, even within the same indication, such as is the case for allogeneic genetically-modified cell therapies, such as chimeric antigen receptor T cells, or CAR-Ts, and the nascency of the cell therapy industry, we expect that it may take several years for us to gain visibility into how these factors will impact our PA revenue over time.

We continuously re-evaluate our PA portfolio based on customer needs and have introduced, and intend to continue to introduce, new PAs and improvements to existing PAs. Beginning in 2019, we have launched a series of new PAs including the R-1000, which can process up to 1 mL, or 200 million cells, and the R-50x3, which is a 3-well cuvette capable of processing up to 10 million cells in each well. In 2021, we expanded our portfolio of multi-well cuvettes, which reduce manual handling and improve productivity in the lab, with the launch of our R-50x8. The R-50x8 is an 8-well cuvette capable of processing up to 225,000 cells in each well. Compared to single-well PAs, multi-well PAs allow users to run multiple samples concurrently, which enables scientists to complete more experiments per run, leading to shorter overall processing time and lower per transfection cost. The introduction of new PAs, however, introduces additional uncertainty. Some new PAs may fail to be used in line with our expectations when they are launched. While we also price PAs based on the value provided to the customer, introduction of new PAs could cannibalize our existing PA portfolio more than we had anticipated as customers find the new products to be a better solution for their applications or workflows.

Strategic Platform Licenses (SPLs)

Typically, our cell therapy customers will either purchase our ATx instrument for research purposes or obtain a research use license under lease of our GTx instrument technology in order to validate the use of our technology in their programs and to progress their pre-clinical work towards clinic trials. However, once a cell therapy customer using one of our ExPERT instruments advances their pre-clinical research to a stage where they are planning to enter clinical development, they need to enter into a licensing arrangement with us for the rights to clinical and/or commercial use of our instrument. Our customers typically negotiate the terms of those licenses during research and pre-clinical development.

We refer to these arrangements as SPLs, the terms of which contain not only higher annual, non-exclusive license fees for the clinical use of the instrument, but also allow us to share in the economics of the customer’s programs. From 2017 through February 2022, we have entered into 16 SPLs with commercial cell therapy developers, and those licenses currently allow for over 95 clinical development programs in the aggregate. On average, our current SPLs allow for approximately six product candidates per license, although this average may change over time. SPLs include potential payments to us upon the customer’s achievement of specified clinical development or regulatory milestones, as well as potential sales-based payments to us, which could be payments based upon the achievement of specified sales levels and/or royalty payments that are a percentage of the customer’s net sales. The amount of each milestone payment is typically correlated in size with value-creating, pre-commercial clinical progress events or commercial sales levels.

Of the over 95 programs associated with our current SPLs, more than 15% are in the clinic, meaning they have at least an FDA-cleared Investigational New Drug application, or IND. Our 16 SPLs have the potential to generate over $1.25 billion in pre-commercial milestone payments, if all product candidates allowed under those agreements were to fully progress through clinical development and obtain regulatory approval. However, our actual milestone revenue from these agreements will likely be considerably lower than this amount, as not all programs covered by each agreement will become and remain active programs in a customer’s development pipeline or successfully complete the clinical

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development process. Further, each agreement typically includes programs that have not been specifically identified, or for which a candidate may never be identified or developed by the customer.

Our strategy is to capitalize on the growth in the number of cell therapy developers by entering into new SPLs. We announced six such agreements in 2019, three in 2020, four in 2021 and one so far in 2022.

For the year ended December 31, 2021, one cell therapy company with which we have entered into an SPL accounted for 21% of our total revenue, and our six largest such customers accounted for an aggregate of approximately 40% of our total revenue for the year through a combination of instrument license fees, milestones realized and processing assembly revenue.

Our future milestone revenue under our SPLs will depend in large part on the clinical and regulatory achievements of our customers. Generally, pre-commercial milestone payments become larger as programs move through the clinic. We rely in part on our customers’ public disclosures around regulatory timelines to forecast our receipt of pre-commercial milestone payments. While we expect our forecasting ability to improve over time as more of our customers’ programs advance through the clinic and the number of clinical programs covered by our licenses expands, given the early nature of the cell therapy clinical market, we expect our realization of pre-commercial milestones to be somewhat unpredictable.

In addition, the potential for sales-based payments once a customer’s product is approved and in commercial use is unknown and variable based on a number of factors, including inherent clinical risk, potential changes in the customer’s strategy, the designated indication and its impact on the potential number of patients to be served and the competitive products available to patients, product pricing and reimbursement structures, our customer’s commercial manufacturing plans and the inherent unknowns in adoption of next-generation cell therapies relative to other modalities.

Gross Margins

We have historically generated overall gross margins of approximately 90% over the past several years, although our margins depend on our revenue mix from instruments, PAs and potential milestones under SPLs. We price our instruments at a premium given what we believe to be the broad benefits of our platform, and the limited availability of alternative, clinically validated non-viral delivery approaches. However, the market for non-viral delivery is highly competitive, and introduction of a GMP-grade platform by a competitor that delivers similar performance across a similar diversity of cell types could negatively impact our business and lead to increased price pressure that negatively impacts our gross margins. In addition, part of our growth strategy is to expand into new regional markets, which could require the use of distributors and/or our participation in more competitive environments, which could impact our ability to price our instruments at a premium and could negatively impact our ability to enter into SPLs on terms similar to those currently in effect.

We expect our gross margins to benefit from realization of the economics from our SPL agreements described above, to the extent that such milestones grow to be a significant proportion of overall revenues, as there is no cost of goods sold associated with such revenue. However, realization of these potential milestone revenues is uncertain. Margins may experience downward pressure during ramp up of internal PA production or due to increases in labor and materials costs or expansion of our PA portfolio or as a result of future design changes and may benefit in the mid-to-long term as PA production becomes more automated.

Key Business Metrics

In addition to revenue, we regularly review several key business metrics to evaluate our business, measure our performance, identify trends affecting our business, formulate financial projections and make strategic decisions. These key metrics include:

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With respect to the numbers of programs under license, in many cases we make estimates of such programs based on our contract terms with our customers and our knowledge about our customers’ clinical progression of their programs. We rely, in part, on our customers’ public disclosures around regulatory timelines to forecast our receipt of pre-commercial milestone payments. However, it is possible that some programs may have become dormant or inactive without our knowledge, some new programs may be identified and some programs may progress further in clinical development without our knowledge if the customer has not made a public announcement. While we expect our forecasting ability to improve over time as more of our customers’ programs move through the clinic and the number of clinical programs covered by our licenses expands, given the early nature of the cell therapy clinical market, we expect our realization of pre-commercial milestones to be somewhat unpredictable. This number may fluctuate due to the success of our commercial partners. Additionally, the addition of a large multi-product (program) SPL may dilute the percentage of commercial programs currently in the clinic.

As of the dates presented, our key metrics described above were as follows:

As of December 31,

Installed base of instruments (sold or leased) >500 >400 >320

Number of active SPLs 15 12 8

Total number of licensed clinical programs (SPLs only) >95 >75 >55

* Amounts presented as of December 31, 2020, give effect to one SPL entered into and additional INDs cleared in January 2021.

** Number of licensed clinical programs under SPLs are by number of product candidates and not by indication.

Components of Our Results of Operations

Revenue

We generate revenue principally from the sale of instruments, single-use PAs and buffer as well as from the lease of instruments to our customers. Our SPLs also include associated clinical progress milestones and sales-based payments to us, in addition to annual lease payments. Sales of instruments and disposables under contracts with customers are classified as product sales in our consolidated financial statements. Revenue from instrument leases, including payments that we may receive from our customers based on their achievement of specified clinical development or commercialization milestones, are classified as leased elements in our consolidated financial statements.

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Our business and revenue growth strategy consists of the sale or lease of instruments and the sale of disposables. We record revenue from the sale of instruments or PAs upon shipment to a customer. Instrument leases are typically invoiced annually at the start of each instrument license period and are accounted for as monthly revenue over the lease term with the expectation of continuing customer renewals of their instrument leases. As our customers achieve clinical progress milestones and/or sales-based payment milestones, we recognize the full value of the milestone as revenue. In addition, as customers use instruments they have either purchased or leased, they typically replenish their supplies of disposables through recurring purchases. Although customers are not contractually obligated to renew their instrument leases or to purchase additional disposables and may decide not to do so solely at their own discretion, leased instruments and disposables revenue streams have historically formed an important component of our future revenues, and we believe they provide insight into our future performance. We consider these sales and lease revenue streams to be recurring revenues.

In order to evaluate how our sales are trending across key markets, as well as the contribution of program economics from our SPLs, we separately analyze revenue derived from our cell therapy customers and drug discovery customers, as well as the performance-based milestone revenues we recognize under our SPLs. Cell therapy includes revenue from instruments sold, annual license fees for instruments under lease, and sales of our proprietary disposables. Drug discovery includes revenue from instruments sold, sales of our proprietary disposables and, occasionally, instruments leased, in each case under contracts with drug discovery customers. Program-related revenue includes pre-commercial milestones earned and recognized as revenue during the period. Once SPL customers achieve regulatory approval for and commercialize their products, in nearly all cases we will also be entitled to receive sales-based payments which may be milestone payments upon achievement of specified levels of net sales and/or royalties expressed as a percentage of net sales. We have not received any commercial payments from our SPL customers to date, and we do not expect to receive any such payments in the near term. As our customers progress their programs and achieve additional milestones, our SPL program revenue is expected to constitute a growing portion of our total revenues in future periods.

We also offer our customers extended warranty and service plans. Our extended warranty and service plans are offered for periods beyond the standard no-fee, one-year warranty that customers who purchase instruments receive. These extended warranty and service plans generally have fixed fees and terms ranging from one additional year to four additional years and include an annual calibration. We recognize revenue from the sale of extended warranty and service plans over the respective coverage period, which approximates the service effort provided by us. Warranties are typically not a material revenue stream for us.

Product Sales

Revenue from contracts with customers includes revenue from the sale of instruments, PAs and buffer. Customers purchase an ATx, STx or GTx depending upon their intended use and all customers purchase PAs for use with our instruments. Commercial customers may not use a purchased instrument for clinical or commercial processes.

We expect product sales revenue to increase in future periods as our market grows and we are able to generate recurring PA sales.

Leased Elements

Revenue from leased elements consists of revenue from the leasing of instruments to customers (typically the GTx). Our leases of instruments to customers consist of fixed license/lease payments and variable milestone payments that are dependent on our customer's achievement of clinical milestones. Typically, instrument leases that provide for clinical or commercial use also include sales-based milestone payments (and/or sales-based royalties in some cases) upon the commercialization of the customer's product. Under our instrument lease arrangements, we lease our instruments to customers and provide associated software licenses to allow customers non-exclusive use of our technology for research and/or specific clinical programs, typically along with rights for commercial use upon approval of the customer's products. We also provide scientific and regulatory support to our clinical use licensees to help them improve process optimization and facilitate their regulatory submission process.

We expect leased elements revenue to increase in future periods as our market grows.

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Cost of Goods Sold

Cost of goods sold primarily consists of costs for raw material parts, contract manufacturer costs, salaries, overhead, other direct costs related to sales recognized as revenue in the period, and leased equipment depreciation.

We expect that our cost of goods sold will increase or decrease primarily to the extent that our instrument and disposables revenue increases and decreases.

Gross Profit and Gross Margin

Gross profit is calculated as revenue less cost of goods sold. Gross profit margin is gross profit expressed as a percentage of revenue. Our gross profit in future periods will depend on a variety of factors, including sales mix among instruments, disposables and milestones, the specific mix among types of instruments or disposables, the proportion of revenues associated with instrument leases as opposed to sales, the share of revenues composed of milestones, changes in the costs to produce our various products, the launch of new products or changes in existing products, our cost structure for manufacturing including changes in production volumes, and the pricing of our products which may be impacted by market conditions.

Operating Expenses

Research and Development

Research and development expenses consist primarily of costs incurred for our research activities related to advancing our technology and development of applications for our technology, including research into specific applications and associated data development, process development, product development (e.g., development of instruments and disposables, including hardware and software engineering) and design and other costs not directly charged to inventory or cost of goods sold, such as supply chain development and design and management of quality systems.

These expenses include employee-related costs, such as salaries, benefits, incentive compensation, stock-based compensation, and travel, as well as consultant services, facilities, and other expenses, laboratory supplies and materials expenses for employees and contractors engaged in research and development. These expenses are exclusive of depreciation and amortization. We expense research and development costs as incurred in the period in which the underlying activity is undertaken.

We previously developed CARMA, our proprietary platform technology for the development of non-viral, human messenger RNA, or mRNA-based, chimeric antigen receptor, or CAR, or T-cell receptor, or TCR, redirected immune cell therapies.

In the first quarter of 2021, we conducted a strategic review of our CARMA activities and made the decision to cease further pre-clinical and clinical activities with respect to the CARMA platform and associated candidates (MCY-M11 and other identified targets) for our own internal purposes and instead to focus on out-licensing the CARMA platform manufacturing processes and associated intellectual property to third-party customers. For periods through the first half of 2021, our research and development expenses include costs associated with developing the CARMA platform principally for a clinical trial that has concluded. There were no material CARMA-related expenses in the second half of 2021. As a result of our strategic decision to focus on out-licensing this platform, we will no longer incur any material CARMA-related expenses in future periods.

We believe that our continued investment in research and development is essential to our long-term competitive position. We expect to continue to incur substantial research and development expenses as we invest in research and development to support our customers, develop new uses for our existing technology and develop improved and/or new offerings to our customers and partners. As a result, we expect that our research and development expenses will continue to increase in absolute dollars in future periods and vary from period to period as a percentage of revenue.

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Sales and Marketing

Our sales and marketing expenses consist primarily of salaries, commissions and other variable compensation, benefits, stock-based compensation and travel costs for employees within our commercial sales and marketing functions, as well as third-party costs associated with our marketing activities. These expenses are exclusive of depreciation and amortization.

We expect our sales and marketing expenses to increase in future periods as we expand our commercial sales, marketing and business development teams, increase our presence globally, and increase marketing activities to drive awareness and adoption of our products.

General and Administrative

General and administrative expenses primarily consist of salaries, benefits, stock-based compensation and travel costs for employees in our executive, accounting and finance, legal, corporate development, human resources, and office administration functions as well as professional services fees, such as consulting, audit, tax and legal fees, general corporate costs, facilities and allocated overhead expenses and costs associated with being a Nasdaq and AIM listed public company such as director fees, U.K. NOMAD and broker fees, investor relations consultants and insurance costs. These expenses are exclusive of depreciation and amortization.

We expect that our general and administrative expenses will continue to increase in absolute dollars in future periods, primarily due to increased headcount to support anticipated growth in the business and due to incremental costs associated with operating as a public company listed on a U.S. exchange, including insurance (particularly directors and officers insurance), costs to comply with the rules and regulations applicable to companies listed on a U.S. securities exchange and costs related to compliance and reporting obligations pursuant to the rules and regulations of the SEC and stock exchange listing standards, investor relations and professional services. We expect these expenses to vary from period to period as a percentage of revenue.

Depreciation and Amortization

Depreciation expense consists of the depreciation of property and equipment used actively in the business, primarily by research and development activities. Amortization expense includes the amortization of intangible assets over their respective useful lives.

Other Income (Expense)

Interest Expense

Interest expense consists primarily of interest related to borrowings under credit facility agreements.

For the years ended December 31, 2019 and 2020, we had a $5.0 million outstanding term loan, or the Term Loan, under the MidCap Credit Agreement (as discussed further below). In March 2021, we repaid the Term Loan in full prior to maturity as allowed by and in accordance with the terms of the MidCap Credit Agreement.

Other Income (Expense), Net

We previously classified an outstanding warrant for the purchase of shares of our common stock as a liability on our consolidated balance sheets since the warrant’s strike price was in a currency other than our functional currency. The warrant liability was initially recorded at fair value at the date of issuance and was subsequently remeasured to fair value at each reporting date. Changes in the fair value of the warrant liability were recognized as a component of other income (expense). In a cashless settlement in August 2021, the holder fully exercised the warrant in exchange for 64,603 shares of common stock. As of December 31, 2021, we no longer had any outstanding warrants.

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Other income (expense), net also includes interest earned on cash balances in our cash accounts and interest earned on money market funds, commercial paper and corporate bonds as well as miscellaneous income unrelated to our core operations.

Provision for Income Taxes

We did not recognize a benefit for the net operating losses we incurred for the years ended December 31, 2021, 2020 and 2019. As of December 31, 2021, we had U.S. net operating loss carryforwards of $90.3 million, which may be available to offset future taxable income and begin to expire in 2026, as well as net operating losses in the various states in which we file. We have recorded a full valuation allowance against our net deferred tax assets at each balance sheet date since, due to our history of net losses, we have determined that it is not currently more likely than not that our net deferred tax assets are recoverable.

The use of our net operating loss carryforwards may have been restricted by changes in our ownership and may be further restricted as a result of future changes in our ownership.

Results of Operations

Comparison of the Years Ended December 31, 2021 and 2020

The results of operations presented below should be reviewed in conjunction with the consolidated financial statements and notes included elsewhere in this Annual Report. The following tables set forth our results of operations for the periods presented:

Year Ended

December 31,

(in thousands)

Operating expense

Depreciation and amortization 1,349 1,025

Other income (expense)

Interest and other expense (1,044) (826)

Interest and other income 151 66

Total other income (expense) (894) (760)

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Revenue

The following table provides details regarding the sources of our revenue for the periods presented:

Year Ended

December 31, Change

(in thousands, except percentages)

Total revenue for the year ended December 31, 2021 was $33.9 million, an increase of $7.7 million, or 30%, compared to revenue of $26.2 million during the year ended December 31, 2020.

Our overall increase in revenue was primarily driven by growth in sales and licenses of instruments and sales of disposables to cell therapy customers. In the cell therapy market, revenue from instrument sales and licenses of instruments increased by $5.0 million, which was primarily due to continued high levels of capital invested in companies operating in our target markets, while disposables sales increased by $2.1 million as a result of the continued progression of our cell therapy partners’ clinical development programs. In the drug discovery market, the $1.3 million increase was due to an increase in sales of disposables, including both single-well and multi-well processing assemblies. The $0.7 million decrease in program-related revenues resulted from expected variability from period to period in the level of program-related revenue given the small number of individual triggering events which currently generate this portion of revenue. We expect program-related revenue to experience variability for some time, although we anticipate that variability may moderate as the volume of SPLs and associated milestones grows.

Cost of Goods Sold and Gross Profit

Year Ended December 31, Change

(in thousands, except percentages)

Gross margin 89% 89%

Cost of goods sold increased by $0.9 million, or 32%, for the year ended December 31, 2021, compared to the year ended December 31, 2020. The increase was primarily driven by higher sales of instruments and disposables.

Gross profit increased by $6.8 million, or 29%, for the year ended December 31, 2021, compared to the year ended December 31, 2020. The increase was primarily driven by increased revenue from instrument sales and licenses and disposable sales partially offset by the decrease in program related revenues.

Operating Expenses

Research and Development

Year Ended December 31, Change

(in thousands, except percentages)

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Research and development expenses decreased by $2.3 million, or 13%, for the year ended December 31, 2021, compared to the year ended December 31, 2020. The decrease was primarily driven by a $5.8 million decrease in CARMA expenses as a result of the wind-down of CARMA operations, partially offset by a $1.1 million increase in compensation expenses associated with headcount increases, a $1.4 million increase in stock-based compensation primarily due to stock price appreciation, a $0.5 million increase in product development and lab expenses and a $0.3 million increase in occupancy expenses.

Sales and Marketing

Year Ended December 31, Change

(in thousands, except percentages)

Sales and marketing expenses increased by $4.7 million, or 56%, for the year ended December 31, 2021, compared to the year ended December 31, 2020. The increase was primarily driven by a $2.9 million increase in compensation expenses as a result of increases in headcount and commissions on sales and a $1.0 million increase in stock-based compensation primarily due to stock price appreciation and a $0.5 million increase in marketing expenses.

General and Administrative

Year Ended December 31, Change

(in thousands, except percentages)

General and administrative expense increased by $11.3 million, or 153%, for the year ended December 31, 2021, compared to the year ended December 31, 2020. The increase was primarily driven by a $3.8 million increase in compensation expense associated with headcount and salary increases, a $3.4 million increase in stock-based compensation primarily due to stock price appreciation, a $2.0 million increase in expenses including legal and professional services, a $1.1 million increase in expense associated with the costs of our common stock being listed on the Nasdaq stock exchange, and a $0.7 million increase in recruiting fees and other general expenses.

Depreciation and Amortization

Year Ended December 31, Change

(in thousands, except percentages)

Depreciation and amortization expense increased by $0.3 million, or 32%, for the year ended December 31, 2021, compared to the year ended December 31, 2020. The increase was primarily driven by a significant investment in capital assets made in 2020 and 2021 for laboratory associated equipment.

Interest and Other Income (Expense)

Year Ended December 31, Change

(in thousands, except percentages)

Interest and other income $ 151 $ 66 $85 129%

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Interest and other income were immaterial in the years ended December 31, 2021 and 2020. Interest and other expense increased by $0.2 million, or 27%, for the year ended December 31, 2021, compared to the year ended December 31, 2020. The increase was primarily driven by the termination fees associated with repayment before maturity of the MidCap loan and the fair value change of common stock warrants prior to their full exercise.

Comparison of the Years Ended December 31, 2020 and 2019

Year Ended

December 31,

(in thousands)

Operating expense

General and administrative 7,370 5,556

Depreciation and amortization 1,025 541

Other income (expense)

Interest and other expense (826) (681)

Interest and other income 66 206

Total other income (expense) (760) (475)

Revenue

Year Ended

December 31, Change

(in thousands, except percentages)

Total revenue for the year ended December 31, 2020 was $26.2 million, an increase of $4.5 million, or 21%, compared to revenue of $21.6 million during the year ended December 31, 2019. Our overall increase in revenue primarily was driven by growth among cell therapy customers in the number of instruments and disposables that we sold, new leased instrument placements, and recurring revenues from existing instrument leases, as well as growth in the number of clinical milestone events that our SPL customers achieved that resulted in payments to us. Instrument sales and leases and disposable sales increased in part due to continued high levels of capital invested in companies operating in our target markets. Milestones increased due to the clinical progress of our SPL customers.

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Cost of Goods Sold

Year Ended December 31, Change

(in thousands, except percentages)

Gross margin 89% 88%

Costs of goods sold increased by $0.3 million, or 11%, from the year ended December 31, 2019 to the year ended December 31, 2020. The increase was primarily driven by higher sales of instruments and disposables. Cost of goods sold did not increase at the same rate as revenue growth because of the growth in milestone payments, which have no associated cost of goods.

Operating Expenses

Research and Development

Year Ended December 31, Change

(in thousands, except percentages)

Research and development expenses increased by $0.1 million, or 1%, from the year ended December 31, 2019 to the year ended December 31, 2020. The increase was primarily driven by increased compensation expense associated with field application scientist headcount increases and applications development headcount increases which combined to add $1.4 million to research and development costs, offset by reduced expenses associated with our CARMA activities of $1.1 million and reduced travel expenses of $0.3 million during 2020 due to the impact of the COVID-19 pandemic.

Sales and Marketing

Year Ended December 31, Change

(in thousands, except percentages)

Sales and marketing expenses increased by $0.5 million, or 6%, from the year ended December 31, 2019 to the year ended December 31, 2020. The increase was primarily driven by increased compensation expense as a result of headcount increases, commissions on sales, and stock-based compensation which added $1.8 million to sales and marketing costs, partially offset by COVID-19 driven reductions in travel and marketing expenses of $1.3 million. As travel and in-person restrictions instituted due to COVID-19 begin to recede, we expect travel and marketing expenses to increase.

General and Administrative

Year Ended December 31, Change

(in thousands, except percentages)

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General and administrative expense increased by $1.8 million, or 33%, from the year ended December 31, 2019 to the year ended December 31, 2020. The increase was primarily driven by increased compensation expense associated with headcount increases, salary increases, and stock-based compensation which added $1.5 million within the general and administrative function as well as $0.6 million of expenses associated with capital raising activities that were not eligible to be capitalized.

Depreciation and Amortization

Year Ended December 31, Change

(in thousands, except percentages)

Depreciation and amortization expense increased by $0.5 million, or 89%, for the year ended December 31, 2020 compared to the year ended December 31, 2019. The increase was primarily driven by a significant investment in capital assets made in 2019 and 2020 for laboratory equipment and internally developed software.

Interest and Other Income (Expense)

Year Ended December 31, Change

(in thousands, except percentages)

Interest and other income $ 66 $ 206 ($140) (68)%

Interest and other expense increased by $0.1 million, or 21%, from the year ended December 31, 2019 to the year ended December 31, 2020. The increase was primarily driven by the fair value change of common stock warrants, partially offset by fees associated with an early prepayment of debt in 2019 and the lower interest expenses due to a lower average loan balance associated with an early repayment of debt in 2019.

Interest and other income decreased by $0.1 million, or 68%, from the year ended December 31, 2019 to the year ended December 31, 2020. The decrease was primarily driven by declining interest income due to lower market rates in 2020 on our short-term investments.

Liquidity and Capital Resources

Since our inception, we have experienced losses and negative cash flows from operations. For the years ended December 31, 2021, 2020 and 2019, we incurred net losses of $19.1 million, $11.8 million and $12.9 million, respectively. As of December 31, 2021, we had an accumulated deficit of $114.3 million. To date, we have funded our operations primarily with proceeds from sales of common stock, borrowings under loan agreements and cash flows associated with sales and licenses of our products to customers. On August 3, 2021, we completed our IPO, generating gross proceeds of $201.8 million. We received net proceeds of $184.3 million after deducting aggregate underwriting commissions and offering expenses of $17.6 million. As of December 31, 2021, we had cash and cash equivalents and short-term investments of $255.0 million.

We expect to incur increased near-term operating losses as we continue to invest in expanding our business through growing our sales and marketing efforts, continued research and development, product development and expanding our product offerings. Based on our current business plan, we believe the net proceeds from the IPO, together with our existing cash and cash equivalents, will enable us to fund our operating expenses and capital expenditure requirements for the foreseeable future.

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We have based this estimate on assumptions that may prove to be wrong, and we could utilize our available capital resources sooner than we expect. Our future funding requirements will depend on many factors, including:

• Transaction and capital expenditures necessitated by strategic activities;

• Market acceptance of our products;

• The effect of competing technological and market developments; and

• The level of our selling, general and administrative expenses.

If we are unable to execute on our business plan and adequately fund operations, or if the business plan requires a level of spending in excess of cash resources, we will have to seek additional equity or debt financing. If additional financings are required from outside sources, we may not be able to raise such capital on terms acceptable to us or at all. To the extent that we raise additional capital through the sale of equity or debt securities, the ownership interest of our stockholders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our common stockholders. Debt financing, if available, may involve agreements that include covenants restricting our ability to take specific actions, such as incurring additional debt, selling or licensing our assets, making product acquisitions, making capital expenditures or declaring dividends. If we raise additional funds through collaboration and licensing arrangements with third parties, it may be necessary to relinquish some rights to our technologies or our products, or grant licenses on terms that are not favorable to us. If we are unable to raise additional capital when desired, we may have to delay development or commercialization of future products. We also may have to reduce marketing, customer support or other resources devoted to our existing products.

Cash Flows

The following table summarizes our uses and sources of cash for the periods presented:

Year Ended

December 31,

Net cash provided by (used in):

Net increase in cash and cash equivalents $ 29,027 $ 3,544 $ 3,963

Operating Activities

Net cash used in operating activities for the year ended December 31, 2021 was $10.7 million, and consisted primarily of our net loss of $19.1 million, offset in part by net non-cash expenses of $10.0 million, including stock-based compensation of $8.0 million, depreciation and amortization expenses of $1.4 million, and warrant liability fair value adjustments of $0.6 million. We also had net cash outflows of $1.6 million due to net changes in our operating assets and liabilities. Net changes in our operating assets and liabilities consisted primarily of an increase in deferred revenue (consisting primarily of unrecognized instrument license revenue) of $1.9 million and an increase in accounts payable

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and accrued expenses of $2.1 million, partially offset by a $2.3 million increase in prepaid expenses and other current assets, a $1.7 million increase in accounts receivable and a $1.4 million increase in inventory.

Net cash used in operating activities for the year ended December 31, 2020 was $8.8 million, and consisted primarily of our net loss of $11.8 million, offset in part by net non-cash expenses of $3.9 million, including stock-based compensation of $2.5 million and depreciation and amortization expenses of $1.0 million. We also had net cash outflows of $0.9 million due to net changes in our operating assets and liabilities. Net changes in our operating assets and liabilities consisted primarily of an increase in deferred revenue of $1.6 million and an increase in accounts payable and accrued expenses of $0.4 million, partially offset by a $1.8 million increase in accounts receivable, a $0.9 million increase in inventory, a $0.2 million increase in other current and non-current assets and a $0.1 million increase in the net effect of our right-of-use assets and lease liabilities.

Net cash used in operating activities for the year ended December 31, 2019 was $8.8 million, and consisted primarily of our net loss of $12.9 million, offset in part by net non-cash expenses of $2.5 million, including stock-based compensation of $1.8 million and depreciation and amortization expenses of $0.6 million. We also had net cash inflows of $1.6 million due to changes in our operating assets and liabilities. Net changes in our operating assets and liabilities consisted primarily of a decrease in accounts receivable of $1.6 million, an increase in accounts payable and accrued expenses of $1.2 million, an increase in deferred revenue of $0.8 million and a $0.5 million increase in the net effect of our right-of- use assets and lease liabilities, partially offset by a $1.9 million increase in inventory and a $0.7 million increase in other current and non-current liabilities.

Investing Activities

Cash used in investing activities during the year ended December 31, 2021 was $195.0 million, which was primarily attributable to net purchases of short-term marketable securities of $191.2 million, as well as purchases of property and equipment of $1.5 million and capitalized new product development costs of $2.3 million. Purchases of short-term marketable securities are made as part of ordinary course investing activities in compliance with our investment policy which has as its primary objective preservation of principal.

Cash used in investing activities during the year ended December 31, 2020 was $16.6 million, which was primarily attributable to net purchases of marketable securities of $14.5 million and purchases of property and equipment of $2.1 million.

Cash provided by investing activities during the year ended December 31, 2019 was $0.5 million, which was primarily attributable to net purchases and maturities of marketable securities of $1.7 million, partially offset by purchases of property and equipment of $1.3 million.

Financing Activities

Net cash provided by financing activities during the year ended December 31, 2021 was $234.7 million, which was primarily attributable to net proceeds of $236.1 million, including $51.8 million from the issuance of common stock in the first quarter and $184.3 million from the IPO in the third quarter of 2021, and proceeds of $3.6 million from the exercise of stock options, partially offset by the repayment of the Midcap loan of $4.9 million.

Cash provided by financing activities during the year ended December 31, 2020 was $28.9 million, which was primarily attributable to net proceeds from issuance of common stock of $28.6 million and the proceeds of $0.4 million from the exercise of stock options, partially offset by lease principal payments of $0.1 million.

Cash provided by financing activities during the year ended December 31, 2019 was $12.3 million, which was primarily attributable to net proceeds from issuance of common stock of $12.3 million, proceeds from borrowing under our MidCap Credit Agreement of $5.0 million and the proceeds of $0.1 million from the exercise of stock options, partially offset by the repayment of our previously outstanding borrowing under the MidCap Credit Agreement of $5.1 million.

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Contractual Obligations and Commitments

Our contractual obligations and commitments as of December 31, 2021, consisted of operating lease obligations. On May 27, 2021, we entered into an operating lease, or the 2021 Lease, for new office, laboratory and warehouse/manufacturing space. See Part I, Item 2, “Facilities” in this Annual Report for additional information regarding the 2021 Lease.

We will design and construct the leasehold improvements with the approval of the landlord. The lease agreement includes a landlord-provided tenant improvement allowance of $6.3 million, which will be applied to the construction cost of leasehold improvements. The total incremental non-cancellable lease payments under the 2021 Lease are approximately $29.9 million over the lease term, which continues until 2035.

On June 8, 2021, we exercised our option to early terminate one of our existing office and lab space lease arrangements. The amended office lease expires on June 7, 2022.

As of December 31, 2021, operating lease obligations included approximately $1.0 million in payments due under our lease of office and laboratory space under operating lease agreements that expire in October 2023.

In August 2021, we terminated a finance lease and as of December 31, 2021, we did not have any finance lease obligations. As of December 31, 2020, debt obligations included the contractually required principal and interest payments payable under our MidCap Credit Agreement, under which borrowings bore interest at a variable rate. On March 12, 2021, we repaid all amounts outstanding under the MidCap Credit Agreement in full.

Purchase orders or contracts for the purchase of supplies and other goods and services are based on our current procurement or development needs and are generally fulfilled by our vendors within short time horizons.

Critical Accounting Policies and Significant Judgments and Estimates

We have prepared our consolidated financial statements in accordance with generally accepted accounting principles in the United States. Our preparation of these consolidated financial statements requires us to make estimates, assumptions and judgments that affect the reported amounts of assets, liabilities, revenue, expenses and related disclosures. We evaluate our estimates and judgments on an ongoing basis. We base our estimates on historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources.

Actual results could therefore differ materially from these estimates under different assumptions or conditions.

While our significant accounting policies are described in more detail in Note 2 to our audited consolidated financial statements included elsewhere in this Annual Report, we believe the following accounting policies to be critical to the judgments and estimates used in the preparation of our consolidated financial statements.

Revenue Recognition

We derive revenue from two primary sources, product sales, which are comprised primarily of instrument and disposables revenue, and leased elements, which are comprised of revenue associated with instrument leases.

For revenue generated pursuant to contracts with customers, we recognize revenue when our customer obtains control of promised goods or services, in an amount that reflects the consideration that we expect to receive in exchange for those goods or services. In determining the appropriate amount of revenue to be recognized as we fulfill our obligations under our arrangements, we perform the following steps: (i) identification of the promised goods or services in the contract; (ii) determination of whether the promised goods or services are performance obligations, including whether they are distinct in the context of the contract; (iii) measurement of the transaction price, including the assessment of the constraint on variable consideration; (iv) allocation of the transaction price to the performance

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obligations and (v) recognition of revenue when, or as, we satisfy each performance obligation. At contract inception, we assess the goods or services promised within each contract, determine which goods or services are performance obligations and assess whether each promised good or service is distinct.

We enter into instrument lease and licensing arrangements that are accounted for using lease accounting rather than accounted for as pursuant to contracts with customers. Under these arrangements, we license to third parties’ the rights to use our products and embedded software. The terms of these arrangements typically include payment to us of one or more of the following: instrument lease fees, and clinical progress milestones and may, under the terms of existing agreements, include regulatory and/or sales milestone payments and/or royalties. Revenue from instrument leases is recognized ratably over the determined contractual term of the lease agreement and revenue from associated milestones is recognized when each specific milestone event is achieved by the customer.

In some product sale arrangements, products and services have been sold together representing distinct performance obligations. In such arrangements we allocate the sale price to the various performance obligations in the arrangement on a relative standalone selling price basis.

The standalone selling price is the price at which an entity would sell a promised good or service separately to a customer. We estimate the standalone selling price of each of the identified performance obligations in our customer contracts, maximizing the use of observable inputs. Our process for determining standalone selling price requires judgment and considers multiple factors that are reasonably available and maximizes the use of observable inputs that may vary over time depending upon the unique facts and circumstances related to each performance obligation. We believe that this method results in an estimate that represents the price we would charge for the product offerings if they were sold separately.

Taxes, such as sales, value-add and other taxes, collected from customers concurrent with revenue generating activities and remitted to governmental authorities are not included in revenue. Shipping and handling costs associated with outbound freight are primarily directly paid by customers as pass-through costs.

Amounts received under lease arrangements prior to revenue recognition are recorded as deferred revenue in our consolidated balance sheets. Amounts expected to be recognized as revenue within the 12 months following the balance sheet date are classified as current portion of deferred revenue in our consolidated balance sheets. Amounts not expected to be recognized as revenue within the 12 months following the balance sheet date are classified as other liabilities in our consolidated balance sheets.

Stock-based Compensation

We maintain an incentive compensation plan under which stock options are granted primarily to employees, consultants and non-employee directors. We measure stock-based compensation expense on the date of grant and recognize the corresponding compensation expense of those awards over the requisite service period, which is generally the vesting period of the respective award. We record forfeitures as they occur.

We estimate the fair value of stock options granted to our employees and directors based on the closing price of our common stock on the grant date and the resulting stock-based compensation expense using the Black-Scholes option-pricing model. For grants prior to July 30, 2021, the fair value was based on the value of our common stock on the AIM, a market operated by the London Stock Exchange; for grants after that date, the fair value was based on the value of our common stock on the Nasdaq Global Select Market on the grant date. The Black-Scholes option-pricing model requires the use of assumptions regarding a number of variables that are complex, subjective and generally require significant judgment to determine. The assumptions include expected volatility using publicly traded peer group companies’ common stock, expected dividend yield, risk-free rate of interest and the expected term using the simplified method.

Recent Accounting Pronouncements

A description of recently issued accounting pronouncements that may potentially impact our financial position, results of operations or cash flows is disclosed in Note 2 to our consolidated financial statements in this Annual Report.

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Emerging Growth Company Status

We are an “emerging growth company,” or EGC, under the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. Section 107 of the JOBS Act provides that an EGC can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. Thus, an EGC can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected to avail ourselves of the delayed adoption of new and revised accounting standards and, therefore, we will be subject to the same requirements to adopt new or revised accounting standards as private entities. We also intend to rely on other exemptions provided by the JOBS Act, including not being required to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act.

We will remain an emerging growth company until the earliest of: (i) December 31, 2026, which is the last day of the fiscal year following the fifth anniversary of our initial public offering in the United States; (ii) the last day of the first fiscal year in which our annual gross revenue is $1.07 billion or more; (iii) the date on which we have, during the previous rolling three-year period, issued more than $1 billion in non-convertible debt securities; and (iv) the last day of the fiscal year in which the market value of our common stock held by non-affiliates exceeded $700 million as of June 30 of such fiscal year. Based on the current market value of our common stock, it is possible that we may lose emerging growth company status as of December 31, 2022.

Item 7A. Quantitative and Qualitative Disclosures about Market Risk

Interest Rate Risk

We are exposed to market risk for changes in interest rates related primarily to balances of our financial instruments including cash and cash equivalents and short-term investments. As of December 31, 2021, we had cash and cash equivalents and short-term investments of $255.0 million, which consisted primarily of money market funds and commercial paper. The primary objective of our investment approach is to preserve principal and provide liquidity. As of December 31, 2021, we held money market fund securities of $19.3 million, short-term corporate debt of $4.9 million and short-term commercial paper of $227.8 million. Our primary exposure to market risk is interest income sensitivity, which is affected by changes in the general level of interest rates in the United States. A 10% change in the level of market interest rates would not have a material effect on our business, financial condition or results of operations.

Foreign Currency Risk

We are exposed to financial risks as a result of exchange rate fluctuations between the U.S. Dollar and certain foreign currencies and the volatility of these rates. In the normal course of business, we earn revenue primarily denominated in U.S. Dollars as well as in Euros and British Pounds. We incur expenses primarily in U.S. Dollars as well as in Euros, British Pounds and other currencies. Our reporting currency is the U.S. Dollar. We hold our cash primarily in U.S. Dollars as well as in Euros and British Pounds. We do not expect that foreign currency gains or losses will have a material effect on our financial position or results of operations in the foreseeable future. We have not entered into any hedging arrangements with respect to foreign currency risk. As our international operations grow, we will continue to reassess our approach to managing risks relating to fluctuations in currency exchange rates.

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Item 8. Financial Statements and Supplementary Data.

MaxCyte, Inc.

Index to Consolidated Financial Statements

Page No

Consolidated Balance Sheets 96

Consolidated Statements of Operations 97

Consolidated Statements of Changes in Stockholders’ Equity 98

Consolidated Statements of Cash Flows 99

Notes to Consolidated Financial Statements 100

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Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders of MaxCyte, Inc.

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of MaxCyte, Inc. and Subsidiary (the “Company”) as of December 31, 2021 and 2020, the related consolidated statements of operations, changes in stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2021, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2021, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

/s/ CohnReznick LLP

We have served as the Company’s auditor since 2018.

Tysons, Virginia

March 22, 2022

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MaxCyte, Inc.

Consolidated Balance Sheets

December 31,

Assets

Current assets:

Right of use asset - finance leases - 218,300

Liabilities and stockholders’ equity

Current liabilities:

Note payable, net of discount, and deferred fees — 4,917,000

Operating lease liability, net of current portion 5,154,900 1,234,600

Commitments and contingencies (Note 9)

Stockholders’ equity

See accompanying notes to consolidated financial statements.

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MaxCyte, Inc.

Consolidated Statements of Operations

Year Ended December 31,

Operating expenses:

Other income (expense):

Provision for income taxes — — —

Basic and diluted net loss per share $ (0.21) $ (0.17) $ (0.23)

See accompanying notes to consolidated financial statements.

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MaxCyte, Inc.

Consolidated Statements of Changes in Stockholders’ Equity

Additional Total

Common Stock Paid-in Accumulated Stockholders’

Shares Amount Capital Deficit Equity

Stock-based compensation expense — — 7,958,800 — 7,958,800

See accompanying notes to consolidated financial statements.

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MaxCyte, Inc.

Consolidated Statements of Cash Flows

Year Ended December 31,

Cash flows from operating activities:

Changes in operating assets and liabilities:

Right of use asset – finance lease 63,500 83,400 —

Cash flows from investing activities:

Proceeds from sale of equipment 4,600 — —

Cash flows from financing activities:

Principal payments on finance leases (66,100) (63,700) —

Supplemental cash flow information:

Supplemental disclosure of non-cash investing and financing activities:

Issuance of warrant in conjunction with debt transaction $ — — 60,700

Other liability reduction due to exercise of warrant $ 1,086,600 $ — $ —

See accompanying notes to consolidated financial statements.

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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 global life sciences company focused on advancing the discovery, development and commercialization of next-generation cell therapies. MaxCyte leverages its proprietary cell engineering technology platform to enable the programs of its biotechnology and pharmaceutical company customers who are engaged in cell therapy, including gene editing and immuno-oncology, as well as in drug discovery and development and biomanufacturing. The Company licenses and sells its instruments and technology and sells its consumables to developers of cell therapies and to pharmaceutical and biotechnology companies for use in drug discovery and development and biomanufacturing. In early 2020, the Company established a wholly owned subsidiary, CARMA Cell Therapies, Inc. (“CCTI”), as part of its development of CARMA, MaxCyte’s proprietary, mRNA-based, clinical-stage, immuno-oncology cell therapy. CARMA ceased all material operations by the end of March 2021.

The COVID-19 pandemic has disrupted economic markets and the economic impact, duration and spread of related effects is uncertain at this time and difficult to predict. As a result, it is not possible to ascertain the overall future impact of COVID-19 on the Company’s business and, depending upon the extent and severity of such effects, including, but not limited to potential slowdowns in customer operations, extension of sales cycles, shrinkage in customer capital budgets or delays in customers’ clinical trials, the pandemic could have a material adverse effect on the Company’s business, results of operations, financial condition and cash flows. In 2020 and 2021, the Company made adjustments to its operating, sales and marketing practices to mitigate the effects of COVID-19 restrictions which reduced planned spending, particularly on travel and marketing expenditures. In addition, COVID-19 restrictions may have delayed or slowed the research activities of some existing and prospective customers. It is not possible to quantify the impact of COVID-19 on the Company’s revenues and expenses to date or its expected impact on future periods.

The Company’s registration statement on Form S-1 related to its initial public offering of common stock in the United States (the “IPO”) was declared effective on July 29, 2021, and the Company’s common stock began trading on the Nasdaq Global Select Market on July 30, 2021. On August 3, 2021, the Company issued and sold 15,525,000 shares of common stock in the IPO at a price to the public of $13.00 per share, inclusive of 2,025,000 shares issued pursuant to the full exercise of the underwriters’ option to purchase additional shares. The IPO generated gross proceeds to the Company of $201.8 million. The Company received aggregate net proceeds of $184.3 million from the IPO after deducting aggregate underwriting commissions and offering costs of $17.6 million.

2. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”).

Prior years’ depreciation and amortization expenses included in individual functional operating expense categories were reclassified on the consolidated statement of operations to one functional expense category “Depreciation and Amortization Expense” to conform with current year presentation. For the years ended 2020 and 2019, the amounts of $1,025,100 and $541,300 were reclassified from other functional operating expenses to depreciation and amortization expense, respectively. This reclassification did not impact the Company’s balance sheets, statements of cash flows, and statements of change in stockholders’ equity.

Use of Estimates

The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at

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the date of the financial statements and the reported amount of revenues and expenses during the reporting period. In the accompanying consolidated financial statements, estimates are used for, but not limited to, revenue recognition, stock-based compensation, allowance for doubtful accounts, allowance for inventory obsolescence, accruals for contingent liabilities, accruals for clinical trials, deferred taxes and valuation allowance, and the depreciable lives of fixed assets. Actual results could differ from those estimates.

Principles of Consolidation

The consolidated financial statements include the accounts of the Company and its wholly owned subsidiary, CCTI. All significant intercompany balances have been eliminated in consolidation.

Concentrations of Risk

Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash and cash equivalents, marketable securities and trade receivables. The Company’s cash and cash equivalents balances may exceed federally insured limits and cash may also be deposited in foreign bank accounts that are not covered by federal deposit insurance. The Company does not believe that this results in any significant credit risk. The Company invests its excess cash in money market funds, commercial paper and corporate debt. The Company has established guidelines relative to credit ratings, diversification and maturities that seek to maintain safety and liquidity.

Significant customers are those that accounted for 10% or more of the Company’s total revenue for the period or accounts receivable as the end of a reporting period. During the years ended December 31, 2021, 2020 and 2019, one customer represented 21%, 15% and 10% of revenue, respectively. As of December 31, 2021, two customers accounted for 16% and 13% of accounts receivable, respectively. One customer accounted for 13% of accounts receivable at December 31, 2020.

Certain components included in the Company’s products are obtained from a single source or a limited group of suppliers. During the years ended December 31, 2021, 2020 and 2019, the Company purchased approximately 33%, 47% and 56% of its inventory from a single supplier, respectively. At December 31, 2021, amounts payable to one supplier totaled 14% of total accounts payable. As of December 31, 2020, amounts payable to three suppliers totaled 62% of total accounts payable.

Foreign Currency

The Company’s functional currency is the US Dollar; transactions denominated in foreign currencies are transacted at the exchange rate in effect at the date of each transaction. Differences in exchange rates during the period between the date a transaction denominated in foreign currency is consummated and the date on which it is either settled or at the reporting date are recognized in the consolidated statements of operations as general and administrative expense. For the year ended December 31, 2021, 2020 and 2019, the Company recognized $72,000 in foreign currency transaction loss, $81,800 in foreign currency transaction gain and $24,700 in foreign currency transaction loss, respectively.

Fair Value

Fair value is the price that would be received from the sale of an asset or paid to transfer a liability assuming an orderly transaction in the most advantageous market at the measurement date. US GAAP establishes a hierarchical disclosure framework which prioritizes and ranks the level of observability of inputs used in measuring fair value. These tiers include:

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See Note 7 for additional information regarding fair value.

Cash, Cash Equivalents and Short-term Investments

Cash and cash equivalents consist of financial instruments including money market funds and commercial paper with original maturities of less than 90 days. Short-term investments consist of commercial paper and corporate bonds with original maturities greater than 90 days and less than one year. All money market funds, commercial paper and corporate debt instruments are recorded at amortized cost unless they are deemed to be impaired on an other-than-temporary basis, at which time they are recorded at fair value using Level 2 inputs.

Inventory

The Company sells or licenses products to customers. The Company uses the average cost method of accounting for its inventory and adjustments resulting from periodic physical inventory counts are reflected in costs of goods sold in the period of the adjustment. Inventory is carried at the lower of cost or net realizable value.

Accounts Receivable

Accounts receivable are reduced by an allowance for doubtful accounts, if needed. The allowance for doubtful accounts reflects the best estimate of probable losses determined principally on the basis of historical experience and specific allowances for known troubled accounts. All accounts or portions thereof that are deemed to be uncollectible or to require an excessive collection cost are written off to the allowance for doubtful accounts. The Company determined no allowance was necessary at December 31, 2021 and 2020.

Property and Equipment

Property and equipment are stated at cost. Depreciation is computed using the straight-line method. Office equipment (principally computers) is depreciated over an estimated useful life of three years. Laboratory equipment is depreciated over an estimated useful life of five years. Furniture is depreciated over a useful life of seven years. Leasehold improvements are amortized over the shorter of the estimated lease term or useful life. Instruments represent equipment held at a customer’s site that is typically leased to customers on a short-term basis and is depreciated over an estimated useful life of five years.

Property and equipment include capitalized costs to develop internal-use software. Applicable costs are capitalized during the development stage of the project and include direct internal costs, third-party costs and allocated interest expenses as appropriate.

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. The Company recognized no impairment in either of the years ended December 31, 2021 or 2020.

Deferred Offering Costs

The Company capitalizes certain legal, accounting and other third-party fees that are directly associated with in-process equity financings as deferred offering costs (non-current) until such financings are consummated or determined not to be probable of consummation. After consummation of the equity financing, these costs are recorded in stockholders’ equity as a reduction of proceeds received as a result of the offering. If the equity financing is no longer considered

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probable of being consummated, all deferred offering costs will be charged to operating expenses in the consolidated statement of operations at such time.

During the third quarter of 2021, the Company netted $17.6 million in issuance costs against IPO proceeds (see Note 1) and additional paid-in capital. As of December 31, 2021 and 2020, there were no capitalized deferred offering costs in the consolidated balance sheets.

Revenue Recognition

The Company analyzes contracts to determine the appropriate revenue recognition using the following steps: (i) identification of contracts with customers; (ii) identification of distinct performance obligations in the contract; (iii) determination of contract transaction price; (iv) allocation of contract transaction price to the performance obligations and (v) determination of revenue recognition based on timing of satisfaction of the performance obligations.

In some arrangements, product and services have been sold together representing distinct performance obligations. In such arrangements the Company allocates the sale price to the various performance obligations in the arrangement on a relative selling price basis. Under this basis, the Company determines the estimated selling price of each performance obligation in a manner that is consistent with that used to determine the price to sell the deliverable on a standalone basis.

The Company recognizes revenue upon the satisfaction of its performance obligation (generally upon transfer of control of promised goods or services to its customers) in an amount that reflects the consideration to which it expects to be entitled in exchange for those goods or services.

The Company defers incremental costs of obtaining a customer contract and amortizes the deferred costs over the period that the goods and services are transferred to the customer. The Company had no material incremental costs to obtain customer contracts in any period presented.

Deferred revenue results from amounts billed in advance to customers or cash received from customers in advance of services being provided.

Cost of Goods Sold

Cost of goods sold primarily consists of costs for raw material parts, contract manufacturer costs, salaries, overhead, leased equipment depreciation and other direct costs related to sales recognized as revenue in the 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 paid by customers are included in cost of goods sold.

Stock-Based Compensation

The Company grants stock-based awards in exchange for employee, consultant and non-employee director services. The value of the award is 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

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the expected volatility, expected dividend yield, risk-free rate of interest and the expected life of the award. A discussion of management’s methodology for developing each of the assumptions used in the Black-Scholes model is as follows:

Expected Volatility

Volatility is a measure of the amount by which a financial variable such as a share price has fluctuated (historical volatility) or is expected to fluctuate (expected volatility) during a period. The Company does not currently have sufficient history with its own common stock to determine its actual volatility. The Company has been able to identify several public entities of similar size, complexity and stage of development; accordingly, historical volatility has been calculated for the periods presented 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. Therefore, the Company used an expected dividend yield of zero.

Risk-Free Interest Rate

This approximates the US Treasury rate for the day of each option grant during the year, having a term that closely resembles the expected term of the option.

Expected Term

This is the period that the options granted are expected to remain unexercised. Options granted have a maximum term of ten years. The Company estimates the expected term of the options to be approximately six years for options, with a majority vesting over a four-year period, using the simplified method. Over time, management intends to track estimates of the expected term of the option term so that estimates will approximate actual behavior for similar options.

Expected Forfeiture Rate

The Company records forfeitures as they occur.

The fair value of stock options was estimated using the Black-Scholes option-pricing model based on the following assumptions during the years ended:

December 31,

Expected term (in years) 6 6 6

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,

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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 on the consolidated financial statements.

The Company is subject to taxation in various jurisdictions in the United States and abroad and remains subject to examination by taxing jurisdictions for 2017 and all subsequent periods. The Company had a Federal Net Operating Loss (“NOL”) carryforward of $90.3 million as of December 31, 2021, which was generally available as a deduction against future income for US federal corporate income tax purposes, subject to applicable carryforward limitations. The Company’s NOLs are limited on an annual basis, subject to certain carryforward provisions, pursuant to Section 382 of the Internal Revenue Code of 1986, as amended, as a result of a greater than 50% change in ownership that occurred in prior periods. The Company has calculated that for the period ending December 31, 2022, the cumulative limitation amount exceeds the NOLs subject to the limitation. In addition, the Company’s NOLs may also be limited as a result of subsequent changes in ownership.

Leases

Right-of-use (“ROU”) assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent its obligation to make lease payments arising from the lease. In transactions where the Company is the lessee, at the inception of a contract, the Company determines if the arrangement is, or contains, a lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. Lease expense is recognized on a straight-line basis over the lease term.

The Company has made certain accounting policy elections for leases where it is the lessee whereby the Company (i) does not recognize ROU assets or lease liabilities for short-term leases (those with original terms of 12-months or less) and (ii) combines lease and non-lease elements of its operating leases. See Note 9 for additional details over leases where the Company is the lessee.

All transactions where the Company is the lessor are short-term (one year or less) and have been classified as operating leases. All leases require upfront payments covering the full period of the lease and thus, there are no future payments expected to be received from existing leases. See Note 3 for details over revenue recognition related to lease agreements.

Loss Per Share

Basic loss per share is computed by dividing net loss available to common shareholders by the weighted average number of shares of Common Stock outstanding during the period.

For periods of net income, and when the effects are not anti-dilutive, diluted earnings per share is computed by dividing net income available to common shareholders by the weighted-average number of shares outstanding plus the impact of all potential dilutive common shares, consisting primarily of common stock options and stock purchase warrants using the treasury stock method.

For periods of net loss, diluted loss per share is calculated similarly to basic loss per share because the impact of all dilutive potential common shares is anti-dilutive. The number of anti-dilutive shares, consisting of stock options and stock purchase warrants, which has been excluded from the computation of diluted loss per share, was 12.4 million, 12.9 million and 10.4 million for the years ended December 31, 2021, 2020 and 2019, respectively.

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Recent Accounting Pronouncements

Recently Adopted

On January 1, 2021, the Company adopted new guidance addressing income taxes, which is intended to simplify various aspects related to the accounting for income taxes. The guidance removes certain exceptions to the general principles in Accounting Standards Codification (“ASC”) 740, Income Taxes, and also clarifies and amends existing guidance to improve consistent application. The adoption did not have a material effect on the Company’s consolidated financial statements.

New Accounting Pronouncements Not Yet Adopted

In June 2016, the Financial Accounting Standards Board (“FASB”) issued guidance with respect to measuring credit losses on financial instruments, including trade receivables. The guidance eliminates the probable initial recognition threshold that was previously required prior to recognizing 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 December 15, 2022, including interim periods within those fiscal years. The adoption of certain amendments of this guidance must be applied on a modified retrospective basis and the adoption of the remaining amendments must be applied on a prospective basis. The Company is currently evaluating the impact, if any, that this new accounting pronouncement will have on its consolidated financial statements.

In August 2020, the FASB issued guidance with respect to (i) accounting for convertible instruments, (ii) accounting for contracts in an entity’s own equity as derivatives and (iii) earnings per share calculations. The guidance attempts to simplify the accounting for convertible instruments by eliminating the requirement to separate embedded conversion options in certain circumstances. The guidance also provides for updated disclosure requirements for convertible instruments. The guidance further updates the criteria for determining whether a contract in an entity’s own equity can be classified as equity. Lastly, the guidance specifically addresses how to account for the effect of convertible instruments and potential cash settled instruments in calculating diluted earnings per share. The guidance is effective for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. The adoption of this guidance may be applied on a modified retrospective basis or a full retrospective basis. The Company is currently evaluating the impact, if any, that this new accounting pronouncement will have on its consolidated financial statements.

The Company has evaluated all other issued and unadopted Accounting Standards Updates and believes the adoption of these standards will not have a material impact on its results of operations, financial position or cash flows.

3. Revenue

Revenue is principally from the sale of instruments and processing assemblies, and extended warranties and the lease of instruments, which lease agreements also include customer-specific milestone payments. In some arrangements, product and services have been sold together representing distinct performance obligations. In these arrangements the Company allocates the sale price to the various performance obligations in the arrangement on a relative selling price basis. Under this basis, the Company determines the estimated selling price of each performance obligation in a manner that is consistent with that used to determine the price to sell the deliverable on a standalone basis.

Revenue is recognized at the time control is transferred to the customer and the performance obligation is satisfied. Revenue from the sale of instruments and processing assemblies is generally recognized at the time of shipment to the customer, provided no significant vendor obligations remain and collectability is reasonably assured. Revenue from equipment leases is recognized ratably over the contractual term of the lease agreement and when specific milestones are achieved by a customer. Licensing fee revenue is recognized ratably over the license period. Revenue from fees for research services is recognized when services have been provided.

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Disaggregated revenue for the year ended December 31, 2021 is as follows:

Revenue from Revenue

Contracts from

with Lease Total

Customers Elements Revenue

Disaggregated revenue for the year ended December 31, 2020 is as follows:

Revenue from Revenue

Contracts from

with Lease Total

Customers Elements Revenue

Disaggregated revenue for the year ended December 31, 2019 is as follows:

Revenue from Revenue

Contracts from

with Lease Total

Customers Elements Revenue

Additional disclosures relating to Revenue from Contracts with Customers

Changes in deferred revenue for the years ended December 31, 2021, 2020 and 2019 were as follows:

Year Ended December 31,

Remaining contract consideration for which revenue has not been recognized due to unsatisfied performance obligations with a duration greater than one year was $1,345,200 at December 31, 2021, of which the Company expects to recognize $894,900 in 2022, $208,200 in 2023, $61,200 in 2024, $21,400 in 2024 and $159,500thereafter.

In the years ended December 31, 2021, 2020 and 2019, the Company did not incur, and therefore did not defer, any material incremental costs to obtain contracts or costs to fulfil contracts.

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4. Debt

The Company originally entered into a credit facility with MidCap Financial SBIC, LP (“MidCap”) in March 2014. In February 2019, the Company paid off the MidCap credit facility in full in accordance with its terms and conditions.

In November 2019, the Company entered into a new credit facility with MidCap. The credit facility provided for a $5 million term loan maturing on November 1, 2024. The term loan provided for (i) an interest rate of one-month Libor plus 6.5% with a 1.5% Libor floor, (ii) monthly interest payments, (iii) 30monthly principal payments of approximately $166,700 beginning June 2022 and (iv) a 3% final payment fee. The Company used the proceeds from the credit facility for general operating purposes. The debt was collateralized by substantially all assets of the Company. At December 31, 2020, the term loan had an outstanding principal balance of $5 million and $83,000 of unamortized debt discount. In March 2021, the Company repaid the MidCap loan in full. The Company incurred fees of $260,000 associated with early repayment of the loan. The unamortized debt discounts and fees were expensed and recorded as interest expense.

In April 2020, the Company received a loan from Silicon Valley Bank in the amount of $1,440,000 under the US Small Business Administration’s Paycheck Protection Program (“PPP”). The PPP was established as part of the US Coronavirus Aid, Relief, and Economic Security (“CARES”) Act and provided for potential forgiveness of the loan upon the Company meeting certain conditions as to the use of the proceeds. The loan provided for interest at 1% and a maturity date of April 2022. In May 2020, the Company repaid the loan in full.

5. Stockholders’ Equity

MXCT US Equity

MXCT · 10-K · period ended 2021-12-31

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Item 7A. Quantitative and Qualitative Disclosures about Market Risk

Item 8. Financial Statements and Supplementary Data.

MXCT US Equity☆

MXCT · 10-K · period ended 2021-12-31

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Item 7A. Quantitative and Qualitative Disclosures about Market Risk

Item 8. Financial Statements and Supplementary Data.

MXCT US Equity