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 the discovery, development and commercialization of next-generation cell therapeutics and to support innovative cell-based research and development. Over more than two decades, we have developed and commercialized our proprietary Flow Electroporation technology, 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 therapies. The ExPERT family of products includes four instruments, which we call the ATx, STx, GTx and VLx, and related software protocols, as well as a portfolio of proprietary related disposables and consumables. We launched the VLx instrument in September 2022.

Our disposables and consumables include 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 150 granted U.S. and foreign patents and more than 95 pending patent applications worldwide.

From leading commercial cell therapy drug and biologic developers and top biopharmaceutical companies to top academic and government research institutions, including the 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 a majority of the top 25 pharmaceutical companies based on 2022 global revenue, to hundreds of biotechnology companies and academic centers focused on translational research. As of December 31, 2023, we have placed more than 680 of our electroporation instruments with customers worldwide.

Historically, we have financed our operations primarily from the issuance and sale of equity securities, previous debt borrowings and cash flows from operations. On August 3, 2021, we issued and sold 15,525,000 shares of common stock in our U.S. 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.

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We believe that our current cash, cash equivalents and short-term investments will enable us to fund our operating expenses and capital expenditure requirements for at least the next 12 months from the date of the filing of this Annual Report. 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.

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 $41.3 million and $44.3 million for the years ended December 31, 2023 and 2022, respectively, and incurred net losses of $37.9 million and $23.6 million for those same years. As of December 31, 2023, we had an accumulated deficit of $175.8 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.

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 SPL agreements.

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 four versions of our instruments, the ATx, the STx, the GTx and the VLx. The ATx is primarily sold across geographic markets in which we currently sell our technology. 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 launched the VLx in September 2022 to provide our customers with an easier to use system that incorporates the benefits of the ExPERT platform. 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 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 or biologic 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 discovery only, we typically sell the instrument outright. Each of the ATx, STx, GTx and VLx instruments have different prices based on the instrument’s features, with the VLx 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 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

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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 may 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 preclinical or clinical purposes. Once we have leased an instrument to a customer, we generally have high visibility 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 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, which could result in our actual future lease revenues differing from our estimates and projections.

Our installed base of electroporation instruments has grown to over 680 instruments as of December 31, 2023. This installed base includes both instruments sold to customers and instruments licensed for research and clinical use. Because of the size of the drug and biologic discovery market and our long history in that market, the installed base of instruments is currently weighted more heavily towards instruments sold for 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, product discovery, academic and other 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 36 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 or biologic 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 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 clinical development and potentially

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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:

•the purpose for which the customer is using the platform;

•the relative pricing of our PAs;

•the progression of cell therapy products through preclinical and clinical development;

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

•the 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 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, improvements to existing PAs, and complementary products. 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 anticipated if 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 purchase 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 preclinical work towards clinic trials. However, once a cell therapy customer using one of our ExPERT instruments advances their preclinical 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 preclinical development.

We refer to these arrangements as SPL partnerships, the terms of which contain not only higher annual, non-exclusive 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 2024, we have entered into 26 SPL partnerships with commercial cell therapy developers, and those licenses currently allow for over 160 clinical development programs in the aggregate. On average, our current SPL partnerships allow for approximately six product candidates per license, although this average may change over time. SPL partnerships typically 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, precommercial clinical progress events or commercial sales levels.

Of the over 160 programs associated with our current SPLs, one is in commercial stage, and 16 of those programs are currently active in clinical development, meaning they have at least an FDA-cleared IND application or foreign equivalent. Our 26 SPLs have the potential to generate over $1.95 billion in precommercial 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

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customer’s development pipeline or successfully complete the clinical 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 SPL partnerships. We entered into seven agreements in 2023 and have entered into three agreements thus far in 2024 as of March 1, 2024.

For the year ended December 31, 2023, two cell therapy companies with which we have entered into an SPL accounted for 39% of our total revenue, and our five largest SPL partners accounted for an aggregate of approximately 52% 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 SPL partnerships will depend in large part on the clinical and regulatory achievements of our customers. Generally, precommercial milestone payments become larger as programs move through clinical development. We rely in part on our customers’ public disclosures around regulatory timelines to forecast our receipt of precommercial milestone payments. While we expect our forecasting ability to improve over time as more of our customers’ programs advance through clinical development 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 precommercial 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 generated overall gross margins of nearly 90% for the last six years, although our margins vary depending on our revenue mix from instruments, PAs and milestones under SPL partnerships and other factors. 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 cGMP-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 could negatively impact 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 SPL partnerships on terms similar to those currently in effect.

We expect our gross margins to benefit from realization of the economics from our SPL partnership agreements described above, to the extent that such milestones and/or sales-based payments 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 revenues is uncertain. Margins may also experience downward pressure during the investment phase of our internal PA production ramp up, increases in labor and materials costs, expansion of our PA portfolio, future design changes or the mix of PAs sold, or other factors, but 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 precommercial 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 continue to improve over time as more of our customers’ programs move through clinical development 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 precommercial milestones to be somewhat unpredictable. This number may fluctuate due to the success of our commercial partners. Additionally, the addition of a large SPL partnership in which one SPL partner uses multiple instruments as part of their research, clinical or commercial program, 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) 683 616 502

Number of active SPLs 23 18 15

Total number of licensed clinical programs (SPL clients only) >160 >125 >95

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

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Components of Our Results of Operations

Revenue

We generate revenue principally from the sale of instruments, single-use PAs and buffers as well as from the lease of instruments to our customers. Our SPL partnerships 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.

Our business and revenue growth strategy currently 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 in their own discretion, leased instruments and disposables revenue streams have historically formed an important component of our 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 SPL partnerships, 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 SPL partnerships. 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. Core revenue includes sales and leases of instruments and disposables to cell therapy and drug discovery customers, excluding SPL program-related revenue.

Program-related revenue includes precommercial 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. 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. Leases of instruments include warranty during the lease term without additional charge. 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 buffers. Customers purchase an ATx, STx, GTx or VLx 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 and customer base grow.

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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 regulatory 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 and customer base grow.

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 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, the proportion of sales made through third-party distributors, 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 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. Nominated Advisor 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 leasehold improvements over their respective lease terms.

Other Income (Expense)

Interest income 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. Other expense for the year ended December 31, 2022 related to a write-off of leasehold improvements due to early termination of a prior facility lease.

Provision for Income Taxes

We did not recognize a benefit for the net operating losses we incurred for the years ended December 31, 2023 and 2022. As of December 31, 2023, we had U.S. net operating loss carryforwards of $88.9 million, which may be available to offset future taxable income and begin to expire in 2025, 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.

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Results of Operations

Comparison of the Years Ended December 31, 2023 and 2022

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 3,985 2,528

Other income (expense)

Other expense — (127)

Revenue

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

Year Ended

December 31, Change

(in thousands, except percentages)

Core Revenue:

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The following table provides details regarding our core business revenue for the periods presented:

Year Ended

December 31, Change

(in thousands, except percentages)

Core revenue:

Total revenue for the year ended December 31, 2023 was $41.3 million, a decrease of $3.0 million, or 7%, compared to revenue of $44.3 million during the year ended December 31, 2022. The decrease was primarily driven by the decreases in total core revenue described below.

Total core revenue for the year ended December 31, 2023 was $29.8 million, a decrease of $9.8 million, or 25%, compared to core revenue of $39.6 million for the year ended December 31, 2022. Our overall decrease in core revenue was primarily driven by revenue decreases in instrument sales and disposable sales in the cell therapy market and drug discovery markets. Revenue from instrument sales and disposable sales decreased by $3.4 million and $5.7 million, respectively, in part due to the timing of purchases by customers and partially attributable to challenges in the macro environment affecting the cell therapy and drug discovery markets. Revenue from lease elements and other core revenue decreased $0.6 million and $0.1 million, respectively, for the year ended December 31, 2023 compared to the year ended December 31, 2022.

The $6.9 million increase in program-related revenues resulted from achievement of contractually specified clinical and regulatory milestones and reflects the 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 continue to experience variability for some time, although we anticipate that variability may moderate as the volume of SPL partnerships and associated milestones grows.

Cost of Goods Sold and Gross Profit

Year Ended December 31, Change

(in thousands, except percentages)

Gross margin 89% 88%

Cost of goods sold decreased by $0.4 million, or 7%, for the year ended December 31, 2023, compared to the year ended December 31, 2022. The decrease was primarily driven by decreased revenue from instrument sales and disposable sales.

Gross profit decreased by $2.6 million, or 7%, for the year ended December 31, 2023, compared to the year ended December 31, 2022. The decrease was primarily driven by decreased revenue from instrument and disposable sales, offset by an increase in inventory reserves of $0.7 million.

During the year ended December 31, 2023, gross margin was 89%, compared to 88% in the same period of 2022. The increase was primarily driven by an increase in program related revenue, offset by an increase in cost of goods sold due to initial scale-up of our in-house manufacturing and inventory reserves.

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Operating Expenses

Research and Development

Year Ended December 31, Change

(in thousands, except percentages)

Research and development expenses increased by $4.3 million, or 22%, for the year ended December 31, 2023 compared to the year ended December 31, 2022. The increase was primarily driven by a $1.2 million increase in compensation expenses as a result of increases in headcount, a $1.1 million increase in lab expense and new product development, a $1.0 million increase in stock-based compensation, a $0.5 million increase in travel expenses, $0.4 million increase in professional service fees relating to new product and regulatory consultants and a $0.1 million increase in other expenses.

Sales and Marketing

Year Ended December 31, Change

(in thousands, except percentages)

Sales and marketing expenses increased by $8.3 million, or 45%, for the year ended December 31, 2023, compared to the year ended December 31, 2022. The increase was primarily driven by a $4.3 million increase in compensation expenses as a result of increases in headcount, a $1.2 million increase in occupancy expenses, a $0.8 million increase in travel expenses, a $0.7 million increase in stock-based compensation, a $0.6 million increase in marketing expenses, a $0.4 million increase in professional fees, and a $0.3 million increase in general office expenses.

General and Administrative

Year Ended December 31, Change

(in thousands, except percentages)

General and administrative expense increased by $4.2 million, or 16%, for the year ended December 31, 2023, compared to the year ended December 31, 2022. The increase was primarily driven by a $1.9 million increase in compensation expenses, a $1.6 million increase in professional fees, a $0.7 million increase in general office expenses, a $0.5 million increase in stock-based compensation, a $0.5 million increase in legal fees, a $0.2 million increase in memberships, and a $0.2 million increase in travel and other expenses, partially offset by a $0.9 million reduction in public company fees, and a $0.5 million decrease in occupancy expenses.

Depreciation and Amortization

Year Ended December 31, Change

(in thousands, except percentages)

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Depreciation and amortization expense increased by $1.5 million, or 58%, for the year ended December 31, 2023, compared to the year ended December 31, 2022. The increase was primarily driven by increases in leasehold improvements and investments in laboratory equipment and consignment instruments.

Interest and Other Income (Expense)

Year Ended December 31, Change

(in thousands, except percentages)

Other expense for the year ended December 31, 2022 was primarily related to a write-off of leasehold improvements due to early termination of a prior facility lease. We did not incur other expense for the year ended December 31, 2023. The increase in interest and other income was driven by increases in interest rates and a higher weighted average balance of interest-bearing securities held during the year ended December 31, 2023.

Liquidity and Capital Resources

Since our inception, we have experienced losses and negative cash flows from operations. For the years ended December 31, 2023 and 2022, we incurred net losses of $37.9 million and $23.6 million, respectively. As of December 31, 2023, we had an accumulated deficit of $175.8 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 U.S. 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, 2023, we had cash and cash equivalents and short-term investments of $168.3 million.

We expect to incur 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 that our existing cash, cash equivalents, short-term investments and internally generated cash flows will enable us to fund our operating expenses and capital expenditure requirements for at least the next 12 months.

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;

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• 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 may 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 (decrease) in cash and cash equivalents $ 35,441 $ (36,718)

Operating Activities

Net cash used in operating activities for the year ended December 31, 2023 was $21.7 million, and consisted primarily of our net loss of $37.9 million, offset in part by net non-cash expenses of $12.4 million, including stock-based compensation of $14.0 million, depreciation and amortization expenses of $4.2 million, an increase in our inventory reserve of $0.7 million, and other non-cash expenses totaling $0.6 million, offset by the amortization of $7.1 million of discounts on investments. We also had net cash inflows of $3.8 million due to net changes in our operating assets and liabilities. Net changes in our operating assets and liabilities consisted primarily of a $5.2 million decrease in accounts receivable, a $1.9 million decrease in tenant improvement allowances receivable, a $3.3 million increase in accounts payable, accrued expenses and other, and a $0.4 million decrease in other assets, offset by a $4.5 million increase in inventory, a $1.6 million decrease in deferred revenue, a $0.6 million decrease in prepaid expenses and other current assets, and a $0.2 million decrease in operating lease and other liabilities.

Net cash used in operating activities for the year ended December 31, 2022 was $14.8 million, and consisted primarily of our net loss of $23.6 million, offset in part by net non-cash expenses of $12.8 million, including stock-based compensation of $11.8 million, depreciation and amortization expenses of $2.7 million, non-cash lease expense and other non-cash charges of $1.0 million, offset by the amortization of $2.7 million of discounts on investments. We also had net cash outflows of $3.2 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 lease liabilities of $5.5 million, an increase in other liabilities of $0.9 million and a decrease in prepaid expenses and other current assets of $0.3 million, partially offset by a $4.6 million increase in accounts receivable, a $3.5 million increase in inventory, a $1.9 million increase in tenant improvement allowances receivable and a $0.5 million increase in other assets.

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Investing Activities

Cash provided by investing activities during the year ended December 31, 2023 was $55.0 million, which was primarily attributable to maturities of investments of $313.8 million, partially offset by purchases investments of $255.1 million, and purchases of property and equipment of $3.7 million. Purchases of investments 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, 2022 was $24.8 million, which was primarily attributable to maturities of investments of $284.6 million, partially offset by purchases of investments of $290.9 million, capitalized lease-related construction expenses of $14.2 million, purchases of equipment and furniture of $3.9 million and capitalized internal-use software of $1.0 million.

Financing Activities

Net cash provided by financing activities during the year ended December 31, 2023 was $2.1 million, which consisted of proceeds from the exercise of stock options and employee purchases from our employee stock purchase plan.

Net cash provided by financing activities during the year ended December 31, 2022 was $2.9 million, which consisted exclusively of proceeds from the exercise of stock options.

Contractual Obligations and Commitments

Our contractual obligations and commitments as of December 31, 2023 consisted exclusively of operating lease obligations. In May 2021, we entered into an operating lease for new office, lab and warehouse/manufacturing space. The lease for the new facility consists of three phases, with Phase 1 having commenced in December 2021, Phase 2 having commenced in the first quarter of 2022 and Phase 3 commenced in November 2023. The lease term for all phases expires on August 31, 2035. We designed and constructed the leasehold improvements with the approval of the landlord. The lease provides that the landlord will reimburse us for costs of property improvements up to amounts specified in the lease. The total incremental non-cancellable lease payments under the lease agreement are $29.6 million through the lease term. We expect to be able to fund our obligations under the new lease, both in the short term and in the long term, from cash on hand, short-term investments and operating cash flows. See Part I, Item 2, “Facilities” in this Annual Report for additional information regarding the new office lease.

On June 8, 2021, we exercised our option to early terminate one of our office and lab space lease arrangements associated with our former headquarters facility. That amended office lease expired on June 7, 2022. In June 2022, we exercised our option to early terminate our remaining subleased office, laboratory, manufacturing and other spaces associated with our former headquarters facility, which became effective in July and August 2022. These subleases previously had expiration dates in October 2023.

We had no debt obligations as of December 31, 2023 or 2022.

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 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

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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 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. 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.

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 and restricted stock units are granted primarily to employees, consultants and non-employee directors. We measure stock-based compensation expense on the

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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. The fair value is 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 either publicly traded peer group companies’ common stock (for grants before July 1, 2022) or the Company’s own common stock (for grants beginning on July 1, 2022), 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.

Emerging Growth Company Status

We are an “emerging growth company,” or EGC, under 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 EGC 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 $1.235 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.

We are also a “smaller reporting company,” as defined by Rule 12b-2 of the Exchange Act. We may continue to be a smaller reporting company if either (i) the market value of our stock held by non-affiliates is less than $250 million as of the last business day of our second fiscal quarter or (ii) our annual revenue is less than $100 million during the most recently completed fiscal year and the market value of our stock held by non-affiliates is less than $700 million as of the last business day of our second fiscal quarter. If we are a smaller reporting company at the time we cease to be an emerging growth company, we may continue to rely on exemptions from certain disclosure requirements that are available to smaller reporting companies. Specifically, as a smaller reporting company we have elected to present only the two most recent fiscal years of audited financial statements in this Annual Report. In addition, similar to emerging growth companies, smaller reporting companies have reduced disclosure obligations regarding executive compensation.

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. The primary objective of our investment approach is to preserve principal and provide liquidity. As a result, a 10% change in the level of market interest rates would not be expected to have a material effect on our business, financial condition or results of operations.

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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.

Inflation Risk

During the last two years, inflation and changing prices have not had a material effect on our business. We are unable to predict whether inflation or changing prices will materially affect our business in the foreseeable future.

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Item 8. Financial Statements and Supplementary Data.

MaxCyte, Inc.

Index to Consolidated Financial Statements

Page No

Consolidated Balance Sheets 94

Consolidated Statements of Operations 95

Consolidated Statements of Changes in Stockholders’ Equity 96

Consolidated Statements of Cash Flows 97

Notes to Consolidated Financial Statements 98

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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. (the “Company”) as of December 31, 2023 and 2022, and the related consolidated statements of operations, changes in stockholders’ equity, and cash flows for the years then ended, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of their operations and their cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the 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 12, 2024

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MaxCyte, Inc.

Consolidated Balance Sheets

(in thousands, except share and per share amounts)

December 31, December 31,

Assets

Current assets:

Short-term investments, at amortized cost 121,782 216,275

Accounts receivable - TIA (Note 8) — 1,912

Prepaid expenses and other current assets 3,899 3,258

Investments, non-current, at amortized cost 42,938 —

Right-of-use asset - operating leases 11,241 9,853

Liabilities and stockholders’ equity

Current liabilities:

Accounts payable $ 743 $ 292

Operating lease liability, current 774 157

Deferred revenue, current portion 5,069 6,713

Operating lease liability, net of current portion 17,969 15,938

Commitments and contingencies (Note 8)

Stockholders’ equity

Total liabilities and stockholders’ equity $ 268,274 $ 286,653

See accompanying notes to consolidated financial statements.

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MaxCyte, Inc.

Consolidated Statements of Operations

(in thousands, except share and per share amounts)

Year Ended December 31,

Operating expenses:

Depreciation and amortization 3,985 2,528

Other income and expense:

Other expense — (127)

Provision for income taxes — —

Basic and diluted net loss per share $ (0.37) $ (0.23)

See accompanying notes to consolidated financial statements.

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MaxCyte, Inc.

Consolidated Statements of Changes in Stockholders’ Equity

(in thousands, except share amounts)

Additional Total

Common Stock Paid-in Accumulated Stockholders’

Shares Amount Capital Deficit Equity

Stock-based compensation expense — — 11,752 — 11,752

Stock-based compensation expense — — 13,979 — 13,979

Vesting of restricted stock units 288,550 3 (3) — —

See accompanying notes to consolidated financial statements.

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MaxCyte, Inc.

Consolidated Statements of Cash Flows

(in thousands)

Year Ended December 31,

Cash flows from operating activities:

Depreciation and amortization 4,171 2,698

Non-cash lease expense 395 767

Net book value of consigned equipment sold 94 76

Loss on disposal of fixed assets 30 139

Bad debt expense 171 —

Change in excess/obsolete inventory reserve 697 —

Amortization of discounts on investments (7,120) (2,667)

Changes in operating assets and liabilities:

Accounts receivable - TIA 1,912 (1,912)

Prepaid expense and other current assets (641) 320

Accounts payable, accrued expenses and other 3,252 (150)

Operating lease liability (133) 5,482

Deferred revenue (1,644) (34)

Other liabilities (39) 871

Net cash used in operating activities (21,686) (14,783)

Cash flows from investing activities:

Purchases of property and equipment (3,700) (18,477)

Proceeds from sale of equipment 9 —

Net cash provided by (used in) investing activities 54,984 (24,823)

Cash flows from financing activities:

Proceeds from exercise of stock options 1,874 2,888

Net cash provided by financing activities 2,143 2,888

Net increase (decrease) in cash and cash equivalents 35,441 (36,718)

Cash and cash equivalents, beginning of year 11,065 47,783

Cash and cash equivalents, end of year $ 46,506 $ 11,065

Supplemental disclosure of non-cash investing and financing activities:

See accompanying notes to consolidated financial statements.

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MaxCyte, Inc.

Notes to Consolidated Financial Statements

(in thousands, except par value, share and per share amounts)

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 and biologic 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 and biologic discovery and development and biomanufacturing.

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 $201,825. The Company received aggregate net proceeds of $184,268 from the IPO after deducting aggregate underwriting commissions and offering costs of $17,557.

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”).

Use of Estimates

The preparation of consolidated financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated 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 credit losses, allowance for inventory obsolescence, accruals for contingent liabilities, 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. All significant intercompany balances have been eliminated in consolidation.

Reclassifications

Certain reclassifications have been made to prior years’ financial statements to conform to current year presentation. These reclassifications had no effect on previously reported results of operations or accumulated deficit.

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Concentrations of Risk

Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash and cash equivalents, investments 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, 2023 and 2022, one customer represented 30% and 23% of revenue, respectively. As of December 31, 2023, three customers accounted for 38% of accounts receivable. As of December 31, 2022, one customer accounted for 14% of accounts receivable.

Certain components included in the Company’s products are obtained from a single source or a limited group of suppliers. Of the inventory on hand at December 31, 2023 and 2022, the Company purchased approximately 56% and 34%, respectively, from a single supplier. At December 31, 2023, no supplier accounted for 10% or more of the Company’s total accounts payable. At December 31, 2022, amounts payable to two suppliers totaled 34% 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 years ended December 31, 2023 and 2022, the Company recognized $84 and $79 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:

See Note 6 for additional information regarding fair value.

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Cash and Cash Equivalents and 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, corporate bonds and U.S. Treasury securities and government agency bonds with original maturities greater than 90 days and less than one year. Long-term investments consist of U.S. Treasury securities and government agency bonds with maturities greater than one year. All money market funds and investments 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 and there were no changes from Level 2 for the years ended December 31, 2023 and 2022, respectively.

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. Inventory that is obsolete or in excess of forecasted usage is written down to its estimated net realizable value based on assumptions about future demand and market conditions. Inventory write-downs are charged to cost of goods sold and establish a new cost basis for the inventory.

Accounts Receivable

Accounts receivable are reduced by an allowance for expected credit losses if needed. The allowance for expected credit losses 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 expected credit losses. The Company recorded an allowance for expected credit losses of $130 at December 31, 2023. The Company determined no allowance was necessary at December 31, 2022.

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 five to 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 for the years ended December 31, 2023 or 2022.

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.

100

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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 Expense

Stock-based compensation expense is measured based on grant-date fair value. 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 uses the market closing price of its common stock as reported on the Nasdaq Global Select Market for the fair value of equity awards. The grant-date fair value of stock options is estimated using the Black-Scholes option pricing model for estimating fair value of its stock options granted. Option valuation models, including the Black-Scholes option pricing model, require the input of highly subjective assumptions, and changes in the assumptions used can materially affect the grant-date fair value of an award. These assumptions include the expected volatility, expected dividend yield, risk-free rate of interest and the expected life of the award. Historically, the Company exclusively used identified comparable companies’ stock price volatility to calculate expected volatility for the periods presented due to lack of history with its own common stock available to determine its volatility. Beginning with the third quarter of 2022, the Company has observed sufficient historical information regarding its common stock to use the Company’s common stock for the estimate of volatility in the Black-Scholes option pricing model. Management’s methodology for developing other assumptions has not changed from prior periods. A discussion of management’s methodology for developing each of the assumptions used in the Black-Scholes option pricing 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. For the first two quarters of 2022, the Company identified several public entities of similar size, complexity and stage of development to calculate historical volatility using the volatility of these companies. Beginning with the third quarter of 2022, the Company estimates its expected stock volatility based on historical volatility of its own common stock.

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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. For the Employee Stock Purchase Plan (“ESPP”), the US Treasury rate on each Offering Date is used for a term that approximates the Purchase Period.

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. For the ESPP, the term of each Offering Period is used.

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,

Risk-free interest rate 3.3-4.6% 1.9-4.0%

Expected term (in years) 4-6 6

The fair value of the shares under the ESPP was estimated using the Black-Scholes option-pricing model based on the following assumptions during the year ended:

December 31

Expected volatility 57-60%

Risk-free interest rate 5.36-5.43%

Expected term (in years) 0.5

See Note 4 for additional information regarding stock-based compensation.

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.

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Management uses a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return, as well as guidance on derecognition, classification, interest and penalties and financial statement reporting disclosures. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities. The Company recognizes interest and penalties accrued on any unrecognized tax exposures as a component of income tax expense. The Company has not identified any uncertain income tax positions that could have a material impact 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 2020 and all subsequent periods. The Company has a federal Net Operating Loss (“NOL”) carryforward of approximately $88.9 million as of December 31, 2023, of which approximately $32.7 million begins to expire in 2025. Certain of the Company’s NOLs were initially limited on an annual basis pursuant to Section 382 of the Internal Revenue Code of 1986 (“Section 382”), as amended, as a result of a cumulative change in ownership that occurred in 2016; however, as of December 31, 2023, the Company has determined that the cumulative limitation amount exceeds the NOLs subject to the limitation and, as a result, no annual limitation remains.

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 8 for additional details about leases where the Company is the lessee.

All transactions in which 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 about revenue recognition related to lease agreements.

Comprehensive Loss

For the years ended December 31, 2023 and 2022, comprehensive loss equaled net loss; therefore, a separate statement of comprehensive loss is not included in the accompanying financial statements.

Loss Per Share

Basic loss per share is computed by dividing net loss available to common stockholders 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 stockholders 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 restricted stock units excluded from the computation of diluted loss per share, was 16.7 million and 15.0 million for the years ended December 31, 2023 and 2022, respectively.

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Recent Accounting Pronouncements

New Accounting Pronouncements Recently 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 adopted this new accounting pronouncement effective January 1, 2023 and the adoption did not have a material impact 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.

Disaggregated revenue for the year ended December 31, 2023 was as follows:

Year ended December 31, 2023

Revenue from Revenue

Contracts with from Lease Total

Customers Elements Revenue

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Disaggregated revenue for the year ended December 31, 2022 was as follows:

Year ended December 31, 2022

Revenue from Revenue

Contracts with from Lease Total

Customers Elements Revenue

Additional disclosures relating to Revenue from Contracts with Customers

Changes in deferred revenue for the years ended December 31, 2023 and 2022 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 $368 at December 31, 2023, of which the Company expects to recognize $85 in 2024, $81 in 2025, $39 in 2026, $21 in 2027, and $142thereafter.

In the years ended December 31, 2023 and 2022, the Company did not incur, and therefore did not defer, any material incremental costs to obtain contracts or costs to fulfil contracts.

4. Stockholders’ Equity

Common Stock

During the year ended December 31, 2023, the Company issued 1,192,784 shares of common stock resulting from stock option exercises, receiving gross proceeds of $1,874 and issued 288,550 shares from the vesting of restricted stock units, and issued 82,423 shares to employees pursuant to the Employee Stock Purchase Plan (“ESPP”), receiving gross proceeds of $269.

During the year ended December 31, 2022, the Company issued 1,195,208 shares of common stock as a result of stock option exercises, receiving gross proceeds of $2,888.

Preferred Stock

The Company’s certificate of incorporation authorizes 5,000,000 shares of preferred stock, par value $0.01 per share. As of December 31, 2023 and 2022, no shares of preferred stock were issued or outstanding.

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Stock Incentive Plans

The Company adopted the MaxCyte, Inc. Long-Term Incentive Plan (the “2016 Plan”) in January 2016 to provide for the awarding of (i) stock options, (ii) restricted stock, (iii) incentive shares, and (iv) performance awards to employees, officers, and directors of the Company and to other individuals as determined by the board of directors.

In December 2021, the Company adopted the MaxCyte, Inc. 2021 Inducement Plan (the “Inducement Plan”) to provide for the awarding of (i) non-qualified stock options; (ii) stock appreciation rights; (iii) restricted stock awards; (iv) restricted stock unit awards; (v) performance awards; and (vi) other awards only to persons eligible to receive grants of awards who satisfy the standards for inducement grants under Nasdaq Marketplace Rule 5635(c)(4) or 5635(c)(3), if applicable, and the related guidance under Nasdaq IM 5635-1. The board of directors reserved 2,500,000 shares for issuance under the Inducement Plan. As of December 31, 2023, options to purchase 818,400 shares remain outstanding under the Inducement Plan.

In May 2022, the Company’s board of directors adopted, and in June 2022 the Company’s stockholders approved, the MaxCyte, Inc. 2022 Equity Incentive Plan (the “2022 Plan”) to provide for the awarding of (i) incentive stock options, (ii) non-qualified stock options, (iii) stock appreciation rights, (iv) restricted stock awards, (v) restricted stock unit awards, (vi) performance awards, and (vii) other awards. Following the approval of the 2022 Plan, no additional awards can be granted under the 2016 Plan or the Inducement Plan, but all outstanding awards will continue to remain subject to the terms of the applicable plan.

Upon the effectiveness of the 2022 Plan, a total of 3,692,397 shares were initially reserved for issuance pursuant to future awards under the 2022 Plan, consisting of 1,928,000 new shares and 1,764,397 shares previously available under the 2016 Plan. If and to the extent that outstanding options under the 2016 Plan or the Inducement Plan are forfeited, the shares underlying such forfeited options will become available for issuance under the 2022 Plan. At the Company’s Annual Meeting of Stockholders held on June 22, 2023, the Company’s stockholders voted to reserve an additional 6,069,000 shares of issuance pursuant to future awards under the 2022 Plan.

Stock Option Activity

A summary of stock option activity for the years ended December 31, 2023 and 2022 is as follows:

Weighted-

Average

Weighted Remaining

Number of Average Contractual Life Aggregate

Options Exercise Price (in years) Intrinsic Value

Expired (3,327) $ 6.46

The weighted-average fair value of the options granted during the years ended December 31, 2023 and 2022 was estimated to be $2.05 and $3.48, respectively.

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The value of a stock option is recognized as expense on a straight-line basis over the requisite service period. As of December 31, 2023, total unrecognized compensation expense for outstanding stock options was $18,931, which will be recognized over the next 2.0 years.

Restricted Stock Unit Activity

During the years ended December 31, 2023 and 2022, the Company issued restricted stock unit awards (“RSUs”) under the 2022 Plan. Each RSU represents the contingent right to receive one share of common stock.

A summary of RSU activity for the years ended December 31, 2023 and 2022 is as follows:

Weighted-

Average

Weighted Remaining

Number of Average Contractual Life

RSUs Grant Date Fair Value (in years)

Outstanding at January 1, 2022 — $ —

Vested and released (288,550) $ 5.48

The value of an RSU is recognized as expense on a straight-line basis over the requisite service period. As of December 31, 2023, total unrecognized compensation expense for outstanding RSUs was $4,589, which will be recognized over the next 2.8 years.

Employee Stock Purchase Plan

The Company commenced the initial offering (the “Initial Offering”) under the MaxCyte, Inc. 2021 Employee Stock Purchase Plan (the “ESPP”). The ESPP provides an offering period of 24 months, with four purchase periods that are generally six months long (the “Purchase Period”).

The ESPP allows eligible employees to purchase a number of shares of the Company’s Common Stock up to a maximum of 15% of the employee’s earnings during the Purchase Period subject to certain limitations. The purchase price will be the lesser of 85% of the fair market value of shares on the beginning of each Purchase Period or on the Purchase Date (i.e., the last day of the Purchase Period). Participants may decrease their contribution level or withdraw from the ESPP at any time during the Purchase Period subject to certain conditions.

The first purchase period began on May 19, 2023 and ended on November 17, 2023. The second purchase period began on November 20, 2023. For the year ended December 31, 2023, the Company recognized $127 in compensation cost related to the ESPP. As of December 31, 2023, total unrecognized compensation expense related to the ESPP was $81, which will be recognized over the next 0.4 years.

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Stock-based Compensation Expense

Stock-based compensation expense recognized in connection with stock options, RSUs and the ESPP for the years ended December 31, 2023 and 2022 was classified as follows on the consolidated statements of operations:

MXCT US Equity

MXCT · 10-K · period ended 2023-12-31

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 2023-12-31

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