SEC Filing | Cytek Biosciences

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10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2022


☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO

Commission File Number 001-40632

CYTEK BIOSCIENCES, INC.

(Exact name of Registrant as specified in its Charter)


Delaware	47-2547526
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
47215 Lakeview Blvd. Fremont, California	94538
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (877) 922-9835

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.001 per share	CTKB	The Nasdaq Global Select Market

Indicate by check mark whether the Registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the Registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of May 5, 2022, there were 134,313,135 outstanding shares of the Registrant’s common stock, par value $0.001 per share.

Table of Contents


		Page
PART I	FINANCIAL INFORMATION
Item 1.	Consolidated Financial Statements (Unaudited)	2
	Consolidated Balance Sheets	2
	Consolidated Statements of Operations and Comprehensive Income (Loss)	3
	Consolidated Statements of Redeemable Convertible Preferred Stock and Stockholders' Equity	4
	Consolidated Statements of Cash Flows	5
	Notes to Consolidated Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	38
Item 3.	Quantitative and Qualitative Disclosures About Market Risk
Item 4.	Controls and Procedures

PART II	OTHER INFORMATION
Item 1.	Legal Proceedings	39
Item 1A.	Risk Factors	40
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	79
Item 3.	Defaults Upon Senior Securities	80
Item 4.	Mine Safety Disclosures	80
Item 5.	Other Information	80
Item 15.	Exhibits	81

Signatures		82

PART I - FINANCIAL INFORMATION

Item 1. Consolidated Financial Statements (Unaudited).

Cytek Biosciences, Inc.

Consolidated Balance Sheets


(In thousands, except share and per share data)	March 31, 2022			December 31, 2021
	(unaudited)			(audited)
Assets
Current assets:
Cash and cash equivalents	$	362,506		$	364,618
Trade accounts receivable, net		30,406			29,760
Inventories		37,982			32,171
Prepaid expenses and other current assets		8,218			5,184
Total current assets		439,112			431,733
Deferred income tax assets, noncurrent		10,688			9,173
Property and equipment, net		6,504			5,851
Operating lease right-of-use assets		13,839			-
Goodwill		10,144			10,144
Intangible assets, net		4,328			4,739
Other noncurrent assets		1,264			1,665
Total assets	$	485,879		$	463,305
Liabilities, redeemable convertible preferred stock and stockholders’ equity
Current liabilities:
Trade accounts payable	$	5,971		$	3,034
Legal settlement liability, current		1,554			1,463
Accrued expenses		14,640			15,251
Other current liabilities		8,386			6,352
Deferred revenue, current		12,252			7,081
Total current liabilities		42,803			33,181
Legal settlement liability, noncurrent		14,635			13,745
Deferred revenue, noncurrent		7,199			9,790
Operating lease liability, non-current		12,684			-
Other noncurrent liabilities		1,116			1,204
Total liabilities	$	78,437		$	57,920
Commitments and contingencies (Note 17)
Redeemable convertible preferred stock, $0.001 par value; 10,000,000 shares authorized, zero issued and outstanding as of March 31, 2022 and December 31, 2021; aggregate liquidation preference of zero as of March 31, 2022 and December 31, 2021.		—			—
Stockholders’ equity:
Common stock, $0.001 par value; 1,000,000,000 authorized shares as of March 31, 2022 and December 31, 2021, respectively; 134,242,930 and 133,749,663 issued and outstanding shares as of March 31, 2022 and December 31, 2021, respectively.		134			126
Additional paid-in capital		427,818			423,625
Accumulated deficit		(21,627	)		(19,606	)
Accumulated other comprehensive income		911			897
Noncontrolling interest in consolidated subsidiary		206			343
Total stockholders’ equity	$	407,442		$	405,385
Total liabilities, redeemable convertible preferred stock and stockholders’ equity	$	485,879		$	463,305

The accompanying notes are an integral part of these unaudited interim consolidated financial statements

Cytek Biosciences, Inc.

Consolidated Statements of Operations and Comprehensive (Loss) Income

(Unaudited)


	Three months ended March 31,
(In thousands, except share and per share data)	2022			2021
Revenue, net:
Product	$	31,481		$	22,700
Service		3,583			1,572
Total revenue, net		35,064			24,272
Cost of sales:
Product		11,767			7,308
Service		3,120			2,478
Total cost of sales		14,887			9,786
Gross profit		20,177			14,486
Operating expenses:
Research and development		8,025			5,094
Sales and marketing		6,960			4,277
General and administrative		7,549			3,983
Total operating expenses		22,534			13,354
(Loss) income from operations		(2,357	)		1,132
Other income (expense):
Interest expense		(590	)		(375	)
Interest income		18			10
Other expense, net		(374	)		(615	)
Total other expense, net		(946	)		(980	)
(Loss) income before income taxes		(3,303	)		152
(Benefit from) provision for income taxes		(1,145	)		50
Net (loss) income	$	(2,158	)	$	102
Less: net loss allocated to noncontrolling interests		137			-
Less: net income allocated to participating securities		—			(102	)
Net (loss) income attributable to common stockholders, basic and diluted	$	(2,021	)	$	-
Net (loss) income attributable to common stockholders per share, basic	$	(0.02	)	$	-
Net (loss) income attributable to common stockholders per share, diluted	$	(0.02	)	$	-
Weighted-average shares used in calculating net (loss) income per share, basic		133,902,523			31,557,473
Weighted-average shares used in calculating net (loss) income per share, diluted		133,902,523			35,757,157
Comprehensive (loss) income:
Net (loss) income	$	(2,158	)	$	102
Foreign currency translation adjustment, net of tax		14			202
Net comprehensive (loss) income	$	(2,144	)	$	304

The accompanying notes are an integral part of these unaudited interim consolidated financial statements

Cytek Biosciences, Inc

Consolidated Statements of Redeemable Convertible

Preferred Stock and Stockholders’ Equity (Deficit)

(Unaudited)


	Redeemable convertible									Additional							Accumulated other			Noncontrolling				Total
	preferred stock				Common stock					paid-in			Accumulated				comprehensive			interest in consolidated				stockholders’
(In thousands, except share data)	Shares		Amount		Shares		Amount			capital			deficit				income			subsidiary				equity
Balances at December 31, 2021		-	$	-		133,749,663	$	126		$	423,625		$	(19,606	)		$	897		$	343			$	405,385
Exercise of stock options						493,267		8			356														364
Stock-based compensation											3,837														3,837
Foreign currency translation adjustment, net of tax																		14							14
Net loss														(2,021	)										(2,021	)
Noncontrolling interest																					(137	)			(137	)
Balances at March 31, 2022		-	$	-		134,242,930	$	134		$	427,818		$	(21,627	)		$	911		$	206			$	407,442

	Redeemable convertible									Additional							Accumulated other			Noncontrolling				Total
	preferred stock				Common stock					paid-in			Accumulated				comprehensive			interest in consolidated				stockholders’
(In thousands, except share data)	Shares		Amount		Shares		Amount			capital			deficit				income			subsidiary				equity (deficit)
Balances at December 31, 2020		87,268,694	$	194,319		31,241,916	$	23		$	6,491		$	(22,607	)		$	65		$	—			$	(16,028	)
Exercise of stock options						533,540		1			195														196
Stock-based compensation											456														456
Foreign currency translation adjustment, net of tax																		202							202
Net income														102											102
Noncontrolling interest																					315				315
Balances at March 31, 2021		87,268,694	$	194,319		31,775,456	$	24	—	$	7,142	—	$	(22,505	)	—	$	267	—	$	315		—	$	(14,757	)

The accompanying notes are an integral part of these unaudited interim consolidated financial statements

Cytek Biosciences, Inc

Consolidated Statements of Cash Flows

(Unaudited)


	Three months ended March 31,
(In thousands)	2022			2021
Cash flows from operating activities:
Net (loss) income	$	(2,158	)	$	102
Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities:
Depreciation and amortization		794			167
Amortization of operating lease-right-of use assets		676			-
Stock-based compensation		3,837			456
Gain on equity method investment		-			(40	)
Provision for excess and obsolete inventory		74			321
Interest expenses for accretion of the legal settlement liabilities		498			372
Change in operating assets and liabilities:
Trade accounts receivable		(1,038	)		2,236
Inventories		(5,921	)		(3,614	)
Prepaid expenses and other assets		(4,351	)		(477	)
Trade accounts payable		2,782			112
Accrued expenses and other liabilities		555			135
Legal settlement liabilities		482			429
Deferred revenue		2,581			1,736
Lease liabilities		(291	)		-
Net cash (used in) provided by operating activities		(1,480	)		1,935
Cash flows from investing activities:
Purchase of property and equipment		(780	)		(509	)
Payment for additional investment in Cytek Japan, net of cash acquired		-			371
Net cash used in investing activities		(780	)		(138	)
Cash flows from financing activities:
Proceeds from issuance of common stock upon exercise of stock options		364			187
Net cash provided by financing activities		364			187
Effect of exchange rate changes on cash and cash equivalents		(216	)		481
Cash and cash equivalents:
Net (decrease) increase in cash and cash equivalents		(2,112	)		2,465
Cash and cash equivalents at beginning of period		364,618			166,119
Cash and cash equivalents at end of period	$	362,506		$	168,584
Supplemental disclosure of cash flow information:
Cash paid for taxes	$	75		$	125
Non-cash investing and financing activities:
Fixed asset purchases in accounts payable at period end	$	228		$	—
Intangible asset in accrued expenses at period end	$	40		$	—
Stock option exercise in accounts receivable at period end	$	—		$	9
Deferred financing costs in accounts payable at period end	$	—		$	369

The accompanying notes are an integral part of these unaudited interim consolidated financial statements

Cytek Biosciences, Inc.

Notes to consolidated financial statements

Description of business

Cytek Biosciences, Inc. (“Cytek” or the “Company”) is a leading cell analysis solutions company advancing the next generation of cell analysis tools by leveraging novel technical approaches. The Company has focused on becoming the premier cell analysis company through continued innovation that facilitates scientific advances in biomedical research and clinical applications.

The Company has successfully developed and manufactured its full spectrum flow cytometry platform (“instrument(s)” or “product(s)”). The Company believes its core instruments, the Aurora and Northern Lights systems, are the first full spectrum flow cytometers able to deliver high-resolution, high-content and high-sensitivity cell analysis by utilizing the full spectrum of fluorescence signatures from multiple lasers to distinguish fluorescent tags on single cells (“Full Spectrum Profiling” or “FSP”). The Company’s FSP platform includes instruments, accessories, reagents, software, and services to provide a comprehensive and integrated suite of solutions for its customers.

The Company was incorporated in the state of Delaware in December 2014 and is headquartered in Fremont, California with offices, manufacturing facilities and distribution channels across the globe.

Initial Public Offering

In July 2021, the Company priced its initial public offering (“IPO”) of 13,949,401 shares of common stock, which included the full exercise by the underwriters of their option to purchase an additional 2,184,695 shares from the Company, at an initial public offering price of $17.00 per share for gross proceeds of $237.1 million, which resulted in net proceeds to the Company of approximately $215.7 million, after deducting underwriting discounts and commissions of approximately $17.3 million and offering-related transaction costs of approximately $5.3 million. In addition, certain selling stockholders offered and sold an additional 2,799,929 shares or common stock in the IPO. The Company did not receive any proceeds from the sale of such shares by the selling stockholders.

In addition, in connection with the completion of the IPO on July 27, 2021, all outstanding shares of convertible preferred stock (see Note 11) were automatically converted into 87,268,694 shares of the Company’s common stock and were reclassified as permanent equity. Further, immediately following the closing of the IPO, the Company amended and restated its certificate of incorporation such that the total number of shares of common stock authorized to be issued was 1,000,000,000 and the total number of shares of preferred stock authorized to be issued was 10,000,000. Following the IPO, there are no shares of convertible preferred stock outstanding.

Basis of presentation and summary of significant accounting policies

The Company has prepared the accompanying unaudited interim consolidated financial statements in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). Any reference in these notes to applicable guidance is meant to refer to the authoritative U.S. GAAP as found in the Accounting Standards Codification (“ASC”) and Accounting Standards Updates (“ASUs”) of the Financial Accounting Standards Board (“FASB”).

Principles of consolidation

The unaudited interim consolidated financial statements include the accounts of Cytek Biosciences, Inc., its wholly-owned subsidiaries, Cytek Limited (HK), Cytek Biosciences B.V. (Europe), Cytek (Shanghai) Biosciences Co., Ltd., Cytek Biosciences (Wuxi) Co., Ltd., Cytoville Biosciences Shanghai Co., Ltd. and Cytek (Shanghai) Software Development Technology Co., Ltd. and its majority-owned subsidiary, Cytek Japan Kabushiki Kaisha (“Cytek Japan”). The noncontrolling interest is presented in stockholders’ equity in the consolidated balance sheets and consolidated statements of redeemable convertible preferred stock and stockholders’ equity (deficit). All intercompany accounts and transactions have been eliminated in consolidation.

On July 16, 2021, the Company effected a 1.3333-for-1 stock split of its common stock and redeemable convertible preferred stock (the “Stock Split”). All share and per share information has been retroactively adjusted to reflect the Stock Split for all periods presented.

Variable interest entities and voting interest entities

The Company determines whether it has a controlling financial interest in an entity by first evaluating whether the entity is a variable interest entity (“VIE”) and therefore subject to the consolidation requirements under the VIE model. Only if the entity does not meet the definition of a VIE, the Company will apply the voting interest model (“VOE”) or other applicable GAAP. VOEs are entities in which the total equity investment at risk is sufficient to enable the entity to finance itself independently and provides the equity holders with the obligation to absorb losses, the right to receive residual returns and the right to make decisions about the entity’s activities. The

Company consolidates VOEs in which it has greater than 50% of the voting shares and that other equity holders do not have substantive voting, participating or liquidation rights. As defined in applicable accounting standards, VIEs are entities that lack one or more of the characteristics of a voting interest entity. A controlling financial interest in a VIE is present when an enterprise has both the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance and an obligation to absorb losses or the right to receive benefits that could potentially be significant to the VIE. The Company consolidates a VIE where it has been determined that the Company is the primary beneficiary of the entity’s operations. The Company does not currently hold an interest in a VIE.

Use of estimates

The preparation of the unaudited interim consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses and the disclosure of contingent assets and liabilities in the Company’s unaudited interim consolidated financial statements and accompanying notes as of the date of the unaudited interim consolidated financial statements. These estimates and assumptions are based on current facts, historical experience and various other factors believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the recording of expenses that are not readily apparent from other sources. Actual results may differ materially and adversely from these estimates.

COVID-19

The global COVID-19 pandemic continues to evolve and the Company intends to continue to monitor it closely. In response to the COVID-19 pandemic and various resulting government directives, the Company took proactive measures to protect the health and safety of its employees, contractors, customers and visiting vendors and suppliers, including implementing social distancing and other protective measures, restricting business travel and limiting access to its facilities to vendors, suppliers and partners who are critical to its business operations. The Company communicates regularly with its suppliers so that its supply chain remains intact, and the Company has not experienced any material supply issues. The Company also developed, and continues to develop, remote learning capabilities to help its customers and partners operate and reduce the number of required customer/partner on-site visits for its field application scientists and field support engineers to comply with travel restrictions and country-specific quarantine requirements. While the COVID-19 pandemic has not had a material adverse effect on the Company's business, results of operations or the operation of financial reporting systems, internal control over financial reporting and disclosure controls and procedures, given the considerable uncertainty around the duration and extent of the pandemic, the related financial and operational impact cannot be reasonably estimated. The Company continues to monitor the implications of the COVID-19 pandemic on its business, as well as its customers’ and suppliers’ business. Potential impacts of the COVID-19 pandemic, some of which the Company has already experienced, include those described throughout the “Risk Factors” section, including “A pandemic, epidemic or outbreak of an infectious disease in the United States or worldwide could adversely affect our business. The COVID-19 pandemic has had and could continue to have an adverse impact on our business, operations, and the markets and communities in which we, our partners, and customers operate."

Operating segments

Operating segments are defined as components of an enterprise about which separate discrete information is available for evaluation by the chief operating decision maker, or decision-making group, in deciding how to allocate resources and in assessing performance. The Company’s Chief Executive Officer, who is the chief operating decision maker, reviews financial information on an aggregate basis for allocating and evaluating financial performance. The Company operates and manages its business as one reportable and operating segment.

Foreign currency translation and transactions

The Company has determined that the functional and reporting currency for its operations across the globe is the functional currency of the Company’s international subsidiaries. Accordingly, all foreign balance sheet accounts have been translated into U.S. dollars using the rate of exchange at the respective balance sheet date. Components of the unaudited interim consolidated statements of operations and comprehensive income have been translated at the average exchange rate for the year or the reporting period. Translation gains and losses are recorded in accumulated other comprehensive income as a component of stockholders’ equity. Gains or losses arising from currency exchange rate fluctuations on transactions denominated in a currency other than the local functional currency are included in the unaudited interim consolidated statements of operations and comprehensive income.

Cash and cash equivalents

The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. Cash equivalents are carried at cost, which approximates fair value.

The Company’s cash and cash equivalents consist of money held in demand depositary accounts and money market funds. The carrying amount of cash and cash equivalents was $362.5 million and $364.6 million as of March 31, 2022 and December 31, 2021,

respectively, which approximates fair value and was determined based upon Level 1 inputs. The money market account is valued using quoted market prices with no valuation adjustments applied and is categorized as Level 1. The Company limits its credit risk associated with cash and cash equivalents by maintaining its bank accounts at major and reputable financial institutions. The Company’s cash and cash equivalents balance exceeded the federally insured limit of $250,000 as of March 31, 2022 and December 31, 2021.

The following is a summary of cash and cash equivalents on the consolidated balance sheets (in thousands):


	March 31, 2022		December 31, 2021
Cash	$	18,445	$	18,939
Money market funds		344,061		345,679
Total cash and cash equivalents as presented on the consolidated statements of cash flows	$	362,506	$	364,618

Trade accounts receivable, net

Trade accounts receivable are recorded at the invoiced amount and do not bear interest. The Company maintains an allowance for doubtful accounts for estimated losses inherent in its accounts receivable portfolio. In establishing the required allowance, management considers historical losses adjusted to take into account current market conditions and the Company’s customers’ respective financial conditions, the amounts of receivables in dispute and the current receivables aging and current payment patterns. To the extent identified, account balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. To date, the Company’s customers have primarily been large pharmaceutical companies, biopharmaceutical companies, leading academic research centers and clinical research organizations and therefore, the Company has not had any material write-offs or allowance for doubtful accounts for the presented periods. The following is a summary of the accounts receivables allowance for doubtful accounts for the three months ended March 31, 2022 and the year ended December 31, 2021 (in thousands):