10-Q
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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, 2023

OR

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.

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

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

The number of shares of Registrant’s Common Stock outstanding as of May 4, 2023 was 135,666,676.

 

 

 


 

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 Loss

3

 

Consolidated Statements of 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

26

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

36

Item 4.

Controls and Procedures

36

 

 

 

PART II

OTHER INFORMATION

 

Item 1.

Legal Proceedings

38

Item 1A.

Risk Factors

39

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

77

Item 3.

Defaults Upon Senior Securities

77

Item 4.

Mine Safety Disclosures

78

Item 5.

Other Information

78

Item 6.

Exhibits

79

Signatures

 

80

 

1


 

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,
2023

 

 

December 31,
2022

 

 

 

(unaudited)

 

 

(audited)

 

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

129,476

 

 

$

296,601

 

Restricted cash

 

 

2,918

 

 

 

2,899

 

Marketable securities

 

 

169,519

 

 

 

44,548

 

Trade accounts receivable, net

 

 

43,100

 

 

 

48,864

 

Inventories

 

 

69,502

 

 

 

48,154

 

Prepaid expenses and other current assets

 

 

11,107

 

 

 

12,954

 

Total current assets

 

 

425,622

 

 

 

454,020

 

Deferred income tax assets, noncurrent

 

 

23,404

 

 

 

20,459

 

Property and equipment, net

 

 

15,549

 

 

 

13,682

 

Operating lease right-of-use assets

 

 

13,187

 

 

 

13,883

 

Goodwill

 

 

19,143

 

 

 

10,144

 

Intangible assets, net

 

 

24,664

 

 

 

4,331

 

Other noncurrent assets

 

 

3,006

 

 

 

2,957

 

Total assets

 

$

524,575

 

 

$

519,476

 

Liabilities and stockholders’ equity

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Trade accounts payable

 

$

5,280

 

 

$

4,805

 

Legal settlement liability, current

 

 

1,906

 

 

 

2,163

 

Accrued expenses

 

 

20,366

 

 

 

21,126

 

Other current liabilities

 

 

10,861

 

 

 

7,960

 

Deferred revenue, current

 

 

18,104

 

 

 

12,986

 

Total current liabilities

 

 

56,517

 

 

 

49,040

 

Legal settlement liability, noncurrent

 

 

16,045

 

 

 

15,596

 

Deferred revenue, noncurrent

 

 

13,012

 

 

 

13,124

 

Operating lease liability, noncurrent

 

 

11,541

 

 

 

12,312

 

Long term debt

 

 

2,133

 

 

 

2,271

 

Other noncurrent liabilities

 

 

1,867

 

 

 

1,587

 

Total liabilities

 

$

101,115

 

 

$

93,930

 

Commitments and contingencies (Note 18)

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

Common stock, $0.001 par value; 1,000,000,000 authorized shares as of March 31, 2023 and December 31, 2022, respectively; 135,644,055 and 135,365,381 issued and outstanding shares as of March 31, 2023 and December 31, 2022, respectively.

 

 

136

 

 

 

135

 

Additional paid-in capital

 

 

447,748

 

 

 

442,887

 

Accumulated deficit

 

 

(23,837

)

 

 

(17,030

)

Accumulated other comprehensive loss

 

 

(587

)

 

 

(697

)

Noncontrolling interest in consolidated subsidiary

 

 

-

 

 

 

251

 

Total stockholders’ equity

 

$

423,460

 

 

$

425,546

 

Total liabilities and stockholders’ equity

 

$

524,575

 

 

$

519,476

 

 

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

2


 

Cytek Biosciences, Inc.

Consolidated Statements of Operations and Comprehensive Loss

(unaudited)

 

 

 

Three Months Ended March 31,

 

(In thousands, except share and per share data)

 

2023

 

 

2022

 

 

 

(unaudited)

 

 

(unaudited)

 

Revenue, net:

 

 

 

 

 

 

Product

 

$

31,172

 

 

$

31,481

 

Service

 

 

5,916

 

 

 

3,583

 

Total revenue, net

 

 

37,088

 

 

 

35,064

 

Cost of sales:

 

 

 

 

 

 

Product

 

 

12,677

 

 

 

11,767

 

Service

 

 

3,373

 

 

 

3,120

 

Total cost of sales

 

 

16,050

 

 

 

14,887

 

Gross profit

 

 

21,038

 

 

 

20,177

 

Operating expenses:

 

 

 

 

 

 

Research and development

 

 

9,974

 

 

 

8,025

 

Sales and marketing

 

 

11,145

 

 

 

6,960

 

General and administrative

 

 

12,081

 

 

 

7,549

 

Total operating expenses

 

 

33,200

 

 

 

22,534

 

Loss from operations

 

 

(12,162

)

 

 

(2,357

)

Other income (expense):

 

 

 

 

 

 

Interest expense

 

 

(673

)

 

 

(590

)

Interest income

 

 

2,143

 

 

 

18

 

Other income (expense), net

 

 

1,652

 

 

 

(374

)

Total other income (expense), net

 

 

3,122

 

 

 

(946

)

Loss before income taxes

 

 

(9,040

)

 

 

(3,303

)

Benefit from income taxes

 

 

(2,233

)

 

 

(1,145

)

Net loss

 

$

(6,807

)

 

$

(2,158

)

Less: net loss allocated to noncontrolling interests

 

 

-

 

 

 

137

 

Net loss attributable to common stockholders, basic and diluted

 

$

(6,807

)

 

$

(2,021

)

Net loss attributable to common stockholders per share, basic and diluted

 

$

(0.05

)

 

$

(0.02

)

Weighted-average shares used in calculating net loss per share, basic and diluted

 

 

135,489,194

 

 

 

133,902,523

 

Comprehensive loss:

 

 

 

 

 

 

Net loss

 

$

(6,807

)

 

$

(2,158

)

Foreign currency translation adjustment, net of tax

 

 

(42

)

 

 

14

 

Unrealized gain on marketable securities

 

 

152

 

 

 

-

 

Net comprehensive loss

 

$

(6,697

)

 

$

(2,144

)

 

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

3


 

Cytek Biosciences, Inc

Consolidated Statements of Stockholders’ Equity

(unaudited)

 

 

 

 

 

Additional

 

 

 

 

 

Accumulated other

 

 

Noncontrolling

 

 

Total

 

 

Common stock

 

 

paid-in

 

 

Accumulated

 

 

comprehensive

 

 

interest in consolidated

 

 

stockholders’

 

(In thousands, except share data)

Shares

 

Amount

 

 

capital

 

 

deficit

 

 

income (loss)

 

 

subsidiary

 

 

equity

 

Balances at December 31, 2022

 

135,365,381

 

$

135

 

 

$

442,887

 

 

$

(17,030

)

 

$

(697

)

 

$

251

 

 

$

425,546

 

Shares issued in connection with employee stock plans

 

283,856

 

 

1

 

 

 

203

 

 

 

 

 

 

 

 

 

 

 

 

204

 

Shares of Common Stock withheld related to net share settlement

 

(5,182

)

 

-

 

 

 

(57

)

 

 

 

 

 

 

 

 

 

 

 

(57

)

Stock-based compensation

 

 

 

 

 

 

4,699

 

 

 

 

 

 

 

 

 

 

 

 

4,699

 

Unrealized gain on marketable securities

 

 

 

 

 

 

 

 

 

 

 

 

152

 

 

 

 

 

 

152

 

Foreign currency translation adjustment, net of tax

 

 

 

 

 

 

 

 

 

 

 

 

(42

)

 

 

 

 

 

(42

)

Net loss

 

 

 

 

 

 

 

 

 

(6,807

)

 

 

 

 

 

 

 

 

(6,807

)

Noncontrolling interest

 

 

 

 

 

 

16

 

 

 

 

 

 

 

 

 

(251

)

 

 

(235

)

Balances at March 31, 2023

 

135,644,055

 

$

136

 

 

$

447,748

 

 

$

(23,837

)

 

$

(587

)

 

$

-

 

 

$

423,460

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

Accumulated other

 

 

Noncontrolling

 

 

Total

 

 

Common stock

 

 

paid-in

 

 

Accumulated

 

 

comprehensive

 

 

interest in consolidated

 

 

stockholders’

 

(In thousands, except share data)

Shares

 

Amount

 

 

capital

 

 

deficit

 

 

income (loss)

 

 

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

 

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

4


 

Cytek Biosciences, Inc

Consolidated Statements of Cash Flows

(unaudited)

 

 

Three months ended March 31,

 

(In thousands)

 

2023

 

 

2022

 

Cash flows from operating activities:

 

 

 

 

 

 

Net loss

 

$

(6,807

)

 

$

(2,158

)

Adjustments to reconcile net loss to net cash provided by (used in) operating activities:

 

 

 

 

 

 

Depreciation and amortization

 

 

1,001

 

 

 

794

 

Amortization of operating lease-right-of use assets

 

 

800

 

 

 

676

 

Stock-based compensation

 

 

4,699

 

 

 

3,837

 

Provision for excess and obsolete inventory

 

 

508

 

 

 

74

 

Gain on investments, accretion, and amortization, net

 

 

(1,580

)

 

 

-

 

Interest expenses for accretion of the legal settlement liabilities

 

 

544

 

 

 

498

 

Change in operating assets and liabilities:

 

 

 

 

 

 

Trade accounts receivable

 

 

6,055

 

 

 

(1,038

)

Inventories

 

 

(3,188

)

 

 

(5,921

)

Prepaid expenses and other assets

 

 

(136

)

 

 

(4,351

)

Trade accounts payable

 

 

305

 

 

 

2,782

 

Accrued expenses and other liabilities

 

 

1,763

 

 

 

555

 

Legal settlement liabilities

 

 

(351

)

 

 

482

 

Deferred revenue

 

 

(49

)

 

 

2,581

 

Lease liabilities

 

 

(706

)

 

 

(291

)

Net cash provided by (used in) operating activities

 

 

2,858

 

 

 

(1,480

)

Cash flows from investing activities:

 

 

 

 

 

 

Purchases of marketable securities

 

 

(123,239

)

 

 

-

 

Purchase of property and equipment

 

 

(505

)

 

 

(780

)

Acquisition of business

 

 

(44,895

)

 

 

-

 

Payment for additional investment in Cytek Japan

 

 

(235

)

 

 

 

Net cash used in investing activities

 

 

(168,874

)

 

 

(780

)

Cash flows from financing activities:

 

 

 

 

 

 

Repayment of loan

 

 

(146

)

 

 

-

 

Payments for taxes related to net share settlement of equity awards

 

 

(57

)

 

 

-

 

Proceeds from issuance of common stock under employee stock plans

 

 

203

 

 

 

364

 

Net cash provided by financing activities

 

 

-

 

 

 

364

 

Effect of exchange rate changes on cash, cash equivalents and restricted cash

 

 

(1,090

)

 

 

(216

)

Cash, cash equivalents and restricted cash:

 

 

 

 

 

 

Net decrease in cash, cash equivalents and restricted cash

 

 

(167,106

)

 

 

(2,112

)

Cash, cash equivalents and restricted cash at beginning of period

 

 

299,500

 

 

 

364,618

 

Cash, cash equivalents and restricted cash at end of period

 

$

132,394

 

 

$

362,506

 

Supplemental disclosure of cash flow information:

 

 

 

 

 

 

Cash paid for taxes

 

$

93

 

 

$

75

 

Non-cash investing and financing activities:

 

 

 

 

 

 

Fixed asset purchases in accounts payable at period end

 

$

139

 

 

$

228

 

Intangible asset in accrued expenses at period end

 

$

4

 

 

$

40

 

 

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

5


 

Cytek Biosciences, Inc.

Notes to consolidated financial statements

1.
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 LightsTM 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 ProfilingTM” or “FSPTM”). The Company’s FSP platform includes instruments, accessories, reagents, software, and services to provide a comprehensive and integrated suite of solutions for its customers.

On February 28, 2023, the Company completed the acquisition of the flow cytometry and imaging (“FCI”) business unit of Luminex Corporation ("Luminex"), including relating to the business of manufacturing, marketing, selling, servicing and maintaining Amnis-, CellStream-, Guava- and Muse-branded instruments, and flow cytometry reagent products and services.

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.

Shelf Registration Statement and At-the-Market Offering

On August 26, 2022, the Company filed with the SEC an automatic shelf registration statement on Form S-3ASR (File No. 333-267118) (the “Registration Statement”). In connection with the filing of the Registration Statement, the Company also entered into a sales agreement (the “2022 Sales Agreement”) with Piper Sandler & Co. (“Piper”) as sales agent to sell from time to time up to $150 million of the Company’s common stock through an “at-the-market” offering program as defined in Rule 415 promulgated under the Securities Act of 1933, as amended (the “Securities Act”).

Pursuant to the terms of the 2022 Sales Agreement, the aggregate compensation payable to Piper is up to 3% of the gross proceeds from the sale of common stock sold by Piper pursuant to the 2022 Sales Agreement. Each party agreed in the 2022 Sale Agreement to provide indemnification and contribution against certain liabilities, including liabilities under the Securities Act, subject to the terms of the 2022 Sales Agreement. As of March 31, 2023, the Company has not made any sales of common stock pursuant to the 2022 Sales Agreement.

2.
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 (“GAAP”). Any reference in these notes to applicable guidance is meant to refer to the authoritative 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., Cytek (Shanghai) Software Development Technology Co., Ltd. and Cytek Japan Kabushiki Kaisha (“Cytek Japan”). All intercompany accounts and transactions have been eliminated in consolidation.

Use of estimates

The preparation of the unaudited interim consolidated financial statements in conformity with 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.

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

6


 

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, cash equivalents, and restricted cash

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 $129.5 million and $296.6 million as of March 31, 2023 and December 31, 2022, 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, 2023.

The Company classifies restricted cash as current on the accompanying unaudited interim consolidated balance sheets based upon the term of the remaining restrictions.

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

 

 

March 31,
2023

 

 

December 31,
2022

 

Cash

 

$

118,305

 

 

$

123,371

 

U.S. Treasury

 

 

 

 

 

29,930

 

Federal agency securities

 

 

 

 

 

19,908

 

Commercial paper