Quarterly Report for Quarter Ending September 30, 2025 (Form 10-Q)

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 unaudited condensed consolidated financial statements and related notes thereto included in Part I, Item 1 of this Quarterly Report on Form 10-Q, our audited consolidated financial statements and related notes for the year ended December 31, 2024 included in our Annual Report on Form 10-K filed with the SEC on March 11, 2025, (the "2024 Form 10-K"), as well as the information contained under Part II, Item 1A "Risk Factors" of this Quarterly Report on Form 10-Q, the "Risk Factors" section contained in the 2024 Form 10-K and other information provided from time to time in our other filings with the SEC.

Special Note Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements about us and our industry involve substantial risks, uncertainties, and assumptions, including those described elsewhere in this report. All statements other than statements of historical facts contained in this report, including statements regarding our future results of operations or financial condition, business strategy, and plans and objectives of management for future operations, are forward-looking statements. In some cases, you can identify forward-looking statements because they contain words such as "anticipate," "believe," "contemplate," "continue," "could," "estimate," "expect," "intend," "may," "plan," "potential," "predict," "project," "should," "target," "will" or "would" or the negative of these words or other similar terms or expressions. These forward-looking statements include, but are not limited to, statements concerning the following:

•our expected future growth and the success of our business model;

•the potential payments we may receive pursuant to our Strategic Platform Licenses ("SPLs");

•the expected future growth of our manufacturing capabilities and sales, support and marketing capabilities;

•our ability to expand our customer base and enter into additional SPL partnerships;

•our use of available capital resources.

You should not rely on forward-looking statements as predictions of future events. We have based the forward-looking statements contained in this Quarterly Report on Form 10-Q primarily on our current expectations and projections about future events and trends that we believe may affect our business, financial condition and operating results. The outcome of the events described in these forward-looking statements is subject to risks, uncertainties and other factors described under the caption "Risk Factors" and elsewhere in the 2024 Form 10-K. Moreover, we operate in a very competitive and rapidly changing environment. New risks and uncertainties emerge from time to time, and it is not possible for us to predict all risks and uncertainties that could have an impact on the forward-looking statements contained in this report. The results, events and circumstances reflected in the forward-looking statements may not be achieved or occur, and actual results, events or circumstances could differ materially from those described in the forward-looking statements.

In addition, statements that "we believe" and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based on information available to us as of the date of this Quarterly Report on Form 10-Q, and while we believe that information provides a reasonable basis for these statements, that information may be limited or incomplete. Our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all relevant information. These statements are inherently uncertain, and investors are cautioned not to unduly rely on these statements.

The forward-looking statements made in this Quarterly Report on Form 10-Q relate only to events as of the date on which the statements are made. We undertake no obligation to update any forward-looking statements made in this Quarterly Report on Form 10-Q to reflect events or circumstances after the date of this Quarterly Report on Form 10-Q or to reflect new information or the occurrence of unanticipated events, except as required by law. Given these uncertainties, you should not place undue reliance on our forward-looking statements. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions or joint ventures.

You should read this Quarterly Report on Form 10-Q and the documents that we file from time to time with the SEC with the understanding that our actual future results, levels of activity, performance and events and circumstances may be materially different from what we expect.

In this Quarterly Report on Form 10-Q, unless the context requires otherwise, all references to "we," "our," "us," "MaxCyte" and the "Company" refer to MaxCyte, Inc.

Trademarks

We have applied for various trademarks that we use in connection with the operation of our business. This Quarterly Report on Form 10-Q includes trademarks, service marks, and trade names owned by us or other companies. All trademarks, service marks, and trade names included in this Quarterly Report on Form 10-Q are the property of their respective owners. Solely for convenience, the trademarks and trade names in this report may be referred to without the ® or TM symbols, but such references should not be construed as any indicator that their respective owners will not assert, to the fullest extent under applicable law, their rights thereto.

Overview

We are a commercial cell engineering company focused on providing enabling platform technologies to advance the discovery, development, and commercialization of next-generation cell therapeutics including cell and gene therapies 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 is used by biopharmaceutical companies to facilitate complex engineering of a wide variety of cells. Electroporation is a method of transfection, or the process of deliberately introducing molecules into cells, that involves applying an electric field in order to temporarily increase the permeability of the cell membrane. This precisely controlled increase in permeability allows the intracellular delivery of molecules, such as genetic material and proteins, that would not normally be able to cross the cell membrane as easily.

Our ExPERT platform, which is based on our Flow Electroporation technology, has been designed to address this rapidly expanding cell therapy market and can be utilized across the continuum of the high-growth cell therapy sector, from discovery and development through commercialization of next-generation, cell-based medicines. The ExPERT™ family of products includes four instruments, which we call the ATx™, STx™, GTx™ and VLx™, as well as a portfolio of proprietary related disposables and consumables. Our disposables and consumables include processing assemblies ("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. Our platform is also supported by a robust intellectual property portfolio with more than 200 granted U.S. and foreign patents and more than 100 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 U.S. National Institutes of Health, 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, which includes but is not limited to our 32 SPL partners, ranges from large biopharmaceutical companies, including a majority of the top 25 pharmaceutical companies based on 2024 global revenue, to hundreds of biotechnology companies and academic centers focused on translational research. Our Flow Electroporation technology is used by one of our SPL partners to engineer the first ex-vivo cell therapy approved by the FDA in December 2023.

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, commercialization adoption, and market acceptance of our products. We generated revenue of $25.7 million and incurred a net loss of $35.0 million for the nine months ended September 30, 2025. As of September 30 2025, we had an accumulated deficit of $251.9 million. We expect to continue to incur net losses as we focus on growing commercial sales of our products in both the U.S. and international markets, including expanding our sales force, scaling our manufacturing operations, and continuing research and development efforts to develop new products and further enhance our existing products.

Recent Developments

In January 2025, we acquired SeQure Dx, Inc. ("SeQure") a provider of on-target and off-target editing assessment services for cell and gene therapies. We expect that this acquisition will strengthen our ability to serve ex vivo and in vivo cell and gene therapy developers with an innovative suite of tools and services spanning early R&D through clinical development and commercialization. We anticipate that successful integration of SeQure into our Company (which is not guaranteed) will allow us to expand our service offerings for our partners and leverage our commercial and field application scientist teams to work with developers earlier in their research processes. See Note 8 - Business Combination in the Notes to the Unaudited Condensed Consolidated Financial Statements in Item 1 of this Quarterly Report on Form 10-Q for more information.

We have continued to enter into SPL agreements with our cell therapy customers. These agreements, which are discussed in more detail under the caption "Results of Operations" below, provide us with revenue from instrument sales and leases and disposables sales as well as pre-commercial milestones based on progress of our partners' programs through the clinic and sales-based payments upon commercialization of our partners' programs. In 2025, we have signed SPL agreements with four new partners, TG Therapeutics, Anocca AB, Adicet Bio and Moonlight Bio. We continue to grow our SPL pipeline and, while the specific timing of any agreement is uncertain, we look forward to continuing to build on our existing SPL partnerships and develop additional SPL partnerships in the future.

On September 22, 2025, we began to implement a workforce reduction plan (the "Plan") as part of our ongoing efforts to streamline operations, improve our cost structure, and align resources with strategic priorities. The Plan is expected to result in a reduction of approximately 34% of the Company's workforce globally, which includes both directly employed personnel and individuals engaged through third-party employer-of-record arrangements, and is expected to be substantially completed by November 2025.

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On November 12, 2025, the Company entered into an amendment (the "CFO Severance Agreement Amendment") to that certain Severance Agreement, dated March 10, 2025, by and between the Company and Douglas Swirsky, pursuant to which Mr. Swirsky will transition from his position as Chief Financial Officer of the Company, effective May 31, 2026 (the "Retention Date"). Mr. Swirsky will continue to be eligible for bonus payments for fiscal year 2025 and the applicable portion of 2026; in addition, to support the retention of Mr. Swirsky through the Retention Date and in exchange for executing a separation and release agreement, he will be entitled to a one-time payment of $150,000, payable following the Retention Date. Following May 31, 2026, Mr. Swirsky will provide the company with consulting services for a period of eighteen consecutive months during which his equity awards will continue to vest in accordance with their terms based on his continued service and the Company will reimburse Mr. Swirsky for the cost of his COBRA benefits. Mr. Swirsky will be eligible to receive a monthly fee of $10,000 per month, payable in arrears, for services to the Company

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Results of Operations

Comparison of the Three Months Ended September 30, 2025 and 2024

The following table sets forth our results of operations for the periods presented:

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Revenue

We generate revenue principally from the sale of instruments, single-use PAs and consumables as well as from licenses and service offerings to our customers. Our SPL agreements also include associated clinical progress milestones and sales-based payments to us, in addition to annual license payments.

In order to evaluate how our sales are trending across key markets, as well as the contribution of program economics from our SPL agreements, we separately analyze our core revenue and our performance-based milestone revenues we recognize under our SPL agreements. Core revenue includes instrument sales, PAs and consumables, research and clinical licenses, and assay services, while non-core revenue relates to SPL program-related revenue. We recognize both core and non-core revenue in accordance with US GAAP.

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

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Total revenue for the three months ended September 30, 2025 was $6.8 million, a decrease of $1.3 million, or 16%, compared to $8.2 million during the three months ended September 30, 2024. The decrease was primarily driven by a decrease in a core revenue in the amounts shown in the table above.

Total core revenue for the three months ended September 30, 2025 was $6.4 million, a decrease of $1.7 million, or 21%, compared to the three months ended September 30, 2024. Our overall decrease in core revenue was primarily driven by decreases in instrument revenue, PA revenue and license revenue of $0.4 million, $0.9 million, and $0.7 million, respectively.

The $0.4 million increase in program-related revenues for the three months ended September 30, 2025 compared to the three months ended September 30, 2024 resulted from customer variability in achievement of contractually specified clinical and regulatory milestones during the respective periods. 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 and matures.

Notwithstanding decreases in 2025, we expect total revenue to increase over time as our customers' programs advance and our markets grow, resulting in additional instrument sales and license and PA sales and also as the percentage of our installed base that are under SPL license agreements increases. We expect revenue from PA and instrument sales and instrument licenses to cell therapy customers will continue to grow as those customers advance their preclinical pipeline programs into clinical development and move their existing drug development programs into later-stage clinical trials and, potentially, into commercialization. In addition, we believe we are well-positioned to attract new customers who may contribute to these revenues, based on the underlying growth in the cell therapy pipeline among companies in this market, the extent to which capital is available to support such companies, and in particular the switch by some cell therapy companies away from viral to non-viral approaches. We expect, however, that our revenue may fluctuate from period to period due to the timing of securing product sales and licenses, the inherently uncertain nature of the timing of our partners' achievements of clinical progress, and our dependence on the program decisions of our partners.

Cost of Goods Sold and Gross Profit

Cost of goods sold primarily consists of costs for instrument and processing assembly components, contract manufacturer costs, salaries, overhead, and other direct costs related to sales recognized as revenue in the period. Cost of goods sold associated with instrument lease revenue consists of leased equipment depreciation. Gross profit is calculated as revenue less cost of goods sold. Gross profit margin is gross profit expressed as a percentage of revenue.

Our gross profit in future periods will depend on a variety of factors, including sales mix among instruments, disposables and milestones, the specific mix among types of instruments or disposables, the proportion of revenues associated with instrument leases as opposed to sales, changes in the costs to produce our various products, the launch of new products or changes in existing products, our cost structure for manufacturing including changes in production volumes, and the pricing of our products which may be impacted by market conditions. 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. Instrument pricing also depends upon the customer's specific market. However, the market for non-viral delivery is highly competitive, and introduction of a Good Manufacturing Practices ("GMP") grade platform by a competitor that delivers similar performance across a similar diversity of cell types could negatively impact our business and lead to increased price pressure that negatively impacts our gross margins.

During the three months ended September 30, 2025, gross margin was 77% compared to 76% for the three months ended September 30, 2024. The increase in gross margin was primarily due to an increase in program-related revenue.

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Cost of goods sold decreased by $0.3 million or 17%, for the three months ended September 30, 2025 compared to the three months ended September 30, 2024. The decrease was primarily driven by decreases in instrument and PA sales.

Gross profit decreased by $1.0 million, or 16%, for the three months ended September 30, 2025 compared to the three months ended September 30, 2024. The decrease was primarily driven by the decrease in instrument and PA sales.

We expect that our cost of goods sold will generally increase or decrease modestly as our instrument, PA and assay service revenue increases or decreases. We expect our gross margin to benefit from realization of program-related revenue from our SPL agreements, to the extent that such revenue grows to be a significant proportion of overall revenues, as there is no cost of goods sold associated with such revenue. However, realization and timing of these potential milestone revenues is uncertain.

Operating Expenses

Research and Development

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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 assays) and design and other costs not directly charged to inventory or cost of goods sold.

These expenses principally include employee-related costs, such as salaries, benefits, incentive compensation, stock-based compensation, and travel, as well as consultant services, facilities, and laboratory supplies, and materials. 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.

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Research and development expenses remained flat for the three months ended September 30, 2025 compared to the three months September 30 2024. Increases of $0.2 million of lab expense, $0.1 million in professional fees, and $0.1 million in software expenses, all due to timing of expenses were offset by decreases of $0.3 million in stock-based compensation and $0.1 million of compensation expenses.

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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 for our customers and partners. As a result, we expect that our research and development expenses will continue to fluctuate in absolute dollars in future periods and vary from period to period as a percentage of revenue.

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Sales and Marketing

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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.

Sales and marketing expenses decreased by $2.3 million, or 37%, for the three months ended September 30, 2025 compared to the three months ended September 30, 2024. The decrease was primarily driven by a $1.0 million decrease in compensation expenses due to a reduction in headcount, and a $0.5 million decrease in stock-based compensation, a $0.3 million decrease in marketing expenses, and a $0.1 million decrease in travel expense.

We expect our recurring sales and marketing expenses to increase in absolute dollars in future periods as we expand our commercial sales, marketing and business development teams, expand our product offerings, expand our collaboration efforts, increase our presence globally, and increase marketing activities to drive awareness and adoption of our products. We expect that in the near term, sales and marketing expenses could increase as a percentage of revenue, and thereafter vary from period to period as a percentage of revenue. The effects of such sales and marketing investments could take a few quarters to materialize into revenue growth or it may not materialize into revenue growth as expected or at all.

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General and Administrative

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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, information systems, 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 public company fees associated with being a Nasdaq and AIM-listed public company such as director fees, U.K. Nominated Adviser and broker fees, investor relations consultants fees and insurance costs. These expenses are exclusive of depreciation and amortization.

General and administrative decreased $1.7 million, or 22%, for the three months ended September 30, 2025 compared to the three months ended September 30, 2024. The decrease was primarily driven by a $0.6 million decrease in stock-based compensation, a $0.6 million decrease in legal fees, a $0.2 million increase in compensation expense, and $0.2 million decrease in public company expenses, and a $0.1 million decrease in overhead expenses.

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We expect that our general and administrative expenses will increase in absolute dollars in future periods, primarily due to support anticipated growth in the business.

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Restructuring Expense

We incurred $3.1 million in restructuring expense during the three months ended September 30, 2025 due to the implementation of the Plan. We did not incur restructuring expense during the three months ended September 30, 2024.

Depreciation and Amortization

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

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Depreciation and amortization expense increased by $23,000, or 2%, for the three months ended September 30, 2025, compared to the three months ended September 30, 2024.

Interest Income

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Interest income represents interest on our cash balances and investments. Interest income decreased $0.8 million, or 31% for the three months ended September 2025 compared to the three months ended September 30, 2024. The decrease was driven by decreases in interest rates and average cash and investment balances during the three months ended September 30, 2025.

Comparison of the Nine Months Ended September 30, 2025 and 2024

The following table sets forth our results of operations for the periods presented:

Revenue

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

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Total revenue for the nine months ended September 30, 2025 was $25.7 million, a decrease of $4.2 million, or 14%, compared to $29.9 million during the nine months ended September 30, 2024. The decrease was primarily driven by a decrease in program-related revenue.

Total core revenue for the nine months ended September 30, 2025 was $22.8 million, a decrease of $1.1 million, or 4%, compared to the nine months ended September 30, 2024. Our overall decrease in core revenue was primarily driven by decreases in license revenue of $0.8 million, decreases in instrument and PA revenue of $0.5 million and $0.3 million, respectively, offset by an increase in assay and other service revenue of $0.5 million.

The $3.2 million decrease in program-related revenues for the nine months ended September 30, 2025 compared to the nine months ended September 30, 2024 resulted from customer variability in achievement of contractually specified clinical and regulatory milestones during the respective periods. 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 and matures.

Cost of Goods Sold and Gross Profit

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Cost of goods sold decreased by $0.2 million or 4%, for the nine months ended September 30, 2025 compared to the nine months ended September 30, 2024. The decrease was primarily driven by decreases in instrument and PA sales.

Gross profit decreased by $4.0 million, or 16%, for the nine months ended September 30, 2025 compared to the nine months ended September 30, 2024. The decrease was primarily driven by the decrease in license and program-related revenue.

Operating Expenses

Research and Development

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Research and development decreased by $0.1 million, or 1% for the nine months ended September 30, 2025 compared to the nine months ended September 30 2024. Decreases of $0.7 million in stock-based compensation and $0.5 million in lab expense were offset by increases of $0.4 million in both engineering expenses and professional fees, both due to timing of expenses, $0.2 million in occupancy expenses, and $0.1 million in compensation expenses.

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Sales and Marketing

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Sales and marketing expenses decreased by $4.8 million, or 24%, for the nine months ended September 30, 2025 compared to the nine months ended September 30, 2024. The decrease was primarily driven by a $3.0 million decrease in compensation expenses due to a reduction in headcount, a $0.5 million decrease in travel expense commensurate with the reduction in headcount, a $0.4 million decrease in professional fees, a $0.2 million decrease in marketing expenses, and a $0.7 million decrease in stock-based compensation.

General and Administrative

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General and administrative increased by $0.1 million, or 1%, for the nine months ended September 30, 2025 compared to the nine months ended September 30, 2024. The increase was primarily driven by a $0.6 million increase in professional fees, offset by a $0.2 million decrease in legal fees, and by a $0.3 million decrease from a one-time fixed asset disposal loss occurring during nine months ended September 30, 2024.

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Restructuring Expense

We incurred $3.1 million in restructuring expense during the nine months ended September 30, 2025 due to the implementation of the Plan. We did not incur restructuring expense during the nine months ended September 30, 2024.

Depreciation and Amortization

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Depreciation and amortization expense increased by $62,000, or 2%, for the nine months ended September 30, 2025, compared to the nine months ended September 30, 2024.

Interest Income

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Interest income decreased $2.2 million, or 28%, for the nine months ended September 30, 2025 compared to the nine months ended September 30, 2024. The decrease was driven by decreases in interest rates and average cash and investment balances during the nine months ended September 30, 2025.

Liquidity and Capital Resources

Since our inception, we have experienced losses and negative cash flows from operations. For the nine months ended September 30, 2025, we incurred a net loss of $35.0 million. As of September 30, 2025, we had an accumulated deficit of $251.9 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.

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 from the date these consolidated financial statements have been issued.

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

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If we are unable to execute 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:

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Operating Activities

Net cash used in operating activities for the nine months ended September 30, 2025 was $31.7 million, and consisted primarily of our net loss of $35.0 million, which was offset in part by net non-cash expenses of $10.9 million. Net non-cash expenses include stock-based compensation of $8.5 million, depreciation and amortization expenses of $3.3 million, and an aggregate of $1.3 million in other non-cash charges offset by amortization of discounts on investments of $2.2 million. We also had net cash outflows of $7.6 million due to changes in our operating assets and liabilities. Net changes in our operating assets and liabilities consisted primarily of a decrease in accounts payable and accrued expenses of $3.3 million due to timing considerations, an increase in accounts receivable of $3.6 million, an increase in other assets of $0.9 million, a decrease in operating lease liabilities of $0.9 million, and a decrease in deferred revenue and other liabilities of $0.1 million, offset by a decrease in prepaid expenses and other current assets of $0.7 million and a decrease in inventory of $0.6 million.

Net cash used in operating activities for the nine months ended September 30, 2024 was $19.8 million, and consisted primarily of our net loss of $30.5 million, which was offset in part by net non-cash expenses of $9.7 million. Net non-cash expenses include stock-based compensation of $9.9 million, depreciation and amortization expenses of $3.3 million, an increase to our excess and obsolete inventory reserve of $0.8 million, and an aggregate of $0.7 million in other non-cash charges offset by amortization of discounts on investments of $5.1 million. We also had net cash inflows of $1.0 million due to changes in our operating assets and liabilities. Net changes in our operating assets and liabilities consisted primarily of an increase in deferred revenue of $1.6 million, a decrease in accounts receivable of $1.3 million, and a decrease in inventory of $0.8 million, offset by a decrease in accounts payable and accrued expenses of $1.4 million due to timing considerations, an increase in other assets of $0.7 million, a decrease in operating lease liabilities of $0.4 million and an increase in prepaid expenses and other current assets of $0.2 million.

Investing Activities

Net cash provided by investing activities during the nine months ended September 30, 2025 was $16.3 million, which was primarily attributable to maturities of investments of $117.6 million, offset by purchases of investments of $98.0 million, $1.8 million for the acquisition of SeQure, net of cash acquired, and purchases of property and equipment of $1.5 million.

Net cash provided by investing activities during the nine months ended September 30, 2024 was $8.6 million, which was primarily due maturities of investments of $128.4 million, offset by purchases of investments of $118.3 million and purchases of property and equipment of $1.5 million.

Financing Activities

Net cash provided by financing activities during the nine months ended September 30, 2025 and 2024 was $0.6 million and $1.6 million, respectively, from the exercise of stock options and employee purchases of common stock from our employee stock purchase plan.

Contractual Obligations and Commitments

Our contractual obligations and commitments as of September 30, 2025 consisted primarily of operating lease obligations. In May 2021, we entered into the Headquarters Lease for new office, lab and warehouse/manufacturing space. The Headquarters Lease term expires on August 31, 2035. The total incremental remaining non-cancellable lease payments under the Headquarters Lease are $24.4 million through the lease term. Upon acquisition of SeQure, we assumed the SeQure Lease, which term expires on December 31, 2027. The total incremental remaining non-cancellable lease payments under the SeQure lease are $0.9 million throughout the lease term. We expect to be able to fund our obligations under these leases, both in the short-term and in the long-term, from cash on hand, investments and operating cash flows.

We have the obligation, if certain revenue targets are achieved, to pay an amount not to exceed $2.5 million to former holders of convertible promissory notes of SeQure for the years ending December 31, 2025 and December 31, 2026. Our estimate of the fair value of the liability for contingent consideration was $25,000 as of September 30, 2025.

We had no debt obligations as of September 30, 2025 and December 31, 2024.

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

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

There have been no material changes, except as described below to our critical accounting estimates from those disclosed in our condensed consolidated financial statements and the related notes and other financial information included in the 2024 Form 10-K.

Business Combination Accounting-Developed Technology

Assets acquired and liabilities assumed as part of a business acquisition are generally recorded at their fair value at the date of acquisition. The excess of purchase price over the fair value of assets acquired and liabilities assumed is recorded as goodwill. Determining fair value of intangible assets requires management to make estimates, which are based on all available information and in some cases assumptions with respect to the timing and amount of future revenues and expenses associated with an asset. These estimates affect the amount of consideration that is allocable to assets and liabilities acquired in the business acquisition. The Company recorded $471,000 in developed technology upon the acquisition of SeQure.

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Goodwill

We evaluate goodwill for possible impairment at least annually or upon the occurrence of events or circumstances that indicate that they would more likely than not reduce the fair value of a reporting unit below its carrying amount. We have concluded we are a single reporting unit, and therefore the quantitative assessment of goodwill impairment would involve comparing our fair value to our carrying value. If the carrying value exceeds the fair value, a goodwill impairment charge is recorded. Determining our fair value required us to make assumptions and estimates, the most significant of which are projected future growth rates, discount rates, capital expenditures, tax rates, gross margins and terminal value. Changes in key estimates or market conditions, could result in an impairment charge. For the three and nine months ended September 30 2025, we did not recognize a goodwill impairment.

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JOBS Act Accounting Election

We are an emerging growth company ("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 of 1933, as amended 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 of 2002.

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 IPO in the U.S.; (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. The Company expects to retain its EGC status through the last day of the fiscal year following the fifth anniversary of the first sale of its registered common equity, that is, through December 31, 2026.

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We are also a "smaller reporting company," as defined by Rule 12b-2 of the Securities Exchange Act of 1934, as amended (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.

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 unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q.

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Subsequent Events

On November 12, 2025, the Company entered into the CFO Severance Agreement Amendment with Douglas Swirsky, pursuant to which Mr. Swirsky will transition from his position as Chief Financial Officer of the Company, effective as of the Retention Date. Mr. Swirsky will continue to be eligible for bonus payments for fiscal year 2025 and the applicable portion of 2026; in addition, to support the retention of Mr. Swirsky through the Retention Date and in exchange for executing a separation and release agreement, he will be entitled to a one-time payment of $150,000, payable following the Retention Date. Following May 31, 2026, Mr. Swirsky will provide the company with consulting services for a period of eighteen consecutive months during which his equity awards will continue to vest in accordance with their terms based on his continued service and the Company will reimburse Mr. Swirsky for the cost of his COBRA benefits. Mr. Swirsky will be eligible to receive a monthly fee of $10,000 per month, payable in arrears, for services to the Company

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