Cytek Biosciences Inc

The following table displays the (benefit from) provision for income taxes for the three and nine months ended September 30, 2024 and 2023 (in thousands):

Benefit from income taxes was$0.8 million for the three months ended September 30, 2024, as compared to a provision for income taxes of$2.3 million for the three months ended September 30, 2023. The net change of $3.1 million for the three months ended September 30, 2024 was primarily due to the reversal in the three months ended September 30, 2023 of the tax benefit from the six months ended June 30, 2023 due to a lower effective tax rate for the nine months ended September 30, 2023, and in the three months ended September 30, 2024 an adjustment to tax expense to account for the settlement price of restricted stock units settled in the quarter being lower than the grant price.

Benefit from income taxes was $0.4 million for the nine months ended September 30, 2024, as compared to a benefit from income taxes of $2.2 million for the nine months ended September 30, 2023. The net decrease in tax benefit of $1.8 million for the nine months ended September 30, 2024 is primarily due to a lower projected loss and lower R&D credits in 2024 which caused a reduction in the effective tax rate.

17. Lease

The Company determines if an arrangement is or contains a lease at inception, which is the date on which the terms of the contract are agreed to, and the agreement creates enforceable rights and obligations. Under Topic 842, a contract is or contains a lease when (i) explicitly or implicitly identified assets have been deployed in the contract and (ii) the customer obtains substantially all of the economic benefits from the use of that underlying asset and directs how and for what purpose the asset is used during the term of the contract. The Company also considers whether its service arrangements include the right to control the use of an asset.

The Company leases office facilities and equipment from unrelated parties under operating lease agreements that have initial terms ranging from 1 to 7.25 years. Some leases includeone or more options to renew, generally at the Company's sole discretion, with renewal terms that can extend the lease term up to 5 years. In addition, certain leases contain termination options, where the rights to terminate are held by either the Company, the lessor, or both parties. These options to extend or terminate a lease are included in the lease terms when it is reasonably certain that the Company will exercise that option. The Company’s leases generally do not contain any material restrictive covenants. The Company was a sub-lessor in an agreement with a term of 3 years that ended in March 2024.

Operating lease cost is recognized on a straight-line basis over the lease term. The components of lease expense are as follows (in thousands):

For the three and nine months ended September 30, 2024, sublease income was$0 and $57,000 recorded as other income.

Supplemental cash flow information related to leases is as follows (in thousands):

Supplemental balance sheet information related to leases is as follows (in thousands):

Future undiscounted cash flows for each of the next five years and thereafter and reconciliation to the lease liabilities recognized on the balance sheet as of September 30, 2024 is as follows (in thousands):

18. Commitments and contingencies

Purchase Obligations

The Company has entered into non-cancelable arrangements with third parties, primarily related to cloud computing and other information technology services. As of September 30, 2024, future payments under these contractual obligations were as follows (in thousands):

Legal proceedings

From time to time, the Company is involved in legal proceedings and claims. On August 14, 2024, Beckman Coulter, Inc. (“Beckman Coulter”) sued the Company in federal court in the District of Delaware, alleging that the Company's Aurora, Northern Lights and Northern Lights-CLC flow cytometers and Aurora CS cell sorters infringe U.S. Patent Nos. 10,330,582 and 11,703,443, each titled “Flow Cytometer ” On October 7, 2024, the Company filed an answer denying any liability and including a counterclaim against Beckman Coulter for false patent marking. On October 28, 2024, Beckman Coulter filed an answer to the counterclaim, denying liability. A case schedule has not been entered yet. The Company intends to vigorously defend itself and pursue the counterclaim.

The Company evaluates the status of each legal matter, if any, and assesses potential financial exposure. If the potential loss from any legal proceedings or litigation is considered probable and the amount can be reasonably estimated, the Company accrues a liability for the estimated loss. Significant judgment is required to determine the probability of a loss and whether the amount of the loss is reasonably estimated. The outcome of any proceeding is not determinable in advance. As a result, the assessment of a potential liability and the amount of accruals recorded are based on the information available at the time.

19. Investment in Cytek Japan

In May 2019, the Company jointly formed Cytek Japan with TOMY Digital Biology (“TOMY”). Cytek Japan was created for the purpose of expanding the Company’s presence in Japan. The Company and TOMY each purchased $46,000 of common stock of Cytek Japan. The Company previously accounted for its 50% interest in Cytek Japan as an equity method investment. The Company recorded $40,000 for its proportionate share of Cytek Japan’s earnings prior to its additional investment, which is included in other income (expense), net in the consolidated statements of operations and comprehensive loss for the year ended December 31, 2022.

In March 2021, the Company purchased an additional $688,000 of common stock of Cytek Japan and TOMY purchased an additional $229,000 of common stock of Cytek Japan. The Company’s interest in Cytek Japan increased from 50% to 73% giving the Company a controlling interest. The Company consolidated Cytek Japan as of March 31, 2021.

The Company recognized net assets of $1.1 million, consisting primarily of $1.0 million cash. The Company recorded a noncontrolling interest of $315,000 on the unaudited interim consolidated financial statements as of March 31, 2021.

In January 2023, the Company purchased an additional $235,000 of common stock of Cytek Japan. Cytek Japan became a wholly-owned subsidiary of the Company.

20. Product warranty

The following table shows the activity in the product warranty accrual included in accrued expenses on the consolidated balance sheets (in thousands):

21. Net income (loss) per share

The following table sets forth the computation of the Company’s basic and diluted net income (loss) per share for the three and nine months ended September 30, 2024 and 2023 (in thousands except share and per share data):

For the three months ended September 30, 2024, diluted EPS includes the impact of outstanding RSUs, and stock options, while shares from the ESPP were excluded due to their anti-dilutive effect. The basic weighted average shares outstanding were 131,003,744. The treasury stock method was applied to add 1,754,814 shares from stock options and 26,994 shares from RSUs.

Stock-based compensation awards of approximately 9.4 million and 6.2 million equivalent shares for the nine months ended September 30, 2024 and September 30, 2023, respectively, were outstanding but were not included in the computation of the diluted net loss per share attributable to common stockholders, because the effect of including such shares would have been anti-dilutive in the periods presented.

22. Geographic areas

The Company sells its products worldwide and attributes revenue to the geography where the product is delivered. The geographical distribution of revenue for the three and nine months ended September 30, 2024 and 2023 was as follows (in thousands):

EMEA includes Europe, the Middle East and Africa; APAC includes Asia and the Pacific countries; Other includes Canada and Latin America.

For the three and nine months ended September 30, 2024 and 2023, the Company hadno major customers.

As of September 30, 2024 and December 31, 2023, the Company’s long-lived assets by geographic area were as follows (in thousands):

As of September 30, 2024 and December 31, 2023, most of the Company’s long-lived assets were located in the United States and in Wuxi, China.

23. Subsequent Events

Credit Agreement

On October 24, 2024, the Company signed a maximum credit agreement with Bank of China, Wuxi Branch, for 37 million Chinese renminbi (approximately US $5.2 million). This credit is collateralized by the Cytek Wuxi's cash deposit to the bank. The 37 million Chinese renminbi (approximately US $5.2 million) can be borrowed, as needed, as a short-term loan for normal business operation requirements. The line of credit is available from October 24, 2024 to September 22, 2025.

Acquisition

On October 28, 2024, the Company completed the acquisition of substantially all of the assets of Cytometric Engineering Ltd. (d.b.a. FlowCEL) for a purchase price of $1.3 million. The acquisition included certain receivables, inventory assets, services contracts, andtwo rental facilities. The acquisition was accounted for as a business acquisition in accordance with ASC 805.