þ
|
Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended
|
|
|
September 30, 2018
|
or
|
o
|
Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from __ to __.
|
DELAWARE
|
|
72-2747608
|
(State or other jurisdiction of incorporation or organization)
|
|
(I.R.S. Employer Identification No.)
|
12212 TECHNOLOGY BLVD., AUSTIN, TEXAS
|
|
78727
|
(Address of principal executive offices)
|
|
(Zip Code)
|
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.
|
||
|
þ
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).
|
||
|
þ
Yes
|
¨
No
|
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
|
þ
No
|
|
Page
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortized Cost
|
|
Gains in Accumulated Other Comprehensive Income
|
|
Losses in Accumulated Other Comprehensive Income
|
|
Estimated Fair Value
|
||||||||
Current:
|
|
|
|
|
|
|
|
||||||||
Cash equivalents
|
$
|
702
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
702
|
|
Total current securities
|
702
|
|
|
—
|
|
|
—
|
|
|
702
|
|
||||
Noncurrent:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total noncurrent securities
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Total available-for-sale securities
|
$
|
702
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
702
|
|
|
Amortized Cost
|
|
Gains in Accumulated Other Comprehensive Income
|
|
Losses in Accumulated Other Comprehensive Income
|
|
Estimated Fair Value
|
||||||||
Current:
|
|
|
|
|
|
|
|
||||||||
Cash equivalents
|
$
|
701
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
701
|
|
Total current securities
|
701
|
|
|
—
|
|
|
—
|
|
|
701
|
|
||||
Noncurrent:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total noncurrent securities
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Total available-for-sale securities
|
$
|
701
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
701
|
|
|
September 30, 2018
|
|
December 31, 2017
|
||||
Parts and supplies
|
$
|
31,811
|
|
|
$
|
29,266
|
|
Work-in-progress
|
10,739
|
|
|
8,712
|
|
||
Finished goods
|
12,496
|
|
|
11,500
|
|
||
|
$
|
55,046
|
|
|
$
|
49,478
|
|
Level 1 –
|
Quoted prices in active markets for identical assets or liabilities.
|
Level 2 –
|
Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
|
Level 3 –
|
Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
|
|
Fair Value Measurements as of September 30, 2018 Using
|
||||||||||||||
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
||||||||
Assets:
|
|
|
|
|
|
|
|
||||||||
Money Market funds
|
$
|
702
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
702
|
|
|
Fair Value Measurements as of December 31, 2017 Using
|
||||||||||||||
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
||||||||
Assets:
|
|
|
|
|
|
|
|
||||||||
Money Market funds
|
$
|
701
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
701
|
|
|
September 30, 2018
|
|
December 31, 2017
|
||||
Balance at beginning of year
|
$
|
85,481
|
|
|
$
|
85,481
|
|
Balance at end of period
|
$
|
85,481
|
|
|
$
|
85,481
|
|
|
Finite-lived
|
|
Indefinite-lived
|
|
|
||||||||||||||
|
Technology, trade secrets and know-how
|
|
Customer lists and contracts
|
|
Other identifiable intangible assets
|
|
IP R&D
|
|
Total
|
||||||||||
2017
|
|
|
|
|
|
|
|
|
|
||||||||||
Balance as of December 31, 2016
|
$
|
81,385
|
|
|
$
|
19,097
|
|
|
$
|
5,664
|
|
|
$
|
12,982
|
|
|
$
|
119,128
|
|
Balance as of December 31, 2017
|
81,385
|
|
|
19,097
|
|
|
5,664
|
|
|
12,982
|
|
|
119,128
|
|
|||||
Less: accumulated amortization:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Accumulated amortization balance as of December 31, 2016
|
(28,137
|
)
|
|
(5,038
|
)
|
|
(1,112
|
)
|
|
—
|
|
|
(34,287
|
)
|
|||||
Amortization expense
|
(6,277
|
)
|
|
(1,999
|
)
|
|
(580
|
)
|
|
—
|
|
|
(8,856
|
)
|
|||||
Accumulated amortization balance as of December 31, 2017
|
(34,414
|
)
|
|
(7,037
|
)
|
|
(1,692
|
)
|
|
—
|
|
|
(43,143
|
)
|
|||||
Net balance as of December 31, 2017
|
$
|
46,971
|
|
|
$
|
12,060
|
|
|
$
|
3,972
|
|
|
$
|
12,982
|
|
|
$
|
75,985
|
|
Weighted average life (in years)
|
11
|
|
|
10
|
|
|
10
|
|
|
|
|
|
|
|
|||||
|
|
|
|
|
|
|
|
|
|
||||||||||
2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Balance as of December 31, 2017
|
$
|
81,385
|
|
|
$
|
19,097
|
|
|
$
|
5,664
|
|
|
$
|
12,982
|
|
|
$
|
119,128
|
|
Asset acquisition
|
—
|
|
|
—
|
|
|
—
|
|
|
4,328
|
|
|
4,328
|
|
|||||
Balance as of September 30, 2018
|
81,385
|
|
|
19,097
|
|
|
5,664
|
|
|
17,310
|
|
|
123,456
|
|
|||||
Less: accumulated amortization:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Accumulated amortization balance as of December 31, 2017
|
(34,414
|
)
|
|
(7,037
|
)
|
|
(1,692
|
)
|
|
—
|
|
|
(43,143
|
)
|
|||||
Amortization expense
|
(4,565
|
)
|
|
(1,499
|
)
|
|
(434
|
)
|
|
—
|
|
|
(6,498
|
)
|
|||||
Accumulated amortization balance as of September 30, 2018
|
(38,979
|
)
|
|
(8,536
|
)
|
|
(2,126
|
)
|
|
—
|
|
|
(49,641
|
)
|
|||||
Net balance as of September 30, 2018
|
$
|
42,406
|
|
|
$
|
10,561
|
|
|
$
|
3,538
|
|
|
$
|
17,310
|
|
|
$
|
73,815
|
|
Weighted average life (in years)
|
11
|
|
|
10
|
|
|
10
|
|
|
|
|
|
|
|
2018 (three months)
|
$
|
2,166
|
|
2019
|
8,666
|
|
|
2020
|
8,666
|
|
|
2021
|
8,307
|
|
|
2022
|
7,060
|
|
|
Thereafter
|
21,640
|
|
|
|
$
|
56,505
|
|
IP R&D
|
17,310
|
|
|
|
$
|
73,815
|
|
|
Foreign Currency Items
|
|
Available-for-Sale Investments
|
|
Accumulated Other Comprehensive Income (Loss) Items
|
||||||
Balance as of December 31, 2017
|
$
|
(625
|
)
|
|
$
|
—
|
|
|
$
|
(625
|
)
|
Other comprehensive income before reclassifications
|
(421
|
)
|
|
—
|
|
|
(421
|
)
|
|||
Net current-period other comprehensive loss
|
(421
|
)
|
|
—
|
|
|
(421
|
)
|
|||
Balance as of September 30, 2018
|
$
|
(1,046
|
)
|
|
$
|
—
|
|
|
$
|
(1,046
|
)
|
|
Three Months Ended September 30, 2018
|
|
Nine Months Ended September 30, 2018
|
||||||||||||||||||||
|
Before Tax
|
|
Tax Benefit
|
|
Net of Tax
|
|
Before Tax
|
|
Tax Benefit
|
|
Net of Tax
|
||||||||||||
Foreign currency translation adjustments
|
$
|
(102
|
)
|
|
$
|
—
|
|
|
$
|
(102
|
)
|
|
$
|
(421
|
)
|
|
$
|
—
|
|
|
$
|
(421
|
)
|
Unrealized gains on available-for-sale investments
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Other comprehensive loss
|
$
|
(102
|
)
|
|
$
|
—
|
|
|
$
|
(102
|
)
|
|
$
|
(421
|
)
|
|
$
|
—
|
|
|
$
|
(421
|
)
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
Basic:
|
|
|
|
|
|
|
|
||||||||
Net income
|
$
|
1,737
|
|
|
$
|
17,613
|
|
|
$
|
20,803
|
|
|
$
|
32,388
|
|
Less: allocation to participating securities
|
(29
|
)
|
|
(314
|
)
|
|
(356
|
)
|
|
(599
|
)
|
||||
Net income attributable to common stockholders
|
$
|
1,708
|
|
|
$
|
17,299
|
|
|
$
|
20,447
|
|
|
$
|
31,789
|
|
Weighted average common stock outstanding
|
43,836
|
|
|
43,164
|
|
|
43,679
|
|
|
43,110
|
|
||||
Net income per share attributable to common stockholders
|
$
|
0.04
|
|
|
$
|
0.40
|
|
|
$
|
0.47
|
|
|
$
|
0.74
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Diluted:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net income
|
$
|
1,737
|
|
|
$
|
17,613
|
|
|
$
|
20,803
|
|
|
$
|
32,388
|
|
Less: allocation to participating securities
|
(29
|
)
|
|
(314
|
)
|
|
(354
|
)
|
|
(599
|
)
|
||||
Net income attributable to common stockholders
|
$
|
1,708
|
|
|
$
|
17,299
|
|
|
$
|
20,449
|
|
|
$
|
31,789
|
|
Weighted average common stock outstanding
|
43,836
|
|
|
43,164
|
|
|
43,679
|
|
|
43,110
|
|
||||
Effect of dilutive securities: stock options and awards
|
871
|
|
|
102
|
|
|
514
|
|
|
106
|
|
||||
Weighted-average shares used in computing net income per share
|
44,707
|
|
|
43,266
|
|
|
44,193
|
|
|
43,216
|
|
||||
Net income per share attributable to common stockholders
|
$
|
0.04
|
|
|
$
|
0.40
|
|
|
$
|
0.46
|
|
|
$
|
0.74
|
|
Restricted Stock Awards (shares in thousands)
|
Shares
|
|
Weighted Average Grant Price
|
|||
Non-vested as of December 31, 2017
|
715
|
|
|
$
|
18.46
|
|
Granted
|
383
|
|
|
22.14
|
|
|
Vested
|
(286
|
)
|
|
18.48
|
|
|
Cancelled or expired
|
(53
|
)
|
|
19.47
|
|
|
Non-vested as of September 30, 2018
|
759
|
|
|
$
|
20.24
|
|
|
|
|
|
|||
Restricted Stock Units (in thousands)
|
Shares
|
|
|
|
||
Non-vested as of December 31, 2017
|
423
|
|
|
|
|
|
Granted
|
91
|
|
|
|
|
|
Vested
|
(49
|
)
|
|
|
|
|
Cancelled or expired
|
(3
|
)
|
|
|
|
|
Non-vested as of September 30, 2018
|
462
|
|
|
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
Cost of revenue
|
$
|
437
|
|
|
$
|
409
|
|
|
$
|
1,253
|
|
|
$
|
1,146
|
|
Research and development
|
571
|
|
|
702
|
|
|
771
|
|
|
1,299
|
|
||||
Selling, general and administrative
|
2,644
|
|
|
2,718
|
|
|
6,436
|
|
|
6,132
|
|
||||
Stock-based compensation costs reflected in net income
|
$
|
3,652
|
|
|
$
|
3,829
|
|
|
$
|
8,460
|
|
|
$
|
8,577
|
|
|
September 30, 2018
|
|
December 31, 2017
|
||||
Compensation and employee benefits
|
$
|
12,080
|
|
|
$
|
18,218
|
|
Dividends payable
|
2,702
|
|
|
2,671
|
|
||
Income and other taxes
|
704
|
|
|
1,070
|
|
||
Warranty costs
|
1,314
|
|
|
1,308
|
|
||
Other
|
3,095
|
|
|
2,723
|
|
||
|
$
|
19,895
|
|
|
$
|
25,990
|
|
Accrued warranty costs as of December 31, 2017
|
$
|
1,308
|
|
Warranty adjustments/settlements
|
(1,613
|
)
|
|
Accrual for warranty costs
|
1,619
|
|
|
Accrued warranty costs as of September 30, 2018
|
$
|
1,314
|
|
|
Balance at Beginning of Period
|
|
Balance at
End of Period
|
||||
Contract assets:
|
|
|
|
||||
Unbilled receivables - Royalties
|
$
|
10,643
|
|
|
$
|
10,719
|
|
|
|
|
|
||||
Contract liabilities - short-term:
|
|
|
|
||||
Deferred revenue - Service
|
$
|
4,438
|
|
|
$
|
5,136
|
|
Deferred revenue - Licenses
|
246
|
|
|
234
|
|
||
Deferred revenue - Other
|
37
|
|
|
219
|
|
||
Total Contract liabilities - short-term
|
$
|
4,721
|
|
|
$
|
5,589
|
|
|
|
|
|
||||
Contract liabilities - long-term:
|
|
|
|
||||
Deferred revenue - Service
|
$
|
315
|
|
|
$
|
253
|
|
Deferred revenue - Licenses
|
1,099
|
|
|
927
|
|
||
Deferred revenue - Other
|
83
|
|
|
97
|
|
||
Total Contract liabilities - long-term
|
$
|
1,497
|
|
|
$
|
1,277
|
|
|
Nine Months Ended September 30,
|
||
Revenue recognized in the period from:
|
2018
|
||
Amounts included as contract liabilities at the beginning of the period
|
$
|
4,354
|
|
Performance obligations satisfied in previous periods
|
-
|
|
|
Three Months Ended September 30, 2018
|
|
Nine Months Ended September 30, 2018
|
||||||||||||||||||||
Income Statement
|
As Reported in this Quarterly Report
|
|
Amounts Before Adoption of the Standard
|
|
Net Effect of Adoption of the Standard
|
|
As Reported in this Quarterly Report
|
|
Amounts Before Adoption of the Standard
|
|
Net Effect of Adoption of the Standard
|
||||||||||||
System sales
|
$
|
10,026
|
|
|
$
|
9,349
|
|
|
$
|
677
|
|
|
$
|
29,777
|
|
|
$
|
28,072
|
|
|
$
|
1,705
|
|
Consumable sales
|
11,627
|
|
|
11,627
|
|
|
—
|
|
|
34,466
|
|
|
34,466
|
|
|
—
|
|
||||||
Royalty revenue
|
12,081
|
|
|
12,316
|
|
|
(235
|
)
|
|
35,887
|
|
|
35,706
|
|
|
181
|
|
||||||
Assay revenue
|
33,747
|
|
|
34,432
|
|
|
(685
|
)
|
|
119,762
|
|
|
121,570
|
|
|
(1,808
|
)
|
||||||
Other revenue
|
4,964
|
|
|
4,964
|
|
|
—
|
|
|
14,793
|
|
|
14,793
|
|
|
—
|
|
||||||
Revenue
|
72,445
|
|
|
72,688
|
|
|
(243
|
)
|
|
234,685
|
|
|
234,607
|
|
|
78
|
|
||||||
Gross profit
|
44,256
|
|
|
44,499
|
|
|
(243
|
)
|
|
147,150
|
|
|
147,072
|
|
|
78
|
|
||||||
Income from operations
|
3,754
|
|
|
3,997
|
|
|
(243
|
)
|
|
26,878
|
|
|
26,800
|
|
|
78
|
|
||||||
Income tax benefit (expense)
|
(2,025
|
)
|
|
(2,083
|
)
|
|
58
|
|
|
(6,540
|
)
|
|
(6,521
|
)
|
|
(19
|
)
|
||||||
Net Income
|
1,737
|
|
|
1,922
|
|
|
(185
|
)
|
|
20,803
|
|
|
20,744
|
|
|
59
|
|
|
As of September 30, 2018
|
|||||||
Balance Sheet
|
As Reported in this Quarterly Report
|
|
Balances Before Adoption of ASC 606
|
|
Effect of Adoption of the Standard
|
|||
ASSETS
|
|
|
|
|
|
|||
Accounts receivable, net
|
42,205
|
|
|
31,484
|
|
|
10,721
|
|
Deferred income taxes
|
27,875
|
|
|
30,448
|
|
|
(2,573
|
)
|
|
|
|
|
|
|
|||
LIABILITIES AND STOCKHOLDERS
’
EQUITY
|
|
|
|
|
|
|||
Retained earnings
|
108,388
|
|
|
100,240
|
|
|
8,148
|
|
•
|
concentration of our revenue in a limited number of direct customers and strategic partners, some of which may experience decreased demand for their products utilizing or incorporating our technology, budget or finance constraints in the current economic environment, or periodic variability in their purchasing patterns or practices as a result of material resource planning challenges;
|
•
|
risks and uncertainties relating to market demand and acceptance of our products and technology, including ARIES
®
, MultiCode
®
, NxTAG
®
, xMAP
®
and VERIGENE
®
;
|
•
|
the impact on our growth and future results of operations as a result of the loss of the LabCorp women’s health business in June 2018 and the potential future loss of other products traditionally sold to LabCorp;
|
•
|
the occurrence of any event, change or circumstance that could give rise to the termination of the acquisition agreement entered into the parties in connection with the Company’s proposed acquisition of EMD Millipore Corporation’s flow cytometry portfolio;
|
•
|
our ability to consummate and complete the acquisition of EMD Millipore Corporation’s flow cytometry portfolio and that the expected benefits of the transaction will be realized;
|
•
|
risks and uncertainties associated with implementing our acquisition strategy, our ability to identify suitable acquisition targets including our ability to obtain financing on acceptable terms, our ability to integrate acquired companies or selected assets into our consolidated business operations, and the ability to fully realize the benefits of our acquisitions;
|
•
|
our ability to scale manufacturing operations and manage operating expenses, gross margins and inventory levels;
|
•
|
our ability to obtain and enforce intellectual property protections on our products and technologies;
|
•
|
our ability to successfully launch new products in a timely manner;
|
•
|
our dependence on strategic partners for development, commercialization and distribution of products;
|
•
|
the timing of and process for regulatory approvals;
|
•
|
competition and competitive technologies utilized by our competitors;
|
•
|
fluctuations in quarterly results due to a lengthy and unpredictable sales cycle, fluctuations in bulk purchases of consumables, fluctuations in product mix, the seasonal nature of some of our assays, and the variability of operating expense timing;
|
•
|
our ability to comply with applicable laws, regulations, policies and procedures;
|
•
|
the impact of the ongoing uncertainty in global finance markets and changes in government and government agency funding, including effects on the capital spending policies of our partners and end users and their ability to finance purchases of our products;
|
•
|
changes in interpretation, assumptions and expectations regarding the Tax Act, including additional guidance that may be issued by federal and state taxing authorities;
|
•
|
changes in principal members of our management staff;
|
•
|
potential shortages, or increases in costs, of components or other disruptions to our manufacturing operations;
|
•
|
our increasing dependency on information technology to enable us to improve the effectiveness of our operations and to monitor financial accuracy and efficiency;
|
•
|
the implementation, including any modifications, of our strategic operating plans;
|
•
|
the uncertainty regarding the outcome or expense of any litigation brought against or initiated by us; and
|
•
|
risks relating to our foreign operations, including fluctuations in exchange rates, tariffs, customs and other barriers to importing/exporting materials and products in a cost-effective and timely manner; difficulties in accounts receivable collections; our ability to monitor and comply with foreign and international laws and treaties; and our ability to comply with changes in international taxation policies.
|
•
|
Placements made by customers within our Licensed Technologies Group (LTG) in which customers either:
|
•
|
license our xMAP technology and develop products that incorporate our xMAP technology into products that they then sell to end users, or
|
•
|
purchase our proprietary xMAP laboratory instrumentation and our proprietary xMAP microspheres and sell xMAP-based assay products and/or xMAP-based testing services, which run on the xMAP instrumentation, and pay a royalty to us; and
|
•
|
A direct sales force that focuses on the sale of molecular diagnostic assays that run on our systems.
|
|
|
FDA
|
|
CE-IVD MARK
|
||||
|
|
Clearance
|
|
Commercial Launch
|
|
Declaration
|
|
Commercial Launch
|
ARIES
®
HSV 1&2 Assay
|
|
þ
|
|
2015 - Q4
|
|
þ
|
|
2016 - Q1
|
ARIES
®
Flu A/B & RSV Assay
|
|
þ
|
|
2016 - Q2
|
|
þ
|
|
2016 - Q2
|
ARIES
®
Group B Streptococcus (GBS) Assay
|
|
þ
|
|
2017 - Q1
|
|
þ
|
|
2016 - Q4
|
ARIES
®
Bordetella
Assay
|
|
þ
|
|
2017 - Q2
|
|
þ
|
|
2017 - Q3
|
ARIES
®
Norovirus Assay
|
|
|
|
|
|
þ
|
|
2017 - Q2
|
ARIES
®
C.
Difficile
Assay
|
|
þ
|
|
2017 - Q3
|
|
þ
|
|
2017 - Q3
|
ARIES
®
Group A Strep Assay
|
|
þ
|
|
2017 - Q4
|
|
þ
|
|
2017 - Q4
|
NxTAG
®
Respiratory Pathogen Panel (RPP)
|
|
þ
|
|
2016 - Q1
|
|
þ
|
|
2015 - Q4
|
VERIGENE
®
Clostridium Difficile
Test (CDF)
|
|
þ
|
|
2012 - Q4
|
|
þ
|
|
2013 - Q2
|
VERIGENE
®
Enteric Pathogens Test (EP)
|
|
þ
|
|
2014 - Q4
|
|
þ
|
|
2015 - Q4
|
VERIGENE
®
Respiratory Pathogens
Flex
Test (RP Flex)
|
|
þ
|
|
2015 - Q4
|
|
þ
|
|
2015 - Q2
|
VERIGENE
®
Gram-Negative Blood Culture Test (BC-GN)
|
|
þ
|
|
2014 - Q2
|
|
þ
|
|
2013 - Q1
|
VERIGENE
®
Gram-Positive Blood Culture Test (BC-GP)
|
|
þ
|
|
2012 - Q4
|
|
þ
|
|
2012 - Q1
|
xTAG
®
CYP2C19 Kit v3
|
|
þ
|
|
2013 - Q4
|
|
þ
|
|
2013 - Q4
|
xTAG
®
CYP2D6 Kit v3
|
|
þ
|
|
2011 - Q2
|
|
þ
|
|
2013 - Q2
|
xTAG
®
Cystic Fibrosis (CFTR) 39 Kit v2
|
|
þ
|
|
2009 - Q4
|
|
þ
|
|
2012 - Q1
|
xTAG
®
Cystic Fibrosis (CFTR) 60 Kit v2
|
|
þ
|
|
2010 - Q1
|
|
|
|
|
xTAG
®
Cystic Fibrosis (CFTR) 71 Kit v2
|
|
|
|
|
|
þ
|
|
2009 - Q3
|
xTAG
®
Gastrointestinal Pathogen Panel (GPP)
|
|
þ
|
|
2013 - Q1
|
|
þ
|
|
2011 - Q2
|
xTAG
®
Respiratory Viral Panel (RVP)
|
|
þ
|
|
2008 - Q1
|
|
þ
|
|
2007 - Q4
|
xTAG
®
Respiratory Viral Panel (RVP)
FAST v2
|
|
|
|
|
|
þ
|
|
2011 - Q4
|
•
|
Post quarter end, announced the signing of a definitive agreement to acquire the Amnis and Guava Flow cytometry businesses from EMD Millipore Corporation for approximately $69.9 million in cash at closing and approximately $5.1 million in obligations to make certain other inventory purchases under ancillary agreements for a period of up to twelve months following closing (both of which are subject to a purchase price reconciliation shortly after closing) for total consideration of approximately $75 million.
|
•
|
Consolidated revenue was
$72.4 million
for the quarter ended
September 30, 2018
, representing a
2%
decrease over revenue for the
third
quarter of
2017
. Revenue growth, excluding LabCorp sales, was up 7% over the prior year quarter.
|
•
|
Assay revenue was
$33.7 million
for the quarter ended
September 30, 2018
, representing an
11%
decrease over assay revenue for the
third
quarter of
2017
. Excluding the reduction of LabCorp sales, assay revenue increased 6% for the quarter ended September 30, 2018 over the prior year quarter.
|
•
|
Sample-to-answer assay revenue growth increased by
20%
for the quarter ended
September 30, 2018
over the
third
quarter of
2017
.
|
•
|
Royalty revenue was
$12.1 million
for the quarter ended
September 30, 2018
, representing a
10%
increase over royalty revenue for the
third
quarter of
2017
.
|
•
|
delivering on our revenue growth goals;
|
•
|
accelerating development and commercialization of the assays on our sample-to-answer diagnostic systems;
|
•
|
consummating the acquisition of the Amnis and Guava Flow cytometry businesses from EMD Millipore Corporation and effectively integrating such businesses;
|
•
|
increasing the growth of our LTG revenue through enrichment of our existing partner relationships and the addition of new partners;
|
•
|
completing development of and commercializing the next generation sample-to-answer system, VERIGENE II and our next generation xMAP System SENSIPLEX;
|
•
|
improvement of ARIES
®
and VERIGENE gross margins;
|
•
|
placements of our VERIGENE and ARIES
®
Systems, our sample-to-answer platforms and assays;
|
•
|
maintenance and improvement of our existing products and the timely development, completion and successful commercial launch of our pipeline products;
|
•
|
adoption and use of our platforms and consumables by our customers for their testing services;
|
•
|
expansion and enhancement of our installed base of systems and our market position within our identified target market segments; and
|
•
|
monitoring and mitigating the effect of the ongoing uncertainty in global finance markets and changes in government funding on planned purchases by end users.
|
|
Three Months Ended September 30,
|
|
|
|
|
|||||||||
|
2018
|
|
2017
|
|
Variance
|
|
Variance (%)
|
|||||||
Revenue
|
$
|
72,445
|
|
|
$
|
74,136
|
|
|
$
|
(1,691
|
)
|
|
(2
|
)%
|
Gross profit
|
$
|
44,256
|
|
|
$
|
45,819
|
|
|
(1,563
|
)
|
|
(3
|
)%
|
|
Gross margin percentage
|
61
|
%
|
|
62
|
%
|
|
(1
|
)%
|
|
N/A
|
|
|||
Operating expenses
|
$
|
40,502
|
|
|
$
|
39,290
|
|
|
1,212
|
|
|
3
|
%
|
|
Income from operations
|
$
|
3,754
|
|
|
$
|
6,529
|
|
|
(2,775
|
)
|
|
(43
|
)%
|
|
Three Months Ended September 30,
|
|
|
|
|
|||||||||
|
2018
|
|
2017
|
|
Variance
|
|
Variance (%)
|
|||||||
System sales
|
$
|
10,026
|
|
|
$
|
9,903
|
|
|
$
|
123
|
|
|
1
|
%
|
Consumable sales
|
11,627
|
|
|
10,619
|
|
|
1,008
|
|
|
9
|
%
|
|||
Royalty revenue
|
12,081
|
|
|
11,001
|
|
|
1,080
|
|
|
10
|
%
|
|||
Assay revenue
|
33,747
|
|
|
37,917
|
|
|
(4,170
|
)
|
|
(11
|
)%
|
|||
Service revenue
|
3,015
|
|
|
2,894
|
|
|
121
|
|
|
4
|
%
|
|||
Other revenue
|
1,949
|
|
|
1,802
|
|
|
147
|
|
|
8
|
%
|
|||
|
$
|
72,445
|
|
|
$
|
74,136
|
|
|
$
|
(1,691
|
)
|
|
(2
|
)%
|
|
Nine Months Ended September 30,
|
|
|
|
|
|||||||||
|
2018
|
|
2017
|
|
Variance
|
|
Variance (%)
|
|||||||
Revenue
|
$
|
234,685
|
|
|
$
|
228,372
|
|
|
$
|
6,313
|
|
|
3
|
%
|
Gross profit
|
$
|
147,150
|
|
|
$
|
148,666
|
|
|
(1,516
|
)
|
|
(1
|
)%
|
|
Gross margin percentage
|
63
|
%
|
|
65
|
%
|
|
(2
|
)%
|
|
N/A
|
|
|||
Operating expenses
|
$
|
120,272
|
|
|
$
|
120,643
|
|
|
(371
|
)
|
|
—
|
%
|
|
Income from operations
|
$
|
26,878
|
|
|
$
|
28,023
|
|
|
(1,145
|
)
|
|
(4
|
)%
|
|
September 30, 2018
|
|
December 31, 2017
|
||||
|
(in thousands)
|
||||||
Cash and cash equivalents
|
$
|
146,894
|
|
|
$
|
127,112
|
|
ISSUER PURCHASES OF EQUITY SECURITIES
|
|||||||||||||
Period
|
Total Number of Shares Purchased (1)
|
|
Average Price Paid per Share
|
|
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs
|
|
Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs
|
||||||
7/1/18 - 7/31/18
|
88
|
|
|
$
|
29.47
|
|
|
—
|
|
|
$
|
—
|
|
8/1/18 - 8/31/18
|
142
|
|
|
34.57
|
|
|
—
|
|
|
—
|
|
||
9/1/18 - 9/30/18
|
260
|
|
|
29.05
|
|
|
—
|
|
|
—
|
|
||
Total Third Quarter
|
490
|
|
|
$
|
30.72
|
|
|
—
|
|
|
$
|
—
|
|
(1)
Total shares purchased are attributable to the withholding of shares by Luminex to satisfy the payment of tax obligations related to the vesting of restricted shares.
|
Exhibit
Number
|
|
Description of Documents
|
|
|
|
|
||
|
|
|
|
||
|
|
|
|
||
|
|
|
|
||
|
|
|
|
||
|
|
|
|
||
|
|
|
101
|
|
The following materials from Luminex Corporation’s Quarterly Report on Form 10-Q for the three and nine months ended September 30, 2018, formatted in XBRL: (i) Condensed Consolidated Balance Sheets; (ii) Condensed Consolidated Statements of Comprehensive Income; (iii) Condensed Consolidated Statement of Cash Flows; and (iv) Notes to Condensed Consolidated Financial Statements.
|
|
|
|
|
|
|
A.
|
Landlord and Tenant are parties to that certain lease dated September 30, 2014 (the “Lease”).· Pursuant to the Lease, Landlord has leased to Tenant space currently containing approximately 162,117 rentable square feet (the “Original Premises”) comprised of (i) 53,925 rentable square feet commonly known as Suites 110, 120, 122, 125, 130, 145, and 150 located at 12201 Technology Blvd., Austin, TX 78727, (the “McNeil 3 Building”); (ii) 35,450 rentable square feet commonly known as Suites H, K, and K1 located at 12212 Technology Blvd., Austin, TX 78727, (the “McNeil 4 Building”); (iii) 44,378 rentable square feet commonly known as Suite A located at 12112 Technology Blvd., Austin, TX 78727, (the “McNeil 5 Building”); and (iv) 28,364 rentable square feet commonly known as Suite A located at 12100 Technology Blvd., Austin, TX 78727, (the “McNeil 6 Building”). The McNeil 3 Building is a part of the Project commonly referred to as McNeil 3 (the “McNeil 3 Project”) in the buildings commonly known as McNeil 3, 4, 5 and 6 located at 12100, 12201, 12212 and 12112 Technology Boulevard, Austin, Texas 78727 (the “Existing Buildings”), which is a part of the project commonly referred to as McNeil 3, 4, 5 and 6 (the “Existing Project”).
|
B.
|
Tenant has requested that additional space containing approximately 22,004 rentable square feel described as Suite 800 located at 12301 Technology Blvd., Austin, TX (the “Expansion Space”) of the Building shown on Exhibit A hereto (the “McNeil 8 Building”) be added to the Original Premises and that the Lease be appropriately amended and Landlord is willing to do the same on the following terms and conditions.
|
I.
|
Expansion and Effective Date.
Effective as of July 1, 2017 (the “Expansion Effective Date”), the Premises, as defined in the Lease, is increased from 162,117 rentable square feet to 184,121 rentable square feet by the addition of the Expansion Space, and from and after the Expansion Effective Date, the Original Premises and the Expansion Space, collectively, shall be deemed the Premises, as defined In the lease. The Expansion Space is subject to all the terms and conditions of the Lease except as expressly modified herein and except that Tenant shall not be entitled to receive any allowances, abatements or other financial concessions granted with respect to the Original Premises unless such concessions are expressly provided for herein with respect to the Expansion Space.
|
II.
|
Term.
The Term of the Lease, solely with regard to the Expansion Space, shall commence on the Expansion Effective Date and expire on June 30, 2022 (the “’Expansion Space Expiration Date”).
|
III.
|
Termination of McNeil 8 Existing Lease.
Tenant is currently in possession of the Expansion Space pursuant to the terms of that certain lease agreement dated April 27, 2012 (the “McNeil 8 Existing lease”) by and between Tenant, as tenant, and Landlord's predecessor in interest. The parties hereto acknowledge and agree that, notwithstanding any provision to the contrary set forth in the McNeil 8 Existing Lease, the McNeil 8 Existing Lease Is currently in full force and effect, has continued in full force and effect without interruption since the date Tenant initially took occupancy of the Expansion Space under the McNeil 8 Existing lease. In addition, notwithstanding to the contrary contained In the McNeil 8 Existing Lease, effective as of 11:59 p.m. (Central Time) on the day Immediately prior to the Expansion Effective Date (the “McNeil 8 Existing Lease Termination Date”) the McNeil 8 Existing Lease shall expire by its terms and be of no further force or effect and Landlord and Tenant's rights and obligations with respect to the Expansion Space arising or accruing thereafter shall be as set forth in the Lease, provided, however, that Landlord and Tenant shall remain liable under the terms of the McNeil 8 Existing Lease with respect to (i) any obligations which specifically survive the term of the McNeil 8 Existing Lease and (ii) for the performance of all of their respective obligations under the McNeil 8 Existing Lease accruing prior to the McNeil 8 Existing Lease Termination Date, including, without limitation, with respect to any liability arising on or before such date related to Tenant's use, occupancy or control of the Expansion Space during the term of the McNeil 8 Existing Lease (including, without limitation, with respect to
|
IV.
|
Base Rent.
|
A.
|
Base Rent for Expansion Space from Expansion Effective Date through Expansion Space Expiration Date. As of the Expansion Effective Date, and in addition to Tenant's obligation to pay Base Rent for the Original Premises, Tenant shall pay Landlord Base Rent for the Expansion Space as follows:
|
Period of Term
|
Monthly Base Rent
|
July 1, 2017 - June 30, 2018
|
$25,304.60
|
July 1, 2018 - June 30, 2019
|
$25 964.72
|
July 1, 2019 - June 30, 2020
|
$26,624.84
|
July 1, 2020 - June 30, 2021
|
$27 284.96
|
July 1, 2021 - June 30, 2022
|
$27,945.08
|
V.
|
Additional Security Deposit.
Upon the Expansion Effective Date, Tenant authorizes and directs Landlord to apply the sum Landlord currently holds under the McNeil 8 Existing lease as the security deposit (in the sum of $21,188.51) which will be added to and become part of the Security Deposit held by Landlord as provided under Section 5 of the Lease as security for payment of rent and the performance of the other terms and conditions of the Lease by Tenant Accordingly, simultaneous with the Expansion Effective Date, the Security Deposit under the Lease, shall be increased from $153,539.65 to $174,728.16.
|
VI.
|
Tenant's Proportionate Share.
For the period commencing with the Expansion Effective Date and ending on the Expansion Space Expiration Date, Tenant's Proportionate Share for the Expansion Space is 97.44% of McNeil 8.
|
VII.
|
Operating Expenses.
For the period commencing with the Expansion Effective Date and ending on the Expansion Space Expiration Date, Tenant shall pay for Tenant’s Proportionate Share of Operating Expenses applicable to the Expansion Space In accordance with the terms of the lease.
|
VIII.
|
Improvements to Expansion Space.
|
A.
|
Condition of Expansion Space. Tenant is in possession of the Expansion Space and accepts the same “as is” without any agreements, representations, understandings or obligations on the part of Landlord to perform any alterations, repairs or improvements, except as may be expressly provided otherwise in this Amendment.
|
B.
|
Responsibility for Improvements to Expansion Space. Tenant may perform improvements to the Premises In accordance with the Work Letter attached hereto as Exhibit C and Tenant shall be entitled to an improvement allowance in connection with such work as more fully described in Exhibit C.
|
IX.
|
Other Provisions.
Landlord and Tenant agree that, effective as of the date of this Amendment (unless different effective date(s) is/are specifically referenced in this Section). the Lease shall be amended in the following additional respects:
|
X.
|
Miscellaneous.
|
i.
|
This Amendment, including Exhibit A, Exhibit B, and Exhibit C hereto, sets forth the entire agreement between the parties with respect to the matters set forth herein. There have been no additional oral or written representations or agreements. Under no circumstances shall Tenant be entitled to any rent abatement, improvement allowance, leasehold improvements, or other work to the Premises, or any similar economic Incentives that may have been provided Tenant in connection with entering into the Lease, unless specifically set forth in this Amendment.
|
ii.
|
Except as herein modified or amended, the provisions, conditions and terms of the lease shall remain unchanged and in full force and effect.
|
iii.
|
In the case of any inconsistency between the provisions of the Lease and this Amendment, the provisions of this Amendment shall govern and control.
|
iv.
|
Submission of this Amendment by Landlord is not an offer to enter into this Amendment but rather is a solicitation for such an offer by Tenant. Landlord shall not be bound by this Amendment until Landlord has executed and delivered the same to Tenant.
|
v.
|
The capitalized terms used in this Amendment shall have the same definitions as set forth in the Lease to the extent that such capitalized terms are defined therein and not redefined in this Amendment
|
vi.
|
Tenant hereby represents to Landlord that Tenant has dean with no broker in connection with this Amendment other than Endeavor Real Estate Group. Tenant agrees to indemnify and hold Landlord, its trustees, members, principals, beneficiaries, partners, officers, directors, employees, mortgagee(s) and agents, and the respective principals and members of any such agents (collectively, the “Landlord Related Parties”) harmless from all claims of any brokers, other than Endeavor Real Estate Group, claiming to have represented Tenant in connection with this Amendment. Landlord hereby represents to Tenant that Landlord has dealt with no broker in connection with this Amendment. Landlord agrees to indemnify and hold Tenant, its trustees, members, principals, beneficiaries, partners, officers, directors, employees, and agents, and the respective principals and members of any such agents (collectively, the “Tenant Related Parties”) harmless from all claims of any brokers claiming to have represented Landlord in connection with this Amendment.
|
vii.
|
Each signatory of this Amendment represents hereby that he or she has the authority to execute and deliver the same on behalf of the party hereto for which such signatory is acting. Tenant hereby represents and warrants that neither Tenant, nor any persons or entities holding any legal or beneficial interest whatsoever in Tenant. are (i) the target of any sanctions program that is established by Executive Order of the President or published by the Office of Foreign Assets Control, U.S. Department of the Treasury (“OFAC”); (ii) designated by the President or OFAC pursuant to the Trading with the Enemy Act, 50 U.S.C.. App. § 5, the International Emergency Economic Powers Act, 50 U.S.C. §§ 1701-06, the Patriot Act, Public Law 107-56, Executive Order 13224 (September 23, 2001) or any Executive Order of the President Issued pursuant to such statutes; or (iii) named on the following list that is published by OFAC: “List of Specially Designated Nationals and Blocked Persons.” If the foregoing representation is untrue at any time during the Term, an uncured event of default under the Lease will be deemed to have occurred, without the necessity of notice to Tenant.
|
viii.
|
Notwithstanding anything to the contrary contained in this Amendment or the Lease, the liability of Landlord (and of any successor Landlord) under this Amendment and the Lease shall be limited to the lesser of (a) the interest of Landlord In the Building, or (b) the equity interest Landlord would have in the Building if the Building were encumbered by third party debt in an amount equal to 80% of the value of the Building (calculations of equity shall be made as of the initial date Tenant notifies Landlord of the actual or alleged default or other claim). Tenant shall look solely to Landlord's interest in the Building for the recovery of any judgment or award against Landlord or any Landlord Related Party.
|
ix.
|
This Amendment may be executed in any number of counterparts, each of which shall be deemed an original, but all of which, together, shall constitute one and the same Amendment. In order to expedite the transaction contemplated herein, to the extent allowable under applicable Law, telecopied signatures or signatures transmitted by electronic mall in so-called “pdf” format may be used in place of original signatures on this Amendment and shall be of the same force and effect as original signatures and shall be enforceable and admissible In lieu of original signatures to this Amendment. Landlord and Tenant intend to be bound by the signatures on the telecopied or e-mailed document, are aware that the other party will rely on the telecopied or e-mailed signatures which shall be of the same force and effect as original hand-written signatures for all purposes, and hereby waive any defenses to the admissibility or enforcement of the terms of this Amendment based on such telecopied or a-mailed signatures.
|
By:
|
|
Name:
|
David A. Vicars
|
Title:
|
Divisional Vice President
|
By:
|
|
Name:
|
Harriss Currie
|
Title:
|
CFO
|
1.
|
Option To Renew Lease with respect to the Expansion Space.
|
a.
|
Provided the lease is in full force and effect and Tenant is not in Default under any of the other terms and conditions of the Lease at the time of notification or commencement, Tenant shall have one (1) option to renew (the “Renewal Option”) the Term of the Lease for a term of five (5) years (the “Renewal Term”), for the portion of the Expansion Space being leased by Tenant as of the date the Renewal Term is to commence, on the same terms and conditions set forth in the lease, except as modified by the terms, covenants and conditions as set forth below:
|
i.
|
If Tenant elects to exercise the Renewal Option, then Tenant shall provide Landlord with written notice no earlier than the date which is 365 days prior to the expiration of the Expansion Space Expiration Date but no later than the date which is 180 days prior to the expiration of the Expansion Space Expiration Date. If Tenant fails to provide such notice, Tenant shall have no further or additional right to extend or renew the Term of the lease.
|
ii.
|
During the Renewal Term, the Base Rent shall be the then prevailing market rental rate (including all market concessions such as tenant finish allowance, commission and abated rent) for comparable size, quality and location as of the date the Renewal Option is exercised, taking into account the specific provisions of the lease which will remain constant. Base Rent during the Renewal Term shall increase, if at all, In accordance with the increases assumed in the determination of the then prevailing market rental rate. Base Rent attributable to the Expansion Space shall be payable in monthly installments in accordance with the terms and conditions of Article 2 of the Lease. Landlord shall advise Tenant of the new Base Rent for the Premises no later than 30 days after receipt of Tenant's written request therefore. Said request shall be made no earlier than 30 days prior to the first date on which Tenant may exercise its Renewal Option under paragraph (i) above.
|
b.
|
If Tenant is entitled to and properly exercises its Renewal Option, Landlord shall prepare an amendment (the “Renewal Amendment”) to reflect changes In the Base Rent, Term, Termination Date with regard to the Expansion Space and other appropriate terms as provided above. Tenant shall execute and return the Renewal Amendment to Landlord within 15 days after Tenant’s receipt of same. Tenant’s failure to return a fully executed Renewal Amendment to Landlord within such period shall be deemed a termination by Tenant of its Renewal Option and Tenant shall have no further right to extend the Term of the Lease, but such failure shall not be a default by Tenant under the Lease.
|
c.
|
Except in connection with a Permitted Transfer, the Renewal Option is not transferable; the parties hereto acknowledge and agree that they intend that the Renewal Option shall be “personal” to Tenant as set forth above and that in no event will any assignee or sublessee have any rights to exercise the Renewal Option. If the Renewal Option is validly exercised or if Tenant falls to validly exercise the Renewal Option, Tenant shall have no further right to extend the Term of the lease.
|
2.
|
Right of First Refusal.
|
1.
|
Tenant, following the full and final execution and delivery of this Amendment to which this Exhibit C is attached and the Security Deposit, if any required under such agreement, shall have the right to perform alterations and improvements in the Expansion Space (the “Tenant Improvements”). Notwithstanding the foregoing, Tenant and its contractors shall not have the right to perform the Tenant Improvements in the Expansion Space unless and until Tenant has complied with all of the terms and conditions of Article 9 of the Lease, including, without limitation, approval by Landlord of the final plans for the Tenant Improvements and the contractors to be retained by Tenant to perform such Tenant Improvements. Tenant shall be responsible for all elements of the design of Tenant's plans (including, without limitation, compliance with law, functionality of design, the structural integrity of the design, the configuration of the Expansion Space and the placement of Tenant's furniture, appliances and equipment), and Landlord's approval of Tenant's plans shalt in no event relieve Tenant of the responsibility for such design. Landlord's approval of the contractors to perform the Tenant Improvements shall not be unreasonably withheld. The parties agree that Landlord's approval of the general contractor to perform the Tenant Improvements shall not be considered to be unreasonably withheld if any such general contractor (a) does not have trade references reasonably acceptable to Landlord, (b) does not maintain insurance as required pursuant to the terms of the Lease, (c) does not have the ability to be bonded for the work in an amount of no less than 150% of the total estimated cost of the Tenant Improvements, (d) does not provide current financial statements reasonably acceptable to Landlord, or (e) is not licensed as a contractor in the state/municipality in which the Expansion Space is located. Tenant acknowledges the foregoing is not intended to be an exclusive list of the reasons why Landlord may reasonably withhold its consent to a general contractor. Landlord acknowledges that it has pre-approved Tenant's right to install new carpet in the Premises (i) without having to use a general contractor, (II) without having to engage an architect, and (ill) without having to provide as-built plans for documenting carpet installation.
|
2.
|
Provided Tenant is not in default under the terms of the Lease, Landlord agrees to contribute the sum of $110,020.00 (the “Tenant Improvement Allowance”) toward the cost of performing the Tenant Improvements. The Tenant Improvement Allowance may only be used for the cost of preparing design and construction documents and mechanical and electrical plans for the Tenant Improvements and for hard costs in connection with the Tenant Improvements. The Tenant Improvement Allowance shall be paid to Tenant or, at Landlord's option, to the order of the general contractor that performed the Tenant Improvements, within 30 days following receipt by Landlord of (a) receipted bills covering all labor and materials expended and used In the Tenant Improvements; (b) a sworn contractor's affidavit from the general contractor and a request to disburse from Tenant containing an approval by Tenant of the work done; (c) full and final waivers of lien; (d) as-built plans of the Tenant Improvements; and (e) the certification of Tenant and its architect that the Tenant Improvements have been installed in a good and workmanlike manner in accordance with the approved plans, and in accordance with applicable laws. The Tenant Improvement Allowance shall be disbursed in the amount reflected on the receipted bills meeting the requirements above. Notwithstanding anything herein to the contrary, Landlord shall not be obligated to disburse any portion of the Tenant Improvement Allowance during the continuance of an uncured Default under the Lease, and Landlord's obligation to disburse shall only resume when and if such Default is cured.
|
3.
|
In no event shall the Tenant Improvement Allowance be used for the purchase of equipment, furniture or other items of personal property of Tenant. If Tenant does not submit a request for payment of the entire Tenant Improvement Allowance to Landlord in accordance with the provisions contained in this Exhibit C by November 30, 2017, any unused amount shall accrue to the sole benefit of Landlord, it being understood that Tenant shall not be entitled to any credit, abatement or other concession in connection therewith. Tenant shall be responsible for all applicable state sales or use taxes, if any, payable in connection with the Tenant Improvements and for Tenant Improvement Allowance.
|
4.
|
Without limiting the "as-is" provisions of the Lease, Tenant accepts the Expansion Space in its “as-is” condition and acknowledges that landlord has no obligation to make any changes or improvements to the Premises or, except as provided above with respect to the Tenant Improvement Allowance, to pay any costs expended or to be expended in connection with any such changes or improvements in the Expansion Space.
|
5.
|
This Exhibit C shall not be deemed applicable to any additional space added to the Premises at any time or from time to time, whether by any options under the Lease or otherwise, or to any portion of the original Premises or any additions to the Premises in the event of a renewal or extension of the original Term of the Lease, whether by any options under the Lease or otherwise, unless expressly so provided in the Lease or any amendment or supplement to the Lease. Tenant shall not perform any work in the Expansion Space (including, without limitation, cabling, wiring, fixturization, painting, carpeting, replacements or repairs) except in accordance with Article 9 of the Lease.
|
6.
|
Not a Construction Contract or an Agreement Collateral to or Affecting a Construction Contract. Landlord and Tenant agree that this Exhibit is merely one part of this Amendment, which contains the overall agreement concerning Tenant's use and occupancy of the Premises. In no event is this Exhibit or the Lease a construction contract or an agreement collateral to or affecting a construction contract.
|
A.
|
Landlord and Tenant are parties to that certain lease dated September 30, 2014 with respect to the following Premises: approximately 162,117
rentable square feet comprised of (i)
53,925
rentable square feet commonly known as Suites 110, 120, 122, 125, 130, 145, and 150 in the McNeil 3 Building; (ii)
35,450
rentable square feet commonly known as Suites H, K, and K1 in the McNeil 4 Building; (iii)
44,378
rentable square feet commonly known as Suite A in the McNeil 5 Building; and (iv)
28,364
rentable square feet commonly known as Suite A in the McNeil 6 Building, for a total of
162,117
rentable square feet, herein described as the “
Original Premises
” (the “
Original Lease
”), as amended by that certain First Amendment dated March 10, 2017 (the “
First Amendment
”) with respect to certain premises comprised of approximately
22,004
rentable square feet commonly known as Suite 800 located in the McNeil 8 Building, herein described as the “
McNeil 8 Premises
”. The Original Lease and the First Amendment are, collectively, the "
Lease
". The Original Premises and the McNeil 8 Premises, comprised of approximately
184,121
rentable square feet, are, collectively, the “
Existing Premises
”. The Existing Project (as defined in the First Amendment) and the McNeil 8 Building are, collectively, the “
Project
”.
|
B.
|
Tenant has requested that the space described in the Original Lease as the Right of First Refusal Space, containing approximately
14,475
rentable square feet commonly known as Suite No.
100
in the McNeil 3 Building and shown on
Exhibit A
hereto (the "
McNeil 3 Expansion Space
") be added to the Existing Premises and that the Lease be appropriately amended, and Landlord is willing to do the same on the following terms and conditions.
|
C.
|
The Lease by its terms is scheduled to expire on (i)
April 30, 2020
with respect to the Original Premises (“
Prior Termination Date
”), and (ii)
June 30, 2022
with respect to the McNeil 8 Premises (“
McNeil 8 Expiration Date
”), and the parties desire to extend the Term of the Lease for the Original Premises (but not for the McNeil 8 Premises) all on the following terms and conditions.
|
I.
|
Expansion.
Effective as of
July 23, 2018
(“
Expansion Effective Date
”), the Premises, as defined in the Lease, is increased from approximately 184,121 rentable square feet in the Project to approximately
198,596
rentable square feet in the Project by the addition of the McNeil 3 Expansion Space, and from and after the Expansion Effective Date, the Existing Premises and the McNeil 3 Expansion Space, collectively, shall be deemed the Premises, as defined in the Lease and as used herein. The Term for the McNeil 3 Expansion Space shall commence on the Expansion Effective Date and end on the Extended Termination Date (as hereinafter defined). The McNeil 3 Expansion Space is subject to all the terms and conditions of the Lease except as expressly modified herein and except that Tenant shall not be entitled to receive any allowances, abatements or other financial concessions granted with respect to the Original Premises unless such concessions are expressly provided for herein with respect to the McNeil 3 Expansion Space.
|
II.
|
Extension.
|
A.
|
The Term of the Lease with respect to the Existing Premises (excluding the McNeil 8 Premises) is hereby extended for a period of
sixty (60)
Months, and shall expire on
April 30, 2025
("
Extended Termination Date
"), unless sooner terminated in accordance with the terms of the Lease. That portion of the Term commencing May 1, 2020 ("
Extension Date
") and ending on the Extended Termination Date shall be referred to herein as the "
Extended Term
”.
|
B.
|
The Term of the Lease with respect to the McNeil 8 Premises is not changed, and the McNeil 8 Expiration Date for the McNeil 8 Premises remains June 30, 2022. Notwithstanding the forgoing, Tenant shall have the Early Expiration Right with regard to the McNeil 8 Premises as set forth in
Exhibit D
hereto.
|
III.
|
Base Rent.
|
A.
|
Original Premises Through Prior Termination Date
. The Base Rent, Additional Rent and all other charges under the Lease shall be payable as provided therein with respect to the Original Premises through and including the Prior Termination Date.
|
B.
|
Original Premises From Extension Date through Extended Termination Date.
As of the Extension Date, the schedule of Base Rent payable with respect to the Original Premises during the Extended Term is the following:
|
Period of Term
|
Monthly
Base Rent
|
May 1, 2020 - April 30, 2021
|
$194,540.40
|
May 1, 2021 - April 30, 2022
|
$199,403.91
|
May 1, 2022 - April 30, 2023
|
$204,267.42
|
May 1, 2023 - April 30, 2024
|
$209,130.93
|
May 1, 2024 - April 30, 2025
|
$213,994.44
|
C.
|
McNeil 3 Expansion Space From Expansion Effective Date Through Extended Termination Date.
As of the Expansion Effective Date, the schedule of Base Rent payable with respect to the McNeil 3 Expansion Space for the balance of the original Term and the Extended Term is the following:
|
Period of Term
|
Monthly
Base Rent
|
July 23, 2018 - June 30, 2019
|
Abated
|
July 1, 2019 - April 30, 2020
|
$16,935.75
|
May 1, 2020 - April 30, 2021
|
$17,370.00
|
May 1, 2021 - April 30, 2022
|
$17,804.35
|
May 1, 2022 - April 30, 2023
|
$18,238.50
|
May 1, 2023 - April 30, 2024
|
$18,672.75
|
May 1, 2024 - April 30, 2025
|
$19,107.00
|
D.
|
McNeil 8 Premises through McNeil 8 Expiration Date.
Base Rent, Additional Rent and all other charges under the Lease shall be payable as provided therein with respect to the McNeil 8 Premises through and including the McNeil 8 Expiration Date, subject to
Exhibit D
hereto.
|
IV.
|
Additional Security Deposit.
No additional security deposit shall be required in connection with this Amendment.
|
V.
|
Tenant's Proportionate Share.
For the period commencing with the Expansion Effective Date and ending on the Extended Termination Date, Tenant's Proportionate Share is:
|
VI.
|
Operating Expenses.
|
A.
|
Original Premises for the Extended Term.
For the period commencing with the Extension Date and ending on the Extended Termination Date, Tenant shall pay Tenant’s Proportionate Share of Operating Expenses applicable to the Premises in accordance with the terms of the Lease.
|
B.
|
McNeil 3 Expansion Space From Expansion Effective Date Through Extended Termination Date.
Tenant’s obligation to pay for Tenant’s Proportionate Share of Operating Expenses applicable to the
|
VII.
|
Improvements to Premises.
|
A.
|
Condition of Existing Premises
. Tenant is in possession of the Existing Premises and accepts the same "as is" without any agreements, representations, understandings or obligations on the part of Landlord to perform any alterations, repairs or improvements except as provided for in the Lease. Notwithstanding the foregoing, Landlord agrees to extend the date by which Tenant may submit its request for the Tenant Improvement Allowance (as set forth in Exhibit C to the First Amendment) with regard to the McNeil 8 Premises only. The second sentence of Paragraph 3, Exhibit C of the First Amendment is hereby replaced in its entirety with the following sentence:
|
B.
|
Condition of McNeil 3 Expansion Space.
Tenant has inspected the McNeil 3 Expansion Space and agrees to accept the same "as is" without any agreements, representations, understandings or obligations on the part of Landlord to perform any alterations, repairs or improvements.
|
C.
|
Responsibility for Improvements to McNeil 3 Expansion Space.
Tenant may perform improvements to the McNeil 3 Expansion Space in accordance with the Work Letter attached hereto as
Exhibit B
, and Tenant shall be entitled to an improvement allowance in connection with such work as more fully described in
Exhibit B
.
|
VIII.
|
Early Access to McNeil 3 Expansion Space.
During any period that Tenant shall be permitted to enter the McNeil 3 Expansion Space prior to the Expansion Effective Date (e.g., to perform alterations or improvements), Tenant shall comply with all terms and provisions of the Lease, except those provisions requiring payment of Base Rent or Additional Rent as to the McNeil 3 Expansion Space. If Tenant takes possession of the McNeil 3 Expansion Space prior to the Expansion Effective Date for any reason whatsoever (other than the performance of work in the McNeil 3 Expansion Space with Landlord's prior approval), such possession shall be subject to all the terms and conditions of the Lease and this Amendment, and Tenant shall pay Base Rent and Additional Rent as applicable to the McNeil 3 Expansion Space to Landlord on a per diem basis for each day of occupancy prior to the Expansion Effective Date.
|
IX.
|
Additional Extension.
Tenant shall have one option to renew the Lease with respect to the Premises (excluding the McNeil 8 Premises, as to which Exhibit B to the First Amendment controls), as provided in
Exhibit C
attached hereto. Paragraph 28.02 (Option to Renew) of the Original Lease is no longer of any force or effect.
|
X.
|
Other Provisions.
Landlord and Tenant agree that, effective as of the date of this Amendment (unless different effective date(s) is/are specifically referenced in this Section), the Lease shall be amended in the following additional respects:
|
A.
|
Commencing on the Expansion Effective Date, Tenant shall be entitled to install and maintain exterior building signage (“
Exterior Signage
”), at its own expense, on the exterior of the McNeil 3 Building. In the event Tenant elects to install Exterior Signage, Landlord and Tenant shall mutually agree on a location for signage. The design, size, and method of installation of Tenant’s signage to be installed must comply with all applicable City codes, Landlord’s sign criteria, if any, and
Exhibit F
to the Original Lease, and shall require the approval of Landlord, which approval shall not be unreasonably withheld, conditioned or delayed. Tenant shall pay all electrical costs associated with its Exterior Signage, by separate meter installed at Tenant’s cost and expense. Upon expiration of the Term of the Lease, or any earlier termination, Tenant shall, at its own expense, remove the Exterior Signage and restore the exterior of the Building to its condition prior to installation of the Exterior Signage.
|
B.
|
Landlord shall deliver the McNeil 3 Expansion Space to Tenant with the heating and air conditioning systems serving the McNeil 3 Expansion Space ("
McNeil 3 Expansion Space HVAC system
") in good working order and condition. Provided that Tenant enters into, and continues throughout the Term, the service contract as set forth under this
Section X.B.
, at Tenant's cost and expense, then, beginning on July 23, 2018 and ending on
June 30, 2019
, Landlord agrees to repair or replace major HVAC components (the "
HVAC Components
") at Landlord's cost and expense, if, in Landlord's
|
XI.
|
Miscellaneous.
|
A.
|
This Amendment, including
Exhibits A, B, C and D
hereto, sets forth the entire agreement between the parties with respect to the matters set forth herein. There have been no additional oral or written representations or agreements. Under no circumstances shall Tenant be entitled to any rent abatement, improvement allowance, leasehold improvements, or other work to the Premises, or any similar economic incentives that may have been provided Tenant in connection with entering into the Lease, unless specifically set forth in this Amendment.
|
B.
|
Except as herein modified or amended, the provisions, conditions and terms of the Lease shall remain unchanged and in full force and effect.
|
C.
|
In the case of any inconsistency between the provisions of the Lease and this Amendment, the provisions of this Amendment shall govern and control.
|
D.
|
Submission of this Amendment by Landlord is not an offer to enter into this Amendment but rather is a solicitation for such an offer by Tenant. Landlord shall not be bound by this Amendment until Landlord has executed and delivered the same to Tenant.
|
E.
|
The capitalized terms used in this Amendment shall have the same definitions as set forth in the Lease to the extent that such capitalized terms are defined therein and not redefined in this Amendment.
|
F.
|
Tenant hereby represents to Landlord that Tenant has dealt with no broker in connection with this Amendment other than Endeavor Real Estate Group. Tenant agrees to indemnify and hold Landlord, its trustees, members, principals, beneficiaries, partners, officers, directors, employees, mortgagee(s) and agents, and the respective principals and members of any such agents (collectively, the “
Landlord Related Parties
”) harmless from all claims of any brokers, other than Endeavor Real Estate Group, claiming to have represented Tenant in connection with this Amendment. Landlord hereby represents to Tenant that Landlord has dealt with no broker in connection with this Amendment. Landlord agrees to indemnify and hold Tenant, its trustees, members, principals, beneficiaries, partners, officers, directors, employees, and agents, and the respective principals and members of any such agents (collectively, the “
Tenant Related Parties
”) harmless from all claims of any brokers claiming to have represented Landlord in connection with this Amendment. In no event shall Landlord be obligated to pay a commission to any broker or agent in connection with any extension of the Extended Term (whether pursuant to the automatic extension described above or otherwise) except as may be specifically provided otherwise in a separate written agreement between Landlord and any such broker or agent.
|
G.
|
Each signatory of this Amendment represents hereby that he or she has the authority to execute and deliver the same on behalf of the party hereto for which such signatory is acting. Tenant hereby represents and warrants that neither Tenant, nor any persons or entities holding any legal or beneficial interest whatsoever in Tenant, are (i) the target of any sanctions program that is established by Executive Order of the President or published by the Office of Foreign Assets Control, U.S. Department
|
H.
|
This Amendment may be executed in any number of counterparts, each of which shall be deemed an original, but all of which, together, shall constitute one and the same Amendment. In order to expedite the transaction contemplated herein, to the extent allowable under applicable Law, telecopied signatures or signatures transmitted by electronic mail in so-called "pdf" format may be used in place of original signatures on this Amendment and shall be of the same force and effect as original signatures and shall be enforceable and admissible in lieu of original signatures to this Amendment. Landlord and Tenant intend to be bound by the signatures on the telecopied or e-mailed document, are aware that the other party will rely on the telecopied or e-mailed signatures which shall be of the same force and effect as original hand-written signatures for all purposes, and hereby waive any defenses to the admissibility or enforcement of the terms of this Amendment based on such telecopied or e-mailed signatures.
|
XI.
|
Esignature Consent
. Signatures to this Amendment transmitted by telecopy or electronic signatures shall be valid and effective to bind the party so signing. This Amendment may be executed in two or more counterparts, each of which shall be deemed an original and all of which together shall constitute one and same agreement. FURTHER, THE PARTIES HERETO EXPRESSLY CONSENT AND AGREE THAT THIS AMENDMENT MAY BE ELECTRONICALLY SIGNED. THE PARTIES AGREE THE ELECTRONIC SIGNATURES APPEARING ON THIS AMENDMENT SHALL BE TREATED, FOR PURPOSES OF VALIDITY, ENFORCEABILITY AS WELL AS ADMISSIBILITY, THE SAME AS HAND-WRITTEN SIGNATURES.
|
|
|
|
Landlord Initial
|
|
Tenant Initial
|
By:
|
|
Name:
|
|
Title:
|
|
By:
|
|
Name:
|
|
Title:
|
|