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Subsequent Events
9 Months Ended
Sep. 30, 2017
Subsequent Events [Abstract]  
Subsequent Events

Note 15. Subsequent Events

 

Convertible Promissory Note

 

On October 26, 2017, the Company issued a subordinated convertible promissory note (the “Note”) to QNAH in the principal amount of $3.0 million against receipt of cash proceeds equal to such principal amount. The Note bears simple interest at the rate of 3.0% per annum and matures on October 26, 2020 (the “Maturity Date”). The Company’s indebtedness under the Note is expressly subordinated in right of payment to the Company’s prior repayment in full of its indebtedness under its Loan and Security Agreement, dated August 22, 2014, as amended, with Oxford Finance LLC and Silicon Valley Bank. QNAH may elect to convert all or any portion of the outstanding principal balance of the Note and all unpaid accrued interest thereon at any time prior to the Maturity Date into shares of the Company’s common stock at a conversion price of $3.984 per share.

 

Statement of Work Two and Supplement Agreement

 

On October 26, 2017, the Company and QML entered into SOW Two under the Governing Agreement. SOW Two was made effective as of June 2, 2017 (“Onset Date”). SOW Two addresses development activities conducted by the Company and QML since the Onset Date and those expected to be further conducted by parties in connection with a sponsor project agreement, dated June 2, 2017, between QML and BMS (the “BMS/QML SPA”).

The development work performed and expected to be performed by the Company and QML under SOW Two (“Initial Phase Work”) is expected to form the basis of a multi-stage project leading to the potential development and commercialization of a companion diagnostic assay in support of one or more of BMS’s therapeutic development and commercialization programs. SOW Two will expire upon completion of the Initial Phase Work and receipt by the Company of all amounts due for such work, which the Company believes will occur in mid‑2018 barring any unexpected project delays. QML will pay the Company mid-single digit millions of dollars for the Initial Phase Work performed by the Company under SOW Two. In addition, the Company and QML will share in any net profits (as determined under the Governing Agreement) generated by the Initial Phase Work on an approximately quarterly basis throughout the SOW Two term.

SOW Two also provides that, notwithstanding anything in the Governing Agreement to the contrary, neither QML nor the Company shall have the right to terminate SOW Two or the Governing Agreement to the extent it relates to SOW Two upon a change of control of either party.

Concurrent with SOW Two, as a condition to BMS’s approval of SOW Two, the Company, QML and BMS entered into a Supplement Agreement, made effective as of the Onset Date. The Supplement Agreement establishes certain rights and obligations of the parties with regard to confidential information and other intellectual property needed to perform, and/or produced as a result of, the Initial Phase Work. The Company will receive sole ownership of “HTG Technology Improvements” (as defined in the Supplement Agreement) that may be produced as a result of the Initial Phase Work, and has agreed to grant certain royalty‑free, non-exclusive license rights to its technology in the event of a project delay caused by the Company and to certain patent rights the Company may obtain as a result of the Initial Phase Work. In addition, the Company will have joint ownership of certain other results of the Initial Phase Work, and royalty‑free, non‑exclusive license rights to BMS‑ or QML-owned (solely or jointly) patents resulting from the Initial Phase Work. The Supplement Agreement will expire or terminate upon expiration or termination of the BMS/QML SPA, which is expected to be approximately coextensive with the term of SOW Two.