License Agreements and Grants

9 Months Ended

Sep. 30, 2015

Notes to Financial Statements

License Agreements and Grants

NOTE 7. LICENSE AGREEMENTS AND GRANTS

Schott Janaer Glas GmbH

The Company signed a licensing agreement for microarraying slides using OptiChem coatings with Schott Jenaer Glas GmbH (“SCHOTT”) in November 2004. In November 2014, the agreement was amended and extended with an expiration date that coincides with the expiration of the underlying patents. Royalties are 5% of SCHOTT’s net product sales. Revenue is recognized as SCHOTT’s net product sales are reported to the Company.

NanoString Technologies

In October 2007, the Company entered into an exclusive seven-year license with NanoString Technologies, Inc. (“NanoString”). The license grants NanoString the right to apply OptiChem coatings to NanoString’s proprietary molecular detection products.

Defense Medical Research and Development Program

In May 2012, the Company and Denver Health were notified that the Defense Medical Research and Development Program (“DMRDP”) recommended $2,000,000 of funding for a project which ended in August 2015. The joint proposal became the sole recipient under the Military Infectious Diseases Applied Research Award program for rapid detection of serious antibiotic-resistant infections.  The project applied the Accelerate ID/AST system to wound infections and other serious infections secondary to trauma. The Company has invoiced a cumulative total of $558,000 under this grant which is recorded as an offset to research and development expenses. The amount invoiced for the three-month periods ended September 30, 2015 and 2014 was $43,000 and $50,000 respectively, and for the nine-month periods ended September 30, 2015 and 2014 was $179,000 and $150,000, respectively.

National Institute of Health Grant

In February 2015, we were notified that the National Institute of Health awarded a five year, $5,000,000 grant to Denver Health and ourselves to develop a fast and reliable identification and categorical susceptibility test carbepenem-resistant Enterobacteriaceae directly from whole blood. In June 2015, we executed a subaward agreement with Denver Health for the services we will provide as part of this grant which covers the period of February 15, 2015 through January 31, 2016 and totals $689,000. The amount invoiced for the three-month and nine-month periods ended September 30, 2015 and 2014 was $467,000 and $0, respectively.

Arizona Commerce Authority

In August 2012, the Company entered into a Grant Agreement (the “Grant Agreement”) with the Arizona Commerce Authority, an agency of the State of Arizona (the “Authority”), pursuant to which the Authority provided certain state and county sponsored incentives for the Company to relocate its corporate headquarters to, and expand its business within, the State of Arizona (the “Project”). Pursuant to the Grant Agreement, the Authority agreed to provide a total grant in the amount of $1,000,000 (the “Grant”) for the use by the Company in the advancement of the Project. The Grant is payable out of an escrow account in four installments, upon the achievement of the following milestones: 

· Milestone 1 – Relocation of Company’s operations and corporate headquarters to Arizona and creation of 15 Qualified Jobs (as defined below).

· Milestone 2 – Creation of 30 Qualified Jobs (including Qualified Jobs under Milestone 1).

· Milestone 3 – Creation of 40 Qualified Jobs (including Qualified Jobs under Milestones 1 and 2).

· Milestone 4 – Creation of 65 Qualified Jobs (including Qualified Jobs under Milestones 1, 2 and 3) and capital investment of at least $4,520,000.

For purposes of the Grant Agreement, a “Qualified Job” is a job that is permanent, full-time, new to Arizona, and for which the Company pays average (across all Qualified Jobs identified by the Company in its discretion) annual wages of at least $63,000 and offers health insurance benefits and pays at least 65% of the premiums associated with such benefits. The amount of each installment payment will be determined in accordance with a formula specified in the Grant Agreement. The Grant Agreement also contains other customary provisions, including representations, warranties and covenants of both parties. As of December 31, 2014, the Company had collected all of the $1,000,000 in milestones. The full amount is recorded in long-term deferred income until the economic development provisions of the grant have been satisfied in full, as there are “claw-back” provisions which would require repayment of certain amounts received if employment levels are not sustained during the term of the arrangement. Once the “claw-back” provisions expire in January 2018, we will recognize the grant as other non-operating income. Further details are included in Note 8, Deferred Income.