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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1998
------------------
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _______________ to ____________
Commission file number: 0-26642
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MYRIAD GENETICS, INC.
(Exact name of registrant as specified in its charter)
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<CAPTION>
<S> <C>
DELAWARE 87-0494517
-------- ----------
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
</TABLE>
320 WAKARA WAY, SALT LAKE CITY, UT 84108
- ------------------------------------ -----
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (801) 584-3600
--------------
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. Yes [X] No [_]
As of November 9, 1998, the registrant had 9,400,192 shares of common stock
outstanding.
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MYRIAD GENETICS, INC.
INDEX TO FORM 10-Q
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Page
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PART I - Financial Information
Item 1. Financial Statements.
Condensed Consolidated Balance Sheets as of September 30, 1998 (unaudited) 3
and June 30, 1998
Condensed Consolidated Statements of Operations for the three months ended 4
September 30, 1998 and 1997 (unaudited)
Condensed Consolidated Statements of Cash Flows for the three months ended 5
September 30, 1998 and 1997 (unaudited)
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 8
PART II - Other Information
Item 1. Legal Proceedings 13
Item 2. Changes in Securities 13
Item 3. Defaults Upon Senior Securities 13
Item 4. Submission of Matters to a Vote of Security Holders 13
Item 5. Other Information 13
Item 6. Exhibits and Reports on Form 8-K 13
SIGNATURE(S) 14
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MYRIAD GENETICS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
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<CAPTION>
Sept.. 30, 1998
(Unaudited) June 30, 1998
Assets ------------------ ------------------
------
<S> <C> <C>
Current assets:
Cash and cash equivalents $9,230,572 $14,595,034
Marketable investment securities 6,842,430 16,267,156
Prepaid expenses 759,316 266,679
Trade accounts receivables, less allowance for doubtful accounts of $75,000
at Sept. 30, 1998, $66,000 at June 30, 1998 669,944 471,327
Non-trade receivables 85,109 117,053
------------- ------------
Total current assets 17,587,371 31,717,249
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Equipment and leasehold improvements:
Equipment 16,983,063 16,049,721
Leasehold improvements 2,313,488 2,288,241
------------- ------------
19,296,551 18,337,962
Less accumulated depreciation and amortization 6,653,087 5,902,926
------------- ------------
Net equipment and leasehold improvements 12,643,464 12,435,036
Long-term marketable investment securities 31,627,353 22,247,303
Other assets 950,198 992,384
------------- ------------
$62,808,386 $67,391,972
============= ============
Liabilities and Stockholders' Equity
------------------------------------
Current liabilities:
Accounts payable $3,763,714 $5,121,279
Accrued liabilities 1,846,599 1,938,722
Deferred revenue 2,132,699 2,722,115
Current portion of notes payable 37,375 128,843
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Total current liabilities 7,780,387 9,910,959
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Stockholders' equity
Common stock, $0.01 par value, 15,000,000 shares authorized; issued and
outstanding 9,355,692 shares on September 30, 1998 and
9,337,501 shares on June 30, 1998 93,557 93,375
Additional paid-in capital 91,984,629 91,907,034
Fair value adjustment on available-for-sale marketable investment securities 94,555 1,477
Deferred compensation (497,813) (576,446)
Accumulated deficit (36,646,929) (33,944,427)
------------- ------------
Net stockholders' equity 55,027,999 57,481,013
------------- ------------
$62,808,386 $67,391,972
============= ============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
3
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MYRIAD GENETICS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
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Three Months Ended
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Sept. 30, 1998 Sept. 30, 1997
(Unaudited) (Unaudited)
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Research revenue $4,646,516 $5,515,042
Genetic testing revenue 913,470 409,545
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Total revenues 5,559,986 5,924,587
Costs and expenses:
Research and development expenses 5,817,490 6,200,637
Selling, general and administrative expenses 2,555,415 2,137,228
Genetic testing cost of revenue 602,872 235,999
-------------- --------------
Total costs and expenses 8,975,777 8,573,864
-------------- --------------
Operating loss (3,415,791) (2,649,277)
Other income (expense):
Interest income 696,219 864,803
Interest expense (2,371) (11,448)
Other 19,441 121
-------------- --------------
713,289 853,476
-------------- --------------
Net loss ($2,702,502) ($1,795,801)
============== ==============
Basic and diluted loss per share ($0.29) ($0.19)
============== ==============
Basic and diluted weighted average shares outstanding 9,342,942 9,237,843
</TABLE>
See accompanying notes to condensed consolidated financial statements.
4
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MYRIAD GENETICS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Three Months Ended
------------------
Sept. 30, 1998 Sept. 30, 1997
(Unaudited) (Unaudited
------------- ------------
<S> <C> <C>
Cash flows from operating activities:
Net loss ($2,702,502) ($1,795,801)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization 840,594 769,116
Loss on sale of assets 11,937 --
Bad debt expense 9,000 --
Increase in trade receivables (207,617) (3,310)
Decrease (increase) in non-trade receivables 31,942 (34,696)
Decrease (increase) in prepaid expenses (492,637) 289,162
Decrease in other assets 42,188 --
Increase (decrease) in accounts payable and accrued
expenses (1,449,690) 459,566
Decrease in deferred revenue (589,416) (274,497)
----------------- --------------
Net cash used in operating activities (4,506,201) (590,460)
----------------- --------------
Cash flows from investing activities:
Proceeds from sale of equipment 2,595 --
Capital expenditures (984,921) (725,631)
Net change in marketable investment securities 137,755 6,044,404
----------------- -------------
Net cash provided by (used in) investing activities (844,571) 5,318,773
----------------- -------------
Cash flows from financing activities:
Net payments of notes payable (91,467) (82,516)
Net proceeds from issuance of common stock 77,777 125,667
----------------- -------------
Net cash provided by (used in) financing activities (13,690) 43,151
----------------- -------------
Net increase (decrease) in cash and cash equivalents (5,364,462) 4,771,464
Cash and cash equivalents at beginning of period 14,595,034 15,675,763
------------------ -------------
Cash and cash equivalents at end of period $9,230,572 $20,447,227
================== =============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
5
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MYRIAD GENETICS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(1) Basis of Presentation
---------------------
The accompanying condensed unaudited consolidated financial statements have
been prepared by Myriad Genetics, Inc. (the "Company") in accordance with
generally accepted accounting principles for interim financial information
and pursuant to the applicable rules and regulations of the Securities and
Exchange Commission. The condensed unaudited consolidated financial
statements include the accounts of the Company and its wholly-owned
subsidiaries. All material intercompany accounts and transactions have been
eliminated in consolidation. In the opinion of management, the accompanying
financial statements contain all adjustments (consisting of normal and
recurring accruals) necessary to present fairly all financial statements.
The financial statements herein should be read in conjunction with the
Company's audited consolidated financial statements and notes thereto for
the fiscal year ended June 30, 1998, included in the Company's Annual
Report on Form 10-K for the year ended June 30, 1998. Operating results for
the three-month period ended September 30, 1998 may not necessarily be
indicative of the results to be expected for any other interim period or
for the full year.
(2) Subsequent Events
-----------------
In October 1998, the Company entered into a five-year collaboration with
Schering AG, Germany, to utilize the Company's protein interaction
technology ("ProNet") for drug discovery and development. Under the
agreement, the Company will have an option to co-promote all new
therapeutic products in North America and receive 50 percent of the profits
from North American sales of all new drugs discovered with ProNet. This
collaboration may provide the Company with licensing fees, subscription
fees, option payments and milestone fees with a value of up to $51,000,000.
(3) Comprehensive Earnings (Loss)
-----------------------------
The Company adopted Statement of Financial Accounting Standards No. 130
(SFAS 130), "Reporting Comprehensive Income", effective July 1, 1998. SFAS
130 establishes standards for reporting and displaying comprehensive
earnings (loss) and its components in financial statements. The components
of the Company's comprehensive earnings (loss) are as follows:
<TABLE>
<CAPTION>
Three Months Ended Three Months Ended
September 30, 1998 September 30, 1998
(unaudited) (unaudited)
------------------ ------------------
<S> <C> <C>
Net loss ($2,702,502) ($1,795,801)
Unrealized gain (loss) on available for-sale
Marketable investment securities 93,078 (5,291)
------------------ ------------------
Comprehensive loss ($2,609,424) ($1,801,092)
================== ==================
</TABLE>
6
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(4) Net Loss Per Common and Common Equivalent Share
-----------------------------------------------
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 128, Earnings per Share (SFAS 128).
SFAS 128 became effective for financial statements with interim and annual
periods ending after December 15, 1997. Accordingly, the Company has
adopted SFAS 128.
SFAS 128 establishes a different method of computing earnings (loss) per
common and common-equivalent share than was previously required under the
provisions of Accounting Principles Board Opinion No. 15. SFAS 128 requires
the presentation of basic and diluted earnings (loss) per share. Basic is
the amount of net income (loss) for the period available to each share of
common stock outstanding during the reporting period. Diluted earnings per
share is the amount of net income (loss) for the period available to each
share of common stock outstanding during the reporting period and to each
share that would have been outstanding assuming the issuance of common
shares for all dilutive potential common shares outstanding during the
period.
In calculating earnings (loss) per common and common-equivalent share the
net income (loss) and the weighted average common and common-equivalent
shares outstanding were the same for both the basic and diluted
calculation.
For the three months ended September 30, 1998 and September 30, 1997, there
were antidilutive common stock equivalents of 2,155,178 and 1,342,497,
respectively. Accordingly, these common stock equivalents were not included
in the computation of diluted earnings per share for the years presented,
but may be dilutive to future basic and diluted earnings per share.
7
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MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
Since inception, the Company has devoted substantially all of its resources to
maintaining its research and development programs, establishing and operating a
genetic testing laboratory, and supporting collaborative research agreements.
Revenues received by the Company primarily have been payments pursuant to
collaborative research agreements and sales of genetic tests. The Company has
been unprofitable since its inception and, for the quarter ended September 30,
1998, the Company had a net loss of $2,702,502 and as of September 30, 1998 had
an accumulated deficit of $36,646,929.
In April 1995, the Company commenced a five-year collaborative research and
development arrangement with Novartis Corporation ("Novartis"). This
collaboration may provide the Company with an equity investment, research
funding and potential milestone payments of up to $60,000,000. The Company is
entitled to receive royalties from sales of therapeutic products sold by
Novartis. The Company recognized $1,426,440 in revenue under this agreement for
the quarter ended September 30, 1998.
In September 1995, the Company commenced a five-year collaborative research and
development arrangement with Bayer Corporation ("Bayer"). This collaboration
may provide the Company with an equity investment, research funding and
potential milestone payments of up to $71,000,000. In November 1997, the
Company announced an expansion of its collaborative research and development
arrangement with Bayer. The expanded collaboration may provide the Company with
additional research funding and potential milestone payments of up to
$54,000,000 or a total potential of up to $125,000,000. The Company is entitled
to receive royalties from sales of therapeutic products sold by Bayer. The
Company recognized $2,470,076 in revenue under this agreement for the quarter
ended September 30, 1998.
In October 1996, the Company announced the introduction of BRACAnalysis, a
comprehensive BRCA1 and BRCA2 gene sequence analysis for susceptibility to
breast and ovarian cancer. In January 1998, the Company announced the
introduction of CardiaRisk which may assist physicians both in (i) identifying
which hypertensive patients are at a significantly increased risk of developing
cardiovascular disease and (ii) identifying which patients are likely to respond
to low salt diet therapy and antihypertensive drug therapy. The Company,
through its wholly owned subsidiary Myriad Genetic Laboratories, Inc.,
recognized genetic testing revenues, primarily from BRACAnalysis, of $913,470
for the quarter ended September 30, 1998.
In April 1997, the Company commenced a three-year collaborative research and
development arrangement with Schering Corporation ("Schering"). The three-year
term may be extended for two additional one-year periods. This collaboration
may provide the Company with an equity investment, license fees, research
funding and potential milestone payments totalling up to $60,000,000. The
Company is entitled to receive royalties from sales of therapeutic products sold
by Schering. The Company recognized $750,000 in revenue under this agreement
for the quarter ended September 30, 1998.
The Company intends to enter into additional collaborative relationships to
locate and sequence genes associated with other common diseases as well as
continuing to fund internal research projects. There can be no assurance that
the Company will be able to enter into additional collaborative relationships on
terms acceptable to the Company. The Company expects to incur losses for at
least the next several years, primarily due to expansion of its research and
development programs, increased staffing costs and expansion of its facilities.
Additionally, the Company expects to incur substantial sales, marketing and
other expenses in connection with building its genetic testing business. The
Company expects that losses will fluctuate from quarter to quarter and that such
fluctuations may be substantial.
SUBSEQUENT EVENT
In October 1998, the Company entered into a five-year collaboration with
Schering AG, Germany, to utilize the Company's protein interaction technology
("ProNet") for drug discovery and development. Under the agreement, the Company
will have an option to co-promote all new therapeutic products in North America
and receive 50
8
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percent of the profits from North American sales of all new drugs discovered
with ProNet. This collaboration may provide the Company with licensing fees,
subscription fees, option payments and milestone fees with a value of up to
$51,000,000.
RESULTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
Research revenues for the quarter ended September 30, 1998 were $4,646,516 as
compared to $5,515,042 for the same quarter of 1997. Greater research revenue
recognized during the quarter ended September 30, 1997 versus the current
quarter is the result of a $2,000,000 milestone payment from Schering received
by the Company in 1997. Excluding the milestone payment, the Company's ongoing
research revenue increased $1,131,474 for the quarter ended September 30, 1998
versus the same quarter of 1997. This increase is primarily the result of the
expanded scope of the Bayer agreement. Research revenue from the research
collaboration agreements is recognized as related costs are incurred.
Consequently, as these programs progress and costs increase, revenues increase
proportionately.
Genetic testing revenues of $913,470 were recognized in the quarter ended
September 30, 1998, an increase of 123% or $503,925 over the same quarter of the
prior year. The test for genetic predisposition to breast and ovarian cancer
was launched by the Company in October 1996 and the test for heart disease and
hypertension risk was launched by the Company in January 1998. Sales and
marketing efforts since that time have given rise to the increased revenues for
the quarter ended September 1998. There can be no assurance, however that
genetic testing revenues will continue to increase at the historical rate.
Research and development expenses for the quarter ended September 30, 1998 were
$5,817,490 as compared to $6,200,637 for the same quarter of 1997. Research and
development expenses were greater in the quarter ended September 30, 1997 versus
the same quarter of 1998 as a result of expenses incurred by the Company related
to a milestone achieved by one of its academic collaborators during the fiscal
1997 quarter. Excluding the milestone expense, the Company's research and
development expenses increased for the quarter ended September 30, 1998 as
compared to the same quarter of 1997. This increase was primarily due to an
increase in research activities as a result of the progress in the Company's
collaborations with Novartis, Bayer and Schering as well as those programs
funded by the Company. The increased level of research spending includes third-
party research programs, increased depreciation charges related to purchasing
additional research equipment, the hiring of additional research personnel and
the associated increase in use of laboratory supplies and reagents. Such
expenses will likely increase to the extent that the Company enters into
additional research agreements with third parties.
Selling, general and administrative expenses for the quarter ended September 30,
1998 were $2,555,415 as compared to $2,137,228 for the same quarter of 1997.
The increase was attributable to costs associated with the ongoing promotion of
BRACAnalysis as well as additional administrative, sales, marketing and
education personnel, market research activities, education material development,
and facilities-related costs. The Company expects its selling, general and
administrative expenses will continue to increase in support of its genetic
testing business and its research and development efforts.
Interest income for the quarter ended September 30, 1998 was $696,219 as
compared to $864,803 for the same quarter of 1997. Cash, cash equivalents, and
marketable investment securities were $61,799,207 at September 30, 1997 as
compared to $47,700,355 at September 30, 1998. This decrease in cash and
investments, attributable to expenditures incurred in the ordinary course of
business, has resulted in reduced interest income. Interest expense for the
quarter ended September 30, 1998, amounting to $2,371, was due entirely to
borrowings under the Company's equipment financing facility.
LIQUIDITY AND CAPITAL RESOURCES
Net cash used in operating activities was $4,506,201 during the quarter ended
September 30, 1998 and $590,460 during the same quarter of 1997. Cash used in
operating activities is comprised of changes in the following financial
statement accounts: depreciation and amortization, loss on sale of assets, bad
debt expense, trade receivables, non-
9
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trade receivables, prepaid expenses, other assets, accounts payable and accrued
expenses, and deferred revenue. Trade receivables for the three months ended
September 30, 1998 increased $207,617. This increase is primarily attributable
to the 29% increase in genetic testing revenue for the quarter ended September
30, 1998 as compared to testing revenue for the quarter ended June 30, 1998.
Non-trade receivables decreased $31,942 between June 30, 1998 and September 30,
1998 primarily as a result of certain patent legal fees which the Company has
incurred and which were reimbursed by one of the Company's collaborative
partners. Prepaid expenses increased $492,637 during the quarter ended September
30, 1998. The increase is primarily due to advance payments to purchase lab
supplies at a discount. These expenses were offset by advance royalties and
insurance premiums being expensed during the quarter. Accounts payable and
accrued expenses decreased $1,449,690 between June 30, 1998 and September 30,
1998 primarily as a result of payments for lab supplies and equipment which were
accrued into the prior quarter. Deferred revenue, representing the difference in
collaborative payments received and research revenue recognized, decreased
$589,416 during the quarter ended September 30, 1998.
The Company's investing activities used cash of $844,571 in the three months
ended September 30, 1998 and provided cash of $5,318,773 in the three months
ended September 30, 1997. Investing activities were comprised primarily of
capital expenditures for research equipment.
Financing activities used $13,690 during the quarter ended September 30, 1998.
The Company reduced the principal on its equipment financing facility by
$91,467. This decrease was offset by proceeds of $77,777 from the exercise of
stock options. Financing activities provided $43,151 during the quarter ended
September 30, 1997. The Company reduced the principal on its equipment
financing facility by $82,516 and received proceeds from stock option exercises
of $125,667 during the 1997 quarter.
The Company anticipates that its existing capital resources will be adequate to
maintain its current and planned operations for at least the next two years,
although no assurance can be given that changes will not occur that would
consume available capital resources before such time. The Company's future
capital requirements will be substantial and will depend on many factors,
including progress of the Company's research and development programs, the
results and cost of clinical correlation testing of the Company's genetic tests,
the costs of filing, prosecuting and enforcing patent claims, competing
technological and market developments, payments received under collaborative
agreements, changes in collaborative research relationships, the costs
associated with potential commercialization of its gene discoveries, if any,
including the development of manufacturing, marketing and sales capabilities,
the cost and availability of third-party financing for capital expenditures and
administrative and legal expenses. Because of the Company's significant long-
term capital requirements, the Company intends to raise funds when conditions
are favorable, even if it does not have an immediate need for additional capital
at such time.
IMPACT OF THE YEAR 2000 ISSUE
The Year 2000 Issue
The Year 2000 Issue is the result of computer programs using a two-digit format,
as opposed to four digits, to indicate the year. Any of the Company's computer
programs or other information systems that have time-sensitive software or
embedded microcontrollers may recognize a date using "00" as the year 1900
rather than the year 2000. This could result in a system failure or
miscalculations causing disruptions of operations.
State of Readiness and Costs to Address the Year 2000 Issue
During fiscal 1998, the Company completed an initial review ("Phase I") of its
information and non-information technology systems. This review included its
existing and planned computer software and hardware. The Company has made an
initial determination, based on its Phase I review, that the costs and/or
consequences associated with the Year 2000 issue are not expected to have a
material effect on its business, operations or future financial condition.
A second, more in-depth analysis ("Phase II") is currently ongoing. Internally,
Phase II will include the testing of internally developed systems. Although the
internal portion of Phase II just recently commenced, and is not expected to be
completed until the end of calendar year 1998, the Company presently believes
that with modifications to existing software and conversions to new software and
systems, the Year 2000 Issue will not pose
10
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significant operational problems for its computer and other information systems.
If required, the Company will utilize both internal and external resources to
reprogram, or replace, and test the software and systems for Year 2000
modifications. Externally, Phase II of the Company's preparations for the Year
2000 Issue will consist of soliciting and obtaining certification of Year 2000
compliance from third-party software vendors and determining the readiness of
its significant suppliers and customers.
Risks of the Year 2000 Issue
If such modifications, conversions and/or replacements are not made, are not
completed timely, or if any of the Company's suppliers or customers do not
successfully deal with the Year 2000 Issue, the Year 2000 Issue could have a
material impact on the operations of the Company. The Company could experience
delays in receiving or sending its genetic testing products that would increase
its costs and that could cause the Company to lose business and even customers
and could subject the Company to claims for damages. Problems with the Year
2000 Issue could also result in delays in the Company invoicing its genetics
testing customers or in the Company receiving payments from them. In addition,
the Company's research and development efforts which rely heavily on the storage
and retrieval of electronic information could be interrupted resulting in
significant delays in discovering genes, the loss of current collaborations, and
the impairment of the Company's ability to enter into new collaborations. The
severity of these possible problems would depend on the nature of the problem
and how quickly it could be corrected or an alternative implemented, which is
unknown at this time. In the extreme, such problems could bring the Company to
a standstill.
While management has not yet specifically determined the costs associated with
its Year 2000 readiness efforts, monitoring and managing the Year 2000 Issue
will result in additional direct and indirect costs to the Company. Direct
costs include potential charges by third-party software vendors for product
enhancements, costs involved in testing software products for Year 2000
compliance and any resulting costs for developing and implementing contingency
plans for critical software products which are not enhanced. Indirect costs
will principally consist of the time devoted by existing employees in monitoring
software vendor progress, testing enhanced software products and implementing
any necessary contingency plans. Such costs have not been material to date.
Both direct and indirect costs of addressing the Year 2000 Issue will be charged
to earnings as incurred.
Contingency Plan
After evaluating its internal compliance efforts as well as the compliance of
third parties as described above, the Company will develop during calendar year
1999 appropriate contingency plans to address situations in which various
systems of the Company, or of third parties with which the Company does
business, are not Year 2000 compliant. Some risks of the Year 2000 Issue,
however, are beyond the control of the Company and its suppliers and customers.
For example, no preparations or contingency plan will protect the Company from a
downturn in economic activity caused by the possible ripple effect throughout
the entire economy caused by the Year 2000 Issue.
CERTAIN FACTORS THAT MAY AFFECT FUTURE RESULTS OF OPERATIONS
The Company believes that this report on Form 10-Q contains certain forward-
looking statements as that term is defined in the Private Securities Litigation
Reform Act of 1995. Such statements are based on management's current
expectations and are subject to a number of factors and uncertainties which
could cause actual results to differ materially from those described in the
forward-looking statements. The Company cautions investors that there can be no
assurance that actual results or business conditions will not differ materially
from those projected or suggested in such forward-looking statements as a result
of various factors, including, but not limited to, the following: the timely
implementation by the Company of its plan to prepare its computer systems for
the Year 2000, the costs to the Company of such preparation, and the timely
conversion by other parties on which the Company's business relies; intense
competition related to the discovery of disease-related genes and the
possibility that others may discover, and the Company may not be able to gain
rights with respect to, genes important to the establishment of a successful
genetic testing business, difficulties inherent in developing genetic tests once
genes have been discovered; the Company's limited experience in operating a
genetic testing laboratory; the Company's limited marketing and sales experience
and the risk that tests which the Company has or may develop may not be able to
be marketed at acceptable prices or receive commercial acceptance in the markets
that the Company is targeting or expects to target;
11
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uncertainty as to whether there will exist adequate reimbursement for the
Company's services from government, private healthcare insurers and third-party
payors; and uncertainties as to the extent of future government regulation of
the Company's business. As a result, the Company's future development efforts
involve a high degree of risk. For further information, refer to the more
specific risks and uncertainties disclosed throughout this Quarterly Report on
Form 10-Q.
12
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PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
The Company is not a party to any legal proceedings.
ITEM 2. CHANGES IN SECURITIES.
(c) Sales of Unregistered Securities
--------------------------------
During the three months ended September 30, 1998, the Company issued a total of
7,834 shares of Common Stock to a consultant of the Company pursuant to the
exercise of stock options at a weighted average price of $3.50 per share.
No person acted as an underwriter with respect to the transactions set forth
above. In the foregoing instance, the Company relied on Section 4(2) of the
Securities Act of 1933, as amended (the "Securities Act") or Rule 701
promulgated under the Securities Act for the exemption from the registration
requirements of the Securities Act, since no public offerings were involved.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
ITEM 5. OTHER INFORMATION.
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
--------
The following is a list of exhibits filed as part of this Quarterly Report on
Form 10-Q.
Exhibit
Number Description
- ------ -----------
10.1 Memorandum of Lease between the Company and Boyer Foothill Associates,
LTD. dated August 24, 1998.
10.2 Memorandum of Lease between the Company and Boyer Research Park
Associates VI, L.C. dated August 24, 1998.
10.3 Subordination Agreement and Estoppel, Attornment and
Non-Disturbance Agreement (Lease to Deed of Trust) between the Company
and Wells Fargo Bank, National Association dated June 24, 1998.
11.1 Statement Regarding Computation of Net Loss Per Share
27.1 Financial Data Schedule
(b) Reports on Form 8-K
-------------------
No reports on Form 8-K were filed during the quarter ended September 30, 1998.
13
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
MYRIAD GENETICS, INC.
Date: November 12, 1998 By: /s/ Peter D. Meldrum
--------------------------
Peter D. Meldrum
President and Chief Executive Officer
Date: November 12, 1998 /s/ Jay M. Moyes
---------------------------
Jay M. Moyes
Vice President of Finance and Chief Financial
Officer
(principal financial and accounting officer)
14
<PAGE>
MYRIAD GENETICS, INC.
EXHIBIT INDEX
Exhibit
Number Description
- ------ -----------
10.1 Memorandum of Lease between the Company and Boyer Foothill
Associates, LTD. dated August 24, 1998.
10.2 Memorandum of Lease between the Company and Boyer Research Park
Associates VI, L.C. dated August 24, 1998.
10.3 Subordination Agreement and Estoppel, Attornment and Non-Disturbance
Agreement (Lease to Deed of Trust) between the Company and Wells
Fargo Bank, National Association dated June 24, 1998.
11.1 Statement Regarding Computation of Net Loss Per Share
27.1 Financial Data Schedule
15
<PAGE>
Exhibit 10.1
WHEN RECORDED, PLEASE RETURN TO:
David E. Gee, Esq.
Parr Waddoups Brown Gee & Loveless
185 South State Street, Suite 1300
Salt Lake City, Utah 84111
MEMORANDUM OF LEASE
THIS MEMORANDUM OF LEASE (the "Memorandum") is entered into as of the
24th day of August, 1998, between BOYER FOOTHILL ASSOCIATES, LTD. ("Landlord")
and MYRIAD GENETICS, INC. ("Tenant").
WITNESSETH:
1. Agreement of Lease. Pursuant to a Lease Agreement dated as of
------------------
October 1, 1995, as amended (the "Lease Agreement"), Landlord leased to Tenant
real property described on Exhibit "A" attached to this Memorandum (the
"Property"), for an initial term of ten (10) years. Subject to the terms and
conditions set forth in the Lease, the term of the Lease may be extended for two
(2) additional periods of five (5) years each. The provisions set forth in the
Lease Agreement are hereby incorporated herein by this reference. For more
information, the parties to the Lease may be contacted at the following
addresses:
LANDLORD:Boyer Foothill Associates, Ltd.
127 South 500 East, Suite 100
Salt Lake City, Utah 84102
TENANT: Myriad Genetics, Inc.
320 Wakara Way
Salt Lake City, Utah 84108
2. Right of First Refusal. Pursuant to the Lease Agreement,
----------------------
Landlord has granted to Tenant a right of first refusal to purchase the building
located on the Property upon terms and conditions set forth in the Lease
Agreement.
1
<PAGE>
3. Lease Agreement Controls. In the event of any conflict between
------------------------
the provisions of the Lease Agreement and the provisions of this Memorandum, the
provisions of the Lease Agreement shall control.
4. Miscellaneous. This Memorandum shall inure to the benefit of and
-------------
be binding upon the parties hereto and their respective successors, assigns and
legal representatives. This Memorandum shall be construed and interpreted in
accordance with the laws of the State of Utah.
IN WITNESS WHEREOF, Landlord and Tenant have executed this Memorandum
on the date first set forth above.
"LANDLORD"
BOYER FOOTHILL ASSOCIATES, LTD., a Utah
limited partnership, by its general partner
THE BOYER COMPANY, L.C., a Utah
limited liability
By /s/ Kem C. Gardner
-----------------------------------
Kem C. Gardner
Its President and Manager
"TENANT"
MYRIAD GENETICS, INC.
By /s/ Jay M. Moyes
-----------------------------------------
Its Chief Financial Officer
----------------------------------------
2
<PAGE>
STATE OF UTAH )
: ss.
COUNTY OF SALT LAKE )
On the 20th day of August, 1998, personally appeared before me Kem C.
Gardner, who is the President and Manager of The Boyer Company, L.C., which is
the general partner of Boyer Foothill Associates, Ltd.
/s/ De Niese D. Balli
-------------------------------------------
NOTARY PUBLIC
Residing at: Salt Lake County, Utah
My Commission Expires: 4-28-01
STATE OF UTAH )
: ss.
COUNTY OF SALT LAKE )
On the 24th day of August, 1998, personally appeared before me Jay M.
Moyes, who is the Chief Financial Officer of Myriad Genetics, Inc.
/s/ Diana Raitt
-------------------------------------------
NOTARY PUBLIC
Residing at: Salt Lake County, Utah
My Commission Expires:
3
<PAGE>
EXHIBIT "A"
TO
MEMORANDUM OF LEASE
The Premises described in the foregoing instrument is located in the County of
Salt Lake, State of Utah, more particularly described as follows:
Beginning at a point which is North 82 degrees 17'08" West 53.33 feet from
a Salt Lake City Monument in the intersection of Wakara Way (2235 East) and
Colorow Drive (2410 East) using as a basis of bearing the Salt Lake City
Monument in the intersection of Tabby Lane (2330 East) and Colorow Drive
(2410 East) which bearing is South 35 degrees 21'39" East, which beginning
point is on the right-of-way corner of Wakara Way and is also North 42
degrees 32'38" West 3908.91 feet and North 82 degrees 17'08" West 53.33
feet from the Southeast corner of Section 3, Township 1 South, Range 1
East, Salt Lake Base & Meridian; thence along said right-of-way South 45
degrees 45'00" West 73.93 feet; thence North 44 degrees 15'00" West 165.39
feet; thence South 45 degrees 45'00" West 61.19 feet; thence South 0
degrees 45'00" West 143.01 feet; thence South 44 degrees 15'00" East 64.26
feet to a point on Wakara Way right-of-way line; thence along said
right-of-way line South 45 degrees 45'00" West 379.97 feet; thence North 87
degrees 37'30" West 23.69 feet, which point is on a 2014.10 foot radius
curve with the radius bearing South 49 degrees 59'47" West; thence
Northerly 242.31 feet along the arc of said curve to the point of beginning
as stated in the Northwest Pipeline description dated August 1978; thence
along said pipeline description North 45 degrees 45'00" East 667.00 feet;
thence South 44 degrees 15'00" East 70.99 feet; thence South 45 degrees
45'00" West 21.15 feet; thence South 44 degrees 15'00" East 171.77 feet;
thence South 45 degrees 45'00" West 16.74 feet; thence South 44 degrees
13'33" East 16.63 feet to the point of beginning. Containing 3.37 acres.
4
<PAGE>
Exhibit 10.2
WHEN RECORDED, PLEASE RETURN TO:
David E. Gee, Esq.
Parr Waddoups Brown Gee & Loveless
185 South State Street, Suite 1300
Salt Lake City, Utah 84111
MEMORANDUM OF LEASE
THIS MEMORANDUM OF LEASE (the "Memorandum") is entered into as of the
24th day of August, 1998, between BOYER RESEARCH PARK ASSOCIATES VI, L.C.
("Landlord") and MYRIAD GENETICS, INC. ("Tenant").
WITNESSETH:
1. Agreement of Lease. Pursuant to a Lease Agreement dated as of
------------------
March 6, 1998, as amended (the "Lease Agreement"), Landlord leased to Tenant
real property described on Exhibit "A" attached to this Memorandum (the
"Property"), for an initial term of ten (10) years. Subject to the terms and
conditions set forth in the Lease, the term of the Lease may be extended for two
(2) additional periods of five (5) years each. The provisions set forth in the
Lease Agreement are hereby incorporated herein by this reference. For more
information, the parties to the Lease may be contacted at the following
addresses:
LANDLORD:Boyer Research Park Associates VI
127 South 500 East, Suite 100
Salt Lake City, Utah 84102
TENANT: Myriad Genetics, Inc.
320 Wakara Way
Salt Lake City, Utah 84108
2. Right of First Refusal. Pursuant to the Lease Agreement,
----------------------
Landlord has granted to Tenant a right of first refusal to purchase the building
located on the Property upon terms and conditions set forth in the Lease
Agreement.
1
<PAGE>
3. Lease Agreement Controls. In the event of any conflict between
------------------------
the provisions of the Lease Agreement and the provisions of this Memorandum, the
provisions of the Lease Agreement shall control.
4. Miscellaneous. This Memorandum shall inure to the benefit of and
-------------
be binding upon the parties hereto and their respective successors, assigns and
legal representatives. This Memorandum shall be construed and interpreted in
accordance with the laws of the State of Utah.
IN WITNESS WHEREOF, Landlord and Tenant have executed this Memorandum
on the date first set forth above.
"LANDLORD"
BOYER RESEARCH PARK ASSOCIATES VI,
L.C., a Utah limited liability company, by
its Manager:
THE BOYER COMPANY, L.C., a Utah
limited liability
By /s/ Kem C. Gardner
-----------------------------
Kem C. Gardner
Its President and Manager
"TENANT"
MYRIAD GENETICS, INC.
By /s/ Jay M. Moyes
-----------------------------
Its Chief Financial Officer
-----------------------------
2
<PAGE>
STATE OF UTAH )
: ss.
COUNTY OF SALT LAKE )
On the 20th day of August, 1998 personally appeared before me Kem C.
Gardner, who is the President and Manager of The Boyer Company, L.C., which is
the Manager of Boyer Research Park Associates VI, L.C.
/s/ Deniese D. Balli
-------------------------------------------
NOTARY PUBLIC
Residing at: Salt Lake County, Utah
My Commission Expires: 4-28-01
STATE OF UTAH )
: ss.
COUNTY OF SALT LAKE )
On the 24th day of August, 1998, personally appeared before me Jay M.
Moyes, who is the Chief Financial Officer of Myriad Genetics, Inc.
/s/ Diana Raitt
-------------------------------------------
NOTARY PUBLIC
Residing at: Salt Lake County, Utah
My Commission Expires:
3
<PAGE>
EXHIBIT "A"
TO
MEMORANDUM OF LEASE
The Premises described in the foregoing instrument is located in the County of
Salt Lake, State of Utah, more particularly described as follows:
Beginning at a point which is North 82 degrees 17'08" West 53.33 feet from
a Salt Lake City Monument in the intersection of Wakara Way (2235 East) and
Colorow Drive (2410 East) using as a basis of bearing the Salt Lake City
Monument in the intersection of Tabby Lane (2330 East) and Colorow Drive
(2410 East) which bearing is South 35 degrees 21'39" East, which beginning
point is on the right-of-way corner of Wakara Way and is also North 43
degrees 07'03" West 3865.93 feet and North 82 degrees 17'08" West 53.33
feet from the Southeast corner of Section 3, Township 1 South, Range 1
East, Salt Lake Base & Meridian; and running thence North 44 degrees 13'33"
West 16.63 feet; thence North 45 degrees 45'00" East 16.74 feet; thence
North 44 degrees 15'00" West 171.77 feet; thence North 45 degrees 45'00"
East 21.15 feet; thence North 44 degrees 15'00" West 70.99 feet; thence
North 45 degrees 45'00" East 327.50 feet; thence South 67 degrees 42'00"
East 18.27 feet to a non-radial curve with a radius of 225.00 feet, which
radius bears South 67 degrees 50'48" East; thence Southerly along said
curve a distance of 171.88 feet to a reverse curve, with a radius of 200.00
feet, which radius bears South 68 degrees 22'50" West; thence Southwesterly
along said curve 232.67 feet; thence South 45 degrees 45'00" West 72.97
feet to the point of beginning. Containing 1.41 acres.
TOGETHER WITH THE FOLLOWING PARCEL: Beginning at a point which is North 82
degrees 17'08" West 53.33 feet and South 45 degrees 45'00" West 73.93 feet
from a Salt Lake City Monument in the intersection of Wakara Way (2235
East) and Colorow Drive (2410 East) using as a basis of bearing the Salt
Lake City Monument in the intersection of Tabby Lane (2330 East) and
Colorow Drive (2410 East) which bearing is South 35 degrees 21'39" East,
which beginning point is on the right-of-way corner of Wakara Way and is
also North 43 degrees 07'03" West 3865.93 feet and North 82 degrees 17'08"
West 53.33 feet and South 45 degrees 45'00" West 73.93 feet from the
Southeast corner of Section 3, Township 1 South, Range 1 East, Salt Lake
Base and Meridian; and running thence South 45 degrees 45'00" West 162.31
feet; thence North 44 degrees 15'00" West 64.26 feet; thence North 00
degrees 45'00" East 143.01 feet; thence North 45 degrees 45'00" East 61.19
feet; thence South 44 degrees 15'00" East 165.39 feet to the point of
beginning. Containing 0.50 acres.
4
<PAGE>
Exhibit 10.3
RECORDING REQUESTED BY
AND WHEN RECORDED MAIL TO:
Wells Fargo Bank, National
Association
Real Estate Group (AU #2692)
400 Capitol Mall, Suite 700
Sacramento, California 95814
Attn: Patty Cabrera
Loan No. 2537
SUBORDINATION AGREEMENT; ACKNOWLEDGMENT OF LEASE ASSIGNMENT, ESTOPPEL,
ATTORNMENT AND NON-DISTURBANCE AGREEMENT
(LEASE TO DEED OF TRUST)
NOTICE: THIS SUBORDINATION AGREEMENT RESULTS IN YOUR LEASE BECOMING SUBJECT
TO AND OF LOWER PRIORITY THAN THE LIEN OF THE DEED OF TRUST (DEFINED
BELOW).
This SUBORDINATION AGREEMENT AND ESTOPPEL, NON-DISTURBANCE AND ATTORNMENT
AGREEMENT ("Agreement") is made as of June 24, 1998, by and between MYRIAD
GENETICS, INC., a Delaware corporation ("Tenant"), and WELLS FARGO BANK,
NATIONAL ASSOCIATION ("Lender"), with reference to the following facts and
intentions of the parties:
RECITALS
--------
A. BOYER RESEARCH PARK ASSOCIATES VI, L.C., a Utah limited liability
company ("Borrower"), is the ground lessee of the land and improvements commonly
Exhibit A attached hereto ("Property") and the owner of the landlord's interest
- ---------
in the lease identified in Recital B below ("Lease").
B. Tenant is the owner of the tenant's interest in that lease dated March
6, 1998, as amended by that certain Amendment to Lease, dated June 24, 1998 (the
"Lease").
C. Borrower has applied to Lender for a loan ("Loan"), which will be
secured by, among other things, a Leasehold Construction Deed of Trust and
Absolute Assignment of Rents and Leases and Security Agreement and Fixture
Filing ("Deed of Trust") upon the Property.
D. As a condition to making the Loan, Lender has required that Tenant
furnish certain assurances to, and make certain agreements with, Lender, as set
forth below.
THEREFORE, The parties agree as follows:
1. SUBORDINATION.
-------------
1.1 Prior Lien. Except as expressly provided to the contrary in this
----------
<PAGE>
Agreement, the Deed of Trust, and any modifications, renewals or extensions
thereof, shall unconditionally be and at all times remain a lien or charge on
the Property prior and superior to the Lease.
1.2 Condition Precedent. Lender would not make the Loan without this
-------------------
Agreement.
1.3 Entire Agreement. This Agreement shall be the whole agreement
----------------
and only agreement with regard to the subordination of the Lease to the lien or
charge of the Deed of Trust, and shall supersede and cancel, but only insofar as
would affect the priority between the Deed of Trust and the Lease, any prior
agreements as to such subordination, including, without limitation, those
provisions, if any, contained in the Lease which provide for the subordination
of the Lease to a deed or deeds of trust or to a mortgage or mortgages.
1.4 Disbursements. Lender, in making disbursements pursuant to the
-------------
Note, the Deed of Trust or any loan agreements with respect to the Property, is
under no obligation or duty to, nor has Lender represented that it will, see to
the application of such proceeds by the person or persons to whom Lender
disburses such proceeds, and any application or use of such proceeds for
purposes other than those provided for in such agreement or agreements shall not
defeat this agreement to subordinate in whole or in part.
1.5 Subordination. Except as expressly provided to the contrary in
-------------
this Agreement, Tenant intentionally and unconditionally waives, relinquishes
and subordinates all of Tenant's right, title and interest in and to the
Property, to the lien of the Deed of Trust and understands that in reliance
upon, and in consideration of, this waiver, relinquishment and subordination,
specific loans and advances are being and will be made by Lender and, as part
and parcel thereof, specific monetary and other obligations are being and will
be entered into which would not be made or entered into but for said reliance
upon this waiver, relinquishment and subordination.
2. NON-DISTURBANCE AND ATTORNMENT.
------------------------------
2.1 Non-Disturbance. So long as there shall exist no breach,
---------------
default or event of default (beyond any period given to Tenant in the Lease to
cure such default) on the part of Tenant under the Lease at the time of any
foreclosure of the Deed of Trust, Lender agrees that the leasehold interest of
Tenant under the Lease shall not be terminated by reason of such foreclosure,
but rather the Lease shall continue in full force and effect and Lender shall
recognize and accept Tenant as tenant under the Lease subject to the provisions
of the Lease.
2.2 Attornment. Should title to the Property and the landlord's
----------
interest in the Lease be transferred to Lender or any other person or entity
("New Owner") by, or in-lieu of judicial or non-judicial foreclosure of the Deed
of Trust, Tenant agrees, for the benefit of New Owner and effective immediately
and automatically upon the occurrence of any such transfer, that: (a) Tenant
shall pay to New Owner all rental payments required to be made by Tenant
pursuant to the terms of the Lease for the remainder of the Lease term; (b)
Tenant shall be bound to New Owner in accordance with all of the provisions of
the Lease for the remainder of the Lease term; and (c) Tenant hereby attorns to
New Owner as its landlord, such attornment to be effective and self-operative
without the execution of any further instrument. Upon acquiring the Property,
New Owner shall perform landlord's covenants under the Lease arising from and
after the date of such acquisition; provided, New Owner shall have no obligation
to perform any covenants of landlord under the Lease following any subsequent
transfer by New Owner of the landlord's interest in the Lease. If any provision
of the Lease (including, without limitation, any provision of the Lease
concerning the automatic or optional subordination of the Lease to
<PAGE>
a deed of trust) conflicts with any provision of this Section 2.2, the provision
of this Section 2.2 shall, to the extent of such conflict, prevail and control.
2.3 Amendment. Notwithstanding anything to the contrary in Sections
---------
2.1 or 2.2 above, Lender and Tenant agree that, in the event title to the
Property and the landlord's interest in the Lease are transferred to a New Owner
by or in lieu of judicial or nonjudicial foreclosure of the Deed of Trust, the
Lease shall be automatically deemed amended in the following respects only
without the need for any further action by New Owner or Tenant: Paragraphs A and
B of the Rider to the Lease shall be temporarily suspended and shall be of no
force and effect for the period commencing upon Lender's recordation of a Notice
of Default in connection with the Loan and continuing until the earlier of (a)
two (2) years from such date, or (b) the transfer of the Property to a third
party unrelated to Lender, and upon the earlier to occur of (a) or (b),
Paragraphs A and B of the Rider to the Lease shall become once again in full
force and effect.
3. ESTOPPEL. Tenant warrants and represents to Lender, as of the date
--------
hereof, that:
3.1 Lease Effective. The Lease has been duly executed and delivered
---------------
by Tenant and, subject to the terms and conditions thereof, the Lease is in full
force and effect, the obligations of Tenant thereunder are valid and binding,
and there have been no modifications or additions to the Lease, written or oral.
3.2 No Default. To the best of Tenant's knowledge: (a) there exists
----------
no breach, default, or event or condition which, with the giving of notice or
the passage of time or both, would constitute a breach or default under the
Lease either by Tenant or Owner; and (b) Tenant has no existing claims, defenses
or offsets against rental due or to become due under the Lease.
3.3 Entire Agreement. The Lease constitutes the entire agreement
----------------
between Borrower and Tenant with respect to the Property, and Tenant claims no
rights of any kind whatsoever with respect to the Property, other than as set
forth in the Lease.
3.5 Minimum Rent. The "Basic Annual Rent" under the Lease is
------------
$679,917.30, subject to any escalation, percentage rent and/or common area
maintenance charges provided in the Lease.
3.6 No Deposits or Prepaid Rent. No deposits or prepayments of rent
---------------------------
have been made in connection with the Lease, except as follows None.
3.7 No Other Assignment. Tenant has received no notice, and is not
-------------------
otherwise aware of, any other assignment of the landlord's interest in the
Lease.
3.8 No Purchase Option or Refusal Rights. Tenant does not have any
------------------------------------
option or preferential right to purchase all or any part of the Property, except
as follows: Tenant has a right of first refusal set forth in Paragraph A of the
Rider to the Lease and a purchase option set forth in Paragraph B of the Rider
to the Lease, which rights are not subordinated or waived pursuant to Section
1.5 hereof except as provided in Section 2.3 hereof.
4. APPLICATION OF PURCHASE PROCEEDS. If Tenant elects to exercise the
--------------------------------
purchase option for which provision is made in Paragraph B of the Rider to the
Lease, Tenant agrees that (a) Tenant shall give Lender at least thirty (30) days
advance written notice thereof, and (b) Tenant shall pay the related purchase
price, or cause the related purchase price to be paid (as the case may be),
directly to Lender to the extent of the outstanding indebtedness under the Loan,
and (c) the title acquired by Tenant in
<PAGE>
connection with any such transfer shall continue to be subject to the Deed of
Trust unless all obligations secured by the Deed of Trust are fully and
irrevocably discharged as part of the transaction effecting the transfer.
5. SCOPE OF RIGHT OF FIRST REFUSAL. Tenant acknowledges and agrees that,
-------------------------------
notwithstanding anything to the contrary in the Lease, none of the following
events shall be deemed to constitute an offer to purchase the Property or any
portion thereof for purposes of Paragraph A of the Rider to the Lease, and
Tenant shall have no right of first refusal or other rights under Paragraph A of
the Rider to the Lease as a result of any such events: (a) the judicial or
nonjudicial foreclosure of the Deed of Trust; (b) the delivery of a deed in lieu
of judicial or nonjudicial foreclosure of the Deed of Trust; or (c) any offer,
notice, pleading, agreement, transaction or other event or condition of any kind
arising out of or relating to any of the events referred to in foregoing clauses
(a) or (b).
6. MISCELLANEOUS.
-------------
6.1 Reliance by Lender. Tenant acknowledges that the representations
------------------
and agreements made by Tenant to and with Lender herein constitute a material
inducement to Lender to make the Loan, and that Lender would not make the Loan
in the absence of this Agreement.
6.2 Heirs, Successors and Assigns. The covenants herein shall be
-----------------------------
binding upon, and inure to the benefit of, the heirs, successors and assigns of
the parties hereto. Whenever necessary or appropriate to give logical meaning
to a provision of this Agreement, the term "Borrower" shall be deemed to mean
the then current owner of the Property and the landlord's interest in the Lease.
6.3 Addresses; Request for Notice. All notices and other
-----------------------------
communications that are required or permitted to be given to a party under this
Agreement shall be in writing and shall be sent to such party, either by
personal delivery, by overnight delivery service, by certified first class mail,
return receipt requested, or by facsimile transmission, to the address or
facsimile number below. All such notices and communications shall be effective
upon receipt of such delivery or facsimile transmission. The addresses and
facsimile numbers of the parties shall be:
Tenant: Lender:
MYRIAD GENETICS, INC. Wells Fargo Bank, National Association
320 Wakara Way Real Estate Group (AU #2692)
Salt Lake City, Utah 84108 400 Capitol Mall, Suite 700
Attn: Jay Moyes Sacramento, California 95814
FAX No.: (801) 584-3640 FAX NO: (916) 442-4295
provided, however, any party shall have the right to change its address for
- -------- -------
notice hereunder by the giving of written notice thereof to the other party in
the manner set forth in this Agreement.
6.4 Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original and all of which
together shall constitute and be construed as one and the same instrument.
6.5 Section Headings. Section headings in this Agreement are for
----------------
convenience only and are not to be construed as part of this Agreement or in any
way limiting or applying the provisions hereof.
<PAGE>
6.6 Attorneys' Fees. If any legal action, suit or proceeding is
---------------
commenced between Tenant and Lender regarding their respective rights and
obligations under this Agreement, the prevailing party shall be entitled to
recover, in addition to damages or other relief, costs and expenses, attorneys'
fees and court costs (including, without limitation, expert witness fees). As
used herein, the term "prevailing party" shall mean the party which obtains the
principal relief it has sought, whether by compromise settlement or judgment.
If the party which commenced or instituted the action, suit or proceeding shall
dismiss or discontinue it without the concurrence of the other party, such other
party shall be deemed the prevailing party.
7. INCORPORATION. Exhibit A and the Borrower's Consent are attached hereto
-------------
and incorporated herein by this reference.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day and year first above written.
NOTICE: THIS SUBORDINATION AGREEMENT CONTAINS A PROVISION WHICH ALLOWS THE OWNER
TO OBTAIN A LOAN, THE PROCEEDS OF WHICH MAY BE EXPENDED FOR PURPOSES
OTHER THAN THE IMPROVEMENT OF THE PROPERTY.
"Lender" "Tenant"
WELLS FARGO BANK, NATIONAL MYRIAD GENETICS, INC.
ASSOCIATION
By /s/ Ted Bodnar By /s/ Jay M. Moyes
----------------------------- ------------------------------
Name: Ted bodnar, Vice President Name: Jay M. Moyes
Title: Chief Financial Officer
IT IS RECOMMENDED THAT, PRIOR TO THE EXECUTION OF THIS AGREEMENT, THE PARTIES
CONSULT WITH THEIR ATTORNEYS WITH RESPECT HERETO.
OWNER'S CONSENT
---------------
The undersigned, which leases the Property and the landlord's interest in
the Lease, hereby consents to the execution of the foregoing SUBORDINATION
AGREEMENT AND ESTOPPEL, NON-DISTURBANCE AND ATTORNMENT AGREEMENT, and to
implementation of the agreements and transactions provided for therein.
"Borrower"
BOYER RESEARCH PARK ASSOCIATES VI, L.C.
By: The Boyer Company, L.C.,
a Utah limited liability company
Its Manager
By: /s/ Kem C. Gardner
------------------------------
Kem C. Gardner,
President and Manager
<PAGE>
STATE OF CALIFORNIA )
: ss.
COUNTY OF SACRAMENTO )
The foregoing SUBORDINATION AGREEMENT AND ESTOPPEL, NON-DISTURBANCE AND
ATTORNMENT AGREEMENT was acknowledged before me this 24th day of August, 1998,
by Ted Bodnar, Vice President of Wells Fargo Bank, National Association.
/s/ Lillian M Muncy
------------------------------------
NOTARY PUBLIC
Residing at:c/o Wells Fargo Bank, Sacramento, CA
------------------------------------
My Commission Expires:
11-5-99
- -------
STATE OF UTAH )
: ss.
COUNTY OF SALT LAKE )
The foregoing SUBORDINATION AGREEMENT AND ESTOPPEL, NON-DISTURBANCE
AND ATTORNMENT AGREEMENT was acknowledged before me this 24th day of August,
1998, by Jay Moyes, Chief Financial Officer of Myriad Genetics, Inc., a Delaware
corporation.
/s/ Diana Raitt
------------------------------------
NOTARY PUBLIC
Residing at:320 Wakara Way, SLC, UT 84108
-----------------------------
My Commission Expires:
3-24-2001
- ---------
STATE OF UTAH )
: ss.
COUNTY OF SALT LAKE )
The foregoing SUBORDINATION AGREEMENT AND ESTOPPEL, NON-DISTURBANCE
AND ATTORNMENT AGREEMENT was acknowledged before me this 25th day of August,
1998, by Kem C. Gardner, President and Manager of The Boyer Company, L.C., a
Utah limited liability company, Manager of Boyer Research Park Associates VI,
L.C., a Utah limited liability company.
Kimberly Gardner
------------------------------------
NOTARY PUBLIC
Residing at:Salt Lake City
--------------
My Commission Expires:
10-11-99
- --------
<PAGE>
EXHIBIT A
Loan No. 2537
EXHIBIT A
---------
(Description of Property)
EXHIBIT A to SUBORDINATION AGREEMENT AND ESTOPPEL, NON-DISTURBANCE AND
ATTORNMENT AGREEMENT dated as of JUNE 24, 1998, executed by MYRIAD GENETICS,
INC., a Delaware corporation, as "Tenant", and WELLS FARGO BANK, NATIONAL
ASSOCIATION, as "Lender".
All that certain real property located in the County of Salt Lake, State of
Utah, described as follows:
A Parcel of land which is located within the Northwest
quarter of Section 3, Township 1 South, Range 1 East, Salt
Lake Base and Meridian, said parcel being more particularly
described as follows:
A. Beginning at a point which is North 82 degrees 17'08"
West 53.33 feet from a Salt Lake City Monument in the
intersection of Wakara Way (2235 East) and Colorow Drive
(2410 East) using as a basis of bearing the Salt Lake City
Monument in the intersection of Tabby Lane (2330 East) and
Colorow Drive (2410 East) which bearing is South 35 degrees
21'39" East, which beginning point is on the right-of-way
corner of Wakara Way and is also North 43 degrees 07'03"
West 3865.93 and North 82 degrees 17'08" West 53.33 feet
from the Southeast Corner Section 3, Township 1 South, Range
1 East, Salt Lake Base and Meridian; running thence North 44
degrees 13'33" West 16.63 feet; thence North 45 degrees
45'00" East 16.74 feet; thence North 44 degrees 15'00" West
171.77 feet; thence North 45 degrees 45'00" East 21.15;
thence North 44 degrees 15'00" West 70.99 feet; thence North
45 degrees 45'00" East 327.50 feet; thence South 67 degrees
42'00" East 18.27 feet to a non-radial curve with a radius
of 225.00 feet, which radius bears South 67 degrees 50'48"
East; thence Southerly along said curve to a distance of
171.88 feet to a reverse curve, with a radius of 200.00
feet, which radius bears South 68 degrees 22'50" West;
thence Southwesterly along said curve 232.67 feet; thence
South 45 degrees 45'00" West 72.97 feet to the point of
beginning.
B. Together with the following parcel beginning at a point
which is North 82 degrees 17'08" West 53.33 feet and South
45 degrees 45'00" West 73.93 feet from a Salt Lake City
Monument in the intersection of Wakara Way (2235 East) and
Colorow Drive (2410 East) using as a basis of bearing the
Salt Lake City Monument in the intersection of Tabby Lane
(2330 East) and Colorow Drive (2410 East) which bearing is
South 35 degrees 21'39" East, which beginning point is on
the right-of-way corner of Wakara Way and is also North 43
degrees 07'03" West 3865.93 feet and North 82 degrees 17'08"
West 53.33 feet and South 45 degrees 45'00" West 73.93 feet
from the Southeast Corner of Section 3, Township 1 South,
Range 1 East, Salt Lake Base and Meridian and running thence
South 45 degrees 45'00" West 162.31 feet; thence North 44
degrees 15'00" West 64.26 feet; thence North 00 degrees
45'00" East 143.01 feet; thence North 45 degrees 45'00" East
61.19 feet; thence South 44 degrees 15'00" East 165.39 feet
to the point of beginning.
<PAGE>
Exhibit 11.1
MYRIAD GENETICS, INC.
STATEMENT REGARDING COMPUTATION OF NET LOSS PER SHARE
<TABLE>
<CAPTION>
Three Months Ended
September 30, 1998 September 30, 1997
------------------ ------------------
<S> <C> <C>
Net loss ($2,702,502) ($1,795,801)
Basic and diluted weighted average common shares
outstanding 9,342,942 9,237,843
------------------ ------------------
Net loss per share ($0.29) ($0.19)
================== ==================
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CONDENSED
UNAUDITED CONSOLIDATED STATEMENT OF OPERATIONS AND CONDENSED UNAUDITED
CONSOLIDATED BALANCE SHEET AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-START> JUL-01-1998
<PERIOD-END> SEP-30-1998
<EXCHANGE-RATE> 1
<CASH> 9,230,572
<SECURITIES> 38,469,783
<RECEIVABLES> 744,944
<ALLOWANCES> 75,000
<INVENTORY> 0
<CURRENT-ASSETS> 17,587,371
<PP&E> 19,296,551
<DEPRECIATION> 6,653,087
<TOTAL-ASSETS> 62,808,386
<CURRENT-LIABILITIES> 7,780,387
<BONDS> 0
0
0
<COMMON> 93,557
<OTHER-SE> 54,934,442
<TOTAL-LIABILITY-AND-EQUITY> 62,808,386
<SALES> 913,470
<TOTAL-REVENUES> 5,559,986
<CGS> 602,872
<TOTAL-COSTS> 8,975,777
<OTHER-EXPENSES> 19,441
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,371
<INCOME-PRETAX> (2,702,502)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,702,502)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,702,502)
<EPS-PRIMARY> (.29)
<EPS-DILUTED> (.29)
</TABLE>
