Hamilton Thorne Ltd.

David, are you there? Sorry operator, we might have a bit of a technical difficulty here.

I'm not sure whether David too lost his signal and needs to redial in. If we could hold one minute, that would be appreciated.

Operator, do you have David calling back in?

All right, my apologies for the timing. Let's wait one more minute if we could.

My apologies to all those on the call and David must have had a cell phone signal problem and should be dialing right back in. Well, perhaps in the interest of everybody's time this morning, let me go ahead and start with David's remarks and then actually – actually let me flip over to the results of operations when I'll begin with my remarks and then David will be dialing back in just a minute.

As everyone knows, I'm Michael Bruns, the CFO of Hamilton Thorne and the results of operations for the second quarter and the year-to-date, the company's total sales increased 10% to $8 million for the quarter end of June 30, 2019 an increase of $704,000 from the $7.3 million during the previous year. Six months year-to-date sales for 2019 [ph] increased 9% to $15.6 million over the same period in 2018.

Total equipment sales increased 8% in the quarter compared to a very strong prior year Q2 and 9.5% for the year. Consumables and services increased 10.7% in the quarter and 9.3% year-to-date.

Gross profit increased 1% to $4.2 million in the quarter compared to $4.1 million in the previous year and increased 1% to $8.2 million for the comparable six month period. Gross profit as a percentage of sales was consistent with Q1 at 52.2% for the quarter and 52.1% for the six months ended June 30, 2019 versus 56.7% and 56.5% for the comparable periods in 2018 primarily attributable to product mix, increased sales of products or distribution channels, volume discounting, and certain supplier price increases, all partially offset by increases in direct sales of higher margin branded consumables and quality control testing services.

Operating expenses increased 14% for the quarter and 8% for the six months ended June 30, to $3.6 million and $6.5 million for the three and six months ended June 30 versus $3.1 million and $6.1 million for the comparable periods during the previous year, primarily due to the addition of acquisition expenses of $315,000 incurred in the second quarter relating to the Planer acquisition, increased G&A expenses and marketing expenses. Excluding acquisition related expenses, all other operating expenses increased 4% and 3% respectively for the three and six-month periods.

Research and development expenses increased slightly to $409,000 for the quarter and $851,000 for the six-month period primarily due to increased personnel cost and significantly offset by increased costs incurred in the development of new products which the company capitalizes. The largest expenditures this quarter were for the cost [ph] to launch our next-generation LYKOS DTS movable laser.

Sales and marketing expenses increased to $1.8 million for the quarter and $3.4 million for the six-month period due to a large part to the timing of our large international trade show in Europe which occurred in the second quarter of 2019 compared to the third quarter in the prior-year, as well as continued investment in direct sales, support, and marketing resources. General and administrative expenses increased to $1.4 million which was $1.1 million excluding the acquisition expenses for the quarter.

Six months year-to-date G&A increased to $2.3 million which was $2 million when excluding acquisition expenses. Net interest expense increased slightly to $300,000 for the quarter and $631,000 for the six-month period versus the prior year primarily due to increased interest expense related to the reclassification of a portion of rental expense pursuant to IFRS 16 and partially offset by a reduction in the company's other term loans and revolving line of credit borrowings.

Income tax expense decreased somewhat to $183,000 for the quarter and $435,000 for the year-to-date primarily to lower taxable income attributable to acquisition expenses. The deferred tax expense remains a non-cash expense which was offset against the deferred tax asset.

Net income for the quarter ended June 30, 2019 increased from a net loss of $133,000 in the prior year quarter to net income of $100,000 primarily due to increased gross profit and partially offset by the $315,000 of acquisition expenses incurred this year in Q2. Year-to-date after the Q2 net income of $133,000 the net loss of $464,000 is entirely attributable to the $1 million Q1 non-cash expense related to the change in the fair value of the convertible debentures issued in connection with the 2017 Gynemed acquisition.

As we have discussed in many of our quarterly earnings calls, the variables in this required quarterly Black-Scholes valuation model are dynamic and substantial variations occurred each quarter in 2018 and in 2019 Q1 as well. The June 2019 conversion of 45% of these debentures reduces future exposure to this fair value measurement.

Adjusted EBITDA, one of our key metrics of measuring our business increased 3% to $1.6 million for the quarter and 2% to $3.1 million for the six months year-to-date attributable to revenue and gross profit growth and partially offset by planned increases in operating expenses in the periods. Turning now to the company's balance sheet and cash flow for the first six months of the year, cash generated by operations was again positive for the quarter and the six months which ended year-to-date increased 18% to $2 million compared to $1.7 million in the prior year first half.

We invested over $600,000 in inventory growth year-to-date to continue to facilitate our expanded product offerings primarily in the Americas, and to enhance production efficiency in the U.S., and provide the industry's best fulfillment turnaround in Germany and the EU in our Gynemed operations. We continue to review and manage our inventory to optimize new and existing opportunities.

Cash used in investing activities was $469,000 for Q2 and $751,000 year-to-date primarily for ongoing investments and intangible development cost by our R&D teams related to the LYKOS DTS laser. Cash utilized by financing activities was $922,000, primarily for scheduled acquisition term loan debt and lease obligations and partially offset by $150,000 drawdown to our revolving line of credit.

Our cash position of 14 million at June 30 was subsequently reduced in August to approximately $9 million after the Planer acquisition. In addition, we have an additional $1.5 million of availability in our $2.5 million total revolver and we are replenishing our $3 million of availability in the acquisition line of credit which we utilized in the Planer acquisition which is an important resource in our ability to complete acquisitions at a relatively low-cost cost of capital.

And now as you know on August 13, we announced the acquisition of Planer Limited. David will talk more in his closing remarks about the strategic benefits of this acquisition, but I thought I would take a minute or two to discuss the financial side.

Planer acquisition will be immediately accretive to both revenues and earnings adding over $6 million of revenues after eliminating intercompany sales and nearly $1 million of EBITDA on an annual pro forma basis. From a structure perspective, we acquired three distinct assets.

Please note that for purposes of clarity today, I will discuss the transaction strictly in U.S. dollar terms although the transaction documents in the press release addressed the British pound Sterling amounts as well.

First and foremost, we paid $7.3 million for the enterprise value of the Planer business based on a 7.5 times targeted Planer EBITDA as of May 31, 2019 of approximately $975,000. In addition, we paid $1.2 million for the acquired cash and working capital including excess of capital typical operating needs, and $2.1 million for the value of promissory notes from certain of the sellers and Planer Associates Limited, their affiliated real estate company to the acquired holding company Sunbury.

On closing, Hamilton Thorne paid aggregate consideration of approximately $10.7 million consisting of the $7.3 million in cash, the issuance of an aggregate $1.4 million common shares of HTL, which was at an issuance price of a moving average of Can$1.13 per share and was valued at $1.2 million and the issuance of a promissory note in the principal amount of $2.1 million which was immediately retired in exchange for the seller notes received as assets in the acquired holding company. As security 74% of the shares issued to the sellers will be subject to a two-year escrow pending final calculation of any closing adjustments and to satisfy any possible indemnity claims that might arise.

The total cash paid was $7.3 million was financed with the company's cash on hand and a drawdown of $3 million from our acquisition line of credit facility with our senior lender, Middlesex Savings Bank. The line of credit drawdown automatically converted to a secure term loan of US$3 million which now bears interest at the rate of 4.45% per annum amortized over the life of the loan and matures five years from the closing date.

Now I'd like to thank you all for your attendance. David has dialed back in and I'd like to turn it back over to David.

Yes, thank you, Michael and I apologize to all for the technical difficulties. I'm not sure if you started with my part of the discussion or you just jumped into the financials, so I should decide where to start.

I just jumped into financials, so I think you should begin with your introduction.

I will start at the beginning. So first of all, obviously Michael has talked about some of the sales results and you've had the opportunity to read our press release, but I'd like to provide some commentary.

So I'm pleased to report that we did have a strong start to the year in Q1 which has continued into the second quarter. Sales increased 10% year-over-year to $8 million for the quarter and were up 9% to $15.6 million for the six-month period.

Currency fluctuations continue to impact our reported results in U.S. dollars, but we are pleased to report we achieved constant currency growth of 12% for the quarter and 13% for the six-month period.

Sales into the clinical market continued to grow substantially for the three and six-month periods driven by strong demand for Gynemed products worldwide, increased direct sales for equipment in the EMEA regions and in the U.S. and increases in quality control testing service sales.

Sales into the animal breeding market were down for the quarter but slightly up for the six-month period while sales into the research markets were down for both periods, again reflecting our continued focus and emphasis on the ART business. We also continued to make substantial progress in several of our business goals, including completing our first two lab buildouts in the U.S.

and substantially increasing cell culture media sales in established markets worldwide. We also successfully launched our much anticipated next-generation LYKOS DTS moveable laser and have received positive feedback from our customers.

Laser sales which were down slightly in the first quarter rebounded in the second quarter, but albeit somewhat below prior year’s total, which was a record laser sales for the quarter for the Company. Gross profit margins were 52.2% for the quarter and 52.1% for the six months, primarily due to the factors that Michael discussed in his comments.

Organic growth in U.S. dollars was 8% for the quarter and 10% in constant currency and 7% in U.S.

dollars and also 10% in constant currency for the six-month periods essentially on target with our expectations. For the quarter, we had net income of $100,000 while we had net loss of $464,000 for the six-month period largely attributable to the approximately $1 million of noncash adjustments in the valuation of derivatives relating to the outstanding debentures in Q1 which again Michael discussed.

Net income was also negatively impacted in the second quarter by over $300,000 expenses incurred in the quarter relating to the acquisition of Planer Limited. Adjusted EBITDA, which among other things eliminates the change in value to the derivative and the acquisition expenses and is therefore one of the key metrics we use to measure our progress, was up 3% for the quarter and 2% for the first half and $1.6 million for the quarter and $3.1 million for the second half.

I'd like to talk a little bit now about the Planer acquisition and our outlook. So looking forward to the balance of 2019 we expect to see enhanced growth driven by continued growth in U.S.-based business augmented by strong performance of our equipment sales services and consumables brands as well as our most recent acquisition.

As we discussed earlier, in the third quarter we completed the acquisition of Planer Limited. Planer is a leading worldwide provider of incubators, control rate freezers and monitoring equipment with manufacturing sales and support operations in the UK.

This acquisition enhances our product solutions in incubation, cryopreservation and lab monitoring solutions as well as providing us a direct sales and support platform for our entire Hamilton Thorne portfolio of products in additional major market, ART market in the UK. While in the short term enhancing our direct sales and support capabilities in UK will require an investment in marketing and sales personnel, over the long term, we would expect to see increased sales and profitability from the sale of our products through direct channels as well as closer customer relationships.

Gross profit margins were down from last year but roughly the same of the first quarter as we saw a significant contribution from third-party equipment products and increased distribution sales and a little volume discounting primarily in Europe. The Planer business which historically has had somewhat lower gross profit margin, EBITDA margin than existing business based somewhat on product mix that primarily hence it has historically sold its products through distribution channels.

While this will dampen our efforts to increase margins in the short term, however, as previously discussed, over the longer period we look to see enhanced margins through direct sales of Planer products in the markets where we have direct sales coverage. We also expect to continue to make investments in personnel, R&D programs and systems to support our growth with an eye to balancing our top line growth and overall sustained EBITDA expansion.

I'd like to add a few comments on our media business. In the second quarter we achieved significant growth of our Gynemed branded media despite continued delays in getting FDA clearance for our sales of media in the U.S.

We remain confident that clearance is imminent, however realistically we will see minimum sales impact in the second half of this year. On the other hand, as our media products as well as all the other Gynemed branded consumables are [indiscernible] marked we will be able to sell them immediately in the UK, although we should remember it will take a little time for this business to ramp up.

In closing, we have continued EBITDA growth, strong cash flows, and a healthy cash balance of over $9 million following the Planer acquisition. We believe we are well positioned to continue our acquisition strategy to complement our growth.

And now I'd like to open the line up for questions.

Hi, good morning. I have got a few questions.

First one is, the industry appears to be growing at least in the upper single digit range which is already pretty respectable, but given the multiple big demographic drivers, do you see a potential inflection point coming where the industry's growth is going to take a material jump to even higher rates?

Thank you, for the question. So the growth rates as you could imagine are a blend of growth rates in various countries.

Historically, in the U.S. growth rates have actually been fairly modest with the expansion of egg producing which is a significant growth area.

That has the potential to grow because of some secular activities that are going on in the U.S. primarily relating to additional funding.

I think we've discussed this in the past, but we see additional funding both for employer provided benefits for large primarily technology companies are offering IVF funding as a separate additional benefit beyond what their health plans mandate. In addition, we've seen two states here in the past six months add mandates, New York had a mandate for large employer plants in New Hampshire which is obviously not a large demographic, has also added a mandate.

So we expect to see continued growth in IVF and therefore an acceleration of growth in IVF because the availability of third-party funding. Europe, where there is already strong third-party funding, but generally stable population growth despite the need, we expect that market to continue to grow a little faster and the U.S.

has historically grown but not quite as fast as the Asia-Pacific region and some other developing economies where again we would expect to see significant growth. As to the question of whether the inflection point will occur in Asia-pacific region which could cause significant growth well over the 6% to 8% the most industry analysts believe is possible and more crystal-balling than I'm ready to do.

Okay and a second question, VitroLife recently reported 18% organic growth in 2Q, what do you see as the differences, the main differences between your businesses that account for the different organic growth rates and what can you do to get up to that type of organic growth rate?

Yes, so I think you have to look at things over may be a somewhat longer period. I think if you look at, if you like to Q1, the organic growth was low single digits, I think it was in the 3% or 4% range.

So if you average constant currency organic growth we're pretty frankly pretty similar over the first six-month period. That being said, the VitroLife business is primarily a consumables business and of that primarily a media business that has good growth opportunities and perhaps something specific happening in that one quarter.

They also announced a significant sale of some equipment which is not really a major part of their business in China. But I think we'll have to wait and see whether that is the new normal for that company or frankly likely, you know, and I admit it is all a quarter but maybe an aberration.

Okay, I've got one more question and then I'll get back in the queue. Have you mentioned the delays in FDA clearance for the Gynemed cell culture media, what's the nature of the delay, is it something that could prevent you from getting the products to the market or is it just a matter of time?

So, I would say maybe editorially this has been one of the more frustrating regulatory experiences in my career, though frankly I find it hard to criticize the FDA, they are just literally doing their job and crossing every t and dotting every i. So the issues that we have been having has been largely relating to kind of, I would say stability, stability testing as it relates to labeling.

So I would think, I'm told we are very much in the – at the endgame and that we should be seeing clearances for the products that we've originally applied for immediately and to be followed on ideally very closely by a wider range of products. I think when we get that -- start to get those clearances we'll be able to announce little more detail on that.

So the short answer is, I would be, I don’t see any reason, but you never know that any fatal problem, I think it's literally just delay as the FDA thoroughly does its job.

Okay, thank you.

Hi good morning everyone. I just want to focus on the Planer acquisition, I think it was originally announced sort of this company was doing a $6.7 million in December sort of this company was doing the $6.7 million in trailing revenue and you just noted it is $6 million plus.

It gives out the intercompany sales as a bit…?

Yes, exactly. So both, and this is one of things by the way that has made us comfortable with this acquisition.

So both, in the U.S., in the U.S. and in Germany our direct sales team have been selling Planer products, but we don’t want to give the exact number in terms.

So there is obviously duplication of that and you eliminate that in consolidation. So it is certainly over $6 million of revenues that won't be added and I think if the news is that it will be more profitable revenue at least high gross profit percentage because while you eliminate some of that revenue in consolidation you actually take or keep all the margins.

Right, is it going to be classified as equipment sales?

So the business is a combination of equipment and consumables and services. Equipment is the most significant portion of the business and followed by services and then consumables.

Obviously one of our goals is to use this platform in the UK to begin to sell additional consumables, primarily this will be Gynemed consumables.

So the gross, you mentioned gross profit was a little less than, excuse me, the rest of the consolidated business. Can you give us an idea what that is?

I guess, if we did a $1 million off of the 6 plus it is kind of a 15% or 16% EBITDA business, but what's gross margin?

So the gross margins for their last audit financials which are available at company sales were in the mid-40s -- mid-ish-40s [ph], so a little over 46%, 47% that’s certainly something we hope to grow over time.

Okay. And you indicated that you were selling some of their products in Europe and in the U.S., but is the majority of their product sales in the U.K.

at this point in time?

No, no. This is a worldwide business.

The majority of the sales are certainly outside the U.K., so U.S., Europe, China, Japan, Russia, Saudi Arabia, Australia, the markets that that we are selling to.

Okay. And just the nature of the incubator business, is this mostly for lab setups or how do you see the selling cycle for such a product?

So one of the things I like a lot about incubator business is obviously, when you equip a new lab you have to buy incubators at table stakes [ph], where there are other products that we sell while they have tremendous benefits are things that you may decide, you don’t need or you defer the expense particularly if you are building a very small lab, where incubators are not optional. Also incubator usage unlike a lot of equipment scales fairly linearly with a number of cycles.

If you have any typical incubator, we have relatively – these are relatively small bench-top incubators depending how people load them, could have just two patients and the nurse, I mean, there’s eight or 10 per chamber and when your incubator is full you need to buy another incubator and that will -- and that is often a large and that of course it’s a step function. You don’t need to buy another incubator until that incubator is full again.

So it’s one of the few pieces of equipment that does scale. So we see the growth prospects of this are going to not be exactly similar to consumables business, but more similar to consumables business, growth will be again scalable to…

So it’s not a -- is it a -- I am going to say a lumpy business, but is it some less lumpy because of that growth of the number of cycles for the clinics?

So it’s been a fairly consistent business over the years, in terms of I’ll call it preclinical [ph] lumpiness. I think again, and then we've talked about the lumpiness in U.S.

business, particularly it had more to do with significant lab sales, where you might have a $200,000 to $500,000 or more sale made in one quarter, which obviously can have a significant difference. The incubator sales I would say are generally more of a steady business.

Okay. And I guess you had mentioned incubators for a while as sort of on your wish list, now that you have one, what is the focus of the acquisition pipeline now?

So the focus of the acquisition pipeline continues to be the types of things we’ve always been looking for. The Planer acquisition provides us with a much stronger offering in incubators and good offering in cryopreservation that covers 80 sort of waterfront but not be completely sort of waterfront.

So one of the areas we continue to focus on is cryopreservation devices which are the disposables and reusables that are used in cryopreserving samples, so the freezing devices themselves as well as the straws in which things are stored in. On the equipment side, we still do not have our own workstations and flow goods, so that's an area that we’re looking at.

And then I think one of the areas that we want to like factor in and put a little more attention to is software, both lab management software and quality control software, which I think both of which can fit very nicely with our product offerings.

Okay. So this is basically to almost 2.5 years since the last major one we talked called Gynemed, do you think that the next one will be quicker like how long will take to integrate the planner and how quickly can you be ready to do one if it comes to?

Yes, so I think the readiness is pretty high. We integrate as you know, we do our integration planning in fairly good detail before we close.

Also since we are -- as we said in our press release are continuing to retain both the physical plant, the manufacturing and the personnel in place we’re not really doing and because we’ve already sold Planer products in other areas. A lot of the kind of mechanics of -- part of the mechanics of integration are relatively straightforward, and the things that we will be adding which is new sales and support capabilities in the U.K.

and the ability to import both U.S. based and the German based products into the U.K, really obviously, are significant level of work for the Planer team, for the U.K.

team, but don't really require level of sort of organizational investment and other than cash I suppose, but organizational investment in time and resources. So I would say on the readiness side, we are fairly ready.

We've been working on this acquisition for quite some time. So they all take time.

So I am not – I don’t know if this one took particularly long, but I would say this could have been closed maybe even a year ago and we’d be sitting here without asking, you know without maybe asking that question. We've also added resources to our M&A team.

We've just hired a Director of Corporate Development, who will help both with some of the integration and management activities that obviously, significantly accelerate our M&A activities.

Okay. And final question from me and Michael, you said in the MD&A the shares outstanding as of June 30, 123.7 million basic.

I am assuming the Planer acquisition shares would be not included in that numbers, so the basic share count now roughly 125.5, is that correct?

That's exactly right, yes.

Okay, great. Thank you.

Good morning, guys.

Good morning.

Good morning. Most of my questions have been answered now, but I’ll just go into a little bit more detail on Planer’s.

I am wondering is there any number for synergies or cost savings you are expecting there?

So, you know I think, we talked about this in the past. So we do not anticipate any meaningful cost savings off the numbers that we've been talking about.

The adjusted EBITDA and kind of pro forma adjusted EBITDA that we’ve discussed reflects the elimination of certain costs that were related to essentially the ownership group of the company that will not be continuing with the business. That’s the primary area of the cost savings as well as couple of smaller areas of cost savings.

In terms of – and in fact, as I mentioned, in the short term you may even see additional expenses as we continue to invest in growing the business on the sales and marketing side.

Okay. And do you have idea of what that number could be or how many -- you are hiring new people, is that what you are insinuating?

Yes, so we will be adding sales staff in the U.K. devoted to direct sales.

Obviously, since geographically it’s a much smaller country than let's say the U.S. where we added three salespeople and a couple of support people to do this, in the U.K.

we’re talking about initially one additional salesperson and maybe perhaps a full time equivalent on the support side. So in our trivial numbers but not really significant numbers and not – £100,000 range so $120,000 per year.

Okay. So for those Planers markets, I am wondering about cryopreservation in particular, do you know what the market size is in your geographies for cryopreservation?

So cryopreservation is a -- I would say is an umbrella term for a wide range of approaches. So if you think of all cryopreservation activities that are done, let’s say in IVF and then I’ll talk a bit about Planers target markets for cryopreservation as well, it is certainly well over $100 million a year of annual spend, roughly $1 billion of annual spend on our products that are used in the IVF lab.

The Planer business though is frankly more of a niche business, where we focused on selling control rate freezers, which are used in IVF but not in all markets and frankly and have been replaced in large part by vitrification in a number of markets and are also used in IVF for -- but are used large, , primarily for larger samples. So they are kind of making a comeback a little bit in IVF for freezing of tissue, ovarian tissue as an example and certainly used in general lab use.

So in terms of the specific products that we sell, the overall businesses would be measured I would say in tens of millions versus hundreds of millions. But importantly, this provides us with significantly more technical expertise, so that as we both access some of the other products that we might see if we’re thinking of acquisition or wanted to own product development, we have a much stronger base of both scientific and engineering knowledge to build on.

Okay, good. So for the other, your other products that you are getting from Planer, so in the past you were selling those third-party I believe, are you not going to sell those third-party at all anymore?

You're completely replacing them with these first party products or are you going to continue selling those?

So, it's a little bit of a mixed bag. On the lab monitoring equipment, which is just to make sure we could describe it better, so that's a typically a computer system hooked up to sensors and communications devices that are placed throughout the labs and measure temperature, gases, humidity and other environmental factors, so you can make sure that the lab is operating properly and that the storage devices are properly maintained and maintaining temperature.

Those, there may have been some small ones around the edges, but on those we primarily only sold the Planer products over the last couple years, so there we would obviously put more -- continue our emphasis on those. I don't see that we would add any meaningful third-party products.

On the incubation side, as I mentioned, we’ve sold both Planer products and other products. We would continue to sell some of the other products, primarily based on form factor, so the Planer products have very specific form factors on bench-top.

There are other so-called large-format incubators that are big-box incubators that we sell provided by others that we don't make by Planer, probably wouldn't make those there relatively I would say they are commodity products but they are less technically complex. And certainly time lapse incubation which we sell in Germany.

We don’t have the time lapse incubator through - at Planer. And again I don’t want to make any promises on this, but this certainly also provides us with the basis for technical expertise that should we decide to develop the time lapse incubator, we would have a much quicker time-to-market on that.

Okay, good. One thing I noticed, you stated that your sales to research labs was down for both the first two quarters.

How much of your sales are from research labs now?

Low single-digits, and I think, it has historically been in the 5 percentage range, so it’s dropped a couple of points off that. I will add and I should have -- so thank you for reminding me of this, out Planer business is a little bit different than the overall Hamilton Thorne business in that, it is primarily selling products into human IVF, very small amount in animal world, but a meaningful amount of their business he has sold into research labs and other general biology labs, so I think you'll see that number begin to come up.

And frankly we may even change the categorization of that from research to general laboratory, because it's -- a lot of these customers maybe using their products for things like blood banking or stem cell tissue preservation, which is sometimes the research side and sometimes more in the I’ll call it the production side.

Okay, my final question. I also noticed you stated that your first two lab buildouts in the U.S., first of the lab buildout was substantially completed.

I'm just wondering, does that mean, now you recognize any more revenues from that or is it’s just in terms of getting installed or getting both of them installed?

Yes, so they were completed and installed and has probably continued, while hopefully there will be substantial continued revenue coming largely from consumables, but there's always going to be a little bit more equipment business. In fact one of these labs is having their open house shortly, so they will be up and running in quick order.

Okay. So, just as a quick follow up before I jump out of the queue here.

So, in relation to those, are they part of the larger network of clinics that you get follow-on orders from those?

So I don't want to get too much into the details of follow-on orders because that relates a little bit to their strategic plans. But one of them is part of the larger network and one of them is a start-up.

Okay, all right. Thanks, guys.

Just want to follow up on that last question. You said completed and installed in second quarter, so there are revenues associated with the buildout itself, I am not considering the go forward consumable revenues.

Were any -- were all of those revenues booked in Q1 or were any of your Q2 revenues due to these large lab buildouts?

No, they were booked in the combination of Q1 and Q2.

In Q2.

But I was very curious there’s no more leftover, nothing meaningful leftover that will roll into Q3.

Okay, for Q3, are there any new large lab doorbells that you…

We have a couple of good sized projects, some workstations and I think you know, then we’ve talked about kind of this large labs kind of small labs and workstations and workstations can be certainly well over $100,000 in orders, so I think you’ll see measurable revenues from labs in Q3, but not the same kind of I think you used the term lumpiness that you might have seen in Q1 and Q2.

Okay. And the -- the workstations, do they involve just your proprietary instrumentation or is it also third-party in there like full or large lab buildouts?

So a combination. So a typical workstation that we would sell would be a so-called [indiscernible] station where one uses inverted microscope, laser, micromanipulators and maybe an anti-vibration table or might be inside of the holder or not.

So depending on how one sets that up and which manipulation set they choose, it could be substantially our products or it could be well, and we always be a combination as obviously we don’t make around microscopes or it could be higher percentage of third-party products.

Okay. You mentioned vitrification as an alternative to cryopreservation freezers, do you have vitrification products?

Yes, so we through our Gynemed subsidiary we sell the workstation media products but we still have market share on that is very low, so I think that's one of the areas we want to focus on but there are still some disposable devices and storage devices that are -- that we don't sell and/or manufacture that would complete our product portfolio.

Okay. The $975,000 of target EBITDA for Planer, does that include your increase in expenses to grow the sales force or is that a pro forma number of those expenses or should we take those expenses out of $975,000.

Come out of the $975,000. So that was based on the historical through May 31, 2019 adjusted EBITDA number of the business that we bought.

What we decided to do with this is our those on us.

Okay. And last question.

Acquisition expenses for Planer you talk something in 2Q should there be a similar amount in Q3 or…?

I’ll let Michael respond to that.

So that was incurred through June 30 and we worked very hard to have the acquisition done the a few sort of natural legal timing delays stretch that out into Q3. So we will have additional closing costs, probably will not reach the same amount as Q2 but we will have meaningful closing, final closing costs in Q3 for Planar, yes.

Okay, sorry I do have one more question. You mentioned the rebound of major sales from Q1 of this year, but it was below last year's total.

You mentioned, 2Q last year was particularly strong. Why was 2Q so strong last year?

I would love to be able to give you the exact answer because then we would work hard to repeat it. But I think sometimes maybe be back to my Vitrolife comment, sometimes just looking to drop in a particular quarter.

Okay. Was part of the year-over-year debt because next gen products were launched until May 1 and going forward should we see a full recovery in quarters going forward or is…?

Yes. So I hesitate to use the word, to make any guarantee.

But certainly we would work hard and we would hope to see not only a full recovery but increase in sales because of the increased demand for this innovative product. As you know, I try not to make too many forward-looking promises, so I would say that’s our objective and we will report on it as we go along.

Okay and what proportion of the new buyers of the LYKOS new system or new customers versus labs that are existing customers are upgrading?

That’s actually a very good question. So most of our sales because of both for regulatory and another reasons were in markets certainly outside the U.S.

and through distribution, so we sold in Asia and Europe, primarily because we do have CE Mark for it and regulatory group clearance in certain Asian countries, or have been selling in countries that don’t require regulatory clearance. With distribution sales, we don't always have full transparency to essentially answer that question because we don't know.

We’ll find out who the buyer was, but we don’t – we know which lab it went to. But we don’t necessarily know exactly what they have installed in their location.

And that is one of the reasons we are interested in and willing to make investments in greater direct sales because we think having closer relationships with the end-user will give us not only that kind of market intelligence, but also give the ability to just provide better service and they afford to have be more use and some order is come to these labs.

Okay. Just to clarify, did you say the new lasers aren’t yet cleared in the U.S.

or they are?

That’s correct. They are not.

They’re not. When do you expect that clearance?

Again, I am skeptical to make any promises with regard to FDA clearance, but certainly we would hope by the end of this year.

And are U.S. customers holding off for the new lasers, like they did in the other markets?

Hard to say. There is a fair amount of geographic difference in demand for certain products, so one of the features that we've added to this product which is the movable laser is something that for whatever reason has not been exceptionally highly demanded in the U.S.

as it has been in other markets. So I don't think it's going to materially affect sales in the U.S.

but certainly I would expect to see some of that.

Okay. Thank you.

All right. Well, I would like to thank everybody for joining our conference call this morning.

We encourage you to go to our website for more information on our products initiatives and further investor information and look forward to speaking to you again in November. Thank you.