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 ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☒☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of August ~~2, 2019,~~4, 2020, there were ~~66,269,401~~80,642,661 Ordinary Shares, nil par value, of Quotient Limited outstanding.

This Quarterly Report on Form 10-Q, and exhibits thereto, contains estimates, predictions, opinions, projections and other statements that may be interpreted as “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act, that involve substantial risks and uncertainties. The forward-looking statements are contained principally in Part I, Item 2: “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and are also contained elsewhere in this Quarterly Report. Forward-looking statements can be identified by words such as “strategy,” “objective,” “anticipate,” “believe,” “estimate,” “expect,” “intend,” “may,” “plan,” “predict,” “project,” “target,” “potential,” “will,” “would,” “could,” “should,” “continue,” “contemplate,” “might,” “design” and other similar expressions, although not all forward-looking statements contain these identifying words. Although we believe that we have a reasonable basis for each forward-looking statement contained in this Quarterly Report, we caution you that these statements are based on a combination of facts and factors currently known by us and our expectations of the future, about which we cannot be certain, and are subject to numerous known and unknown risks and uncertainties.

You should also refer to the various factors identified in this and other reports filed by us with the Securities and Exchange Commission, or SEC, including but not limited to those discussed in the section entitled “Risk Factors” in our Annual Report on Form 10-K for the year ended March 31, ~~2019,~~2020, for a discussion of other important factors that may cause our actual results to differ materially from those expressed or implied by our forward-looking statements. As a result of these factors, we cannot assure you that the forward-looking statements in this Quarterly Report will prove to be accurate. Further, if our forward-looking statements prove to be inaccurate, the inaccuracy may be material. In light of the significant uncertainties in these forward-looking statements, you should

not regard these statements as a representation or warranty by us that we will achieve our objectives and plans in any specified time frame, or at all. The forward-looking statements in this Quarterly Report represent our views only as of the date of this Quarterly Report. Subsequent events and developments may cause our views to change. While we may elect to update these forward-looking statements at some point in the future, we undertake no obligation to publicly update any forward-looking statements, except as required by law. You should, therefore, not rely on these forward-looking statements as representing our views as of any date subsequent to the date of this Quarterly Report.

Access to our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to these reports filed with or furnished to the SEC, may be obtained through the investor section of our website at www.quotientbd.com as soon as reasonably practical after we electronically file or furnish these reports. We do not charge for access to and viewing of these reports. Information on our website, including in the investor section, ~~and on our website~~ is not part of this Quarterly Report on Form 10-Q or any of our other securities filings unless specifically incorporated herein by reference. In addition, our filings with the SEC may be accessed through the SEC’s website at www.sec.gov. All statements made in any of our securities filings, including all forward-looking statements or information, are made as of the date of the document in which the statement is included, and we do not assume or undertake any obligation to update any of those statements or documents unless we are required to do so by law.

(Expressed in thousands of U.S. Dollars — except for share data and per share data)

	June 30, 2019			March 31, 2019			June 30, 2020			March 31, 2020
ASSETS
Current assets:
Cash and cash equivalents	$	6,528		$	4,096		$	7,325		$	3,923
Short-term investments		84,151			90,729			87,152			116,871
Trade accounts receivable, net		4,724			3,348			5,972			5,402
Inventories		16,712			15,551			21,291			20,501
Prepaid expenses and other current assets		3,326			3,202			4,091			3,775
Total current assets		115,441			116,926			125,831			150,472
Restricted cash		9,016			7,507			9,021			9,017
Property and equipment, net		45,506			47,293			39,428			40,165
Operating lease right-of-use assets		17,615			—			21,124			21,493
Intangible assets, net		707			751			606			625
Deferred income taxes		592			605			237			237
Other non-current assets		4,568			4,688			4,438			4,454
Total assets	$	193,445		$	177,770		$	200,685		$	226,463
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
LIABILITIES AND SHAREHOLDERS' (DEFICIT) EQUITY
Current liabilities:
Accounts payable	$	5,342		$	5,936		$	5,621		$	4,826
Accrued compensation and benefits		4,372			6,149			5,190			7,210
Accrued expenses and other current liabilities		9,441			12,458			13,317			15,490
Current portion of operating lease liability		2,723			—			3,045			3,033
Current portion of deferred lease rental benefit		—			435
Current portion of finance lease obligation		457			471			573			598
Total current liabilities		22,335			25,449			27,746			31,157
Long-term debt, less current portion		148,088			121,855			155,101			153,024
Operating lease liability, less current portion		16,176			—			19,695			19,914
Deferred lease rental benefit, less current portion		—			1,144
Finance lease obligation, less current portion		753			865			1,017			1,117
Defined benefit pension plan obligation		7,647			7,368			6,623			6,353
7% Cumulative redeemable preference shares		19,638			19,375			20,688			20,425
Total liabilities		214,637			176,056			230,870			231,990
Commitments and contingencies		—			—			—			—
Shareholders' equity (deficit):
Ordinary shares (nil par value) 66,212,893 and 65,900,447 issued and outstanding at June 30, 2019 and March 31, 2019 respectively		369,021			368,958
Shareholders' (deficit) equity:
Ordinary shares (nil par value) 80,593,440 and 80,398,326 issued and outstanding at June 30, 2020 and March 31, 2020 respectively								459,990			459,931
Additional paid in capital		29,843			28,665			34,092			33,132
Accumulated other comprehensive loss		(15,823	)		(14,884	)		(15,403	)		(15,155	)
Accumulated deficit		(404,233	)		(381,025	)		(508,864	)		(483,435	)
Total shareholders' equity (deficit)		(21,192	)		1,714
Total liabilities and shareholders' equity (deficit)	$	193,445		$	177,770
Total shareholders' (deficit) equity								(30,185	)		(5,527	)
Total liabilities and shareholders' (deficit) equity							$	200,685		$	226,463

The accompanying notes form an integral part of these condensed consolidated financial statements.

(Expressed in thousands of U.S. Dollars — except for share data and per share data)

	Quarter ended						Quarter ended
	June 30,						June 30,
	2019			2018			2020			2019
Revenue:
Product sales	$	8,169		$	7,864		$	8,924		$	8,169
Other revenues		—			19			—			—
Total revenue		8,169			7,883			8,924			8,169
Cost of revenue		(4,563	)		(4,065	)		(5,414	)		(4,563	)
Gross profit		3,606			3,818			3,510			3,606
Operating expenses:
Sales and marketing		(2,580	)		(2,281	)		(2,243	)		(2,580	)
Research and development, net of government grants		(11,653	)		(12,570	)		(11,450	)		(11,653	)
General and administrative expense:
Compensation expense in respect of share options and management equity incentives		(1,178	)		(1,347	)		(960	)		(1,178	)
Other general and administrative expenses		(6,619	)		(6,158	)		(8,578	)		(6,619	)
Total general and administrative expense		(7,797	)		(7,505	)		(9,538	)		(7,797	)
Total operating expense		(22,030	)		(22,356	)		(23,231	)		(22,030	)
Operating loss		(18,424	)		(18,538	)		(19,721	)		(18,424	)
Other income (expense):
Interest expense, net		(6,086	)		(3,116	)		(5,926	)		(6,086	)
Other, net		952			(3,512	)		233			952
Other expense, net		(5,134	)		(6,628	)		(5,693	)		(5,134	)
Loss before income taxes		(23,558	)		(25,166	)		(25,414	)		(23,558	)
Provision for income taxes		(13	)		(11	)		(15	)		(13	)
Net loss	$	(23,571	)	$	(25,177	)	$	(25,429	)	$	(23,571	)
Other comprehensive income (loss):
Change in fair value of foreign currency cash flow hedges	$	(120	)	$	(332	)	$	(3	)	$	(120	)
Change in unrealized gain on short-term investments		147			26			(404	)		147
Foreign currency gain (loss)		(1,014	)		357			146			(1,014	)
Provision for pension benefit obligation		48			36			13			48
Other comprehensive income (loss), net		(939	)		87
Other comprehensive loss, net								(248	)		(939	)
Comprehensive loss	$	(24,510	)	$	(25,090	)	$	(25,677	)	$	(24,510	)
Net loss available to ordinary shareholders - basic and diluted	$	(23,571	)	$	(25,177	)	$	(25,429	)	$	(23,571	)
Loss per share - basic and diluted	$	(0.36	)	$	(0.55	)	$	(0.32	)	$	(0.36	)
Weighted-average shares outstanding - basic and diluted		66,078,290			45,796,533			80,485,985			66,078,290

The accompanying notes form an integral part of these condensed consolidated financial statements.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (DEFICIT) (unaudited)

	Ordinary shares				Additional paid in		Accumulated Other Comprehensive			Accumulated			Total Shareholders'			Ordinary shares				Additional paid in		Accumulated Other Comprehensive			Accumulated			Total Shareholders'
	Shares		Amount		capital		Loss			Deficit			Equity (Deficit)			Shares		Amount		capital		Loss			Deficit			Equity (Deficit)
March 31, 2019		65,900,447	$	368,958	$	28,665	$	(14,884	)	$	(381,025	)	$	1,714
March 31, 2020																	80,398,326	$	459,931	$	33,132	$	(15,155	)	$	(483,435	)	$	(5,527	)
Issue of shares upon exercise of incentive share options and vesting of RSUs		312,446		63		—		—			—			63			195,114		59		—		—			—			59
Net loss		—		—		—		—			(23,571	)		(23,571	)		—		—		—		—			(25,429	)		(25,429	)
Change in the fair value of foreign currency cash flow hedges		—		—		—		(120	)		—			(120	)		—		—		—		(3	)		—			(3	)
Change in unrealized gain on short-term investments		—		—		—		147			—			147			—		—		—		(404	)		—			(404	)
Foreign currency gain (loss) on:
Long-term investment nature intra-entity balances		—		—		—		8,288			—			8,288
Long-term investment nature intra- entity balances																	—		—		—		4,685			—			4,685
Retranslation of foreign entities		—		—		—		(9,302	)		—			(9,302	)		—		—		—		(4,539	)		—			(4,539	)
Provision for pension benefit obligation		—		—		—		48			—			48			—		—		—		13			—			13
Other comprehensive loss		—		—		—		(939	)		—			(939	)		—		—		—		(248	)		—			(248	)
Stock-based compensation		—		—		1,178		—			—			1,178			—		—		960		—			—			960
Cumulative effect of accounting changes		—		—		—		—			363			363
June 30, 2019		66,212,893	$	369,021	$	29,843	$	(15,823	)	$	(404,233	)	$	(21,192	)
June 30, 2020																	80,593,440	$	459,990	$	34,092	$	(15,403	)	$	(508,864	)	$	(30,185	)

	Ordinary shares				Additional paid in		Accumulated Other Comprehensive			Accumulated			Total Shareholders'			Ordinary shares					Additional paid in			Accumulated Other Comprehensive				Accumulated				Total Shareholders'
	Shares		Amount		capital		Loss			Deficit			(Deficit)			Shares		Amount			capital			Loss				Deficit				Equity (Deficit)
March 31, 2018		45,646,424	$	253,934	$	23,708	$	(16,634	)	$	(275,639	)	$	(14,631	)
Issue of shares upon exercise of warrants		375,000		2,175		—		—			—			2,175
March 31, 2019																	65,900,447		$	368,958		$	28,665		$	(14,884	)		$	(381,025	)		$	1,714
Issue of shares upon exercise of incentive share options and vesting of RSUs		43,277		20		—		—			—			20			312,446			63			—			—				—				63
Net loss		—		—		—		—			(25,177	)		(25,177	)		—			—			—			—				(23,571	)			(23,571	)
Change in the fair value of foreign currency cash flow hedges		—		—		—		(332	)		—			(332	)		—			—			—			(120	)			—				(120	)
Change in unrealized gain on short-term investments		—		—		—		26			—			26			—			—			—			147				—				147
Foreign currency gain (loss) on:
Long-term investment nature intra- entity balances		—		—		—		3,629			—			3,629
Long-term investment nature intra-entity balances																	—			—			—			8,288				—				8,288
Retranslation of foreign entities		—		—		—		(3,272	)		—			(3,272	)		—			—			—			(9,302	)			—				(9,302	)
Provision for pension benefit obligation		—		—		—		36			—			36			—			—			—			48				—				48
Other comprehensive loss		—		—		—		87			—			87			—			—			—			(939	)			—				(939	)
Stock-based compensation		—		—		1,347		—			—			1,347			—			—			1,178			—				—				1,178
June 30, 2018		46,064,701	$	256,129	$	25,055	$	(16,547	)	$	(300,816	)	$	(36,179	)
Cumulative effect of accounting changes																	—			—			—			—				363				363
June 30, 2019																	66,212,893		$	369,021		$	29,843		$	(15,823	)		$	(404,233	)		$	(21,192	)

The accompanying notes form an integral part of these condensed consolidated financial statements.

	Quarter ended June 30,						Quarter ended June 30,
	2019			2018			2020			2019
OPERATING ACTIVITIES:
Net loss	$	(23,571	)	$	(25,177	)	$	(25,429	)	$	(23,571	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization		3,038			3,333
Depreciation, amortization and loss on disposal of fixed assets								1,953			3,038
Share-based compensation		1,178			1,347			960			1,178
Amortization of lease incentive		(109	)		(108	)
Increase (decrease) in deferred lease rentals								169			(109	)
Swiss pension obligation		183			155			253			183
Amortization of deferred debt issue costs		2,107			291			2,078			2,107
Accrued preference share dividends		263			263			263			263
Deferred income taxes		13			11
Income taxes								15			13
Net change in assets and liabilities:
Trade accounts receivable, net		(1,439	)		(141	)		(587	)		(1,439	)
Inventories		(1,160	)		(28	)		(638	)		(1,160	)
Accounts payable and accrued liabilities		(3,713	)		(5,401	)		(1,514	)		(3,713	)
Accrued compensation and benefits		(1,699	)		1,057			(2,025	)		(1,699	)
Other assets		(145	)		3,280			(306	)		(145	)
Net cash used in operating activities		(25,054	)		(21,118	)		(24,808	)		(25,054	)
INVESTING ACTIVITIES:
Increase in short-term investments		(15,000	)		—			—			(15,000	)
Realization of short-term investments		21,724			—			29,314			21,724
Purchase of property and equipment		(1,138	)		(1,428	)		(830	)		(1,138	)
Net cash generated from (used in) investing activities		5,586			(1,428	)
Net cash generated from investing activities								28,484			5,586
FINANCING ACTIVITIES:
Repayment of finance leases		(94	)		(116	)		(171	)		(94	)
Proceeds from drawdown of new debt		25,000			36,000			—			25,000
Debt issuance costs and fees paid to noteholders		(874	)		(1,213	)		—			(874	)
Proceeds from issuance of ordinary shares and warrants		63			2,195			59			63
Net cash generated from financing activities		24,095			36,866
Net cash (used in) generated from financing activities								(112	)		24,095
Effect of exchange rate fluctuations on cash, cash equivalents and restricted cash		(686	)		3,304			(158	)		(686	)
Change in cash, cash equivalents and restricted cash		3,941			17,624			3,406			3,941
Beginning cash, cash equivalents and restricted cash		11,603			25,205			12,940			11,603
Ending cash, cash equivalents and restricted cash	$	15,544		$	42,829		$	16,346		$	15,544
Supplemental cash flow disclosures:
Income taxes paid	$	—		$	—		$	—		$	—
Interest paid	$	7,221		$	5,069		$	8,731		$	7,221
Reconciliation of cash, cash equivalents and restricted cash:
Cash and cash equivalents	$	6,528		$	35,629		$	7,325		$	6,528
Restricted cash		9,016			7,200			9,021			9,016
Total cash, cash equivalents and restricted cash	$	15,544		$	42,829		$	16,346		$	15,544

The accompanying notes form an integral part of these condensed consolidated financial statements.

(Expressed in thousands of U.S. Dollars — except for share data and per share data, unless otherwise stated)

The principal activity of Quotient Limited (the “Company”) and its subsidiaries (the “Group”) is the development, manufacture and sale of products for the global transfusion diagnostics market. Products manufactured by the Group are sold to hospitals, blood banking operations and other diagnostics companies worldwide.

The condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) and are unaudited. In accordance with those rules and regulations, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States (“GAAP”) for complete financial statements.

In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all adjustments (consisting only of normal recurring adjustments) considered necessary to present fairly the financial position, results of operations, changes in shareholders’ equity and cash flows for the interim periods presented. The March 31, ~~2019~~2020 balance sheet was derived from audited financial statements, but does not include all disclosures required by GAAP. However, the Company believes that the disclosures are adequate to make the information presented not misleading. The financial statements should be read in conjunction with the audited consolidated financial statements at and for the year ended March 31, ~~2019~~2020 included in the Company’s Annual Report on Form 10-K for the year then ended. The results of operations for the quarter ended June 30, ~~2019~~2020 are not necessarily indicative of the results of operations that may be expected for the year ending March 31, ~~2020~~2021 and any future period.

The Company has incurred net losses and negative cash flows from operations in each year since it commenced operations in 2007 and had an accumulated deficit of ~~$404.2~~$508.9 million as of June 30, ~~2019.~~2020. At June 30, ~~2019~~2020, the Company had available cash holdings and short-term investments of ~~$90.7~~$94.5 million.The Company is currently involved in an arbitration dispute with Ortho-Clinical Diagnostics, Inc. (“Ortho”), and an arbitration hearing is scheduled for September 2020 (see Note 6). An adverse outcome of this dispute in addition to the Company’s expenditure plans over the next 12 months and the generation of lower than expected sales could result in an impact on the liquidity and financial position of the business such that the net cash outflows over the next 12 months could exceed the Company’s existing available cash and short-term investment balances, ~~are adequate~~raising substantial doubt about its ability to ~~meet its forecasted cash requirements for the next twelve months and accordingly the financial statements have been prepared on the~~continue as a going ~~concern basis.~~concern.

~~In the longer term, the~~The Company expects to fund its operations, including the ongoing development of MosaiQ through successful field trial completion, achievement of required regulatory authorizations and commercialization from the use of existing available cash and short-term investment balances, cash generated through ongoing sales of the Company’s COVID-19 antibody test, and the issuance of new equity or ~~debt.~~debt, and accordingly has prepared the financial statements on the going concern basis. However, there can be no assurance that the Company will be able to generate sales as expected or obtain adequate financing when necessary and the terms of any financings may not be advantageous to the Company and may result in dilution to its shareholders.

The preparation of unaudited condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the unaudited condensed consolidated financial statements and accompanying notes.

On March 11, 2020, the World Health Organization declared the outbreak of a strain of novel coronavirus disease, COVID-19, a global pandemic. The extent to which the COVID-19 pandemic will impact the Company’s business, operations and financial results will depend on future developments and numerous evolving factors, which are highly uncertain and difficult to predict. As of the date of issuance of these unaudited condensed consolidated financial statements, the Company is not aware of any specific event or circumstance that would require the Company to further update estimates, judgments or revise the carrying value of any assets or liabilities. These estimates may change, as new events occur and additional information is obtained, and are recognized in the condensed consolidated financial statements as soon as they become known. Actual results could differ from ~~these estimates.~~those estimates and any such differences may be material to the Company’s condensed consolidated financial statements.

The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents. ~~All~~At June 30, 2020 and March 31, 2020, all cash and cash equivalents comprised readily accessible cash balances. Restricted cash comprised $8.7 million ~~and $7.2 million~~ at both June 30, ~~2019~~2020 and March 31, ~~2019, respectively,~~2020, held in a cash reserve account pursuant to the indenture governing the Company’s 12% Senior Secured Notes (“the Secured Notes”) and ~~$316~~$321 and ~~$307~~$317 at June 30, ~~2019~~2020 and March 31, ~~2019,~~2020, respectively, held in a restricted account as security for the property rental obligations of the Company’s Swiss subsidiary.

Short-term investments represent investments in a money-market fund which is valued daily and which has no minimum notice period for withdrawals. The fund is invested in a portfolio of holdings and the creditworthiness requirement for individual investment holdings is a minimum of an A rating from a leading credit-rating agency. The Company records the value of its investment in the fund based on the quoted value of the fund at the balance sheet date. Unrealized gains or losses are recorded in accumulated other comprehensive loss and are transferred to the statement of comprehensive loss when they are realized.

Trade accounts receivable are recorded at the invoiced amount and are not interest bearing. The Company maintains an allowance for doubtful accounts to reserve for potentially uncollectible trade receivables. Movements in the allowance for doubtful accounts are recorded in general and administrative expenses. The Company reviews its trade receivables to identify specific customers with known disputes or collectability issues. In addition, the Company maintains an allowance for all other receivables not included in the specific reserve by applying specific rates of projected uncollectible receivables to the various aging categories. In determining these percentages, the Company analyzes its historical collection experience, customer credit-worthiness, current economic trends and changes in customer payment terms.

The carrying amounts for financial instruments consisting of cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities approximate fair value due to their short maturities. Derivative instruments, consisting of foreign exchange contracts, and short-term investments are stated at their estimated fair values, based on quoted market prices for the same or similar instruments. The counterparties to the foreign exchange contracts consist of large financial institutions of high credit standing. The short-term investments are invested in a fund which is invested in a portfolio of holdings and the creditworthiness requirement for individual investment holdings is a minimum of an A rating from a leading credit-rating agency.

The Company’s main financial institutions for banking operations ~~hold~~held all of the Company’s cash and cash equivalents as of June 30, ~~2019~~2020 and at March 31, ~~2019.~~2020. The Company’s accounts receivable are derived from net revenue to customers and distributors located in the United States and other countries. The Company performs credit evaluations of its customers’ financial condition. The Company provides reserves for potential credit losses, but has not experienced significant losses to date. There was ~~one~~1 customer whose accounts receivable balance represented 10% or more of total accounts receivable, net, as of June 30, ~~2019~~2020 and March 31, ~~2019.~~2020. This customer represented 70% ~~and 55%~~ of the accounts receivable balances as of both June 30, ~~2019~~2020 and March 31, ~~2019,~~2020, respectively.

The Company currently sells products through its direct sales force and through third-party distributors. There was ~~one~~1 customer that accounted for 10% or more of total product sales for the quarters ended June 30, ~~2019~~2020 and June 30, ~~2018.~~2019. This customer represented ~~58%~~62% of total product sales for the quarter ended June 30, ~~2019~~2020 and ~~59%~~58% for the quarter ended June 30, ~~2018.~~2019.

The Company defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The Company’s valuation techniques used to measure fair value maximized the use of observable inputs and minimized the use of unobservable inputs. The fair value hierarchy is based on the following three levels of inputs:

See Note 6, “Commitment and Contingencies,” for information and related disclosures regarding the Company’s fair value measurements.

Inventory is stated at the lower of standard cost ~~(which approximates actual cost)~~ or market, ~~with~~net of reserves. Cost is determined at standard cost, ~~determined on the first-in-first-out method. Accordingly, allocation~~approximating average cost. Allocation of fixed production overheads to conversion costs is based on normal capacity of production. Abnormal amounts of idle facility expense, freight, handling costs and spoilage are expensed as incurred and not included in overhead. NoVariances between standard cost and actual cost, arising in the production process, are analyzed to determine whether they reflect part of the normal cost of production, and should therefore be reflected as inventory value, or whether they are a period cost and should thus not be included in inventory. Inventory reserves are recorded based upon historic usage, expected future demand and shelf life of the products held in inventory. NaN stock-based compensation cost was included in inventory as of June 30, ~~2019~~2020 and March 31, ~~2019.~~2020.

Property, equipment and leasehold improvements are stated at cost, net of accumulated depreciation and amortization. Depreciation and amortization are computed on a straight-line basis over the estimated useful lives of the related assets as follows:

Repairs and maintenance expenditures, which are not considered improvements and do not extend the useful life of property and equipment, are expensed as incurred.

Intangible assets related to product licenses are recorded at cost, less accumulated amortization. Intangible assets related to technology and other intangible assets acquired in acquisitions are recorded at fair value at the date of acquisition, less accumulated amortization. Intangible assets are amortized over their estimated useful lives, on a straight-line basis as follows:

The Company reviews its intangible assets for impairment and conducts an impairment review when events or circumstances indicate the carrying value of a long-lived asset may be impaired by estimating the future undiscounted cash flows to be derived from an asset to assess whether or not a potential impairment exists. NoNaN impairment losses have been recorded in either of the quarters ended June 30, ~~2019~~2020 or June 30, ~~2018.~~2019.

Revenue is recognized in accordance with ASU 2014-09, Revenue from Contracts with Customers.

Product revenue is recognized at a point in time upon transfer of control of a product to a customer, which is generally at the time of delivery at an amount based on the transaction price. Customers have no right of return except in the case of damaged goods and the Company has not experienced any significant returns of its products. Shipping and handling costs are expensed as incurred and included in cost of product sales. ~~In those cases where the Company bills shipping and handling costs to customers, the amounts billed are classified as revenue.~~

Revenue is also earned from the provision of development services to a small number of original equipment manufacturer (“OEM”) customers. These development service contracts are reviewed individually to determine the nature of the performance obligations and the associated transaction prices. In recent years, product development revenues have been commensurate with achieving milestones specified in the respective development agreements relating to those products. These milestones may include the approval of new products by the European or U.S. regulatory authorities, which are not within the Company’s control. While there can be no assurance that this will continue to be the case, the milestones have been such that they effectively represent completion of the Company’s performance obligations under a particular part of a development program. Should the Company fail to achieve these milestones the Company would not be entitled under the terms of the development agreements to any compensation for the work undertaken to date. As a result, the milestone-related revenues have been recognized as the contractual milestones are achieved.

Pursuant to an Umbrella Supply Agreement with Ortho-Clinical Diagnostics, Inc. (“Ortho”), the Company executed a product attachment relating to the development of a range of rare antisera products. During the year ended March 31, ~~2019,~~2020, the Company recognized ~~a milestone of $450~~milestones totaling $1,050 related to the ~~submission to~~approval by the FDA of an application ~~to cover use of~~submitted during the ~~products on an Ortho automation platform. The Company is entitled to receive~~year ended March 31, 2019, and a further ~~milestone payments totaling $1,050~~FDA submission and approval related to ~~FDA submissions and approvals of~~ the use of the products on another of Ortho’s automation platforms. ~~The Company expects these remaining milestones to be achieved in the financial year ending March 31, 2020.~~There are no further milestone revenues due under this agreement.

In January 2015, the Company entered into a supply and distribution agreement with Ortho related to the commercialization and distribution of certain MosaiQproducts. Under the terms of this agreement, the Company iswas entitled to receive milestone payments, totaling in aggregate $59.0 million, upon CE-mark and FDA approval, as well as upon the first commercial sale of the relevant MosaiQproducts by Ortho within the European Union, United States and within any country outside of these two regions. The Company ~~has~~had concluded that as each of these milestones ~~require~~required significant levels of development work to be undertaken and there was no certainty at the start of the projects that the development work would be successful, these milestones ~~are~~were substantive and the revenue ~~will be~~would have been recognized when the milestones ~~are~~were achieved. The Company terminated this agreement effective as of December 27, 2019. Ortho initiated arbitration proceedings against the Company for wrongful termination with the Company subsequently pursuing counterclaims. Refer to Note 6 for details.

In the quarter ended June 30, ~~2019,~~2020, revenue recognized from performance obligations related to prior periods was not material and, at June 30, ~~2019,~~2020, revenue expected to be recognized in future periods related to remaining performance obligations was also not material.

Research and development expenses consist of costs incurred for company-sponsored and collaborative research and development activities. These costs include direct and research-related overhead expenses. ~~The~~Other than materials assessed as having alternative future uses and which are recognized as prepaid expenses, the Company expenses research and development costs, including products manufactured for research and development purposes and the expenses for research under collaborative agreements, as such costs are incurred. Where government grants ~~or tax credits~~ are available for the ~~income concerned~~sponsorship of such research, the grant receipt is included as a credit against the related expense.

Stock-based compensation cost is measured at the grant date based on the fair value of the award and is recognized as an expense on a straight-line basis over the requisite service period, which is generally the vesting period. The value of the portion of the award that is ultimately expected to vest is recognized as expense over the requisite service periods in the Company’s consolidated statements of comprehensive loss.

In determining fair value of the stock-based compensation payments, the Company uses the Black–Scholes model and a single option award approach for share options and a barrier option pricing model for multi-year performance based restricted share units (“MRSUs”), both of which require the input of subjective assumptions. These assumptions include: the fair value of the underlying share, estimating the length of time employees will retain their awards before exercising them (expected term), the estimated volatility of the Company’s ordinary ~~shares~~share price over the expected term (expected volatility), risk-free interest rate (interest rate), expected dividends and the number of shares subject to awards that will ultimately not complete their vesting requirements (forfeitures).

Where modifications are made to vesting conditions, the Company considers the nature of the change and accounts for the change in accordance with ASC 715 Compensation – Stock Compensation. The Company determined that certain modifications made during the year ended March 31, 2020 were type III in nature and accordingly the original compensation expense related to these awards was reversed and the value of the awards was re-measured at the date of the change and was expensed over the vesting period of the awards concerned. No modifications were made in the quarter ended June 30, 2020.

As of June 30, ~~2019,~~2020, the Company had one class of warrants to purchase ordinary shares outstanding, which comprised warrants that were issued in December 2013 and August 2015 in connection with the establishment or increase of the Company’s then existing secured term loan facility. None of these warrants contain ~~or contained~~ any obligation to transfer value and, as such, the issuance of these warrants has been recorded in additional paid in capital as part of shareholders’ (deficit) equity.

~~In February 2016, the Financial Accounting Standards Board, or FASB, issued Accounting Standard Update, or ASU 2016-02,~~ Leasesor ASU 2016-02, to enhance the transparency and comparability of financial reporting related to leasing arrangements. The Company adopted ASU 2016-02 on April 1, 2019, or the effective date, and used the effective date as its date of initial application.

At the inception of an arrangement, the Company determines whether the arrangement is or contains a lease based on the unique facts and circumstances present. A lease is a contract, or part of a contract, that conveys the right to control the use of identified property, plant or equipment (an identified asset) for a period of time, in exchange for consideration. The Company determines if the contract conveys the right to control the use of an identified asset for a period of time. The Company assesses throughout the period of use whether the Company has both of the following: (1) the right to obtain substantially all of the economic benefits for use of the identified asset, and (2) the right to direct the use of the identified asset. This determination is reassessed if the terms of the contract are changed. The Company also reviews the terms of the lease in accordance with Accounting Standard Update, or ASU, 2016-02 in order to determine whether the lease concerned is a finance or an operating lease. Most leases with a term greater than one year are recognized on the balance sheet as right-of-use assets, lease liabilities and, if applicable, long-term lease liabilities. The Company has elected not to recognize on the balance sheet leases with terms of one year or less.

For finance leases, an asset is included within property and equipment and a lease liability equal to the present value of the minimum lease payments is included in current or long-term liabilities. Interest expense is recorded over the life of the lease at a constant rate.

Operating lease liabilities and their corresponding right-of-use assets are recorded based on the present value of lease payments over the expected remaining lease term. The operating lease right-of-use assets also include any lease payments made prior to the commencement date and any initial direct costs incurred, less any lease incentives received. The interest rate implicit in lease contracts is typically not readily determinable. As a result, the Company utilizes its incremental borrowing rates, which are the rates incurred to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment. The incremental borrowing rate is determined at lease commencement, or as of April 1, 2019 for operating leases existing upon adoption of ASU 2016-02. The incremental borrowing rate is subsequently reassessed upon modification to the lease arrangement. Operating lease expense is recognized on a straight-line basis over the lease term.

In accordance with the guidance in ASU 2016-02, components of a lease should be split into three categories: lease components (e.g., land, building, etc.), non-lease components (e.g., common area maintenance, maintenance, consumables, etc.), and non-components (e.g., property taxes, insurance, etc.). Although separation of lease and non-lease components is required, certain practical expedients are available. In particular, entities may elect a practical expedient to not separate lease and non-lease components and instead account for each lease component and the related non-lease component together as a single component. The Company has elected to account for the lease and non-lease components of each of its operating leases as a single lease component and allocate all of the contract consideration to the lease component only. The lease component results in an operating lease right-of-use asset being recorded on the balance sheet and amortized on a straight-line basis as lease expense.

The finance lease assets and operating lease right-of-use assets are assessed for impairment in accordance with the Company’s accounting policy for long-lived assets.

In the normal course of business, the Company’s financial position is routinely subjected to market risk associated with foreign currency exchange rate fluctuations. The Company’s policy is to mitigate the effect of these exchange rate fluctuations on certain foreign currency denominated business exposures. The Company has a policy that allows the use of derivative financial instruments to hedge foreign currency exchange rate fluctuations on forecasted revenue denominated in foreign currencies. The Company carries derivative financial instruments (derivatives) on the balance sheet at their fair values. The Company does not use derivatives for trading or speculative purposes. The Company does not believe that it is exposed to more than a nominal amount of credit risk in its foreign currency hedges, as counterparties are large, global and well-capitalized financial institutions. To hedge foreign currency risks, the Company uses foreign currency exchange forward contracts, where possible and prudent. These forward contracts are valued using standard valuation formulas with assumptions about future foreign currency exchange rates derived from existing exchange rates, interest rates, and other market factors.

The Company considers its most current forecast in determining the level of foreign currency denominated revenue to hedge as cash flow hedges. The Company combines these forecasts with historical trends to establish the portion of its expected volume to be hedged. The revenue and expenses are hedged and designated as cash flow hedges to protect the Company from exposures to fluctuations in foreign currency exchange rates. If the underlying forecasted transaction does not occur, or it becomes probable that it will not occur, the related hedge gains and losses on the cash flow hedge are reclassified from accumulated other comprehensive loss to the consolidated statement of comprehensive loss at that time.

The Company accounts for income taxes using an asset and liability approach, which requires recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in the consolidated financial statements, but have not been reflected in taxable income. A valuation allowance is established to reduce deferred tax assets to their estimated realizable value. Therefore, the Company provides a valuation allowance to the extent that is more likely than not that it will generate sufficient taxable income in future periods to realize the benefit of its deferred tax assets. Deferred tax assets and liabilities are classified as noncurrent on the balance sheet.

The Company accounts for uncertain tax positions using a “more-likely-than-not” threshold for recognizing and resolving uncertain tax positions. The Company evaluates uncertain tax positions on a quarterly basis and considers various factors, including, but not limited to, changes in tax law, the measurement of tax positions taken or expected to be taken in tax returns, the effective settlement of matters subject to audit and changes in facts or circumstances related to the tax position.

Termination charges are recognized as a result of actions to restructure operations. Transition charges are recognized as a result of the retirement of senior employees. Such charges are recognized upon meeting certain criteria, including the finalization of committed plans or agreements and discussions with the impacted employees.

Loss contingencies from legal proceedings and claims may occur from contractual and other related matters. Accruals are recognized when it is probable that a liability will be incurred and the amount of the loss can be reasonably estimated. Gain contingencies are not recognized until realized. Legal fees are expensed as incurred.

The Company follows the requirements of Accounting Standards Update 2015-03, Interest — Imputation of Interest (Subtopic 835-30) — Simplifying the Presentation of Debt Issuance Costs, which requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the debt liability rather than as an asset.

On October 14, 2016, June 29, 2018 and May 15, 2019, the Company issued Secured Notes, and, on December 4, 2018, the Company amended the indenture governing the Secured Notes, which amendments became effective on December 18, 2018. In connection with these issuances and this amendment, the Company entered into royalty rights agreements with the subscribers and the consenting note holders, as applicable, which, as of June 30, ~~2019,~~2020, provided for an aggregate amount of royalties payable thereunder of 3.4% of net sales of MosaiQ instruments and consumables made in the donor testing market in the United States and the European Union. All of these royalty rights agreements are treated as sales of future revenues that meet the requirements of Accounting Standards Codification Topic 470 “Debt” (“ASC 470”) to be treated as debt. The future cash outflows under the royalty rights agreements have been combined with the issuance costs (which includes the one-time consent payment of $3.9 million paid to holders of our Secured Notes in December 2018) and interest payable to calculate the effective interest rate of the Secured Notes and ~~will be~~is being expensed through interest expense in the consolidated statement of comprehensive loss using the effective interest rate method over the term of the Secured Notes and royalty rights agreements.

The Company maintains a pension plan covering employees in Switzerland pursuant to the requirements of Swiss pension law. Certain aspects of the plan require that it be accounted for as a defined benefit plan pursuant to Accounting Standards Codification Topic, 715 Compensation – Retirement Benefits (“ASC 715”). The Company recognizes an asset for the plan’s overfunded status or a liability for the plan’s underfunded status in its consolidated balance sheets. Additionally, the Company measures the plan’s assets and obligations that determine its funded status as of the end of the year and recognizes the change in the funded status within ‘‘Accumulated other comprehensive loss’’. The service cost component of the net periodic benefit cost is disclosed in the same line item as other employee compensation costs arising from services rendered during the period, and the other components are reported separately from the line item that includes the service cost and within interest expense, net in the consolidated statement of comprehensive loss.

The Company uses an actuarial valuation to determine its pension benefit costs and credits. The amounts calculated depend on a variety of key assumptions, including discount rates and expected return on plan assets. Details of the assumptions used to determine the net funded status are set out in the notes to the Company’s audited consolidated financial statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, ~~2019.~~2020. The Company’s pension plan assets are assigned to their respective levels in the fair value hierarchy in accordance with the valuation principles described in the ‘‘Fair Value of Financial Instruments’’ section above.

In ~~February~~June 2016, the FASB issued ASU ~~2016-02,~~ ~~Leases~~2016-13, “Financial Instruments – Credit Losses”. The standard, including subsequently issued amendments, requires a financial asset measured on an amortized cost basis, such as accounts receivable, to be presented at the net amount expected to be collected based on relevant information about past events, including historical experience, current conditions, and reasonable and supportable forecasts that requires lessees to recognize a right-of-use asset and a lease liability on their balance sheet for all leases with lease terms greater than 12 months but recognize expenses in their income statements in a manner similar toaffect the ~~previous guidance. ASU 2016-02 also requires new qualitative and quantitative disclosures to help investors and other financial statement users better understand~~collectability of the amount, timing and uncertainty of cash flows arising from leases. The Company’s process of evaluating the impact of ASU 2016-02 has included reviewing all forms of leases and performing a completeness assessment over the lease population. The Company also performed detailed analysis to determine the appropriate incremental borrowing rates used to discount outstanding lease payments.

reported amount. The Company adopted ASU ~~2016-02~~2016-13 on April 1, 2019. In adopting this standard the Company applied the package of practical expedients in ASU 2016-02 which allow an entity to not reassess whether any expired or existing contracts are or contain leases, lease classification of any expired or existing leases and the accounting for any initial direct costs on any expired or existing leases. The Company also elected the additional transitional approach prescribed under ASU 2018-11 to allow the Company to apply the new standard from the date of adoption, rather than adjusting comparative periods, and recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption.

The results for the quarter to June 30, 2019 reflect the adoption of ASU 2016-02 guidance while the results for the quarter to June 30, 2018 and the year to March 31, 2019 were prepared under the guidance of the previous leasing standard (Accounting Standard Codification 840).2020. The adoption of ~~ASU 2016-02 has~~this standard did not ~~had~~have a material impact on the ~~Company’s consolidated statements of comprehensive loss or consolidated statements of cash flows. The adoption of ASU 2016-02 resulted in the following impact on its consolidated balance sheet:~~

~~The cumulative effect of adopting ASU 2016-02 to all leases that had commenced at or prior to April 1, 2019 was as follows:~~

~~The Company has included additional disclosures in Note 12 to its~~unaudited condensed consolidated financial statements ~~regarding its leasing portfolio.~~

In the condensed consolidated statement of cash flows the non-cash amortization of deferred lease rental benefit in the quarter ended June 30, 2018 has been retitled as amortization of lease incentive.

In August 2018, the FASB issued ASU 2018-14, “Compensation Retirement Benefits - Defined Benefit Plans -General (Subtopic 715-20)” or ASU 2018-14. ASU 2018-14 removes the requirements to disclose the amounts in accumulated other comprehensive income (loss) expected to be recognized as components of net periodic benefit cost over the next fiscal year and other disclosure requirements. In addition, the ASU adds the requirement to disclose an explanation for any significant gains and losses related to changes in the benefit obligation for the period. The ASU is effective for fiscal years ending after December 15, 2020 and will be applied on a retrospective basis to all periods presented. Early adoption is permitted. The Company ~~continues to evaluate the impact that~~adopted ASU 2018-14 on April 1, 2020. The adoption of this ~~guidance will~~standard did not have a material impact on ~~its~~the unaudited condensed consolidated financial statements and related ~~disclosures, but does not expect it to have a material impact.~~disclosures.

	June 30, 2019									June 30, 2020
	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount		Weighted Average Remaining Useful Life		Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount		Weighted Average Remaining Useful Life
Customer relationships	$	2,499	$	(2,499	)	$	—		—	$	2,427	$	(2,427	)	$	—		—
Brands associated with acquired cell lines		515		(151	)		364	28.3 years			501		(161	)		340	27.0 years
Product licenses		867		(524	)		343	4.0 years			845		(579	)		266	3.3 years
Other intangibles		162		(162	)		—		—		158		(158	)		—		—
Total	$	4,043	$	(3,336	)	$	707	16.5 years		$	3,931	$	(3,325	)	$	606	16.5 years

	June 30, 2019		March 31, 2019		June 30, 2020			March 31, 2020
Total debt	$	145,000	$	120,000	$	145,000		$	145,000
Less current portion		—		—		—			—
Long-term debt	$	145,000	$	120,000	$	145,000		$	145,000
Deferred debt costs and royalty liability, net of amortization		3,088		1,855
Royalty liability					$	17,127		$	15,473
Deferred debt costs, net of amortization						(7,026	)		(7,449	)
	$	148,088	$	121,855	$	155,101		$	153,024

The Company’s debt at June 30, ~~2019~~2020 and March 31, 2020, comprises the Secured Notes. On October 14, 2016, the Company completed the private placement of up to $120 million aggregate principal amount of the Secured Notes and entered into an indenture governing the Secured Notes with the guarantors party thereto and U.S. Bank National Association, a national banking association, as trustee and collateral agent. The Company issued $84 million aggregate principal amount of the Secured Notes on October 14, 2016 and an additional $36 million aggregate principal amount of the Secured Notes on June 29, 2018. On December 18, 2018, the Company also completed certain amendments to the indenture governing the Secured Notes. The amendments included an increase to the aggregate principal amount of Secured Notes that can be issued under the indenture from $120 million to up to $145 million following the European CE Marking of the Company’s initial MosaiQ IH Microarray. On April 30, 2019, the Company was notified that it had received the European CE Marking of the initial MosaiQ IH Microarray and, on May 15, 2019, the Company issued the additional $25 million of Secured Notes.

The obligations of the Company under the indenture and the Secured Notes are unconditionally guaranteed on a secured basis by the guarantors, which include all the Company’s subsidiaries, and the indenture governing the Secured Notes contains customary events of default. The Company and its subsidiaries must also comply with certain customary affirmative and negative covenants, including a requirement to maintain six-months of interest in a cash reserve account maintained with the collateral agent. Upon the occurrence of a Change of Control, subject to certain conditions, or certain Asset Sales (each, as defined in the indenture), holders of the Secured Notes may require the Company to repurchase for cash all or part of their Secured Notes at a repurchase price equal to 101% or 100%, respectively, of the principal amount of the Secured Notes to be repurchased, plus accrued and unpaid interest to the date of repurchase.

The Company paid $8.7 million of the total proceeds of the three issuances into the cash reserve account maintained with the collateral agent under the terms of the indenture, $1.5 million of which related to the third issuance on May 15, 2019.

Interest on the Secured Notes accrues at a rate of 12% per annum and is payable semi-annually on April 15 and October 15 of each year commencing on April 15, 2017. Commencing on April 15, 2021, the Company will also be required to pay an installment of principal of the Secured Notes on each April 15 and October 15 until April 15, 2024 pursuant to a fixed amortization schedule.

In connection with the three issuances of the Secured Notes as well as the December 2018 amendment of the related indenture, the Company has entered into royalty rights agreements, pursuant to which the Company has agreed to pay 3.4% of the aggregate net sales of MosaiQ instruments and consumables made in the donor testing market in the United States and the European Union. The royalties will be payable beginning on the date that the Company or its affiliates makes its first sale of MosaiQ consumables in the donor testing market in the European Union or the United States and will end on the last day of the calendar quarter in which the eighth anniversary of the first sale date occurs. The royalty rights agreements are treated as sales of future revenues that meet the requirements of Accounting Standards Codification Topic 470 “Debt” to be treated as debt. The ~~estimated~~ future cash outflows under the royalty rights agreements, estimated at $87.0 million at each of June 30, 2020 andMarch 31, 2020, have been combined with the Secured Notes issuance costs and interest payable to calculate the effective interest rate of the Secured Notes and will be expensed through interest expenses using the effective interest rate method over the term of the Secured Notes and such royalty rights agreements. Estimating the future cash outflows under the royalty rights agreements requires the Company to make certain estimates and assumptions about future sales of MosaiQ products. These estimates of the magnitude and timing of MosaiQ sales are subject to significant variability due to the current status of development of MosaiQproducts, and thus are subject to significant uncertainty. Therefore, the estimates are likely to change as the Company gains experience of marketing MosaiQ, which may result in future adjustments to the accretion of the interest expense and amortized cost based carrying value of the Secured Notes.

Within 1 year	$	—	$	12,083
Between 1 and 2 years		12,083		30,208
Between 2 and 3 years		30,208		48,334
Between 3 and 4 years		48,334		54,375
Between 4 and 5 years		54,375		—
Total debt	$	145,000	$	145,000

	June 30, 2019		March 31, 2019		June 30, 2020		March 31, 2020
Raw materials	$	8,944	$	8,216	$	10,256	$	9,737
Work in progress	$	5,859		4,959		8,215		8,522
Finished goods	$	1,909		2,376		2,820		2,242
Total inventories	$	16,712	$	15,551	$	21,291	$	20,501

Inventory at June 30, ~~2019~~2020 included ~~$7,320~~$8,001 of raw materials, ~~$2,788~~$4,732 of work in progress and ~~$175~~$1,205 of finished goods related to the MosaiQproject. Inventory at March 31, ~~2019,~~2020, included ~~$6,187~~$8,093 of raw materials and ~~$2,311~~$4,395 of work in progress and ~~$235~~$368 of finished goods related to the MosaiQproject.

The following table summarizes property and equipment by categories for the dates presented:

	June 30, 2019			March 31, 2019			June 30, 2020			March 31, 2020
Plant and equipment	$	53,546		$	51,327		$	58,608		$	57,726
Leasehold improvements		31,393			32,047			31,774			31,395
Total property and equipment		84,939			83,374			90,382			89,121
Less: accumulated depreciation		(39,433	)		(36,081	)		(50,954	)		(48,956	)
Total property and equipment, net	$	45,506		$	47,293		$	39,428		$	40,165

Depreciation expenses were ~~$3,013~~$1,936 and ~~$3,306~~$3,013 in the quarters ended June 30, ~~2019~~2020 and June 30, ~~2018,~~2019, respectively. During the quarter ended June 30, 2020, the Company reassessed the useful economic lives of equipment used in the production line at its facility in Eysins, Switzerland. Based on lower utilization rates than initially estimated, the remaining useful lives of the equipment was increased from 4 years to 6 years. The impact of these changes in remaining useful lives was to reduce the depreciation expenses for the quarter ended June 30, 2020 by $292.

	June 30, 2019		March 31, 2019		June 30, 2020		March 31, 2020
Salary and related benefits	$	765	$	638	$	977	$	635
Accrued vacation		552		495		887		521
Accrued payroll taxes		2,225		1,316		2,152		1,200
Accrued incentive payments		830		3,700		1,112		3,700
Accrued termination and transition payments						62		1,154
Total accrued compensation and benefits	$	4,372	$	6,149	$	5,190	$	7,210

In the year ended March 31, 2020, the Company incurred termination benefit costs of $1,323 in respect of a restructuring of its operations. The restructuring was completed during the year ended March 31, 2020. In the year ended March 31, 2020 the Company also incurred transition benefit costs of $807 in respect of the transitional arrangements with its former chief financial officer and its former group financial controller. The final payments under these arrangements were made during the quarter ended June 30, 2020.

	June 30, 2019		March 31, 2019		June 30, 2020		March 31, 2020
Accrued legal and professional fees	$	432	$	405	$	1,807	$	829
Accrued interest		3,416		6,628		3,671		8,056
Goods received not invoiced		1,276		1,337		3,212		1,724
Accrued capital expenditure		848		801		1,362		1,287
Other accrued expenses		3,469		3,287		3,265		3,594
Total accrued expenses and other current liabilities	$	9,441	$	12,458	$	13,317	$	15,490

The Company’s subsidiary in the United Kingdom (“UK”) has entered into ~~three~~3 contracts to sell $500 ~~and purchase pounds sterling at £1:$1.30~~ in each calendar month from July ~~2019~~2020 through September ~~2019, three~~2020 at £1:$1.28, 3 contracts to sell $500 ~~and purchase pounds sterling at £1:$1.3180~~ in each calendar month from October ~~2019~~2020 through December ~~2019, three~~2020 at £1:$1.2520, 3 contracts to sell $500 ~~and purchase pounds sterling at £1:$1.3245~~ in each calendar month from January ~~2020~~2021 through March ~~2020,~~2021 at £1:$1.3350, and ~~three~~3 contracts to sell $500 ~~and purchase pounds sterling at £1:$1.30~~ in each calendar month from April ~~2020~~2021 through June ~~2020~~2021 at £1:$1.2630, as hedges of its U.S. dollar denominated revenues. The fair values of these contracts in place at June 30, 2020, and similar contracts in place at March 31, 2020, amounted to liabilities of $230 and $227 respectively.

The following table summarizes the Company’s assets and liabilities that are measured at fair value on a recurring basis, by level, within the fair value hierarchy:

	June 30, 2019								June 30, 2020
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Assets:
Pension plan assets⁽¹⁾	$	—	$	10,933	$	—	$	10,933	$	—	$	13,980	$	—	$	13,980
Short-term investments⁽²⁾		84,151		—		—		84,151		87,152		—		—		87,152
Total assets measured at fair value	$	84,151	$	10,933	$	—	$	95,084	$	87,152	$	13,980	$	—	$	101,132

	June 30, 2019								June 30, 2020
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Liabilities:
Foreign currency forward contracts⁽³⁾	$	—	$	190	$	—	$	190	$	—	$	230	$	—	$	230
Total liabilities measured at fair value	$	—	$	190	$	—	$	190	$	—	$	230	$	—	$	230

	March 31, 2019								March 31, 2020
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Assets:
Pension plan assets⁽¹⁾	$	—	$	10,416	$	—	$	10,416	$	—	$	12,436	$	—	$	12,436
Short-term investments⁽²⁾		90,729		—		—		90,729		116,871		—		—		116,871
Total assets measured at fair value	$	90,729	$	10,416	$	—	$	101,145	$	116,871	$	12,436	$	—	$	129,307

	March 31, 2019								March 31, 2020
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Liabilities:
Foreign currency forward contracts⁽³⁾	$	—	$	70	$	—	$	70	$	—	$	227	$	—	$	227
Total liabilities measured at fair value	$	—	$	70	$	—	$	70	$	—	$	227	$	—	$	227

The total unrealized gains on the short-term investments were $317 and $340 in the quarters ended June 30, 2020 and June 30, 2019, respectively. The amount of these unrealized gains reclassified to earnings were $721 and $193 in the quarters ended June 30, 2020 and June 30, 2019, respectively.

The Company’s subsidiaries, Quotient Suisse and QBD (QS-IP) Limited were party to a distribution and supply agreement with Ortho related to the commercialization and distribution of certain MosaiQ products (the “Ortho Agreement”). See Note 2, “Summary of Significant Accounting Policies—Revenue Recognition,” for information regarding this agreement. The Company and an affiliate of Ortho also entered into a subscription agreement pursuant to which the affiliate subscribed for newly issued ordinary shares of the Company and newly issued 7% cumulative redeemable preference shares, of no par value, of the Company for an aggregate subscription price of approximately $25 million.

On November 27, 2019, the Company delivered a notice to Ortho that it had terminated the Ortho Agreement, effective as of December 27, 2019. The Company did not realize any revenue under the Ortho Agreement prior to its termination.

On or about November 17, 2019 Ortho initiated an arbitration proceeding in which it seeks a declaration that the Company does not have the right to terminate the Ortho Agreement, specific performance of certain provisions of the Ortho Agreement, and damages including in respect of the difference in amounts Ortho invested in the Company’s shares and their market value. The Company is pursuing counterclaims against Ortho, including that it has the right to terminate the Ortho Agreement and damages that include the milestone payments due under the Ortho agreement (see Note 2 for details). In addition, on December 20, 2019, the Company entered into an agreement, or the Ortho Dispute Agreement, with Ortho pursuant to which it agreed, while the arbitration is pending, not to grant commercialization rights in respect of products that overlap with Ortho’s rights under the Ortho Agreement without prior written notice to Ortho.

An arbitration hearing is scheduled for September 2020 and is to be held in the United States. The Ortho Agreement provides that any arbitration award shall be final and binding on the parties and shall not be appealable to any court in any jurisdiction.

The Company believes that Ortho’s allegations are without merit and that a loss is not probable. However, because of the complexities and uncertainties inherent in arbitration proceedings and the nature of the claims, it cannot predict with certainty whether it will prevail in its defenses and counterclaims or the impact of this arbitration on its business, results of operations or financial condition. As a result, the Company does not believe that it is possible to provide a meaningful estimate of reasonably possible loss at this time. Accordingly, under ASC 450 “Contingencies”, 0 provision for an unfavorable outcome resulting from the arbitration hearing has been recorded.

	Shares Issued and Outstanding						Shares Issued and Outstanding
	June 30, 2019		March 31, 2019		Par value		June 30, 2020		March 31, 2020		Par value
Ordinary shares		66,212,893		65,900,447	$	—		80,593,440		80,398,326	$	—
Total		66,212,893		65,900,447	$	—		80,593,440		80,398,326	$	—

The Company’s issued and outstanding preference shares consist of the following:

	Shares Issued and Outstanding				Liquidation amount per share				Shares Issued and Outstanding				Liquidation amount per share
	June 30, 2019		March 31, 2019		June 30, 2019		March 31, 2019		June 30, 2020		March 31, 2020		June 30, 2020		March 31, 2020
7% Cumulative Redeemable Preference shares		666,665		666,665	$	29.46	$	29.06		666,665		666,665	$	31.03	$	30.64
Total		666,665		666,665						666,665		666,665

~~On May 31, 2019,~~The 7% Cumulative Redeemable Preference shares were issued to Ortho-Clinical Diagnostics Finco S.Á.R.L., an affiliate of Ortho on January 29, 2015 at a subscription price of $22.50 per share. These preference shares are redeemable at the ~~Company entered into an Open Market Sale Agreement (the “Sale Agreement”) with Jefferies LLC, as sales agent and/or principal (“Jefferies”), pursuant to~~request of the shareholder on the “Redemption Trigger Date” which is currently the date of the seventh anniversary of the date of issue of the preference shares, but the Company may ~~issue and sell from time to time~~further extend the redemption date in one year increments up to ~~an aggregate of $80 million~~the tenth anniversary of the ~~Company’s ordinary shares. Sales~~date of issue. Because the 7% Cumulative Redeemable Preference shares are redeemable at the option of the ~~shares, if any, pursuant to~~shareholders, they are shown as a liability in the Sale Agreement, may be made by any method that is deemed to be an “at-the-market offering” as defined in Rule 415(a)(4) promulgated under the Securities Act, including sales made directly on or through The Nasdaq Global Market, or any other existing trading market for the Company’s ordinary shares, sales made to or through a market maker other than on an exchange or otherwise, in negotiated transactions with the Company’s consent at market prices prevailing at the time of sale or prices related to such prevailing market prices, and/or any other method permitted by law. Under the terms of the Sale Agreement, the Company will pay Jefferies a commission equal to 3% of the gross proceeds of the shares sold through it under the Sale Agreement. unaudited condensed consolidated balance sheet.

The Company has no obligation to sell any of the shares under the Sale Agreement, and may at any time suspend offers under the Sale Agreement upon proper notice to Jefferies or terminate the Sale Agreement upon one trading day’s written notice. The Company intends to use the net proceeds of the offering to fund the ongoing scale up and commercialization of MosaiQ and for working capital and other general corporate purposes. At June 30, 2019, no shares had been issued or sold under the Sale Agreement.

The Company records share-based compensation expense in respect of options ~~multi-year performance based restricted share units (“MRSUs”)~~ and restricted share units (“RSUs”) issued under its share incentive plans. Share-based compensation expense amounted to ~~$1,178~~$960 and ~~$1,347~~$1,178 in the quarters ended June 30, ~~2019~~2020 and June 30, ~~2018,~~2019, respectively.

Number
of Share
Options
Outstanding

Weighted
Average
Exercise Price

Weighted
Average
Remaining Contractual Life
(Months)

Outstanding — March 31, 2019

1,936,397

$
7.77

78

Exercised

(9,889
)

7.09

—

Forfeited

(12,176
)

11.69

—

Outstanding — June 30, 2019

1,914,332

$
7.75

75

Exercisable — June 30, 2019

1,548,630

$
8.05

68

	Number of Share Options Outstanding			Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (Months)
Outstanding — March 31, 2020		1,848,052		$	7.73		70
Granted		60,438			7.69		120
Exercised		(628	)		3.95		—
Forfeited		(29,939	)		9.53		—
Outstanding — June 30, 2020		1,877,923		$	7.71		68
Exercisable — June 30, 2020		1,641,904		$	7.80		63

The closing price of the Company’s ordinary shares on ~~The NASDAQ~~the Nasdaq Global Market at June 30, ~~2019~~2020 was ~~$9.35.~~$7.40.

The following table summarizes the options granted in the quarter ended June 30, 2020 with their exercise prices, the fair value of ordinary shares as of the applicable grant date, and the intrinsic value, if any:

The fair value of each grant of share options was determined by the Company using the Black Scholes option pricing model. The total fair value of option awards in the quarter ended June 30, 2020 amounted to $294. No option awards were made in the quarter ended June 30, 2019.

Assumptions used in the option pricing models are discussed below. Each of these inputs is subjective and generally requires significant judgment to determine.

Expected volatility. The expected volatility was based on the historical share price volatility of the Company’s shares over a period equal to the expected terms of the options.

Fair value of ordinary shares. Since the Company’s initial public offering in April 2014, the fair value of ordinary shares has been based on the share price of the Company’s shares on the Nasdaq Global Market immediately prior to the grant of the options concerned.

Risk-Free Interest Rate. The risk-free interest rate is based on the UK Government 10-year bond yield curve in effect at the time of grant prior to the initial public offering and 10-year U.S. Treasury Stock for awards from April 2014 onwards.

Expected term. The expected term is determined after giving consideration to the contractual terms of the share-based awards, graded vesting schedules ranging from one to three years and expectations of future employee behavior as influenced by changes to the terms of its share-based awards.

Expected dividend. According to the terms of the awards, the exercise price of the options is adjusted to take into account any dividends paid. As a result, dividends are not required as an input to the model, as these reductions in the share price are offset by a corresponding reduction in exercise price.

A summary of the assumptions applicable to the share options issued in the quarter ended June 30, 2020 is as follows:

A summary of the RSUs ~~and MRSUs~~ in issue at June 30, ~~2019~~2020 is as follows:

Number

of RSUs or MRSUs

Outstanding

Weighted

Average

Remaining

Vesting Period

(Months)

Period in which the

target must be

achieved

Number

of RSUs

Outstanding

Weighted

Average

Remaining

Vesting Period

(Months)

Period in which the

target must be

achieved

RSUs subject to time based vesting

723,818

N/A

851,130

N/A

RSUs subject to milestone based vesting

80,000

N/A

45,000

N/A

MRSUs with vesting based on $22 share price

106,000

N/A

Apr - Dec 2019

At June 30, ~~2019, 723,818~~2020, 851,130 RSUs were subject to time-based vesting and the weighted average remaining vesting period was 15 months. In addition, ~~80,000~~45,000 RSUs were subject to vesting based on the achievement of various business milestones related mainly to the development, approval and marketing of MosaiQ. The MRSUs in issue at June 30, 2019 comprised 106,000 MRSUs which will vest between April 1, 2019 and December 31, 2019 if the Company’s ordinary share price exceeds $22 for 20 consecutive days in this period.

A reconciliation of the income tax expense at the statutory rate to the provision for income taxes is as follows:

	Quarter ended
	June 30,						Quarter ended June 30,
	2019			2018			2020			2019
Income tax expense at statutory rate	$	—		$	—		$	—		$	—
Foreign tax rate differential		(920	)		(1,062	)		(847	)		(920	)
Increase in valuation allowance against deferred tax assets		933			1,073			862			933
Provision for income tax	$	13		$	11		$	15		$	13

	June 30, 2019			March 31, 2019			June 30, 2020			March 31, 2020
Provisions and reserves	$	1,470		$	1,442		$	1,318		$	1,315
Fixed asset basis difference		79			34
Operating lease liability								3,386			3,409
Net operating loss carry forwards		18,177			17,330			20,315			19,526
Gross deferred tax assets	$	19,726		$	18,806		$	25,019		$	24,250
Fixed asset basis difference							$	(20	)	$	(90	)
Operating lease right-of-use assets							$	(3,386	)	$	(3,409	)
Gross deferred tax liabilities							$	(3,406	)	$	(3,499	)
Net deferred tax asset	$	19,726		$	18,806		$	21,613		$	20,751
Valuation allowance		(19,134	)		(18,201	)		(21,376	)		(20,514	)
Total	$	592		$	605		$	237		$	237

June 30,

2019

March 31,

2019

June 30,

2020

March 31,

2020

Net noncurrent deferred tax assets

592

605

237

Total

592

605

237

The following table summarizes the activity related to the Company’s uncertain tax positions (excluding interest and penalties and related tax attributes):

As of June 30, 2020, the Company has an unrecognized benefit of $1,216, that if recognized would be recorded as a component of tax expense. The Company’s unrecognized tax benefits include exposures related to positions taken on all jurisdictions income tax returns. The Company has interest expense carryforward from March 31, 2017 that potentially would be disqualified as interest expense in the amount of $613. Additionally, the Company has reassessed its transfer pricing policies in certain jurisdictions from 2015 to 2017, the impact of which is $603. In the normal course of business, the Company’s tax returns are subject to examination by various taxing authorities. Such examinations may result in future tax and interest assessments by these taxing authorities and the Company has accrued a liability when it believes it is more likely than not that the tax position claimed on tax returns will not be sustained by the taxing authorities on the technical merits of the position. Changes in the recognition of the liability are reflected in the period in which the change in judgment occurs.

In connection with the sale and leaseback transaction of the ~~Biocampus~~Company’s conventional reagents manufacturing facility, near Edinburgh, Scotland (the “Alan Robb Campus (“ARC”) facility”) that was completed in March 2018, the Company has agreed to transfer tax allowances related to certain other property, plant and equipment to the ~~purchaser. However, at June 30, 2019,~~purchaser of the facility. An election to effect the transfer of these allowances ~~had not~~to the purchaser has been ~~completed and thus~~made, but due to uncertainty regarding whether the election will be effective, the tax effect of the transfer of the allowances has not been ~~reflected~~recorded in the financial ~~statements.~~statements as at June 30, 2020. If the transfer of the allowances was regarded as being effective at June 30, 2020, the financial statements would reflect an additional deferred tax expense of $1,216 and an equivalent deferred tax liability. The Company will continue to monitor the position regarding the effectiveness of the election to transfer the allowances in order to determine whether the deferred tax liability should be recorded.

The Company’s Swiss subsidiary has a fully insured pension plan managed by Swiss Life. The costs of this plan were:

	Quarter ended						Quarter ended
	June 30, 2019			June 30, 2018			June 30, 2020			June 30, 2019
Employer service cost	$	456		$	396		$	571		$	456
Interest cost		31			39			30			31
Expected return on plan assets		(31	)		(33	)		(57	)		(31	)
Amortization of prior service credit		(6	)		(4	)		13			(6	)
Amortization of net loss		54			39			—			54
Net pension cost	$	504		$	437		$	557		$	504

The employer contributions for the quarters ended June 30, ~~2019~~2020 and June 30, ~~2018~~2019 were ~~$321~~$317 and ~~$282,~~$321, respectively. The estimated employer contributions for the fiscal year ending March 31, ~~2020~~2021 are ~~$1,217.~~$1,255.

In accordance with Accounting Standards Codification Topic 260 “Earnings Per Share”, basic earnings available to ordinary shareholders per share is computed based on the weighted average number of ordinary shares outstanding during each period. Diluted earnings available to ordinary shareholders per share is computed based on the weighted average number of ordinary shares outstanding during each period, plus potential ordinary shares considered outstanding during the period, as long as the inclusion of such shares is not anti-dilutive. Potential ordinary shares consist of the incremental ordinary shares issuable upon the exercise of share options (using the treasury shares method), the warrants to acquire ordinary shares and the ordinary shares issuable upon vesting of the ~~MRSUs and~~ RSUs.

The following table sets forth the computation of basic and diluted ~~earnings~~loss per ordinary share:

	Quarter ended						Quarter ended
	June 30,						June 30,
	2019			2018			2020			2019
Numerator:
Net loss	$	(23,571	)	$	(25,177	)	$	(25,429	)	$	(23,571	)
Net loss available to ordinary shareholders - basic and diluted	$	(23,571	)	$	(25,177	)	$	(25,429	)	$	(23,571	)
Denominator:
Weighted-average shares outstanding - basic and diluted		66,078,290			45,796,533			80,485,985			66,078,290
Loss per share - basic and diluted	$	(0.36	)	$	(0.55	)	$	(0.32	)	$	(0.36	)

The following table sets out the numbers of ordinary shares excluded from the above computation of earnings per share at June 30, ~~2019~~2020 and June 30, ~~2018~~2019 as their inclusion would have been anti-dilutive:

The Company has operating lease commitments for real estate and certain equipment in the United States, the United Kingdom, the Republic of Ireland and Switzerland. There are no0 sublease agreements in place. The Company has finance lease commitments for equipment in the United Kingdom and Switzerland.

The Company leases an 87,200 square foot conventional reagents manufacturing facility, with integrated offices and laboratories, in Edinburgh, Scotland. This lease commenced in March 2018, following completion of a sale and leaseback transaction, and expires in September 2052. Rent is recognized in the consolidated statement of comprehensive loss on a straight-line basis over the lease term. Additionally, the lease required the Company to provide a rent deposit of £3.6 million which amounted to ~~$4.6~~$4.4 million at June 30, ~~2019~~2020 and ~~$4.7~~$4.5 million at March 31, ~~2019~~2020 and is included within other non-current assets in the consolidated balance sheets. In March 2015 the Company signed a five-year lease agreement for its corporate headquarters and MosaiQ manufacturing facility in Eysins, Switzerland. This lease ~~is currently in the process of being~~was extended for a further five-year ~~term and the Company believes it should be able~~ period to ~~obtain such an extension on satisfactory terms.~~March 14, 2025. The Company also leases office space for commercial and development activities under one to three-year lease agreements in Newtown PA, Chapel Hill NC and Dublin, Republic of Ireland.

The operating lease commitments relating to equipment are not material. The finance lease commitments relate to specialized equipment required for manufacturing operations in both Edinburgh, Scotland and Eysins, Switzerland.

Many of the Company’s leases contain options to renew and extend lease terms and options to terminate leases early. Reflected in the right-of-use asset and lease liability on the Company’s balance sheet are the periods provided by renewal and extension options that the Company is reasonably certain to exercise, as well as the periods provided by termination options that the Company is reasonably certain not to exercise. The Company does not have any existing lease agreements with variable lease components.

In calculating the present value of future lease payments, the Company has elected to utilize its incremental borrowing rate based on the remaining lease term at the date of adoption. Incremental borrowing rates are the rates incurred to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment. The Company has elected to account for each lease component and its associated non-lease component as a single lease component and has allocated all the contract consideration across the lease component only. There are no material non-lease components. As of June 30, ~~2019,~~2020, an operating lease right-of-use asset of ~~$17,615~~$21,124 and an operating lease liability of ~~$18,899~~$22,740 (including a current portion of ~~$2,723)~~$3,045) were reflected on the condensed consolidated balance sheet. As of March 31, 2020, an operating lease right-of-use asset of $21,493 and an operating lease liability of $22,947 (including a current portion of $3,033) were reflected on the condensed consolidated balance sheet. As of June 30, ~~2019,~~2020, the Company had entered into finance leases for the purchase of plant and equipment that had net book values of ~~$1,953.~~$1,973. An associated finance lease liability of ~~$1,210~~$1,590 (including a current portion of ~~$457)~~$573) was reflected on the condensed consolidated balance sheet. As of March 31, 2020, the Company had entered into finance leases for the purchase of plant and equipment that had net book values of $2,216. An associated finance lease liability of $1,715 (including a current portion of $598) was reflected on the condensed consolidated balance sheet.

	Quarter ended		Quarter ended June 30,
	June 30, 2019		2020		2019
Lease cost
Operating lease cost	$	902	$	1,061	$	902
Finance lease cost
Amortization of right-of-use asset		55		193		55
Interest on lease liabilities		28		37		28
Short-term lease cost		17		17		17
Total lease cost	$	1,002	$	1,308	$	1,002

	Quarter ended			Quarter ended June 30,
	June 30, 2019			2020			2019
Cash paid for amounts included in the measurement of lease liabilities
Operating leases - operating cash flows	$	731		$	909		$	731
Finance leases - operating cash flows	$	98		$	171		$	98
Finance leases - finance cash flows	$	22		$	31		$	22
Non-cash leases activity
Right-of-use assets obtained in exchange for new operating lease liabilities	$	29		$	31		$	29
Right-of-use assets obtained in exchange for new finance lease liabilities	$	28		$	62		$	28
Weighted average remaining lease terms (in years)
Operating leases	32.5			29.8			32.5
Finance leases	2.5			2.2			2.5
Weighted average discount rate
Operating leases		10.8	%		10.8	%		10.8	%
Finance leases		7.4	%		9.3	%		7.4	%

Future lease payments required under non-cancellable operating leases ~~in effect as of June 30, 2019~~ were as follows:

	June 30, 2019			June 30, 2020			March 31, 2020
2020 (excluding the three months ended June 30, 2019)	$	2,547
2021		1,817
2021 (excluding the three months ended June 30, 2020)				$	2,510		$	3,335
2022		1,813			3,344			3,319
2023		1,785			3,072			3,050
2024		1,796			3,069			3,055
2025					3,116			3,105
Thereafter		67,833			65,887			66,138
Total lease payments	$	77,591		$	80,998		$	82,002
Less : imputed interest		(58,692	)		(58,258	)		(59,055	)
Total operating lease liabilities	$	18,899		$	22,740		$	22,947

Future lease payments required under finance leases ~~in effect as of June 30, 2019~~ were as follows:

	June 30, 2019			June 30, 2019			March 31, 2020
2020 (excluding the three months ended June 30, 2019)	$	420
2021 (excluding the three months ended June 30, 2020)				$	525		$	720
2021		421			859			838
2022		336			366			349
2023		200			25			7
2024		3
Thereafter		—
Total lease payments	$	1,380		$	1,775		$	1,914
Less : imputed interest		(170	)		(185	)		(199	)
Total finance lease liabilities	$	1,210		$	1,590		$	1,715

The Company adopted ASU 2016-02 on April 1, 2019 and, as required, the following disclosure is provided for periods prior to adoption. Future minimum lease payments required under non-cancellable operating leases in effect as of March 31, 2019 were as follows:

~~Future annual lease payments required under finance leases in effect as of March 31, 2019 were as follows:~~

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

You should read the following discussion and analysis of our financial condition and results of operations in conjunction with the corresponding section of our Annual Report on Form 10-K for the year ended March 31, ~~2019~~2020 filed with the SEC on ~~May 29, 2019.~~June 12, 2020.

The information set forth and discussed below for the quarters ended June 30, ~~2019~~2020 and June 30, ~~2018~~2019 is derived from the condensed consolidated financial statements included under Item 1 above. The financial information set forth and discussed below is unaudited but includes all adjustments (consisting of normal recurring adjustments) that our management considers necessary for a fair presentation of the financial position and the operating results and cash flows for those periods. Our results of operations for a particular quarter may not be indicative of the results that may be expected for other quarters or the entire year.

In addition to historical financial information, the following discussion contains forward looking statements that reflect our plans, estimates, beliefs and expectations that involve risks and uncertainties. Our actual results and the timing of events could differ materially from those discussed in these forward-looking statements. Factors that could cause or contribute to these differences include those discussed below and elsewhere in this Quarterly Report, and our Annual Report on Form 10-K for the year ended March 31, ~~2019,~~2020, particularly in “Risk Factors.”

We were incorporated in Jersey, Channel Islands on January 18, 2012. On February 16, 2012, we acquired the entire issued share capital of Alba Bioscience Limited (or Alba), Quotient Biodiagnostics, Inc. (or QBDI) and QBD (QSIP) Limited (or QSIP) from Quotient Biodiagnostics Group Limited (or QBDG), our predecessor.

We are a commercial-stage diagnostics company committed to reducing healthcare costs and improving patient care through the provision of innovative tests within established markets. Our initial focus is on blood grouping and donor disease screening, which is commonly referred to as transfusion diagnostics. Blood grouping involves specific procedures performed at donor or patient testing laboratories to characterize blood, which includes antigen typing and antibody detection. Disease screening involves the screening of donor blood for unwanted pathogens using two different methods, a serological approach (testing for specific antigens or antibodies) and a molecular approach (testing for DNA or RNA).

We have over 3035 years of experience developing, manufacturing and commercializing conventional reagent products used for blood grouping within the global transfusion diagnostics market. We are developing MosaiQ, our proprietary technology platform, to better address the comprehensive needs of this large and established market. We believe MosaiQ has the potential to transform transfusion diagnostics, significantly reducing the cost of blood grouping in the donor and patient testing environments, while improving patient outcomes.

In addition, in response to the COVID-19 global pandemic, in May 2020, we completed development of a microarray-based SARS-CoV-2 antibody test for use on the MosaiQ platform. The SARS-CoV-2 antibody test is designed as a serological disease screen specific to COVID-19 antibody detection. The assay detects the Immunoglobulin G (IgG) and Immunoglobulin M (IgM) antibodies directed at SARS-CoV-2. We refer to the SARS-CoV-2 antibody test as the MosaiQ COVID-19 Microarray.

We currently operate as one business segment with ~~417~~420 employees in the United Kingdom, Switzerland and the United States, as of June 30, ~~2019.~~2020. Our principal markets are the United States, Europe and Japan. Based on the location of the customer, revenues outside the United States accounted for ~~47%~~44% of total revenue during the quarter ended June 30, ~~2019~~2020 and ~~52%~~47% during the quarter ended June 30, ~~2018.~~2019.

We have incurred net losses and negative cash flows from operations in each year since we commenced operations in 2007. As of June 30, ~~2019,~~2020, we had an accumulated deficit of ~~$404.2~~$508.9 million. We expect our operating losses to continue for at least the remainder of the current year as we continue our investment in the commercialization of MosaiQ. For the quarter ended June 30, ~~2019,~~2020, our total revenue was ~~$8.2~~$8.9 million and our net loss was ~~$23.6~~$25.4 million.

From our incorporation in 2012 to March 31, ~~2019,~~2020, we have raised $160.0 million of gross proceeds through the private placement of our ordinary and preference shares and warrants, ~~$250.1~~$346.7 million of gross proceeds from public offerings of our shares and issuances of ordinary shares upon exercise of warrants and ~~$120.0~~$145.0 million of gross proceeds from the issuance of 12% Senior Secured Notes, or the “Secured Notes”.

~~On May 15, 2019, we~~ issued an additional $25.0 million aggregate principal amount of the Secured Notes. As referenced above, we previously issued $120.0 million aggregate principal amount of Secured Notes. On May 15, 2019, we paid $1.5 million of the net proceeds of the issuance into the cash reserve account maintained with the collateral agent under the terms of the indenture governing the Secured Notes, which together with the $7.2 million paid into the cash reserve account in respect of previous issuances, brought the total in the cash reserve account to $8.7 million at June 30, 2019.

On May 31, 2019, we entered into an Open Market Sale Agreement, or the “Sale Agreement” with Jefferies LLC, as sales agent and/or principal, or “Jefferies”, pursuant to which we may issue and sell from time to time up to an aggregate of $80 million of our ordinary shares. Sales of the shares, if any, pursuant to the Sale Agreement, may be made by any method that is deemed to be an “at-the-market offering” as defined in Rule 415(a)(4) promulgated under the Securities Act, including sales made directly on or through The Nasdaq Global Market, or any other existing trading market for our ordinary shares, sales made to or through a market maker other than on an exchange or otherwise, in negotiated transactions with our consent at market prices prevailing at the time of sale or prices related to such prevailing market prices, and/or any other method permitted by law. Under the terms of the Sale Agreement, we will pay Jefferies a commission equal to 3% of the gross proceeds of the shares sold through it under the Sale Agreement.

We have no obligation to sell any of the shares under the Sale Agreement, and may at any time suspend offers under the Sale Agreement upon proper notice to Jefferies or terminate the Sale Agreement upon one trading day’s written notice. We intend to use the net proceeds of the offering to fund the ongoing scale up and commercialization of MosaiQ and for working capital and other general corporate purposes. At June 30, 2019, no shares had been issued or sold under the Sale Agreement.

As of June 30, ~~2019,~~2020, we had available cash, cash equivalents and short-term investments of ~~$90.7~~$94.5 million and $9.0 million of restricted cash held as part of the arrangements relating to our Secured Notes and the lease of our property in Eysins, Switzerland.

You should read the following regulatory and commercial milestones update in conjunction with the discussion included under the sections “Item 1. Business” and “Item 1A. Risk Factors” of our Annual Report on Form 10-K for the year ended March 31, ~~2019~~2020 filed with the SEC on ~~May 29, 2019.~~June 12, 2020.

~~Initial European Regulatory Approval– we filed for European regulatory approval for our initial MosaiQ Immunohematology, or “IH”, microarray~~

You should read the following COVID-19 pandemic update in ~~late September 2018 and were notified of its approval on April 30, 2019.~~

The extent to which the COVID-19 pandemic will impact our business, operations and financial results will depend on future developments and numerous evolving factors, which are highly uncertain and difficult to predict.

We generate product sales revenue from the sale of conventional reagent products directly to hospitals, donor collection agencies and independent testing laboratories in the United States, the United Kingdom and to distributors in Europe and the rest of the world, and indirectly through sales to our original equipment manufacturer (or OEM) customers. We recognize revenues in the form of product sales when the goods are shipped. Products sold by standing purchase orders as a percentage of product sales revenue were ~~68%~~69% and ~~65%~~68% for the quarters ended June 30, ~~2019~~2020 and June 30, ~~2018,~~2019, respectively. We also provide product development services to our OEM customers. We recognize revenue from these contractual relationships in the form of product development fees, which are included in other revenues. In addition, during the quarter ended June 30, 2020, we began to generate sales revenue from the MosaiQ COVID-19 Microarray in Europe. For a description of our revenue recognition policies, see “—Critical Accounting Policies and Significant Judgments and Estimates—Revenue Recognition and Accounts Receivable.”

Our revenue is denominated in multiple currencies. Sales in the United States and to certain of our OEM customers are denominated in U.S. Dollars. Sales in Europe and the rest of the world are denominated primarily in U.S. Dollars, Pounds Sterling or Euros. Our expenses are generally denominated in the currencies in which our operations are located, which are primarily in the United Kingdom, Switzerland and the United States. We operate globally and therefore changes in foreign currency exchange rates may become material to us in the future due to factors beyond our control. See “—Quantitative and Qualitative Disclosure About Market Risk—Foreign Currency Exchange Risk.”

Cost of revenue consists of direct labor expenses, including employee benefits, overhead expenses, material costs and freight costs, along with the depreciation of manufacturing equipment and leasehold improvements. Our gross profit represents total revenue less

the cost of revenue, gross margin represents gross profit expressed as a percentage of total revenue, and gross margin on product sales represents gross margin excluding other revenues as a percentage of revenues excluding other revenues. We expect our overall cost of revenue to increase in absolute U.S. Dollars as we continue to increase our product sales volumes. However, we also believe that we can achieve efficiencies in our manufacturing operations, primarily through increasing production volumes.

Our sales and marketing expenses include costs associated with our sales organization for conventional reagent products, including our direct sales force, as well as our marketing and customer service personnel and the costs of the MosaiQ commercial team. These expenses consist principally of salaries, commissions, bonuses and employee benefits, as well as travel and other costs related to our sales and product marketing activities. We expense all sales and marketing costs as incurred. We expect sales and marketing expense to increase in absolute U.S. Dollars, primarily as a result of commissions on increased product sales in the United States and as we grow the MosaiQ commercial team.

Our research and development expenses include costs associated with performing research, development, field trials and our regulatory activities, as well as production costs incurred in advance of the commercial launch of MosaiQ. Research and development expenses include research personnel-related expenses, fees for contractual and consulting services, travel costs, laboratory supplies and depreciation of laboratory equipment.

We expense all research and development costs as incurred, net of government grants received and tax credits. Our UK subsidiary claims certain tax credits on its research and development expenditures and these are included as an offset to our research and development expenses. Our research and development efforts are focused on developing new products and technologies for the global transfusion diagnostics market. We segregate research and development expenses for the MosaiQ project from expenses for other research and development projects. We do not maintain detailed records of these other costs by activity. We are nearing completion of the initial development of MosaiQ and expect our costs associated with field trials and regulatory approvals will increase at the same time as our development costs decrease. As we move to commercialization of MosaiQ in the donor testing market, we expect our overall research and development expense to decrease.

Our general and administrative expenses include costs for our executive, accounting and finance, legal, corporate development, information technology and human resources functions. We expense all general and administrative expenses as incurred. These expenses consist principally of salaries, bonuses and employee benefits for the personnel performing these functions, including travel costs. These expenses also include share-based compensation, professional service fees (such as audit, tax and legal fees), costs related to our Board of Directors, and general corporate overhead costs, which include depreciation and amortization. We expect our general and administrative expenses to increase as our business develops and also due to the costs of operating as a public company, such as additional legal, accounting and corporate governance expenses, including expenses related to compliance with the Sarbanes-Oxley Act, directors’ and officers’ insurance premiums and investor relations expenses.

Net interest expense consists primarily of interest charges on our Secured Notes and the amortization of debt issuance costs (which includes amortization of the one-time consent payment of $3.9 million paid to holders of our Secured Notes in December 2018), as well as accrued dividends on the 7% cumulative redeemable preference shares issued in January 2015. We amortize debt issuance costs over the life of the ~~Secured Notes~~instrument and report them as interest expense in our statements of operations. Net interest also includes the expected costs of the royalty rights agreements we entered into in October 2016, June 2018, December 2018 and May 2019 with the purchasers and consenting holders, as applicable, of our Secured Notes. See Note 4 “Debt” and Note 7 “Ordinary and Preference Shares – Preference shares” to our condensed consolidated financial statements included in this Quarterly Report for additional information.

Other income (expense), net consists primarily of exchange fluctuations. These include realized exchange fluctuations resulting from the settlement of transactions in currencies other than the functional currencies of our businesses. Monetary assets and liabilities that are denominated in foreign currencies are measured at the period-end closing rate with resulting unrealized exchange fluctuations. The functional currencies of our ~~businesses~~legal entities are Pounds Sterling, Swiss Francs and U.S. Dollars depending on the entity.

Provision for income taxes in the quarter ended June 30, ~~2019 reflects~~2020 reflected the taxes payable on the taxable income of a ~~reduction in the net operating losses available to be carried forward in a subsidiary as a result of the offset of historic tax losses against the profits of this~~ subsidiary.

The following table sets forth, for the periods indicated, the amounts of certain components of our statements of operations and the percentage of total revenue represented by these items, showing period-to-period changes.

	Quarter ended June 30,																		Quarter ended June 30,
	2019						2018						Change						2020						2019						Change
	Amount			% of revenue			Amount			% of revenue			Amount			%			Amount			% of revenue			Amount			% of revenue			Amount			%
	(in thousands, except percentages)																		(in thousands, except percentages)
Revenue:
Product sales	$	8,169			100	%	$	7,864			100	%	$	305			4	%	$	8,924			100	%	$	8,169			100	%	$	755			9	%
Other revenues		—			0	%		19			0	%		(19	)		—			—			0	%		—			0	%		—			—
Total revenue		8,169			100	%		7,883			100	%		286			4	%		8,924			100	%		8,169			100	%		755			9	%
Cost of revenue		4,563			56	%		4,065			52	%		498			12	%		5,414			61	%		4,563			56	%		851			19	%
Gross profit		3,606			44	%		3,818			48	%		(212	)		-6	%		3,510			39	%		3,606			44	%		(96	)		-3	%
Operating expenses:
Sales and marketing		2,580			32	%		2,281			29	%		299			13	%		2,243			25	%		2,580			32	%		(337	)		-13	%
Research and development		11,653			143	%		12,570			159	%		(917	)		-7	%		11,450			128	%		11,653			143	%		(203	)		-2	%
General and administrative		7,797			95	%		7,505			95	%		292			4	%		9,538			107	%		7,797			95	%		1,741			22	%
Total operating expenses		22,030			270	%		22,356			284	%		(326	)		-1	%		23,231			260	%		22,030			270	%		1,201			5	%
Operating loss		(18,424	)		-226	%		(18,538	)		-235	%		114			-1	%		(19,721	)		-221	%		(18,424	)		-226	%		(1,297	)		7	%
Other income (expense):
Interest expense, net		(6,086	)		-74	%		(3,116	)		-40	%		(2,970	)		95	%		(5,926	)		-66	%		(6,086	)		-75	%		160			-3	%
Other, net		952			12	%		(3,512	)		-45	%		4,464			-127	%		233			3	%		952			12	%		(719	)		-76	%
Total other expense, net		(5,134	)		-63	%		(6,628	)		-84	%		1,494			-23	%		(5,693	)		-64	%		(5,134	)		-63	%		(559	)		11	%
Loss before income taxes		(23,558	)		-288	%		(25,166	)		-319	%		1,608			-6	%		(25,414	)		-285	%		(23,558	)		-288	%		(1,856	)		8	%
Provision for income taxes		(13	)		—			(11	)		—			(2	)		—			(15	)		—			(13	)		—			(2	)		—
Net loss	$	(23,571	)		-289	%	$	(25,177	)		-319	%	$	1,606			-6	%	$	(25,429	)		-285	%	$	(23,571	)		-289	%	$	(1,858	)		8	%

Total revenue and product sales for the quarter ended June 30, ~~2019~~2020 increased by 4%9% to ~~$8.2~~$8.9 million, compared with ~~$7.9~~$8.2 million for the quarter ended June 30, ~~2018.~~2019. The increase in total revenue and product sales was primarily attributable to growth in product sales to OEM customers and incremental direct sales of conventional reagent products to customers in the United States. Products sold by standing purchase order were ~~68%~~69% of product sales for the quarter ended June 30, ~~2019,~~2020, compared with ~~65%~~68% for the quarter ended June 30, ~~2018.~~2019.

	Quarter ended June 30,																Quarter ended June 30,
	2019					2018					Change						2020					2019					Change
	Amount		% of revenue			Amount		% of revenue			Amount			%			Amount		% of revenue			Amount		% of revenue			Amount		%
	(in thousands, except percentages)																(in thousands, except percentages)
Revenue:
Product sales - OEM customers	$	5,737		70	%	$	5,647		72	%	$	90			2	%	$	6,184		69	%	$	5,737		70	%	$	447		8	%
Product sales - direct customers and distributors	$	2,432		30	%		2,217		28	%		215			10	%	$	2,629		29	%		2,432		30	%		197		8	%
Other revenues		—		0	%		19		0	%		(19	)		—
Product sales - MosaiQ																		111		1	%		—		0	%		111		100	%
Total revenue	$	8,169		100	%	$	7,883		100	%	$	286			4	%	$	8,924		100	%	$	8,169		100	%	$	755		9	%

OEM Sales. Product sales to OEM customers increased 2%8% to $6.2 million for the quarter ended June 30, 2020, compared with $5.7 million for the quarter ended June 30, ~~2019, compared with $5.6 million for the quarter ended June 30, 2018.~~2019. The increase was due to increased sales to existing customers and the impact of ~~recently launched new products.~~pricing increases.

Direct Sales to Customers and Distributors. Product sales directly to customers and distributors of $2.6 million for the quarter ended June 30, 2020 increased by $0.2 million compared with $2.4 million for the quarter ended June 30, ~~2019 increased by $0.2 million compared with $2.2 million for the quarter ended June 30, 2018.~~2019. This increase was due to increased direct sales in the United States which increased to $2.4 million in the quarter ended June 30, 2020 from $2.2 million in the quarter ended June 30, 2019 ~~from $1.8 million~~as a result of growth in sales to existing customers and expansion of our customer base.

MosaiQ Sales. MosaiQ sales in the quarter ended June 30, ~~2018 as a result~~2020 consisted of ~~recent product launches and~~ the ~~expansion of~~initial revenues from our ~~customer base.~~

~~Other Revenues.~~MosaiQ COVID-19 Microarray. There were no ~~other revenues~~MosaiQ sales in the quarter ended June 30, 2019. Other revenues in the quarter ended June 30, 2018 consisted of sales of ancillary products related to the MosaiQ instruments that we sold to a development partner in the year ended March 31, 2018 and sales of licenses to use our reagent products.

Cost of revenue increased by ~~12%~~19% to $5.4 million for the quarter ended June 30, 2020, compared with $4.6 million for the quarter ended June 30, ~~2019, compared with $4.1 million for the quarter ended June 30, 2018.~~2019. The increase in cost of revenue ~~partially~~ reflected additional costs associated with operating social distancing restrictions and the incremental costs associated with greater sales volumes. In addition, in the quarter ended June 30, 2019, we incurred additional depreciation and other non-cash costs related to our conventional reagents manufacturing facility of approximately $0.4 million compared to the equivalent costs in the quarter ended June 30, 2018.

Gross profit on total revenue for the quarter ended June 30, ~~2019~~2020 was ~~$3.6~~$3.5 million, a decrease of 3% when compared with ~~$3.8~~$3.6 million for the quarter ended June 30, ~~2018.~~2019. The decrease was attributable to the decrease in gross margin on product sales described below.

Gross profit on product sales, which excludes other revenues, was $3.5 million for the quarter ended June 30, 2020, a decrease of 3% when compared with $3.6 million for the quarter ended June 30, ~~2019 compared with $3.8 million for the quarter ended June 30, 2018.~~2019. This decrease was due to ~~additional depreciation and other non-cash~~the incremental costs ~~related to our conventional reagents manufacturing facility~~ of ~~approximately $0.4 million compared to the equivalent costs~~operating under social distancing restrictions, which was offset in ~~the quarter ended June 30, 2018 offset~~part by the gross profit on increased sales to existing ~~customers~~ and ~~the impact of recently launched~~ new ~~products.~~ customers. Gross margin on product sales, which excludes other revenues, was 39% for the quarter ended June 30, 2020 compared with 44% for the quarter ended June 30, 2019 ~~compared with 48% for the quarter ended June 30, 2018~~.

Sales and marketing expenses were $2.2 million for the quarter ended June 30, 2020, compared with $2.6 million for the quarter ended June 30, ~~2019, compared with $2.3 million for~~2019. This decrease was the ~~quarter ended June 30, 2018. This increase was attributable to greater personnel~~result of travel restrictions and ~~other expenses related~~the cancellation of sales conferences due to the ~~planned commercial launch of MosaiQ.~~COVID-19 pandemic. As a percentage of total revenue, sales and marketing expenses were 25% for the quarter ended June 30, 2020 compared to 32% for the quarter ended June 30, ~~2019 compared to 29% for the quarter ended June 30, 2018.~~2019.

	Quarter ended June 30,																		Quarter ended June 30,
	2019						2018						Change						2020						2019						Change
	Amount			% of revenue			Amount			% of revenue			Amount			%			Amount			% of revenue			Amount			% of revenue			Amount			%
	(in thousands, except percentages)																		(in thousands, except percentages)
Research and development expenses:
MosaiQ research and development	$	11,060			135	%	$	12,264			156	%	$	(1,204	)		-10	%	$	11,103			124	%	$	11,060			135	%	$	43			0	%
Other research and development		677			8	%		366			5	%		311			85	%		467			5	%		677			8	%		(210	)		-31	%
Tax credits		(84	)		-1	%		(60	)		-1	%		(24	)		41	%		(120	)		-1	%		(84	)		-1	%		(36	)		43	%
Total research and development expenses	$	11,653			143	%	$	12,570			159	%	$	(917	)		-7	%	$	11,450			128	%	$	11,653			143	%	$	(203	)		-2	%

Research and development expenses decreased by 7%2% to $11.5 million for the quarter ended June 30, 2020, compared with $11.7 million for the quarter ended June 30, ~~2019, compared~~2019. The decreased costs reflected lower depreciation charges as a result of certain leasehold improvements becoming fully depreciated in the quarter ended June 30, 2020, as well as the impact of extending the useful economic lives of certain operating equipment. This decrease was offset in part by the development costs for the MosaiQ COVID-19 Microarray and higher expenditures with ~~$12.6~~development partners in the quarter ended June 30, 2020.

General and administrative expenses increased by 22% to $9.5 million for the quarter ended June 30, ~~2018. The decrease in costs reflected reduced overall expenditure as the initial development of MosaiQ nears completion.~~

~~General and administrative expenses increased by 4% to~~2020, compared with $7.8 million for the quarter ended June 30, 2019, ~~compared~~reflecting additional legal expenses related to our dispute with ~~$7.5 million for the quarter ended June 30, 2018, reflecting greater personnel-related costs as we move towards commercialization of MosaiQ~~Ortho and higher advisory fees. We recognized ~~$1.2~~$1.0 million of stock compensation expense in the quarter ended June 30, ~~2019~~2020 compared with ~~$1.3~~$1.2 million in the quarter ended June 30, ~~2018.~~2019. As a percentage of total revenue, general and administrative expenses were ~~95%~~107% for ~~both~~ the quarter ended June 30, ~~2019 and~~2020 compared to 95% for the quarter ended June 30, ~~2018.~~2019.

Net interest expense was $5.9 million for the quarter ended June 30, 2020, compared with $6.1 million for the quarter ended June 30, ~~2019, compared with $3.1 million for the quarter ended June 30, 2018.~~2019. Interest expense in the quarter ended June 30, ~~2019~~2020 included ~~$4.0~~$4.3 million of interest charges on our Secured Notes compared with ~~$2.5~~$4.0 million in the quarter ended June 30, ~~2018.~~2019. The increase was due to the additional ~~issuances~~issuance of ~~$36 million of Secured Notes on June 29, 2018 and~~ $25 million of Secured Notes on May 15, 2019. Interest expense in the quarters ended June 30, ~~2019~~2020 and June 30, ~~2018~~2019 included amortization of deferred debt issue costs of $2.1 million and ~~$0.3~~$2.1 million, respectively, which included, in the 2019 period, the amortization of the expected costs of the royalty rights agreements entered into in October 2016, June 2018, December 2018 and May 2019 in connection with the issuances of the Secured Notes and the amendment of the indenture relating to the Secured Notes and, in the 2018 period, amortization of the expected costs of the royalty rights agreements entered into in October 2016 and June 2018. The additional royalty rights agreements entered into in December 2018 and May 2019 increased in aggregate the amount of royalties payable pursuant to royalty rights agreements from 2% to 3.4% of net sales of MosaiQ instruments and consumables made in the donor testing market in the United States and the European Union.respectively. Net interest expense also included $0.3 million of dividends accrued on the 7% cumulative redeemable preference shares in each of the quarters ended June 30, ~~2019~~2020 and June 30, ~~2018.~~2019. In addition, in the quarter ended June 30, ~~2019~~2020 we realized interest income of ~~$0.3~~$0.7 million on our short-term money market ~~investments.~~investments compared to $0.3 million for the quarter ended June 30, 2019.

Other, net in the quarter ended June 30, ~~2019 was~~2020 comprised ~~of $1.0~~$0.2 million of foreign exchange gains arising on monetary assets and liabilities denominated in foreign currencies compared to ~~$3.5~~$1.0 million of foreign exchange ~~losses~~gains for the quarter ended June 30, ~~2018.~~2019.

Our quarterly product sales can fluctuate depending upon the shipment cycles for our red blood cell based products, which account for approximately two-thirds of our current product sales. For these products, we typically experience 13 shipping cycles per year. This equates to three shipments of each product per quarter, except for one quarter per year when four shipments occur. In fiscal ~~2019,~~2020, the greatest impact of extra product shipments occurred in our first quarter and the greatest impact thus far in fiscal ~~2020~~2021 has also occurred in the first quarter. The timing of shipment of bulk antisera products to our OEM customers may also impact revenues from quarter to quarter. We also experience some seasonality in demand around holiday periods in both Europe and the United States. As a result of these factors, we expect to continue to see seasonality and quarter-to-quarter variations in our product sales. The timing of product development fees included in other revenues is mostly dependent upon the achievement of pre-negotiated project or revenue milestones.

Since our commencement of operations in 2007, we have incurred net losses and negative cash flows from operations. As of June 30, ~~2019,~~2020, we had an accumulated deficit of ~~$404.2~~$508.9 million. During the quarter ended June 30, ~~2019,~~2020, we incurred a net loss of ~~$23.6~~$25.4 million and used ~~$25.1~~$24.8 million of cash in operating activities. As described under results of operations, our use of cash during the quarter ended June 30, ~~2019~~2020 was primarily attributable to our investment in the development of MosaiQ and corporate costs, including costs related to being a public company.

On May 31, 2019, we entered into a Sale Agreement with Jefferies, pursuant to which we may issue and sell from time to time up to an aggregate of $80 million of our ordinary shares. Sales of the shares, if any, pursuant to the Sale Agreement, may be made by any method that is deemed to be an “at-the-market offering” as defined in Rule 415(a)(4) promulgated under the Securities Act, including sales made directly on or through The Nasdaq Global Market, or any other existing trading market for our ordinary shares, sales made to or through a market maker other than on an exchange or otherwise, in negotiated transactions with our consent at market prices prevailing at the time of sale or prices related to such prevailing market prices, and/or any other method permitted by law. Under the terms of the Sale Agreement, we will pay Jefferies a commission equal to 3% of the gross proceeds of the shares sold through it under the Sale Agreement.

~~We have no obligation to sell any of the shares under the Sale Agreement, and may at any time suspend offers under the Sale~~

Agreement upon proper notice to Jefferies or terminate the Sale Agreement upon one trading day’s written notice. We intend to use the net proceeds of the offering to fund the ongoing scale up and commercialization of MosaiQ and for working capital and other general corporate purposes. At June 30, 2019, no shares had been issued or sold under the Sale Agreement.

Net cash used in operating activities was $24.8 million during the quarter ended June 30, 2020, which included net losses of $25.4 million offset by non-cash items of $5.7 million. Non-cash items were depreciation and amortization expense of $2.0 million, share-based compensation expense of $1.0 million, Swiss pension costs of $0.3 million, amortization of deferred debt issue costs of $2.1 million, accrued preference share dividends of $0.3 million and deferred lease rentals of $0.2 million. We also experienced a net cash outflow of $5.1 million from changes in operating assets and liabilities during the period, consisting of a $1.5 million reduction in accounts payable and accrued liabilities, a $2.0 million reduction in accrued compensation and benefits, a $0.6 million increase in accounts receivable, a $0.6 million increase in inventories and a $0.3 million increase in other assets.

Net cash used in operating activities was $25.1 million during the quarter ended June 30, 2019, which included net losses of $23.6 million offset by non-cash items of $6.7 million. Non-cash items were depreciation and amortization expense of $3.0 million, share-based compensation expense of $1.2 million, Swiss pension costs of $0.2 million, amortization of deferred debt issue costs of $2.1 million, and accrued preference share dividends of $0.3 million, offset by amortization of lease incentives of $0.1 million. We also experienced a net cash outflow of $8.2 million from changes in operating assets and liabilities during the period, consisting of a $3.7 million reduction in accounts payable and accrued liabilities, a $1.7 million reduction in accrued compensation and benefits, a $1.4 million increase in accounts receivable, a $1.2 million increase in inventories and a $0.1 million increase in other assets.

Net cash used in operating activities was $21.1 million during the quarter ended June 30, 2018, which included net losses of $25.2 million offset by non-cash items of $5.3 million. Non-cash items were depreciation and amortization expense of $3.3 million, share-based compensation expense of $1.3 million, Swiss pension costs of $0.2 million, amortization of deferred debt issue costs of $0.3 million and accrued preference share dividends of $0.3 million, offset by amortization of lease rental benefit of $0.1 million. We also experienced a net cash outflow of $1.2 million from changes in operating assets and liabilities during the period, consisting of a $5.4 million reduction in accounts payable and accrued liabilities and a $0.2 million increase in accounts receivable and inventories, offset by a $1.1 million increase in accrued compensation and benefits and a $3.3 million decrease in other assets.

Net cash generated from investing activities was $28.5 million for the quarter ended June 30, 2020 compared to $5.6 million for the quarter ended June 30, ~~2019 compared to $1.4 million of net cash used in investing activities for the quarter ended June 30, 2018.~~2019. We spent ~~$1.1~~$0.8 million on purchases of property and equipment in the quarter ended June 30, 2020. Purchases of property and equipment in the quarter ended June 30, 2019 were $1.1 million, which was mainly related to payments for an additional assembly unit for our MosaiQ manufacturing facility. Purchases of property and equipment in the quarter ended June 30, 2018 were $1.4 million, which was mainly related to the payment of final costs related to the construction of our new conventional reagents manufacturing facility. We also realized ~~$6.7~~$29.3 million ~~net~~ from our short-term money market investments in the quarter ended June 30, 2020, compared to $6.7 million net for the quarter ended June 30, 2019.

Net cash used in financing activities was $0.1 million during the quarter ended June 30, 2020, consisting of $0.1 million generated from the exercise of share options, offset by $0.2 million of repayments on finance leases. Net cash provided by financing activities was $24.1 million during the quarter ended June 30, 2019, consisting of $24.1 million of net proceeds from the issuance of additional Secured Notes on May 15, 2019 and $0.1 million from the exercise of share options, offset by $0.1 million of repayments on finance leases. Net cash provided by financing activities was $36.9 million during the quarter ended June 30, 2018, consisting of $34.8 million of net proceeds from the issuance of additional Secured Notes on June 29, 2018 and $2.2 million of proceeds from the issuance of ordinary shares upon exercise of warrants and share options, offset by $0.1 million of repayments on finance leases.

We have not achieved profitability on an annual basis since we commenced operations in 2007 and we expect to incur net losses for at least the next fiscal year. As we move towards the commercial launch of MosaiQ in the donor testing market, we expect our operating expenses during the year ended March 31, ~~2020~~2021 to be similar to those of the year ended March 31, ~~2019,~~2020, as we continue to invest in growing our customer base, expanding our marketing and distribution channels, completing field trials and regulatory filings, hiring additional employees and investing in other product development opportunities while our development expenditures on MosaiQdecrease.

As of June 30, ~~2019,~~2020, we had $94.5 million of available cash, cash equivalents and short-term investments ~~of $90.7 million~~ and $9.0 million of restricted cash held as part of the arrangements relating to our Secured Notes and the lease of our property in Eysins, Switzerland.

Our existing available cash and short-term investment balances are adequate to meet our forecasted cash requirements for the next twelve months and accordingly we have prepared the financial statements on the going concern basis.

~~In the longer term, we~~ We expect to fund our operations, including the ongoing development of MosaiQ through successful field trial completion, achievement of required regulatory authorizations and commercialization from the use of existing available cash and short-term investment balances, cash generated through ongoing sales of our MosaiQ COVID-19 Microarray, and the issuance of new equity or ~~debt.~~debt, and accordingly have prepared our financial statements on the going concern basis. However, there can be no assurance that we will be able to generate sales as expected or obtain adequate financing when necessary and the terms of any financings may not be advantageous to us and may result in dilution to our shareholders.

Our contractual obligations and commitments were summarized in our Annual Report on Form 10-K for the year ended March 31, ~~2019.~~2020.

On May 15, 2019, we issued an additional $25 million aggregate principal amount of the Secured Notes and entered into additional royalty rights agreements with the purchasers of the Secured Notes. As a result of these transactions, the aggregate amounts payable under the Secured Notes is $145.0 million, with zero due in less than a year, $42.3 million due in 1-3 years and $102.7 million due in 3-5 years. Interest payments due on the Secured Notes total $65.7 million with $17.2 million due in less than a year, $32.6 million due in 1-3 years and $15.9 million due in 3-5 years. The aggregate estimated amount payable in connection with the royalty rights agreements is $84.4 million, with zero due in less than a year, $2.6 million due in 1-3 years, $16.7 million due in 3-5 years and $65.1 million due in more than 5 years.

We note that the capital leases referred to in the summary of our contractual obligations in our Annual Report on Form 10-K are now accounted for as finance leases under current GAAP; however, the nature of these obligations has not changed. There were no other major changes in the nature of our contractual obligations and commitments between March 31, 2019 and June 30, 2019.

We have prepared our condensed consolidated financial statements in accordance with U.S. GAAP. Our preparation of these condensed consolidated financial statements requires us to make estimates, assumptions and judgments that affect the reported amounts of assets, liabilities, expenses and related disclosures at the date of the consolidated financial statements, as well as revenue and expenses during the reporting periods. We evaluate our estimates and judgments on an ongoing basis. We base our estimates on historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results could therefore differ materially from these estimates under different assumptions or conditions.

While our significant accounting policies are described in more detail in Note 2 to our condensed consolidated financial statements included in this Quarterly Report, we believe the following accounting policies to be critical to the judgments and estimates used in the preparation of our financial statements.

Revenue is recognized in accordance with Accounting Standards Update, or ASU, 2014-09, Revenue from Contracts with Customers. Product revenue is recognized at a point in time upon transfer of control of a product to a customer, which is generally at the time of delivery at an amount based on the transaction price. Customers have no right of return except in the case of damaged goods and we have not experienced any significant returns of our products.

We also earn revenue from the provision of development services to a small number of OEM customers. These development service contracts are reviewed individually to determine the nature of the performance obligations and the associated transaction prices. In recent years, our product development revenues have been commensurate with achieving milestones specified in the respective development agreements relating to those products. These milestones may include the approval of new products by the European or U.S. regulatory authorities, which are not within our control. While there can be no assurance that this will continue to be the case, the nature of the milestones has been such that they effectively represent completion of our performance obligations under a particular part of a development program. Should we fail to achieve these milestones, we are not entitled under the terms of the development agreements to any compensation related to the work undertaken to date. As a result, we typically fully recognize milestone-related revenues as the contractual milestones are achieved.

Under certain development contracts, we also manufacture and supply the customer with finished products once they have been approved for use by relevant regulatory agencies. These agreements reflect both arrangements for product development and the sales prices and other contractual terms for subsequent supply of the product to the customer. Under these development contracts, we view the development service revenue as distinct from subsequent product sales revenue, and we recognize each separately as described above.

Accounts receivable consist primarily of amounts due from OEM customers, hospitals, donor testing laboratories, and distributors. Accounts receivable are reported net of an allowance for uncollectible accounts, which we also refer to as doubtful accounts. The allowance for doubtful accounts represents a reserve for estimated losses resulting from our inability to collect amounts due from our customers. Direct sales, where we may make many low value sales to a large number of customers, represents a larger risk of doubtful accounts, as opposed to OEM customer sales consisting primarily of a small number of well established businesses with whom we have a long trading history. The collectability of our trade receivables balances is regularly evaluated based on a combination of factors such as the ~~ageing~~aging profile of our receivables, past history with our customers, changes in customer payment patterns, customer credit-worthiness and any other relevant factors. Based on these assessments, we adjust the reserve for doubtful accounts recorded in our financial statements.

We record inventories at the lower of cost ~~(first-in, first-out basis)~~(at standard costs, approximating average costs) or market (net realizable value), net of reserves. We record adjustments to inventory based upon historic usage, expected future demand and shelf life of the products held in inventory. We also calculate our inventory value based on the standard cost of each product. This approach requires us to analyze variances arising in the production process to determine whether they reflect part of the normal cost of production, and should therefore be reflected as inventory value, or whether they are a period cost and should thus not be included in inventory.

The intangible assets included in our financial statements include intangible assets identified as at the time of the acquisition of the business of Alba Bioscience on August 31, 2007. At the time of this acquisition, we identified intangible assets related to customer relationships, master cell lines and certain other items, which include domain names and product trademarks. The customer relationships have been amortized over a five-year period, which resulted in them becoming fully amortized at August 31, 2012. The other items were amortized over a seven-year period from August 31, 2007, which resulted in them becoming fully amortized at August 31, 2014.

The intangible assets related to master cell lines reflect the know-how and market recognition associated with the cell lines, which are used as the source material of certain of our products. These cell lines are maintained by us and have an indefinite life. We have nevertheless decided to amortize the intangible assets over a forty-year period to reflect the possibility of market changes or other events resulting in the lines becoming technically obsolete at some future date. In the event that any of the lines cease to be used, we would record additional amortization at that point.

We also include in intangible assets the costs of obtaining product licenses for our products. These include external costs such as regulatory agency fees associated with the approval and bringing to market of our products once the development is complete. We amortize these over an expected product life of ten years, although if any such product ceased to be produced, we would record additional amortization at that point.

We account for income taxes under the asset and liability method, which requires, among other things, that deferred income taxes be provided for temporary differences between the tax basis of our assets and liabilities and their financial statement reported amounts. In addition, deferred tax assets are recorded for the future benefit of utilizing NOLs and research and development credit carry forwards. A valuation allowance is established when necessary to reduce deferred tax assets to the amount expected to be realized.

We follow the accounting guidance for uncertainties in income taxes, which prescribes a recognition threshold and measurement process for recording uncertain tax positions taken, or expected to be taken, in a tax return in the financial statements. Additionally, the guidance also prescribes the derecognition, classification, accounting in interim periods and disclosure requirements for uncertain tax positions. We accrue for the estimated amount of taxes for uncertain tax positions if it is more likely than not that we would be required to pay such additional taxes. An uncertain tax position will not be recognized if it has less than a 50% likelihood of being sustained.

We did not have any accrued interest or penalties associated with any unrecognized tax positions, and there were no such interest or penalties recognized during the quarter ended June 30, ~~2019~~2020 or in the year ended March 31, ~~2019.~~2020.

Stock compensation expense is measured at the grant date based on the fair value of the award and is recognized as an expense in the income statement over the vesting period of the award. The calculation of the stock compensation expense is sensitive to the fair value of the underlying ordinary shares. The fair value of option awards ~~and multi-year performance based restricted share units or MRSUs~~ at the grant date is calculated using the Black-Scholes model or other valuation models, which use a number of assumptions to determine the fair value. Details of the assumptions used are set out in the notes to the condensed consolidated financial statements included in this Quarterly Report.

We account for the pension obligations of our Swiss subsidiary as a defined benefit plan under Accounting Standards Codification Topic 715 Compensation – Retirement Benefits,or ASC 715. This requires that an actuarial valuation be performed to determine the funded status of the pension arrangements. The actuarial valuation is based on a number of assumptions, details of which are set out in the notes to the audited consolidated financial statements included in our Annual Report on Form 10-K for the fiscal year ended March 31, ~~2019.~~2020.

The royalty rights agreements entered into in connection with the issuances of our Secured Notes and the amendment of the related indenture are treated as sales of future revenues that meet the requirements of Accounting Standards Codification Topic 470 “Debt” to be treated as debt. The estimated future cash outflows under the royalty rights agreements have been combined with the Secured Notes issuance costs and interest payable to calculate the effective interest rate of the Secured Notes and will be expensed through interest expenses using the effective interest rate method over the term of the Secured Notes and royalty rights agreements. Estimating the future cash outflows under the royalty rights agreements requires us to make certain estimates and assumptions about future sales of MosaiQproducts. These estimates of the magnitude and timing of MosaiQ sales are subject to significant variability due to the current status of development of MosaiQproducts, and thus are subject to significant uncertainty. Therefore, the estimates are likely to change as we gain experience of marketing MosaiQ, which may result in future adjustments to the accretion of the interest expense and the amortized cost based carrying value of the Secured Notes.

~~In February 2016, the Financial Accounting Standards Board, or FASB, issued Accounting Standard Update or ASU 2016-02,~~ ~~Leases,~~ or ASU 2016-02, to enhance the transparency and comparability of financial reporting related to leasing arrangements. We adopted ASU 2016-02 on April 1, 2019, or the effective date, and used the effective date as our date of initial application.

At the inception of an arrangement, we determine whether the arrangement is or contains a lease based on the unique facts and circumstances present. A lease is a contract, or part of a contract, that conveys the right to control the use of identified property, plant or equipment (an identified asset) for a period of time, in exchange for consideration. We determine if the contract conveys the right to control the use of an identified asset for a period of time. We assess throughout the period of use whether we have both of the following: (1) the right to obtain substantially all of the economic benefits for use of the identified asset, and (2) the right to direct the use of the identified asset. This determination is reassessed if the terms of the contract are changed. We also review the terms of the lease in accordance with ~~ASU~~Accounting Standards Update, or “ASU”, 2016-02, “Leases” in order to determine whether the lease concerned is a finance or an operating lease. Most leases with a term greater than one year are recognized on the balance sheet as right-of-use assets, lease liabilities and, if applicable, long-term lease liabilities. We have elected not to recognize on the balance sheet leases with terms of one year or less.

Operating lease liabilities and their corresponding right-of-use assets are recorded based on the present value of lease payments over the expected remaining lease term. The operating lease right-of-use assets also include any lease payments made prior to the commencement date and any initial direct costs incurred, less any lease incentives received. The interest rate implicit in lease contracts is typically not readily determinable. As a result, we utilize our incremental borrowing rates, which are the rates incurred to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment. The incremental borrowing rate is determined at lease commencement, or as of April 1, 2019 for operating leases existing upon the adoption of ASU 2016-02. The incremental borrowing rate is subsequently reassessed upon modification to the lease arrangement. Operating lease expense is recognized on a straight-line basis over the lease term.

In accordance with the guidance in ASU 2016-02, components of a lease should be split into three categories: lease components (e.g., land, building, etc.), non-lease components (e.g., common area maintenance, maintenance, consumables, etc.), and non-components (e.g., property taxes, insurance, etc.). Although separation of lease and non-lease components is required, certain practical expedients are available. In particular, entities may elect a practical expedient to not separate lease and non-lease components and instead account for each lease component and the related non-lease component together as a single component. We have elected to account for the lease and non-lease components of each of its operating leases as a single lease component and allocate all of the contract consideration to the lease component only. The lease component results in an operating lease right-of-use asset being recorded on the balance sheet and amortized on a straight-line basis as lease expense.

The finance lease assets and operating lease right-of-use assets are assessed for impairment in accordance with ~~the Company’s~~our accounting policy for long-lived assets.

We do not have any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, which would have been established for the purpose of facilitating off-balance sheet arrangements or for any other contractually narrow or limited purpose.

Refer to Note 2 to our accompanying unaudited condensed consolidated financial statements included elsewhere in this report for a discussion of recently issued accounting pronouncements.

Under the Jumpstart Our Business Startups Act of 2012, emerging growth companies that become public can delay adopting new or revised accounting standards until such time as those standards apply to private companies. We have irrevocably elected not to avail ourselves of this exemption from new or revised accounting standards and, therefore, we will be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies.

We are exposed to market risks in the ordinary course of our business. These market risks are principally limited to interest rate fluctuations and foreign currency exchange rate fluctuations.

We are exposed to market risk related to changes in interest rates as it impacts our interest income and expense.

Cash, cash equivalents and cash reserve account. At June 30, ~~2019,~~2020, we had cash and cash equivalents of ~~$6.5~~$7.3 million and we also held $9.0 million of restricted cash. Our exposure to market risk includes interest income sensitivity, which is impacted by changes in the general level of U.S. and European interest rates. Our cash and cash equivalents and the restricted cash are held in interest-bearing savings accounts and bank accounts. We do not enter into investments for trading or speculative purposes. Due to the current levels of interest rates, we do not believe an immediate one percentage point change in interest rates would have a material effect on the fair market value of our holdings, and therefore we do not expect our operating results or cash flows to be significantly affected by changes in market interest rates.

~~Senior secured~~Secured notes. At June 30, ~~2019,~~2020, we had term debt of $145 million outstanding under the Secured Notes. The Secured Notes are fixed-rate instruments and, as a result, a change in market interest rates has no impact on our interest expense incurred or cash flows.

The main currencies that we use for our trading operations are the U.S. Dollar, the Pound Sterling, the Swiss Franc and, to a lesser extent, the Euro. Our meaningful cash balances are held in a mixture of U.S. Dollars, Euros, Pounds Sterling and Swiss Francs. These cash balances may not be the same as the functional currencies of the Quotient entities in which they are held and, as a result, exchange rate fluctuations may result in foreign exchange gains and losses on our income statement.

We are subject to market risks arising from changes in foreign currency exchange rates between the U.S. Dollar and the Pound Sterling and the U.S. Dollar and the Swiss Franc. Accordingly, fluctuations in the U.S. Dollar versus Pounds Sterling and U.S. Dollar versus the Swiss Franc exchange rate give rise to exchange gains and losses. These gains and losses arise from the conversion of U.S. Dollars and Euros to Pounds Sterling and the retranslation of cash, accounts receivable, intercompany indebtedness and other asset and liability balances. Based on our assets and liabilities held in Pounds Sterling at June 30, ~~2019,~~2020, we estimate that a 5% strengthening of the Pound Sterling against the U.S. Dollar would give rise to a gain of approximately ~~$0.9~~$0.5 million and a 5% weakening of the Pound Sterling against the U.S. Dollar would give rise to loss of approximately ~~$0.9~~$0.5 million. Based on our assets and liabilities held in Swiss Francs at June 30, ~~2019,~~2020, we estimate that a 5% strengthening of the Swiss Franc against the U.S. Dollar would give rise to a gain of approximately $1.3 million and a 5% weakening of the Swiss Franc against the U.S. Dollar would give rise to loss of approximately $1.3 million.

Most of our revenues are earned in U.S. Dollars, but the costs of our conventional reagent manufacturing operations are payable mainly in Pounds Sterling. We therefore closely monitor the results of our UK operations to address this difference. During the year ended March 31, ~~2019,~~2020, the net operating expenses arising in Pounds Sterling from our UK conventional reagent manufacturing operations amounted to ~~$27.0~~$25.8 million. This expenditure was offset by revenues arising in U.S. Dollars and other currencies. We have entered into forward contracts to hedge against the effects of fluctuations in the U.S. Dollar versus the Pounds Sterling exchange rate. The principal value of the hedges related to the results of fiscal year ~~2020~~2021 is $6.0 million and, based on this, a hypothetical instantaneous 5% strengthening of the Pound Sterling against the U.S. Dollar would reduce our net income by ~~$1.1~~$1.0 million in the year ending March 31, ~~2020~~2021 after taking account of the shelter provided by our existing hedging arrangements through March 31, ~~2020.~~2021. Similarly, a hypothetical instantaneous 5% weakening of the Pound Sterling against the U.S. Dollar would increase group net income by ~~$1.1~~$1.0 million over the same period.

Our management does not believe that inflation in past years has had a significant impact on our results from operations. In the event inflation affects our costs in the future, we will offset the effect of inflation and maintain appropriate margins through increased selling prices.

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of the end of the period covered by this Quarterly Report on Form 10-Q. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on such evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of June 30, ~~2019,~~2020, our disclosure controls and procedures were effective to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms, and is accumulated and communicated to our management, including our Chief Executive and Chief Financial Officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

There were no material changes to our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the period covered by this Quarterly Report on Form 10-Q that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. We did implement internal controls to ensure we properly assess the impact of the new accounting standard related to leases on our financial statements to facilitate its adoption on April 1, 2019. However, there were no material changes to our internal control over financial reporting due to the adoption of the new accounting standard.

Our subsidiaries, Quotient Suisse and QBD (QS-IP) Limited were party to a distribution and supply agreement with Ortho-Clinical Diagnostics, Inc., or “Ortho”, related to the commercialization and distribution of certain MosaiQ products, which we refer to as the Ortho Agreement. We also entered into a subscription agreement with an affiliate of Ortho pursuant to which the affiliate subscribed for our newly issued ordinary shares and newly issued 7% cumulative redeemable preference shares, of no par value, for an aggregate subscription price of approximately $25 million.

On November 27, 2019, we delivered a notice to Ortho that we had terminated the Ortho Agreement, effective as of December 27, 2019. We had not realized any revenue under the Ortho Agreement prior to its termination.

On or about November 17, 2019, Ortho initiated an arbitration proceeding in which it seeks a declaration that we do not have the right to terminate the Ortho Agreement, specific performance of certain provisions of the Ortho Agreement, and damages including in respect of the difference in amounts Ortho invested in our shares and their market value. We are pursuing counterclaims against Ortho, including that we have the right to terminate the Ortho Agreement and damages that include the milestone payments due under the Ortho Agreement. In addition, on December 20, 2019, we entered into an agreement, or the Ortho Dispute Agreement, with Ortho pursuant to which we agreed, while the arbitration is pending, not ~~currently a party~~to grant commercialization rights in respect of products that overlap with Ortho’s rights under the Ortho Agreement without prior written notice to Ortho.

We believe that Ortho’s allegations are without merit and we intend to defend ourselves vigorously against Ortho’s claims. However, because of the complexities and uncertainties inherent in arbitration proceedings ~~that~~and the nature of the claims, we ~~believe could have a material adverse effect~~cannot predict with certainty whether we will prevail in our defenses and counterclaims or the impact of this arbitration on our business, results of operations or financial condition. ~~However,~~

As discussed in Note 6 to our condensed consolidated financial statements, because we cannot predict the outcome of this arbitration, we do not believe it is possible to provide a meaningful estimate of a reasonably possible loss at this time in connection with the preparation of those financial statements. Nevertheless, if Ortho prevailed on its claim that we did not have the right to terminate the Ortho Agreement, the arbitral tribunal might issue a declaration that the Ortho Agreement remains in effect and/or an award compelling Quotient to specifically perform obligations under the Ortho Agreement. Similarly, if Ortho prevailed on its breach of contract claims, we could be obligated to pay damages. The damages are claimed to include, but not be limited to, the difference between the aggregate amount Ortho invested in our ordinary and preference shares of $25 million and the shares’ market value (see Note 7 to our condensed consolidated financial statements for more information on our shares).

Our initial MosaiQ IH Microarray and our second, expanded MosaiQ IH Microarray are being developed for the donor testing market, with our initial focus being on Europe and the United States, while our third MosaiQ IH Microarray is being developed for the patient testing market. Under the Ortho Agreement, Ortho had rights to distribute the MosaiQ IH Microarrays in the patient testing market in Europe and the United States. While our dispute with Ortho has been ongoing, we have not pursued alternatives for commercializing our MosaiQ IH Microarrays in the patient testing market.

We may also be subject to ~~various~~other claims and legal actions arising in the ordinary course of business from time to time.

There have been no material changes in the risk factors described in Item 1A "Risk Factors" of our Annual Report on Form 10-K for the year ended March 31, ~~2019.~~2020.

The following is a list of exhibits filed as part of this Quarterly Report on Form 10-Q:

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.

Jersey, Channel Islands		Not Applicable
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

B1, Business Park Terre Bonne, Route de Crassier 13, 1262 Eysins, Switzerland		Not Applicable
(Address of principal executive offices)		(Zip Code)

Title of each class		Trading Symbol		Name of each exchange on which registered
Ordinary Shares, nil par value		QTNT		The Nasdaq Global Market

	Page
PART I – FINANCIAL INFORMATION		3
Item 1. Financial Statements		3
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		2325
Item 3. Quantitative and Qualitative Disclosures About Market Risk		34
~~Item 4. Controls and Procedures~~		35
~~PART II – OTHER INFORMATION~~		35
~~Item 1. Legal Proceedings~~		35
~~Item 1A. Risk Factors~~		35
~~Item 2. Unregistered Sales of Equity Securities and Use of Proceeds~~		35
~~Item 3. Defaults Upon Senior Securities~~		35
~~Item 4. Mine Safety Disclosures~~		35
~~Item 5. Other Information~~		35
~~Item 6. Exhibits~~		36
~~Signatures~~Item 4. Controls and Procedures		37
PART II – OTHER INFORMATION		37
Item 1. Legal Proceedings		37
Item 1A. Risk Factors		38
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		38
Item 3. Defaults Upon Senior Securities		38
Item 4. Mine Safety Disclosures		38
Item 5. Other Information		38
Item 6. Exhibits		38
Signatures		39

Balance sheet captions impacted by ASU 2016-02	31 March 2019 (prior to adoption of ASU 2016-02)			Effect of the adoption of ASU 2016-02			March 31, 2019 (As adjusted)
Operating lease right-of use assets (1)	$	—		$	18,478		$	18,478
Current portion of operating lease liability (2)		—			3,130			3,130
Operating lease liability less current portion (3)		—			16,564			16,564
Current portion of deferred lease rental benefit (4)		435			(435	)		—
Deferred lease rental benefit, less current portion (5)		1,144			(1,144	)		—
Accumulated deficit (6)		(381,025	)		363			(380,662	)

	May 24, 2020
Risk-free interest rate		0.65	%
Expected lives (years)		6
Volatility		74.50	%
Dividend yield		—
Grant date fair value (per share)	$	7.69
Number granted		60,438

	June 30, 2020		June 30, 2019
Ordinary shares issuable on exercise of options to purchase ordinary shares		1,877,923		1,914,332
Restricted share units awarded, including the multi-year performance related restricted share units		896,130		909,818
Ordinary shares issuable on exercise of warrants at $16.14 per share		111,525		111,525
Ordinary shares issuable on exercise of warrants at $9.375 per share		64,000		64,000
		2,949,578		2,999,675

	March 31, 2019
2020	$	3,387
2021		1,861
2022		1,858
2023		1,830
2024		1,841
Thereafter		71,507
Total minimum future lease payments	$	82,284

		QUOTIENT LIMITED

Date: August 6, ~~2019~~2020		/s/ Franz Walt
		Franz Walt Chief Executive Officer

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company