QUOTIENT: Management report and analysis of financial position and operating results (Form 10-K)

You should read the following discussion and analysis of our financial condition
and results of operations in conjunction with the financial statements and the
related notes to those statements included later in this Annual Report on Form
10-K. Our discussion of results for the fiscal year ended March 31, 2019 is
included in Part II, Item 7 of the annual report on Form 10-K for the fiscal
year ended March 31, 2020. In addition to historical financial information, the
discussion below 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 Annual Report, particularly in "Risk Factors."

Overview

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
(QS IP) Limited (or QSIP) from Quotient Biodiagnostics Group Limited (or QBDG),
our predecessor.

Our Business

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 35 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.

We currently operate as one business segment with 435 employees in the United
Kingdom, Switzerland and the United States as of March 31, 2021. Our principal
markets are the United States, Europe and Japan. Based on the location of the
customer, revenues outside the United States accounted for 35%, 45% and 49% of
total revenue during the years ended March 31, 2021, 2020 and 2019,
respectively.

We have incurred net losses and negative cash flows from operations in each year
since we commenced operations in 2007. As of March 31, 2021, we had an
accumulated deficit of $591.9 million. We expect our operating losses will
continue for at least the next fiscal year as we continue our investment in the
commercialization of MosaiQ. Our total revenue was $43.4 million for the year
ended March 31, 2021, $32.7 million for the year ended March 31, 2020 and
$29.1 million for the year ended March 31, 2019. Our net loss was $108.5 million
for the year ended March 31, 2021, $102.8 million for the year ended March 31,
2020 and $105.4 million for the year ended March 31, 2019.

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

On September 15, 2020, we completed a public offering of 20,294,117 newly issued
ordinary shares at a price of $4.25 per share which raised $86.3 million of
gross proceeds before deducting underwriting discounts and other offering
expenses of $5.6 million. In May 2021, we issued $95.0 million aggregate
principal amount of the Convertible Notes. On or prior to June 2, 2021, we may
issue up to an additional $15.0 million aggregate principal amount of the
Convertible Notes in one or more subsequent offerings.

As discussed further below under "-Liquidity and Capital Resources," we have
approximately $35.0 million of cash invested in two funds that have suspended
redemptions, and there can be no assurance as to the timing or amount of future
distributions from these funds.

As of March 31, 2021, we had available cash, cash equivalents and short-term
investments of $111.7 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.

                                     - 46 -
--------------------------------------------------------------------------------

Regulatory and commercial milestones

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".


• Initial European regulatory approval – we have applied for European regulations

the approval of our first MosaiQ IH Microarray at the end September 2018 and were

notified of its approval on April 30, 2019. We have also filed a European application

regulatory approval of the first MosaiQ SDS Microarray in June 2019 and

was notified of its approval on February 14, 2020.

Development of microarray menus in progress – our activities for the expansion of our

IH and SDS, the test menus included completion of validation and

verification, or “V&V”, concordance study for the extended MosaiQ IH

The Microarray menu, which we announced in October 2019. The V&V study for the

MosaiQ SDS Microarray extended is planned for the coming months.

• Field tests – we have started field tests for the extended MosaiQ IH

Microarray in Europe in the first quarter of calendar year 2020. These tests

were initially suspended due to the COVID-19 pandemic in March 2020, But

the end of May 2020, the quarantine and containment measures and restrictions had

relaxed in the three test locations, allowing work to be resumed. however,

subsequent government restrictions implemented towards the end of 2020

    impacted our ability to conduct these trials, as discussed below. We
    announced the initial results from these trials in November 2020. Based on
    our internal performance testing, we subsequently determined to enhance a

limited number of tests on the extended MosaiQ IH Microarray. Since,

further field trials in Europe and United States for the extended MosaiQ

IH Microarray has been postponed due to the COVID-19 pandemic. We are waiting

these tests must resume in the second quarter of calendar year 2021 in

Europe and in the second semester of calendar year 2021 in United States. We

MosaiQ SDS extended microarray field trials to begin

towards the end of calendar year 2021.

• Regulatory approval process underway – we have applied for we regulatory approval

for our first MosaiQ SDS Microarray on 23 december 2019. At December 10,

2020, we received a request from the FDA for additional test data related

to the specific individual performance characteristics of the tests on this

DNA chip. We plan to resubmit our dossier and receive 510 (k)

Authorization for the initial MosaiQ SDS Microarray in the calendar year

2021. We plan to make the first European regulatory submissions for our

extended MosaiQ IH Microarray in the third quarter of calendar year 2021,

    with the U.S. regulatory submissions following in the fourth quarter of
    calendar year 2021 or first quarter of calendar year 2022. We expect to
    receive the CE mark for the expanded MosaiQ IH Microarray by the fourth
    quarter of calendar year 2021. We expect to make a European regulatory

submission for the extended MosaiQ SDS Microarray in the second quarter of

calendar year 2022, with the we regulatory submission following the

second or third quarter of calendar year 2022. As noted above, our progress

towards regulatory approvals has been affected by the disruption

effect of the COVID-19 pandemic. Our timing expectations outlined in this

paragraph are subject to a variety of factors, including COVID-19 impacts,

this could cause further delays.

• Patient IH Microarray – we are developing the MosaiQ IH3 for Ortho

    Microarray, and we expect to submit it for CE mark in the first half of
    calendar year 2022.




COVID-19 Pandemic

You should read the following update regarding the COVID-19 pandemic in conjunction with the discussion included in the “Item 1. Business” and “Item 1A” sections. Risk factors “.



On March 11, 2020, the World Health Organization declared the novel strain of
coronavirus (COVID-19) a global pandemic and recommended containment and
mitigation measures worldwide. The governments of each of the major locations in
which we operate, the United Kingdom, Switzerland and the United States, have
implemented varying measures and restrictions to combat the COVID-19 pandemic.



The restrictions implemented at the beginning of the pandemic directly impacted
our on-going clinical trials for our expanded MosaiQ IH Microarray in Europe and
the commencement of clinical trials for our expanded MosaiQ IH Microarray in the
United States. All external work on these trials was suspended in March 2020
until such time as the existing restrictions in the relevant jurisdictions are
removed or moderated. By the end of May 2020, quarantine and containment
measures and restrictions had eased in all of the three European trial locations
allowing the work to recommence.

                                     - 47 -

--------------------------------------------------------------------------------


In addition, on April 6, 2020, we announced the completion of the development
phase of the MosaiQ COVID-19 Microarray, in response to the COVID-19 pandemic.
On April 27, 2020, we published the final performance data for the MosaiQ
COVID-19 Microarray, achieving 100% sensitivity and 99.8% specificity, and on
May 1, 2020, we announced the CE Mark for this Microarray. In addition, in May
2020, we submitted an application to the FDA for an Emergency Use Authorization
(EUA) of the MosaiQ COVID-19 Microarray in the United States, and in September
2020, we announced the EUA had been issued by the FDA for this Microarray. We
signed the first commercial contract for the sale of the MosaiQ COVID-19
Microarray in May 2020, and we have subsequently entered into nine additional
contracts with customers in Europe and the United States. In addition, we
developed an enhanced, semi-quantitative MosaiQ COVID-19 Microarray, which was
CE marked as of January 29, 2021.

Towards the end of 2020 and beginning of 2021, there was a widespread increase,
or "second wave," in reported infections from COVID-19, including in Europe and
the United States. In response, various countries including in Europe announced
the re-imposition of some restrictions on social, business and other activities.
Government travel restrictions and lockdowns imposed in response to the second
wave seriously affected our operations in Europe and the United Kingdom.



In spite of this widespread increase of COVID-19 infections, the COVID-19
pandemic and the associated restrictions have not had a material adverse impact
on our conventional reagent revenues. Customer demand has remained robust since
March 31, 2020 and, to date, supply chain disruptions have been minimal. Our
manufacturing operations in Edinburgh, Scotland have been adapted to meet social
distancing requirements, which impacted our operating costs during the year
ended March 31, 2021.



However, the second wave negatively affected the on-going field trials for our
expanded MosaiQ IH Microarray, with travel restrictions and lockdowns making it
difficult for relevant teams to spend time on-site and resulting in trials
repeatedly stopping and restarting. Furthermore, these restrictions and
lockdowns have impacted our research and development activities, slowed down the
regulatory approval process and delayed the timing of customer tenders.



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. See Item 1A. Risk
Factors - "We face risks related to health pandemics, epidemics and outbreaks,
including the outbreak of the current COVID-19 pandemic, which could
significantly disrupt our operations and could have a material adverse impact on
us."



Revenue

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 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 67%, 70% and 68% for the years ended March 31, 2021, 2020 and
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 year ended March 31, 2021, we began to generate sales revenue from
the MosaiQ COVID-19 Microarray in Europe and the United States, and our product
sales from this microarray were approximately $1.3 million during this period.
Although we believe that these product sales could continue in the first half of
the next financial year, we believe there is ultimately a limited opportunity
for future revenue from our MosaiQ COVID-19 Microarray beyond that timeframe,
based on the limited demand for COVID-19 antibody testing that we are observing.
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 operating income and expenses

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.

                                     - 48 -

--------------------------------------------------------------------------------


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 note 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 or holders of the Secured Notes, as applicable. See
Note 3 "Debt" and Note 8 "Ordinary and Preference Shares - Preference shares" to
our consolidated financial statements included in this Annual 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 business are Pounds
Sterling, Swiss Franc and U.S. Dollars depending on the entity. Other income
(expense) also includes exceptional costs related to deferred debt issue costs
expensed on the repayment of debt facilities and certain other non-recurring
items as mentioned below under "-Results of Operations- Comparison of Years
ended March 31, 2021 and 2020- Other income (expense)" and "-Results of
Operations- Comparison of Years ended March 31, 2020 and 2019- Other income
(expense)."

As discussed in more detail below, provision for income taxes in the year ended
March 31, 2021 reflected the taxes payable on the taxable income of a subsidiary
and the resolution of a major tax uncertainty related to the treatment of
certain tax depreciation allowances. Provision for income taxes in the years
ended March 31, 2020 and March 31, 2019 reflected 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 and
adjustments for uncertain tax positions.

                                     - 49 -

--------------------------------------------------------------------------------

Results of operations

Comparison of completed years March 31, 2021 and 2020

The following table presents, for the periods indicated, the amounts of certain components of our income statements and the percentage of total revenues represented by these elements, showing the variations from one period to another.


                                                  Year ended March 31,
                                         2021                              2020                         Change
                               Amount        % of revenue        Amount        % of revenue       Amount         %
                                                        (in thousands, except percentages)
Revenue:
Product sales                $   35,787                 82 %   $   31,601                 97 %   $  4,186          13 %
Other revenues                    7,592                 18 %        1,055                  3 %      6,537         620 %
Total revenue                    43,379                100 %       32,656                100 %     10,723          33 %
Cost of revenue                  20,074                 46 %       17,800                 55 %      2,274          13 %
Gross profit                     23,305                 54 %       14,856                 45 %      8,449          57 %
Operating expenses:
Sales and marketing               9,849                 23 %        9,853                 30 %         (4 )         0 %
Research and development         54,168                125 %       53,744                165 %        424           1 %
General and administrative       41,796                 96 %       31,950                 98 %      9,846          31 %
Total operating expenses        105,813                244 %       95,547                293 %     10,266          11 %
Operating (loss)                (82,508 )             -190 %      (80,691 )             -247 %     (1,817 )         2 %
Other income (expense):
Interest expense, net           (25,918 )              -60 %      (23,859 )              -73 %     (2,059 )         9 %
Other, net                        1,882                  4 %        2,438                  7 %       (556 )       -23 %
Total other expense, net        (24,036 )              -55 %      (21,421 )              -66 %     (2,615 )        12 %
Loss before income taxes       (106,544 )             -246 %     (102,112 )             -313 %     (4,432 )         4 %
Provision for income taxes       (1,926 )               -4 %         (661 )               -2 %     (1,265 )       191 %
Net loss                     $ (108,470 )             -250 %   $ (102,773 )             -315 %   $ (5,697 )         6 %




Revenue

Product sales revenue increased by 13% to $35.8 million for the year ended March
31, 2021, compared with $31.6 million for the year ended March 31, 2020. The
increase in product sales revenue was primarily attributable to incremental
direct sales of conventional reagent products to customers in the United States
and product sales to OEM customers. Products sold by standing purchase order
were 67% of product sales for the year ended March 31, 2021, compared with 70%
for the year ended March 31, 2020. Total revenue for the year ended March 31,
2021 increased by 33% to $43.4 million compared with $32.7 million in the year
ended March 31, 2020, and included other revenues arising from the achievement
of product development milestones of $7.6 million and $1.1 million,
respectively.

The table below shows the revenues by product group:



                                              Year ended March 31,
                                       2021                           2020                       Change
                             Amount      % of revenue       Amount      % of revenue       Amount         %
                                                    (in thousands, except percentages)
Revenue:
Product sales - OEM
customers                   $ 23,224                54 %   $ 21,217                65 %   $  2,007         9.5 %
Product sales - direct
customers
  and distributors            11,287                26 %     10,384                32 %        903         8.7 %
Product sales - MosaiQ         1,276                 3 %          -                 0 %      1,276         100 %
Other revenues                 7,592                17 %      1,055                 3 %      6,537         620 %
Total revenue               $ 43,379               100 %   $ 32,656               100 %   $ 10,723          33 %


                                     - 50 -
--------------------------------------------------------------------------------


OEM Sales. Product sales to OEM customers increased 10% to $23.2 million for the
year ended March 31, 2021, compared with $21.2 million for the year ended
March 31, 2020. The increase was due to increased sales to existing customers
and the impact and an additional shipment of red blood cell-based products in
March 2021.

Direct Sales to Customers and Distributors. Direct product sales increased 9% to
$11.3 million for the year ended March 31, 2021 compared with $10.4 million for
the year ended March 31, 2020. This mainly consisted of direct sales in the
United States which increased to $10.2 million in the year ended March 31, 2021
compared with $9.5 million in the year ended March 31, 2020 as a result of
recent product launches and the expansion of our customer base.

MosaiQ Product Sales. MosaiQ sales in the year ended March 31, 2021 consisted of
revenues from our MosaiQ COVID-19 Microarray. There were no MosaiQ sales in the
year ended March 31, 2020.

Other Revenues. Other revenues for the year ended March 31, 2021 arose from the
recognition of an initial milestone payment of $7.5 million received from Ortho
in respect of the development of the MosaiQ IH3 Microarray and a small
development project for an OEM customer. Other revenues in the year ended March
31, 2020 arose from the achievement of product development milestones on another
development contract, which was completed during the year ended March 31, 2020.
See Note 1 "Summary of Significant Accounting Policies - Revenue Recognition" to
our consolidated financial statements included in this Annual Report for
additional information.

Cost of revenue and gross margin

Cost of revenue increased by 13% to $20.1 million for the year ended March 31,
2021, compared with $17.8 million for the year ended March 31, 2020. The
increase in cost of revenue reflected additional costs associated with operating
social distancing restrictions and the incremental costs associated with the 13%
increase in product sales in the year ended March 31, 2021. For the year ended
March 31, 2021 salaries, benefits and other employee expenses represented 29.0%
of total cost of revenue compared to 31.7% in the year ended March 31, 2020.



Gross profit on total revenue in the year ended March 31, 2021 was $23.3
million, an increase of 57% when compared with $14.9 million for the year ended
March 31, 2020. The increase was attributable to the $6.5 million increase in
other revenues (the associated cost of which was included in research and
development expenses) in the year ended March 31, 2021 and the increase in gross
margin on product sales described below.

Gross profit on product sales, which excludes other revenues, was $15.7 million
for the year ended March 31, 2021 compared with $13.8 million for the year ended
March 31, 2020. This increase was due to the gross profit on increased sales to
existing and new customers, offset in part by higher costs associated with
social distancing requirements. Gross margin on product sales, which excludes
other revenues, was 44% for the year ended March 31, 2021 compared with 44% for
the year ended March 31, 2020.

Sales and marketing costs

Sales and marketing expense were unchanged at $9.9 million for the year ended
March 31, 2021, compared with $9.9 million for the year ended March 31, 2020.
Cost reductions associated with reduced travel expenses and the cancellation of
sales conferences due to the COVID-19 pandemic were offset by increased
headcount and staff benefit costs. As a percentage of total revenue, sales and
marketing expenses were 23% for the year ended March 31, 2021 compared to 30%
for the year ended March 31, 2020. For the year ended March 31, 2021 salaries,
benefits and other employee expenses represented 75.8% of total sales and
marketing expenses compared to 69.5% in the year ended March 31, 2020.

Research and development costs



                                              Year ended March 31,
                                       2021                           2020                       Change
                             Amount      % of revenue       Amount      % of revenue       Amount         %
                                                    (in thousands, except percentages)
Research and development
expenses:
MosaiQ research and
development                 $ 53,546               123 %   $ 52,202               160 %   $  1,344           3 %
Other research and
development                    1,426                 3 %      2,035                 6 %       (609 )       -30 %
Tax credits                     (804 )              -2 %       (493 )              -1 %       (311 )        63 %
Total research and
development
  expenses                  $ 54,168               125 %   $ 53,744               165 %   $    424           1 %




                                     - 51 -
--------------------------------------------------------------------------------


Research and development expenses increased by 1% or $0.4 million to $54.2
million for the year ended March 31, 2021, compared with $53.7 million for the
year ended March 31, 2020. Our research and development expenses included
expenses of $1.0 million in both the year ended March 31, 2021 and March 31,
2020 related to the costs of our intellectual property license with TTP. During
the year ended March 31, 2021, we recorded inventory provisions of $2.0 million
in respect of certain raw materials and work-in-progress items following
evaluation of further development data and corresponding changes in
manufacturing processes. We also incurred additional development costs for the
MosaiQ COVID-19 Microarray and higher employee costs in the year ended March 31,
2021. These expenses were offset by a $3.5 million decrease in depreciation
charges as a result of certain leasehold improvements becoming fully depreciated
in the year ended March 31, 2021, as well as the impact of extending the useful
economic lives of certain operating equipment. In addition, termination benefit
costs of $0.7 million were included in the year ended March 31, 2020. There were
no termination benefit costs in the year ended March 31, 2021. For the year
ended March 31, 2021 salaries, benefits and other employee expenses represented
40.6% of total research and development expenses compared to 38.8% in the year
ended March 31, 2020.

General and administrative expenses

General and administrative expenses increased 31% to $41.8 million for the year
ended March 31, 2021, compared with $32.0 million for the year ended March 31,
2020. In the year ended March 31, 2021, our general and administrative expenses
included $4.2 million in costs associated with the appointment of our new Chief
Executive Officer, $1.2 million in transition benefits payable to our former
Chief Executive Officer and $0.4 million transition benefits payable to our
former Chief Operating Officer. This compared to termination and transition
benefit costs of $1.3 million in the year ended March 31, 2020. The increase in
general and administrative expenses also included additional legal expenses of
$2 million related to our dispute with Ortho, higher D&O insurance costs of $2.3
million and increases in other advisory fees. We recognized $5.0 million of
stock compensation expense in the year ended March 31, 2021 compared with $4.5
million in the year ended March 31, 2020. Stock compensation expense is
recognized over the expected vesting period of incentive awards. As a percentage
of total revenue, general and administrative expenses increased to 96% for the
year ended March 31, 2021, compared with 98% for the year ended March 31, 2020.
For the year ended March 31, 2021 salaries, benefits and other employee expenses
(including stock compensation expenses) represented 58.9% of total general and
administrative expenses compared to 58.7% in the year ended March 31, 2020.



Other income (expenses)

Net interest expense was $25.9 million for the year ended March 31, 2021,
compared with $23.9 million for the year ended March 31, 2020. Interest expense
in the year ended March 31, 2021 included $17.4 million of interest charges on
our Secured Notes compared with $17.1 million in the year ended March 31, 2020.
The increase was due to the additional issuance of $25 million of Secured Notes
on May 15, 2019. Interest expense in the years ended March 31, 2021 and March
31, 2020 included amortization of deferred debt issue costs of $9.1 million and
$7.0 million, respectively. The increased expense reflected changes in the
royalty cost estimates. In each of the years ended March 31, 2021 and March 31,
2020, net interest expense also included $1.1 million of accrued dividends on
the 7% cumulative redeemable preference shares issued in January 2015. In
addition, in the year ended March 31, 2021 we earned interest income of $1.6
million on our money market deposits as compared with $1.3 million in the year
ended March 31, 2020.

Other, net in the year ended March 31, 2021 was comprised of $4.2 million of
foreign exchange gains arising on monetary assets and liabilities denominated in
foreign currencies and an impairment charge of $2.3 million in respect of our
short term investments. Other, net comprised $2.4 million of foreign exchange
gains for the year ended March 31, 2020.

Provision for income taxes

Provision for income taxes in the year ended March 31, 2021 reflected the taxes
payable on the taxable income of a subsidiary and the resolution of a major tax
uncertainty related to the treatment of tax depreciation allowances, which
resulted in a one-time tax charge of $1.5 million, and on-going tax charges of
$0.4 million. Provision for income taxes in the year ended March 31, 2020
reflects both adjustments to net operating losses carried forward and current
tax accruals in a subsidiary as a result of an uncertain tax position.





Quarterly operating results



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
2021 we made 14 shipments with the additional shipments in the first and fourth
quarters. In fiscal 2020, the greatest impact of extra product shipments
occurred in our first quarter. The timing of shipment of bulk antisera products
to our OEM customers may also move

                                     - 52 -

--------------------------------------------------------------------------------


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 costs included in other income depends primarily on the achievement of pre-negotiated project milestones.

Liquidity and capital resources

Since our commencement of operations in 2007, we have incurred net losses and
negative cash flows from operations. As of March 31, 2021, we had an accumulated
deficit of $591.9 million. During the year ended March 31, 2021, we incurred a
net loss of $108.5 million and used $77.6 million of cash for operating
activities. During the year ended March 31, 2020, we incurred a net loss of
$102.8 million and used $80.6 million of cash for operating activities. During
the year ended March 31, 2019, we incurred a net loss of $105.4 million and used
$75.7 million of cash for operating activities. As described under results of
operations, our use of cash during the years ended March 31, 2021 and March 31,
2020 was primarily attributable to our investment in the development of MosaiQ
and corporate costs, including costs related to being a public company.

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

At September 15, 2020, we carried out a public offering of 20,294,117 newly issued ordinary shares at the price of $ 4.25 by action that raised $ 86.3 million gross proceeds before deduction of subscription discounts and other costs of offering $ 5.6 million.



On March 12, 2021, we announced that two funds managed by CSAM in which we had
invested an aggregate of approximately $110.35 million had suspended
redemptions. The investments into these funds were made in accordance with our
investment policy of making individual investments with a minimum of an A rating
from a leading credit-rating agency. Each fund holds short-term credit
obligations of various obligors. According to a press release issued by CSAM,
redemptions in the funds were suspended because "certain part of the Subfunds'
assets is currently subject to considerable uncertainties with respect to their
accurate valuation." CSAM subsequently began a liquidation of the funds.
Pursuant to the liquidation, we have already received cash distributions of
approximately $75.6 million. Based on information provided by Credit Suisse, we
expect to receive further cash distributions from the funds in the next several
months; however, there can be no assurance as to the amount or timing of any
such distributions.



While Credit Suisse has advised that the credit assets held by the funds are
covered by insurance that potentially will be available to cover losses the
funds would incur if any of the obligors on the funds' credit assets were to
default, we do not know if the funds will incur losses (net of insurance) on the
credit assets held by the funds. We believe, and have advised Credit Suisse,
that any such losses should be borne by Credit Suisse.

As of March 31, 2021, we had available cash, cash equivalents and short-term
investments of $111.7 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.

On May 26, 2021, we issued and sold $95.0 million aggregate principal amount of
the Convertible Notes in a private offering to institutional investors. The
Convertible Notes are guaranteed by our material subsidiaries. The Convertible
Notes are our unsecured, senior obligations and rank equally in right of payment
with all of our existing and future unsecured, unsubordinated indebtedness. The
Convertible Notes are convertible at the option of the holders at an initial
conversion rate of 176.3668 ordinary shares per $1,000.00 principal amount of
Convertible Notes, subject to adjustment. We have the right to redeem the
Convertible Notes in certain circumstances. On or prior to June 2, 2021, we may
issue up to an additional $15.0 million aggregate principal amount of the
Convertible Notes in one or more subsequent offerings. For further information
about the Convertible Notes, please see our Current Report on Form 8-K filed
with the SEC on May 27, 2021.



We currently expect that the additional net cash generated from the Convertible
Notes issuance combined with our existing available cash and short-term
investment balances are adequate to meet our forecasted cash requirements for
the next twelve months.



We expect to fund our operations in the near-term, including the ongoing
development of MosaiQ through successful field trial completion, achievement of
required regulatory authorizations and commercialization from a combination of
funding sources. These expected funding sources include the use of existing
available cash and short-term investment balances, the sale of rights and other
assets, and the issuance of new equity or debt.

Contractual obligations

                                     - 53 -

--------------------------------------------------------------------------------

We have contractual obligations for non-cancellable facility leases, our secured tickets and related royalty rights agreements, equipment leases and purchase commitments. The following table presents a summary of our contractual obligations at March 31, 2021.

                                                       Payment by period
                                              Less than       1 to 3        3 to 5       After 5
Contractual Obligations          Total         1 year          years        years         years
12% Senior Secured Notes due
2024                           $ 145,000     $    24,167     $  90,625     $ 30,208     $       -
Interest on 12% Senior
Secured Notes                     39,875          16,675        21,387        1,813             -
Royalty rights agreements
with note
  purchasers                     106,448               -         2,190       17,795        86,463
7% Cumulative Redeemable
Preference
  Shares (1)                      15,000               -        15,000            -             -
Dividends on 7% Cumulative
  Redeemable Preference
Shares (1)                         6,475               -         6,475            -             -
Operating and capital leases      88,728           4,754         7,044        5,583        71,347
STRATEC Biomedical
manufacturing
  agreement (2)                   68,840           3,451        24,446       40,943             -
Other                             20,603          15,691         4,912            -             -
Total contractual
obligations                    $ 490,969     $    64,738     $ 172,079     $ 96,342     $ 157,810



(1) Preference Shares Redeemable at 7% Cumulative are redeemable at the option

of shareholders at a non-prior date January 29, 2023, who can be

extended at our discretion in one year increments up to January 29, 2025. We can

pay dividends at any time on the 7% Cumulative Redeemable Preference Shares,

but are not required to do so until redemption.

(2) We have entered into a manufacturing agreement with STRATEC within the framework

with the supply of MosaiQ instruments over a period of six years. Total

the remaining purchase obligation under this agreement is $ 68.8 million using

March 31, 2021 exchange rate.

12% senior secured notes due 2024

On October 14, 2016, we completed a private placement of our Secured Notes. Our
obligations under the Secured Notes and the related indenture are
unconditionally guaranteed on a secured basis by the guarantors, which include
all our subsidiaries, and the indenture contains customary events of default. We
are also required to 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.

We issued $84 million aggregate principal amount of the Secured Notes on October
14, 2016, an additional $36 million aggregate principal amount of the Secured
Notes on June 29, 2018 and an additional $25 million of the Secured Notes on May
15, 2019.

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 us 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.

We paid $7.2 million of the total proceeds of the October 2016 and June 2018
issuances into the cash reserve account maintained with the collateral agent
under the terms of the indenture, $2.2 million of which related to the second
issuance. We paid a further $1.5 million into the cash reserve account on May
15, 2019 in connection with the issuance of the additional $25 million of
Secured Notes on that date.

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, we will also 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 October 2016, June 2018 and May 2019 issuances of the
Secured Notes as well as the December 2018 amendment of the related indenture,
we entered into royalty rights agreements, pursuant to which we 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 we make our 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.

                                     - 54 -

--------------------------------------------------------------------------------

Cash flow for the years ended March 31, 2021 and 2020

Operating activities

Net cash used in operating activities was $77.6 million during the year ended
March 31, 2021, which included net losses of $108.5 million and non-cash items
of $29.7 million. Non-cash items were depreciation and amortization expense of
$8.6 million, share-based compensation expense of $5.0 million, deferred lease
rentals of $0.7 million, Swiss pension costs of $1.1 million, amortization of
deferred debt issue costs of $9.1 million, impairment of short term investments
of $2.3 million, accrued preference share dividends of $1.0 million and deferred
income taxes of $1.9 million. We also experienced a net cash inflow of $1.2
million from changes in operating assets and liabilities during the period,
consisting of a $0.5 million increase in inventories, a $0.5 million increase in
other assets and a $2.5 million decrease in accounts payable and accrued
liabilities, offset by a $0.6 million decrease in accounts receivable and a $4.0
million increase in accrued compensation and benefits.

Net cash used in operating activities was $80.6 million during the year ended
March 31, 2020, which included net losses of $102.8 million and non-cash items
of $26.3 million. Non-cash items were depreciation and amortization expense of
$12.3 million, share-based compensation expense of $4.5 million, deferred lease
rentals of $0.3 million, Swiss pension costs of $0.8 million, amortization of
deferred debt issue costs of $7.0 million, accrued preference share dividends of
$1.0 million and deferred income taxes of $0.4 million. We also experienced a
net cash outflow of $4.1 million from changes in operating assets and
liabilities during the period, consisting of a $5.0 million increase in
inventories, a $0.7 million increase in other assets and a $2.1 million increase
in accounts receivable, offset by a $2.5 million increase in accounts payable
and accrued liabilities and a $1.2 million increase in accrued compensation and
benefits.

Investing activities

Net cash from investing activities was $43.4 million in the year ended March 31,
2021, compared to net cash used in investing activities of $30.2 million in the
year ended March 31, 2020. We divested $47.7 million net from our short-term
investments in the year ended March 31, 2021, compared to investing $25.6
million net in our short term investments in the year ended March 31, 2020.
Purchases of property and equipment in the year ended March 31, 2021 were $4.3
million and were mainly related to payments for MosaiQ instruments and IT
upgrades. Purchases of property and equipment in the year ended March 31, 2020
were $4.6 million, and were mainly related to payments for an additional
assembly unit for our MosaiQ manufacturing facility.

Fundraising activities

The net cash provided by financing activities was $ 80.3 million during the year ended March 31, 2021, composed of $ 80.7 million generated by the issuance of ordinary shares on September 15, 2020 and $ 0.2 million generated by the exercise of stock options, offset by $ 0.6 million reimbursements of finance leases.

Net cash provided by financing activities was $114.6 million during the year
ended March 31, 2020, consisting of $24.1 million of net proceeds from the
issuance of additional Secured Notes on May 15, 2019, $90.5 million of net
proceeds from the issuance of ordinary shares on November 12, 2019 and $0.5
million of proceeds from the exercise of share options, offset by $0.5 million
of repayments on finance leases.

Operating and capital expenditure requirements

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,
2022 to be similar to those of the year ended March 31, 2021, 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
development expenditure on MosaiQ reduces.

As of March 31, 2021, we had available cash, cash equivalents and short-term
investments of $111.7 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 future capital needs will depend on many factors, including:

• our progress in the development and commercialization of MosaiQ and the cost

necessary to complete development, obtain regulatory approvals and complete

our manufacturing to scale;

• our ability to seek successful alternatives for the marketing of MosaiQ

in the patient market;

• our ability to manufacture and sell our conventional reactive products,

        including the costs and timing of further expansion of our sales and
        marketing efforts;

• the impact of the COVID-19 pandemic on the global economy, our business

        and our development timeline for MosaiQ;


                                     - 55 -
--------------------------------------------------------------------------------

• our ability to recover the remainder approximately $ 35 million funds

        invested in two funds that have suspended redemptions;


  • our ability to collect our accounts receivable;


  • our ability to generate cash from operations;

• any acquisition of businesses or technologies that we may undertake; and

• our ability to penetrate our existing market and new markets.


On May 26, 2021, we issued and sold $95.0 million aggregate principal amount of
the Convertible Notes in a private offering to institutional investors. The
Convertible Notes are guaranteed by our material subsidiaries. The Convertible
Notes are our unsecured, senior obligations and rank equally in right of payment
with all of our existing and future unsecured, unsubordinated indebtedness. The
Convertible Notes are convertible at the option of the holders at an initial
conversion rate of 176.3668 ordinary shares per $1,000.00 principal amount of
Convertible Notes, subject to adjustment. We have the right to redeem the
Convertible Notes in certain circumstances. On or prior to June 2, 2021, we may
issue up to an additional $15.0 million aggregate principal amount of the
Convertible Notes in one or more subsequent offerings. For further information
about the Convertible Notes, please see our Current Report on Form 8-K filed
with the SEC on May 27, 2021.



We currently expect that the additional net cash generated from the Convertible
Notes issuance combined with our existing available cash and short-term
investment balances are adequate to meet our forecasted cash requirements for
the next twelve months.



We expect to fund our operations in the near-term, including the ongoing
development of MosaiQ through successful field trial completion, achievement of
required regulatory authorizations and commercialization from a combination of
funding sources. These expected funding sources include the use of existing
available cash and short-term investment balances, the sale of rights and other
assets, and the issuance of new equity or debt.

Critical accounting policies and significant judgments and estimates

We have prepared our consolidated financial statements in accordance with U.S.
GAAP. Our preparation of these 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 1
to our consolidated financial statements included in this Annual Report, we
believe the following accounting policies to be critical to the judgments and
estimates used in the preparation of our financial statements.

Revenue recognition and accounts receivable

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 or ineffective
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.

                                     - 56 -

--------------------------------------------------------------------------------


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 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.

Inventories

We record inventories at the lower of cost (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.

Income taxes

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 had no accrued interest or penalties associated with unrecognized tax positions, and no such interest or penalties were accrued during the year ended. March 31, 2021.

Equity compensation expense

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 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
consolidated financial statements included in this Annual Report.

Defined benefit pension plan obligations



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 including the expected
return on plan assets, withdrawal and mortality rates, discount rate, and rate
of increase in employee compensation levels.



Assumptions are determined based on our data and appropriate market indicators,
and are evaluated each year as of the plans' measurement date. Should any of
these assumptions change, they would have an effect on net periodic pension
costs and the unfunded benefit obligation.



The expected long-term rate of return on plan assets reflects the average rate
of earnings expected on the funds invested, or to be invested, to provide for
the benefits included in the projected benefit obligations. In determining the
expected long-term rate of return on plan assets, we consider the relative
weighting of plan assets, the historical performance of total plan assets and
individual asset classes and economic and other indicators of future
performance.

                                     - 57 -

--------------------------------------------------------------------------------

The discount rate reflects the rate we would pay to purchase high quality investments that would provide sufficient liquidity to meet our current pension obligations. A 25 basis point change in the discount rate changes the projected benefit obligation by approximately $ 1.1 million for our plan.

Royalty Liability

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 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 MosaiQ products, 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.



Valuation and impairment of long-lived assets



Long-lived assets to be held and used, including property, plant, and equipment,
are reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amount of the assets or asset group may not be recoverable.
Factors we consider important that could trigger an impairment review include,
but are not limited to, the following:



• significant underperformance compared to historical or projected expectations

     future operating results;


  • significant negative industry or economic trends; or

• significant changes or developments in strategy or operations which

     affect the utilization of our long-lived assets.




Given the status of the project the valuation of the property, plant and
equipment associated with MosaiQ are reviewed each quarter. Determination of
recoverability is based on an estimate of undiscounted future cash flows
resulting from the use of the assets and their eventual disposition. In the
event that such cash flows are not expected to be sufficient to recover the
carrying amount of the assets, the assets are written down to their fair values.
Estimating the future cash outflows for this purpose requires us 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 MosaiQ products, and
thus are subject to significant uncertainty. We measure any impairment based on
a projected discounted cash flow method using a discount rate determined by
management to be commensurate with the risk inherent in our current business
model.


Changes in these estimates and assumptions could have a material impact on the determination of the fair value of these assets.

Valuation of short-term investments



On March 12, 2021, we announced that two funds managed by CSAM in which we had
invested an aggregate of approximately $110.35 million had suspended
redemptions. The investments into these funds were made in accordance with our
investment policy of making individual investments with a minimum of an A rating
from a leading credit-rating agency. Each fund holds short-term credit
obligations of various obligors. According to a press release issued by CSAM,
redemptions in the funds were suspended because "certain part of the Subfunds'
assets is currently subject to considerable uncertainties with respect to their
accurate valuation." CSAM subsequently began a liquidation of the funds.
Pursuant to the liquidation, we have already received cash distributions of
approximately $75.6 million. Based on information provided by Credit Suisse, we
expect to receive further cash distributions from the funds in the next several
months; however, there can be no assurance as to the timing or amount of any
such distributions.



While Credit Suisse has advised that the credit assets held by the funds are
covered by insurance that potentially will be available to cover losses the
funds would incur if any of the obligors on the funds' credit assets were to
default, we do not know if the funds will incur losses (net of insurance) on the
credit assets held by the funds.



On April 22, 2021, Credit Suisse published its FY 2021 Q1 press release with
commentary related to the Credit Suisse Supply Chain Finance Investment Grade
Fund and the Credit Suisse (Lux) Supply Chain Finance Fund. Notably, Credit
Suisse indicated that investors in the funds should assume losses will be
incurred.



                                     - 58 -
--------------------------------------------------------------------------------


As of March 31, 2021, we evaluated the investments in the CSAM managed funds for
impairment and determined that our investment in one of the funds was impaired.
We recognized an impairment expense of $2.3 million at March 31, 2021 related to
this fund.



We view the liquidation of the supply chain finance funds as a fluid situation
with a significant amount of valuation uncertainty. We will closely monitor the
situation and in the event that new information is released that provides
valuation clarity will evaluate the accounting implications accordingly. We
believe, and has advised Credit Suisse, that any losses on the supply chain
funds should be borne by Credit Suisse. We will pursue all available options to
recoup the full amount of its investment in the supply chain funds prior to
liquidation.

Leases



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 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.



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, 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.

Finance lease assets and operating lease right-of-use assets are tested for impairment in accordance with our accounting policy for long-lived assets.

Recent accounting positions

Refer to Note 1 to our accompanying audited consolidated financial statements
included elsewhere in this Annual Report for a discussion of recently issued
accounting pronouncements.



                                     - 59 -

————————————————– ——————————

© Edgar online, source Previews


Source link

About Joel Simmons

Check Also

Financial Services Security Software Market Forecast and Development Analysis – The Courier

Business Intelligence survey onGlobal Financial Services Security Software Market“ Strives to provide holistic information on …