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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2020

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from              to             

Commission File Number 001-36415

 

QUOTIENT LIMITED

(Exact name of registrant as specified in its charter)

 

 

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)

011-41-22-716-9800

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading Symbol

 

Name of each exchange on which registered

Ordinary Shares, nil par value

 

QTNT

 

The Nasdaq Global Market

 

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.

 

Large accelerated filer

 

  

Accelerated filer

 

 

 

 

 

Non-accelerated filer

 

  

Smaller reporting company

 

 

 

 

 

 

 

 

Emerging growth company

 

 

 

 

 

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 November 4, 2020, there were 101,021,719 Ordinary Shares, nil par value, of Quotient Limited outstanding.

 

 

 


 

TABLE OF CONTENTS

 

 

  

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

  

 

27

 

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk

  

 

41

 

 

Item 4. Controls and Procedures

  

 

42

 

 

PART II – OTHER INFORMATION

  

 

43

 

 

Item 1. Legal Proceedings

  

 

43

 

 

Item 1A. Risk Factors

  

 

43

 

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

  

 

45

 

 

Item 3. Defaults Upon Senior Securities

  

 

45

 

 

Item 4. Mine Safety Disclosures

  

 

45

 

 

Item 5. Other Information

  

 

45

 

 

Item 6. Exhibits

  

 

46

 

 

Signatures

 

 

47

 

 

 

 

- i -


 

Cautionary note regarding forward-looking statements

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.

Forward-looking statements include statements about:

 

the continuing development, regulatory approval and commercialization of the MosaiQTM technology, or “MosaiQ”;

 

the design of blood grouping and disease screening capabilities of MosaiQ, the potential for the expansion of MosaiQ into the larger clinical diagnostics market and the benefits of MosaiQ for both customers and patients (including using MosaiQ  to test for novel coronavirus disease 2019, or COVID-19, antibodies);

 

future demand for and customer adoption of MosaiQ, the factors that we believe will drive such demand and our ability to address such demand;

 

our expected profit margins for MosaiQ;

 

the size of the market for MosaiQ;

 

the regulation of MosaiQ by the U.S. Food and Drug Administration, or the FDA, or other regulatory bodies, or any unanticipated regulatory changes or scrutiny by such regulators;

 

future plans for our conventional reagent products;

 

the status of our future relationships with customers, suppliers, and regulators relating to our products;

 

future demand for our conventional reagent products and our ability to meet such demand;

 

our ability to manage the risks associated with international operations;

 

anticipated changes, trends and challenges in our business and the transfusion diagnostics market;

 

continued or worsening adverse conditions in the global economic and financial markets, including as a result of the recent COVID-19 pandemic;

 

the impact on our business of the United Kingdom ceasing to be a member of the European Union;

 

the effects of competition;

 

the expected outcome or impact of arbitration or litigation;

 

our ability to protect our intellectual property and operate our business without infringing upon the intellectual property rights of others;

 

our anticipated cash needs, including the adequacy of our available cash and short-term investment balances relative to our forecasted cash requirements for the next twelve months, our expected sources of funding, and our estimates regarding our capital requirements and capital expenditures; and

 

our plans for executive and director compensation for the future.

 

 

 

 

- 1 -


 

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, 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.

Available Information

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, 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.

 

 

- 2 -


 

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)

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

 

 

 

 

September 30,

2020

 

 

March 31,

2020

 

ASSETS

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

18,125

 

 

$

3,923

 

Short-term investments

 

 

144,618

 

 

 

116,871

 

Trade accounts receivable, net

 

 

4,518

 

 

 

5,402

 

Inventories

 

 

22,798

 

 

 

20,501

 

Prepaid expenses and other current assets

 

 

5,851

 

 

 

3,775

 

Total current assets

 

 

195,910

 

 

 

150,472

 

Restricted cash

 

 

9,031

 

 

 

9,017

 

Property and equipment, net

 

 

39,912

 

 

 

40,165

 

Operating lease right-of-use assets

 

 

21,557

 

 

 

21,493

 

Intangible assets, net

 

 

614

 

 

 

625

 

Deferred income taxes

 

 

237

 

 

 

237

 

Other non-current assets

 

 

4,634

 

 

 

4,454

 

Total assets

 

$

271,895

 

 

$

226,463

 

LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

5,138

 

 

$

4,826

 

Accrued compensation and benefits

 

 

5,191

 

 

 

7,210

 

Accrued expenses and other current liabilities

 

 

17,410

 

 

 

15,490

 

Current portion of long-term debt

 

 

12,083

 

 

 

 

Current portion of operating lease liability

 

 

3,138

 

 

 

3,033

 

Current portion of finance lease obligation

 

 

577

 

 

 

598

 

Total current liabilities

 

 

43,537

 

 

 

31,157

 

Long-term debt, less current portion

 

 

145,326

 

 

 

153,024

 

Operating lease liability, less current portion

 

 

20,282

 

 

 

19,914

 

Finance lease obligation, less current portion

 

 

921

 

 

 

1,117

 

Defined benefit pension plan obligation

 

 

7,169

 

 

 

6,353

 

7% Cumulative redeemable preference shares

 

 

20,950

 

 

 

20,425

 

Total liabilities

 

 

238,185

 

 

 

231,990

 

Commitments and contingencies

 

 

 

 

 

 

Shareholders' equity (deficit):

 

 

 

 

 

 

 

 

Ordinary shares (nil par value) 100,965,451 and 80,398,326 issued and outstanding at September 30, 2020 and March 31, 2020 respectively

 

 

540,769

 

 

 

459,931

 

Additional paid in capital

 

 

35,416

 

 

 

33,132

 

Accumulated other comprehensive loss

 

 

(18,636

)

 

 

(15,155

)

Accumulated deficit

 

 

(523,839

)

 

 

(483,435

)

Total shareholders' equity (deficit)

 

 

33,710

 

 

 

(5,527

)

Total liabilities and shareholders' equity (deficit)

 

$

271,895

 

 

$

226,463

 

 

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

 

- 3 -


 

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (unaudited)

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

 

 

 

 

Quarter ended

 

 

Six months ended

 

 

 

September 30,

 

 

September 30,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Product sales

 

$

8,543

 

 

$

7,096

 

 

$

17,467

 

 

$

15,265

 

Other revenues

 

 

7,523

 

 

 

750

 

 

 

7,523

 

 

 

750

 

Total revenue

 

 

16,066

 

 

 

7,846

 

 

 

24,990

 

 

 

16,015

 

Cost of revenue

 

 

(4,499

)

 

 

(3,970

)

 

 

(9,913

)

 

 

(8,534

)

Gross profit

 

 

11,567

 

 

 

3,876

 

 

 

15,077

 

 

 

7,481

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sales and marketing

 

 

(2,231

)

 

 

(2,253

)

 

 

(4,474

)

 

 

(4,833

)

Research and development, net of government grants

 

 

(12,878

)

 

 

(13,083

)

 

 

(24,328

)

 

 

(24,736

)

General and administrative expense:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Compensation expense in respect of share options and

   management equity incentives

 

 

(1,324

)

 

 

(1,001

)

 

 

(2,284

)

 

 

(2,179

)

Other general and administrative expenses

 

 

(8,232

)

 

 

(5,980

)

 

 

(16,810

)

 

 

(12,597

)

Total general and administrative expense

 

 

(9,556

)

 

 

(6,981

)

 

 

(19,094

)

 

 

(14,776

)

Total operating expense

 

 

(24,665

)

 

 

(22,317

)

 

 

(47,896

)

 

 

(44,345

)

Operating loss

 

 

(13,098

)

 

 

(18,441

)

 

 

(32,819

)

 

 

(36,864

)

Other income (expense):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense, net

 

 

(6,858

)

 

 

(7,291

)

 

 

(12,784

)

 

 

(13,376

)

Other, net

 

 

4,998

 

 

 

(1,244

)

 

 

5,231

 

 

 

(294

)

Other expense, net

 

 

(1,860

)

 

 

(8,535

)

 

 

(7,553

)

 

 

(13,670

)

Loss before income taxes

 

 

(14,958

)

 

 

(26,976

)

 

 

(40,372

)

 

 

(50,534

)

Provision for income taxes

 

 

(17

)

 

 

(14

)

 

 

(32

)

 

 

(27

)

Net loss

 

$

(14,975

)

 

$

(26,990

)

 

$

(40,404

)

 

$

(50,561

)

Other comprehensive income (loss):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Change in fair value of foreign currency

   cash flow hedges

 

$

279

 

 

$

(158

)

 

$

276

 

 

$

(278

)

Change in unrealized gain on short-term investments

 

 

(79

)

 

 

47

 

 

 

(483

)

 

 

194

 

Foreign currency gain (loss)

 

 

(3,447

)

 

 

(11

)

 

 

(3,301

)

 

 

(1,025

)

Provision for pension benefit obligation

 

 

14

 

 

 

48

 

 

 

27

 

 

 

96

 

Other comprehensive loss, net

 

 

(3,233

)

 

 

(74

)

 

 

(3,481

)

 

 

(1,013

)

Comprehensive loss

 

$

(18,208

)

 

$

(27,064

)

 

$

(43,885

)

 

$

(51,574

)

Net loss available to ordinary shareholders - basic and diluted

 

$

(14,975

)

 

$

(26,990

)

 

$

(40,404

)

 

$

(50,561

)

Loss per share - basic and diluted

 

$

(0.18

)

 

$

(0.41

)

 

$

(0.49

)

 

$

(0.76

)

Weighted-average shares outstanding - basic and diluted

 

 

83,949,195

 

 

 

66,291,548

 

 

 

82,227,052

 

 

 

66,185,501

 

 

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

 

 

- 4 -


 

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

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

 

 

 

Ordinary shares

 

 

Additional paid in

 

 

Accumulated

Other Comprehensive

 

 

Accumulated

 

 

Total Shareholders'

 

 

 

Shares

 

 

Amount

 

 

capital

 

 

Loss

 

 

Deficit

 

 

Equity (Deficit)

 

June 30, 2020

 

 

80,593,440

 

 

$

459,990

 

 

$

34,092

 

 

$

(15,403

)

 

$

(508,864

)

 

$

(30,185

)

Issue of shares, net of issue costs of $5,565

 

 

20,294,117

 

 

 

80,685

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

80,685

 

Issue of shares upon exercise of incentive share options and vesting of RSUs

 

 

77,894

 

 

 

94

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

94

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(14,975

)

 

 

(14,975

)

Change in the fair value of foreign currency cash flow hedges

 

 

 

 

 

 

 

 

 

 

 

 

 

 

279

 

 

 

 

 

 

 

279

 

Change in unrealized gain on short-term investments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(79

)

 

 

 

 

 

 

(79

)

Foreign currency gain (loss) on:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Long-term investment nature intra-entity balances

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(3,841

)

 

 

 

 

 

 

(3,841

)

Retranslation of foreign entities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

394

 

 

 

 

 

 

 

394

 

Provision for pension benefit obligation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

14

 

 

 

 

 

 

 

14

 

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(3,233

)

 

 

 

 

 

 

(3,233

)

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

1,324

 

 

 

 

 

 

 

 

 

 

1,324

 

September 30, 2020

 

 

100,965,451

 

 

$

540,769

 

 

$

35,416

 

 

$

(18,636

)

 

$

(523,839

)

 

$

33,710

 

 

 

 

 

Ordinary shares

 

 

Additional paid in

 

 

Accumulated

Other Comprehensive

 

 

Accumulated

 

 

Total Shareholders'

 

 

 

Shares

 

 

Amount

 

 

capital

 

 

Loss

 

 

Deficit

 

 

Equity (Deficit)

 

March 31, 2020

 

 

80,398,326

 

 

$

459,931

 

 

$

33,132

 

 

$

(15,155

)

 

$

(483,435

)

 

$

(5,527

)

Issue of shares, net of issue costs of $5,565

 

 

20,294,117

 

 

 

80,685

 

 

 

 

 

 

 

 

 

 

 

 

80,685

 

Issue of shares upon exercise of incentive share options and vesting of RSUs

 

 

273,008

 

 

 

153

 

 

 

 

 

 

 

 

 

 

 

 

153

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(40,404

)

 

 

(40,404

)

Change in the fair value of foreign currency cash flow hedges

 

 

 

 

 

 

 

 

 

 

 

276

 

 

 

 

 

 

276

 

Unrealized gain on short-term investments

 

 

 

 

 

 

 

 

 

 

 

(483

)

 

 

 

 

 

(483

)

Foreign currency gain (loss) on:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Long-term investment nature intra-entity balances

 

 

 

 

 

 

 

 

 

 

 

844

 

 

 

 

 

 

844

 

Retranslation of foreign entities

 

 

 

 

 

 

 

 

 

 

 

(4,145

)

 

 

 

 

 

(4,145

)

Provision for pension benefit obligation

 

 

 

 

 

 

 

 

 

 

 

27

 

 

 

 

 

 

27

 

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

(3,481

)

 

 

 

 

 

(3,481

)

Stock-based compensation

 

 

 

 

 

 

 

 

2,284

 

 

 

 

 

 

 

 

 

2,284

 

September 30, 2020

 

 

100,965,451

 

 

$

540,769

 

 

$

35,416

 

 

$

(18,636

)

 

$

(523,839

)

 

$

33,710

 

 

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

 

- 5 -


 

 

 

Ordinary shares

 

 

Additional paid in

 

 

Accumulated

Other Comprehensive

 

 

Accumulated

 

 

Total Shareholders'

 

 

 

Shares

 

 

Amount

 

 

capital

 

 

Loss

 

 

Deficit

 

 

Deficit

 

June 30, 2019

 

 

66,212,893

 

 

$

369,021

 

 

$

29,843

 

 

$

(15,823

)

 

$

(404,233

)

 

$

(21,192

)

Issue of shares upon exercise of

   incentive share options and

   vesting of RSUs

 

 

153,813

 

 

 

314

 

 

 

 

 

 

 

 

 

 

 

 

314

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(26,990

)

 

 

(26,990

)

Change in the fair value of foreign

   currency cash flow hedges

 

 

 

 

 

 

 

 

 

 

 

(158

)

 

 

 

 

 

(158

)

Change in unrealized gain on short-

   term investments

 

 

 

 

 

 

 

 

 

 

 

47

 

 

 

 

 

 

47

 

Foreign currency gain (loss) on:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Long-term investment nature

   intra-entity balances

 

 

 

 

 

 

 

 

 

 

 

2,118

 

 

 

 

 

 

2,118

 

Retranslation of foreign entities

 

 

 

 

 

 

 

 

 

 

 

(2,129

)

 

 

 

 

 

(2,129

)

Provision for pension benefit

   obligation