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QUOTIENT LTD Management’s Discussion and Analysis of Financial Condition and Results of Operations (form 10-Q)

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You should read the following discussion and analysis of our financial condition
and results of operations in conjunction with the corresponding section of our
Annual Report on Form 10-K for the year ended March 31, 2022 filed with the SEC
on June 28, 2022.

The information set forth and discussed below for the quarters ended September
30, 2022 and September 30, 2021 is derived from the condensed consolidated
financial statements included under Part I, Item 1 "Financial Statements" above.
The financial information set forth and discussed below is unaudited but
includes all normal and recurring adjustments that our management considers
necessary for a fair presentation of the financial position and the operating
results and cash flows for those periods. Our results of operations for a
particular quarter may not be indicative of the results that may be expected for
other quarters or the entire year.

In addition to historical financial information, the following discussion
contains forward looking statements that reflect our plans, estimates, beliefs
and expectations that involve risks and uncertainties. Our actual results and
the timing of events could differ materially from those discussed in these
forward-looking statements. Factors that could cause or contribute to these
differences include those discussed below and elsewhere in this Quarterly
Report, and our Annual Report on Form 10-K for the year ended March 31, 2022,
particularly in "Risk Factors."

Insight


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

Updates on liquidity, financial condition and corporate strategy


While we have made substantial progress toward the commercialization of our
MosaiQ-based transfusion diagnostics products, that progress has been expensive
and has required us to continuously raise capital. Since earlier this year we
have pursued various potential methods of raising the funds that we require to
complete the commercialization of our products. Adverse conditions in the U.S.
and global capital markets made our pursuit of capital very difficult. To date,
we have been unable to raise additional capital in the amounts we require. We
are now close to running out of cash and close to being forced to cease
operations and liquidate our MosaiQ business. As of September 30, 2022, we had
approximately $41.4 million of cash, cash equivalents and investments, compared
with approximately $63.2 million of cash, cash equivalents and investments as of
June 30, 2022. Our investments include approximately $16.9 million of cash
invested in two funds that have suspended redemptions, and there can be no
assurance that we will receive future distributions of cash from these funds.

Because of our liquidity constraints, we have not made the interest payment on
our Senior Secured Notes that was due on October 17, 2022, in the amount of $4.0
million. Under the indenture governing our Senior Secured Notes, it is an "Event
of Default" if our failure to make the interest payment continues for 30 days
(in other words, if the payment has not been made by the close of business on
November 16, 2022).

We have continued to hold discussions with various parties, including certain of
our noteholders, about alternative means of obtaining access to the funding that
we now urgently need. In these discussions, to date:

The noteholders have agreed to amend the Senior Secured Notes indenture to
eliminate our obligation to make a cash interest payment otherwise due on
October 17, 2022, and to require us instead to make that interest payment by
issuing new debt securities to the noteholders. Because of this amendment, our
failure to make the October 17, 2022 interest payment when due will no longer be
a default

Certain of the holders of our Senior Secured Notes have committed to provide
bridge funding in the form of indebtedness in the amount of $3.7 million, when
our available cash on hand declines below $7.0 million. The noteholders'
obligations to fund the loan will be, subject to certain documentary conditions
and deliverables

We continue to have constructive discussions with our noteholders regarding a
restructuring of our outstanding indebtedness as well as additional funding,
although noteholders are not presently contractually committed to provide or
negotiate this funding and there is no assurance they will do so.

We understand that the noteholders' willingness to continue to pursue the
potential funding arrangements summarized above is premised on a change in our
business strategy in which we would suspend our activities focused on the
commercialization of our transfusion diagnostics products and would instead
focus in the near term exclusively on development and commercialization of
MosaiQ products for the autoimmune and allergy clinical diagnostics markets.
This change in strategy would involve our implementation of significant cost
reductions, including reductions in employee headcount.


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There is no assurance that our negotiations with the noteholders or with other
parties will result in definitive agreements or in our receipt of funding. If we
are unable to reach definitive agreements and consummate a funding in the next
few weeks, we may be required to shut down and liquidate our MosaiQ business or,
possibly, to seek protection under applicable bankruptcy or insolvency laws. In
either case, we expect that a restructuring of our balance sheet, the
procurement of additional funding, or a bankruptcy proceeding, would likely
result in the extinguishment, through cancellation for no consideration or
through dilution, of all of our outstanding equity interests, including any
outstanding options or warrants. To the extent we liquidate our MosaiQ business
and/or commence an insolvency or bankruptcy proceeding, we expect we would seek
to continue operating our Alba business but we would have no realistic prospect
of repaying all our existing liabilities in full.

In an effort to sustain our business under current market conditions as we seek
additional funding, we will shift our business strategy to focus our MosaiQ
innovation pipeline on clinical diagnostics with testing solutions for allergy
and autoimmune while pausing the development and commercialization of our MosaiQ
testing solutions in immunohematology and infectious disease immunoassay
screening. As we invest and reallocate resources, we will be reducing the number
of employees, partners and costs to match the clinical diagnostics priority and
seek to achieve a sustainable business, subject to obtaining additional funding.
The discussion below of our historical financial condition, results of
operations and liquidity position do not reflect any effects or costs of the
shift in our business strategy or the potential funding arrangements that we are
currently discussing with our noteholders; therefore, these historical results
are not indicative of our expected results in future periods.

Company overview


We currently operate as one business segment with 450 employees in the United
Kingdom, Switzerland, Dubai and the United States, as of September 30, 2022. Our
principal markets are the United States, Europe and Japan. Based on the location
of the customer, revenues outside the United States accounted for 45% of total
revenue during the six month period ended September 30, 2022 and 43% during the
three month period ended September 30, 2021.

We have incurred net losses and negative cash flows from operations in each year
since we commenced operations in 2007. As of September 30, 2022, we had an
accumulated deficit of $809.8 million. We expect our operating losses to
continue for at least the remainder of the fiscal year ending March 31, 2023 as
we continue our investment in the commercialization of MosaiQ. For the six month
period ended September 30, 2022, our total revenue was $17.7 million and our net
loss was $84.8 million.

From our incorporation in 2012 to March 31, 2022, we have raised $160.0 million
of gross proceeds through the private placement of our ordinary and preference
shares and warrants, $433.0 million of gross proceeds from public offerings of
our ordinary shares and issuances of ordinary shares upon exercise of warrants,
$145.0 million of gross proceeds from the issuance of 12% Senior Secured Notes
due 2025 (which we refer to as the Secured Notes) and $105 million of gross
proceeds from the issuance of 4.75% Convertible Notes due 2026 (which we refer
to as the Convertible Notes). In addition, on March 23, 2018, we raised $20.9
million from the sale and leaseback of our conventional reagents manufacturing
facility near Edinburgh, Scotland, which we refer to as the Allan Robb Campus,
or ARC, facility.

During the quarter ended June 30, 2022, we raised gross proceeds of
approximately $20.0 million from a public offering of 811,458 of our ordinary
shares and, in lieu of ordinary shares to certain investors, pre-funded warrants
exercisable for an aggregate of 855,208 ordinary shares at an exercise price of
$0.04 per share after accounting for the reverse stock split.

As of September 30, 2022, we had available cash, cash equivalents, and
investments of $41.4 million and $0.8 million of restricted cash held as part of
the arrangements relating to our Secured Notes and the lease of our property in
Eysins, Switzerland.

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" of this report and our Annual Report on Form 10-K
for the year ended March 31, 2022 filed with the SEC on June 28, 2022.

Clinical diagnostic microarrays

We currently expect commercial launch of the clinical diagnostic autoimmune microarray to occur before the end of calendar year 2023.

We currently expect commercial launch of the clinical allergy diagnostic DNA chip to occur before the end of calendar year 2024.

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 original
equipment manufacturer (or OEM) customers. We recognize revenues in the form of
product

                                     - 20 -
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sales when the goods are shipped. 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.

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.

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

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

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

We expense all research and development costs as incurred, net of government
grants received and tax credits. Our UK subsidiary claims certain tax credits on
its research and development expenditures and these are included as an offset to
our research and development expenses. Our research and development efforts are
focused on developing new products and technologies for the global transfusion
diagnostics market. We expect our costs associated with field trials and
regulatory approvals will increase at the same time as our development costs
with MosaiQ 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 Convertible Notes and the amortization debt discount and 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 instrument and report
them as interest expense in our statements of operations. Net interest also
includes the expected costs of the royalty rights agreements we entered into in
October 2016, June 2018, December 2018 and May 2019 with the purchasers and
consenting holders, as applicable, of our Secured Notes. See Note 3, "Debt" and
Note 6, "Ordinary and Preference Shares" to our condensed consolidated financial
statements included in this Quarterly Report for additional information.

Other income (expense), net consists of the change in fair value of our
convertible debt derivative, warrant liabilities and the impact of exchange rate
fluctuations. See Note 3, "Debt" and Note 5, "Fair value measurement" to our
condensed consolidated financial statements included in this Quarterly Report
for additional information. Exchange rate fluctuations 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 legal entities are Pounds Sterling, Swiss Francs,
Euros, and U.S. Dollars depending on the entity.

Provision for income taxes in the three and six month periods ended September
30, 2022 and 2021, reflected the taxes chargeable on the taxable income of our
subsidiaries.

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Operating results

Comparison of quarters ended September 30, 2022 and 2021

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


                                           Quarter Ended September 30,
                                      2022                             2021                         Change
                           Amount        % of revenue       Amount        % of revenue       Amount           %
                                                     (in thousands, except percentages)
Revenue:
Product sales             $   8,856                100 %   $   9,284                 98 %   $    (428 )          -5 %
Other revenues                    -                  0 %         183                  2 %        (183 )        -100 %
Total revenue                 8,856                100 %       9,467                100 %        (611 )          -6 %
Cost of revenue              21,117                238 %       4,875                 51 %      16,242           333 %
Gross margin                (12,261 )             -138 %       4,592                 49 %     (16,853 )        -367 %
Operating expenses:
Sales and marketing           3,513                 40 %       2,640                 28 %         873            33 %
Research and
development                  14,261                161 %      15,754                166 %      (1,493 )          -9 %
General and
administrative                7,696                 87 %      10,022                106 %      (2,326 )         -23 %
Total operating
expenses                     25,470                288 %      28,416                300 %      (2,946 )         -10 %
Operating loss              (37,731 )             -426 %     (23,824 )             -252 %     (13,907 )          58 %
Other (expense) income:
Interest income
(expense), net                7,386                 83 %      (9,352 )              -99 %      16,738          -179 %
Other, net                  (15,214 )             -172 %       5,916                 62 %     (21,130 )        -357 %
Total other expense,
net                          (7,828 )              -88 %      (3,436 )              -36 %      (4,392 )         128 %
Loss before income
taxes                       (45,559 )             -514 %     (27,260 )             -288 %     (18,299 )          67 %
Provision for income
taxes                          (367 )                -           155                  -          (522 )        -337 %
Net loss                  $ (45,926 )             -519 %   $ (27,105 )             -286 %   $ (18,821 )          69 %


Revenue

Total revenue for the quarter ended September 30, 2022 decreased by 6% to $8.9
million compared with $9.5 million for the quarter ended September 30, 2021. The
decrease in product sales relates primarily to reduced orders from an OEM
customer in our conventional reagent business. Other revenues for the quarter
ended September 30, 2021 related to a small development project for an OEM
customer.

Cost of sales and gross margin


Cost of revenue increased by 333% to $21.1 million for the quarter ended
September 30, 2022 compared with $4.9 million for the quarter ended September
30, 2021. The increase in costs of revenue of resulted from a $15.8 million
write-off of transfusion related MosaiQ inventory and purchase commitments.
There were also higher costs in our conventional reagent business due to
inventory write-downs and write-offs of certain products due to expiration of
products and quality control tests, and higher production costs associated with
inflation.

Gross margin on total revenue for the quarter ended September 30, 2022 was a
$12.3 million loss, a decrease of 367% when compared with a $4.6 million profit
for the quarter ended September 30, 2021. Total gross margin on sales was (138)%
in the quarter ended September 30, 2022 compared to 49% in the quarter ended
September 30, 2021.

Sales and marketing expenses


Sales and marketing expenses were $3.5 million for the quarter ended September
30, 2022, compared with $2.6 million for the quarter ended September 30, 2021.
This increase was attributable to greater personnel and other expenses related
to the planned commercial launch of MosaiQ and the opening of a sales office in
the Middle-East. As a percentage of total revenue, sales and marketing expenses
were 40% for the quarter ended September 30, 2022 compared to 28% for the
quarter ended September 30, 2021.

Research and development costs


Research and development expenses decreased by 9% to $14.3 million for the
quarter ended September 30, 2022 compared with $15.8 million for the quarter
ended September 30, 2021. The decrease in research and development expenses is
driven by lower write-offs of research and development materials and lower third
party costs associated with field trials in the quarter.

General and administrative expenses

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General and administrative expenses decreased by 23% to $7.7 million for the
quarter ended September 30, 2022, compared with $10.0 million for the quarter
ended September 30, 2021. The decrease was primarily attributed to a decrease of
stock compensation expense in the period where we recognized $35 in the quarter
ended September 30, 2022 compared with $1,404 in the quarter ended September 30,
2021. As a percentage of total revenue, general and administrative expenses were
87% for the quarter ended September 30, 2022 compared to 106% for the quarter
ended September 30, 2021.

Other (expense) income

Net interest income was $7.4 million for the quarter ended September 30, 2022
compared with $9.4 million in interest expense for the quarter ended September
30, 2021. Interest income in the quarter ended September 30, 2022 included $10.1
million of interest income on our Secured Notes and royalty liabilities compared
with $6.7 million expense for the quarter ended September 30, 2021. Income
recognized in 2022 resulted from decrease in the estimated payments due under
the royalty rights agreement. Interest expense for the quarter ended September
30, 2022 also included $2.6 million of interest charges related to the
Convertible Notes compared to $2.5 million for the quarter ended September 30,
2021. Net interest expense also included $0.3 million of dividends accrued on
the 7% cumulative redeemable preference shares in each of the quarters ended
September 30, 2022 and September 30, 2021. In the quarter ended September 30,
2021 we realized gains of $0.1 million on our short-term money market
investments while no gains were recognized in September 30, 2022.

Other, net was a $15.2 million expense for the quarter ended September 30, 2022
compared with a $5.9 million gain for the quarter ended September 30, 2021. For
the quarter ended September 30, 2022 this comprised a $2.1 million gain related
to the change in fair value associated with derivative liabilities, a $0.2
million impairment related to the change in estimated fair value of CSAM funds
and $17.1 million in foreign exchange losses arising on monetary assets and
liabilities denominated in foreign currencies. In the quarter ended September
30, 2021 this comprised a $9.3 million gain related to the change in fair value
associated with the Convertible Loan derivatives and $3.4 million in foreign
exchange losses arising on monetary assets and liabilities denominated in
foreign currencies

Provision for income taxes

Provision for income taxes during the quarter ended September 30, 2022 and 2021, reflected taxes due on the taxable income of our subsidiaries.

Comparison of six-month periods ended September 30, 2022 and 2021 The following table sets forth, for the periods indicated, the amounts of certain components of our statements of income and the percentage of total revenue represented by these items, showing the changes from period to period.

                                                Six months ended September 30,
                                             2022                             2021                         Change
                                  Amount        % of revenue       Amount        % of revenue       Amount           %
                                                            (in thousands, except percentages)
Revenue:
Product sales                    $  17,670                100 %   $  18,325                 99 %   $    (655 )          -4 %
Other revenues                           -                  0 %         231                  1 %        (231 )        -100 %
Total revenue                       17,670                100 %      18,556                100 %        (886 )          -5 %
Cost of revenue                     27,237                154 %       9,652                 52 %      17,585           182 %
Gross margin                        (9,567 )              -54 %       8,904                 48 %     (18,471 )        -207 %
Operating expenses:
Sales and marketing                  6,819                 39 %       5,133                 28 %       1,686            33 %
Research and development            28,407                161 %      29,285                158 %        (878 )          -3 %
General and administrative          18,733                106 %      20,198                109 %      (1,465 )          -7 %
Total operating expenses            53,959                305 %      54,616                294 %        (657 )          -1 %
Operating (loss)                   (63,526 )             -360 %     (45,712 )             -246 %     (17,814 )          39 %
Other income (expense):
Interest income (expense), net      (1,188 )               -7 %     (12,354 )              -67 %      11,166           -90 %
Other, net                         (19,580 )             -111 %       4,184                 23 %     (23,764 )        -568 %
Total other expense, net           (20,768 )             -118 %      (8,170 )              -44 %     (12,598 )         154 %
Loss before income taxes           (84,294 )             -477 %     (53,882 )             -290 %     (30,412 )          56 %
Provision for income taxes            (500 )                -          (515 )                -            15            -3 %
Net loss                         $ (84,794 )             -480 %   $ (54,397 )             -293 %   $ (30,397 )          56 %



Revenue
Total revenue for the six month period ended September 30, 2022 decreased by 5%
to $17.7 million, compared with $18.6 million for the six month period ended
September 30, 2021.


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The decrease in product sales relates primarily to reduced orders from an OEM
customer in our conventional reagent business. Other revenues for the six month
period ended September 30, 2021 related to a small development project for an
OEM customer.

Cost of sales and gross margin


Cost of revenue increased by 182% to $27.2 million for the six month period
ended September 30, 2022, compared with $9.7 million for the six month period
ended September 30, 2021. The increase in costs of revenue of resulted from a
$15.8 million write-down of transfusion related MosaiQ inventory and purchase
commitments. There were also higher costs in our conventional reagent business
due to inventory write-downs and write-offs of certain products due to
expiration of products and quality control tests, higher production costs
associated with inflation, and higher costs associated with sales mix in the six
month period ended September 30, 2022.

Gross margin on total revenue for the six month period ended September 30, 2022
was a $9.6 million loss, compared with $8.9 million gross margin for the six
month period ended September 30, 2021.

Sales and marketing expenses
Sales and marketing expenses were $6.8 million for the six month period ended
September 30, 2022, compared with $5.1 million for the six month period ended
September 30, 2021. This increase was attributable to greater personnel and
other expenses related to commercial launch activities with MosaiQ, opening of a
sales office in the Middle-East, and related travel costs. As a percentage of
total revenue, sales and marketing expenses were 39% for the six month period
ended September 30, 2022 compared to 28% for the six month period ended
September 30, 2021.

Research and development expenses
Research and development expenses decreased by 3% to $28.4 million for the six
month period ended September 30, 2022, compared with $29.3 million for the six
month period ended September 30, 2021. The decrease in research and development
expenses in 2022, is driven by a payment of $1.5 million related to the costs of
our intellectual property license with TTP which were incurred in 2021 but did
not occur in 2022. This was offset by higher expenses related to additional
employee and third party expenses to support planned field trials and product
development.

General and administrative expenses
General and administrative expenses decreased by 7% to $18.7 million for the six
month period ended September 30, 2022, compared with $20.2 million for the six
month period ended September 30, 2021. The decrease is primarily driven by a
reduction in stock compensation expense which was $1.7 million in the six month
period ended September 30, 2022 compared with $3.2 million in the six month
period ended September 30, 2021. As a percentage of total revenue, general and
administrative expenses were 106% for the six month period ended September 30,
2022 and 109% for the six month period ended September 30, 2021.

Other income (expenses)


Net interest expense was $1.2 million for the six month period ended September
30, 2022, compared with $12.4 million for the six month period ended September
30, 2021. Interest expense in the six month period ended September 30, 2021
included $4.5 million of interest income on our Secured Notes and royalty
liabilities compared with $8.6 million in expense the six month period ended
September 30, 2021. The decreased expense reflected changes in the royalty cost
estimates. Interest expense for the six month period ended September 30, 2022
also included $5.2 million of interest charges related to the Convertible Notes
compared to $3.4 million for the quarter ended September 30, 2021. Net interest
expense also included $0.5 million of dividends accrued on the 7% cumulative
redeemable preference shares in each of the six month periods ended September
30, 2022 and September 30, 2021. In addition, in the six month period ended
September 30, 2021 we realized interest income of $0.1 million on our short-term
money market investments while no interest income was recognized in the six
month period ended September 30, 2022.

Other, net was $19.6 million in expense for the six month period ended September
30, 2022 compared with a $4.2 gain for the six month period ended September 30,
2021. For the six month period ended September 30, 2022 this comprised a $12.9
million gain related to the change in fair value associated with the Convertible
Loan derivatives and warrants, $31.3 million of foreign exchange losses arising
on monetary assets and liabilities denominated in foreign currencies, and a $1.2
million impairment related to the change in estimated fair value of CSAM funds.
For the six month period ended September 30, 2021 this comprised a $7.3 million
gain related to the change in fair value associated with the Convertible Loan
derivatives and $3.1 million of foreign exchange losses arising on monetary
assets and liabilities denominated in foreign currencies.

Provision for income taxes Provision for income taxes for the six-month period ended September 30, 2021
reflects the taxes payable on the taxable income of our subsidiaries.

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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. Not all
products ship on the same day so quarters where four shipments occur do not
always align. In fiscal 2022 we experienced additional shipments in the third
and fourth quarters. In fiscal 2023, the greatest impact of extra product
shipments is expected to occur in our third quarter. The timing of shipment of
bulk antisera products to our OEM customers may also move 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 is primarily dependent on the achievement of pre-negotiated project milestones.

Cash and capital resources


See "Updates on Liquidity, Financial Condition and Company Strategy" above for a
discussion of recent developments affecting our current and expected liquidity
and capital resources.

Since our commencement of operations in 2007, we have incurred net losses and
negative cash flows from operations. As of September 30, 2022, we had an
accumulated deficit of $809.8 million. During the six month period ended
September 30, 2022, we incurred a net loss of $84.8 million and used $64.3
million of cash in operating activities. As described under results of
operations, our use of cash during the six month period ended September 30, 2022
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, 2022, we have raised $160.0 million
of gross proceeds through the private placement of our ordinary and preference
shares and warrants, $433.0 million of gross proceeds from public offerings of
our ordinary shares and issuances of ordinary shares upon exercise of warrants,
$145.0 million of gross proceeds from the issuance of the Secured Notes and $105
million of gross proceeds from the issuance of the Convertible Notes. In
addition, on March 23, 2018, we raised $20.9 million from the sale and leaseback
of the Allan Robb Campus.

During the six month period ended September 30, 2022, we raised gross proceeds
of approximately $20.0 million from a public offering of 811,458 of our ordinary
shares and, in lieu of ordinary shares to certain investors, pre-funded warrants
exercisable for an aggregate of 855,208 ordinary shares at an exercise price of
$0.04 per share.

On July 6, 2022, the Company completed the Sixth Supplemental Indenture to the
Secured Notes which includes a change to the amortization payment schedule of
the Secured Notes from requiring semi-annual payments ranging from $12.1 million
to $24.2 million beginning in April 2023, to requiring quarterly payments of
$2.5 million beginning on July 15, 2024 and ending on July 15, 2025, with the
remaining principal balance due on October 15, 2025, which will reduce expected
amortization payments by $93.0 million over the next 36 months prior to the
payment of the remaining principal balance at maturity. It eliminates the
requirement that we maintain a cash reserve account for the benefit of holders
of the Secured Notes, and adds a covenant that we maintain a minimum liquidity
of at least $8.0 million, comprised of cash and certain other eligible
investments, as of the end of each fiscal quarter. See Note 3 to the financial
statements for additional information.

Cash flow for the quarter ended September 30, 2022 and 2021

Operational activities


Net cash used in operating activities was $64.3 million during the six month
period ended September 30, 2022, which included net losses of $84.8 million
offset by non-cash items of $24.1 million. Non-cash items were depreciation and
amortization expense of $2.9 million, share-based compensation expense of $1.7
million, a decrease from the change in fair value of loan derivatives of $13.0
million, Swiss pension costs of $0.4 million, amortization of debt discounts,
royalty, and unrealized foreign currency loss on debt of $29.1 million,
impairment of investments of $1.2 million, accrued preference share dividends of
$0.5 million, deferred lease rentals of $0.8 million and income taxes of $0.5
million. We also experienced a net cash outflow of $3.6 million from changes in
operating assets and liabilities during the period, consisting of a $0.9 million
reduction in accrued compensation and benefits, a $7.2 million decrease in
inventories, a decrease of $10.2 million from a net change in other assets and
liabilities, a $0.1 million reduction in accounts payable and accrued
liabilities, and a $0.4 million decrease in accounts receivables.

Net cash used in operating activities was $58.7 million during the six month
period ended September 30, 2021, which included net losses of $54.4 million
offset by non-cash items of $3.9 million. Non-cash items were depreciation and
amortization expense of $3.9 million, share-based compensation expense of $3.2
million, a reduction from the change in fair value of convertible loan
derivatives of $7.3 million, Swiss pension costs of $0.4 million, amortization
of deferred debt issue costs, discount, and royalties of $2.2 million, accrued
preference share dividends of $0.5 million, deferred lease rentals of $0.4
million and income taxes of $0.6 million. We also experienced a net cash outflow
of $8.2 million from changes in operating assets and liabilities during the
period, consisting of a $6.0 million reduction in accrued compensation and
benefits, a $3.1 million increase in inventories, and a $2.9 million increase in
other

                                     - 25 -
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active and compensated by $3.6 million increase in accounts payable and accrued liabilities and a $0.2 million reduction in accounts receivable.

Investing activities


Net cash (used in) provided by investing activities was $1.2 million for the six
month period ended September 30, 2022 compared to $43.0 million for the quarter
ended September 30, 2021. We spent $1.1 million on purchases of property and
equipment in the six month period ended September 30, 2022, which was mainly
related to purchasing MosaiQ instruments and investments in our IT
infrastructure.

Net cash provided by investing activities was $43.0 million for the six month
period ended September 30, 2021. We spent $1.7 million on purchases of property
and equipment in the six month period ended September 30, 2021, which was mainly
related to purchasing MosaiQ instruments and investments in our IT
infrastructure. We also received distributions on our short-term money market
investments of $29.7 million from CSAM in the six month period ended September
30, 2021, received $19.5 million from selling other short term investments and
invested $4.5 million in other short-term money market investments.

Fundraising activities


Net cash provided by financing activities was $17.6 million during the six month
period ending September 30, 2022, consisting of $17.9 million of proceeds
related to the issuance of ordinary shares and warrants after deducting issuance
costs and $0.3 million of repayments on finance leases.

Net cash provided by financing activities was $88.0 million during the quarter
ended September 30, 2021, consisting of $100.5 million generated from the
issuance of the Convertible Notes, net of debt issue costs, offset by $12.1
million repayment of the Secured Notes, expenses related to restricted stock
units vested of $0.1 million and $0.3 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 our operating losses to continue for at least
the remainder of the fiscal year ending March 31, 2023. As we launch MosaiQ in
the donor testing market, we expect our operating expenses during the year ended
March 31, 2023 to be similar to those of the year ended March 31, 2022.

As of September 30, 2022, we had $41.4 million of available cash, cash
equivalents, and investments and $0.8 million of restricted cash held as part of
the arrangements relating to our Secured Notes and the lease of our properties
in Eysins, Switzerland.

Critical Accounting Policies and Significant Judgments and Estimates


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

For a detailed discussion of our critical accounting policies, see Note 1,
"Organization and Summary of Significant Accounting Policies." to our Annual
Report on Form 10-K for the year ended March 31, 2022. For a detailed
description of our significant judgements and estimates, see "Management's
Discussion and Analysis of Financial Condition and Results of Operations" in our
Annual Report on Form 10-K for the year ended March 31, 2022.

Recent accounting pronouncements


We did not adopt any other new accounting pronouncements during the six month
period ended September 30, 2022 that had a significant effect on our condensed
consolidated financial statements included in this Quarterly Report.

Item 3. Reserved

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