Business and basis of presentation

Description of business

Oxford Immunotec Global PLC, or the Company, is a global, high-growth diagnostics company focused on developing and commercializing proprietary tests for immunology and infectious disease by leveraging the technological, product development, manufacturing, quality, regulatory, and sales and marketing capabilities it has developed over its

seventeen

year history. The Company’s proprietary T-SPOT.

test utilizes its T-SPOT technology platform to test for tuberculosis, which is the leading cause of infectious disease death worldwide.

Discontinued operations

The Company reports the results of operations of a business that either has been disposed of or is classified as held for sale, in accordance with Accounting Standards Codification, or ASC,

360,

Property, Plant, and Equipment

, in discontinued operations, as required by ASC

205,

Presentation of Financial Statements

. The Company presents such events as discontinued operations so long as the financial results can be clearly identified and the future operations and cash flows are completely eliminated from ongoing operations. The Company’s historical results for all periods presented are restated to account for businesses reported as discontinued operations in our Consolidated Financial Statements and these Notes. Unless otherwise specified, disclosures in our Consolidated Financial Statements and these Notes relate solely to our continuing operations.

As discussed in Note

13,

Discontinued operations

, on

September 25, 2018,

the Company entered into an agreement to sell the Company’s U.S. Laboratory Services Business to Quest Diagnostics Incorporated. The Transaction represents a strategic business shift having a major effect on the Company’s operations and financial results. Accordingly, operations have been reported in discontinued operations in the consolidated financial statements for all periods presented. The Transaction was consummated on

November 6, 2018

for gross proceeds of

$170

million in cash. Immediately following the Transaction, the Company had approximately

210

employees, including sales and marketing teams on

three

continents, and a laboratory in the United Kingdom.

Unaudited interim financial statements

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles, or U.S. GAAP, for interim financial information and with the instructions to Form

-Q and Article

of Regulation S-

Accordingly, they do

not

include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, the interim condensed consolidated financial statements reflect all adjustments, of a normal recurring nature, necessary for a fair statement of the financial position at

March 31, 2019,

the results of operations for the

three

-month periods ended

March 31, 2019

and

2018,

and the cash flows for the

three

-month periods ended

March 31, 2019

and

2018.

Interim results are

not

necessarily indicative of results for a full year.

The consolidated balance sheet presented as of

December 31, 2018,

has been derived from the audited consolidated financial statements as of that date. The consolidated financial statements and notes included in this report should be read in conjunction with the

2018

consolidated financial statements and notes included in the Company’s Annual Report on Form

-K, as filed with the Securities and Exchange Commission on

March 28, 2019,

or the Company’s

2018

Form

-K.

Cash

cash equivalents

and restricted cash

The Company considers all highly liquid investments purchased with maturities at acquisition of

three

months or less to be cash equivalents. The Company maintains its available cash balances in cash, money market funds and repurchase agreements primarily invested in U.S. government and agency securities, and bank savings accounts in the United States, United Kingdom, Germany, Japan, China and South Korea. The Company maintains deposits in government insured financial institutions in excess of government insured limits. Management believes that the Company is

not

exposed to significant credit risk due to the financial position of the depository institutions in which those deposits are held.

Restricted cash relates to collateral for procurement cards issued by a U.S. commercial bank.

Cash, cash equivalents, and restricted cash consists of the following:

(in thousands)	March 31, 2019		December 31, 2018
Cash and cash equivalents	$	189,518	$	192,844
Restricted cash, non-current		100		100
Total cash, cash equivalents, and restricted cash	$	189,618	$	192,944

Revenues

The Company’s revenues include product and service revenues. In general, revenue from diagnostic test kit sales and related accessories is recognized at a point in time based upon contractual rates. However, for contracts with tiered pricing provisions, if the tiered pricing constitutes a material right and spans across multiple reporting periods, the Company estimates the total transaction price at the beginning of each reset period (i.e. the period in which revenue at different tiers is earned and settled) based on expected volumes. The Company revises its estimates of variable consideration at each reporting date throughout each reset period. Service revenue is recorded based upon contractually established billing rates and recognized upon delivery of test results to the customer. See Note

Revenue

for disaggregation of revenue by type and geography.

As of

March 31, 2019,

accounts receivables related to products and services were

$10.2

million. For the

three

months ended

March 31, 2019,

the Company had

material bad-debt expense and there were

material contract assets, contract liabilities or deferred contract costs recorded on the Condensed Consolidated Balance Sheet as of

March 31, 2019.

The Company generally expenses sales commissions when incurred because the amortization period would be less than

one

year.

Revenue expected to be recognized in any future year related to remaining performance obligations is

not

material.

Taxes assessed by governmental authorities on revenue, including sales and value added taxes, are recorded on a net basis (excluded from revenue) in the consolidated statements of operations.

Other than the following discussion regarding leases, the remainder of the significant accounting estimates and policies used in preparation of the condensed consolidated financial statements disclosed in Note

Description of business and significant accounting policies

to the consolidated financial statements in the Company’s

2018

Form

-K remain unchanged.

Leases

February 2016,

the Financial Accounting Standards Board, or FASB, issued Accounting Standard Update or ASU

2016

02,

Leases,

or ASU

2016

02,

to enhance the transparency and comparability of financial reporting related to leasing arrangements. The Company adopted ASU

2016

January 1, 2019,

or the effective date, and used the effective date as its date of initial application.

At the inception of an arrangement, the Company determines whether the arrangement is or contains a lease based on the unique facts and circumstances present. Most leases with a term greater than

one

year are recognized on the balance sheet as right-of-use assets, lease liabilities and, if applicable, long-term lease liabilities. The Company has elected

not

to recognize on the balance sheet leases with terms of

one

year or less. 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 exclude lease incentives and initial direct costs incurred. The operating lease right-of-use assets are subsequently assessed for impairment in accordance with the Company’s accounting policy for long-lived assets. The interest rate implicit in lease contracts is typically

not

readily determinable. As a result, the Company utilizes its incremental borrowing rates, which are the rates incurred to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment. The incremental borrowing rate was determined at lease commencement, or as of

January 1, 2019

for operating leases existing upon adoption of ASC

842.

The incremental borrowing rate is subsequently reassessed upon modification to the lease arrangement.

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.). Then the fixed and in-substance fixed contract consideration (including any related to non-components) must be allocated based on fair values to the lease components and non-lease components.

Although separation of lease and non-lease components is required, certain practical expedients are available. Entities

may

elect the practical expedient to

not

separate lease and non-lease components and would instead account for each lease component and the related non-lease component together as a single component. The Company has elected to account for the lease and non-lease components of each of its operating leases as a single lease component and allocate all of the contract consideration to the lease component only. The lease component results in an operating lease right-of-use asset being recorded on the balance sheet and amortized on a straight-line basis as lease expense.

Recently Adopted Accounting Pronouncements

February 2016,

the FASB issued ASU

2016

02,

which requires lessees to reflect all leases with terms longer than

months on their balance sheets. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. The FASB has subsequently issued amendments to the guidance, including the addition of an optional transition method. The Company’s process of evaluating the impact of ASU

2016

has included reviewing all forms of leases and performing a completeness assessment over the lease population. The Company adopted ASU

2016

January 1, 2019

and applied the modified retrospective approach, which recognize a cumulative-effect adjustment, if any, to the opening balance of retained earnings. The Company took advantage of the transition package of practical expedients permitted within ASU

2016

02,

which among other things, allowed it to carryforward historical lease classifications. The Company made an accounting policy election that will keep leases with an initial term of

months or less and that do

not

include an option to purchase the underlying asset that the Company is reasonably certain to exercise off of the balance sheet and will result in recognizing those lease payments in the consolidated statements of operations on a straight-line basis over the lease term. As a result of adopting ASU

2016

02,

the Company recognized right-of-use assets of about

$7.2

million and corresponding liabilities of about

$8.2

million for its existing lease portfolio on its consolidated balance sheets. The adoption of ASU

2016

has

not

had a material impact on the Company’s consolidated statements of operations or consolidated statements of cash flows. The Company has included additional disclosures in Note

12.

Lease commitments

to its condensed consolidated financial statements regarding its leasing portfolio, including key judgments and assumptions and the discount rates used in calculating the Company’s right-of-use assets and corresponding liabilities.

June 2018,

the FASB issued ASU

2018

07,

Improvements to Nonemployee Share-Based Payment Accounting

, or ASU

2018

07.

ASU

2018

simplifies the accounting for share-based payments to nonemployees by aligning it with the accounting for share-based payments to employees, with certain exceptions. The Company adopted ASU

2018

prospectively as of

January 1, 2019.

The adoption of ASU

2018

has

not

had a material impact on the Company’s financial position, results of operations or related disclosures.

Recently Issued Accounting Pronouncements

June 2016,

the FASB issued ASU

2016

13,

Financial Instruments-Credit Losses

, or ASU

2016

13.

ASU

2016

requires a financial asset (or a group of financial assets) measured at amortized cost basis to be presented at the net amount expected to be collected. Under current U.S. GAAP, a company only considered past events and current conditions in measuring an incurred loss. Under ASU

2016

13,

the information that a company must consider is broadened in developing an expected credit loss estimate for assets measured either collectively or individually. The use of forecasted information incorporates more timely information in the estimate of expected credit loss. The new guidance will be effective for the Company for annual and interim periods beginning after

December 15, 2019.

Early adoption is permitted for annual and interim periods beginning after

December 15, 2018.

The guidance is applied using a modified retrospective, or prospective approach, depending on a specific amendment. The Company does

not

expect that the application of ASU

2016

will have a material impact on the presentation of its results of operations, financial position, or related disclosures.

January 2017,

the FASB issued ASU

2017

04,

Intangibles – Goodwill and Other

, or ASU

2017

04.

ASU

2017

simplifies subsequent measurement of goodwill by eliminating Step

from the goodwill impairment test. The new guidance will be applied on a prospective basis. ASU

2017

will be effective for the Company for annual or any interim goodwill impairment tests in fiscal years beginning after

December 15, 2019.

Early adoption is permitted for interim or annual goodwill impairment tests. The Company is currently evaluating ASU

2017

04.