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, 2019 

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 001-36200

________________________

OXFORD IMMUNOTEC GLOBAL PLC

(Exact name of registrant as specified in its charter)

England and Wales	98-1133710
(State or other jurisdiction of	(I.R.S. Employer Identification No.)
incorporation or organization)
94C Innovation Drive, Milton Park, Abingdon OX14 4RZ, United Kingdom	Not Applicable
(Address of Principal Executive Offices)	(Zip Code)

+44 (0)1235 442780

(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, £0.006705 nominal value per share	OXFD	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 ☐   Non-accelerated filer   ☐ 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 October 24, 2019, there were 26,446,585 Ordinary Shares, nominal value £0.006705, of Oxford Immunotec Global PLC outstanding.

Oxford Immunotec Global PLC

Form 10-Q

Quarterly Period Ended September 30, 2019

TABLE OF CONTENTS

PART I – FINANCIAL INFORMATION
Item 1.	Financial Statements:
	Condensed consolidated balance sheets as of September 30, 2019 (unaudited) and December 31, 2018	4
	Condensed consolidated statements of operations (unaudited) for the three and nine months ended September 30, 2019 and 2018	5
	Condensed consolidated statements of other comprehensive income (loss) (unaudited) for the three and nine months ended September 30, 2019 and 2018	6
	Condensed consolidated statements of shareholders’ equity (unaudited) for the nine months ended September 30, 2019 and 2018	7
	Condensed consolidated statements of cash flows (unaudited) for the nine months ended September 30, 2019 and 2018	8
	Notes to the unaudited condensed consolidated financial statements	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	19
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	31
Item 4.	Controls and Procedures	31
PART II – OTHER INFORMATION
Item 1.	Legal Proceedings	32
Item 1A.	Risk Factors	32
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	32
Item 6.	Exhibits	32
Signatures		33

1

Special Note Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q, or the Quarterly Report, and the exhibits hereto, contains or incorporates by reference estimates, predictions, opinions, projections and other statements that may be interpreted as “forward-looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. 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 Part II, Item 1A, “Risk Factors,” but are also contained elsewhere in this Quarterly Report. In some cases, you can identify forward-looking statements by the words “may,” “might,” “will,” “would,” “could,” “should,” “intend,” “plan,” “contemplate,” “expect,” “anticipate,” “believe,” “estimate,” “predict,” “project,” “target,” “potential,” “continue,” and “ongoing” and other comparable expressions intended to identify statements about the future, although not all forward-looking statements contain these identifying words. These statements involve substantial known and unknown risks, uncertainties and other factors that may cause our actual results, level of activity, performance or achievements to differ materially from those currently anticipated. Forward-looking statements are neither historical facts nor assurances of future performance. 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 that involve substantial risks and uncertainties. Such risks and uncertainties include, but are not limited to:

● our failure to meet our obligations arising from the sale of our U.S. laboratory services business, or the U.S. Laboratory Services Business, to Quest Diagnostics Incorporated, or Quest, a Delaware corporation, or the Transaction;

● the potential disruption of management time from ongoing business operations due to the Transaction;

● our exposure to potential litigation and contingent liabilities pursuant to the Transaction that could have a material adverse effect on our financial condition;

● given our prior history of losses, our ability to achieve and sustain profitability and our ability to manage our growth;

● our ability to continue to sell our T-SPOT.TB at current prices if, for example, our customers or prospective customers are unwilling to pay for our tests at current pricing levels or as a result of increased competition generally;

● our ability to effectively use our current financial resources and our ability to obtain additional capital resources;

● our ability to further develop, commercialize and achieve market acceptance of our current and future products;

● our ability to obtain and maintain regulatory body clearance and approval to market any of our products;

● continued demand for diagnostic products for tuberculosis and other immune-regulated conditions and the development of new market opportunities;

● our ability to compete successfully in our target markets and to maintain and expand our sales network;

● coverage and reimbursement decisions of insurers and other third-party payors, as well as guidelines, recommendations, and studies published by various organizations related to the use of our products;

● our dependence on certain of our customers, suppliers and service providers;

● disruptions to our business, including disruptions at our laboratory and manufacturing facilities;

● the integrity and uninterrupted operation of our information technology and storage systems;

● the impact of currency fluctuations on our business;

● the impact of global economic and political developments, including the referendum to leave the European Union, passed by the United Kingdom, or U.K., on June 23, 2016, and further implementing legislation on our business;

● potential changes in the United States, or U.S., social, political, regulatory and economic conditions or laws and policies governing the health care system, U.S. tax laws, and laws and regulations impacting foreign trade, immigration, manufacturing, and development and investment in the U.S. and in other territories and countries where we or our customers and suppliers operate;

● our ability to make successful acquisitions or investments and to manage the integration of such acquisitions or investments;

● our ability to retain key members of our management;

● the impact of taxes on our business, including our ability to use net operating losses;

● the impact of legislative and regulatory developments, including healthcare and tax reform, on our business;

● the impact of any product liability, intellectual property and commercial litigation on our business;

● our ability to comply with Securities and Exchange Commission, or SEC, reporting, antifraud, anti-corruption, environmental, health and safety laws and regulations;

● our ability to maintain effective internal control over financial reporting;

● our ability to maintain our licenses to sell our products around the world, including in countries such as China, Japan and the U.S.;

● our ability to protect and enforce our intellectual property rights;

● our status as an English company with our ordinary shares listed in the U.S.;

● the volatility of the price of our ordinary shares, potential substantial future sales of our ordinary shares and the fact that we do not pay dividends; and

● the impact of anti-takeover provisions under U.K. law and our articles of association.

2

You should refer to Part I, Item 1A, “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2018 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. As used in this Quarterly Report, the words “Company,” “we,” “us” and “our” refer to Oxford Immunotec Global PLC, a public limited company incorporated under the laws of England and Wales.

Where You Can Find More Information

We are required to file annual, quarterly and current reports, proxy statements and other information with the SEC. Our SEC filings are available to the public on the SEC’s website at www.sec.gov. In addition, we make available free of charge on our corporate website at www.oxfordimmunotec.com (in the “Investors” section) copies of materials we file with, or furnish to, the SEC. By referring to our corporate website, www.oxfordimmunotec.com, we do not incorporate such website or its contents into this Quarterly Report.

3

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

Oxford Immunotec Global PLC

Condensed consolidated balance sheets

	September 30,			December 31,
(in thousands, except share and per share data)	2019			2018
	(unaudited)
Assets
Current assets:
Cash and cash equivalents	$	184,282		$	192,844
Accounts receivable, net		15,496			9,158
Other receivable		8,696			4,500
Inventory, net		9,800			7,767
Prepaid expenses and other assets		3,157			2,511
Total current assets		221,431			216,780
Restricted cash, non-current		100			100
Other receivable, non-current		1,079			4,500
Property and equipment, net		6,378			7,144
Operating lease right-of-use assets		6,662			-
Goodwill		2,483			2,483
Other intangible assets, net		43			61
Deferred tax asset		790			1,052
Total assets	$	238,966		$	232,120
Liabilities and shareholders' equity
Current liabilities:
Accounts payable	$	3,085		$	2,801
Accrued liabilities		8,718			10,891
Current portion of operating lease liability		533			-
Settlement liability		4,218			4,106
Deferred income		174			125
Current portion of loans payable		-			85
Total current liabilities		16,728			18,008
Long-term portion of operating lease liability		7,239			-
Long-term portion of loans payable		30			106
Total liabilities		23,997			18,114
Commitments and contingencies (Note 13)
Shareholders' equity:
Ordinary shares, £0.006705 nominal value; 40,060,729 and 38,978,604 shares authorized at September 30, 2019 and December 31, 2018, respectively, and 26,642,510 and 26,439,334 shares issued and outstanding at September 30, 2019 and December 31, 2018, respectively		278			276
Additional paid-in capital		306,601			303,015
Accumulated deficit		(81,485	)		(80,762	)
Accumulated other comprehensive loss		(10,425	)		(8,523	)
Total shareholders' equity		214,969			214,006
Total liabilities and shareholders' equity	$	238,966		$	232,120

See accompanying notes to these unaudited condensed consolidated financial statements.

4

Oxford Immunotec Global PLC

Condensed consolidated statements of operations

(unaudited)

	Three months ended						Nine months ended
	September 30,						September 30,
(in thousands, except share and per share data)	2019			2018			2019			2018
Revenue:
Product	$	20,115		$	15,095		$	52,622		$	40,236
Service		1,104			955			2,974			4,150
Total revenue		21,219			16,050			55,596			44,386
Cost of revenue:
Product		5,313			3,864			14,306			9,993
Service		418			709			1,053			2,877
Total cost of revenue		5,731			4,573			15,359			12,870
Gross profit		15,488			11,477			40,237			31,516
Operating expenses:
Research and development		1,631			1,754			6,044			5,969
Sales and marketing		7,405			6,432			21,169			20,655
General and administrative		5,531			8,132			16,230			19,349
Settlement expense		799			212			1,002			1,979
Total operating expenses		15,366			16,530			44,445			47,952
Operating income (loss) from continuing operations		122			(5,053	)		(4,208	)		(16,436	)
Other income (expense):
Interest income (expense), net		1,064			(673	)		3,426			(2,011	)
Foreign exchange gains (losses)		360			(52	)		(233	)		(306	)
Other income (expense)		23			5			65			(242	)
Income (loss) from continuing operations before income taxes		1,569			(5,773	)		(950	)		(18,995	)
Income tax benefit (expense) from continuing operations		(383	)		(485	)		1,230			(1,182	)
Income (loss) from continuing operations		1,186			(6,258	)		280			(20,177	)
Discontinued operations:
Income (loss) from discontinued operations before income taxes		(469	)		2,774			(469	)		(104	)
Income tax expense		-			-			-			-
Income (loss) from discontinued operations		(469	)		2,774			(469	)		(104	)
Net income (loss)	$	717		$	(3,484	)	$	(189	)	$	(20,281	)
Net income (loss) per ordinary share - basic
Income (loss) from continuing operations	$	0.04		$	(0.24	)	$	0.01		$	(0.78	)
Income (loss) from discontinued operations		(0.02	)		0.11			(0.02	)		-
Net income (loss)	$	0.03		$	(0.13	)	$	(0.01	)	$	(0.78	)
Net income (loss) per ordinary share - diluted:
Income (loss) from continuing operations	$	0.04		$	(0.24	)	$	0.01		$	(0.78	)
Income (loss) from discontinued operations		(0.02	)		0.11			(0.02	)		-
Net income (loss)	$	0.03		$	(0.13	)	$	(0.01	)	$	(0.78	)
Weighted-average shares used to compute net income (loss) per ordinary share - basic		26,751,083			26,033,550			26,631,704			25,867,014
Weighted-average shares used to compute net income (loss) per ordinary share - diluted		26,936,541			26,033,550			26,904,481			25,867,014

See accompanying notes to these unaudited condensed consolidated financial statements.

5

Oxford Immunotec Global PLC

Condensed consolidated statements of other comprehensive loss

(unaudited)

	Three months ended						Nine months ended
	September 30,						September 30,
(in thousands)	2019			2018			2019			2018
Net income (loss)	$	717		$	(3,484	)	$	(189	)	$	(20,281	)
Other comprehensive loss:
Foreign currency translation adjustment, including tax charges of $426, $124, $486, and $396, respectively		(1,714	)		(614	)		(1,902	)		(1,578	)
Other comprehensive loss, net of tax		(1,714	)		(614	)		(1,902	)		(1,578	)
Total comprehensive loss	$	(997	)	$	(4,098	)	$	(2,091	)	$	(21,859	)

See accompanying notes to these unaudited condensed consolidated financial statements.

6

Oxford Immunotec Global PLC

Condensed consolidated statements of shareholders’ equity

(unaudited)

										Accumulated
				Additional						other			Total
	Ordinary			paid-in			Accumulated			comprehensive			shareholders'
(in thousands)	shares			capital			deficit			gain (loss)			equity
Balance at December 31, 2018	$	276		$	303,015		$	(80,762	)	$	(8,523	)	$	214,006
Exercise of share options		2			1,800			-			-			1,802
Share-based compensation expense		-			845			-			-			845
Tax on vesting of restricted share units		-			(145	)		-			-			(145	)
Other comprehensive income		-			-			-			1,167			1,167
Net loss		-			-			(1,496	)		-			(1,496	)
Balance at March 31, 2019		278			305,515			(82,258	)		(7,356	)		216,179
Exercise of share options		2			1,531			-			-			1,533
Share-based compensation expense		-			846			-			-			846
Tax on vesting of restricted share units		-			(10	)		-			-			(10	)
Other comprehensive loss		-			-			-			(1,355	)		(1,355	)
Net income		-			-			590			-			590
Balance at June 30, 2019		280			307,882			(81,668	)		(8,711	)		217,783
Exercise of share options		-			593			-			-			593
Share-based compensation expense		-			983			-			-			983
Tax on vesting of restricted share units		-			(68	)		-			-			(68	)
Other comprehensive loss		-			-			-			(1,714	)		(1,714	)
Ordinary shares repurchased		(2	)		(2,789	)		(534	)		-			(3,325	)
Net income		-			-			717			-			717
Balance at September 30, 2019	$	278		$	306,601		$	(81,485	)	$	(10,425	)	$	214,969

									Accumulated
			Additional						other			Total
	Ordinary		paid-in			Accumulated			comprehensive			shareholders'
(in thousands)	shares		capital			deficit			gain (loss)			equity
Balance at December 31, 2017	$	269	$	294,613		$	(201,541	)	$	(5,712	)	$	87,629
Exercise of share options		2		82			-			-			84
Share-based compensation expense		-		1,824			-			-			1,824
Tax on vesting of restricted share units		-		(156	)		-			-			(156	)
Other comprehensive income		-		-			-			557			557
Net loss		-		-			(10,326	)		-			(10,326	)
Balance at March 31, 2018		271		296,363			(211,867	)		(5,155	)		79,612
Exercise of share options		1		729			-			-			730
Share-based compensation expense		-		922			-			-			922
Tax on vesting of restricted share units		-		(108	)		-			-			(108	)
Other comprehensive loss		-		-			-			(1,521	)		(1,521	)
Net loss		-		-			(6,471	)		-			(6,471	)
Balance at June 30, 2018		272		297,906			(218,338	)		(6,676	)		73,164
Exercise of share options		4		1,881			-			-			1,885
Share-based compensation expense		-		1,015			-			-			1,015
Other comprehensive loss		-		-			-			(614	)		(614	)
Net loss		-		-			(3,484	)		-			(3,484	)
Balance at September 30, 2018	$	276	$	300,802		$	(221,822	)	$	(7,290	)	$	71,966

See accompanying notes to these consolidated financial statements.

7

Oxford Immunotec Global PLC

Condensed consolidated statements of cash flows

(unaudited)

	Nine months ended
	September 30,
(in thousands)	2019			2018
Cash flows from operating activities
Net income (loss)	$	(189	)	$	(20,281	)
Less: Net loss from discontinued operations, net of tax		(469	)		(104	)
Net income (loss) from continuing operations		280			(20,177	)
Adjustments to reconcile net income (loss) from continuing operations to net cash used in operating activities:
Depreciation and amortization expense		1,351			953
Non-cash rent expense		178			-
Accretion and amortization of loan fees and non-cash interest income		(147	)		421
Share-based compensation expense		2,674			3,550
Loss on disposal of property and equipment		20			84
Deferred income taxes		(250	)		1,117
Changes in operating assets and liabilities:
Accounts receivable, net		(6,686	)		(1,291	)
Inventory, net		(2,346	)		773
Prepaid expenses and other assets		(1,974	)		(270	)
Accounts payable		325			(8,982	)
Accrued liabilities		(820	)		2,978
Deferred income		49			-
Other liabilities, net		-			(70	)
Net cash used in operating activities from continuing operations		(7,346	)		(20,914	)
Cash flows from investing activities
Purchases of property and equipment		(729	)		(4,884	)
Net cash used in investing activities from continuing operations		(729	)		(4,884	)
Cash flows from financing activities
Proceeds from exercise of share options		3,926			2,697
Payments of tax withheld on exercises of options and vesting of restricted share units		(224	)		(265	)
Repurchases of ordinary shares		(3,325	)		-
Payments on capital lease		-			(57	)
Net cash provided by financing activities from continuing operations		377			2,375
Net cash flows of continuing operations		(7,698	)		(23,423	)
Cash flows from discontinued operations
Net operating cash flows provided by discontinued operations		-			6,778
Net investing cash flows used in discontinued operations		-			(2,527	)
Net financing cash flows used in discontinued operations		-			(10	)
Net cash flows of discontinued operations		-			4,241
Effect of exchange rate changes on cash, cash equivalents, and restricted cash		(864	)		(994	)
Net decrease in cash, cash equivalents, and restricted cash		(8,562	)		(20,176	)
Cash, cash equivalents, and restricted cash at beginning of period		192,944			90,532
Cash, cash equivalents, and restricted cash at end of period	$	184,382		$	70,356

See accompanying notes to these unaudited condensed consolidated financial statements.

8

Oxford Immunotec Global PLC

Notes to Unaudited Condensed Consolidated Financial Statements

September 30, 2019

1. 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.TB 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 14. 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, or the Transaction. The Transaction represented 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 10-Q and Article 10 of Regulation S-X. 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 September 30, 2019, the results of operations for the three and nine-month periods ended September 30, 2019 and 2018, and the cash flows for the nine-month periods ended September 30, 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 Company's audited consolidated financial statements as of that date. The consolidated financial statements and notes included in this Quarterly Report should be read in conjunction with the 2018 consolidated financial statements and notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018, as filed with the Securities and Exchange Commission on March 28, 2019, or the 2018 Form 10-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)	September 30, 2019		December 31, 2018
Cash and cash equivalents	$	184,282	$	192,844
Restricted cash, non-current		100		100
Total cash, cash equivalents, and restricted cash	$	184,382	$	192,944

9

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 2. Revenue for disaggregation of revenue by type and geography.

For the three and nine months ended September 30, 2019, the Company had no material bad-debt expense and there were no material contract assets, contract liabilities or deferred contract costs recorded on the condensed consolidated balance sheet as of September 30, 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 1. Description of business and significant accounting policies to the consolidated financial statements in the 2018 Form 10-K remain unchanged.

Leases

In February 2016, the Financial Accounting Standards Board, or FASB, issued Accounting Standards 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 2016-02 on 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 ASU 2016-02. 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 consideration 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.

Income taxes

The Company calculates its interim income tax provision in accordance with ASC 270, Interim Reporting, and ASC 740, Accounting for Income Taxes. At the end of each interim period, the Company estimates its annual effective tax rate and applies that rate to its ordinary quarterly earnings to calculate the tax related to ordinary income. The tax effects for other items that are excluded from ordinary income are discretely calculated and recognized in the period in which they occur.

The Company recognized an income tax provision of $383,000 and $485,000 for the three months ended September 30, 2019 and September 30, 2018, respectively. In the first quarter of 2019, the Company revised its transfer pricing model to reflect changes in the Company’s business model following the Transaction. Upon completion of the full transfer pricing study in the third quarter of 2019, the Company reassessed the realizability of its deferred tax assets based on all available evidence. As a result, the Company recorded a reversal of $2.2 million of the previously recognized valuation allowances against its deferred tax assets in the U.S. and a $1.4 million valuation allowance against its deferred tax assets in the U. K. The Company recognized an income tax benefit of $1.2 million and income tax expense of $1.2 million for the nine months ended September 30, 2019 and 2018, respectively.

10

Recently adopted accounting pronouncements

In February 2016, the FASB issued ASU 2016-02, which requires lessees to reflect all leases with terms longer than 12 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 2016-02 has included reviewing all forms of leases and performing a completeness assessment over the lease population. The Company adopted ASU 2016-02 on 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 12 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 as of January 1, 2019. The adoption of ASU 2016-02 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 13. 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.

In June 2018, the FASB issued ASU 2018-07, Improvements to Nonemployee Share-Based Payment Accounting, or ASU 2018-07. ASU 2018-07 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 2018-07 prospectively as of January 1, 2019. The adoption of ASU 2018-07 has not had a material impact on the Company’s financial position, results of operations or related disclosures.

Recently issued but not yet adopted accounting pronouncements

In June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses, or ASU 2016-13. ASU 2016-13 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 is currently expected to be effective for the Company for annual and interim periods beginning after December 15, 2019. The FASB is considering a delay of the implementation until annual and interim periods beginning after December 15, 2022 for smaller reporting companies. 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 has been reviewing ASU 2016-13 and does not believe its adoption will have a material impact on the presentation of its results of operations, financial position, or related disclosures.

In January 2017, the FASB issued ASU 2017-04, Intangibles – Goodwill and Other, or ASU 2017-04. ASU 2017-04 simplifies subsequent measurement of goodwill by eliminating Step 2 from the goodwill impairment test. The new guidance will be applied on a prospective basis. ASU 2017-04 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 does not expect that the application of ASU 2017-04 will have a material impact on the presentation of its results of operations, financial position, or related disclosures.

In August 2018, the FASB issued ASU No. 2018-13, Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement, or ASU 2018-13, which modifies certain disclosure requirements on fair value measurements. The amendments regarding changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements, and the narrative description of measurement uncertainty are required to be applied prospectively for only the most recent interim or annual period presented in the initial fiscal year of adoption. All other amendments are required to be applied retrospectively to all periods presented upon their effective date. ASU 2018-13 is effective for fiscal years beginning after December 15, 2019 and interim periods within those years. The Company does not anticipate a material impact to disclosures as a result of the adoption of ASU 2018-13.

11

2. Revenue

On November 6, 2018, the Company completed the sale of its U.S. Laboratory Services Business to Quest Diagnostics Incorporated. Accordingly, the Company’s prior year revenues have been recast to present the U.S. laboratory services business as a discontinued operation. For further information on these changes, refer to Note 14. Discontinued operations.

The following tables present the Company’s revenues disaggregated by type:

	Three months ended September 30,				Nine months ended September 30,
(in thousands)	2019		2018		2019		2018
Revenue
Product	$	20,115	$	15,095	$	52,622	$	40,236
Service		1,104		955		2,974		4,150
Total revenue	$	21,219	$	16,050	$	55,596	$	44,386

Service revenue for the three and nine months ended September 30, 2018 included $93,000 and $1.7 million, respectively, from the blood donor screening market from which the Company withdrew in late 2018.

The following tables reflect revenue by geography (United States, Europe and rest of world, or Europe and ROW, and Asia):

	Three months ended September 30,				Nine months ended September 30,
(in thousands)	2019		2018		2019		2018
Revenue
United States	$	5,735	$	2,876	$	19,034	$	11,615
Europe and ROW		2,709		2,277		7,670		6,750
Asia		12,775		10,897		28,892		26,021
Total revenue	$	21,219	$	16,050	$	55,596	$	44,386

United States revenue for the three and nine months ended September 30, 2018 included $93,000 and $1.7 million, respectively, from the blood donor screening market from which the Company withdrew in late 2018.

3. Fair value measurement

As a basis for determining the fair value of certain of the Company’s financial instruments, the Company utilizes a three-tier value hierarchy, which prioritizes the inputs used in measuring fair value as follows:

Level 1—Observable inputs such as quoted prices in active markets for identical assets or liabilities.

Level 2—Observable inputs, other than Level 1 prices, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

This hierarchy requires the Company to use observable market data, when available, and to minimize the use of unobservable inputs when determining fair value. The carrying amount of certain of the Company’s financial instruments, including cash, accounts receivable, prepaid expenses and other assets, accounts payable, and accrued liabilities approximate fair value due to their short term nature.

Assets and liabilities measured at fair value are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the entire fair value measurement requires management to make judgments and consider factors specific to the asset or liability.

The tables below present information about the Company’s financial assets measured at fair value on a recurring basis as of the respective dates and indicate the level of the fair value hierarchy utilized to determine such fair values. The Company had no financial liabilities measured at fair value on a recurring basis as of the dates indicated.

	September 30, 2019
(in thousands)	Total		Level 1		Level 2		Level 3
Assets:
U.S. Government money market funds	$	10,848	$	10,848	$	-	$	-
Tri-party repurchase agreements (collateralized by at least 102% U.S. Treasury and Agency Securities)		161,098		161,098		-		-
Total	$	171,946	$	171,946	$	-	$	-

	December 31, 2018
(in thousands)	Total		Level 1		Level 2		Level 3
Assets:
U.S. Government money market funds	$	19,812	$	19,812	$	-	$	-
Tri-party repurchase agreements (collateralized by at least 102% U.S. Treasury and Agency Securities)		165,157		165,157		-		-
Total	$	184,969	$	184,969	$	-	$	-

12

Money market funds and repurchase agreements were valued by the Company using quoted prices in active markets for similar securities, which represent a Level 1 measurement within the fair value hierarchy.

4. Accounts receivable, net

Accounts receivable, net, consisted of the following as of:

(in thousands)	September 30, 2019			December 31, 2018
Accounts receivable	$	15,620		$	9,246
Less allowance for uncollectible accounts receivable		(124	)		(88	)
Accounts receivable, net	$	15,496		$	9,158

5. Inventory, net

Inventory, net consisted of the following as of:

(in thousands)	September 30, 2019		December 31, 2018
Raw materials	$	8,347	$	6,169
Work in progress		71		190
Finished goods		1,382		1,408
Inventory, net	$	9,800	$	7,767

6. Goodwill and acquired intangible assets

The Company has one reporting unit, and goodwill represents the synergies realized in its acquisitions of Imugen, Inc. and Immunetics, Inc. The carrying amount of goodwill reflected in the Company’s consolidated balance sheets was $2.5 million at September 30, 2019 and December 31, 2018. 

Acquired intangible assets consisted of the following as of September 30, 2019 and December 31, 2018:

	As of September 30, 2019
(in thousands)	Amortization period (years)	Gross carrying amount		Accumulated Amortization		Net carrying amount
Licenses	5-10	$	652	$	609	$	43
Total		$	652	$	609	$	43

	As of December 31, 2018
(in thousands)	Amortization period (years)	Gross carrying amount		Accumulated Amortization		Net carrying amount
Licenses	5-10	$	652	$	591	$	61
Total		$	652	$	591	$	61

13

7. Accrued liabilities

Accrued liabilities consisted of the following as of:

(in thousands)	September 30, 2019		December 31, 2018
Employee related expenses	$	4,516	$	5,536
Accrued discount		1,173		-
Royalties		1,122		1,354
Professional services		893		863
Corporate tax		118		1,616
Other accrued liabilities		896		1,522
Total accrued liabilities	$	8,718	$	10,891

8. Loans payable

On October 4, 2016, the Company entered into the MidCap Agreement, which provided it with $40 million in debt financing, comprised of both a term loan and a revolving line of credit. The term loan was in the amount of $30 million and matured five years from the closing of the financing transaction. The term loan accrued interest at a rate of LIBOR plus 7.60% with interest only payments for the first 24 months, with the ability to extend to 48 months subject to certain conditions, before the loan began to amortize. The MidCap Agreement also provided the Company with a revolving line of credit of up to $10 million, which matured five years from the closing of the financing transaction. The revolving line of credit accrued interest at a rate of LIBOR plus 4.45%. The Company was also required to pay MidCap an unused line fee equal to 0.50% per annum of the average unused portion of the revolving line of credit. Based on certain conditions, both the term loan and revolving line of credit could have been increased by an additional $10 million for a total of $60 million.

On November 6, 2018, approximately $32.3 million of the gross proceeds received pursuant to the Transaction was paid directly to MidCap to repay the outstanding indebtedness under the MidCap Agreement, which included prepayment and exit fees of approximately $2.3 million. In connection with the Company’s repayment of the outstanding indebtedness under the MidCap Agreement, the term loan, the revolving loan, and all related agreements were terminated and all borrowings outstanding thereunder were repaid in full. The repayment resulted in a fourth quarter 2018 loss on extinguishment of debt of $2.1 million, which represents the cash paid to settle the debt in excess of debt related balances at the time of settlement. 

9. Share capital

During the nine-month period ended September 30, 2019, the Company issued 380,601 ordinary shares upon the exercise of options and 65,405 ordinary shares upon the vesting of restricted share units, or RSUs. During the twelve months ended December 31, 2018, the Company issued 694,322 ordinary shares upon the exercise of options and 83,378 ordinary shares upon the vesting of RSUs.

In 2019, the Company’s Board of Directors authorized the repurchase of up to $100 million of its ordinary shares in the aggregate, subject to the approval of its shareholders by an ordinary resolution at its 2019 Annual General Meeting, or the share repurchase program. The share repurchase program was approved by the Company’s shareholders at its Annual General Meeting held on June 18, 2019 and was initiated during the third quarter of 2019. During the three-month period ended September 30, 2019, the Company repurchased 242,830 ordinary shares at a total cost of $3.3 million. As the share repurchase program allows for a maximum repurchase of $100 million of the Company’s ordinary shares including commissions, up to $96.7 million of ordinary shares remain eligible for repurchase as of September 30, 2019. The share repurchase program may be suspended, modified or discontinued at any time, and the Company has no obligation to repurchase any amount of its ordinary shares under the program. Unless discontinued by the Company's Board of Directors, the share repurchase program will be valid for up to five years.

14

10. Share option and equity incentive plan

The impact on the Company’s results of operations from share-based compensation was as follows:

	Three months ended September 30,				Nine months ended September 30,
(in thousands)	2019		2018		2019		2018
Cost of revenue	$	21	$	38	$	56	$	161
Research and development		132		201		244		581
Sales and marketing		332		137		910		774
General and administrative		498		572		1,464		2,034
Total continuing operations		983		948		2,674		3,550
Discontinued operations		-		67		-		211
Total share-based compensation	$	983	$	1,015	$	2,674	$	3,761

In November 2013, in connection with the Company’s initial public offering, the Company adopted the 2013 Share Incentive Plan, or the 2013 Plan, which provides for the grant of share options, restricted shares, RSUs, and other share-based awards to employees, officers, directors and consultants of the Company. The 2013 Plan was amended at the Company's 2017 annual general meeting of shareholders.

During the three-month period ended September 30, 2019, the Company granted 39,520 share options with an exercise price of $13.33 per share under the 2013 Plan. The weighted-average grant date fair value related to share options granted under the 2013 Plan during the three-month period ended September 30, 2019 was $5.80 per share.

During the nine-month period ended September 30, 2019, the Company granted to certain employees 469,848 share options with exercise prices ranging from $13.33 to $16.42 per share under the 2013 Plan. The weighted-average grant date fair value related to share options granted under the 2013 Plan during the nine-month period ended September 30, 2019 was $7.22 per share. Share options generally vest based on the grantee’s continued service with the Company during a specified period following the vesting start date and expire after ten years.

During the three and nine-month periods ended September 30, 2019, the Company awarded 11,928 and 154,472 RSUs, respectively. RSUs vest based on the grantee’s continued service with the Company during a specified period following grant as follows: 40% on the second anniversary of the vesting start date; 30% on the third anniversary of the vesting start date; and 30% on the fourth anniversary of the vesting start date. Share-based compensation expense for these RSUs is calculated based on the grant date market price of the shares and is being recognized over the vesting period.

For the three-month period ended September 30, 2019, the Company incurred shared-based compensation expense related to share options and RSUs of $658,000 and $325,000, respectively. For the three-month period ended September 30, 2018, the Company incurred shared-based compensation expense related to share options and RSUs of $748,000 and $267,000, respectively.

For the nine-month period ended September 30, 2019, the Company incurred shared-based compensation expense related to share options and RSUs of $1.9 million and $741,000, respectively. For the nine-month period ended September 30, 2018, the Company incurred shared-based compensation expense related to share options and restricted shares/RSUs of $2.4 million and $1.3 million, respectively.

As of September 30, 2019, there was $5.1 million and $3.5 million of total unrecognized compensation cost related to unvested share options and RSUs, respectively. These costs are expected to be recognized over weighted-average periods of 2.6 years for share options and 2.8 years for RSUs.

15

11. Net income (loss) per share

	Three months ended September 30,						Nine months ended September 30,
($ in thousands)	2019			2018			2019			2018
Numerator
Income (loss) from continuing operations	$	1,186		$	(6,258	)	$	280		$	(20,177	)
Income (loss) from discontinued operations		(469	)		2,774			(469	)		(104	)
Net income (loss)	$	717		$	(3,484	)	$	(189	)	$	(20,281	)
Denominator
Weighted-average ordinary shares - basic		26,751,083			26,033,550			26,631,704			25,867,014
Dilutive effect of ordinary share equivalents resulting from ordinary share options and RSUs		185,458			-			272,777			-
Weighted-average ordinary shares - diluted		26,936,541			26,033,550			26,904,481			25,867,014

The following numbers of outstanding ordinary share options and unvested RSUs were excluded from the computation of diluted net loss per share for the periods presented because their effect would have been anti-dilutive:

	Three months ended September 30,				Nine months ended September 30,
	2019		2018		2019		2018
Options to purchase ordinary shares		-		383,855		-		290,226
Unvested RSUs		-		332,455		-		332,455

12. Settlement expense

On September 30, 2019, the Company entered into a Settlement Agreement and Release with Oxford University Innovation Limited, or OUI, or the OUI Settlement Agreement, to resolve outstanding disputes arising from a license agreement with OUI. The terms of the OUI Settlement Agreement are confidential.

On June 18, 2018, the Company entered into a Settlement Agreement with the former shareholders of Immunetics, Inc., or the Immunetics Settlement Agreement, to resolve disputes arising from the Agreement and Plan of Merger dated October 12, 2016. The terms of the Immunetics Settlement Agreement are confidential.

13. Commitments

Operating leases

The Company has operating leases for real estate and non-real estate in the United States, United Kingdom, China, Japan, and South Korea. One such operating lease is a sublease for real estate. The Company does not have any material finance leases.

The Company leases office, storage/warehouse, laboratory and manufacturing space in Abingdon, U.K., which leases are due to expire at various dates from December 31, 2020 to June 18, 2033. On March 1, 2013, the Company signed a five year lease for its U.S. corporate headquarters in Marlborough, Massachusetts. In August 2015, the Company entered into a lease amendment for this location to extend the term of the lease by two years through October 31, 2020. In addition, the lease amendment expanded the Company’s office space at this location by 7,600 square feet to a new total of 22,100 square feet. The base rent for the combined space over the lease term ranges from an initial low of $36,000 per month, which includes $12,000 per month for the expansion space, which commenced in early 2016, to a high of $39,000 per month. The Company has an option to extend the lease for one additional term of five years.

In June 2018, the Company entered into a lease for new space in Abingdon, U.K., which extends through June 2033 that will allow it to combine its manufacturing, laboratory, storage and office operations into a single facility. The base rent on the facility over the lease term will range from $39,000 per month to $79,000 per month. With the exception of manufacturing and associated groups, our U.K. operations are now located in this facility.

In connection with the sale of our U.S. Laboratory Services Business to Quest, the Company entered into a sublease with Quest for approximately 9,000 square feet of warehousing and office space in Norwood, Massachusetts. The sublease expires in November 2020. The base rent for the space subject to sublease is approximately $17,000 per month.

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

The Company has existing leases that include variable lease and non-lease components that are not included in the right-of-use asset and lease liability and are reflected as an expense in the periods incurred. Such payments primarily include common area maintenance charges and increases in rent payments that are driven by factors such as future changes in an index, such as the Consumer Price Index.

16

In calculating the present value of future lease payments, the Company has elected to utilize its incremental borrowing rate based on the remaining lease term at the date of adoption. The Company has elected to account for each lease component and its associated non-lease components as a single lease component and has allocated all of the contract consideration across lease components only. This will potentially result in the initial and subsequent measurement of the balances of the right-of-use asset and lease liability for leases being greater than if the policy election was not applied. The Company has existing net leases in which the non-lease components (e.g., common area maintenance, maintenance, consumables, etc.) are paid separately from rent based on actual costs incurred and therefore are not included in the right-of-use asset and lease liability, but instead are reflected as an expense in the period incurred. As of September 30, 2019, an operating lease right-of-use asset of $6.7 million and an operating lease liability of $7.8 million are reflected on the consolidated balance sheet.

The elements of lease expense were as follows:

($ amounts in thousands)	Three months ended September 30, 2019			Nine months ended September 30, 2019
Lease Cost
Operating lease cost	$	322		$	963
Short-term lease cost		186			553
Variable lease cost		239			705
Total lease cost	$	747		$	2,221
Other Information
Cash paid for amounts included in the measurement of lease liabilities	$	250		$	765
Operating lease liabilities arising from obtaining right-of-use assets		136			136
Operating Leases
Weighted average remaining lease term (in years)		12.5			12.5
Operating Leases
Weighted average discount rate		7.8	%		7.8	%

Future lease payments required under non-cancelable operating leases in effect as of September 30, 2019 were as follows:

(in thousands)	September 30, 2019
2019 (three months)	$	257
2020		1,059
2021		998
2022		971
2023		941
Thereafter		8,184
Total lease payments		12,410
Less: imputed interest		(4,638	)
Total operating lease liabilities	$	7,772

The Company adopted ASC 842, Leases on January 1, 2019, as noted above and, as required, the following disclosure is provided for periods prior to adoption. Future minimum lease payments required under non-cancelable operating leases in effect as of December 31, 2018 were as follows:

(in thousands)	December 31, 2018
2019	$	2,024
2020		1,848
2021		972
2022		855
2023		855
Thereafter		7,558
Total minimum lease payments	$	14,112

Purchase commitments

Future minimum payments required under purchase obligations in effect as of September 30, 2019 are as follows:

(in thousands)	Purchase Obligations
2019 (three months)	$	4,432
2020		3,055
2021		1,200
2022		370
2023		370
Thereafter		-
Total minimum payments	$	9,427

17

14. Discontinued operations

As previously disclosed, on September 25, 2018, the Company entered into a Limited Liability Company Interest Purchase Agreement, or the Purchase Agreement, with Quest, Oxford Immunotec Limited, a limited company incorporated in England and Wales and a wholly owned subsidiary of the Company, or Oxford Limited, and Oxford Immunotec, LLC, a Delaware limited liability company (formerly known as Oxford Immunotec, Inc., a Delaware corporation) and a wholly owned subsidiary of the Company, or Oxford LLC, pursuant to which Oxford Limited agreed to sell, and Quest agreed to acquire, the U.S. Laboratory Services Business, for gross proceeds of $170 million in cash. This transaction is referred to herein as the Transaction. Of this amount, approximately $32.3 million was paid directly to MidCap in settlement of all amounts due under a financing agreement, which included prepayment and exit fees of approximately $2.3 million as described in Note 8. Loans payable.

As contemplated in the Purchase Agreement, Oxford Immunotec USA, Inc., a Delaware corporation and a newly formed wholly owned subsidiary of Oxford Limited, or Oxford USA, joined the Purchase Agreement by way of a Joinder Agreement dated October 1, 2018.

The Transaction was consummated in accordance with the terms and conditions of the Purchase Agreement on November 6, 2018, or the Closing Date. Prior to and in connection with consummation of the Transaction, Oxford USA and Oxford LLC (at the time, known as Oxford Immunotec, Inc.) carried out a corporate restructuring pursuant to which (i) the assets and businesses of Oxford LLC other than the U.S. Laboratory Services Business were transferred to Oxford USA and (ii) Oxford LLC was converted into a limited liability company.

At the time of sale, the U.S. Laboratory Services Business had a carrying value of $27.9 million. The Company recorded a gain of $146.0 million in connection with the Transaction, which amount was included in income from discontinued operations before income taxes in the Company’s consolidated statement of operations during the three months ended December 31, 2018.

Additionally, pursuant to the terms of the Purchase Agreement, the parties entered into certain ancillary agreements as of the Closing Date, including: (i) a transitional services agreement, or TSA, that will continue, unless otherwise terminated, until each service included in the TSA has been completed, (ii) a technology license agreement that will remain in effect until the date of expiration or lapse of the last “Blood Stability Patent” to expire or lapse, and (iii) a long-term supply agreement, or the Supply Agreement, pursuant to which Oxford USA agreed to sell, and Quest agreed to purchase, T-SPOT.TB test kits and related accessories from Oxford USA. The Supply Agreement will last for a period of seven years after the effective date unless terminated earlier by a party to the Supply Agreement, as provided for in the Supply Agreement. In addition, the parties entered into a strategic collaboration agreement to drive continued growth of T-SPOT.TB testing in the U.S. that will remain in effect until the expiration or termination of the Supply Agreement.

In conjunction with the Purchase Agreement, Quest agreed to purchase kits and accessories from the Company for an initial period of seven years after the effective date of the Purchase Agreement unless a party earlier terminates, as provided for in the Purchase Agreement. On June 12, 2019, the Company entered into an Amendment of Agreement between Quest and Oxford Immunotec, USA, Inc., or the Amendment. The Amendment revised growth targets, pricing and various other terms, which are confidential.

During the three and nine months ended September 30, 2018, Oxford Limited sold kits to its discontinued operations, Oxford LLC, for use in the lab services business of $1.8 million and $7.3 million, respectively, that were eliminated in the Company’s consolidated financial results.

The following table presents the results of discontinued operations, which solely relate to 2018:

(in thousands)	Three months ended September 30, 2018		Nine months ended September 30, 2018
Major classes of line items constituting income (loss) from discontinued operations before income taxes:
Service revenue	$	18,446	$	46,265
Cost of service revenue		9,889		30,359
Gross profit		8,557		15,906
Research and development		2,077		4,989
Sales and marketing		2,093		6,582
General and administrative		1,613		4,439
Income (loss) from discontinued operations before income taxes		2,774		(104	)
Income tax expense		—		—
Income (loss) from discontinued operations	$	2,774	$	(104	)

During the third quarter of 2019, the Company recorded a charge in discontinued operations of $469,000 that resulted from adjustments on the remaining proceeds due from the Transaction.

18

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

This management’s discussion and analysis of financial condition and results of operations contains forward-looking statements that involve risks and uncertainties. Please see “Special Note Regarding Forward-Looking Statements” in this Quarterly Report for a discussion of the uncertainties, risks and assumptions associated with these statements. 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 in the 2018 Form 10-K, particularly in Part I, Item 1A, “Risk Factors.” You should read the following discussion and analysis of our financial condition and results of operations in conjunction with our condensed consolidated financial statements and the related notes to those statements included elsewhere in this Quarterly Report.

As previously disclosed, on September 25, 2018, Oxford Immunotec Global PLC, or the Company, entered into a Limited Liability Company Interest Purchase Agreement, or the Purchase Agreement, with Quest Diagnostics Incorporated, or Quest, Oxford Immunotec Limited, a limited company incorporated in England and Wales and a wholly owned subsidiary of the Company, or Oxford Limited, and Oxford Immunotec, LLC, a Delaware limited liability company (formerly known as Oxford Immunotec, Inc., a Delaware corporation) and a wholly owned subsidiary of the Company, or Oxford LLC, pursuant to which Oxford Limited agreed to sell, and Quest agreed to acquire, the Company’s U.S. laboratory services business, or the U.S. Laboratory Services Business, for gross proceeds of $170 million in cash, or the Transaction. Of this amount, approximately $32.3 million was paid directly to MidCap Financial Trust, or MidCap, in settlement of all amounts due under a financing agreement between the Company and MidCap.

In conjunction with the Transaction, all prior year amounts in this Management’s Discussion and Analysis of Financial Condition and Results of Operations have been recast to present our results, as if the Transaction had occurred prior to the earliest period presented. For more information on the Transaction, please see the below section entitled “Discontinued operations” and Note 14. Discontinued operations, of the notes to our consolidated financial statements appearing elsewhere in this Quarterly Report.

Overview

We are 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 we have developed over our seventeen year history. Our proprietary T-SPOT.TB test utilizes our T-SPOT technology platform to test for tuberculosis, which is the leading cause of infectious disease death worldwide.

On November 6, 2018, we completed the sale of our U.S. Laboratory Services Business to Quest for gross proceeds of $170 million in cash. This Transaction represented a strategic business shift and had a major effect on our operations and financial results. 

We have incurred significant losses from inception and as of September 30, 2019 had an accumulated deficit of $81.5million. However, our operating losses declined following the sale of the U.S. Laboratory Services Business to Quest, as we have concentrated on reducing overhead costs and refocusing the business on the sale of kits. And, we reported operating income from continuing operations for the three months ended September 30, 2019. Our revenue for the nine months ended September 30, 2019 and 2018 was $55.6 million and $44.4 million, respectively. Our income from continuing operations for the nine months ended September 30, 2019 was $280,000 compared to a loss from continuing operations of $20.2 million for the nine months ended September 30, 2018.

Discontinued operations

On September 25, 2018, the Company entered into the Purchase Agreement with Quest, Oxford Limited and Oxford LLC pursuant to which Oxford Limited agreed to sell, and Quest agreed to acquire, the Company’s U.S. Laboratory Services Business for gross proceeds of $170 million in cash, or the Transaction. Of this amount, approximately $32.3 million was paid directly to MidCap in settlement of all amounts due under the financing agreement between the Company and MidCap, as described in Note 8. Loans payable of the notes to our consolidated financial statements appearing elsewhere in this Quarterly Report.

As contemplated in the Purchase Agreement, Oxford Immunotec USA, Inc., a Delaware corporation and a newly formed wholly owned subsidiary of Oxford Limited, or Oxford USA, joined the Purchase Agreement by way of a Joinder Agreement dated October 1, 2018.

The Transaction was consummated in accordance with the terms and conditions of the Purchase Agreement on November 6, 2018, or the Closing Date. Prior to and in connection with consummation of the Transaction, Oxford USA and Oxford LLC (at the time, known as Oxford Immunotec, Inc.) carried out a corporate restructuring pursuant to which (i) the assets and businesses of Oxford LLC other than the U.S. Laboratory Services Business were transferred to Oxford USA and (ii) Oxford LLC was converted into a limited liability company.

Additionally, pursuant to the terms of the Purchase Agreement, the parties entered into certain ancillary agreements as of the Closing Date, including: (i) a transitional services agreement, or TSA, (ii) a technology license agreement and (iii) a long-term supply agreement, or the Supply Agreement, pursuant to which Oxford USA agreed to sell, and Quest agreed to purchase, T-SPOT.TB test kits and related accessories from Oxford USA. In addition, the parties entered into a strategic collaboration agreement to drive continued growth of T.SPOT.TB testing in the U.S.

For more information related to the Transaction, please refer to our discussion in the notes to our financial statements in Note 14. Discontinued operations of the notes to our consolidated financial statements appearing elsewhere in this Quarterly Report.

19

Financial operations overview

Revenue

We generate revenue mainly from sales associated with our T-SPOT technology platform via our direct sales force and also through distributors. Our T-SPOT.TB test is our first commercialized product based on this technology.

Revenue by type

We currently offer our T-SPOT.TB test as both an in vitro diagnostic kit and a service. In the former, we sell test kits and associated accessories to distributors for resale and directly to institutions and laboratories that perform tuberculosis, or TB, testing. In the latter, we have an established clinical testing laboratory in the U.K., where we perform our T-SPOT.TB test on samples sent to us by customers. For the majority of our customers, we primarily negotiate pricing directly with our customers; our prices are influenced to some degree by the mechanism and level of funding our customers receive for performing tests for TB infection.

By type, total revenues were as summarized in the table below.

	Three months ended September 30,				Nine months ended September 30,
(in thousands)	2019		2018		2019		2018
Revenue
Product	$	20,115	$	15,095	$	52,622	$	40,236
Service		1,104		955		2,974		4,150
Total revenue	$	21,219	$	16,050	$	55,596	$	44,386

Revenue in the above table includes 2018 sales to the U.S. Laboratory Services Business at our intercompany transfer price that were formerly eliminated in consolidation. We also released unaudited pro forma condensed combined statements of operations in Forms 8-K that were filed with the Securities and Exchange Commission on January 7, 2019 and March 11, 2019 that included the effect of the Transaction on revenues had the pricing and other terms of the Supply Agreement been in force in those prior periods. The unaudited pro forma condensed combined statements of operations were estimated based on the best information available at the time and assumptions that management believed to be factually supportable and reasonable. The unaudited pro forma condensed combined financial information was prepared for illustrative and informational purposes only, was not intended to reflect what our consolidated results of operations would have been had the Transaction occurred prior to the dates indicated, and is not necessarily indicative of our future consolidated results of operations.

Revenue by geography

We have a direct sales force in the U.S., certain European countries and Japan as well as market development personnel in China and South Korea. In parts of the world where we do not maintain a direct sales force, we market and sell our products through distributors. As a result, our revenue is denominated in multiple currencies.

The following table reflects revenue by geography (United States, Europe and rest of world, or Europe and ROW, and Asia) and as a percentage of total revenue, based on the billing address of our customers.

	Three months ended September 30,
(in thousands, except percentages)	2019				2018
Revenue
United States	$	5,735	27	%	$	2,876	18	%
Europe and ROW		2,709	13	%		2,277	14	%
Asia		12,775	60	%		10,897	68	%
Total revenue	$	21,219	100	%	$	16,050	100	%

	Nine months ended September 30,
(in thousands, except percentages)	2019				2018
Revenue
United States	$	19,034	34	%	$	11,615	26	%
Europe and ROW		7,670	14	%		6,750	15	%
Asia		28,892	52	%		26,021	59	%
Total revenue	$	55,596	100	%	$	44,386	100	%

Revenue in the above table includes 2018 sales to the U.S. Laboratory Services Business at our intercompany transfer price that were formerly eliminated in consolidation.

20

Cost of revenue and operating expenses

Cost of revenue and gross margin

Cost of revenue consists of direct labor expenses, including employee benefits and share-based compensation expenses, overhead expenses, material costs, cost of laboratory supplies, freight costs, royalties paid under license agreements, depreciation of laboratory equipment and leasehold improvements.

We expect our overall cost of revenue to increase as we continue to increase our volume of T-SPOT.TB kits manufactured and tests performed. However, we also believe that through these increased volumes, we can achieve certain efficiencies in our manufacturing and laboratory operations that could help maintain or improve our overall margins.

During the three months ended September 30, 2019 and 2018, our cost of revenue represented 27% and 28%, respectively, of our total revenue. For the nine months ended September 30, 2019 and 2018, our cost of revenue represented 28% and 29%, respectively, of our total revenue.

	Three months ended September 30,				Nine months ended September 30,
(in thousands)	2019		2018		2019		2018
Cost of revenue
Product	$	5,313	$	3,864	$	14,306	$	9,993
Service		418		709		1,053		2,877
Total cost of revenue	$	5,731	$	4,573	$	15,359	$	12,870

Our gross profit represents total revenue less total cost of revenue, and gross margin is gross profit expressed as a percentage of total revenue. Our gross margins were 73% and 72% for the three months ended September 30, 2019 and 2018, respectively. Gross margins were 72% and 71% for the nine months ended September 30, 2019 and 2018, respectively.

Research and development expense

Our research and development efforts are focused on development programs to enhance our TB product offering. We are developing multiple product enhancements that aim to improve the clinical utility of our test and improve test workflow and automation.

Our research and development activities include performing research, development, clinical and regulatory activities and validating improvements to our technology and processes for the purposes of enhancing product performance. Research and development expense includes personnel-related expenses, including share-based compensation, fees for contractual and consulting services, clinical trial costs, travel costs, laboratory supplies, amortization, depreciation, rent, insurance and repairs and maintenance. We expense all research and development costs as incurred.

During the three months ended September 30, 2019 and 2018, our research and development expense represented 8% and 11%, respectively, of our total revenue. For the nine months ended September 30, 2019 and 2018, our research and development expense represented 11% and 13%, respectively, of our total revenue.

Sales and marketing expense

Our sales and marketing expense includes costs associated with our sales organization, including our direct sales force and sales management, and our marketing, customer service and business development personnel. These expenses consist principally of salaries, commissions, bonuses and employee benefits for these personnel, including share-based compensation, as well as travel costs related to sales, marketing costs, including the cost of obtaining marketing data, customer service activities, medical education activities and overhead expenses. We expense all sales and marketing costs as incurred.

During the three months ended September 30, 2019 and 2018, our sales and marketing expense represented 35% and 40%, respectively, of our total revenue. For the nine months ended September 30, 2019 and 2018, our sales and marketing expense represented 38% and 47%, respectively, of our total revenue.

General and administrative expense

Our general and administrative expense includes costs for our executive, accounting, treasury, finance, legal, information technology, or IT, and human resources functions. These expenses consist principally of salaries, bonuses and employee benefits for the personnel included in these functions, including share-based compensation and travel costs, professional services fees, such as consulting, audit, tax and legal fees, costs related to our Board of Directors, general corporate costs, overhead expenses, and bad debt expense. Additionally, general and administrative expense for the three and nine months ended September 30, 2019 included a credit for income from the TSA with Quest that was entered into in conjunction with the Transaction. We expense all general and administrative expenses as incurred.

During the three months ended September 30, 2019 and 2018, our general and administrative expense represented 26% and 51%, respectively, of our total revenue. For the nine months ended September 30, 2019 and 2018, our general and administrative expense represented 29% and 44%, respectively, of our total revenue.

21

Settlement expense

On September 30, 2019, we entered into a Settlement Agreement and Release with Oxford University Innovation Limited, or OUI, or the OUI Settlement Agreement, to resolve outstanding disputes arising from a license agreement with OUI. The terms of the OUI Settlement Agreement are confidential.

On June 18, 2018, the Company entered into a Settlement Agreement with the former shareholders of Immunetics, Inc., or the Immunetics Settlement Agreement, to resolve disputes arising from the Agreement and Plan of Merger dated October 12, 2016. The terms of the Immunetics Settlement Agreement are confidential.

On June 30, 2017, we entered into a Release and Settlement Agreement with Statens Serum Institut, or SSI, or the SSI Settlement Agreement, to resolve outstanding disputes arising from a license agreement with SSI. The terms of the SSI Settlement Agreement are confidential.

Interest income (expense), net

Interest income (expense), net includes interest income on our available cash balances, which are primarily invested in money market funds and repurchase agreements, primarily in U.S. government and agency securities, and bank savings accounts in the U.S., U.K., Germany, Japan, China and South Korea. Essentially all our cash is in the U.S. and the U.K. Interest expense for 2018 mainly related to our previous agreement with MidCap, or the MidCap Agreement, that provided us with $40 million in debt financing, comprised of both a term loan and a revolving line of credit. Upon closing of the Transaction, approximately $32.3 million was paid directly to MidCap in settlement of all amounts due. The payment to MidCap included prepayment and exit fees of approximately $2.3 million.

Foreign exchange gains (losses)

Foreign exchange gains (losses) largely resulted from U.S. dollar denominated bank accounts, accounts receivable, and accounts payable reflected on the books of Oxford Limited, which has a functional currency of the U.K. Pound Sterling. We are exposed to foreign exchange rate risk because we currently operate in three major regions of the world: the United States, Europe and ROW, and Asia, and our revenue is denominated in multiple currencies. Sales in the U.S. and South Korea are denominated in U.S. dollars while sales in Europe are denominated primarily in the U.K. Pound Sterling and Euro. As we grow Europe and ROW sales outside the U.K. and the Euro Zone, we may be subject to risk from additional currencies. Sales in China have historically been denominated in U.S. dollars, however, effective with the third quarter of 2019, some sales are denominated in Chinese Yuan. Sales in Japan are denominated in Yen.

Monetary assets and liabilities that are denominated in foreign currencies are remeasured at the period-end closing rate with resulting unrealized exchange fluctuations. Realized exchange fluctuations result from the settlement of transactions in currencies other than the functional currencies of our businesses. The functional currencies of our businesses are U.S. dollars, Pounds Sterling, Euros, Japanese Yen and Chinese Yuan, depending on the entity.

Other income (expense)

Other income (expense) includes other income and expense items.

Income (loss) from discontinued operations

On November 6, 2018, we completed the agreement to sell our U.S. Laboratory Services Business to Quest. This agreement represented a strategic business shift and had a major effect on our operations and financial results. Accordingly, the operations of this business have been reported in discontinued operations in the consolidated financial statements for 2018.

22

Results of operations  

Comparison of three months ended September 30, 2019 and 2018

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

	Three months ended September 30,
	2019						2018						Change
				% of						% of
(in thousands, except percentages)	Amount			Revenue			Amount			Revenue			Amount			%
Revenue:
Product	$	20,115			95	%	$	15,095			94	%	$	5,020			33	%
Service		1,104			5	%		955			6	%		149			16	%
Total revenue		21,219			100	%		16,050			100	%		5,169			32	%
Cost of revenue:
Product		5,313			25	%		3,864			24	%		1,449			38	%
Service		418			2	%		709			4	%		(291	)		(41	)%
Total cost of revenue		5,731			27	%		4,573			28	%		1,158			25	%
Gross profit		15,488			73	%		11,477			72	%		4,011			35	%
Operating expenses:
Research and development		1,631			8	%		1,754			11	%		(123	)		(7	)%
Sales and marketing		7,405			35	%		6,432			40	%		973			15	%
General and administrative		5,531			26	%		8,132			51	%		(2,601	)		(32	)%
Settlement expense		799			4	%		212			1	%		587			277	%
Total operating expenses		15,366			72	%		16,530			103	%		(1,164	)		(7	)%
Operating income (loss) from continuing operations		122			1	%		(5,053	)		(31	)%		5,175			(102	)%
Interest income (expense), net		1,064			5	%		(673	)		(4	)%		1,737			(258	)%
Foreign exchange gains (losses)		360			2	%		(52	)		(0	)%		412			(792	)%
Other income (expense)		23			0	%		5			0	%		18			360	%
Income (loss) from continuing operations before income taxes		1,569			7	%		(5,773	)		(36	)%		7,342			(127	)%
Income tax expense from continuing operations		(383	)		(2	)%		(485	)		(3	)%		102			(21	)%
Income (loss) from continuing operations		1,186			6	%		(6,258	)		(39	)%		7,444			(119	)%
Discontinued operations:
Income (loss) from discontinued operations before income taxes		(469	)		(2	)%		2,774			17	%		(3,243	)		(117	)%
Income tax expense		-			0	%		-			0	%		-			NM
Income (loss) from discontinued operations		(469	)		(2	)%		2,774			17	%		(3,243	)		(117	)%
Net income (loss)	$	717			3	%	$	(3,484	)		(22	)%	$	4,201			(121	)%

23

Revenue 

Revenue increased by 32% to $21.2 million for the three months ended September 30, 2019, from $16.1 million for the same period in 2018.

U.S. revenue, excluding revenue from discontinued operations, increased by 99% to $5.7 million for the three months ended September 30, 2019, from $2.9 million for the same period in 2018, due to growth in testing volumes and higher average selling prices in 2019, as compared to 2018 average selling prices which were the intercompany transfer price formerly eliminated in consolidation, partially offset by a $93,000 decrease in revenue resulting from our withdrawal from the blood donor screening market in 2018.

Asia revenue increased by 17% to $12.8 million for the three months ended September 30, 2019 compared to the same period in 2018, due to strong growth in shipments to Japan. On a non-generally accepted accounting principles, or non-GAAP, constant currency basis, revenue for Asia would have increased by 15%. Europe and ROW revenue increased 19% to $2.7 million for the three months ended September 30, 2019, compared to the same period in 2018. On a non-GAAP constant currency basis, Europe and ROW revenue would have increased by 24% in 2019 compared to 2018.

Changes in revenue include the impact of changes in foreign currency exchange rates. We use the non-GAAP financial measure “constant currency basis” in our filings to show changes in our revenue without giving effect to period-to-period currency fluctuations. Under U.S. GAAP, revenues received in local (non-U.S. dollar) currencies are translated into U.S. dollars at the average exchange rate for the period presented. When we use the term “constant currency basis”, it means that we have translated local currency revenues for the prior reporting period into U.S. dollars using the same average foreign currency exchange rates for the conversion of revenues into U.S. dollars that we used to translate local currency revenues for the comparable reporting period of the current year. We then calculate the change, as a percentage, from the prior period revenues using the current period exchange rates versus the current period revenues. This resulting percentage is a non-GAAP measure referring to a change as a percentage on a “constant currency basis”.

This non-GAAP financial measure may be different from non-GAAP financial measures used by other companies, limiting its usefulness for comparison purposes. Moreover, presentation of revenue on a constant currency basis is provided for year-over-year comparison purposes, and investors should be cautioned that the effect of changing foreign currency exchange rates has an actual effect on our operating results. We consider the use of a period over period revenue comparison on a constant currency basis to be helpful to investors, as it provides a revenue growth measure free of positive or negative volatility due to currency fluctuations.

By revenue type, total revenues were:

	Three months ended September 30,				Change
(in thousands, except percentages)	2019		2018		Amount		%
Revenue
Product	$	20,115	$	15,095	$	5,020		33	%
Service		1,104		955		149		16	%
Total revenue	$	21,219	$	16,050	$	5,169		32	%

Revenue in the above table includes 2018 sales to the U.S. Laboratory Services Business at our intercompany transfer price that were formerly eliminated in consolidation.

By geography, total revenues were:

	Three months ended September 30,				Change
(in thousands, except percentages)	2019		2018		Amount		%
Revenue
United States	$	5,735	$	2,876	$	2,859		99	%
Europe and ROW		2,709		2,277		432		19	%
Asia		12,775		10,897		1,878		17	%
Total revenue	$	21,219	$	16,050	$	5,169		32	%

Revenue in the above table includes 2018 sales to the U.S. Laboratory Services Business at our intercompany transfer price that were formerly eliminated in consolidation.

24

Cost of revenue and gross margin

Cost of revenue increased by 25% to $5.7 million for the three months ended September 30, 2019 compared to the same period in 2018, due largely to increased revenue in 2019. Gross margin for the three months ended September 30, 2019 was 73% compared to 72% for the same period in 2018.

	Three months ended September 30,				Change
(in thousands, except percentages)	2019		2018		Amount			%
Cost of revenue
Product	$	5,313	$	3,864	$	1,449			38	%
Service		418		709		(291	)		(41	)%
Total cost of revenue	$	5,731	$	4,573	$	1,158			25	%

Research and development expense

Research and development expense decreased to $1.6 million for the three months ended September 30, 2019 from $1.8 million for the same period in 2018. As a percentage of total revenue, research and development expense was 8% for the three months ended September 30, 2019 compared to 11% for the same period in 2018.

Sales and marketing expense 

Sales and marketing expense increased to $7.4 million for the three months ended September 30, 2019 from $6.4 million for the same period in 2018. The increase largely resulted from higher salary and employee-related expenses. As a percentage of total revenue, sales and marketing expense decreased to 35% for the three months ended September 30, 2019, compared to 40% for the same period in 2018.

General and administrative expense

General and administrative expense decreased to $5.5 million for the three months ended September 30, 2019 from $8.1 million for the same period in 2018. The higher expenses in 2018 in large part reflected costs incurred in completing the Transaction. As a percentage of total revenue, general and administrative expense decreased to 26% for the three months ended September 30, 2019 from 51% for the same period in 2018.

Settlement expense

Settlement expense increased to $799,000 for the three months ended September 30, 2019 from $212,000 for the same period in 2018. Settlement expense relates to the OUI Settlement Agreement and the SSI Settlement Agreement. The terms of each of the agreements are confidential.

Interest income (expense), net

Interest income (expense), net was income of $1.1 million for the three months ended September 30, 2019 reflecting interest income on proceeds received in connection with the Transaction, compared to expense of $673,000 in the same period in 2018 resulting from the Company's indebtedness under the MidCap Agreement.

Foreign exchange gains (losses)

We recorded foreign exchange gains of $360,000 for the three months ended September 30, 2019, substantially all as a net result of U.S. dollar denominated bank accounts, accounts receivable, and accounts payable reflected on the books of Oxford Limited, which has a functional currency of the U.K. Pound Sterling. For the three months ended September 30, 2018, we recorded foreign exchange losses of $52,000. Approximately 27% of our sales for the three months ended September 30, 2019 were in the U.S., which are denominated in U.S. dollars. Sales in South Korea are also denominated in U.S. dollars. Sales in Europe are denominated primarily in the U.K. Pound Sterling and the Euro. As we grow Europe and ROW sales outside the United Kingdom and the Euro Zone, we may be subject to risk from additional currencies. Sales in China have historically been denominated in U.S dollars, however, effective with the third quarter of 2019, some sales are denominated in Chinese Yuan. Sales in Japan are denominated in Yen.

Our expenses are generally denominated in the currencies in which our operations are located, which are primarily in the U.S., the U.K., Japan, Europe, China and South Korea.

As we continue to grow our business outside the U.S., our results of operations and cash flows will be subject to fluctuations due to changes in foreign currency exchange rates, which could harm our business in the future. To date, we have not entered into any foreign currency hedging contracts, although we may do so in the future.

25

Other income (expense)

Other income for the three months ended September 30, 2019 was $23,000, compared to $5,000 for the three months ended September 30, 2018.

Income (loss) from discontinued operations

Discontinued operations represent the U.S. Laboratory Services Business that we sold to Quest. For financial statement purposes, the results of operations for the discontinued operations have been segregated from those of our continuing operations and are presented in our condensed consolidated financial statements as discontinued operations.

The loss from discontinued operations for the three months ended September 30, 2019 was $469,000 and resulted from adjustments on the remaining proceeds due from the Transaction. The income from discontinued operations for the three months ended September 30, 2018 was $2.8 million.

Comparison of nine months ended September 30, 2019 and 2018

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

	Nine months ended September 30,
	2019					2018					Change
				% of					% of
(in thousands, except percentages)	Amount			Revenue		Amount			Revenue		Amount			%
Revenue:
Product	$	52,622		95	%	$	40,236		91	%	$	12,386		31	%
Service		2,974		5	%		4,150		9	%		(1,176	)	(28	)%
Total revenue		55,596		100	%		44,386		100	%		11,210		25	%
Cost of revenue:
Product		14,306		26	%		9,993		23	%		4,313		43	%
Service		1,053		2	%		2,877		6	%		(1,824	)	(63	)%
Total cost of revenue		15,359		28	%		12,870		29	%		2,489		19	%
Gross profit		40,237		72	%		31,516		71	%		8,721		28	%
Operating expenses:
Research and development		6,044		11	%		5,969		13	%		75		1	%
Sales and marketing		21,169		38	%		20,655		47	%		514		2	%
General and administrative		16,230		29	%		19,349		44	%		(3,119	)	(16	)%
Settlement expense		1,002		2	%		1,979		4	%		(977	)	(49	)%
Total operating expenses		44,445		80	%		47,952		108	%		(3,507	)	(7	)%
Operating loss from continuing operations		(4,208	)	(8	)%		(16,436	)	(37	)%		12,228		(74	)%
Interest income (expense), net		3,426		6	%		(2,011	)	(5	)%		5,437		(270	)%
Foreign exchange losses		(233	)	(0	)%		(306	)	(1	)%		73		(24	)%
Other income (expense)		65		0	%		(242	)	(1	)%		307		(127	)%
Loss from continuing operations before income taxes		(950	)	(2	)%		(18,995	)	(43	)%		18,045		(95	)%
Income tax benefit (expense) from continuing operations		1,230		2	%		(1,182	)	(3	)%		2,412		(204	)%
Income (loss) from continuing operations		280		1	%		(20,177	)	(45	)%		20,457		(101	)%
Discontinued operations:
Loss from discontinued operations before income taxes		(469	)	(1	)%		(104	)	(0	)%		(365	)	351	%
Income tax expense		-		0	%		-		0	%		-		NM
Loss from discontinued operations		(469	)	(1	)%		(104	)	(0	)%		(365	)	351	%
Net loss	$	(189	)	(0	)%	$	(20,281	)	(46	)%	$	20,092		(99	)%

26

Revenue 

Revenue increased by 25% to $55.6 million for the nine months ended September 30, 2019, from $44.4 million for the same period in 2018.

U.S. revenue, excluding revenue from discontinued operations, increased by 64% to $19.0 million for the nine months ended September 30, 2019, from $11.6 million for the same period in 2018. The increase in U.S. revenue was due to growth in testing volumes and higher average selling prices in 2019, as compared to 2018 average selling prices, which were the intercompany transfer price formerly eliminated in consolidation, partially offset by a $1.7 million decrease in revenue resulting from our withdrawal from the blood donor screening market in 2018.

Asia revenue increased by 11% to $28.9 million for the nine months ended September 30, 2019 compared to the same period in 2018, due primarily to growth in testing volumes in both China and Japan. On a non-GAAP constant currency basis, revenue for Asia would have increased by 11%. Europe and ROW revenue increased 14% to $7.7 million for the nine months ended September 30, 2019, compared to the same period in 2018, due mainly to strong growth in TB sales. On a non-GAAP constant currency basis, Europe and ROW revenue would have increased by 20% in 2019 compared to 2018.

By revenue type, total revenues were:

	Nine months ended September 30,				Change
(in thousands, except percentages)	2019		2018		Amount			%
Revenue
Product	$	52,622	$	40,236	$	12,386			31	%
Service		2,974		4,150		(1,176	)		(28	)%
Total revenue	$	55,596	$	44,386	$	11,210			25	%

Revenue in the above table includes 2018 sales to the U.S. Laboratory Services Business at our intercompany transfer price that were formerly eliminated in consolidation.

By geography, total revenues were:

	Nine months ended September 30,				Change
(in thousands, except percentages)	2019		2018		Amount		%
Revenue
United States	$	19,034	$	11,615	$	7,419		64	%
Europe and ROW		7,670		6,750		920		14	%
Asia		28,892		26,021		2,871		11	%
Total revenue	$	55,596	$	44,386	$	11,210		25	%

Revenue in the above table includes 2018 sales to the U.S. Laboratory Services Business at our intercompany transfer price that were formerly eliminated in consolidation.

27

Cost of revenue and gross margin

Cost of revenue increased by 19% to $15.4 million for the nine months ended September 30, 2019 when compared to the same period in 2018, due largely as a reflection of increased revenue in 2019. Gross margin for the nine months ended September 30, 2019 was 72% compared to 71% for the same period in 2018.

	Nine months ended September 30,				Change
(in thousands, except percentages)	2019		2018		Amount			%
Cost of revenue
Product	$	14,306	$	9,993	$	4,313			43	%
Service		1,053		2,877		(1,824	)		(63	)%
Total cost of revenue	$	15,359	$	12,870	$	2,489			19	%

Research and development expense

Research and development expense of $6.0 million for the nine months ended September 30, 2019 was essentially flat compared to the same period in 2018. As a percentage of total revenue, research and development expense decreased to 11% for the nine months ended September 30, 2019 from 13% for the same period in 2018.

Sales and marketing expense 

Sales and marketing expense increased to $21.2 million for the nine months ended September 30, 2019 from $20.7 million for the same period in 2018. The increase largely resulted from higher marketing and travel and entertainment expenses, partially offset by lower administrative and legal and professional fees. As a percentage of total revenue, sales and marketing expense decreased to 38% for the nine months ended September 30, 2019 from 47% for the same period in 2018.

General and administrative expense

General and administrative expense decreased to $16.2 million for the nine months ended September 30, 2019 from $19.3 million for the same period in 2018. The decrease included lower legal and professional fees and payments received under the TSA with Quest that have been credited against general and administrative expense during 2019. General and administrative expense for 2019 was also net of a credit for share-based compensation of $298,000, related to the departure of certain executive officers during the second quarter of 2019. As a percentage of total revenue, general and administrative expense decreased to 29% for the nine months ended September 30, 2019 from 44% for the same period in 2018.

Settlement expense

Settlement expense decreased to $1.0 million for the nine months ended September 30, 2019 from $2.0 million for the same period in 2018. Settlement expense relates to the OUI Settlement Agreement, the Immunetics Settlement Agreement, and the SSI Settlement Agreement. The terms of each of the agreements are confidential.

Interest income (expense), net

Interest income (expense), net was income of $3.4 million for the nine months ended September 30, 2019, reflecting interest income on proceeds received in connection with the Transaction, compared to expense of $2.0 million in the same period in 2018 resulting from the Company's indebtedness under the MidCap Agreement.

Foreign exchange losses

We recorded foreign exchange losses of $233,000 for the nine months ended September 30, 2019, substantially all as a net result of U.S. dollar denominated bank accounts, accounts receivable, and accounts payable reflected on the books of Oxford Limited, which has a functional currency of the U.K. Pound Sterling. For the nine months ended September 30, 2018, we recorded foreign exchange losses of $306,000. Approximately 34% of our sales for the nine months ended September 30, 2019 were in the U.S., which are denominated in U.S. dollars. Sales in South Korea are also denominated in U.S. dollars. Sales in Europe are denominated primarily in the U.K. Pound Sterling and the Euro. As we grow Europe and ROW sales outside the United Kingdom and the Euro Zone, we may be subject to risk from additional currencies. Sales in China have historically been denominated in U.S. dollars, however, effective with the third quarter of 2019, some sales in China are denominated in Chinese Yuan. Sales in Japan are denominated in Yen.

Our expenses are generally denominated in the currencies in which our operations are located, which are primarily in the U.S., the U.K., Japan, Europe, China and South Korea. 

28

As we continue to grow our business outside the U.S., our results of operations and cash flows will be subject to fluctuations due to changes in foreign currency exchange rates, which could harm our business in the future. To date, we have not entered into any foreign currency hedging contracts, although we may do so in the future.

Other income (expense)

Other income for the nine months ended September 30, 2019 was $65,000. Other expense was $242,000 for the nine months ended September 30, 2018.

Income (loss) from discontinued operations

Discontinued operations represent the U.S. Laboratory Services Business that we sold to Quest. For financial statement purposes, the results of operations for the discontinued operations have been segregated from those of our continuing operations and are presented in our condensed consolidated financial statements as discontinued operations.

The loss from discontinued operations for the nine months ended September 30, 2019 of $469,000 resulted from adjustments on the remaining proceeds due from the Transaction. The loss from discontinued operations for the nine months ended September 30, 2018 was $104,000.

Liquidity and capital resources

Sources and uses of funds

Since our inception, we have incurred significant losses and negative cash flows from operations. However, for the nine months ended September 30, 2019, we had income from continuing operations of $280,000, while using $7.3 million of cash in operating activities from continuing operations. As of September 30, 2019, we had an accumulated deficit of $81.5 million. We incurred a loss from continuing operations of $20.2 million and used $20.9 million of cash in operating activities from continuing operations for the nine months ended September 30, 2018.

On November 6, 2018, we completed the sale of our U.S. Laboratory Services Business to Quest, for gross proceeds of $170 million in cash. We received net proceeds of approximately $130.2 million in cash. In conjunction with the closing of the Transaction, approximately $32.3 million was paid directly to MidCap in settlement of all amounts due under our debt financing, which was comprised of both a term loan and a revolving line of credit. The payment to MidCap included prepayment and exit fees of approximately $2.3 million.

In 2019, our Board of Directors authorized the repurchase of up to $100 million of our ordinary shares in the aggregate, subject to the approval of our shareholders by an ordinary resolution at our 2019 Annual General Meeting, or the share repurchase program. The share repurchase program was approved by our shareholders at our Annual General Meeting held on June 18, 2019 and was initiated during the third quarter of 2019. During the three months ended September 30, 2019, we repurchased 242,830 shares at a total cost of $3.3 million. As the share repurchase program allows for a maximum repurchase of $100 million of our ordinary shares including commissions, up to $96.7 million of ordinary shares remain eligible for repurchase as of September 30, 2019. The share repurchase program may be suspended, modified or discontinued at any time, and we have no obligation to repurchase any amount of our ordinary shares under the program. Unless discontinued by our Board of Directors, the share repurchase program will be valid for up to five years. See Part II, Item 2. “Unregistered Sales of Equity Securities and Use of Proceeds” of this Quarterly Report for more information relating to the share repurchase program.

As of September 30, 2019, we had cash, cash equivalents, and restricted cash of $184.4 million. We maintain our 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 U.S., U.K., Germany, Japan, China and South Korea. Essentially all our cash is in the U.S. and the U.K.

29

Summary of cash flows

The following table summarizes our cash, cash equivalents, and restricted cash, accounts receivable and cash flows for the periods indicated:

	As of and for the nine months ended September 30,
(in thousands)	2019			2018
Cash, cash equivalents, and restricted cash	$	184,382		$	70,356
Accounts receivable, net		15,496			7,080
Net cash used in operating activities from continuing operations	$	(7,346	)	$	(20,914	)
Net cash used in investing activities from continuing operations		(729	)		(4,884	)
Net cash provided by financing activities from continuing operations		377			2,375
Net operating cash flows provided by discontinued operations		-			6,778
Net investing cash flows used in discontinued operations		-			(2,527	)
Net financing cash flows used in discontinued operations		-			(10	)
Effect of exchange rate changes on cash, cash equivalents, and restricted cash		(864	)		(994	)
Net decrease in cash, cash equivalents, and restricted cash	$	(8,562	)	$	(20,176	)

Cash flows for the nine months ended September 30, 2019 and 2018

Operating activities from continuing operations

Net cash used in operating activities from continuing operations was $7.3 million during the nine months ended September 30, 2019, which included income from continuing operations of $280,000, non-cash expenses of $3.8 million, and cash used for changes in operating assets and liabilities of $11.5 million. The non-cash items included share-based compensation expense of $2.7 million, depreciation and amortization expense of $1.4 million, and non-cash rent expense of $178,000, partially offset by credits of $250,000 for the change in deferred income taxes and $147,000 for non-cash interest. The cash used for changes in operating assets and liabilities included an increase in accounts receivable of $6.7 million, an increase in inventory of $2.3 million, an increase in prepaid expenses and other assets of $2.0 million, and a decrease in accounts payable and accrued liabilities of $495,000. The increase in accounts receivable reflects increased revenue and timing. The increase in inventory reflects timing. The increase in prepaid expenses and other assets reflects an increase in taxes receivable and the timing of certain payments. The decrease in accounts payable and accrued liabilities was largely due to payments in the first nine months of 2019 for royalties on intellectual property and bonuses that were accrued for at December 31, 2018, as well as the timing of payments. 

Net cash used in operating activities from continuing operations was $20.9 million during the nine months ended September 30, 2018, which included a net loss from continuing operations of $20.2 million, non-cash expenses of $6.1 million, and cash used for changes in operating assets and liabilities of $6.9 million. The non-cash items included share-based compensation expense of $3.6 million, deferred tax expense of $1.1 million, depreciation and amortization of intangible assets of $953,000, accretion and amortization of loan fees of $421,000, and a loss on disposal of property and equipment of $84,000. The cash used for changes in operating assets and liabilities included a decrease in accounts payable and accrued liabilities of $6.0 million, an increase in accounts receivable of $1.3 million, an increase in prepaid expenses and other assets of $270,000, and a decrease in other liabilities of $70,000, partially offset by a decrease in inventory of $773,000.

Investing activities from continuing operations

Net cash used in investing activities from continuing operations was $729,000 and $4.9 million during the nine months ended September 30, 2019 and 2018, respectively, and consisted of purchases of property and equipment.

Financing activities from continuing operations

Net cash provided by financing activities from continuing operations during the nine months ended September 30, 2019 of $377,000 included $3.9 million received upon the exercises of share options during the nine months ended September 30, 2019, partially offset by $3.3 million used for the repurchase of our ordinary shares as permitted under the share repurchase program and $224,000 used to pay taxes withheld on exercises of options and vesting of restricted share units.

During the nine months ended September 30, 2018, net cash provided by financing activities from continuing operations was $2.4 million.

Discontinued operations 

Net cash provided by discontinued operations for the nine months ended September 30, 2018 of $4.2 million related to $6.8 million provided by operating activities of discontinued operations, partially offset by cash used in investing activities of discontinued operations of $2.5 million for the purchase of property and equipment. There were no cash flows from discontinued operations for the nine months ended September 30, 2019.

Employees

As of September 30, 2019, we had 236 employees. None of our employees is represented by a labor union. We have not experienced any work stoppages and we believe our employee relations are good.

30

Item 3. Quantitative and Qualitative Disclosures About Market Risk

The Company’s exposure to market risk from interest rate fluctuations, capital market fluctuations, and foreign currency exchange rate fluctuations has not materially changed from its exposure as of December 31, 2018, as described in Part II, Item 7A of our 2018 Form 10-K.

Item 4. Controls and Procedures 

(a) Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of the end of the period covered by this Quarterly Report. Based on their evaluation, they have concluded our disclosure controls and procedures were not effective as of September 30, 2019 due to a material weakness in internal control over financial reporting related to the accounting for income taxes that was disclosed in our 2018 Form 10-K.

Management’s Plan to Remediate the Material Weakness

As previously described in Part II, Item 9A. “Controls and procedures” of our 2018 Form 10-K, we are working to implement a remediation plan to address the material weakness mentioned above. The material weakness will not be considered remediated until applicable controls operate for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively. We expect that the remediation of this material weakness will be completed by the time we file our Annual Report on Form 10-K for the year ended December 31, 2019.

(b) Changes in Internal Control Over Financial Reporting

There have been no changes to our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the period covered by this Quarterly Report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. We will continue to review and document our disclosure controls and procedures, including our internal control over financial reporting, and may from time to time make changes aimed at enhancing their effectiveness and to ensure that our systems evolve with our business.

31

PART II – OTHER INFORMATION

Item 1. Legal Proceedings

From time to time, we are involved in legal proceedings in the ordinary course of our business. We do not, however, expect such legal proceedings to have a material adverse effect on our business, financial condition or results of operations.

Item 1A. Risk Factors

There have been no material changes in the risk factors described in Part I, Item 1A. “Risk Factors” of the 2018 Form 10-K aside from the risk factor included below:

Continued uncertainty arising from global political events, such as the United Kingdom’s proposed withdrawal from the European Union, could adversely affect our ability to conduct business and our results of operations.

On June 23, 2016, the U.K. held a non-binding referendum, in which voters approved an exit from the European Union, or E.U., commonly referred to as “Brexit”. Thereafter, on March 29, 2017, the U.K. formally notified the E.U. of its intention to withdraw pursuant to Article 50 of the Treaty of the European Union, which formally initiated the withdrawal procedure. The timing of the proposed withdrawal was initially scheduled for March 29, 2019. That deadline has been extended to up until January 31, 2020 to allow the U.K. to adopt a withdrawal agreement bill and ratify it as an international treaty. Discussions within the U.K. and between the U.K. and the E.U. will continue to focus on withdrawal issues, timing, and transition agreements. However, limited progress of the existing withdrawal agreement bill through the U.K. legislature and ongoing uncertainty related to the possibility of the U.K. leaving the E.U. without a formal withdrawal agreement and associated transition period in place, as well as a proposed General Election in December 2019, could cause significant market and economic disruption. Weakening of economic conditions or economic uncertainties tend to harm our business, and if such conditions emerge in the U.K. or in the rest of the E.U., it may have a material adverse effect on our operations and sales.

Although it is unknown what the terms of the U.K.’s future relationship with the E.U. will be, it is possible that there will be greater restrictions on trade between the U.K. and E.U. countries as well as increased regulatory complexities. These changes may adversely affect our operations and financial results. The announcement of Brexit also caused significant volatility in global currency markets. The fluctuation of currency exchange rates may expose us to gains and losses on non-U.S. currency transactions and impact the purchasing power of our non-U.S. currency customers, causing them to decrease or cancel orders or default on payment. Any global political uncertainty similar to the Brexit referendum could similarly harm our ability to conduct our business and our results of operations.

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

Calendar month	Total number of shares purchased (1)		Weighted-average price paid per share		Total number of shares purchased as part of publicly announced plans or programs		Approximate dollar value of shares that may yet be purchased under the share repurchase program
July		-	$	-		-	$	100,000,000
August		-		-		-		100,000,000
September		242,830		13.6922		242,830		96,675,123
		242,830				242,830

⁽¹⁾ All shares were repurchased under an authorization covering up to $100 million of the Company's ordinary shares in the aggregate including commissions, as approved by the Company's Board of Directors and approved by shareholders at the Company's Annual General Meeting held on June 18, 2019. Unless discontinued by the Company's Board of Directors, the share repurchase program will be valid for up to five years.

Item 6. Exhibits

Exhibit No.	Description
3.1	Articles of Association of the Registrant (Filed as Exhibit 3.1 to our Current Report on Form 8-K on June 18, 2014 and incorporated herein by reference.)
31.1*	Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2*	Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32*	Certification of Principal Executive Officer and Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101	The following materials from the Company’s Quarterly Report on Form 10-Q for the three and nine months ended September 30, 2019, formatted in XBRL (eXtensible Business Reporting Language): (i) Condensed consolidated balance sheets at September 30, 2019 and December 31, 2018; (ii) Condensed consolidated statements of operations for the three and nine months ended September 30, 2019 and 2018; (iii) Condensed consolidated statements of comprehensive income (loss) for the three and nine months ended September 30, 2019 and 2018; (iv) Condensed consolidated statements of cash flows for the nine months ended September 30, 2019 and 2018; and (v) Notes to unaudited condensed consolidated financial statements.

* Filed herewith.

32

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

		OXFORD IMMUNOTEC GLOBAL PLC
Date: November 5, 2019	/s/	Peter Wrighton-Smith, Ph.D.
		Peter Wrighton-Smith, Ph.D.
		Chief Executive Officer and Director
		(Principal Executive Officer)
Date: November 5, 2019	/s/	Matthew T E McLaughlin
		Matthew T E McLaughlin
		Chief Financial Officer
		(Principal Financial Officer)

33