Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
You should read the following discussion and analysis of our financial condition and results of operations in conjunction with the corresponding section of our Annual Report on Form 10-K for the year ended March 31, 2022 filed with the SEC on June 28, 2022.
The information set forth and discussed below for the quarters ended December 31, 2022 and December 31, 2021 is derived from the condensed consolidated financial statements included under Part I, Item 1 "Financial Statements" above. The financial information set forth and discussed below is unaudited but includes all normal and recurring adjustments that our management considers necessary for a fair presentation of the financial position and the operating results and cash flows for those periods. Our results of operations for a particular quarter may not be indicative of the results that may be expected for other quarters or the entire year.
In addition to historical financial information, the following discussion contains forward looking statements that reflect our plans, estimates, beliefs and expectations that involve risks and uncertainties. Our actual results and the timing of events could differ materially from those discussed in these forward-looking statements. Factors that could cause or contribute to these differences include those discussed below and elsewhere in this Quarterly Report, and our Annual Report on Form 10-K for the year ended March 31, 2022, particularly in "Risk Factors."
Overview
We were incorporated in Jersey, Channel Islands on January 18, 2012. On February 16, 2012, we acquired the entire issued share capital of Alba Bioscience Limited (or Alba), Quotient Biodiagnostics, Inc. (or QBDI) and QBD (QSIP) Limited (or QSIP) from Quotient Biodiagnostics Group Limited (or QBDG), our predecessor.
Updates on Liquidity, Financial Condition and Company Strategy
On January 10, 2023, Quotient filed a voluntary petition for relief under chapter 11 of title 11 (the “Chapter 11 Case”) of the United States Code (the “Bankruptcy Code”) in the United States Bankruptcy Court for the Southern District of Texas (the “Bankruptcy Court”). The Company will continue to operate its business as a “debtor in possession” under the jurisdiction of the Bankruptcy Court and in accordance with the applicable provisions of the Bankruptcy Code and the orders of the Bankruptcy Court. The Company has filed a series of first day motions with the Bankruptcy Court that seek authorization to continue to conduct its business without interruption. These motions are designed primarily to minimize the effect of bankruptcy on the Company’s operations. None of Quotient’s subsidiaries intend to file voluntary petitions for relief under the Bankruptcy Code, and each of those subsidiaries expects to continue to operate its respective business in the ordinary course unaffected by the Chapter 11 Case. The bankruptcy filing was contemplated under the A&R TSA as part of a comprehensive restructuring to de-lever the Company’s consolidated balance sheet by reducing debt by approximately $140 million and provide new cash for ongoing operations. See Note 1 for additional information.
In an effort to sustain our business under current market conditions as we seek additional funding, we shifted our business strategy to focus our MosaiQ innovation pipeline on clinical diagnostics with testing solutions for allergy and autoimmune while pausing the development and commercialization of our MosaiQ testing solutions in immunohematology and infectious disease immunoassay screening. As we invest and reallocate resources, we reduced the number of employees, partners and costs to match the clinical diagnostics priority and seek to achieve a sustainable business.
The discussion below of our historical financial condition, results of operations and liquidity position do not reflect any effects or costs of the shift in our business strategy or the potential funding arrangements that we are currently discussing with our noteholders; therefore, these historical results are not indicative of our expected results in future periods.
Business Overview
We currently operate as one business segment with 432 employees in the United Kingdom, Switzerland, Dubai and the United States, as of December 31, 2022. Our principal markets are the United States, Europe and Japan. Based on the location of the customer, revenues outside the United States accounted for 44% of total revenue during the nine month period ended December 31, 2022 and 46% during the nine month period ended December 31, 2021.
We have incurred net losses and negative cash flows from operations in each year since we commenced operations in 2007. As of December 31, 2022, we had an accumulated deficit of $823.2 million. We expect our operating losses to continue for at least the remainder of the fiscal year ending March 31, 2023 as we continue our investment in the commercialization of MosaiQ. For the nine month period ended December 31, 2022, our total revenue was $27.6 million and our net loss was $98.1 million.
From our incorporation in 2012 to March 31, 2022, we have raised $160.0 million of gross proceeds through the private placement of our ordinary and preference shares and warrants, $433.0 million of gross proceeds from public offerings of our ordinary shares and issuances of ordinary shares upon exercise of warrants, $145.0 million of gross proceeds from the issuance of 12% Senior Secured Notes and $105 million of gross proceeds from the issuance of 4.75% Convertible Notes. In addition, on March 23, 2018, we raised $20.9 million from the sale and leaseback of our conventional reagents manufacturing facility near Edinburgh, Scotland, which we refer to as the Allan Robb Campus, or ARC, facility.
- 21 -
During the nine month period ended December 31, 2022, we raised gross proceeds of approximately $20.0 million from a public offering of 811,458 of our ordinary shares and, in lieu of ordinary shares to certain investors, pre-funded warrants exercisable for an aggregate of 855,208 ordinary shares at an exercise price of $0.04 per share after accounting for the reverse stock split.
On December 15, 2022, we raised gross proceeds of $10.0 million pursuant to the Ninth Supplemental Indenture.
As of December 31, 2022, we had available cash, cash equivalents, and investments of $27.5 million and $0.8 million of restricted cash held as part of the lease of our property in Eysins, Switzerland.
Regulatory and Commercial Milestones
You should read the following regulatory and commercial milestones update in conjunction with the discussion included under the sections "Item 1. Business" and "Item 1A. Risk Factors" of this report and our Annual Report on Form 10-K for the year ended March 31, 2022 filed with the SEC on June 28, 2022.
Clinical diagnostics microarrays
•We currently expect commercial launch of the clinical diagnostics autoimmune microarray to occur before the end of calendar year 2023.
•We currently expect commercial launch of the clinical diagnostics allergy microarray to occur before the end of calendar year 2024.
Revenue
We generate product sales revenue from the sale of conventional reagent products directly to hospitals, donor collection agencies and independent testing laboratories in the United States, the United Kingdom and to distributors in Europe and the rest of the world, and indirectly through sales to our original equipment manufacturer (or OEM) customers. We recognize revenues in the form of product sales when the goods are shipped. We also provide product development services to our OEM customers. We recognize revenue from these contractual relationships in the form of product development fees, which are included in other revenues.
Our revenue is denominated in multiple currencies. Sales in the United States and to certain of our OEM customers are denominated in U.S. Dollars. Sales in Europe and the rest of the world are denominated primarily in U.S. Dollars, Pounds Sterling or Euros. Our expenses are generally denominated in the currencies in which our operations are located, which are primarily in the United Kingdom, Switzerland and the United States. We operate globally and therefore changes in foreign currency exchange rates may become material to us in the future due to factors beyond our control.
Cost of revenue and operating expenses
Cost of revenue consists of direct labor expenses, including employee benefits, overhead expenses, material costs and freight costs, along with the depreciation of manufacturing equipment and leasehold improvements. Our gross margin represents total revenue less the cost of revenue, gross margin represents gross margin expressed as a percentage of total revenue, and gross margin on product sales represents gross margin excluding other revenues as a percentage of revenues excluding other revenues. We expect our overall cost of revenue to increase in absolute U.S. Dollars as we continue to increase our product sales volumes. However, we also believe that we can achieve efficiencies in our manufacturing operations, primarily through increasing production volumes.
Our sales and marketing expenses include costs associated with our sales organization for conventional reagent products, including our direct sales force, as well as our marketing and customer service personnel and the costs of the MosaiQ commercial team. These expenses consist principally of salaries, commissions, bonuses and employee benefits, as well as travel and other costs related to our sales and product marketing activities. We expense all sales and marketing costs as incurred. We expect sales and marketing expense to increase in absolute U.S. Dollars, primarily as a result of commissions on increased product sales in the United States and as we grow the MosaiQ commercial team.
- 22 -
Our research and development expenses include costs associated with performing research, development, field trials and our regulatory activities, as well as production costs incurred in advance of the commercial launch of MosaiQ. Research and development expenses include research personnel-related expenses, fees for contractual and consulting services, travel costs, laboratory supplies and depreciation of laboratory equipment.
We expense all research and development costs as incurred, net of government grants received and tax credits. Our UK subsidiary claims certain tax credits on its research and development expenditures and these are included as an offset to our research and development expenses. Our research and development efforts are focused on developing new products and technologies for the global transfusion diagnostics market. We expect our costs associated with field trials and regulatory approvals will increase at the same time as our development costs with MosaiQ decrease. As we move to commercialization of MosaiQ in the donor testing market, we expect our overall research and development expense to decrease.
Our general and administrative expenses include costs for our executive, accounting and finance, legal, corporate development, information technology and human resources functions. We expense all general and administrative expenses as incurred. These expenses consist principally of salaries, bonuses and employee benefits for the personnel performing these functions, including travel costs. These expenses also include share-based compensation, professional service fees (such as audit, tax and legal fees), costs related to our Board of Directors, and general corporate overhead costs, which include depreciation and amortization. We expect our general and administrative expenses to increase as our business develops and also due to the costs of operating as a public company, such as additional legal, accounting and corporate governance expenses, including expenses related to compliance with the Sarbanes-Oxley Act, directors’ and officers’ insurance premiums and investor relations expenses.
Net interest expense consists primarily of interest charges on our Senior Secured Notes and Convertible Notes and the amortization debt discount and debt issuance costs, as well as accrued dividends on the 7% cumulative redeemable preference shares issued in January 2015. We amortize debt issuance costs over the life of the instrument and report them as interest expense in our statements of operations. Net interest also includes the expected costs of the royalty rights agreements we entered into in October 2016, June 2018, December 2018 and May 2019 with the purchasers and consenting holders, as applicable, of our Senior Secured Notes. See Note 3, "Debt" and Note 6, "Ordinary and Preference Shares" to our condensed consolidated financial statements included in this Quarterly Report for additional information.
Other income (expense), net consists of the change in fair value of our convertible debt derivative, warrant liabilities and the impact of exchange rate fluctuations. See Note 3, "Debt" and Note 5, "Fair value measurement" to our condensed consolidated financial statements included in this Quarterly Report for additional information. Exchange rate fluctuations include realized exchange fluctuations resulting from the settlement of transactions in currencies other than the functional currencies of our businesses. Monetary assets and liabilities that are denominated in foreign currencies are measured at the period-end closing rate with resulting unrealized exchange fluctuations. The functional currencies of our legal entities are Pounds Sterling, Swiss Francs, Euros, and U.S. Dollars depending on the entity.
Provision for income taxes in the three and nine month periods ended December 31, 2022 and 2021, reflected the taxes chargeable on the taxable income of our subsidiaries.
- 23 -
Results of Operations
Comparison of the Quarters ended December 31, 2022 and 2021
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.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended December 31, |
|
|
|
|
|
|
|
|
|
2022 |
|
|
2021 |
|
|
Change |
|
|
|
Amount |
|
|
% of revenue |
|
|
Amount |
|
|
% of revenue |
|
|
Amount |
|
|
% |
|
|
|
(in thousands, except percentages) |
|
Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Product sales |
|
$ |
9,954 |
|
|
|
100 |
% |
|
$ |
10,172 |
|
|
|
100 |
% |
|
$ |
(218 |
) |
|
|
-2 |
% |
Other revenues |
|
|
— |
|
|
|
0 |
% |
|
|
— |
|
|
|
0 |
% |
|
|
— |
|
|
|
0 |
% |
Total revenue |
|
|
9,954 |
|
|
|
100 |
% |
|
|
10,172 |
|
|
|
100 |
% |
|
|
(218 |
) |
|
|
-2 |
% |
Cost of revenue |
|
|
3,904 |
|
|
|
39 |
% |
|
|
7,928 |
|
|
|
78 |
% |
|
|
(4,024 |
) |
|
|
-51 |
% |
Gross margin |
|
|
6,050 |
|
|
|
61 |
% |
|
|
2,244 |
|
|
|
22 |
% |
|
|
3,806 |
|
|
|
170 |
% |
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales and marketing |
|
|
3,298 |
|
|
|
33 |
% |
|
|
2,878 |
|
|
|
28 |
% |
|
|
420 |
|
|
|
15 |
% |
Research and development |
|
|
15,909 |
|
|
|
160 |
% |
|
|
13,260 |
|
|
|
130 |
% |
|
|
2,649 |
|
|
|
20 |
% |
General and administrative |
|
|
12,394 |
|
|
|
125 |
% |
|
|
17,357 |
|
|
|
171 |
% |
|
|
(4,963 |
) |
|
|
-29 |
% |
Total operating expenses |
|
|
31,601 |
|
|
|
317 |
% |
|
|
33,495 |
|
|
|
329 |
% |
|
|
(1,894 |
) |
|
|
-6 |
% |
Operating loss |
|
|
(25,551 |
) |
|
|
-257 |
% |
|
|
(31,251 |
) |
|
|
-307 |
% |
|
|
5,700 |
|
|
|
-18 |
% |
Other (expense) income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense, net |
|
|
(8,233 |
) |
|
|
-83 |
% |
|
|
(9,559 |
) |
|
|
-94 |
% |
|
|
1,326 |
|
|
|
-14 |
% |
Other, net |
|
|
20,591 |
|
|
|
207 |
% |
|
|
(3,507 |
) |
|
|
-34 |
% |
|
|
24,098 |
|
|
|
-687 |
% |
Total other expense, net |
|
|
12,358 |
|
|
|
124 |
% |
|
|
(13,066 |
) |
|
|
-128 |
% |
|
|
25,424 |
|
|
|
-195 |
% |
Loss before income taxes |
|
|
(13,193 |
) |
|
|
-133 |
% |
|
|
(44,317 |
) |
|
|
-436 |
% |
|
|
31,124 |
|
|
|
-70 |
% |
Provision for income taxes |
|
|
(131 |
) |
|
|
— |
|
|
|
(504 |
) |
|
|
— |
|
|
|
373 |
|
|
|
-74 |
% |
Net loss |
|
$ |
(13,324 |
) |
|
|
-134 |
% |
|
$ |
(44,821 |
) |
|
|
-441 |
% |
|
$ |
31,497 |
|
|
|
-70 |
% |
Revenue
Total revenue for the quarter ended December 31, 2022 decreased by 2% to $10.0 million compared with $10.2 million for the quarter ended December 31, 2021. The decrease in product sales relates primarily to reduced orders from an OEM customer in our conventional reagent business.
Cost of revenue and gross margin
Cost of revenue decreased by 51% to $3.9 million for the quarter ended December 31, 2022 compared with $7.9 million for the quarter ended December 31, 2021. The decrease is driven primarily due to the fact there was a $2.5 million inventory write down in cost of goods sold due to inventory write-downs in the quarter ended December 31, 2021. Additionally, there were changes in estimates associated with the shift to the autoimmune business resulting in a favorable increase in gross margin of $0.6 million and a favorable impact due to foreign currency changes.
Gross margin on total revenue for the quarter ended December 31, 2022 was $6.0 million, an increase of 170% when compared with a $2.2 million profit for the quarter ended December 31, 2021. Total gross margin on sales was 61% in the quarter ended December 31, 2022 compared to 22% in the quarter ended December 31, 2021.
Sales and marketing expenses
Sales and marketing expenses were $3.3 million for the quarter ended December 31, 2022, compared with $2.9 million for the quarter ended December 31, 2021. This increase was attributable primarily to restructuring costs of $0.3 million during the quarter ended December 31, 2022. As a percentage of total revenue, sales and marketing expenses were 33% for the quarter ended December 31, 2022 compared to 28% for the quarter ended December 31, 2021.
Research and development expenses
Research and development expenses increased by 20% to $15.9 million for the quarter ended December 31, 2022 compared with $13.3 million for the quarter ended December 31, 2021. The increase in research and development expenses is driven by $2.4 million in restructuring costs associated with the change in strategy to autoimmune products which took place during the quarter.
General and administrative expenses
General and administrative expenses decreased by 29% to $12.4 million for the quarter ended December 31, 2022, compared with $17.4 million for the quarter ended December 31, 2021. The decrease was primarily attributed to a decrease of stock compensation
- 24 -
expense in the period where we recognized $0.9 million in the quarter ended December 31, 2022 compared with $2.3 million in the quarter ended December 31, 2021. Additionally, in the quarter ended December 31, 2021 there were one-time executive management costs of associated with new hires and relocation which were not repeated in the current year. As a percentage of total revenue, general and administrative expenses were 125 % for the quarter ended December 31, 2022 compared to 171% for the quarter ended December 31, 2021.
Other income (expense)
Net interest expense was $8.2 million for the quarter ended December 31, 2022 compared with $9.6 million in interest expense for the quarter ended December 31, 2021. Interest expense in the quarter ended December 31, 2022 included $5.3 million of interest expense on our Senior Secured Notes and royalty liabilities compared with $6.8 million expense for the quarter ended December 31, 2021. The decrease in interest expense in the quarter ended December 31, 2022 is primarily due to a reduction in interest expense of $1.4 million associated with the royalty rights agreement compared to the prior year. Interest expense related to the Convertible Notes was included $2.6 million and $2.5 million for the quarter ended December 31, 2022 and 2021 respectively. Net interest expense also included $0.3 million of dividends accrued on the 7% cumulative redeemable preference shares in each of the quarters ended December 31, 2022 and December 31, 2021.
Other, net was a $20.6 million gain for the quarter ended December 31, 2022 compared with a $3.5 million loss for the quarter ended December 31, 2021. For the quarter ended December 31, 2022 this comprised a $2.6 million gain related to the change in fair value associated with derivative liabilities, a $0.1 million gain related to a reduction of impairment on one CSAM fund and $17.9 million in foreign exchange gains arising on monetary assets and liabilities denominated in foreign currencies. For the quarter ended December 31, 2021 this comprised a $3.3 million loss related to the change in fair value associated with derivative liabilities and $0.2 million in foreign exchange losses arising on monetary assets and liabilities denominated in foreign currencies
Provision for income taxes
Provision for income taxes in the quarter ended December 31, 2022 and 2021, reflected the taxes chargeable on the taxable income of our subsidiaries.
Comparison of the Nine Month Periods ended December 31, 2022 and 2021
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 December 31, |
|
|
|
|
|
|
|
|
|
2022 |
|
|
2021 |
|
|
Change |
|
|
|
Amount |
|
|
% of revenue |
|
|
Amount |
|
|
% of revenue |
|
|
Amount |
|
|
% |
|
|
|
(in thousands, except percentages) |
|
Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Product sales |
|
$ |
27,624 |
|
|
|
100 |
% |
|
$ |
28,497 |
|
|
|
99 |
% |
|
$ |
(873 |
) |
|
|
-3 |
% |
Other revenues |
|
|
— |
|
|
|
0 |
% |
|
|
231 |
|
|
|
1 |
% |
|
|
(231 |
) |
|
|
-100 |
% |
Total revenue |
|
|
27,624 |
|
|
|
100 |
% |
|
|
28,728 |
|
|
|
100 |
% |
|
|
(1,104 |
) |
|
|
-4 |
% |
Cost of revenue |
|
|
31,141 |
|
|
|
113 |
% |
|
|
17,579 |
|
|
|
61 |
% |
|
|
13,562 |
|
|
|
77 |
% |
Gross margin |
|
|
(3,517 |
) |
|
|
-13 |
% |
|
|
11,149 |
|
|
|
39 |
% |
|
|
(14,666 |
) |
|
|
-132 |
% |
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales and marketing |
|
|
10,117 |
|
|
|
37 |
% |
|
|
8,011 |
|
|
|
28 |
% |
|
|
2,106 |
|
|
|
26 |
% |
Research and development |
|
|
44,316 |
|
|
|
160 |
% |
|
|
42,545 |
|
|
|
148 |
% |
|
|
1,771 |
|
|
|
4 |
% |
General and administrative |
|
|
31,127 |
|
|
|
113 |
% |
|
|
37,555 |
|
|
|
131 |
% |
|
|
(6,428 |
) |
|
|
-17 |
% |
Total operating expenses |
|
|
85,560 |
|
|
|
310 |
% |
|
|
88,111 |
|
|
|
307 |
% |
|
|
(2,551 |
) |
|
|
-3 |
% |
Operating (loss) |
|
|
(89,077 |
) |
|
|
-322 |
% |
|
|
(76,962 |
) |
|
|
-268 |
% |
|
|
(12,115 |
) |
|
|
16 |
% |
Other income (expense): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense, net |
|
|
(9,421 |
) |
|
|
-34 |
% |
|
|
(21,914 |
) |
|
|
-76 |
% |
|
|
12,493 |
|
|
|
-57 |
% |
Other, net |
|
|
1,011 |
|
|
|
4 |
% |
|
|
677 |
|
|
|
2 |
% |
|
|
334 |
|
|
|
49 |
% |
Total other expense, net |
|
|
(8,410 |
) |
|
|
-30 |
% |
|
|
(21,237 |
) |
|
|
-74 |
% |
|
|
12,827 |
|
|
|
-60 |
% |
Loss before income taxes |
|
|
(97,487 |
) |
|
|
-353 |
% |
|
|
(98,199 |
) |
|
|
-342 |
% |
|
|
712 |
|
|
|
-1 |
% |
Provision for income taxes |
|
|
(631 |
) |
|
|
— |
|
|
|
(1,019 |
) |
|
|
— |
|
|
|
388 |
|
|
|
-38 |
% |
Net loss |
|
$ |
(98,118 |
) |
|
|
-355 |
% |
|
$ |
(99,218 |
) |
|
|
-345 |
% |
|
$ |
1,100 |
|
|
|
-1 |
% |
Revenue
Total revenue for the nine month period ended December 31, 2022 decreased by 4% to $27.6 million, compared with $28.7 million for the nine month period ended December 31, 2021.
- 25 -
The decrease in product sales relates primarily to reduced orders from an OEM customer in our conventional reagent business. Other revenues for the nine month period ended December 31, 2021 related to a small development project for an OEM customer.
Cost of revenue and gross margin
Cost of revenue increased by 77% to $31.1 million for the nine month period ended December 31, 2022, compared with $17.6 million for the nine month period ended December 31, 2021. The increase in costs of revenue resulted from a $15.3 million write-down of transfusion related MosaiQ inventory and purchase commitments compared to a $2.5 million write down of inventory in the period ended December 31, 2022. There were also higher costs in our conventional reagent business due to inventory write-downs and write-offs of certain products due to expiration of products and quality control tests, higher production costs associated with inflation, and higher costs associated with sales mix in the nine month period ended December 31, 2022.
Gross margin on total revenue for the nine month period ended December 31, 2022 was a $3.5 million loss, compared with $11.1 million gross margin for the nine month period ended December 31, 2021.
Sales and marketing expenses
Sales and marketing expenses were $10.1 million for the nine month period ended December 31, 2022, compared with $8.0 million for the nine month period ended December 31, 2021. This increase was attributable to greater personnel and other expenses related to commercial launch activities with MosaiQ, opening of a sales office in the Middle-East, and restructuring costs associated with the change in strategy to autoimmune products. As a percentage of total revenue, sales and marketing expenses were 37% for the nine month period ended December 31, 2022 compared to 28% for the nine month period ended December 31, 2021.
Research and development expenses
Research and development expenses increased by 4% to $44.3 million for the nine month period ended December 31, 2022, compared with $42.5 million for the nine month period ended December 31, 2021. The increase in research and development expenses in 2022, is driven by the $2.4 million in restructuring costs associated with the Company's change in strategy to focus on autoimmune products and offset by a payment of $1.5 million related to the costs of our intellectual property license with TTP which were incurred in 2021 but did not occur in 2022. This was offset by higher expenses related to additional employee and third party expenses to support planned field trials and product development at the start of the fiscal year.
General and administrative expenses
General and administrative expenses decreased by 17% to $31.1 million for the nine month period ended December 31, 2022, compared with $37.6 million for the nine month period ended December 31, 2021. The decrease is primarily driven by a reduction in stock compensation expense which was $2.6 million in the nine month period ended December 31, 2022 compared with $5.5 million in the nine month period ended December 31, 2021. Additionally, in the quarter ended December 31, 2021 there were one-time executive management costs of associated with new hires and relocation which were not repeated in the current year. As a percentage of total revenue, general and administrative expenses were 113% for the nine month period ended December 31, 2022 and 131% for the nine month period ended December 31, 2021.
Other income (expense)
Net interest expense was $9.4 million for the nine month period ended December 31, 2022, compared with $21.9 million for the nine month period ended December 31, 2021. Interest expense in the nine month period ended December 31, 2022 included $0.8 million of interest income on our Senior Secured Notes and royalty liabilities compared with $15.3 million in expense the nine month period ended December 31, 2021. The decreased expense reflected changes in the royalty cost estimates. Interest expense for the nine month period ended December 31, 2022 also included $7.8 million of interest charges related to the Convertible Notes compared to $6.0 million for the nine month period ended December 31, 2021. Net interest expense also included $0.8 million of dividends accrued on the 7% cumulative redeemable preference shares in each of the nine month periods ended December 31, 2022 and December 31, 2021. In addition, in the nine month period ended December 31, 2021 we realized interest income of $0.2 million on our short-term money market investments while no interest income was recognized in the nine month period ended December 31, 2022.
Other, net represented a gain of $1.0 million for the nine month period ended December 31, 2022, compared with a $0.7 million gain for the nine month period ended December 31, 2021. For the nine month period ended December 31, 2022 this comprised a $15.5 million gain related to the change in fair value associated with the Convertible Loan derivatives and warrants, $13.4 million of foreign exchange losses arising on monetary assets and liabilities denominated in foreign currencies, and a $1.1 million impairment related to the change in estimated fair value of CSAM funds. For the nine month period ended December 31, 2021 this comprised a $3.9 million gain related to the change in fair value of derivatives liabilities and $3.2 million of foreign exchange losses arising on monetary assets and liabilities denominated in foreign currencies
Provision for income taxes
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Provision for income taxes in the nine month period ended December 31, 2022 and 2021 reflected the taxes payable on the taxable income of our subsidiaries.
Quarterly Results of Operations
Our quarterly product sales can fluctuate depending upon the shipment cycles for our red blood cell-based products, which account for approximately two-thirds of our current product sales. For these products, we typically experience 13 shipping cycles per year. This equates to three shipments of each product per quarter, except for one quarter per year when four shipments occur. Not all products ship on the same day so quarters where four shipments occur do not always align. In fiscal 2022 we experienced additional shipments in the third and fourth quarters. In fiscal 2023, the greatest impact of extra product shipments is expected to occur in our third quarter. The timing of shipment of bulk antisera products to our OEM customers may also move revenues from quarter to quarter. We also experience some seasonality in demand around holiday periods in both Europe and the United States. As a result of these factors, we expect to continue to see seasonality and quarter-to-quarter variations in our product sales.
The timing of product development fees included in other revenues is mostly dependent upon the achievement of pre-negotiated project milestones.
Liquidity and Capital Resources
See "Updates on Liquidity, Financial Condition and Company Strategy" above for a discussion of recent developments affecting our current and expected liquidity and capital resources.
Since our commencement of operations in 2007, we have incurred net losses and negative cash flows from operations. As of December 31, 2022, we had an accumulated deficit of $823.2 million. During the nine month period ended December 31, 2022, we incurred a net loss of $98.1 million and used $89.2 million of cash in operating activities. As described under results of operations, our use of cash during the nine month period ended December 31, 2022 was primarily attributable to our investment in the development of MosaiQ and corporate costs, including costs related to being a public company.
From our incorporation in 2012 to March 31, 2022, we have raised $160.0 million of gross proceeds through the private placement of our ordinary and preference shares and warrants, $433.0 million of gross proceeds from public offerings of our ordinary shares and issuances of ordinary shares upon exercise of warrants, $145.0 million of gross proceeds from the issuance of the Senior Secured Notes and $105 million of gross proceeds from the issuance of the Convertible Notes. In addition, on March 23, 2018, we raised $20.9 million from the sale and leaseback of the Allan Robb Campus.
During the nine month period ended December 31, 2022, we raised gross proceeds of approximately $20.0 million from a public offering of 811,458 of our ordinary shares and, in lieu of ordinary shares to certain investors, pre-funded warrants exercisable for an aggregate of 855,208 ordinary shares at an exercise price of $0.04 per share.
On December 15, 2022, the Company received gross proceeds of $10.0 million pursuant to the Ninth Supplemental Indenture. See Note 3, "Debt" for addtional information about modifications to our debt agreements during the period.
Cash Flows for the quarter ended December 31, 2022 and 2021
Operating activities
Net cash used in operating activities was $89.3 million during the nine month period ended December 31, 2022, which included net losses of $98.1 million offset by non-cash items of $8.4 million. Non-cash items were depreciation and amortization expense of $4.3 million, share-based compensation expense of $2.6 million, a decrease from the change in fair value of loan derivatives of $15.6 million, Swiss pension costs of $0.6 million, amortization of debt discounts, royalty, and unrealized foreign currency loss on debt of $13.0 million, impairment of investments of $1.2 million, accrued preference share dividends of $0.8 million, deferred lease rentals of $0.9 million and income taxes of $0.6 million. We also experienced a net cash outflow of $0.5 million from changes in operating assets and liabilities during the period, consisting of a $1.4 million increase in accrued compensation and benefits, a $6.6 million decrease in inventories, a decrease from a $9.0 million from a net change in other assets and liabilities, a $2.3 million reduction in accounts payable and accrued liabilities, and a $0.8 million increase in accounts receivables.
Net cash used in operating activities was $96.2 million during the nine month period ended December 31, 2021, which included net losses of $99.2 million offset by non-cash items of $15.8 million. Non-cash items were depreciation and amortization expense of $5.7 million, share-based compensation expense of $4.7 million, a reduction from the change in fair value of loan derivatives of $3.9 million, Swiss pension costs of $0.5 million, amortization of deferred debt issue costs and discounts of $6.4 million, accrued preference share dividends of $0.8 million, deferred lease rentals of $0.5 million and income taxes of $1.1 million. We also experienced a net cash outflow of $12.7 million from changes in operating assets and liabilities during the period, consisting of a $5.2 million reduction in accrued compensation and benefits, a $0.5 million increase in inventories, a $2.3 million increase in other assets, a $3.8 million reduction in accounts payable and accrued liabilities and a $0.9 million increase in accounts receivables.
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Investing activities
Net cash provided by investing activities was $0.9 million for the nine month period ended December 31, 2022 compared to $44.6 million for the quarter ended December 31, 2021. We spent $1.7 million on purchases of property and equipment in the nine month period ended December 31, 2022, which was mainly related to purchasing MosaiQ instruments and investments in our IT infrastructure. We also received distributions on our short-term money market investments of $2.6 million from CSAM in the nine month period ended December 31, 2022.
Net cash provided by investing activities was $44.6 million for the nine month period ended December 31, 2021. We spent $2.3 million on purchases of property and equipment in the nine month period ended December 31, 2021, which was mainly related to purchasing MosaiQ instruments and investments in our IT infrastructure. We also received distributions on our short-term money market investments of $31.9 million from CSAM in the nine month period ended December 31, 2021, received $19.5 million from selling other short term investments and invested $4.5 million in other short-term money market investments.
Financing activities
Net cash provided by financing activities was $27.5 million during the nine month period ending December 31, 2022, consisting of $17.9 million of proceeds related to the issuance of ordinary shares and warrants after deducting issuance costs, $10.0 million related to proceeds from the further SSNs and $0.5 million of cash spent on repayments on finance leases.
Net cash provided by financing activities was $87.8 million during the quarter ended December 31, 2021, consisting of $100.5 million generated from the issuance of the Convertible Notes, net of debt issue costs, offset by $12.1 million repayment of the Senior Secured Notes, expenses related to restricted stock units vested of $0.1 million and $0.5 million of repayments on finance leases.
Operating and Capital Expenditure Requirements
We have not achieved profitability on an annual basis since we commenced operations in 2007 and we expect our operating losses to continue for at least the remainder of the fiscal year ending March 31, 2023. As we continue MosaiQ development, we expect our operating expenses during the year ended March 31, 2023 to be similar to those of the year ended March 31, 2022.
As of December 31, 2022, we had $27.5 million of available cash, cash equivalents, and investments and $0.8 million of restricted cash held as part of the arrangements relating to the lease of our properties in Eysins, Switzerland.
Critical Accounting Policies and Significant Judgments and Estimates
We have prepared our condensed consolidated financial statements in accordance with U.S. GAAP. Our preparation of these condensed consolidated financial statements requires us to make estimates, assumptions and judgments that affect the reported amounts of assets, liabilities, expenses and related disclosures at the date of the consolidated financial statements, as well as revenue and expenses during the reporting periods. We evaluate our estimates and judgments on an ongoing basis. We base our estimates on historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results could therefore differ materially from these estimates under different assumptions or conditions.
For a detailed discussion of our critical accounting policies, see Note 1, "Organization and Summary of Significant Accounting Policies." to our Annual Report on Form 10-K for the year ended March 31, 2022. For a detailed description of our significant judgements and estimates, see "Management’s Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the year ended March 31, 2022.
Recent Accounting Pronouncements
We did not adopt any other new accounting pronouncements during the nine month period ended December 31, 2022 that had a significant effect on our condensed consolidated financial statements included in this Quarterly Report.
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