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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

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

For the quarterly period ended June 30, 2022

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: 001-39059

 

 

AVITA MEDICAL, INC.

(Exact name of registrant as specified in its charter)

 

 

Delaware

85-1021707

(State or other jurisdiction of

incorporation or organization)

(IRS Employer

Identification No.)

 

28159 Avenue Stanford

Suite 220

Valencia, CA 91355

(Address of principal executive offices and Zip Code)

Registrant’s telephone number, including area code: (661) 367-9170

 

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

 

Title of each class

 

Trading

Symbol

 

Name of each exchange

on which registered

Common Stock, par value $0.0001 per share

 

RCEL

 

The NASDAQ Stock Market LLC

Securities registered pursuant to section 12(g) of the Act:

None

 

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, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

Accelerated filer

 

 

 

 

 

 

 

Non-accelerated filer

 

Smaller reporting company

 

 

 

 

 

 

 

Emerging growth company

 

 

 

 

If an emerging growth company, indicate by check mark if the registrant has selected 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  

The number of shares of the registrant’s $0.0001 par value common stock outstanding as of August 2, 2022 was 25,003,088

 

 


 

 

TABLE OF CONTENTS

 

FORWARD-LOOKING STATEMENT

3

 

 

PART I – FINANCIAL INFORMATION

5

 

 

 

Item 1.

Financial Statements

5

 

 

 

 

 

 

 

 

 

 

Consolidated Balance Sheets – June 30, 2022 (unaudited) and December 31, 2021

5

 

 

 

 

Consolidated Statements of Operations for the three and six months ended June 30, 2022 and 2021 (unaudited)

6

 

 

 

 

Consolidated Statements of Comprehensive Loss for the three and six months ended June 30, 2022 and 2021 (unaudited)

7

 

 

 

 

Consolidated Statements of Shareholders’ Equity for the three and six months ended June 30, 2022 and 2021 (unaudited)

8

 

 

 

 

Consolidated Statements of Cash Flows for the six months ended June 30, 2022 and 2021 (unaudited)

10

 

 

 

 

Notes to Consolidated Financial Statements (unaudited)

11

 

 

 

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

33

 

 

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

38

 

 

 

Item 4.

Controls and Procedures

38

 

 

Part II – OTHER INFORMATION

40

 

 

 

Item 1.

Legal Proceedings

40

 

 

 

Item 1A.

Risk Factors

40

 

 

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

40

 

 

 

Item 3.

Defaults Upon Senior Securities

40

 

 

 

Item 4.

Mine Safety Disclosures

40

 

 

 

Item 5.

Other Information

40

 

 

 

Item 6.

Exhibits

41

 

 

Signatures

42

 

 

 

 


 

 

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

FORWARD-LOOKING STATEMENT

This Quarterly Report on Form 10-Q contains forward-looking statements. We intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. All statements other than statements of historical facts contained in this Quarterly Report on Form 10-Q, including statements regarding our future revenues; solvency; future industry market conditions; future changes in our capacity and operations; future operating and overhead costs; intellectual property; regulatory and related approvals; the conduct or outcome of pre-clinical or clinical (human) studies; operational and management restructuring activities (including implementation of methodologies and changes in the board of directors); future employment and contributions of personnel; effects on the global economy of the ongoing COVID-19 pandemic, including effects on the economy of existing and future variants on the original COVID-19 strain; including the highly contagious Omicron BA.5 variant; tax and interest rates; productivity, business process, rationalization, investment, acquisition and acquisition integrations, consulting, operational, tax, financial and capital projects and initiatives; inflationary pressures on the U.S. and global economy; changes in the legal or regulatory environment; and future working capital, costs, revenues, business opportunities, cash flows, margins, earnings and growth. These statements involve known and unknown risks, uncertainties and other important factors that may cause our actual results, performance, or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements.

In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “expect,” “plan,” “anticipate,” “could,” “intend,” “target,” “project,” “contemplate,” “believe,” “estimate,” “predict,” “potential”, or “continue” or the negative of these terms or other similar expressions.

The forward-looking statements in this Quarterly Report on Form 10-Q are only predictions. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our business, financial condition, and results of operations. These forward-looking statements speak only as of the date of this Quarterly Report on Form 10-Q and are subject to a number of important factors that could cause actual results to differ materially from those in the forward-looking statements, including the factors described under the sections in this Quarterly Report on Form 10-Q titled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Moreover, we operate in an evolving environment. New risk factors and uncertainties may emerge from time to time, and it is not possible for our management to predict all risk factors and uncertainties.

You should read this Quarterly Report on Form 10-Q and the documents that we reference in this Quarterly Report on Form 10-Q completely and with the understanding that our actual future results may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary statements. Except as required by applicable law, we do not plan to publicly update or revise any forward-looking statements contained herein, whether as a result of any new information, future events, changed circumstances or otherwise.  

 

 

3


 

 

 

 

 

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Shareholders
Avita Medical, Inc.

Results of review of interim financial statements

We have reviewed the accompanying consolidated balance sheet of Avita Medical, Inc. (a Delaware corporation) and subsidiaries (the “Company”) as of June 30, 2022 and the related consolidated statements of operations, comprehensive loss, and shareholders’ equity for the three-month and six-month periods ended June 30, 2022 and 2021, cash flows for the six-month periods ended June 30, 2022 and 2021, and the related notes (collectively referred to as the “interim financial statements”). Based on our reviews, we are not aware of any material modifications that should be made to the accompanying interim financial statements for them to be in conformity with accounting principles generally accepted in the United States of America.

We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated balance sheet of the Company as of December 31, 2021, and the related consolidated statements of operations, comprehensive loss, shareholders’ equity, and cash flows for the year then ended (not presented herein); and in our report dated February 28, 2022, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying consolidated balance sheet as of December 31, 2021, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

Basis for review results

These interim financial statements are the responsibility of the Company’s management. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our reviews in accordance with the standards of the PCAOB. A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the PCAOB, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

/s/ GRANT THORNTON LLP

Los Angeles, California
August 11, 2022

 

 

 

4


 

 

PART I – Financial Information

Item 1. FINANCIAL STATEMENTS

AVITA MEDICAL, INC.

Consolidated Balance Sheets

(In thousands, except share and per share data)

(Unaudited)

 

 

 

As of

 

 

 

June 30, 2022

 

 

December 31, 2021

 

ASSETS

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

34,737

 

 

$

55,511

 

Marketable securities

 

 

49,618

 

 

 

29,649

 

Accounts receivable, net

 

 

3,884

 

 

 

3,118

 

BARDA receivables

 

 

338

 

 

 

308

 

Prepaids and other current assets

 

 

1,005

 

 

 

1,213

 

Restricted cash

 

 

202

 

 

 

201

 

Inventory

 

 

2,022

 

 

 

2,132

 

Total current assets

 

 

91,806

 

 

 

92,132

 

Marketable securities, long-term

 

 

6,743

 

 

 

19,692

 

Plant and equipment, net

 

 

1,249

 

 

 

1,262

 

Operating lease right-of-use assets

 

 

1,203

 

 

 

1,544

 

Intangible assets, net

 

 

428

 

 

 

443

 

Other long-term assets

 

 

1,240

 

 

 

942

 

Total assets

 

$

102,669

 

 

$

116,015

 

LIABILITIES AND SHAREHOLDERS' EQUITY

 

 

 

 

 

 

 

 

Accounts payable and accrued liabilities

 

 

2,495

 

 

 

2,708

 

Accrued wages and fringe benefits

 

 

4,174

 

 

 

5,363

 

Other current liabilities

 

 

1,217

 

 

 

1,075

 

Total current liabilities

 

 

7,886

 

 

 

9,146

 

Contract liabilities

 

 

813

 

 

 

952

 

Operating lease liabilities, long-term

 

 

532

 

 

 

918

 

Other long-term liabilities

 

 

715

 

 

 

375

 

Total liabilities

 

 

9,946

 

 

 

11,391

 

Non-qualified deferred compensation share awards

 

 

163

 

 

 

-

 

Contingencies (Note 12)

 

 

 

 

 

 

 

 

Shareholders' Equity:

 

 

 

 

 

 

 

 

Common stock, $0.0001 par value per share, 200,000,000 shares authorized, 25,003,088

   and 24,925,743 shares issued and outstanding at June 30, 2022 and December 31, 2021,

   respectively

 

 

3

 

 

 

3

 

Preferred stock, $0.0001 par value per share, 10,000,000 shares authorized, no shares

   issued or outstanding at June 30, 2022 and December 31, 2021

 

 

-

 

 

 

-

 

Additional paid-in capital

 

 

336,668

 

 

 

332,484

 

Accumulated other comprehensive income

 

 

7,536

 

 

 

8,060

 

Accumulated deficit

 

 

(251,647

)

 

 

(235,923

)

Total shareholders' equity

 

 

92,560

 

 

 

104,624

 

Total liabilities and shareholders' equity

 

$

102,669

 

 

$

116,015

 

 

The accompanying notes form part of the unaudited consolidated financial statements.

5


 

AVITA MEDICAL, INC.

Consolidated Statements of Operations

(In thousands, except share and per share data)

(Unaudited)

 

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Revenues

 

$

8,335

 

 

$

10,304

 

 

$

15,874

 

 

$

19,069

 

Cost of sales

 

 

(1,386

)

 

 

(2,053

)

 

 

(3,164

)

 

 

(4,199

)

Gross profit

 

 

6,949

 

 

 

8,251

 

 

 

12,710

 

 

 

14,870

 

BARDA income

 

 

551

 

 

 

440

 

 

 

1,285

 

 

 

1,010

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sales and marketing expenses

 

 

(5,332

)

 

 

(4,146

)

 

 

(10,160

)

 

 

(7,795

)

General and administrative expenses

 

 

(5,471

)

 

 

(5,275

)

 

 

(13,005

)

 

 

(10,697

)

Research and development expenses

 

 

(3,059

)

 

 

(3,974

)

 

 

(6,679

)

 

 

(8,083

)

Total operating expenses

 

 

(13,862

)

 

 

(13,395

)

 

 

(29,844

)

 

 

(26,575

)

Operating loss

 

 

(6,362

)

 

 

(4,704

)

 

 

(15,849

)

 

 

(10,695

)

Interest expense

 

 

(4

)

 

 

(9

)

 

 

(4

)

 

 

(12

)

Other income

 

 

109

 

 

 

2

 

 

 

137

 

 

 

9

 

Loss before income taxes

 

 

(6,257

)

 

 

(4,711

)

 

 

(15,716

)

 

 

(10,698

)

Income tax expense

 

 

(4

)

 

 

(7

)

 

 

(8

)

 

 

(17

)

Net loss

 

$

(6,261

)

 

$

(4,718

)

 

$

(15,724

)

 

$

(10,715

)

Net loss per common share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

(0.25

)

 

$

(0.19

)

 

$

(0.63

)

 

$

(0.45

)

Diluted

 

$

(0.25

)

 

$

(0.19

)

 

$

(0.63

)

 

$

(0.45

)

Weighted-average common shares:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

24,971,243

 

 

 

24,860,738

 

 

 

24,954,712

 

 

 

23,803,460

 

Diluted

 

 

24,971,243

 

 

 

24,860,738

 

 

 

24,954,712

 

 

 

23,803,460

 

 

The accompanying notes form part of the unaudited consolidated financial statements.

 

6


 

 

AVITA MEDICAL, INC.

Consolidated Statements of Comprehensive Loss

(In thousands)

(Unaudited)

 

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Net loss

 

$

(6,261

)

 

$

(4,718

)

 

$

(15,724

)

 

$

(10,715

)

Change in foreign currency translation loss

 

 

(110

)

 

 

(12

)

 

 

(92

)

 

 

(30

)

Change in net unrealized loss on marketable securities, net of tax

 

 

(135

)

 

 

-

 

 

 

(432

)

 

 

-

 

Comprehensive loss

 

$

(6,506

)

 

$

(4,730

)

 

$

(16,248

)

 

$

(10,745

)

 

The accompanying notes form part of the unaudited consolidated financial statements.  

7


 

AVITA MEDICAL, INC.

Consolidated Statements of Shareholders’ Equity

(In thousands, except shares)

(Unaudited)

 

 

 

 

Three Months Ended June 30, 2022

 

 

 

Common Stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Additional

Paid-in Capital

 

 

Accumulated Other

Comprehensive

Gain (Loss)

 

 

Accumulated

Deficit

 

 

Total

Shareholders'

Equity

 

Balance at March 31, 2022

 

 

24,955,581

 

 

$

3

 

 

$

335,417

 

 

$

7,781

 

 

$

(245,386

)

 

$

97,815

 

Net loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(6,261

)

 

 

(6,261

)

Share-based compensation

 

 

-

 

 

 

-

 

 

 

1,414

 

 

 

-

 

 

 

-

 

 

 

1,414

 

Vesting of restricted stock units

 

 

47,507

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Change in classification of deferred compensation share awards

 

 

-

 

 

 

-

 

 

 

(192

)

 

 

-

 

 

 

-

 

 

 

(192

)

Change in redemption value of share awards in NQDC plan

 

 

-

 

 

 

-

 

 

 

29

 

 

 

-

 

 

 

-

 

 

 

29

 

Other comprehensive loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(245

)

 

 

-

 

 

 

(245

)

Balance at June 30, 2022

 

 

25,003,088

 

 

$

3

 

 

$

336,668

 

 

$

7,536

 

 

$

(251,647

)

 

$

92,560

 

 

 

 

 

Three Months Ended June 30, 2021

 

 

 

Common Stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Additional

Paid-in Capital

 

 

Accumulated Other

Comprehensive

Gain (Loss)

 

 

Accumulated

Deficit

 

 

Total

Shareholders'

Equity

 

Balance at March 31, 2021

 

 

24,842,883

 

 

$

3

 

 

$

327,447

 

 

$

8,271

 

 

$

(216,778

)

 

$

118,943

 

Net loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(4,718

)

 

 

(4,718

)

Share-based compensation

 

 

-

 

 

 

-

 

 

 

1,410

 

 

 

-

 

 

 

-

 

 

 

1,410

 

Exercise of stock options

 

 

5,475

 

 

 

-

 

 

 

32

 

 

 

-

 

 

 

-

 

 

 

32

 

Vesting of restricted stock units

 

 

47,506

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Translation loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(12

)

 

 

-

 

 

 

(12

)

Balance at June 30, 2021

 

 

24,895,864

 

 

$

3

 

 

$

328,889

 

 

$

8,259

 

 

$

(221,496

)

 

$

115,655

 

 

 

 

 

Six Months Ended June 30, 2022

 

 

 

Common Stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Additional

Paid-in Capital

 

 

Accumulated Other

Comprehensive

Gain (Loss)

 

 

Accumulated

Deficit

 

 

Total

Shareholders'

Equity

 

Balance at December 31, 2021

 

 

24,925,743

 

 

$

3

 

 

$

332,484

 

 

$

8,060

 

 

$

(235,923

)

 

$

104,624

 

Net loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(15,724

)

 

 

(15,724

)

Share-based compensation

 

 

-

 

 

 

-

 

 

 

4,346

 

 

 

-

 

 

 

-

 

 

 

4,346

 

Exercise of stock options

 

 

125

 

 

 

-

 

 

 

1

 

 

 

-

 

 

 

-

 

 

 

1

 

Vesting of restricted stock units

 

 

77,220

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Change in classification of deferred compensation share awards

 

 

-

 

 

 

-

 

 

 

(192

)

 

 

-

 

 

 

-

 

 

 

(192

)

Change in redemption value of share awards in NQDC plan

 

 

-

 

 

 

-

 

 

 

29

 

 

 

-

 

 

 

-

 

 

 

29

 

Other comprehensive loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(524

)

 

 

-

 

 

 

(524

)

Balance at June 30, 2022

 

 

25,003,088

 

 

$

3

 

 

$

336,668

 

 

$

7,536

 

 

$

(251,647

)

 

$

92,560

 

 

 

8


 

 

 

 

Six Months Ended June 30, 2021

 

 

 

Common Stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Additional

Paid-in Capital

 

 

Accumulated Other

Comprehensive

Gain (Loss)

 

 

Accumulated

Deficit

 

 

Total

Shareholders'

Equity

 

Balance at December 31, 2020

 

 

21,625,058

 

 

$

3

 

 

$

262,086

 

 

$

8,289

 

 

$

(210,781

)

 

$

59,597

 

Net loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(10,715

)

 

 

(10,715

)

Issuance of common stock under direct placement

 

 

3,214,250

 

 

 

-

 

 

 

69,106

 

 

 

-

 

 

 

-

 

 

 

69,106

 

Issuance costs associated with direct placement

 

 

-

 

 

 

-

 

 

 

(5,109

)