Investor Relations: SEC Filing | AVITA Medical, Inc.

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rcel-10q_20220630.htm

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

☐	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.

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

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.

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.

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.

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

	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	)		-		-			(5,109	)
Share-based compensation		-