# AVITA Medical, Inc.: Form 10-Q for the period ended Sep 30, 2024

- Company: [AVITA Medical, Inc.](/companies/rcel.md) (CIK 1762303)
- Form: 10-Q
- Filed: 2024-11-07
- Accepted by EDGAR: Nov 7, 2024, 16:10 ET
- Period: 2024-09-30
- Accession: 0000950170-24-123326
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1762303/000095017024123326/rcel-20240930.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1762303/000095017024123326/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2024-09-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2024-07-01 to 2024-09-30 | $19.5m | us-gaap:Revenues |
| Revenue | 9 months, 2024-01-01 to 2024-09-30 | $45.8m | us-gaap:Revenues |
| Cost of revenue | 3 months, 2024-07-01 to 2024-09-30 | $3.2m | us-gaap:CostOfRevenue |
| Cost of revenue | 9 months, 2024-01-01 to 2024-09-30 | $6.8m | us-gaap:CostOfRevenue |
| Gross profit | 3 months, 2024-07-01 to 2024-09-30 | $16.4m | us-gaap:GrossProfit |
| Gross profit | 9 months, 2024-01-01 to 2024-09-30 | $39.0m | us-gaap:GrossProfit |
| Research and development | 3 months, 2024-07-01 to 2024-09-30 | $5.4m | us-gaap:ResearchAndDevelopmentExpense |
| Research and development | 9 months, 2024-01-01 to 2024-09-30 | $15.5m | us-gaap:ResearchAndDevelopmentExpense |
| Operating income | 3 months, 2024-07-01 to 2024-09-30 | −$13.8m | us-gaap:OperatingIncomeLoss |
| Operating income | 9 months, 2024-01-01 to 2024-09-30 | −$46.6m | us-gaap:OperatingIncomeLoss |
| Interest expense | 3 months, 2024-07-01 to 2024-09-30 | $1.4m | us-gaap:InterestExpense |
| Interest expense | 9 months, 2024-01-01 to 2024-09-30 | $4.1m | us-gaap:InterestExpense |
| Income tax | 3 months, 2024-07-01 to 2024-09-30 | −$28.0k | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 9 months, 2024-01-01 to 2024-09-30 | $35.0k | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2024-07-01 to 2024-09-30 | −$16.2m | us-gaap:NetIncomeLoss |
| Net income | 9 months, 2024-01-01 to 2024-09-30 | −$50.3m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2024-07-01 to 2024-09-30 | −$0.62 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 9 months, 2024-01-01 to 2024-09-30 | −$1.95 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2024-07-01 to 2024-09-30 | −$0.62 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 9 months, 2024-01-01 to 2024-09-30 | −$1.95 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2024-07-01 to 2024-09-30 | 25,983,929 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 9 months, 2024-01-01 to 2024-09-30 | 25,794,690 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 9 months, 2024-01-01 to 2024-09-30 | −$40.9m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 9 months, 2024-01-01 to 2024-09-30 | $7.6m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Cash and equivalents | at 2024-09-30 | $18.6m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2024-09-30 | $63.9m | us-gaap:AssetsCurrent |
| Total assets | at 2024-09-30 | $81.1m | us-gaap:Assets |
| Current liabilities | at 2024-09-30 | $17.1m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2024-09-30 | $68.6m | us-gaap:Liabilities |
| Long-term debt | at 2024-09-30 | $42.5m | us-gaap:LongTermDebtNoncurrent |
| Shareholders' equity | at 2024-09-30 | $12.2m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 28,369 characters.

*The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited Consolidated Financial Statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q.*

*Our actual results and timing of certain events may differ materially from the results discussed, projected, anticipated, or indicated in any forward-looking statements. We caution you that forward-looking statements are not guarantees of future performance and that our actual results of operations, financial condition and liquidity, and the development of the industry in which we operate may differ materially from the forward-looking statements contained in this Quarterly Report on Form 10-Q. In addition, even if our results of operations, financial condition and liquidity, and the development of the industry in which we operate are consistent with the forward-looking statements contained in this Quarterly Report on Form 10-Q, they may not be predictive of results, conditions, or developments in future periods.*

*The following information and any forward-looking statements should be considered in light of factors discussed elsewhere in this Quarterly Report on Form 10-Q, including those risks referenced under Part II, Item 1A, “Risk Factors.”*

*We caution readers not to place undue reliance on any forward-looking statements made by us, which speak only as of the date they are made. We disclaim any obligation, except as specifically required by law and the rules regulations of the Securities and Exchange Commission (the “SEC”) and the Australian Securities and Investments Commission (the “ASIC”), to publicly update or revise any such statements to reflect any change in our expectations or in events, conditions or circumstances under which any such statements may be based, or that may affect the likelihood that actual results will differ from those set forth in the forward-looking statements.*

#### Please see “Note Regarding Forward-Looking Statements” on page 3.

### Overview

AVITA Medical, Inc. (“we”, “our”, “us”) is a commercial-stage regenerative medicine company transforming the standard of care in wound care management and skin restoration with innovative devices. At the forefront of our portfolio is our patented and proprietary RECELL® System (“RECELL System” or “RECELL”), approved by the U.S. Food & Drug Administration (the “FDA”) for the treatment of thermal burn wounds and full-thickness skin defects, and for repigmentation of stable depigmented vitiligo lesions. RECELL harnesses the regenerative properties of a patient’s own skin to create an autologous skin cell suspension, Spray-On Skin™ Cells, delivering a transformative solution at the point of care. This breakthrough technology serves as the catalyst for a new treatment paradigm enabling improved clinical outcomes. In the United States, we also hold the rights to market, sell, and distribute PermeaDerm®, a biosynthetic wound matrix, under the terms of an exclusive multi-year distribution agreement (the "Stedical Agreement") with Stedical Scientific, Inc. (“Stedical”). We also entered into an exclusive multi-year development and distribution agreement with Collagen Matrix, Inc. dba Regenity Biosciences (“Regenity”). Following FDA 510(k) clearance, Regenity will manufacture and supply Cohealyx™, an AVITA Medical-branded collagen-based dermal matrix. Under the agreement, we will hold the exclusive rights to market, sell, and distribute Cohealyx in the U.S., with potential expansion into the European Union, Australia, and Japan.

The single-use RECELL Autologous Cell Harvesting Device (“RECELL Ease-of-Use” or “RECELL EOU”) is approved by the FDA for the treatment of thermal burn wounds and full-thickness skin defects, and repigmentation of stable depigmented vitiligo lesions. Our next-generation device, RECELL GO™ Autologous Cell Harvesting Device (“RECELL GO”), is FDA-approved to treat thermal burn wounds and full-thickness skin defects. RECELL GO introduces enhanced features that streamline the preparation of Spray-On Skin Cells and improves workflow efficiency in the operating room. It consists of two components: the RECELL GO Processing Device (the “RPD”) and the RECELL GO Preparation Kit (the “RPK”). The RPD is a multi-use, AC-powered device that controls the RPK. The RPK is a single-use cartridge that contains the RECELL Enzyme™. The RPD regulates the pressure applied to disaggregate the cells and precisely controls the incubation time of the RECELL Enzyme to optimize cell yield and promote cell viability.

We are focused on becoming the leading provider of regenerative medicine addressing unmet medical needs in burn injuries, full-thickness skin defects, and in-skin repigmentation, such as vitiligo. We will continue to drive commercial revenue growth to generate positive cash flow and achieve operating profit. To achieve these objectives, we intend to:

- Become the standard of care in the U.S. burn care market by increasing penetration and adoption in burn centers with our recently FDA-approved RECELL GO
- Expand adoption of RECELL technology for the treatment of full-thickness skin defects in the U.S. with RECELL GO
- Launch RECELL GO mini, which is designed to address smaller wounds, following FDA approval in December of 2024
- Launch Cohealyx after FDA 510(k) clearance anticipated to be received in December of 2024
- Expand our global presence within the U.K., the European Union and Australia through the exclusive use of third-party distributors
- Continue to grow commercial activities in Japan through our partnership with COSMOTEC Company, Ltd (“COSMOTEC”) by leveraging our current Pharmaceuticals and Medical Devices Act approval for RECELL with an indication in burns
- Continue to pursue business development opportunities that are complementary to our core RECELL technology and/or our targeted markets, such as our exclusive distribution agreements with Stedical and Regenity
- Expect post-market study, TONE, and the health care economics study, both related to our vitiligo initiative to be published in early 2025

### Business Environment and Current Trends

The macroeconomic environment may have unexpected adverse effects on businesses and healthcare institutions globally that may negatively impact our consolidated operating results. There remains significant uncertainty in the current macroeconomic environment due to factors including supply chain shortages, increased cost of healthcare, changes to inflation rates, a competitive labor market, and other related global economic conditions and geopolitical conditions. If these conditions continue or worsen, they could adversely impact our future operating results.

Changes in reimbursement rates by third party payors may place additional financial pressure on hospitals and the broader healthcare system. Healthcare institutions may take actions to mitigate any persistent pressures on their budgets and such actions could impact the future demand for our products. Geopolitical conditions may also impact our operations. Although we do not have operations in Russia, Ukraine or in the Middle East, the continuation of the military conflicts in these regions and/or an escalation of the conflicts beyond their current scope may further weaken the global economy that could result in additional inflationary pressures or supply chain constraints.

### Recent Developments

On January 10, 2024, we entered into the Stedical Agreement, an exclusive multi-year distribution agreement with Stedical to commercialize PermeaDerm® Biosynthetic Wound Matrix (“PermeaDerm”) in the United States. PermeaDerm is cleared by the FDA as a transparent matrix for use in the treatment of a variety of wound types until healing is achieved. Under the terms of the Stedical Agreement, we hold the exclusive rights to market, sell, and distribute PermeaDerm products, including any future enhancements or modifications, within the United States. The initial term is for five years, with the option to renew for an additional five years, contingent upon meeting certain minimum requirements.

On February 16, 2024, we amended our contract with the Biomedical Advanced Research and Development Authority, under the Assistant Secretary for Preparedness and Response, within the U.S. Department of Health and Human Services (“BARDA”), dated September 29, 2015, to extend the term through September 28, 2025. Under the modified contract, BARDA will have access to our RECELL inventory in the event of a national emergency. In the case of a national emergency, BARDA will pay for RECELL devices at a reduced price for the first 1,000 units and will then pay retail price for any additional units. No additional inventory build will be required as part of this modification as we have sufficient inventory in stock to fulfill this requirement. BARDA will pay us approximately $333,000 in maintenance fees over the term of the contract to ensure its first right of access to our RECELL inventory.

On May 29, 2024, the FDA approved our premarket approval (“PMA”) supplement for RECELL GO, our next generation autologous cell harvesting device, to treat thermal burn wounds and full-thickness skin defects. Following this approval, we shipped the first RECELL GO order on May 30, 2024, to accommodate the first case for its use on May 31, 2024.

On June 28, 2024, we submitted a PMA supplement for RECELL GO mini, which is designed to address small wounds up to 480 cm2. This version retains the same multi-use processing units as RECELL GO but features a smaller cartridge designed for the smaller donor skin samples needed for smaller wounds. This submission maintains the FDA Breakthrough Device designation from predecessor devices, providing a prioritized 180-day review period.

On July 31, 2024, we entered into a multi-year exclusive development and distribution agreement with Regenity to market, sell, and distribute Cohealyx™, an AVITA-Medical branded collagen-based dermal matrix in the U.S., with the potential to commercialize the product in the European Union, Japan, and Australia.

**Results of Operations for the three-months ended September 30, 2024 compared to the three-months ended September 30, 2023.**

**The table below summarizes the results of our operations for each of the periods presented (in thousands).**

| Statement of Operations Data: | Three-Months Ended September 30, 2024 | September 30, 2023 | $ Change | % Change |
| --- | ---: | ---: | ---: | ---: |
| Sales revenue | $19,394 | $13,645 | 5,749 | 42.1% |
| Lease revenue | 152 | - | 152 | 100.0% |
| Total revenues | 19,546 | 13,645 | 5,901 | 43.2% |
| Cost of sales | (3,190) | (2,113) | (1,077) | (51.0)% |
| Gross profit | 16,356 | 11,532 | 4,824 | 41.8% |
| BARDA income | - | 212 | (212) | (100.0)% |
| Operating expenses: |  |  |  |  |
| Sales and marketing | (15,144) | (10,532) | (4,612) | (43.8)% |
| General and administrative | (9,590) | (6,124) | (3,466) | (56.6)% |
| Research and development | (5,428) | (4,394) | (1,034) | (23.5)% |
| Total operating expenses | (30,162) | (21,050) | (9,112) | (43.3)% |
| Operating loss | (13,806) | (9,306) | (4,500) | (48.4)% |
| Interest expense | (1,359) | (10) | (1,349) | nm |
| Other (expense) income, net | (1,068) | 615 | (1,683) | nm |
| Loss before income taxes | (16,233) | (8,701) | (7,532) | (86.6)% |
| Income tax benefit (expense) | 28 | (11) | 39 | nm |
| Net loss | $(16,205) | $(8,712) | (7,493) | (86.0)% |

\*nm = not meaningful

Total revenues increased by 43.2%, or $5.9 million, to $19.5 million, compared to $13.6 million in the same period in the prior year. Our commercial revenue was $19.5 million in the three-months ended September 30, 2024, an increase of $5.9 million, or 43.8%, compared to $13.5 million in the corresponding period in the prior year. The growth in commercial revenues was largely driven by deeper penetration within customer accounts and new accounts for full-thickness skin defects.

Gross profit margin was 83.7% compared to 84.5% in the corresponding period in the prior year. The decrease in this quarter was due to ongoing engineering and validation of the RECELL GO durable and disposable cartridge.

BARDA income decreased to zero, compared to $0.2 million in the corresponding period in the prior year due to ending of reimbursable clinical trials. BARDA income in the prior year consisted of funding from the Biomedical Advanced Research and Development Authority, under the Assistant Secretary for Preparedness and Response, within the U.S. Department of Health and Human Services, under ongoing USG Contract No. HHSO100201500028C.

Total operating expenses increased by 43.3% or $9.1 million to $30.2 million, compared with $21.1 million in the corresponding period in the prior year.

Sales and marketing expenses increased by 43.8%, or $4.6 million, to $15.1 million, compared to $10.5 million in the corresponding period in the prior year. Higher costs in the current year are due to an increase in salaries and benefits of approximately $1.9 million, commissions expense of $1.9 million, and stock-based compensation expense of $0.4 million, plus $0.4 million in other selling expenses. The increase in salaries and benefits is due to the expansion of the sales force to support our growing commercial capabilities. Higher commissions were directly associated with the increase in revenues. The increase stock-based compensation is due to additional grants related to the expansion of the sales force.

General and administrative expenses increased by 56.6%, or $3.5 million, to $9.6 million, compared to $6.1 million in the same period in the prior year. The increase was attributable to an increase in stock-based compensation of $1.3 million, an increase in salaries and benefits of $1.1 million, an increase in severance benefits of $0.1 million, an increase of $0.5 million in deferred compensation expenses, and an increase of $0.5 million in professional fees, offset by lower other corporate expenses. The increase in stock-based compensation and salaries and benefits are primarily attributable to headcount growth to support the expansion of our business. The increased severance payments is due to termination payments for two former executives. The increase in deferred compensation expense is driven by higher stock price used to calculate the deferred compensation liability for the deferred restricted stock awards.

Research and development expenses increased by 23.5%, or $1.0 million, to $5.4 million, compared to $4.4 million in the same period in the prior year. The increase in salaries and benefits of approximately $0.8 million was due to the increase in headcount resulting from the deployment of a team of Medical Science Liaisons, an increase in development costs of $0.2 million, an increase of $0.1 million in deferred compensation expenses, and an increase to all other development expenses of $0.2 million, offset by a decrease in professional fees of approximately $0.3 million due to higher expenses in the prior period related to RECELL GO and full-thickness skin defects.

Interest expense increased approximately $1.3 million in comparison to the same period in the prior year due to the interest expense related to the long-term debt as part of the OrbiMed Credit Agreement, for an aggregate principal amount owed of $40.0 million.

Other (expense) income, net decreased by $1.7 million to expense of $1.1 million from income of $0.6 million in the prior period. In the current period, other (expense) income consists of non-cash charges of $1.0 million and $0.8 million related to the changes in fair value of the debt and warrant liability, respectively, offset by $0.6 million in income related to our investments and $0.1 million in other gains, net. The prior period income consisted of $0.7 million related to our investments offset by $0.1 million in other losses, net.

**Results of Operations for the nine-months ended September 30, 2024 compared to the nine-months ended September 30, 2023.**

| Statement of Operations Data: | Nine-Months Ended September 30, 2024 | September 30, 2023 | $ Change | % Change |
| --- | ---: | ---: | ---: | ---: |
| Sales revenue | $45,681 | $35,948 | 9,733 | 27.1% |
| Lease revenue | 164 | - | 164 | 100.0% |
| Total revenues | 45,845 | 35,948 | 9,897 | 27.5% |
| Cost of sales | (6,814) | (5,984) | (830) | (13.9)% |
| Gross profit | 39,031 | 29,964 | 9,067 | 30.3% |
| BARDA income | - | 1,369 | (1,369) | (100.0)% |
| Operating expenses: |  |  |  |  |
| Sales and marketing | (44,086) | (27,075) | (17,011) | (62.8)% |
| General and administrative | (26,071) | (20,584) | (5,487) | (26.7)% |
| Research and development | (15,510) | (14,056) | (1,454) | (10.3)% |
| Total operating expenses | (85,667) | (61,715) | (23,952) | (38.8)% |
| Operating loss | (46,636) | (30,382) | (16,254) | (53.5)% |
| Interest expense | (4,063) | (21) | (4,042) | nm |
| Other income, net | 478 | 2,141 | (1,663) | (77.7)% |
| Loss before income taxes | (50,221) | (28,262) | (21,959) | (77.7)% |
| Income tax expense | (35) | (54) | 19 | (35.2)% |
| Net loss | $(50,256) | $(28,316) | (21,940) | (77.5)% |

Total revenues increased by 27.5%, or $9.9 million, to $45.8 million, compared to $35.9 million in the same period in the prior year. Our commercial revenue was $45.7 million in the nine-months ended September 30, 2024, an increase of $10.0 million, or 28.1%, compared to $35.7 million in the corresponding period in the prior year. The growth in commercial revenues was largely driven by deeper penetration within customer accounts and new accounts for full-thickness skin defect.

Gross profit margin was 85.1% compared to 83.4% in the corresponding period in the prior year. This increase was largely driven by increases in both revenues and the volume of production.

BARDA income decreased to zero, compared to $1.4 million in the corresponding period in the prior year due to the ending of reimbursable clinical trials. BARDA income in the prior year consisted of funding received from the Biomedical Advanced Research and Development Authority, under the Assistant Secretary for Preparedness and Response, within the U.S. Department of Health and Human Services, under ongoing USG Contract No. HHSO100201500028C.

Total operating expenses increased by 38.8% or $24.0 million to $85.7 million, compared with $61.7 million in the corresponding period in the prior year.

Sales and marketing expenses increased by 62.8%, or $17.0 million, to $44.1 million, compared to $27.1 million in the corresponding period in the prior year. Higher costs in the current year were primarily related to increases in salaries and benefits and personnel expenses of approximately $7.2 million, commissions expense of $4.9 million, stock-based compensation expense of $1.7 million, $1.0 million in other selling expenses, $0.9 million in professional fees, $0.7 million in travel expenses, and $0.2 million in rent expense, plus $0.4 million in all other expenses, net. The increase in salaries and benefits, personnel related expenses, stock-based compensation, travel expenses, and other selling expenses are due to the expansion of the sales force to support our growing commercial capabilities. Higher commissions were directly associated with the increase in revenues. The increase in professional fees are primarily due to consulting expenses related to our foreign distribution network. The increase in rent is due to increased office space to accommodate our growing operations.

General and administrative expenses increased by 26.7%, or $5.5 million, to $26.1 million, compared to $20.6 million in the same period in the prior year. The increase was attributable to an increase in salaries and benefits and personnel expenses of $3.2 million, an increase in stock-based compensation of $2.0 million, an increase in professional fees of $0.4 million, and an increase of $0.2 million in travel expenses plus an increase in other corporate expenses of $0.3 million, partially offset by lower deferred compensation expenses of $0.6 million. The increase in salaries and benefits and stock-based compensation are primarily attributable to headcount growth to support the expansion of our business. The decrease in deferred compensation expense is driven by a lower stock price used to calculate the deferred compensation liability for the deferred restricted stock awards.

Research and development expenses increased by 10.3%, or $1.4 million, to $15.5 million, compared to $14.1 million in the same period in the prior year. The increase in research and development expenses is primarily due to an increase in salaries and benefits of $2.6 million, an increase in stock-based compensation of $0.4 million, and an increase of $0.3 million in travel expenses, due to the increase in headcount resulting from the deployment of Medical Science Liaisons plus higher other development expenses of $0.8 million, offset by lower professional fees and development expenses of approximately $2.7 million related to RECELL GO and full-thickness skin defects.

Interest expense increased approximately $4.0 million in comparison to the same period in the prior year due to the interest expense related to the long-term debt as part of the OrbiMed Credit Agreement, for an aggregate principal amount owed of $40.0 million.

Other income, net decreased by $1.7 million or 77.7% to income of $0.5 million. In the current period other income, net consists of $2.3 million in income related to our investments, $0.4 million due to the change in fair value of warrant liability, and $0.4 million in other gains, net, offset by a non-cash charge of $2.6 million due to the change in fair value of the debt. In the prior period, income consisted of $2.0 million related to our investments and $0.1 million in other gains, net.

### Liquidity and Capital Resources

#### Overview

We expect to utilize cash reserves until U.S. sales of our products reach a level sufficient to fund ongoing operations. We have historically funded research and development activities, and more recently have funded a substantial investment in sales and marketing activities, through raising capital by issuing securities and the issuance of debt. On October 18, 2023, we entered into a Credit Agreement with an affiliate of OrbiMed Advisors, LLC. The Credit Agreement provides for a five-year senior secured credit facility in an aggregate principal amount of up to $90.0 million, of which $40.0 million was drawn during the fourth quarter of 2023. In addition, an aggregate of $50.0 million will be made available in two separate $25.0 million tranches, at our discretion, subject to certain net revenue requirements. The first tranche of $25.0 million is available on or before December 31, 2024. The second tranche of $25.0 million is available on or prior to June 30, 2025, and only if the first tranche was drawn upon. We have monthly interest rate payments for the debt at a rate equal to the greater of (a) forward-looking one-month term SOFR rate and (b) four percent (4.0%) per annum, plus eight percent (8.0%). In the event that we do not meet certain 12-month trailing revenue targets at the end of certain fiscal quarters, starting December 31, 2024, the outstanding balance of the loan must be repaid in equal quarterly installments of 5.0% of the funded amount through the maturity date. As of September 30, 2024, our projected revenues, for the trailing 12 months ending December 31, 2024, will exceed the minimum revenue requirements under the Credit Agreement. On November 7, 2024, we amended the Credit Agreement, see Note 16, Subsequent Events of our Consolidated Financial Statements.

We had approximately $18.6 million in cash and cash equivalents and $25.8 million in marketable securities as of September 30, 2024.

As of the date of these financial statements, we believe we have sufficient cash reserves to fund operations for the next 12-months.

The following table summarizes our cash flows for the periods presented (in thousands):

*(in thousands)*

|  | Nine-Months Ended September 30, 2024 | September 30, 2023 |
| --- | ---: | ---: |
| Net cash used in operations | $(40,858) | $(27,148) |
| Net cash provided by investing activities | 34,892 | 58,911 |
| Net cash provided by financing activities | 2,487 | 942 |
| Effect of foreign exchange rate on cash and cash equivalents | - | (15) |
| Net increase/(decrease) in cash and cash equivalents | (3,479) | 32,690 |
| Cash and cash equivalents at beginning of the period | 22,118 | 18,164 |
| Cash and cash equivalents at end of the period | 18,639 | 50,854 |

Net cash used in operating activities was $40.9 million and $27.1 million during the nine-months ended September 30, 2024, and 2023, respectively. The increase in net cash used in operations was primarily due to higher operating costs.

Net cash provided by investing activities was $34.9 million and $58.9 million during the nine-months ended September 30, 2024 and 2023, respectively. The decrease in cash provided by investing activities is primarily attributable to higher cash outflows from purchases of marketable securities and lower cash inflows from maturities of marketable securities in the current year compared to the prior year, offset primarily by an increase in cash outflow for capital expenditures. The increase in capital expenditures in the current year is primarily related to the leasehold improvement in the Ventura production facility to enhance manufacturing output and materials related to our RECELL GO RPDs.

Net cash provided by financing activities was $2.5 million and $0.9 million during the nine-months ended September 30, 2024, and 2023, respectively. The increase in cash provided by financing activities is related to proceeds from the exercises of stock options and purchases of stock under the ESPP plan.

#### Capital Management and Material Cash Requirements

We aim to manage capital so that the Company continues as a going concern while also maintaining optimal returns to stockholders and benefits for other stakeholders. We also aim to maintain a capital structure that ensures the lowest cost of capital available to us. We regularly review our capital structure and seek to take advantage of available opportunities to improve outcomes for us and our stockholders.

For the nine-months ended September 30, 2024, there were no dividends paid and we have no plans to commence the payment of dividends. As part of the Stedical Agreement, we have an obligation to Stedical to purchase sufficient products to achieve $5.0 million in customer sales. As of September 30, 2024, we have fulfilled this obligation. Under the terms of our exclusive development and distribution agreement with Regenity, we will make a $2.0 million payment upon receipt of 510(k) clearance by Regenity. We have a further obligation to make up to an additional $3.0 million payment on or before January 4, 2026 to guarantee development and manufacturing capacity (and related resources), contingent on positive results of certain clinical studies. With the exception of the milestone payments related to our exclusive development and distribution agreement with Regenity, we do not have any other purchase commitments or long-term contractual obligations except for lease obligations as of September 30, 2024. In addition, we have no material off-balance sheet arrangements (as defined in the applicable rules and regulations established by the SEC) that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources. While have no committed plans to issue further shares on the market, we will continue to assess market conditions.

### Critical Accounting Estimates

Except as disclosed in Note 2 of our Consolidated Financial Statements, there have been no material changes to our critical accounting policies and estimates from the information provided in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” included in the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2024.

## Controls and procedures

As filed, 1,553 characters.

### Evaluation of Disclosure Controls and Procedures

Our Chief Executive Officer and our Chief Financial Officer evaluated, with the participation of our management, the effectiveness of our disclosure controls and procedures as of the end of the period covered by this Quarterly Report on Form 10-Q. As of September 30, 2024, our Chief Executive Officer and our Chief Financial Officer concluded that our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the “Securities Exchange Act”), were effective.

Our disclosure controls and procedures have been formulated to ensure that (i) information that we are required to disclose in reports that we file or submit under the Securities Exchange Act was recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (ii) information required to be disclosed by us is accumulated and communicated to our management, including our Chief Executive Officer and our Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures.

### Changes in Internal Controls over Financial Reporting

There were no changes in our internal controls over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the third quarter of fiscal year 2024 covered by this Quarterly Report on Form 10-Q that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

## Risk factors

As filed, 720 characters.

In addition to the other information set forth in this report, you should carefully consider the factors discussed under Part I, Item 1A, “Risk Factors,” in the 2023 Annual Report and as updated from time to time in the Company’s subsequent Quarterly Reports on Form 10-Q. These factors could materially adversely affect our business, financial condition, liquidity, results of operations and capital position, and could cause our actual results to differ materially from our historical results or the results contemplated by the forward-looking statements contained in this report. There have been no material changes to the risk factors described in Part I, Item 1A, “Risk Factors,” included in the 2023 Annual Report.

Filed Nov 7, 2024.
Source: SEC EDGAR, the filing index for accession 0000950170-24-123326. Last ingested by Listed: Nov 2, 2026, 18:33 ET. No prices; not investment advice.