AVITA Medical(RCEL) - 2025 Q2 - Quarterly Report

Note Regarding Forward-Looking Statements Forward-looking statements are covered by safe harbor provisions and involve known and unknown risks and uncertainties that may cause actual results to differ materially - Forward-looking statements are covered by safe harbor provisions and involve known and unknown risks and uncertainties that may cause actual results to differ materially[7] - Readers should not place undue reliance on forward-looking statements, which speak only as of the report date, and the company does not plan to publicly update or revise them except as required by law[9][10] Part I – Financial Information Item 1. Financial Statements This item presents the unaudited consolidated financial statements of AVITA Medical, Inc. for the periods ended June 30, 2025, and December 31, 2024 (balance sheet), and June 30, 2025, and 2024 (operations, comprehensive loss, stockholders' equity, cash flows), prepared in accordance with GAAP. The independent registered public accounting firm has reviewed these statements and found no material modifications needed, but highlighted a going concern uncertainty Consolidated Balance Sheets Consolidated Balance Sheet Highlights (June 30, 2025 vs. December 31, 2024) | Metric | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | Change (in thousands) | % Change | | :-------------------------------- | :----------------------------- | :------------------------------- | :-------------------- | :------- | | Cash and cash equivalents | $12,216 | $14,050 | $(1,834) | -13.05% | | Marketable securities | $3,474 | $21,835 | $(18,361) | -84.00% | | Total current assets | $36,253 | $57,000 | $(20,747) | -36.40% | | Total assets | $58,134 | $79,711 | $(21,577) | -27.07% | | Total current liabilities | $62,602 | $20,158 | $42,444 | 210.56% | | Loan facility (current) | $42,216 | $0 | $42,216 | N/A | | Loan facility (long-term) | $0 | $42,245 | $(42,245) | -100.00% | | Total liabilities | $70,981 | $74,968 | $(3,987) | -5.32% | | Total stockholders' equity (deficit) | $(12,892) | $4,499 | $(17,391) | -386.55% | Consolidated Statements of Operations Consolidated Statements of Operations Highlights (Three-Months Ended June 30, 2025 vs. 2024) | Metric | June 30, 2025 (in thousands) | June 30, 2024 (in thousands) | Change (in thousands) | % Change | | :---------------------- | :----------------------------- | :----------------------------- | :-------------------- | :------- | | Total revenues | $18,418 | $15,195 | $3,223 | 21% | | Gross profit | $14,949 | $13,084 | $1,865 | 14% | | Operating expenses | $(26,097) | $(28,708) | $2,611 | -9% | | Operating loss | $(11,148) | $(15,624) | $4,476 | -29% | | Net loss | $(9,920) | $(15,393) | $5,473 | -36% | | Net loss per common share | $(0.38) | $(0.60) | $0.22 | -36.67% | Consolidated Statements of Operations Highlights (Six-Months Ended June 30, 2025 vs. 2024) | Metric | June 30, 2025 (in thousands) | June 30, 2024 (in thousands) | Change (in thousands) | % Change | | :---------------------- | :----------------------------- | :----------------------------- | :-------------------- | :------- | | Total revenues | $36,932 | $26,299 | $10,633 | 40% | | Gross profit | $30,629 | $22,675 | $7,954 | 35% | | Operating expenses | $(53,604) | $(55,504) | $1,900 | -3% | | Operating loss | $(22,975) | $(32,829) | $9,854 | -30% | | Net loss | $(23,779) | $(34,051) | $10,272 | -30% | | Net loss per common share | $(0.90) | $(1.32) | $0.42 | -31.82% | Consolidated Statements of Comprehensive Loss Consolidated Statements of Comprehensive Loss (in thousands) | Period | June 30, 2025 | June 30, 2024 | | :------------------------------------------ | :-------------- | :-------------- | | Three-Months Ended | | | | Net loss | $(9,920) | $(15,393) | | Change in fair value due to credit risk on loan facility | $(1,667) | $1,530 | | Net unrealized gain (loss) on marketable securities | $1 | $(18) | | Comprehensive loss | $(11,586) | $(13,881) | | Six-Months Ended | | | | Net loss | $(23,779) | $(34,051) | | Change in fair value due to credit risk on loan facility | $(126) | $438 | | Net unrealized gain (loss) on marketable securities | $(14) | $(107) | | Comprehensive loss | $(23,919) | $(33,720) | Consolidated Statements of Stockholders' Equity (Deficit) Total Stockholders' Equity (Deficit) (in thousands) | Date | Total Stockholders' Equity (Deficit) | | :-------------------- | :--------------------------------- | | June 30, 2025 | $(12,892) | | December 31, 2024 | $4,499 | | June 30, 2024 | $23,915 | | December 31, 2023 | $49,056 | - The accumulated deficit increased from $(359,814) thousand at December 31, 2024, to $(383,593) thousand at June 30, 2025, reflecting the net loss for the period[25] Consolidated Statements of Cash Flows Consolidated Statements of Cash Flows (Six-Months Ended June 30, 2025 vs. 2024) | Cash Flow Activity | June 30, 2025 (in thousands) | June 30, 2024 (in thousands) | Change (in thousands) | % Change | | :-------------------------------- | :----------------------------- | :----------------------------- | :-------------------- | :------- | | Net cash used in operating activities | $(20,538) | $(33,644) | $13,106 | -38.95% | | Net cash provided by investing activities | $17,782 | $27,498 | $(9,716) | -35.33% | | Net cash provided by financing activities | $922 | $1,480 | $(558) | -37.70% | | Net decrease in cash and cash equivalents | $(1,834) | $(4,666) | $2,832 | -60.70% | | Cash and cash equivalents at end of period | $12,216 | $17,452 | $(5,236) | -30.00% | Notes to Consolidated Financial Statements 1. The Company Nature of the Business - The RECELL® System, including RECELL GO™ and RECELL GO mini™, is FDA-approved for thermal burn wounds and full-thickness skin defects, using autologous skin cells for healing[31][32][33] - AVITA Medical holds exclusive distribution rights for PermeaDerm® (biosynthetic wound matrix) and Cohealyx™ (collagen-based dermal matrix) in the U.S., with potential expansion to other regions[34] Liquidity, Capital Resources and Going Concern - The company has an accumulated deficit of $383.6 million as of June 30, 2025, and has historically incurred operating losses and negative cash flows from operations[35] Cash Used in Operating Activities (in millions) | Period | Cash Used in Operating Activities | | :-------------------- | :-------------------------------- | | Six months ended June 30, 2025 | $20.5 | | Six months ended June 30, 2024 | $33.6 | | Year ended December 31, 2024 | $48.9 | | Year ended December 31, 2023 | $38.0 | - As of June 30, 2025, cash, cash equivalents, and marketable securities totaled $15.7 million[35] - The company was not in compliance with trailing 12-month net revenue covenants for Q1 and Q2 2025, requiring waivers, and management has concluded there is substantial doubt about its ability to maintain minimum cash balance covenants within the next twelve months, raising going concern issues[36][37] - The long-term portion of the credit facility has been reclassified as a current liability due to debt servicing obligations and going concern uncertainty[38] - The company is actively evaluating strategies to obtain additional funding, including equity financing and debt, and has a shelf registration statement for up to $200.0 million[39] 2. Summary of Significant Accounting Policies Basis of Presentation - Interim financial statements are prepared under GAAP and SEC rules, including all necessary normal and recurring adjustments[41] Principles of Consolidation - Consolidated financial statements include the company and its wholly-owned subsidiaries, with intercompany transactions eliminated[43] Recent Accounting Pronouncements - The company is evaluating ASU 2023-09 (Income Taxes), effective after December 15, 2024, for enhanced tax disclosures[44] - The company is evaluating ASU 2024-03 (Expense Disaggregation Disclosures), effective after December 15, 2026, for disaggregated cost and expense disclosures[45] Use of Estimates - Financial statements rely on management estimates for items like SSP, credit losses, inventory, asset values, income taxes, and fair value of financial instruments; actual results may vary[46] Cash and Cash Equivalents Cash and Cash Equivalents (in thousands) | Item | June 30, 2025 | December 31, 2024 | | :-------------------- | :-------------- | :---------------- | | Cash at deposit institutions | $1,600 | $2,300 | | Cash equivalents | $10,600 | $11,700 | | Total | $12,216 | $14,050 | Concentrations - Substantially all cash and cash equivalents are deposited in financial institutions and exceed federally insured limits, posing a risk of bank failure[48] - As of June 30, 2025, no single commercial customer accounted for more than 10% of net accounts receivable or revenues, indicating diversified customer concentration compared to December 31, 2024[49] Revenue Recognition - Revenue is primarily generated from product sales (RECELL EOU, RPKs, PermeaDerm, Cohealyx) under ASC 606 and lease revenue for the RECELL GO RPD under ASC 842[50][51][80] - The five-step model for ASC 606 revenue recognition includes identifying contracts and performance obligations, determining transaction price (considering variable consideration), allocating price based on SSP, and recognizing revenue upon transfer of control[52][53][54][57] - The RECELL GO RPD lease is classified as an operating lease because variable lease payments are not dependent on an index or rate, leading to a loss at lease commencement when fixed payments are absent[58] - Consideration for the RPD (lease revenue) and RPKs (sales revenue) is allocated based on SSP and recognized upon transfer of control of the RPKs[59] 3. Marketable Securities Marketable Securities (in thousands) | Item | June 30, 2025 | December 31, 2024 | | :-------------------------- | :-------------- | :---------------- | | U.S. Treasury securities | $3,474 | $21,835 | | Total current marketable securities | $3,474 | $21,835 | - Marketable securities are classified as available-for-sale, with unrealized gains and losses reported in other comprehensive loss[63] - No credit losses were recognized, and no sales of investments resulted in realized gains or losses during the three and six months ended June 30, 2025 and 2024[63] 4. Fair Value Measurements - Financial assets and liabilities are measured at fair value using a three-tier hierarchy: Level 1 (quoted prices in active markets), Level 2 (observable inputs other than quoted prices), and Level 3 (unobservable inputs)[64][65][66] Fair Value Measurements (June 30, 2025, in thousands) | Item | Level 1 | Level 2 | Level 3 | Total | | :------------------------------------------ | :------ | :------ | :------ | :------ | | Financial Assets: | | | | | | Cash equivalents | $3,626 | $6,995 | $- | $10,621 | | Current marketable securities | $- | $3,474 | $- | $3,474 | | Corporate-owned life insurance policies | $- | $2,913 | $- | $2,913 | | Total marketable securities and cash equivalents | $3,626 | $10,469 | $- | $14,095 | | Total financial assets | $- | $2,913 | $- | $2,913 | | Financial Liabilities: | | | | | | Loan facility | $- | $- | $42,216 | $42,216 | | Warrant liabilities | $768 | $- | $1,132 | $1,900 | | Non-qualified deferred compensation plan liability | $- | $4,139 | $- | $4,139 | | Total financial liabilities | $768 | $4,139 | $43,348 | $48,255 | - The fair value of the loan facility (Level 3) is determined using a Monte Carlo Simulation, considering projected trailing 12-month revenues and potential covenant breaches[70][71] - The $10.9847 Warrants (Level 3) are valued using the Black-Scholes option pricing model, while Penny Warrants (Level 1) are based on quoted market prices[73] 5. Revenues - Revenues are generated from product sales (EOU, RPKs, PermeaDerm, Cohealyx) and lease revenue for the RECELL GO RPD[74][75][80] RECELL GO RPK Sales and RPD Lease Revenue (in thousands) | Period | Sales Revenue (RPKs) | Lease Revenue (RPD) | | :-------------------- | :------------------- | :------------------ | | Three months ended June 30, 2025 | $9,300 | $192 | | Six months ended June 30, 2025 | $19,000 | $381 | | Three months ended June 30, 2024 | $613 | $12 | | Six months ended June 30, 2024 | N/A | N/A | - The company uses the expected value method for variable consideration (e.g., volume discounts) and recognizes revenue net of these discounts[77][78] - Contract liabilities for unsatisfied performance obligations were $340,000 as of June 30, 2025, with $33,000 expected to be recognized as revenue in the next twelve months[81][83] 6. Loan Facility - The company has a $40.0 million senior secured credit facility with OrbiMed Advisors, LLC, maturing October 18, 2028[86] - The company failed to meet trailing 12-month net revenue covenants for Q1 and Q2 2025, requiring waivers from the lender[36][88][91] - Subsequent to June 30, 2025, a fifth amendment to the Credit Agreement adjusted revenue covenants for future quarters and involved the issuance of 400,000 common shares to the lender[124][160] - The loan facility and warrants are recorded at fair value, with changes in fair value impacting both the Consolidated Statements of Operations (Other income, net) and Accumulated other comprehensive loss[95] - The interest rate on the outstanding debt was 12.33% as of June 30, 2025[90] 7. Inventory Inventory Composition (in thousands) | Item | June 30, 2025 | December 31, 2024 | | :---------------- | :-------------- | :---------------- | | Raw materials | $2,381 | $2,449 | | Work in process | $147 | $389 | | Finished goods | $5,008 | $4,431 | | Total inventory | $7,536 | $7,269 | Excess and Obsolescence Charges (in thousands) | Period | June 30, 2025 | June 30, 2024 | | :-------------------- | :-------------- | :-------------- | | Three-months ended | $230 | $151 | | Six-months ended | $543 | $234 | 8. Intangible Assets Intangible Assets, Net (in thousands) | Item | June 30, 2025 | December 31, 2024 | | :---------------- | :-------------- | :---------------- | | Regenity License | $4,750 | $4,986 | | Total intangible assets, net | $5,308 | $5,570 | - The $5.0 million Regenity License was recorded in December 2024 upon 510(k) clearance for Cohealyx, significantly impacting intangible assets[97] Amortization Expense of Intangibles (in thousands) | Period | June 30, 2025 | June 30, 2024 | | :-------------------- | :-------------- | :-------------- | | Three-months ended | $152 | $17 | | Six-months ended | $288 | $34 | Estimated Future Amortization (in thousands) | Year | Estimated Amortization Expense | | :---------------- | :----------------------------- | | Remainder of 2025 | $310 | | 2026 | $571 | | 2027 | $542 | | 2028 | $542 | | 2029 | $542 | | Thereafter | $2,747 | | Total | $5,254 | 9. Plant and Equipment Plant and Equipment, Net (in thousands) | Item | June 30, 2025 | December 31, 2024 | | :-------------------------- | :-------------- | :---------------- | | Leasehold improvements | $4,840 | $4,607 | | Operating lease assets - RPD | $1,626 | $1,384 | | Total plant and equipment, net | $9,689 | $10,018 | - RECELL GO RPDs have a useful life of 200 uses and are amortized based on customer usage (RPK sales)[99] Depreciation Expense (in thousands) | Period | June 30, 2025 | June 30, 2024 | | :-------------------- | :-------------- | :-------------- | | Three-months ended | $400 | $187 | | Six-months ended | $785 | $373 | Lessor Arrangements - RECELL GO device contracts include an operating lease for the RPD, with variable lease payments recognized upon transfer of RPKs control[101] Variable Lease Revenue (in thousands) | Period | June 30, 2025 | June 30, 2024 | | :-------------------- | :-------------- | :-------------- | | Three-months ended | $192 | $12 | | Six-months ended | $381 | $12 | Net Rental RPD Assets (in thousands) | Date | Net Rental RPD Assets | | :-------------------- | :-------------------- | | June 30, 2025 | $1,553 | | December 31, 2024 | $1,337 | 10. Reporting Segment and Geographic Information - The company operates as a single reporting segment, with long-lived assets primarily located in the United States[105] Revenue by Region (in thousands) | Region | Three-Months Ended June 30, 2025 | Three-Months Ended June 30, 2024 | Six-Months Ended June 30, 2025 | Six-Months Ended June 30, 2024 | | :------------- | :------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | | United States | $17,896 | $14,582 | $35,652 | $25,114 | | Japan | $427 | $389 | $1,061 | $850 | | European Union | $- | $103 | $49 | $155 | | Australia | $40 | $61 | $80 | $78 | | United Kingdom | $55 | $60 | $90 | $102 | | Total | $18,418 | $15,195 | $36,932 | $26,299 | Commercial Revenue by Product (in thousands) | Product | Three-Months Ended June 30, 2025 | Three-Months Ended June 30, 2024 | Six-Months Ended June 30, 2025 | Six-Months Ended June 30, 2024 | | :---------------------- | :------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | | RECELL | $16,819 | $14,791 | $34,494 | $25,752 | | Other wound care products | $1,343 | $328 | $1,929 | $435 | | Lease revenue | $192 | $12 | $381 | $12 | | Total commercial sales | $18,354 | $15,131 | $36,804 | $26,199 | 11. Commitments and Contingencies - The company has an exclusive multi-year Distribution Agreement and Manufacturing Agreement with Stedical for PermeaDerm, with revenue share increasing to 60% for AVITA Medical and new sales targets[109][110][111] - Under the Regenity Agreement for Cohealyx, the company made a $2.0 million payment upon 510(k) clearance and has a contingent obligation of up to $3.0 million by January 4, 2026, dependent on clinical study results[112][113] - A $3.0 million contingent liability related to the Regenity Agreement is recorded on the Consolidated Balance Sheets[113] 12. Common and Preferred Stock - Common stock is traded on Nasdaq (RCEL) and CDIs on ASX (AVH), with a 1:5 ratio[114] Common Stock Issued and Outstanding | Date | Shares Issued and Outstanding | | :-------------------- | :---------------------------- | | June 30, 2025 | 26,613,678 | | December 31, 2024 | 26,354,042 | - Common stock held in the rabbi trust for the Non-Qualified Deferred Compensation (NQDC) Plan is classified as treasury stock[116] 13. Stock-Based Payment Plans - Stockholders approved an additional 2,500,000 shares for the 2020 Omnibus Incentive Plan, bringing the total to 6,750,000 shares[117] - The Employee Stock Purchase Plan (ESPP), effective July 1, 2023, has 1,000,000 registered shares[118] Stock-Based Compensation Expense (in thousands) | Expense Category | Three-Months Ended June 30, 2025 | Three-Months Ended June 30, 2024 | Six-Months Ended June 30, 2025 | Six-Months Ended June 30, 2024 | | :-------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | | Sales and marketing | $594 | $1,461 | $1,098 | $1,988 | | General and administrative | $1,439 | $2,068 | $3,017 | $3,729 | | Research and development | $636 | $498 | $1,246 | $901 | | Total | $2,669 | $4,027 | $5,361 | $6,618 | Share Option Activity (June 30, 2025) | Item | Total Share Options | | :-------------------------------- | :------------------ | | Outstanding at December 31, 2024 | 3,540,208 | | Granted | 1,920,770 | | Exercised | (68,125) | | Expired | (123,395) | | Forfeited | (119,482) | | Outstanding at June 30, 2025 | 5,149,976 | 14. Income Taxes Income Tax Expense (in thousands) | Period | June 30, 2025 | June 30, 2024 | | :-------------------- | :-------------- | :-------------- | | Three-months ended | $4 | $33 | | Six-months ended | $12 | $63 | - The company is assessing the impact of the One Big Beautiful Bill Act (OBBBA), enacted July 4, 2025, which includes significant U.S. tax law changes[122] 15. Net Loss per Share Net Loss per Common Share (Basic and Diluted) | Period | June 30, 2025 | June 30, 2024 | | :-------------------- | :-------------- | :-------------- | | Three-Months Ended | | | | Net loss per common share | $(0.38) | $(0.60) | | Weighted-average common shares | 26,368 | 25,760 | | Six-Months Ended | | | | Net loss per common share | $(0.90) | $(1.32) | | Weighted-average common shares | 26,400 | 25,699 | - Due to a net loss, all potentially dilutive securities (stock options, RSUs, ESPP, warrants) were anti-dilutive and excluded from the diluted net loss per share calculation[123] 16. Subsequent Events - On August 7, 2025, the company amended its Credit Agreement, revising trailing 12-month revenue covenants for future quarters and issuing 400,000 common shares to the lender[124][160] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the company's financial condition, results of operations, and liquidity, highlighting key business developments, strategic objectives, and financial performance for the three and six months ended June 30, 2025, compared to the prior year. It also discusses the going concern uncertainty and capital management strategies Overview - AVITA Medical is a leading acute wound care company, offering the FDA-approved RECELL® System, RECELL GO™, and RECELL GO mini™ for thermal burn and full-thickness skin defects[130][131] - The company's portfolio includes PermeaDerm® (biosynthetic wound matrix) and Cohealyx™ (collagen-based dermal matrix) for comprehensive wound management[130] - Strategic objectives include increasing market penetration, expanding product adoption (RECELL portfolio, RECELL GO mini, Cohealyx), obtaining CE mark for RECELL GO, driving revenue growth, achieving profitability, and pursuing new business development[138] Business Environment and Current Trends - Changes in reimbursement rates and coverage policies by third-party payors have reduced demand for the RECELL System, but advocacy efforts are expected to drive revenue recovery in H2 2025[132] - Macroeconomic factors (supply chain, healthcare costs, inflation, labor market) and geopolitical conditions pose risks to the company's operating results[133][134] Recent Developments - Full commercial launch of Cohealyx, a collagen-based dermal matrix, occurred on April 1, 2025, expanding the therapeutic wound care portfolio[135] - Cohealyx, RECELL System, and PermeaDerm offer an integrated approach for two-stage wound care, aiming to improve clinical outcomes and expand market opportunity[136] - The company is pausing further investment in its vitiligo initiative due to a challenging and uncertain reimbursement environment, despite publishing related studies[137] Results of Operations (Three-Months Ended June 30, 2025 vs. 2024) Three-Months Ended June 30, 2025 vs. 2024 Financial Performance (in thousands) | Metric | June 30, 2025 | June 30, 2024 | Change ($) | Change (%) | | :-------------------------- | :------------ | :------------ | :--------- | :--------- | | Total revenues | $18,418 | $15,195 | $3,223 | 21% | | Gross profit | $14,949 | $13,084 | $1,865 | 14% | | Gross profit margin | 81.2% | 86.1% | -4.9% | -5.69% | | Total operating expenses | $(26,097) | $(28,708) | $2,611 | -9% | | Operating loss | $(11,148) | $(15,624) | $4,476 | -29% | | Net loss | $(9,920) | $(15,393) | $5,473 | -36% | - Gross margin percentage decreased due to volume discounts, higher inventory reserves, and product mix, particularly the revenue share arrangements for Cohealyx (50%) and PermeaDerm (60%)[142] - Sales and marketing expenses decreased by $2.0 million (12%) due to lower stock-based compensation, salaries, benefits, and recruiting expenses, reflecting cost savings initiatives and a reduction in sales force[144] - General and administrative expenses decreased by $0.9 million (11%) due to lower salaries, benefits, and stock-based compensation, primarily from higher severance in the prior year[145] - Research and development expenses increased by $0.2 million (5%) due to increased headcount in salaries, benefits, and stock-based compensation[146] - Other income, net, increased by $0.9 million, driven by non-cash gains from changes in fair value of warrants and loan facility[147] Results of Operations (Six-Months Ended June 30, 2025 vs. 2024) Six-Months Ended June 30, 2025 vs. 2024 Financial Performance (in thousands) | Metric | June 30, 2025 | June 30, 2024 | Change ($) | Change (%) | | :-------------------------- | :------------ | :------------ | :--------- | :--------- | | Total revenues | $36,932 | $26,299 | $10,633 | 40% | | Gross profit | $30,629 | $22,675 | $7,954 | 35% | | Gross profit margin | 82.9% | 86.2% | -3.3% | -3.83% | | Total operating expenses | $(53,604) | $(55,504) | $1,900 | -3% | | Operating loss | $(22,975) | $(32,829) | $9,854 | -30% | | Net loss | $(23,779) | $(34,051) | $10,272 | -30% | - Gross margin percentage decreased due to volume discounts, higher inventory reserves, and product mix[149] - General and administrative expenses decreased by $3.4 million (21%) due to lower salaries, benefits, stock-based compensation, deferred compensation, and professional fees, primarily from decreased headcount and lower severance[151] - Research and development expenses increased by $1.3 million (13%) due to increased headcount in salaries and benefits and stock-based compensation, partially offset by lower professional fees from the completion of the vitiligo TONE study[152] - Other income, net, increased by $0.2 million, driven by non-cash gains from changes in fair value of warrants and loan facility, partially offset by debt issuance costs[153] Liquidity and Capital Resources - As of June 30, 2025, the company held $12.2 million in cash and cash equivalents and $3.5 million in marketable securities[154] - Management has determined there is substantial doubt about the company's ability to maintain compliance with its minimum cash balance covenant within the next twelve months, leading to the reclassification of the long-term credit facility as a current liability[155] - The company is actively evaluating strategies for additional funding, including equity financing (with a $200.0 million shelf registration) and debt[156] - The company failed to meet trailing 12-month revenue covenants for Q1 and Q2 2025, requiring waivers, and subsequently amended the Credit Agreement in August 2025, issuing 400,000 common shares to the lender[158][160] Capital Management and Material Cash Requirements - The company aims to manage capital to ensure going concern status and optimal stockholder returns, with no dividends paid or planned for the six months ended June 30, 2025[164][165] - A $2.0 million payment was made under the Regenity Agreement, with a further contingent obligation of up to $3.0 million by January 4, 2026, for development and manufacturing capacity, contingent on clinical study results[165] - The company has no other material purchase commitments or off-balance sheet arrangements, apart from lease obligations[166] Critical Accounting Estimates - No material changes to critical accounting policies and estimates from the 2024 Annual Report[167] Item 3. Quantitative and Qualitative Disclosures About Market Risk As a smaller reporting company, AVITA Medical is not required to provide detailed quantitative and qualitative disclosures about market risk - As a smaller reporting company, AVITA Medical is exempt from providing detailed market risk disclosures[168] Item 4. Controls and Procedures The CEO and CFO evaluated the effectiveness of the company's disclosure controls and procedures as of June 30, 2025, and concluded they were effective. There were no material changes in internal controls over financial reporting during the period - The CEO and CFO concluded that disclosure controls and procedures were effective as of June 30, 2025[169] - No material changes occurred in internal controls over financial reporting during the period[171] Part II – Other Information Item 1. Legal Proceedings The company is not currently a party to any legal proceedings expected to have a material adverse effect on its business or financial condition, though it may face claims in the ordinary course of business - The company is not currently involved in any legal proceedings expected to have a material adverse effect on its business or financial condition[173] Item 1A Risk Factors There have been no material changes to the risk factors previously disclosed in the 2024 Annual Report and the Quarterly Report for Q1 2025. Readers should consider these factors, as they could materially affect the company's business, financial condition, and results of operations - No material changes to the risk factors previously disclosed in the 2024 Annual Report and Q1 2025 Quarterly Report[174] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds There were no unregistered sales of equity securities or use of proceeds to report for the period - No unregistered sales of equity securities or use of proceeds to report[175] Item 3. Defaults Upon Senior Securities There were no defaults upon senior securities to report for the period - No defaults upon senior securities to report[176] Item 4. Mine Safety Disclosures This item is not applicable to the company - This item is not applicable[177] Item 5. Other Information No other information is required to be disclosed under this item - No other information to report[178] Item 6. Exhibits This section lists the exhibits filed as part of the Quarterly Report on Form 10-Q, including corporate documents, amendments to agreements, certifications, and XBRL documents - The report includes various exhibits such as corporate documents, amendments to the lease and credit agreements, and certifications[180] Signatures - The report is signed by James Corbett (President and CEO) and David O'Toole (CFO) on August 7, 2025[182][183]