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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended June 30, 2021
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
(State or other jurisdiction of
incorporation or organization)
85-1021707
(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
Common Stock, par value $0.0001 per share
Trading
Symbol
RCEL
Name of each exchange
on which registered
The NASDAQ Stock Market LLC
Securities registered pursuant to section 12(g) of the Act:
None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒
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
Non-accelerated filer
☐
☐
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 has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under
Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
The aggregate market value of the voting and nonvoting common equity held by non-affiliates of the registrant was approximately $396,652,975 on December 31, 2020, using the closing price on
that day of $18.58.
The number of shares of the registrant’s $0.0001 par value common stock outstanding as of August 18, 2021 was 24,895,864.
☒
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FORWARD LOOKING STATEMENTS
TABLE OF CONTENTS
PART 1
Item 1.
Item 1A.
Item 1B.
Item 2.
Item 3.
Item 4.
PART II
Item 5.
Item 6.
Item 7.
Item 7A.
Item 8.
Item 9.
Item 9A.
Item 9B.
PART III
Item 10.
Item 11.
Item 12.
Item 13.
Item 14.
PART IV
Item 15.
Item 16.
Business
Risk Factors
Unresolved Staff Comments
Properties
Legal Proceedings
Mine Safety Disclosures
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Selected Financial Data
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Quantitative and Qualitative Disclosures About Market Risk
Financial Statements and Supplementary Data
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Controls and Procedures
Other Information
Directors, Executive Officers and Corporate Governance
Executive Compensation
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Certain Relationships and Related Party Transactions, and Director Independence
Principal Accounting Fees and Services
Exhibits, Financial Statement and Schedules
Form 10-K Summary
SIGNATURES
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FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K (this “Annual Report”) and our other public filings contain forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. Forward-looking statements give expectations or forecasts of future events. Forward-looking statements
can sometimes, but not always, be identified by words such as “believe,” “expect,” “anticipate,” “estimate,” “project,” “plan,” “should,” “intend,”
“may,” “will,” “would,” “potential” and similar expressions to future periods. Forward-looking statements are not based on historical facts but rather
represent current expectations and assumptions. Forward-looking statements include statements we make about matters such as: 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 COVID-19 virus; tax and interest rates; productivity, business process, rationalization, investment, acquisition and acquisition integrations,
consulting, operational, tax, financial and capital projects and initiatives; changes in the legal or regulatory environment; and future working capital,
costs, revenues, business opportunities, cash flows, margins, earnings and growth.
Forward-looking statements relate to the future and are subject to many risks, assumptions and uncertainties, including those risks set forth in this
Annual Report in Part I, Item IA Risk Factors and elsewhere. Although we believe the expectations reflected in the forward-looking statements are
reasonable, actual results, developments and business decisions could differ materially from those contemplated by such forward-looking statements. The
environment in which we operate is highly competitive, highly regulated and rapidly changing and it is not possible for our management to predict all
risks, as new risks emerge from time to time.
All subsequent written and oral forward-looking statements by or attributable to us or persons acting on our behalf are expressly qualified in their
entirety by these factors. We undertake no obligation to publicly update or revise any forward-looking statements whether as a result of new information,
future developments or otherwise, except as may be required by law.
Currency
In this Annual Report, all references to “dollars” or “$” are to the currency of the United States.
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Item 1. BUSINESS
GENERAL
PART I
AVITA Medical, Inc. (“AVITA” or the “Company”, and its subsidiaries, including AVITA Medical Pty Limited (“AVITA Medical”), the
former parent company, (collectively, “AVITA Group” or “we”, “us”)) is a regenerative medicine company that is developing and commercializing a
technology platform that enables point-of-care autologous skin restoration for multiple unmet needs. Our patented and proprietary platform technology
provides innovative treatment solutions derived from the regenerative properties of a patient’s own skin. Our RECELL® Autologous Cell Harvesting
System (“RECELL System” or “RECELL”) enables clinicians to prepare Spray-On Skin™ Cells, an autologous skin cell suspension that is sprayed onto
the patient to regenerate natural healthy skin.
CORPORATE
AVITA Medical, the former parent company of the AVITA Group, began as a laboratory spin-off in the Australian State of Western
Australia. AVITA Medical was formed under the laws of the Commonwealth of Australia in December 1992 and has operated as AVITA Medical since
2008. AVITA Medical’s ordinary shares originally began trading in Australia on the Australian Securities Exchange (“ASX”) on August 9, 1993. AVITA
Medical’s American Depositary Shares (“ADSs”) traded over the counter on the OTCQX under the ticker symbol “AVMXY” from May 14, 2012 through
September 30, 2019 and its ADSs began trading on the NASDAQ on October 1, 2019, under the ticker symbol “RCEL”.
On June 29, 2020, a statutory scheme of arrangement under Australian law to effect a redomiciliation of the AVITA Group from Australia to the
United States of America was implemented (the “Redomiciliation”). The Redomiciliation was approved by shareholders on June 15, 2020 and approved
by the Federal Court of Australia on June 22, 2020.
Pursuant to the Redomiciliation, all ordinary shares in AVITA Medical, the former parent company of the AVITA Group, were exchanged for
shares of common stock in the Company. As a result, the Company became the sole shareholder of AVITA Medical and the new parent company of the
AVITA Group. In conjunction with the Redomiciliation, an implicit consolidation or reverse split on a 1 for 100 basis was implemented whereby
shareholders of AVITA Medical received one share of common stock in the Company for every 100 shares held in AVITA Medical.
Under the Redomiciliation, eligible shareholders in AVITA Medical received consideration in the form of :
•
•
five CHESS Depositary Interests (“CDIs”) in the Company for every 100 ordinary shares in AVITA Medical that were held by them;
or
one share of common stock in the Company for every 5 ADSs in AVITA Medical that were held by them.
The Company’s CDI’s are quoted on the ASX under AVITA Medical’s former ASX ticker code, “AVH”. The Company’s shares of common
stock are quoted on NASDAQ under AVITA Medical’s former NASDAQ ticker code, “RCEL”. One share of common stock on NASDAQ is equivalent to
five CDIs on the ASX.
As a result of the ‘implicit consolidation’ that occurred under the Redomiciliation, the number of shares of common stock issued and outstanding
in the Company (as set out in the consolidated financial statements) is less than the number of ordinary shares in AVITA Medical that was set out in the
consolidated financial statements of AVITA Medical prior to August 28, 2020.
COVID-19 IMPACT ON OUR BUSINESS
The coronavirus (“COVID-19”) pandemic has created significant disruptions to the global economies and financial markets. In the United
States, State and Local Governmental authorities have responded by issuing orders, of varying degrees, requiring quarantines, restrictions on travel,
mandatory closures of certain non-essential businesses, as well as providing recommendations to minimize social gatherings or interactions. The
Company’s business and operations have been impacted by COVID-19 as the effects of COVID-19 related travel restrictions have reduced accidents and
the incidence of burns and burns admissions. In addition, during the pandemic, our commercial team’s access to hospitals was limited to case attendance
and training. As COVID-19 abates and the restrictions are lifted, we anticipate that burn related accidents will resume to pre-COVID levels. In response to
the pandemic, we have taken certain business measures which include institution of various workplace protections to ensure the safety of our employees
(e.g.,
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wearing of masks, wiping down high touch areas, etc.), and the limiting of vendors and visitors to our facilities. We have limited activities at our corporate
headquarters, encouraged our employees to work from home, encouraged virtual meetings, restricted non-essential business travel, made physical
modifications and enhancements to our facilities to effect social distancing, and provided personal protective equipment to our employees. We have
increased safety stocks of our product, established temporary satellite product storage locations, and accelerated initiatives to increase sourcing options.
Throughout the pandemic, we have remained focused on managing the business for the long-term, including maintaining our employee workforce as well
as continuing to invest in critical research and development, clinical, and corporate infrastructure-related programs.
STRATEGY
Our objective is to become the leading provider of regenerative medicine addressing unmet medical needs in burn injuries, trauma injuries, and
in dermatological and aesthetics indications, including vitiligo as well as cell and gene therapies. To achieve this objective, we intend to:
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Become the standard of care in the U.S. burns industry by increasing RECELL System penetration in burn centers and with burn physicians
Commercialize the RECELL System in the U.S. for use in soft tissue reconstruction following completion of our current FDA pivotal study in
soft tissue reconstruction
Commercialize the RECELL System in the U.S. for use in treatment of vitiligo following completion of our current FDA pivotal study in vitiligo
Accelerate commercial activities in Japan through our partner Cosmotec once we receive PMDA approval for RECELL with an indication in
burns, soft tissue or vitiligo
Accelerate commercial activities outside of the U.S. and Japan once we have received FDA approval with RECELL System indications in soft
tissue and vitiligo
Pursue potential commercialization opportunities for the RECELL System related to skin rejuvenation and Epidermolysis Bullosa indications
following planned proofs of concept and related FDA pivotal studies
Further invest in our RECELL System platform to improve workflow, speed, and ease of use as it relates to specific indications, as well as to
build upon our intellectual property estate
Pursue business development opportunities that are complementary to our core RECELL System indications and/or our targeted markets
Improve our margins and profitability by leveraging our current team and infrastructure across an expanding base of business in burns and in
future indications
RECELL® PLATFORM
The RECELL System has a long-established safety profile, and clear potential for clinical and health-economic value propositions across a range
of skin-related clinical indications. The patented and proprietary platform technology underlying Spray-On Skin Cells originated in Australia, based on the
seminal work of Professor Fiona Wood and fellow scientist Marie Stoner. RECELL was initially launched in the E.U. during 2005, and then in Australia in
2006, ahead of pivotal outcomes data demonstrating clinical performance relative to standard care. Pivotal trials were conducted in the U.S. beginning in
2010. On September 2018 the U.S. Food and Drug Administration (“FDA”) approved the Class 3 device through a premarket approval (“PMA”) for the
treatment of acute thermal burn injuries in patients 18 years and older. Following receipt of our PMA, we commenced promoting the RECELL System in
January 2019 in the U.S. RECELL is a first-of-kind medical device approved through FDA’s Center for Biologics Evaluation and Research, and the first
Class 3 device approved for use in burn care in over 20 years.
The RECELL System is a single use (disposable), stand-alone, battery operated, autologous cell harvesting device containing enzymatic and
buffer solutions, sterile surgical instruments, and actuators to achieve the disaggregation and delivery of skin cells. The platform technology of the
RECELL System allows for the preparation and delivery of Spray-On Skin Cells, an autologous cellular suspension comprised of the patient’s own skin
cells necessary to regenerate natural healthy epidermis. These Spray-On Skin Cells are prepared at the point of care in as little as 30 minutes, providing a
new way to treat thermal burns, other wounds, skin injuries or
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defects of the skin. The skin cell suspension includes keratinocytes, fibroblasts, and melanocytes, all of which play critical roles in skin regeneration. The
treatment of burns with RECELL yields proven and significant reduction in the harvesting of donor skin. Donor sites are of great concern amongst burn
patients. Burn wounds treated using RECELL show comparable results in burn wound healing outcomes relative to conventional grafting, despite the use
of 32.0-97.5% less donor site tissue. The ability of RECELL to retain melanocytes in the cell suspension is notable as these cells are critical for the
restoration of natural pigmentation to the area treated, which is being further evaluated in ongoing clinical trials. Skin cell suspension is a powerful
therapeutic with the potential for addressing unmet needs in a number of clinical indications, including burns, soft tissue reconstruction, and vitiligo.
RESEARCH & DEVELOPMENT
The launch of the RECELL System into the U.S. market provided an opportunity to gain valuable, in-depth insight into the patient care pathway,
as well as the workflow for surgical management of burn wounds. We continue to commit significant and increasing resources in product development to
ensure that our device continues to evolve and has robust patent protection. The next iteration of the RECELL System is currently under review with the
FDA and will present a more streamlined workflow for enhanced ease-of-use in the clinical setting, while producing the same autologous skin cell
suspension. This new version of the RECELL System is expected to be commercialized in the first half of calendar year 2022 and will offer improved
convenience along with an opportunity to expand our intellectual property portfolio.
Further product development is ongoing on a next generation device for more automated implementation of the core Spray-On Skin Cells
technology, to advance the user experience toward less hands-on processing time. With each iteration of our RECELL System development, we anticipate
preservation of the therapeutic power of Spray-on Skin Cells, deployed in devices that become appropriate for use in an increasing range of clinical
settings. This is particularly important as we aim to enter the dermatology space, where there is a shift toward an emphasis on the volume of patients treated
in a day.
Cell-based gene therapeutic applications are an extension of the platform, where modified skin cells are applied in suspension for regeneration of
skin (from genetically corrected or molecularly reverse-aged cells). For instance, in the case of rejuvenation, rather than skin regeneration directly from the
patient’s own skin cells, harvested cells are planned to undergo a process of molecular reverse aging prior to reintroduction to the patient. Similarly, for
Epidermolysis Bullosa (“EB”), harvested cells are planned to undergo a gene modification process to correct the underlying defect, such that when the EB
wounds are treated, skin is regenerated that does not exhibit the characteristic blistering and fragility associated with EB.
In summary, our research and development efforts are currently focused on:
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Further clinical development of the RECELL System in additional skin-focused clinical indications where the platform can be leveraged.
Specifically, to expand our footprint within wounds and dermatology, such as soft tissue reconstruction and vitiligo. These activities are
generally characterized by pivotal studies for which FDA has approved an Investigational Device Exemption (“IDE”)
RECELL platform technology evolution to improve workflow, speed, and ease of use
Expansion of the technology platform underlying the RECELL System into cell-based gene therapy, including combining the platform with
other technologies, to allow development of the platform in other indications (including orphan indications)
Further research and characterization of the RECELL System design and the composition and activity of the Spray-On Skin Cells
suspension to support further clinical development of the platform, and to expand our intellectual property estate
TARGET MARKETS
Burns
Acute thermal burns are life-threatening and debilitating injuries that are among the most challenging and expensive to manage. These injuries
require complex surgical procedures, long and costly hospitalization, and have a high potential for clinical complications and requirement for rehabilitation
and scar treatment. In the U.S., the largest market for the treatment of burns, approximately 486,000 people seek treatment for burns each year. Of these, at
least 40,000 have burn injuries severe enough to require hospital admission, and it is estimated that 3,300 patients die each year. The majority of patients
treated on an inpatient basis in the U.S. are treated in specialized burn centers.
Severe burns (typically defined as second- and third-degree) are commonly treated with autologous split-thickness skin grafts (“STSGs”) to
achieve definitive closure of the burn wound. In a STSG, or autograft, donor skin is harvested from a healthy area of the patient’s skin. The donor skin is
then typically perforated into a mesh that can be expanded and transferred to cover the prepared burn
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injury. Treatment with STSG results in additional trauma for the patient due to creation of a new donor site wound. Although the use of STSG has been a
standard treatment for more than 50 years, autografting is associated with significant pain, itching, infection, dyschromia, dyspigmentation, delayed
healing, and hypertrophic scarring of the donor site.
The clinical benefits of earlier wound closure are well recognized and include increased survival, reduced hospital length of stay, decreased pain
duration, and reduced infection-related complications. However, in large burn injuries, the patient may have insufficient donor skin available to allow for
immediate and complete treatment of the entire burn injury area when using traditional grafting techniques. The lack of available healthy donor skin in
patients with large burn injuries is often the central problem impacting time to autografting and definitive closure of the wounds. In extensively burned
patients, surgeons often must wait until the donor sites have healed so they can re-harvest from the sites, resulting in delays in treatment and closure,
requiring multiple procedures, and extending hospital stay. While waiting for donor skin, the burn wounds may be temporarily covered by allogeneic skin
(allograft, cadaver skin) or xenograft (typically pig skin). The overall cost of treatment with STSG is expensive - for example it would cost approximately
$579,000 and 59.4 days in hospital for a patient with a 40% Total Body Surface Area (“TBSA”) mixed-depth burn injury to recover and return to normal
day to day activities.
The RECELL System was approved by the FDA in September 2018 for the treatment of second- and third-degree acute thermal burn injuries in
patients 18 years and older. In June 2021, the FDA approved an expanded indication for use to also include treatment of full-thickness (third-degree)
pediatric burns, which represent close to a quarter of all burn injuries in the U.S., as well as full-thickness burn injuries greater than 50% TBSA. As a result
of having achieved an expanded indication for use in pediatric burns, the BARDA-funded U.S. Pediatric Burns trial has been closed to new enrollment
(refer to BARDA Contract section below).
The pivotal studies leading to the RECELL System’s FDA PMA for the treatment of acute thermal burns demonstrated that the RECELL System
treated burns used 97.5 percent less donor skin when used alone in second-degree burns, and 32 percent less donor skin when used with autograft for third-
degree burns, compared to standard of care autografting. In these studies, a statistically significant reduction in donor skin required to treat burn patients
with the RECELL System was realized without any associated compromise to healing or safety outcomes. Donor site outcomes from the clinical trial for
second-degree burns also revealed a statistically significant reduction in patient-reported pain, increased patient satisfaction and improved scar outcomes.
The RECELL System offers fewer procedures required for definitive closure versus conventional autografts. In pediatric cases using the
RECELL System, there were 56% fewer mean surgical procedures (N = 284) compared to the American Burn Association’s National Burn Repository
(“NBR”). Additionally, in patients with >50% TBSA, the RECELL System provided 60% fewer mean surgical procedures versus NBR (N =354).
In addition to robust clinical data, RECELL has proven health economic benefits and a compelling cost-effectiveness model which shows that
treatment using the RECELL System for deep partial-thickness burns reduces total treatment costs by an average of 26%, or approximately $37,000, for
patients with 10% TBSA and approximately $150,000, for patients with 40% TBSA. For full-thickness burns, treatment using the RECELL System
reduced total treatment cost by 3%, or approximately $6,000 for patients with 10% TBSA and by 42% or approximately $243,000, for patients with 40%
TBSA. These cost reductions are attributed to decreasing the length of hospital stay, reducing the number of procedures required to close the burn wound,
and minimizing the donor site size and associated wound care. All of these cost savings estimates are net of the cost of the RECELL System.
A budget impact model was developed and has been used to calculate the annual budget impact of current standard of care for the treatment of
burns versus treatment using the RECELL System for a burn center with 200 patients. The model shows that treatment using the RECELL System reduces
annual total treatment costs from approximately $39.4 million to $32.6 million, saving 17% or approximately $6.8 million per year.
The market for treatment of burns in the U.S. is highly concentrated, with approximately 136 burn centers and approximately 300 burn surgeons
who treat the majority of severe burns in the country (i.e., ~75%). Accordingly, our target market is predominantly focused on burn centers. Our goal is to
establish RECELL as the standard of care for any burn injury that requires grafting for patients with 5% TBSA injury or greater. Within burn centers, we
estimate that there are approximately 25,000 patients annually that could benefit from our technology and equates to a serviceable annual addressable
market of ~$260 million. Each RECELL System can treat up to 10% TBSA, and many patients will require more than one device.
AVITA has a policy of not providing the RECELL System to a provider until they have been certified, which includes extensive training in the
use of the product and in the aftercare of the patient. In general, we have found that most U.S. burn centers follow the industry-standard process of
evaluating the RECELL System and then taking it through their hospital’s Value Analysis Committee (“VAC”) prior to purchasing. This process can
sometimes be a lengthy one, taking 6 months or more to complete. As a result of training requirements and the VAC process, we have found that full
adoption of the RECELL System among U.S. burn
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centers occurs on a gradual basis, in many cases over multiple years. In general, most surgeons follow a typical adoption curve, starting from where they
see the greatest economic and clinical value, which is the use of RECELL for treatment of larger burns. With time and continued use, surgeons typically
progress to adoption of RECELL for smaller, less severe burns and facial burns. Each surgeon traverses the adoption curve at a different rate – some in as
few as 6 months and others expected in 3-5 years.
In the U.S., existing reimbursement codes were in place prior to the commencement of commercial sales of the RECELL System. For inpatient
treatment of burn patients, U.S. hospitals are reimbursed under DRG (Diagnosis Related Group) Codes based on diagnosis of a patient’s injuries. Future
expansion of use of the RECELL System for treatment of burns in the outpatient setting will require us to successfully obtain incremental reimbursement
coverage for use of the RECELL System in that setting. In August 2020, we filed a Transitional Pass-through Payment Application (“TPT”) with The
Centers for Medicare & Medicaid Services (“CMS”) to support separate, additional Medicare payment for use of the RECELL System. If approved, CMS
would create a new “C code” and would allow use of the RECELL System to be billed and paid separately in hospital outpatient facilities and ambulatory
surgical centers. On July 19, 2021, CMS released the 2022 Medicare Hospital Outpatient Prospective Payment System proposed rule which contained a
review of RECELL’s Transitional Pass-through Payment application. CMS is inviting public comment on whether the RECELL System meets the device
pass-through payment criteria discussed in the document. The Company expects to be informed of CMS’s decision on our TPT submission towards the end
of December 2021, with the code expected to go into effect in early 2022. Importantly, the Company will then need to work with commercial carriers to
ensure broader coverage once the code has been granted. The TPT code is not indication specific, so as AVITA gains approval of additional indications
outside of acute thermal burn treatment, the same code will apply. For physicians, CPT (Current Procedural Terminology) codes for use in RECELL
System procedures are recommended by the American Burn Association and are the same for both inpatient and outpatient use.
Outside of the U.S., Japan is the second largest healthcare market. There are approximately 6,000 patients/per year who suffer from severe burns
in Japan who would be a target for the RECELL System. Large patient populations coupled with healthy reimbursement coverage makes Japan an
attractive market for the RECELL System. In February 2019 we entered into a collaboration with Cosmotec Company, Ltd (“COSMOTEC”), an M3
Group company, to market and distribute the RECELL System for the treatment of burns, other wounds, and vitiligo in Japan. We continue to work with
COSMOTEC to advance our application for approval to market the RECELL System in Japan pursuant to Japan’s Pharmaceuticals and Medical Devices
Act (“PMDA”). The Company anticipates regulatory approval in Japan by the end of December 2021 and that COSMOTEC will commercially launch
RECELL in Japan during calendar year 2022. Although RECELL was submitted for a broad indication for use including all acute wounds and vitiligo, it is
unclear whether the PMDA will grant COSMOTEC labelling outside of burns where the Company has the most robust data.
Given the size and concentration of the U.S. & Japanese markets, our commercial efforts are almost exclusively focused on these geographies.
Our highly limited effort in other non-U.S. regions is based on our assessment that the acute burn market in many countries is proportionately less than the
market in the U.S., and the investments in full marketing and sales including the effort to obtain reimbursement are not justified until we have obtained
pivotal clinical results in additional indications. In Australia and Europe, the RECELL System is no longer actively promoted, and our commercialization
efforts are limited to filling sales orders as received from a small group of customers previously trained in use of the product. As additional pivotal data for
the RECELL System are generated in additional indications, we plan to accelerate commercialization of the RECELL System in countries outside the U.S.
through a combination of collaborations and direct efforts, depending upon the region and indication.
Soft Tissue Reconstruction
Soft tissue reconstruction includes treatment of injuries caused by non-burn trauma, including excision of infected tissue, such as necrotizing soft
tissue infections. While minor skin defects may be primarily closed with sutures or standard wound care, larger open defects require more complicated
approaches, including skin grafts, tissue flaps and dermal matrices.
Similar to the burns indication, soft tissue reconstruction is associated with large areas of skin loss and as such, some of the top unmet needs
identified by surgeons are closely aligned:
Reduced donor skin harvesting
Reduced scarring
Reduced pain
Uniform pigmentation with surrounding skin
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Given the interest to reduce donor skin harvesting, just as with the burns indication, we designed a clinical trial to demonstrate the use of less
donor skin without compromising healing outcomes relative to conventional autografting. The trial is essentially a repeat of the successful previous trial in
full-thickness burns, but with a population of patients with full-thickness, non-burn injuries.
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On September 17, 2019, the FDA approved an Investigational Device Exemption (“IDE”) to conduct a pivotal trial evaluating the safety and
effectiveness of the RECELL System in combination with meshed autografting for the treatment of acute full-thickness skin defects. Subsequently, on
March 2, 2020, we initiated a prospective, multi-center, randomized controlled study for soft tissue reconstruction with the enrollment of the first patient at
the Arizona Burn Center at Valleywise Medical Health Center in Phoenix, AZ. Each patient will have a control wound treated with conventional skin
grafting and a wound treated with expanded skin grafting in combination with RECELL. Enrollment of this pivotal study is ongoing. As of the end of our
2021 fiscal year, we had enrolled 32 out of 65 patients and we expect enrollment to be completed during calendar year 2022.
Open wounds associated with traumatic injuries caused over 4.5 million hospital visits in the U.S. in 2017, and traumatic wounds rank among the
five most costly medical conditions. We estimate that the total annual addressable market for RECELL in soft tissue reconstruction is approximately $1
billion. Approximately 80% of our current burn accounts represent opportunities for use of RECELL in soft tissue reconstruction. We plan to build out our
existing field team to cover >400 target accounts in acute wounds (representing burn and high-volume trauma accounts). As such, our estimated annual
serviceable addressable market in soft tissue reconstruction is approximately $450 million. Degloving (a type of injury where the skin is ripped from the
underlying tissue), abrasions and infectious disease (e.g., necrotizing soft tissue infections, like flesh-eating disease), have the greatest stated intent to use,
based on market research. We believe RECELL will be used in both the inpatient & outpatient settings and in general, with wounds 5% TBSA and larger.
From a reimbursement perspective, the same CPT (physician payment) coding that is currently being used in burns can be leveraged. Assuming
we are successful securing an outpatient TPT code, this same TPT code, which is not indication specific, could be utilized for soft tissue reconstruction.
RECELL has been successfully used outside the U.S. for many years and there exist several case reports on the treatment of traumatic injuries
(soft tissue reconstruction) that have been the subject of peer-reviewed scientific publications and presentations at medical conferences. Patients with
traumatic injuries have also been treated using the RECELL System under the U.S. Compassionate Use program and although AVITA does not promote the
use of RECELL in soft tissue reconstruction in the U.S., some surgeons have started successfully using the product. This is not surprising as many burn
surgeons also work in Level 1/Level 2 trauma centers and treat a great deal of traumatic wounds and as mentioned earlier, acute wounds (regardless of burn
or non-thermal origin) present the same unmet needs and have similar treatment protocols. In summary, soft tissue reconstruction is a significant
opportunity which AVITA can pursue leveraging its existing resources. Further, this opportunity is significantly de-risked based on the historical
performance of the product in this indication.
Vitiligo
Vitiligo is a disease that causes the loss of skin pigmentation, or color, in patches that tend to increase in size over time. The extent and rate of
color loss from vitiligo is unpredictable, can affect the skin on any part of the body, and may also affect hair and the inside of the mouth. Vitiligo occurs
when melanocytes, the pigment-producing skin cells, die or stop producing melanin, the pigment that gives skin, hair, and eyes color. Vitiligo is believed to
be an autoimmune disorder in which a patient’s immune system attacks and destroys the melanocytes in the skin. It may also be caused by heredity factors
or a triggering event, such as sunburn, stress, or exposure to industrial chemicals. Vitiligo affects people of all skin types, but it may be more noticeable in
people with darker skin. It is estimated that worldwide vitiligo prevalence is between 0.5-2% of the population. The condition is not life-threatening or
physically painful, but it can significantly alter physical appearance, have negative emotional and psychological consequences, and impair quality of life.
Vitiligo cannot be cured at present, and medical treatments generally fall into one of two categories:
1.
2.
Treatments to arrest the spread of vitiligo, such as steroid creams and non-steroidal anti-inflammatory creams. There are also a number of
therapies under development designed to target the underlying autoimmune disease. One challenge in terms of achieving the desired patient
outcome is that stopping the spread of vitiligo may not restore pigmentation to the areas already damaged.
Treatments to restore pigmentation include skin grafting, laser phototherapy (with and without topicals), and Melanocyte-Keratinocyte
Transplantation Procedure (“MKTP”). MKTP requires expensive and substantial laboratory equipment and is currently only available in 4
locations in the U.S.
RECELL does not treat the underlying disease. Rather, it addresses the second category only and works to restore pigmentation. The key unmet
need is a durable, one-time treatment that has potential to be scalable. MKTP has been proven to be effective but is only available in 4 U.S. locations due to
complexity and the associated substantial investment in lab equipment. The procedure is also lengthy (3 hours). RECELL is a similar procedure, however,
it can be done in as little as 30 minutes, in any dermatology setting. Compared to MKTP, RECELL is essentially a lab in a box that can be easily
distributed.
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Interest in vitiligo treatment tends to increase in individuals who have lesions in more visible areas (such as the face and hands) as well as the
younger population (<40). We estimate that there are approximately 1.3 million people in the U.S. with stable vitiligo who would be both eligible and
interested in a surgical approach which equates to a total addressable market of over $5 billion. The RECELL treatment is initially anticipated to be
provided by a vitiligo specialist and surgical dermatologist in the office setting and we estimate that this will likely not exceed 1,000 physicians.
Approximately 188,000 vitiligo patients who have insurance or the ability to pay are likely at those target call points, and this equates to a serviceable
market opportunity of approximately $750 million.
The market is expected to grow, especially over the next decade with the advent of novel treatment options including oral and topical Janus
Kinase (“JAK”) inhibitors. Although these new products will both stabilize and re-pigment some patients, it is anticipated that many patients will need
additional modes of treatment for re-pigmentation. Further, large pharmaceutical companies with assets in development will likely invest in disease
awareness campaigns which will further grow consumer awareness and the market.
On December 23, 2019, the FDA approved our IDE application to conduct a feasibility study evaluating the safety and effectiveness of the
RECELL System for re-pigmentation of depigmented lesions associated with stable vitiligo. This study is a single site study being conducted at the
University of Massachusetts Medical School in ten (10) patients that have had vitiligo stable for at least one year. Areas of the vitiligo lesion will be
randomly treated with slightly varying cell suspensions prepared using RECELL to confirm response rates and optimal suspension parameters, as well as to
compare outcomes and cell suspension characteristics with MKTP. The randomized controlled study’s primary effectiveness measure is the percent area of
repigmented skin 24 weeks after treatment, as evaluated by a clinician blinded to the treatment assignment. Additional effectiveness data collected over the
course of the 24-week study will include blinded evaluator categorization of treatment success and patient rating of repigmentation. The Company
commenced enrollment in the vitiligo feasibility study in September 2020 and as of the end of the 2021 fiscal year had completed treatment of 5 of the 10
patients.
In addition to the abovementioned feasibility study, on July 1, 2020, the FDA approved our IDE application for a pivotal study in vitiligo which
is titled “A Prospective Multi-Arm Blinded-Evaluator Within-Subject Randomized Controlled Clinical Study to Investigate the Safety and Effectiveness of
RECELL for Repigmentation of Stable Vitiligo.” The primary endpoint compares the incidence of 80% repigmentation of RECELL-treated areas versus
that of phototherapy control-treated areas. The Company commenced enrollment in the vitiligo pivotal study in September 2020 and had treated 16 patients
as of June 30, 2021. While the pivotal trial design initially had 3 separate arms evaluating the clinical performance of varying cell suspensions (1:5, 1:10,
and 1:20 donor expansion), we are in discussion with FDA concerning a single-arm design to evaluate only the 1:20 cell suspension. With a single arm
design, it will be possible to complete enrollment in the pivotal program during calendar year 2021.
We expect revenue from the vitiligo business to stem from both cash pay as well as patients for whom treatment is covered by insurance. Vitiligo
rates a ‘7.61’ on the Dermatology Life Quality Index (“DLQI”), which is in the same range of other aesthetic dermatological disease analogs which receive
healthy positive reimbursement such as Rosacea (5.2), Psoriasis (9.3) and Atopic Dermatitis (12.79). As such, we are optimistic that we will achieve both
coding and coverage for the desired indication. Further, large commercial carriers such as Cigna have recently announced coverage up to $38,000 annually
for excimer laser phototherapy for vitiligo, indicating yet another signal in the importance of therapy for this disease.
The Company has a high degree of confidence that the RECELL System can be an effective therapeutic offering for patients with stable vitiligo.
More than 1,000 patients have been successfully treated with the RECELL System for stable vitiligo outside of the U.S., and to date there are eleven
(11) publications demonstrating the benefits of the RECELL System in vitiligo. Vitiligo is a large and untapped market with no FDA-approved treatments.
RECELL would be the first point-of-care device for preparation of pigment cell suspension which could offer a single application treatment for patients
with stable vitiligo.
Epidermolysis Bullosa
The RECELL System has been studied in a wide variety of indications and has been shown to enable patients to regenerate natural healthy skin
in instances where the patient’s outer skin covering, or epidermis, has been lost or damaged. In addition to these applications of the RECELL System, we
are pursuing related opportunities where the RECELL System’s ability to harness the natural healing capabilities of the body could be augmented with the
use of genetically modified cells for treatment of certain genetic skin disorders. In this way, the RECELL System could potentially be used as a vehicle for
other therapeutic offerings.
Epidermolysis Bullosa (“EB”) is a rare and incurable group of disorders caused by mutations in genes encoding structural skin proteins. EB is
characterized by skin fragility and blistering leading to chronic wounds due to normal mechanical trauma. Dystrophic EB (“DEB”) is often associated with
widespread blistering, pain, pruritus, extensive scarring, increased risk of squamous cell carcinoma with increased mortality. Signs typically occur at birth
and persist over a lifetime. Currently, there are no FDA-
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approved treatments. All treatment options are palliative—focused primarily on pain and nutritional management, itching relief, and wound care
(bandaging) with a significant cost burden ranging from $200,000-$500,000 per year per patient.
In November 2019, AVITA entered into a research agreement with the Gates Center for Regenerative Medicine at the University of Colorado
School of Medicine (“Gates Center”) for the purpose of seeking to establish pre-clinical proof-of-concept for a spray-on treatment of genetically corrected
cells. Pursuant to this agreement, we are pairing the RECELL System Spray-On Skin Cells technology and expertise with the Gates Center’s innovative
patent-pending combined reprogramming and gene-editing technology, to allow the skin cells of patients with EB to function properly. Under the
arrangement with the Gates Center, we retain the option to exclusively license technologies emerging from the partnership for further development and
commercialization.
There are several products in development for EB, including other gene therapies, but to our knowledge this will be the first spray-on method
explored for the delivery of a gene therapy for a genetic skin disease. We expect the developed technology to be widely applicable, and agnostic to the gene
correction approach used. Further, Gates Center’s patented approach is unique in that it is designed to correct the underlying defect in the gene and not just
augment with additional copies of genes. It also enables a single step, integration-free reprogramming which enables expansion of corrected cells. Further,
many of the products in development are targeted at addressing symptoms of the disease and are not curative, while others will require repeat
administration versus a “one and done” approach. Others have faced significant developmental delays. In addition, we believe that spray-on delivery of
genetically corrected cells for in situ skin regeneration will have significant benefits over epidermal sheet-based delivery. Without the requirement for
cultured sheets, delivery of the therapeutic will be faster and more logistically practical without the challenges associated with production and
transportation of fragile, confluent sheets. Moreover, Spray-On Skin Cell delivery to patients is significantly less complex as the treatment area is sprayed
and dressed as opposed to suturing on an epidermal graft that does not always “take.”
DEB is an orphan disease with a prevalence of approximately 6 per million with the majority of individuals not surviving past their 30th
birthday. In the U.S., we estimate there are approximately 900 EB patients eligible for the technology that we have in development and that the price point
would be in the range of $850,000, leading to a $750 million addressable market. We also believe there are potential faster regulatory pathways to market
by leveraging FDA programs for orphan diseases, and a high probability of reimbursement success and quick adoption given the dire need from patients.
This agreement marks an important milestone in AVITA’s strategy to expand the potential of our regenerative medicine platform and is another
step towards our mission of improving patients’ lives and addressing unmet needs, including those conditions that are driven by genetic
aberrations. Further, this program could enable diversification beyond EB as the technology has potential applicability to other EB sub-types and over 50
other genetic skin disorders such as epidermolytic icthyosis and Hailey-Hailey disease. We expect to realize proof of concept with its EB-related work with
Gates Center by the end of December 2021.
Rejuvenation
We believe that reversing aging at a cellular level has the potential to impact rejuvenation by driving functional changes to skin cells. This will be
significantly different from existing products, such as cosmeceuticals that supplement proteins to cells, and surgical approaches that do not alter cellular stat
but alter tissue morphology. An approach for molecular reversal of the underlying defects resulting in aging could have a profound effect on rejuvenation.
In November 2020, AVITA announced a preclinical research agreement with the Houston Methodist Research Institute (“HMRI”) to explore
molecular reversal of cellular aging through a novel cell suspension delivery system. AVITA retains the option to exclusively license HMRI’s patented
technology as well as the right of first negotiations to HMRI’s technologies emerging from the partnership for further development and
commercialization. AVITA expects to realize proof of concept with its rejuvenation work with HMRI by the end of December 2021.
HMRI is a compelling partner for this work. Dr. John Cooke and his team have developed a novel, patented approach of telomerase reverse
transcriptase delivery to reverse cellular aging and have been widely recognized as leaders in this space with multiple peer reviewed publications, grants,
and awards. Further, HMRI has a strong program in translational medicine, including the Center for Rapid Device Translation that supports preclinical
testing and GLP environments which could enable rapid translation from research into clinical trials.
American consumers spend over $16 billion on aesthetic procedures per year. 10 million injectable cosmetic procedures were performed in 2019.
While these are popular procedures, they do not address skin tone, texture, or tightness. Approximately 350,000 facelift and forehead lift procedures were
performed in the same time period. The dramatic differences in procedure volumes are likely due to invasiveness and fear of surgery (including general
anesthesia) as well as cost. Consumers are seeking a natural, more youthful appearance and there is a whitespace in the market for a minimally invasive
procedure that provides meaningful results.
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SALES AND MARKETING
We sell the RECELL System in the U.S. through our direct commercial organization consisting of 23 field personnel who are supported by
corporate marketing, reimbursement, scientific and medical affairs, operations, and corporate leadership. The field sales team was recruited and hired
subsequent to the September 2018 FDA PMA and trained prior to the U.S. market launch of RECELL in January 2019. Our field organization is composed
of highly experienced medical sales representatives as well as former burn nurses averaging 19 years of sales experience and 10 years of burns experience.
We believe that our current field organization is of an appropriate size, without significant additions, to reach the burn surgeons and other key decision
makers and staff associated within U.S. burn centers.
A primary objective of our field sales team is to build upon burn community awareness that has resulted from an extensive series of RECELL
System related burn conference presentations and scientific publications to further expand interest in the clinical and economic benefits of the RECELL
System. In addition, our field sales team provides robust clinical case support and staff training. It is not uncommon in the burn community to have rotating
staff and it is our commitment for all those working with RECELL to be comfortable with the technology both during the procedure as well as during
aftercare.
HUMAN CAPITAL
AVITA’s investment in the U.S. commercial success of RECELL has led to the development of best-in-class teams supporting sales, clinical
education and training, reimbursement, medical affairs, as well as corporate management and infrastructure. As of June 30, 2021, we had approximately 108
employees full-time and part-time employees. As of June 30, 2021, 97.3% of our workforce was based in the United States, with a significant number of our
management and professional employees having prior experience with leading medical product, biotech, or pharmaceutical companies. None of our employees are
covered by collective bargaining agreements.
We embrace differences, diversity and varying perspectives amongst our employee base and are proud to be an equal opportunity employer. We do not
discriminate based on race, religious creed, color, national origin, ancestry, physical disability, mental disability, medical condition, genetic information, marital
status, sex, gender, gender identity, gender expression, age, military or veteran status, sexual orientation or any other protected characteristic established by federal,
state, or local laws. A diverse workforce as well as an inclusive culture and work environment are fundamentally important and strategic to us beginning with our
Board of Directors and CEO and extending to all levels of the Company. As of June 30, 2021, our executive leadership team was 50% female, our senior leadership
team was 40% female, and our total employee base was 47% female. In addition to promoting gender diversity, we encourage ethnic diverse talent when
recruiting as well as provide employee training and development focusing on workplace diversity and inclusion.
INTELLECTUAL PROPERTY
We seek to protect our intellectual property, core technologies and other know-how through a combination of patents, trademarks, trade secrets,
non-disclosure and confidentiality agreements, licenses, assignments of invention and other contractual arrangements with our employees, consultants,
partners, suppliers, customers, and others. Additionally, we rely on our research and development program, clinical trials, know-how and marketing
programs to advance our products and product candidates, and to expand our intellectual property rights.
As of June 30, 2021, we have been granted a total of 56 patents and have 26 pending patent applications worldwide. AVITA owns granted
patents in Austria, Australia, Belgium, Brazil, France, Germany, Hong Kong, Italy, Japan, Netherlands, Portugal, Spain, Sweden, Turkey, United Kingdom
and USA, as well as pending patent applications in Brazil, Canada, China, Europe, Hong Kong, and the United States. AVITA’s patent portfolio covers
AVITA’s core RECELL System, methods of using the RECELL System, the Regenerative Epidermal Suspension (“RES®”) suspension, methods of
evaluating the therapeutic potential of RES, methods of preparing a cell suspension with exogenous agents to promote wound healing, as well as to one or
more automated systems for tissue processing and preparation of cell suspension. AVITA’s pending patent applications cover an all-in-one RECELL
System embodiment, as well as new modifications to RES that are showing potential for therapeutic results. We expect that our research and development
pipeline, strategic partnerships with universities, and improvements to the RECELL System and RES will result in additional and diverse patent
applications for both compositions of matter and related methods of use in the next calendar year.
In 2019, AVITA filed a Patent Term Extension (“PTE”) application with the U.S. Patent and Trademark Office requesting an extension of the
patent term of U.S. Patent No. 9,029,140, “Cell suspension preparation technique and device” as a result of the time required for the FDA regulatory
process. If the term extension requested in the PTE application is approved, the patent term of U.S. Patent No. 9,029,140, which covers the RECELL
System, will be extended to April 9, 2024. AVITA’s other patents have expected expiration dates ranging from 2022 to 2040.
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Additionally, AVITA owns and defends a global trademark portfolio comprising over 120 registered trademarks and pending trademark
applications, including the trademarks “RECELL,” “Spray-On Skin,” the RECELL System logo, “RES,” and others in the U.S. and international markets.
In addition to patent and trademark protection, we also rely on trade secrets, know-how, and other proprietary information to develop and maintain our
competitive position. We have robust confidentiality and invention disclosure procedures in place that incentivize our employees to innovate and allow us
to maintain our rights to AVITA innovations.
FACILITIES
AVITA leases approximately 17,500 square feet of administrative and office space in Valencia, CA that is currently leased through July 31, 2022.
The Company operates an FDA-registered production plant in Ventura, California, in a 27,480 square foot facility that is currently leased through
September 30, 2024. We have two 3-year options to extend the lease, at our sole option, which allows for a total lease extension period through September
30, 2030. We also lease a limited amount of incubator space in Irvine, CA for scientific research and product development activities.
MANUFACTURING, SUPPLY AND PRODUCTION
We produce the RECELL System in the Ventura facility under current Good Manufacturing Practices (“cGMP”) and per ISO 13485, which also
meets the regulatory requirements of other jurisdictions in which we sell the RECELL System. We maintain a state of regulatory compliance and inspection
readiness at all times, and any future material changes to our production processes for the RECELL System will be submitted for approval to the FDA and
regulatory authorities in other jurisdictions as required.
Within the Ventura facility we perform the final manufacturing, assembly, packaging, and warehousing of the RECELL System. Also included
within the Ventura facility is a secure controlled-temperature warehouse that complies with the vendor-managed inventory (“VMI”) requirements of the
contract with Biomedical Advanced Research and Development Authority (“BARDA”). See below for details.
AVITA sources multiple components, sub-assemblies, and materials from third-party suppliers, who are required to meet our cGMP quality
specifications and associated regulatory requirements. To ensure continuity of supply, we maintain multiple sources of supply for key components,
subassemblies and materials, and the majority of critical raw materials and services have multiple qualified suppliers. While a small number of materials
remain single sourced, we are actively working to qualify and validate additional suppliers for these materials as we continue to evaluate methods of
removing risk from the supply chain for the RECELL System. We believe that our current manufacturing capacity at the Ventura facility is sufficient to
meet the expected commercial demand for the RECELL System for burns, as well as other indications under development, for the foreseeable future.
AVITA serves the U.S. burn market by shipping the RECELL System directly from our Ventura facility to U.S. burn centers. From time-to-time
we also store small quantities of the RECELL System at satellite distribution sites within the U.S. to better support access of the RECELL System to our
U.S. customers.
BARDA CONTRACT
We have a contract with the Biomedical Advanced Research and Development Authority (“BARDA”), under the Assistant Secretary for
Preparedness and Response, within the U.S. Department of Health and Human Services, valued at approximately $53.4 million. The contract provided
funding for the development of the RECELL System. The contract will continue to provide funding for future use of the product as a medical
countermeasure to assist disaster preparedness and response in the U.S. for mass casualty events involving burn injuries. We entered into the contract on
September 29, 2015, and the scope has expanded through a number of amendments to the contract. The contract may be terminated earlier at the option of
BARDA, but otherwise continues to December 31, 2023.
Under the contract, BARDA has provided funding and technical support for the development of the RECELL System. BARDA funded the
completion of two randomized, controlled pivotal clinical trials, as well as Compassionate Use and Continued Access programs, and development of the
health economic model demonstrating the cost savings associated with the RECELL System. BARDA exercised a contract option to fund a randomized,
controlled clinical trial for a pediatric early intervention study which commenced enrollment in March 2020, and closed to enrollment in June 2021,
subsequent to FDA-approval of an expanded RECELL indication for use that includes treatment of pediatric patients. Also included in the BARDA
contract was a provision for procurement of the RECELL System under a vendor-managed inventory system to bolster emergency preparedness in the
amount of $7.6 million. Further, BARDA expanded the awarded contract to provide supplemental funding of $1.6 million to support the logistics of
emergency deployment of RECELL Systems for use in mass casualty or other emergency situations. Delivery of RECELL Systems
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under the VMI plan was completed during the fourth quarter of fiscal year 2021. As of June 30, 2021, we had received cumulative payments of
$30.9 million under the BARDA contract.
COMPETITION
The medical device, biotechnology and pharmaceutical industries are intensely competitive and subject to significant technological change and
changes in practice. While we believe that our innovative technology, knowledge, experience, and scientific resources provide us with competitive
advantages, we may face competition from many different sources with respect to the RECELL System or any product candidates that we may seek to
develop and commercialize in the future. Possible competitors may include medical device, pharmaceutical and wound care companies, academic and
medical institutions, governmental agencies, medical practitioners, and public and private research institutions, among others. Any product that we
successfully develop and commercialize will compete with both existing therapies and any new therapies that may become available in the future.
Our primary competitor in the burns market is the current standard of care, primarily split-thickness autografts. Although the RECELL System is
complementary with autografts for the treatment of many burn injuries, we face competition from this traditional surgical procedure for many burn patients.
However, based on our clinical trials, we believe that the RECELL System has sustainable competitive clinical and economic advantages over this current
standard of care. We face additional competition in the burns market from other FDA-approved products such as Epicel® provided by Vericel Corporation
as well as from Stratagraft® provided by Mallinckrodt.
GOVERNMENT REGULATIONS
FDA and International Regulation
The production and marketing of the RECELL System and any additional product candidates developed in future ongoing research and
development activities are subject to regulation by numerous governmental authorities including the FDA in the U.S. and similar agencies in other
countries throughout the world. Pursuant to its authority under the Federal Food, Drug, and Cosmetic Act (FD&C Act), the FDA has jurisdiction over
medical devices in the U.S. The FDA regulates the design, development, manufacturing, and distribution of medical devices to ensure that medical
products distributed domestically are safe and effective for their intended uses. The FD&C Act classifies medical devices into one of three categories based
on the risks associated with the device and the level of control necessary to provide reasonable assurance of safety and effectiveness. Devices deemed by
the FDA to pose the greatest risk, such as life-sustaining, life-supporting or implantable devices, or devices deemed not substantially equivalent to a
previously 510(k) cleared device are categorized as Class III. These devices typically require submission and approval of a PMA. The RECELL System is
categorized as a Class III medical device, and in September 2018 the FDA granted our PMA for use in the treatment of acute thermal burns in patients 18
years and older. In June 2021, the FDA approved a supplement to our PMA to expand the use of RECELL in pediatric patients with full-thickness burns.
Approval of the RECELL System for use in the treatment of new indications in the U.S. will require additional PMA supplement submissions to the FDA
following successful completion of clinical studies.
To support PMA supplements in the U.S. or applications for approval in other regions, the completion of additional clinical and non-clinical
studies and supporting development activities will likely be required. Clinical trials can take many years to complete and require the expenditure of
substantial resources. The length of time varies substantially according to the type, complexity, novelty and intended use of the product candidate. We
cannot make any assurances that once clinical trials are completed by us or a collaborative partner, that we will be able to submit as scheduled a marketing
approval request to the applicable governmental regulatory authority, or that such request and application will be reviewed and cleared by such
governmental authority in a timely manner, or at all. Although we intend to make use of fast-track and abbreviated regulatory approval programs when
possible and commercially appropriate, we cannot be certain that we will be able to obtain the clearances and approvals necessary for clinical testing or for
manufacturing and marketing our product candidates. Delays in obtaining regulatory approvals could adversely affect the development and
commercialization of our product candidates and could adversely impact our business, financial condition, and results of operations. During the course of
clinical trials and non-clinical studies, product candidates may exhibit unforeseen and unacceptable safety considerations. If any unacceptable side effects
were to occur, we may, or regulatory authorities may require us to, interrupt, limit, delay or abort the development of our potential products.
Any products manufactured or distributed by us pursuant to regulatory approvals are subject to continuing regulation by the FDA and similar
agencies in other countries, including maintaining records supporting manufacturing and distribution under Current Good Manufacturing Practice
(“cGMP”) regulations, periodic reporting, advertising, promotion, compliance with any post-approval requirements imposed as a conditional of approval,
recordkeeping and reporting requirements, including adverse events experiences. After approval, material changes to the approved product, such as adding
new indications or other labeling claims, or changes to the manufacturing process, are subject to prior approval by FDA and other regulatory agencies.
Medical device manufacturers and their subcontractors are required to register their establishments with the FDA, certain state agencies and international
agencies.
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Subcontractors are subject to periodic announced and unannounced inspections by the FDA and other agencies for compliance with cGMP requirements.
We have established processes in place for categorization of vendor criticality and the associated activities for qualification and monitoring of vendors.
These activities include but are not limited to, requiring certification of supplier in conformance to relevant cGMP regulations and other FDA and
international agency regulatory requirements, approved supplier lists, and regular Company conducted audits. In addition, all goods and services purchased
from suppliers by us must be purchased from only those suppliers on the approved supplier list. Furthermore, the Company itself will continue to comply
with all relevant FDA requirements and regulations and any applicable international agency regulatory requirements in its continued manufacturing and
promotion of its FDA approved commercial product.
In addition to FDA approval in the U.S., the RECELL System is TGA-registered in Australia for use in the treatment of burns, acute wounds,
scars, and vitiligo. In the European Union, the RECELL System has received CE-mark approval for the treatment of burns, chronic wounds, scars, and
vitiligo. In February 2019, our marketing partner COSMOTEC filed a Japan’s Pharmaceuticals and Medical Devices Act (“JPMDA”) application for
approval to market the RECELL System in Japan for the treatment of burns and other wounds. The JPMDA has accepted the application and the review is
ongoing with approval expected to occur during 2021.
HEALTHCARE LAWS AND REGULATIONS
AVITA is a manufacturer of a medical device and therefore we are subject to regulations by the FDA and various federal and state healthcare
laws and regulations. These regulations govern our advertising and promotional practices, our interactions with healthcare providers (HCPs), and our
reporting of any payments made to HCPs. AVITA is committed to the highest standards of business conduct in accordance with the AdvaMed Code of
Ethics.
Interactions with Healthcare Providers
Providing any benefits or advantages to HCPs in order to induce or encourage the use or referral of AVITA products is strictly prohibited by both
U.S. and international laws and regulations. Restrictions under applicable Federal and State healthcare laws and regulations include but are not limited to
the following:
•
•
•
The Federal healthcare Anti-Kickback Statute (“AKS”). AKS prohibits any person from soliciting, offering, receiving, or providing any
remuneration in cash or in kind, whether directly or indirectly, to induce or reward the referral, purchase, lease, order, or recommendation of any
item or service for which payment may be made in whole or in part under a federal healthcare program such as Medicare and Medicaid
The Federal False Claims Act (“FCA”). FCA may be enforced by either the U.S. Department of Justice or private whistleblowers should they
choose to bring civil (qui tam) actions on behalf of the federal government. The FCA imposes civil penalties, as well as liability for treble
damages and for attorneys’ fees and costs, on individuals or entities who knowingly present, or cause to be presented, claims for payment that are
false or fraudulent to the federal government. FCA also imposes similar penalties on those who make a false statement material to a fraudulent
claim, or who improperly avoid, decrease, or conceal an obligation to pay money to the federal government
State and foreign laws and regulations may apply to sales or marketing arrangements and claims involving healthcare devices or services
reimbursed by non-governmental third-party payors
Additionally, certain state laws require medical device companies to comply with voluntary compliance guidelines promulgated by global trade
associations and relevant compliance guidance issues by the U.S. Department of Health and Human Services, Office of Inspector General. Such laws
prohibit medical device manufacturers from offering or providing certain types of payments or gifts to health care providers; and/or require the disclosure
of gifts or payments to healthcare providers.
Interactions with Foreign Officials and Entities
The U.S. Foreign Corrupt Practices Act (“FCPA”) prohibits any U.S. individual or business from paying, offering, or authorizing payment or
offering of anything of value, directly or indirectly, to any foreign official, political party, or candidate for the purpose of influencing any act or decision of
the foreign entity in order to assist the individual or business in obtaining or retaining business. The FCPA also obligates companies whose securities are
listed in the U.S. to comply with accounting provisions requiring the companies to maintain books and records that accurately and fairly reflect all
transactions of the companies, including international subsidiaries, and to devise and maintain an adequate system of internal accounting controls for
international operations. We are also subject to similar regulations under the Australian bribery laws and other anti-corruption laws that apply in countries
where we do business.
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Federal and State Reporting
Pursuant to the federal Physician Payment Sunshine Act, AVITA is required to report annually to the Centers for Medicare and Medicaid
Services within the U.S. Department of Health and Human Services, as well as in accordance with all relevant state marketing reporting regulations, any
payments, and transfers of value to physicians and teaching hospitals, as well as other categories of disclosures.
Privacy
AVITA must comply with the federal Health Insurance Portability and Accountability Act of 1996 (“HIPAA”) which imposes criminal and civil
liability for, among other conduct, making false statements relating to healthcare matters and executing a scheme to defraud any healthcare benefit
program. It also imposes criminal and civil liability and penalties on those who violate requirements such as mandatory contractual terms which are
intended to safeguard the security, transmission and use of individually identifiable health information.
Various state and foreign laws also govern the privacy and security of health information such as the European Union General Data Protection
Regulation (“GDPR”). GDPR governs the use of individual health data and other personal information and imposes strict obligations and restrictions on
the ability to use, access, process, and disseminate health data from clinical trials and adverse event reporting, among others.
ENVIRONMENTAL, HEALTH AND SAFETY MATTERS
We are subject to extensive environmental, health and safety laws and regulations in a number of jurisdictions, primarily in California and the
U.S., governing, among other things: the use, storage, registration, handling, emission and disposal of chemicals, waste materials and sewage; chemicals,
air, water and ground contamination; and air emissions and the cleanup of contaminated sites, including any contamination that could result from spills due
to our failure to properly dispose of production waste materials. Our operations at our Ventura manufacturing facility produce a small amount of waste
materials that are considered minimally hazardous, and we use a third-party waste disposal company to remove any waste generated during operations from
the facility. Our activities require permits from various governmental authorities including local municipal authorities. Local and state authorities may
conduct periodic inspections in order to review and ensure our compliance with the various regulations. We are not presently aware of any violations or
deficiencies. These laws, regulations and permits could potentially require the expenditure by us for compliance or remediation.
AVAILABLE INFORMATION
The Company files annual, quarterly and current reports, proxy statements and other documents with the Securities and Exchange Commission
(“SEC”) under the Exchange Act. The SEC maintains a website that contains reports, proxy and information statements, and other information regarding
issuers that file electronically with the SEC. The public can obtain any documents that we file with the SEC at www.sec.gov. In addition, copies of
announcements made by the Company to ASX are available on the ASX website (www.asx.com.au) and also, under the heading “Investors: Press
Releases” at the following link on our website (https://ir.avitamedical.com/press-releases). We maintain a website at www.avitamedical.com. Since
becoming a domestic U.S. issuer on July 1, 2020, our filings with the SEC, including without limitation, our annual reports on Form 10-K, quarterly reports
on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act, are
available free of charge on our website under the heading “Investors: Financials _SEC Filings” at the following link on our website
(https://ir.avitamedical.com/financials/sec-filings), as soon as reasonably practicable after we file or furnish them electronically with the SEC. Information
contained on our website is not part of or incorporated into this report.
ORGANIZATIONAL STRUCTURE
The Company has a total of six subsidiaries and their corporate details and business activities are listed below:
Subsidiary Name
AVITA Medical Pty Limited
AVITA Medical Americas, LLC
AVITA Medical Europe Limited
Visiomed Group Pty Ltd
C3 Operations Pty Ltd
Place of
Incorporation
Australia
Delaware
United Kingdom
Australia
Australia
14
%
Held
Business Purpose
100 Operating Company
100 U.S. operations
100 EMEA operations
100 Asia Pacific Operations
100 Holding company
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Subsidiary Name
Infamed Pty Ltd
Item 1A. RISK FACTORS
Place of
Incorporation
%
Held
Business Purpose
Australia
100 Inactive
Our business faces significant risks. You should carefully consider all of the information set forth in this annual report, including the following
risk factors. Our business, results of operations, and financial condition could be materially and adversely affected by any of these risks, and in such event,
the trading price of our common stock would likely decline, and you might lose all or part of your investment. This Annual Report also contains forward-
looking statements that involve risks and uncertainties, and our results could materially differ from those anticipated in these forward-looking statements.
See “Forward-Looking Statements” included elsewhere within this Annual Report for a discussion of certain risks, uncertainties and assumptions
associated with these statements.
Risks Related to Our Business Operations
We have experienced significant losses, expect losses to continue for the foreseeable future and may never achieve or maintain profitability.
Although we have begun full scale marketing and sales of our RECELL® System in the United States and other jurisdictions, such sales have
been limited to date and we have not yet obtained profitability. We had a total net loss of $26.6 million, $42 million, and $25.1 million for our fiscal years
ended June 30, 2021, 2020 and 2019, respectively. We have incurred a cumulative deficit of $221.5 million through June 30, 2021. We anticipate that we
may continue to incur losses at least until U.S. sales of the RECELL System are adequate to fund operating expenses. We may not be able to successfully
achieve or sustain profitability. Successful transition to profitable operations is dependent upon achieving a level of revenues adequate to support our cost
structure, including in new markets for which we are not presently approved.
We are dependent on our contract with the U.S. Biomedical Advanced Research and Development Authority (“BARDA”), and if we do not continue to
receive funding under this contract, we may need to obtain alternative sources of funding.
We have a contract with BARDA valued currently at $53.4 million related to funding for the development of the RECELL System and future use
of the product to assist disaster preparedness and response in the United States for mass casualties involving burn victims. As of June 30, 2021, we had
received cumulative payments of $30.9 million under the BARDA contract. Under the contract BARDA has agreed to fund and provide technical support
for the development of the RECELL System including two randomized, controlled pivotal clinical trials, Compassionate Use and Continued Access
programs, development of the health economic model demonstrating the cost savings associated with the RECELL System, and a randomized, controlled
clinical trial in pediatric scald patients. Also included in the BARDA contract is a provision for the future procurement of the RECELL System by BARDA
under a vendor-managed inventory system to bolster disaster preparedness which BARDA initiated procurement for in July 2020. As of June 30, 2021, a
total of 5,614 RECELL system units have been delivered into the VMI and accepted by BARDA. Any reduction or delay in BARDA funding may force us
to seek alternative funding, which may not be available on non-dilutive terms, terms favorable to us or at all, or cease our development programs related to
the BARDA contract.
Provisions in our U.S. government contracts, including our contracts with BARDA, may affect our intellectual property rights.
Certain of our activities have been funded, and may in the future be funded, by the U.S. government, including through our contracts with
BARDA. When new technologies are developed with U.S. government funding, the government obtains certain rights in any resulting patents, including
the right to a nonexclusive license authorizing the government to use the invention and rights that may permit the government to disclose our confidential
information to third parties and to exercise “march-in” rights. The government can exercise its march-in rights if it determines that action is necessary
because we fail to achieve practical application of the U.S. government-funded technology, because action is necessary to alleviate health or safety needs,
to meet requirements of federal regulations, or to give preference to U.S. industry. In addition, U.S. government-funded inventions must be reported to the
government, U.S. government funding must be disclosed in any resulting patent applications, and our rights in such inventions may be subject to certain
requirements to manufacture products in the United States.
Development and commercialization of our products require successful completion of the regulatory approval process and may suffer delays or fail. We
may be unsuccessful in obtaining additional approvals for our RECELL System for the treatment of trauma injuries and skin conditions such as
vitiligo
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In the United States, as well as other jurisdictions, we have been and will be required to apply for and receive regulatory authorization before we
can market our products. Although our RECELL System has been approved for use in the treatment of acute partial-thickness thermal burn wounds in
patients 18 years of age and older or application in combination with meshed autografting for acute full-thickness thermal burn wounds in pediatric and
adult patients in the United States, we will have to apply for a supplement to our PMA approval to market the product for use in the treatment of trauma
injuries and vitiligo. We plan to expand into each of these indications and will need to apply for a supplement to our PMA approval with the FDA in
connection with each proposed additional indication. While clinical trials for such uses are presently underway or planned, there can be no assurance that
we will be successful in those clinical trials or ever receive approval by the FDA for the use of our RECELL System for such additional applications. Such
a failure of approval would have a material negative effect on our future prospects. In Australia, the RECELL System is approved to use for the treatment
of burns, acute wounds, scars and repigmentation (vitiligo). In the EU the product has been approved for the treatment of burns, chronic wounds, scars, and
vitiligo. We will require additional clinical data or approvals from regulatory authorities within these countries to market the product for the treatment of
other indications, and from any other jurisdictions in which we seek to market the product. This process can be time consuming and complicated and may
be unsuccessful or otherwise result in unanticipated delays or fail altogether. To secure marketing authorization, an applicant generally is required to submit
an application that includes the data supporting preclinical and clinical safety and effectiveness as well as detailed information on the manufacturing and
control of the product, proposed labeling and other additional information. Before marketing authorization is granted, regulatory authorities may require the
inspection of the manufacturing facility or facilities and quality systems (including those of third parties) at which the product candidate is manufactured
and tested, as well as potential audits of the non-clinical and clinical trial sites that generated the data cited in the marketing authorization application.
We cannot predict whether any additional marketing authorizations will ultimately be granted or how long the applicable regulatory authority or
agency will take to do so. Regulatory agencies, including the FDA, have substantial discretion in the approval process. In addition, the approval process
and the requirements governing clinical trials vary from country to country. The policies of the FDA or other regulatory authorities may change, and
additional government regulations may be enacted that could prevent, limit or delay the necessary approval of any products we may develop and
commercialize. We cannot predict the likelihood, nature or extent of government regulation that may arise from future legislation or administrative action,
either in the United States or elsewhere. If we are slow or unable to adapt to new or changed requirements, or if we are not able to maintain regulatory
compliance, we may lose any marketing approval that we may have obtained, and we may not achieve or sustain profitability.
Additionally, any future regulatory approvals that we receive may also contain requirements for costly post-marketing testing and surveillance to
monitor the safety and effectiveness of the product. Once a product is approved, the manufacturing processes, labeling, packaging, distribution, adverse
event reporting, storage, advertising, promotion, import, export, and recordkeeping for the product will be subject to extensive and ongoing regulatory
requirements. These requirements include submission of safety and other post-marketing reports, registration, and continued compliance with good
manufacturing practices for any clinical trials that we conduct post-approval.
Finally, per FDA regulations, changes made to products, specifications, or test data evaluation methodology would generally require
communication with the FDA. There are several pathways for communicating with the FDA of such changes. As part of such review, the FDA may request
additional information, at which time the product may become temporarily unavailable.
Obtaining and maintaining regulatory approval for a product candidate in one jurisdiction does not mean that we will be successful in obtaining
regulatory approval for that product candidate in other jurisdictions.
Obtaining and maintaining regulatory approval for a product in one jurisdiction does not guarantee that we will be able to obtain or maintain
similar approval in other jurisdictions, while a failure or delay in obtaining regulatory approval in one jurisdiction may have a negative effect on the
regulatory approval process in others. For example, even if the FDA grants marketing approval for use of our RECELL System for the treatment of
pediatric burns, trauma injuries and/or vitiligo, comparable regulatory authorities in foreign jurisdictions must also approve the manufacturing, marketing
and promotion of the product candidate in those countries if not currently approved. Approval procedures vary among jurisdictions and can involve
requirements and administrative review periods different from, and greater than, those in the United States, including additional preclinical studies or
clinical trials as clinical trials conducted in one jurisdiction may not be accepted by regulatory authorities in other jurisdictions. In many jurisdictions
outside the United States, a medical device must be approved for reimbursement before it can be approved for sale in that jurisdiction. In some cases, the
price that we intend to charge for our products is also subject to approval.
We are highly dependent on our regulatory approval (“PMA”) in the United States and failure to maintain that approval would materially impact our
business and prospects.
Our business is highly dependent on the PMA we received in September 2018 from the FDA. This PMA allows us to sell our RECELL System
in the United States, our current primary market. In addition, maintaining this PMA also increases the probability of
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approval of secondary indications for the PMA outside of trauma burns. While we intend to take every action and precaution to ensure that our PMA
remains effective, it is possible that the FDA could take a position in the future that requires a modification, temporary suspension or revocation of our
PMA. Any such action by the FDA would have a material adverse effect on our business.
We may encounter substantial delays in any further clinical studies necessary to support any regulatory applications for additional commercial
applications of our technology.
We cannot guarantee that any preclinical testing or clinical trials will be conducted as planned or completed on schedule, if at all. As a result, we
may not achieve the expected clinical milestones necessary for approval by the FDA, or other regulators, for the use of our RECELL System for additional
applications in the United States or other countries.
A failure in a clinical study or regulatory application can occur at any stage. Events that may prevent successful or timely
commencement, enrollment or completion of clinical development or a regulatory application include:
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
delays in raising, or inability to raise, sufficient capital to fund the planned trials;
delays in reaching a consensus with regulatory agencies on trial design;
changes in trial design;
inability to identify, recruit and train suitable clinical investigators;
inability to add new clinical trial sites;
delays in reaching agreement on acceptable terms for the performance of the trials with prospective clinical research organizations and
clinical trial sites;
delays in recruiting suitable clinical sites and patients (i.e., subjects) to participate in clinical trials;
imposition of a clinical hold by regulatory agencies for any reason, including negative clinical results, safety concerns or as a result of an
inspection of manufacturing or clinical operations or trial sites;
failure by any relevant parties to adhere to clinical trial requirements;
failure to perform in accordance with the FDA’s GCP, or applicable regulatory guidelines in other countries;
delays in the testing, validation, manufacturing and delivery of the product candidates to the clinical sites;
delays caused by clinical trial sites not completing a trial;
failure to demonstrate adequate effectiveness;
occurrence of serious adverse events in clinical trials that are associated with the product candidates that are viewed to outweigh its
potential benefits;
changes in regulatory requirements and guidance that require amending or submitting new clinical protocols;
adverse events, safety issues, product recalls, manufacturing or supply chain interruptions, or poor clinical outcomes where the RECELL
System is being used commercially; and
disagreements with regulatory agencies in the interpretation of the data from our clinical trials.
Delays, including delays caused by the above factors, can be costly and could negatively affect our ability to complete clinical trials for our
product candidates. If we are not able to successfully complete clinical trials or are not able to do so in a timely and cost-effective manner, we will not be
able to obtain regulatory approval for the use of our RECELL System for additional applications, all of which could have a material adverse effect on our
business, financial condition and results of operations.
We may be unsuccessful in commercializing our RECELL System, or other future products, due to unfavorable pricing regulations or third-party
coverage and reimbursement policies.
We cannot guarantee that we will receive favorable pricing and reimbursement for use of our products. The rules and regulations that govern
pricing and reimbursement for medical products vary widely from country to country or from indication to indication, and within the United States, can
also vary widely from one health system or hospital to the next. In some foreign jurisdictions, including the EU, the government largely controls pricing of
medical products. In other countries, coverage negotiations must occur at the regional or hospital level. Pricing negotiations can take considerable time
after the receipt of marketing approval for a medical product.
As a result, even after obtaining regulatory approval for a product in a particular country, we may be subject to price regulations or limited
reimbursement, which may delay or limit our commercial launch of the product and negatively impact the revenue we are able to generate from the sale of
the product in that country. Adverse pricing limitations may hinder our ability to recoup our total investment in our RECELL System or other future
products, even after obtaining regulatory approval.
If we are unable to promptly obtain coverage and profitable payment rates from hospital budget, government-funded and private purchasers for
the RECELL System or any future products, this could have a material adverse effect on our operating results, our ability to raise capital needed to
commercialize products and our overall financial condition.
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For example, we presently benefit from various reimbursement codes, including the following:
• Medicare reimburses hospitals for inpatient services using MS-DRGs (Medicare Severity Diagnosis-Related Groups).
Specific ICD-10-PCS code series describing our “cell suspension technique” for the use of the RECELL System.
•
Current Procedural Terminology (“CPT”) for physicians to support reimbursement for physician rendered healthcare services.
•
There can be no guarantee that the above reimbursement codes will not be withdrawn, reduced, consolidated or otherwise be altered in a manner
which is not supportive of ongoing commercial use of the RECELL System. In addition, we are also seeking a Transitional Pass-through Application
(“TPT”) to support additional Medicare payment in the outpatient and the ambulatory surgical setting, and there can be no guarantee that the TPT will be
approved, or we will be available in an amount or manner that supports our commercialization efforts.
We have limited financial resources and will likely require additional financings to continue the development and commercialization of our RECELL
System or any future products, which may cause dilution to our existing stockholders or place restrictions on our operations. If additional financing is
not available, we may have to postpone, reduce or cease operations.
If we are unable to achieve profitability sufficient to permit us to fund our operations and other planned actions, we may be required to raise
additional capital. There can be no assurance that such capital would be available on favorable terms, or at all. If we raise additional capital through the
issuance of equity or convertible debt securities, the percentage ownership held by existing stockholders may be reduced, and the market price of our
common stock or CDIs could fall due to an increased number of shares or CDIs available for sale in the market. Debt financing, if available, may involve
restrictive covenants, which may limit our operating flexibility with respect to certain business matters. If we are unable to secure additional capital as
circumstances require, we may not be able to fund our planned activities or continue our operations.
We have limited experience in manufacturing our products in large-scale commercial quantities and we may face manufacturing risks that may
adversely affect our ability to manufacture products and could reduce our gross margins and negatively affect our business and operating results.
Our success depends, in part, on our ability to manufacture our current and future products in sufficient quantities and on a timely basis to meet
demand, while adhering to product quality standards, complying with regulatory quality system requirements and managing manufacturing costs. We have
a manufacturing facility located in Ventura, California where we produce, package and warehouse the RECELL System. We also rely on global third-party
manufacturers, Baxter International Inc., Hospira (a division of Pfizer), Thermo Fisher Scientific, Lyophilization Services of New England and Becton
Dickinson and Company, for production of some of the components used in the RECELL System. If our facility, or the facilities of our third-party contract
manufacturers, suffer damage, or a force majeure event, this could materially impact our ability to operate.
We are also subject to other risks relating to our manufacturing capabilities, including:
•
•
•
•
•
•
quality and reliability of components, sub-assemblies and materials that we source from third-party suppliers, who are required to meet our
quality specifications, some of whom are our single-source suppliers for the products they supply;
failure to secure raw materials, components and materials in a timely manner, in sufficient quantities or on commercially reasonable terms;
inability to secure raw materials, components and materials of sufficient quality to meet the exacting needs of medical device
manufacturing;
failure to maintain compliance with quality system requirements or pass regulatory quality inspections;
inability to increase production capacity or volumes to meet demand; and
inability to design or modify production processes to enable us to produce future products efficiently or implement changes in current
products in response to design or regulatory requirements.
These risks could be exacerbated by our limited experience as an entity with large-scale commercial manufacturing. As demand for our products
increases, we will have to invest additional resources to purchase raw materials and components, sub-assemblies and materials, hire and train employees
and enhance our manufacturing processes. If we fail to increase our production capacity efficiently to meet demand for our products, we may not be able to
fill customer orders on a timely basis, our sales may not increase in line with our expectations and our operating margins could fluctuate or decline. It may
not be possible for us to manufacture our products at a cost or in quantities sufficient to make these products commercially viable or to maintain current
operating margins, all of which could have a material adverse effect on our business, financial condition and results of operations. In addition, we are
continually identifying additional third-party manufacturers who could serve if necessary, as replacement manufacturers should the need arise.
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We rely on third parties to conduct, supervise and monitor our clinical trials. If these third parties do not successfully carry out their contractual duties
or meet expected deadlines, we may not be able to obtain regulatory approval for or commercialize our drug product candidates and our business could
be substantially harmed.
We rely on clinical research organizations (“CRO”), and clinical trial sites to ensure our clinical trials are conducted properly and on time. While
we will have agreements governing their activities, we will have limited influence over their actual performance. CROs manage and monitor the clinical
trials, duties and functions, and we will control only certain aspects of our CROs’ activities. Nevertheless, we will be responsible for ensuring that each of
our clinical trials is conducted in accordance with the applicable protocol, legal, regulatory and scientific standards, and our reliance on the CROs does not
relieve us of our regulatory responsibilities.
We and our CROs are required to comply with the FDA’s GCPs for conducting, recording and reporting the results of clinical trials to assure that
the data and reported results are credible and accurate and that the rights, integrity and confidentiality of clinical trial participants are protected. The FDA,
and comparable foreign regulatory authorities, enforce these GCPs through periodic inspections of trial sponsors, principal investigators and clinical trial
sites. If we or our CROs fail to comply with applicable GCPs, the clinical data generated in our future clinical trials may be deemed unreliable and the FDA
or other foreign regulatory authorities may require us to perform additional clinical trials before approving any marketing applications.
If our CROs do not successfully carry out their contractual duties or obligations, fail to meet expected deadlines, or if the quality or accuracy of
the clinical data they obtain is compromised due to the failure to adhere to our clinical protocols or regulatory requirements, or for any other reasons, our
clinical trials may be extended, delayed or terminated, and we may not be able to obtain regulatory approval for, or successfully commercialize, our product
candidates. If any such event were to occur, our financial results and the commercial prospects for our product candidates would be harmed, our costs could
increase, and our ability to generate revenues could be delayed. If any of our relationships with these third-party CROs terminate, we may not be able to
enter into arrangements with alternative CROs or to do so on commercially reasonable terms. Further, switching or adding additional CROs involves
additional costs and requires management time and focus. In addition, there is a natural transition period when a new CRO commences work. As a result,
delays occur, which could materially impact our ability to meet our desired clinical development timelines. Though we carefully manage our relationships
with our CROs, there can be no assurance that we will not encounter challenges or delays in the future or that these delays or challenges will not have a
material adverse impact on our business, financial condition and prospects.
As a result of COVID-19, other pandemics, or inadequate funding, the FDA and other government agencies may have resource constraints which
could limit their ability to review and approve our applications in a timely manner, thus negatively impact our business.
The FDA’s ability to review and approve regulatory submissions is impacted by staffing levels, funding levels and emergency priorities. The
time to review submissions can vary from time to time. If a prolonged delay occurs in the review of any application from the Company, our business could
be adversely impacted.
Product recalls or inventory losses caused by unforeseen events may adversely affect our operating results and financial condition.
Our products are manufactured, stored and distributed using technically complex processes requiring specialized facilities, highly specific raw
materials and other production constraints. The complexity of these processes, as well as strict company and government standards for the manufacture,
storage and distribution of our product candidates, subjects us to risks. In addition, process deviations or unanticipated effects of approved process changes
may result in production runs of our RECELL System not complying with stability requirements or specifications. The occurrence or suspected occurrence
of production and distribution difficulties can lead to lost inventories and in some cases product recalls, with consequential reputational damage and the
risk of product liability. The investigation and remediation of any identified problems can cause production delays, substantial expense, lost sales and
delays of new product launches. In the event our production efforts require a recall or result in an inventory loss, our operating results and financial
condition may be adversely affected.
A cyber security incident could be disruptive to our business, compromise confidential data, cause reputation harm, and subject us to litigation and
federal and state governmental inquiries.
We collect and store sensitive business and other information, including intellectual property and trade secrets, on our networks. Our business
operations are dependent upon the secure maintenance of this information. Despite our efforts to secure this information, there can be no assurance that
cyberattacks and other threats from malicious persons and groups will not cause harm to or
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disrupt our business and operations. As a result, cyber security and the continued development and enhancement of our controls, processes and practices
designed to protect our information systems from attack, damage or unauthorized access remain a priority for us. We may be required to expend significant
additional resources to protect against cyber threats. A cyber attack may result in a material adverse effect on our financial position and results of
operations and harm our business reputation.
We rely on information technology systems for critical business functions and the operations of our business.
We rely upon complex, integrated information technology (IT) systems in our business functions including our quality systems to operate our
business. If any of our IT systems were to be disrupted or fail, our business could suffer irreparable harm, financial loss, and our operations would be
adversely impacted.
The burn industry is subject to seasonal sales patterns and other variations which impact our revenue and operating cash flows.
In the past, the burn industry has been characterized by a high degree of seasonality. Typically, relatively high levels of burn incidences have
been realized in the summer months and low levels of burn incidences have been realized in the early winter months. As a result, a significantly higher
percentage of our annual revenues have historically been recognized in the third quarter and the lowest percentage of annual revenues in the first quarter of
a given calendar year. The seasonality of burn related cases, exacerbated by COVID-19 influences, impact our revenues, thus making it difficult accurately
predict future revenues and may prevent us from achieving our quarterly or annual forecasts or meeting or exceeding the expectations of research analysts
or investors, which in turn may cause our stock price to decline.
The markets in which we operate are highly competitive and innovative. Our competitors may develop products that render our products less attractive
or obsolete and our business may deteriorate.
The markets for our products are highly competitive and our competitors may develop products that may more effectively compete with our
products, thus negatively impacting our sales, financial conditions and business prospects. Our competitors may have significantly more financial and
other resources to invest in product development. We must continue to develop and market new products, or we risk our products becoming obsolete, in
which case, our revenues may decline, and our business prospects may suffer.
Product development is an expensive, uncertain and lengthy process.
We have significant product development projects ongoing that, if successful, are intended to improve the ease and use of our device in our
current burn indication as well as planned future indications in soft tissue reconstruction, vitiligo and otherwise. The costs, timeline and ultimate success of
these product development programs are subject to risk and uncertainty. If the Company is not able to develop and obtain regulatory approval for these
products in development in a timely fashion and within budget, our business prospects and financial condition may suffer.
Compliance with environmental, health and safety requirements is costly and, if not achieved, could result in material financial fines and penalties,
expensive lawsuits, cessation of business operations, and a material adverse impact on the business.
Our manufacturing and other processes may involve the use of hazardous materials subject to federal, state, and local and foreign environmental
requirements. Under some environmental laws and regulations, we could be held responsible for costs at third-party sites that we have used for waste
disposal, or for contamination at our past or present facilities. Failure to comply with current environment laws, or future laws, could result in significant
fines, penalties and expenses which could have an adverse impact on our financial condition.
Our future targeted indications would require us to obtain a Biologics License Application (“BLA”) for cell and gene therapy approval by the FDA (as
opposed to PMA approval for a device). BLA’s are subject to greater FDA scrutiny, as well as significantly more time and expense than a PMA. If we
are unable to obtain FDA approval for future BLAs, our future financial condition, prospects and results would be adversely impacted.
The FDA requires a BLA for future cell and other biologic therapy candidates. The BLA is a request for permission to deliver or introduce a
biologic product into interstate commerce in the U.S. The FDA undertakes a detailed and rigorous review of BLA candidates including pre-approval
inspections of manufacturing facilities as well as pre and post approval clinical trials. If these commitments are not met, the FDA can withdraw the product
from the market.
We may be subject to civil and criminal penalties if the FDA determines that we have marketed or promoted our products for off-label usage.
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We are prohibited from promoting our products for uses that are inconsistent with the uses that have been approved by the FDA - also known as
“off-label” uses. More specifically, we may not make claims, in our promotion materials, website or otherwise, about the use of any RECELL products
which are outside of their approved labeling and indications. If the FDA determines that our marketing activities constitute off-label promotion, the FDA
could impose fines and penalties on the Company and our executives, withdraw or recall our approved product from the market, as well as limit our
product from off-label usage.
Risks Relating to our Industry and Intellectual Property
We face competition from the existing standard of care and any future potential changes in medical practice and technology and the possibility that our
competitors may develop products, treatments or procedures that are similar, more advanced, safer or more effective than ours.
The medical device, biotechnology and pharmaceutical industries, specifically relating to the areas where we currently or intend to market our
RECELL System, are intensely competitive and subject to significant changes due to technology and medical practice standards. We may face competition
from any number of different sources with respect to any products we develop and commercialize.
Our commercial opportunity could be reduced or eliminated if our competitors develop and commercialize products, treatments or procedures
that are safer, more effective, have fewer or less severe side effects, are more convenient or are less expensive than our RECELL System or any future
products we develop. Many of our current or future competitors may have significantly greater financial resources and experience and expertise in research
and development, manufacturing, preclinical testing, conducting clinical trials, obtaining regulatory approvals and marketing approved products than we
may have. Mergers and acquisitions in the pharmaceutical, medical device, and biotechnology industries or wound care markets may result in increased
concentration of resources among a smaller number of our competitors. Other early-stage companies may also prove to be significant competitors,
particularly through collaborative arrangements with large and established companies. These companies compete with us in recruiting and retaining
qualified scientific and management personnel, establishing clinical trial sites and patient registration for clinical trials, as well as in acquiring technologies
complementary to, or necessary for, our programs.
We could be subject to product liability lawsuits, which could result in costly and time-consuming litigation and significant liabilities.
The development of medical device products, such as our RECELL System, involves an inherent risk of product liability claims and associated
financial liability and adverse publicity. Any products we may develop could be found to be harmful or to contain harmful substances and expose us to
substantial liability and risk of litigation or may force us to discontinue production. We may be unable to obtain or maintain insurance on reasonable terms
or otherwise protect ourselves against potential product liability claims that could impede or prevent further business development of any products we may
create and commercialize. Furthermore, a product liability claim could damage our reputation, whether or not such claims are covered by insurance or have
merit. A product liability claim against us or the withdrawal of a product from the market could have a material adverse effect on our business or financial
condition. Furthermore, product liability lawsuits, regardless of their success, would likely be time consuming and expensive to resolve and would divert
management’s time and attention, which could seriously harm our business.
If we are unable to effectively protect our intellectual property, we may not be able to operate our business and third parties may be able to use and
profit from our technology, both of which would impair our ability to be competitive
Our success will be heavily dependent on our ability to obtain and maintain meaningful patent protection for our technologies and products
throughout the world. Patent law relating to the scope of claims in the technology fields in which we will operate is still evolving. The amount of ongoing
protection for our proprietary rights therefore is uncertain. We will rely on patents to protect a significant part of our intellectual property and to enhance
our competitive position. However, our presently pending or future patent applications may be denied, and any patent previously issued to us or our
subsidiaries may be challenged, invalidated, held unenforceable or circumvented. In particular, we filed a patent Term Extension application with the U.S.
Patent and Trademark Office requesting an extension of our commercial patent that covers the RECELL System, U.S. Patent No. 9,029,140. If the term
extension is approved, the patent term will be extended to April 9, 2024. Without such approval, our RECELL System patent will expire in 2022 which
could prevent us from defending our patent in the event a competitor infringes on our RECELL System by producing the same type of
product. Furthermore, the patent protections we have been granted may not be broad enough to prevent competitors from producing products similar to
ours. In addition, the laws of various foreign countries in which we may compete, such as China, may not protect our intellectual property to the same
extent as do the laws of the United States. If we fail to obtain adequate patent protection for our proprietary technology, our ability to be commercially
competitive will be materially impaired.
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In the ordinary course of business and as appropriate, we intend to apply for additional patents covering both our technologies and products, as
we deem appropriate. Our existing patents and any future patents we obtain may not be sufficiently broad to prevent others from practicing our
technologies or developing competing products and technologies. In addition, because patent law is evolving in the life science industry, the patent
positions of companies like ours are uncertain. As a result, the validity and enforceability of our patents cannot be predicted with certainty.
We may find it difficult to protect our intellectual property rights throughout the world.
Filing, prosecuting and defending patents on all of our technologies and products in every jurisdiction is expensive. Competitors could reverse
engineer our technologies in jurisdictions where we have not obtained patent protection to develop their own products. These products may compete with
our products and may not be covered by any patent claims or other intellectual property rights.
The laws of some countries do not protect intellectual property rights to the same extent as the laws of the United States and many companies
have encountered significant problems in protecting and defending such rights in foreign jurisdictions. This lack of protection, particularly in relation to
biotechnology, could make it difficult for us to stop the infringement of our patents. Proceedings to enforce our patent rights in foreign jurisdictions could
result in substantial cost and divert the efforts and attention of key personnel from other aspects of our business.
We may incur substantial costs as a result of litigation or other proceedings relating to patent and other intellectual property rights and we may be
unable to protect our rights to, or use of, our technology.
If we choose to go to court to stop someone else from using the inventions claimed in our patents or our licensed patents, that individual or
company has the right to ask the court to rule that these patents are invalid and/or should not be enforced against that third party. These lawsuits are
expensive and would distract our key personnel and consume time and other resources, even if we were successful in stopping the infringement of these
patents. In addition, there is a risk that a court will decide that these patents are invalid or unenforceable and that we do not have the right to stop the other
party from using the inventions or, even if the validity or enforceability of these patents is upheld, the court may refuse to stop the other party because the
competitors’ activities do not infringe our rights.
If third parties make claims of intellectual property infringement against us, or otherwise seek to establish their intellectual property rights equal or
superior to ours, we may have to spend time and money in response and potentially discontinue certain of our operations.
While we currently do not believe it to be the case, third parties may claim that we are employing their proprietary technology without
authorization or that we are infringing on their patents. If such claims were made, we could incur substantial costs coupled with diversion of our
management and key technical personnel in defending against these claims. Furthermore, parties making claims against us may be able to obtain injunctive
or other equitable relief which could effectively halt our ability to further develop, commercialize and sell products. In the event of a successful claim of
infringement, courts may order us to pay damages and obtain one or more licenses from third parties. We may not be able to obtain these licenses at a
reasonable cost, if at all. Defense of any lawsuit or failure to obtain any of these licenses could prevent us from commercializing available products and
have a material negative effect on our business.
Any suits filed against us by third parties alleging we infringe their intellectual property rights could harm our business and operating results as well as
our reputation.
There is considerable patent and other intellectual property activity in the industry in which we operate. We may be unaware of intellectual
property rights of others that may cover some or all of our technology. Additionally, notwithstanding our receipt of a patent, a third-party may nevertheless
challenge the validity of one or more claims included in the patent, which may require significant expenditure of funds, as well as time and effort by key
personnel, to defend our claims.
Our current and future relationships with investigators, health care professionals, consultants, third-party payors, and customers will be subject to
applicable healthcare regulatory laws, which could expose us to penalties.
Our business operations and current and future arrangements with investigators, healthcare professionals, consultants, third-party payors and
customers may expose us to broadly applicable fraud and abuse and other healthcare laws and regulations. These
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laws regulate the business or financial arrangements and relationships through which we conduct our operations, including how we research, market, sell
and distribute our products for which we obtain marketing approval. Such laws include:
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the federal Anti-Kickback Statute prohibits, among other things, persons and entities from knowingly and willfully soliciting, offering, receiving
or providing remuneration, directly or indirectly, in cash or in kind, to induce or reward, or in return for, either the referral of an individual for, or
the purchase, lease, order or recommendation of, any good, facility, item or service, for which payment may be made, in whole or in part, under a
federal healthcare program such as Medicare and Medicaid. A person or entity does not need to have actual knowledge of the federal Anti-
Kickback Statute or specific intent to violate it to have committed a violation; in addition, the government may assert that a claim including items
or services resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the civil False
Claims Act;
the federal false claims laws including the civil False Claims Act, which can be enforced through civil whistleblower or qui tam actions, and civil
monetary penalties laws, which impose criminal and civil penalties against individuals or entities for knowingly presenting, or causing to be
presented to the federal government, claims for payment that are false or fraudulent, knowingly making, using or causing to be made or used, a
false record or statement material to a false or fraudulent claim, or knowingly making, or causing to be made, a false statement to avoid, decrease
or conceal an obligation to pay money to the federal government; in addition, the government may assert that a claim including items and
services resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the civil False
Claims Act;
HIPAA imposes criminal and civil liability for, among other things, knowingly and willfully executing, or attempting to execute, a scheme to
defraud any healthcare benefit program or making false or fraudulent statements relating to healthcare matters. Similar to the federal Anti-
Kickback Statute, a person or entity does not need to have actual knowledge of the statute or specific intent to violate it to have committed a
violation;
HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act and its implementing regulations, also imposes
obligations, including mandatory contractual terms, with respect to safeguarding the privacy, security and transmission of individually
identifiable health information on health plans, health care clearing houses, and certain health care providers, known as covered entities, and their
business associates, defined as independent contractors or agents of covered entities that create, receive or obtain protected health information in
connection with providing a service for or on behalf of a covered entity as well as their covered subcontractors;
a number of federal, state and foreign laws, regulations, guidance and standards that impose requirements regarding the protection of health data
that are applicable to or affect our operations;
the federal transparency requirements, sometimes referred to as the “Sunshine Act,” under the Patient Protection and Affordable Care Act, which
requires certain manufacturers of drugs, devices, biologics and medical supplies for which payment is available under Medicare, Medicaid or the
Children’s Health Insurance Program (with certain exceptions) to report annually to the government information related to payments or other
"transfers of value" made to physicians (defined to include doctors, dentists, optometrists, podiatrists and chiropractors) and teaching hospitals,
and requires applicable manufacturers and group purchasing organizations to report annually to the government ownership and investment
interests held by the physicians described above and their immediate family members. Beginning in 2022, applicable manufacturers also will be
required to report such information regarding their relationships with physician assistants, nurse practitioners, clinical nurse specialists, certified
registered nurse anesthetists and certified nurse midwives during the previous year; and
analogous state and foreign laws and regulations, such as state anti-kickback and false claims laws, may apply to our business practices,
including but not limited to, research, distribution, sales, and marketing arrangements and claims involving healthcare items or services
reimbursed by non-governmental third-party payors, including private insurers, or otherwise restrict payments that may be made to healthcare
providers and other potential referral sources; and state laws that require medical device companies to comply with the industry’s voluntary
compliance guidelines and the relevant compliance guidance promulgated by the federal government; state laws that require medical device
manufacturers to report information related to payments and other transfers of value to physicians and other healthcare providers, marketing
expenditures or drug pricing, as well as state and local laws that require the registration of sales representatives; and state and foreign laws
governing the privacy and security of health information in some circumstances, many of which differ from each other in significant ways and
often are not preempted by HIPAA, thus complicating compliance efforts.
Defending against any such actions can be costly, time-consuming and may require significant financial and personnel resources. Therefore, even if we are
successful in defending against any such actions that may be brought against us, our business may be impaired.
Healthcare legislative reform measures may have a material adverse effect on our business and results of operations.
In the United States, there have been and continue to be a number of legislative initiatives to contain healthcare costs. For example, in March
2010, the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act, or the Health Care Reform Law,
was passed, which substantially changed the way health care is financed by both
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governmental and private insurers, and significantly impacts the U.S. healthcare industry. The Health Care Reform Law, among other things, (i) subjects
biologic products to potential competition by lower-cost biosimilars, (ii) addresses a new methodology by which rebates owed by manufacturers under the
Medicaid Drug Rebate Program are calculated for drugs that are inhaled, infused, instilled, implanted, or injected, (iii) increases the minimum Medicaid
rebates owed by manufacturers under the Medicaid Drug Rebate Program and extends the rebate program to individuals enrolled in Medicaid managed care
organizations, (iv) establishes annual fees and taxes on manufacturers of certain branded prescription drugs, and (v) promotes a new Medicare Part D
coverage gap discount program.
In addition, other legislative changes have been proposed and adopted in the United States since the Health Care Reform Law was enacted. On
August 2, 2011, the Budget Control Act of 2011, among other things, created measures for spending reductions by Congress. A Joint Select Committee on
Deficit Reduction, tasked with recommending a targeted deficit reduction of at least $1.2 trillion for the years 2013 through 2021, was unable to reach
required goals, thereby triggering the legislation’s automatic reduction to several government programs. This includes aggregate reductions of Medicare
payments to providers up to 2% per fiscal year. On January 2, 2013, President Obama signed into law the American Taxpayer Relief Act of 2012, or the
ATRA, which, among other things, delayed for another two months the budget cuts mandated by these sequestration provisions of the Budget Control Act
of 2011. On March 1, 2013, the President signed an executive order implementing sequestration, and on April 1, 2013, the 2% Medicare payment
reductions went into effect. Additional state and federal healthcare reform measures may be adopted in the future, any of which could limit the amounts
that federal and state governments will pay for healthcare products and services, which could result in reduced demand for our product candidates or
additional pricing pressures.
Macroeconomic and Social Risks
Our business, results of operations and financial condition may be adversely impacted by the COVID-19 pandemic.
The COVID-19 pandemic has negatively affected the U.S. and global economies, disrupted global supply chains, resulted in significant travel
and transport restrictions, and created significant disruption of the financial markets. We are closely monitoring the impact of the COVID-19 pandemic on
all aspects of our business, including how it is impacting our employees, product development, customers and supply chain. We are unable to predict the
ultimate impact that the COVID-19 pandemic may have on our business, future results of operations, financial position or cash flows. The extent to which
our operations may be impacted by the COVID-19 pandemic and recovery will depend largely on future developments, which are highly uncertain and
cannot be accurately predicted.
We may experience additional operating costs due to increased challenges with our workforce (including as a result of illness, absenteeism or government
orders), access to supplies, capital, and fundamental support services (such as shipping and transportation). Even after the COVID-19 pandemic has
subsided, we may experience materially adverse impacts to our business due to any resulting supply chain disruptions, economic recession or depression.
Furthermore, the impacts of potential worsening of global economic conditions, inflation resulting from government interventions and stimulus, and
continued disruptions to and volatility in the financial markets remain unknown.
The impact of the COVID-19 pandemic may also exacerbate other risks discussed in this section, any of which could have a material adverse
effect on us. This situation is changing rapidly, and additional impacts may arise that we are not aware of currently.
Adverse changes in general economic conditions or uncertainty about future economic conditions, including economic uncertainty from the current
pandemic, could adversely affect us.
We are subject to the risks arising from adverse changes in general economic market conditions, including the negative impact to the U.S. and
global economy from the COVID-19 pandemic. Uncertainty about future economic conditions could negatively affect our current and prospective
customers causing them to delay the purchase of our products. Poor economic conditions could harm our business, financial condition, operating results
and cash flows.
The COVID-19 pandemic may significantly disrupt our workforce and internal operations.
The COVID-19 pandemic may significantly disrupt our workforce if a significant percentage of our employees are unable to work due to illness,
quarantines, government actions, facility closures in response to the pandemic, fear of acquiring COVID-19 while performing essential business functions,
or as a result of changes to unemployment insurance where unemployed workers can receive, in the short-term, benefits in excess of what would be offered
for working for us. As part of our response to the pandemic, during the course of fiscal year 2021, we instituted remote work schedule for employees at the
Valencia location, mandatory masks and gloves and social distancing for employees at the Ventura location and no outside visitors were allowed unless due
to a scheduled or unscheduled audit or regulatory inspection, in which case such third parties were required to wear masks and gloves and maintain social
distancing. While we believe these changes have adequately addressed our business needs, we cannot guarantee that we will be
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able to continue to adequately staff our operations when needed. We cannot predict the extent to which the COVID-19 pandemic may disrupt our
workforce and internal operations.
We have taken certain precautions due to the COVID-19 pandemic that could negatively impact our business.
In response to the COVID-19 pandemic, we have taken measures intended to protect the health and well-being of our employees, customers, and
communities, which could negatively impact our business. These measures include temporarily requiring all non-essential employees (personnel whose
roles allow) to work remotely, restricting work-related travel except for direct onsite service to our customers, restricting non-essential visitors from
entering our sites, increasing the frequency and extent of cleaning and disinfecting facilities, workstations, and equipment and developing social distancing
plans. The health of our workforce, customers and communities is of primary concern and we may take further actions as may be required by government
authorities or as we determine are in the best interests of our employees, customers and others. In addition, our management team has, and will likely
continue to, spend significant time, attention and resources monitoring the COVID-19 pandemic and seeking to manage its effects on our business and
workforce. The extent to which the pandemic and our precautionary measures may impact our business will depend on future developments, which are
highly uncertain and cannot be predicted at this time.
Risks Relating to Our Common Stock and CDIs
We have never paid a dividend on our common stock and CDIs and do not intend to do so in the foreseeable future, and consequently, investors’ only
opportunity to realize a return on their investment in the Company is through the appreciation in the price of our common stock and CDIs.
We do not anticipate paying cash dividends on our common stock and CDIs in the foreseeable future and intend to retain all earnings, if any, for
our operations. If we decided to pay dividends at some future time, we may not have sufficient funds legally available to do so. Even if funds are legally
available for distribution, we may be unable to pay any dividends to our stockholders because of limitations imposed by a lack of liquidity. Accordingly,
our stockholders may have to sell some or all of their common stock or CDIs (as applicable) in order to generate cash flow from their investment. Our
stockholders may not receive a gain on their investment when they sell their common stock or CDIs and may lose some or all of their investment. Any
determination to pay dividends in the future on our common stock and CDIs will be made at the discretion of our board of directors and will depend on our
results of operations, financial conditions, contractual restrictions, restrictions imposed by applicable law, capital requirements, and other factors that our
board of directors deems relevant.
As long as we remain subject to the rules of the ASX and of NASDAQ, we will be unable to access equity capital without shareholder approval if such
equity capital sales would result in an equity issuance above regulatory thresholds and consequently, we may be unable to obtain financing sufficient to
sustain our business if we are unsuccessful in soliciting requisite shareholder approvals.
Our ability to access equity capital is currently limited by ASX Listing Rule 7.1, which provides that a company must not, subject to specified
exceptions, issue or agree to issue during any consecutive 12-month period any equity securities, or other securities with rights to conversion to equity, if
the number of those securities in aggregate would exceed 15% of the number of ordinary securities on issue at the commencement of that 12-month period
unless shareholder approval is obtained.
Our equity issuances will be limited by ASX Listing Rule 7.1 so long as we continue to be listed on the ASX and this constraint may prevent us from
raising the full amount of equity capital needed for operations without prior shareholder approval.
In addition to ASX Listing Rule 7.1, we are also subject to NASDAQ Listing Rule 5635(d), commonly referred to as the NASDAQ 20% Rule,
which requires shareholder approval of a transaction other than a public offering involving the sale, issuance, or potential issuance by a company of
common stock (or securities convertible into or exercisable for common stock) equal to 20% or more of the common stock, or 20% or more of the voting
power outstanding before the issuance for less than the greater of book or market value of the shares. While less restrictive than ASX Listing Rule 7.1, the
operation of the NASDAQ 20% rule could limit our ability to raise capital through issuance of common stock or convertible securities without jeopardizing
our listing status. If we were to violate the NASDAQ 20% rule, the Company would be subject to delisting from NASDAQ and share prices and trading
volumes would likely suffer.
There has been relatively limited trading volume in the markets for our common stock and CDIs, and more active, liquid trading markets for such
securities may never develop.
Trading in our common stock on NASDAQ and our CDIs on the ASX is often thin and susceptible to wide fluctuations in trading prices due to
such limited trading volume and other factors, some of which may have little to do with our operations or business prospects. Limited liquidity in the
trading markets for our common stock and CDIs may adversely affect a stockholder’s
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ability to sell its shares of our common stock or our CDIs at the time it wishes to sell them or at a price that it considers acceptable. In addition, if a more
active, liquid public trading market does not develop we may be limited in our ability to raise capital by selling shares of common stock or CDIs. We
cannot assure you that more active, liquid public trading markets for our common stock and CDIs will develop or, if developed, will be sustained.
The market price and trading volume of our common stock and CDIs may be volatile and may be affected by variability in our performance from
period to period and economic conditions beyond management’s control.
The market price of our common stock (including common stock represented by CDIs) may be highly volatile and could be subject to wide
fluctuations. This means that our stockholders could experience a decrease in the value of their common stock or CDIs regardless of our operating
performance or prospects. The market prices of securities of companies operating in the medical device and biotech sectors have often experienced
fluctuations that have been unrelated or disproportionate to the operating results of these companies. In addition, the trading volume of our common stock
and CDIs may fluctuate and cause significant price variations to occur. If the market price of our common stock or CDIs declines significantly, our
stockholders may be unable to resell our common stock or CDIs at or above their purchase price, if at all. There can be no assurance that the market price
of our common stock and CDIs will not fluctuate or significantly decline in the future.
Some specific factors that could negatively affect the price of our common stock and CDIs or result in fluctuations in their price and trading
volume include:
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actual or expected fluctuations in our operating results;
actual or expected changes in our growth rates or our competitors’ growth rates;
results of clinical trials of our product candidates;
results of clinical trials of our competitors’ products;
regulatory actions with respect to our products or our competitors’ products;
reports of one or more patient serious adverse events;
publication of research reports by securities analysts about us or our competitors in the industry;
our failure or the failure of our competitors to meet analysts’ projections or guidance that we or our competitors may give to the market;
fluctuations of exchange rates between the U.S. dollar and the Australian dollar;
issuances by us of debt or equity securities;
litigation involving our company, including shareholder litigation;
investigations or audits by regulators into the operations of our company;
proceedings initiated by our competitors or clients;
strategic decisions by us or our competitors, such as acquisitions, divestitures, spin-offs, joint ventures, strategic investments or changes in
business strategy;
sales or perceived potential sales of the common stock or CDIs by us, our directors, senior management or our stockholders in the future;
short selling or other market manipulation activities;
announcement or expectation of additional financing efforts;
terrorist acts, acts of war or periods of widespread civil unrest;
economic and social effects of the COVID-19 virus or other pandemics;
natural disasters and other calamities;
changes in market conditions for biopharmaceutical stocks;
our inability to raise additional capital, limiting our ability to continue as a going concern;
changes in market prices for our product or for our raw materials;
changes in market valuations of similar companies;
changes in key personnel for us or our competitors;
speculation in the press or investment community;
changes or proposed changes in laws and regulations affecting our industry; and
conditions in the financial markets in general or changes in general economic conditions.
The requirements of being a public company in the United States may strain our resources and divert management’s attention.
As a public company, we are subject to the reporting requirements of the Exchange Act, the U.S. Sarbanes-Oxley Act of 2002 (the “Sarbanes-
Oxley Act”) the Dodd-Frank Act and the listing standards and the rules and regulations of NASDAQ. We are also subject to the reporting requirements
under the ASX Listing Rules due to the listing of our CDIs on ASX. We expect that the requirements of these rules and regulations will increase our legal,
accounting and financial compliance costs, make some activities more difficult, time consuming and costly, and place significant strain on our personnel,
systems and resources. As a result of our disclosure of information in filings required of a public company, our business and financial condition will
become more visible,
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which may result in threatened or actual litigation, including by competitors, stockholders or third parties. If such claims are successful, our business and
operating results could be harmed, and even if the claims do not result in litigation or are resolved in our favor, these claims, and the time and resources
necessary to resolve them, could divert the resources of our management and harm our business and operating results.
We are an emerging growth company, and the reduced disclosure requirements applicable to emerging growth companies may make our common stock
less attractive to investors.
We are an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act of 2012 (“JOBS Act”). For as long as we
continue to be an emerging growth company, we may take advantage of certain exemptions and relief from various U.S. reporting requirements that are
applicable to other public companies that are not emerging growth companies, including (i) not being required to comply with the auditor attestation
requirements of Section 404 of the Sarbanes-Oxley Act, (ii) having the option of delaying the adoption of certain new or revised financial accounting
standards, (iii) reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements and (iv) exemptions from the
requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously
approved. We have taken, and in the future may take, advantage of these exemptions until such time that we are no longer an emerging growth company.
Accordingly, the information contained herein and in other reports we file with the SEC may be different than the information our investors receive from
other public companies in which they hold stock. Further, we have elected to take advantage of the extended transition period for complying with new or
revised accounting standards until those standards would otherwise apply to private companies. As a result, our operating results and financial statements
may not be comparable to the operating results and financial statements of other companies who have adopted the new or revised accounting standards. It is
possible that some investors will find our common stock and CDIs less attractive as a result, which may result in a less active trading market for our
common stock and CDIs and higher volatility in our stock and CDI price.
We will remain an emerging growth company until the earliest of (i) the last day of the fiscal year following the fifth anniversary of the date of
the first sale of our common stock pursuant to an effective registration statement under the U.S. Securities Act of 1933, as amended (the “Securities Act”),
(ii) the last day of the fiscal year in which we have total annual gross revenue of at least $1.07 billion, (iii) the last day of the fiscal year in which we are
deemed to be a “large accelerated filer” as defined in Rule 12b-2 under the Exchange Act, or (iv) the date on which we have issued more than $1.0 billion
in non-convertible debt securities during the prior three-year period.
If research analysts publish unfavorable commentary or downgrade our common stock or CDIs it could adversely affect our share price and trading
volume.
The trading market for our common stock and CDIs depends, in part, on the research and reports that research analysts publish about us and our
business and industry. If one or more research analysts downgrade our shares or CDIs, publish unfavorable commentary about the Company or cease
publishing reports about us or our business, the price of our common stock and CDIs could decline. If one or more of the research analysts ceases coverage
of our company or fails to publish reports on us regularly, demand for our common stock and CDIs could decrease, which could cause our share price or
trading volume to decline.
General Risk Factors
If we fail to manage our growth effectively, our business could be disrupted.
Our future financial performance and ability to successfully commercialize our products, which is not guaranteed, and to compete in the market
will depend, in part, on our ability to manage any future growth effectively. We expect to make significant investments to facilitate our future growth
through, among other things:
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new product development;
clinical development of our RECELL System to such areas trauma injuries and vitiligo;
clinical trials for additional indications; and
funding of our marketing and sales infrastructure.
Any failure to manage future growth effectively could have a material adverse effect on our business and results of operations.
Our growth and success depend on our ability to attract and retain additional highly qualified and skilled sales and marketing, research and
development, operational, managerial and finance personnel.
Competition for skilled personnel is intense and the unexpected loss of an employee with a particular skill could have a material adverse effect
on our operations until a replacement can be found and trained. If we cannot attract and retain skilled scientific
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and operational personnel for our research and development and manufacturing operations on acceptable terms, we may not be able to develop and
commercialize our products. Further, any failure to effectively integrate new personnel could prevent us from successfully growing our company.
Our operations are subject to anti-corruption laws, including Australian bribery laws, and the FCPA and other anti-corruption laws that apply in
countries where we do business.
Anti-corruption laws generally prohibit us and our employees and intermediaries from bribing, being bribed or making other prohibited
payments to government officials or other persons to obtain or retain business or gain some other business advantage. We participate in collaborations and
relationships with third parties whose actions could potentially subject us to liability under these anti-corruption laws. In addition, we cannot predict the
nature, scope, or effect of future regulatory requirements to which our international operations might be subject or the manner in which existing laws might
be administered or interpreted.
There is no assurance that we will be completely effective in ensuring our compliance with all applicable anti-corruption laws or other laws
including trade related laws. If we are not in compliance with these laws, we may be subject to criminal and civil penalties, disgorgement and other
sanctions and remedial measures, and legal expenses, which could have an adverse impact on our business, financial condition, results of operations and
liquidity.
Likewise, any investigation of any potential violations of these laws by respective government bodies could also have an adverse impact on our
reputation, our business, results of operations and financial condition.
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Item 1B. UNRESOLVED STAFF COMMENTS
Not applicable.
Item 2. PROPERTIES
Our principal corporate office is located at 28159 Avenue Stanford, Suite 220, Valencia, California 91355. We lease the 17,500 square foot
facility under on lease agreement that, as amended, expires on July 31, 2022. Our production plant in Ventura, California, is a 27,480 square foot facility
that we lease through September 30, 2024 with the right to extend the lease, at our sole option, as a result of two, three-year, options that allow us to extend
the lease up to an additional six years in total. We do not own any real property. We believe that leased facilities are adequate to meet current needs and that
additional facilities will, if required, be available for lease to meet future needs.
Item 3. LEGAL PROCEEDINGS
We are not currently involved in any significant legal, arbitration or governmental proceedings. From time to time, as an operating business, we
are involved in disputes (both formal and informal) with customer, manufacturing partners and employees.
Item 4. MINE SAFETY DISCLOSURES
Not applicable.
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PART II
Item 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF
EQUITY SECURITIES
Market Information
AVITA Medical, the former parent company of the AVITA Group, began as a laboratory spin-off in the Australian State of Western Australia.
AVITA Medical was formed under the laws of the Commonwealth of Australia in December 1992 and has operated as AVITA Medical since 2008. AVITA
Medical’s ordinary shares originally began trading in Australia on the ASX on August 9, 1993. AVITA Medical’s ADSs traded over the counter on the
OTCQX under the ticker symbol “AVMXY” from May 14, 2012 through September 30, 2019 and its ADSs began trading on the NASDAQ on October 1,
2019, under the ticker symbol “RCEL”.
Since completion of the Redomiciliation on June 29, 2020, the Company’s common stock has been quoted on NASDAQ under the ticker symbol
“RCEL” and the Company’s CDIs have been quoted on the ASX under the ticker code “AVH”. One share of common stock on NASDAQ is equivalent to
five CDIs on the ASX.
Holders
As of July 31, 2021, the Company had approximately 26,473 unique stockholders of record of our common stock (which includes CHESS
Depositary Nominees Pty Ltd, who holds all of the outstanding common stock underlying the CDIs of the Company).
Dividends
We have never paid cash dividends to our stockholders or, prior to the Redomiciliation, to the holders of ordinary shares in AVITA Medical. We
intend to retain future earnings for use in our business and do not anticipate paying cash dividends on our common stock and CDIs in the foreseeable
future. Any future dividend policy will be determined by our board of directors and will be based upon various factors, including our results of operations,
financial condition, current and anticipated cash needs, future prospects, contractual restrictions and other factors as our board of directors may deem
relevant.
Recent Sales of Unregistered Securities; Use of Proceeds from Registered Securities
On March 1, 2021, the Company issued 3,214,250 shares of common stock at the offering price of $21.50 per share. The gross proceeds from the
offering are approximately $69.1 million. The Company incurred $5.1 million in capital issuance expenses. The offering was made pursuant to a shelf
registration statement on Form S-3 (File No. 333-249419) that was previously filed with the SEC on October 9, 2020 and declared effective on October 16,
2020 and that was also publicly released on the ASX (the “Registration Statement”). The final prospectus supplement relating to and describing the terms
of the offering was filed with the SEC on February 25, 2021 (in the United States) and released on the ASX on March 1, 2021 (in Australia). There has
been no material change in the planned use of proceeds from this offering as described in the Registration Statement. We invested the funds in short-term,
interest-bearing investment-grade securities and government securities. As of June 30, 2021, we have not used any of the net proceeds from the offering.
None of the offering proceeds were paid directly or indirectly to any of our directors or officers (or their associates) or persons owning 10.0% or more of
any class of our equity securities or to any other affiliates.
During the year ended June 30, 2020, we completed an institutional placement to raise $81.7 million (through our former parent company,
AVITA Medical). We sold the equivalent of 2,033,898 shares at an issue price of $40.17 per share for total net proceeds of $76.6 million, after deducting
commission and offering expenses. In addition, an aggregate of the equivalent of 15,853 shares were issued to our directors in lieu of their director fees
during the year ended June 30, 2020 under the Director Share Plan that was approved by shareholders in December 2017. Each transaction was exempt
from the registration requirements of the Securities Act as a transaction not involving a public offering pursuant to Section 4(2) of the Securities Act.
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Item 6. SELECTED FINANCIAL DATA
(In thousands, except share and per share data)
Revenues
Cost of sales
Gross profit
BARDA income
Operating expenses:
Sales and marketing expenses (1)
General and administrative expenses (1)
Research and development expenses (1)
Total operating expenses
Operating loss
Interest expense
Other income
Loss before income taxes
Income tax benefit/(expense)
Net loss
Net loss per common share:
Basic
Diluted
Weighted-average common shares:
Basic
Diluted
2021
$
$
$
$
Year Ended June 30,
2020
2019
29,232 $
(5,949)
23,283
2,055
(14,660)
(22,400)
(14,818)
(51,878)
(26,540)
(22)
17
(26,545)
(38)
(26,583) $
(1.17) $
(1.17) $
14,263 $
(2,973)
11,290
3,926
(15,706)
(33,025)
(9,164)
(57,895)
(42,679)
(33)
686
(42,026)
(4)
(42,030) $
(2.07) $
(2.07) $
5,474
(1,271)
4,203
5,921
(12,549)
(15,099)
(8,004)
(35,652)
(25,528)
(27)
332
(25,223)
121
(25,102)
(1.56)
(1.56)
22,674,313
22,674,313
20,290,966
20,290,966
16,064,588
16,064,588
(1)
Refer to Note 2 for information about a reclassification of share-based compensation expense for the 2020 and 2019 comparative period.
Cash and cash equivalents
Total current assets
Total assets
Total current liabilities
Total long-term liabilities
Total Equity
31
$
Year Ended June 30,
2021
2020
(in thousands)
110,746 $
121,330
125,501
7,390
2,456
115,655
73,639
78,387
82,462
7,709
2,352
72,401
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Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS
The following discussion and analysis of our financial condition and results of operations for the years ended June 30, 2021 and 2020, should be
read in conjunction with our consolidated financial statements and related notes included in this Annual Report.
Results of Operations
The table below summarizes the results of our continuing operations for each of the periods presented (in thousands).
Statement of Operations Data:
Revenues
Cost of sales
Gross profit
BARDA income
Operating Expenses:
Sales and marketing expenses
General and administrative expenses
Research and development expenses
Total operating expenses
Operating loss
Interest expense
Other income
Loss before income taxes
Income tax benefit (expense)
Net loss
Year Ended June 30,
2021
2020
$
Change
%
Change
$
$
29,232 $
(5,949)
23,283
2,055
(14,660)
(22,400)
(14,818)
(51,878)
(26,540)
(22)
17
(26,545)
(38)
(26,583) $
14,263 $
(2,973)
11,290
3,926
(15,706)
(33,025)
(9,164)
(57,895)
(42,679)
(33)
686
(42,026)
(4)
(42,030) $
14,969
(2,976)
11,993
(1,871)
1,046
10,625
(5,654)
6,017
16,139
11
(669)
15,481
(34)
15,447
105%
100%
106%
(48)%
(7)%
(32)%
62%
(10)%
(38)%
(33)%
(98)%
(37)%
850%
(37)%
Year Ended June 30, 2021, compared to Year Ended June 30, 2020
Total net revenue increased 105% to $29.2 million, compared to $14.3 million in the corresponding period in the prior year. RECELL®
commercial revenues were $21.5 million, while RECELL revenues associated U.S. Department of Health and Human Services’ Biomedical Advanced
Research and Development Authority within the Office of the Assistant Secretary for Preparedness and Response (“BARDA”) were $7.7
million. Revenues associated with BARDA were attributable to the purchase of RECELL units for emergency preparedness by BARDA. RECELL
commercial revenues, increased 50% or $7.2 million.
Gross profit margin was 80% compared with 79% in the same period in the prior year, driven largely by lower shipping costs and increased
production along with the extension of our shelf-life.
BARDA income consisted of funding from BARDA, under the Assistant Secretary for Preparedness and Response, within the U.S. Department
of Health and Human Services, under ongoing USG Contract No. HHSO100201500028C. Under the BARDA contract, income of $2.1 million was
recognized during the year ended June 30, 2021, compared to income of $3.9 million for the year ended June 30, 2020. BARDA income declined as a
result of wind-down of certain activities associated with supporting the U.S. FDA approval of the RECEL System as well as the compassionate use,
continued access programs and pivotal trials for the treatment of pediatric scald injuries.
Total operating expenses decreased 10% or $6 million to $51.9 million, compared with $57.9 million incurred in the same period in the prior
year. Sales and marketing expenses decreased $1 million or 7% to $14.7 million, compared to $15.7 million recognized in the same period in the prior year.
The decrease in sales and marketing expenses is primarily due to fewer conferences, lower travel expenses due to COVID-19 related travel restrictions and
higher costs incurred in the prior year associated with the product launch. General and administrative expenses decreased 32% or $10.6 million to
$22.4 million compared with $33 million recognized in the same period in the prior year. The decrease was driven by higher share-based compensation
expenses in the prior year associated with certain performance milestones being met along with higher costs related to the Redomiciliation. Research and
development expenses increased 61% or $5.6 million to $14.8 million, compared to $9.2 million recognized in the same period in the prior year. The
increase was primarily attributed to ramping up of clinical trials related activities for treatment of vitiligo as well as other research and development costs
associated with furthering the Company’s pipeline.
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Net loss after tax decreased 37% or $15.4 million to $26.6 million, over the $42 million recognized in the same period in the prior year. The
decrease in net loss was driven by higher revenue during the year, and lower operating expenses described above.
The table below summarizes the results of our continuing operations for each of the periods presented (in thousands).
Statement of Operations Data:
Revenues
Cost of sales
Gross profit
BARDA income
Operating Expenses:
Sales and marketing expenses
General and administrative expenses
Research and development expenses
Total operating expenses
Operating loss
Interest expense
Other income
Loss before income taxes
Income tax benefit (expense)
Net loss
Year Ended June 30,
2020
2019
$
Change
%
Change
$
$
14,263 $
(2,973)
11,290
3,926
(15,706)
(33,025)
(9,164)
(57,895)
(42,679)
(33)
686
(42,026)
(4)
(42,030) $
5,474 $
(1,271)
4,203
5,921
(12,549)
(15,099)
(8,004)
(35,652)
(25,528)
(27)
332
(25,223)
121
(25,102) $
8,789
(1,702)
7,087
(1,995)
(3,157)
(17,926)
(1,160)
(22,243)
(17,151)
(6)
354
(16,803)
(125)
(16,928)
161%
134%
169%
(34)%
25%
119%
14%
62%
67%
22%
107%
67%
(103)%
67%
Year Ended June 30, 2020, compared to Year Ended June 30, 2019
Total net revenue increased 161% to $14.3 million, compared to $5.5 million. Similar to prior years, most of the current year increase in sales
occurred in the United States as a result of the September 2018 FDA approval and commencement of the U.S. national market launch of the RECELL
System in January 2019. U.S. sales during the year ended June 30, 2020, totaled $13.8 million compared to $4.4 million in the prior year.
Gross profit margin was 79% compared to 77% for the same period in 2019 driven largely by increased production.
BARDA income consisted of funding from BARDA, under the Assistant Secretary for Preparedness and Response, within the U.S. Department
of Health and Human Services, under ongoing USG Contract No. HHSO100201500028C. Under the BARDA contract, income of $3.9 million was
recognized during the year ended June 30, 2020, compared to income of $5.9 million for the year ended June 30, 2019. BARDA income declined as a
result of wind-down of certain activities associated with supporting the U.S. FDA approval of the RECEL System as well as the compassionate use and
continued access programs.
Total operating expenses increased 62% or $22.2 million to $57.9 million, compared to $35.7 million incurred in the same period in the prior
year. Sales and marketing expenses increased 25% or $3.2 million to $15.7 million, compared to $12.6 million recognized in the same period in the prior
year. This increase was primarily attributed to commercialization activities being provided for the entire fiscal year ended June 30, 2020, versus the prior
fiscal year where those activities were rendered for less than twelve months. General and administrative expenses increased 119% or $17.9 million to
$33 million compared to $15.1 million recognized in the same period in the prior year. The increase was primarily a result of higher share-based
compensation and higher costs related to the Redomiciliation together with additional headcount associated with the growth of the Company and the
Company’s status as a cross listed entity on NASDAQ and the ASX. Share-based compensation increased $14.6 million primarily due to the increase in the
grant date fair value of awards granted during the year due to higher stock prices and accelerated expense due to meeting of certain performance
milestones. Research and development expenses increased 14% or $1.2 million to $9.2 million compared to $8.0 million recognized during the same period
in the prior year
Net loss after tax increased 67% or $16.9 million to $42 million compared to $25.1 million in the same period in the prior year. The increase in
net loss was driven by the higher operating expenses described above, partially offset by the higher revenue during the year. As a result of the U.S. national
launch of the RECELL System in January 2019, and the expansion of research and development including multiple pivotal clinical studies seeking
premarket approval from the FDA, operating expenses are expected to increase in future periods. These expenses are expected to be partially offset by
increased commercial sales of the RECELL System as well as income under the BARDA contract.
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B. Liquidity and Capital Resources
We expect to utilize cash reserves until U.S. sales of our products reach a level sufficient to fund ongoing operations. The AVITA Group has
historically funded its research and development activities, and more recently its substantial investment in sales and marketing activities, through raising
capital by issuing securities, and it is expected that similar funding will be obtained to provide working capital if and when required. If the Company is
unable to raise capital in the future, the Company may need to curtail expenditures by scaling back certain research and development or other programs.
On March 1, 2021, the Company issued 3,214,250 shares of common stock at the offering price of $21.50 per share. The gross proceeds from the
offering are approximately $69.1 million. The Company incurred $5.1 million in capital issuance expenses. The offering was made pursuant to a shelf
registration statement on Form S-3 (File No. 333-249419) that was previously filed with the SEC on October 9, 2020 and declared effective on October 16,
2020 and that was also publicly released on the ASX. The final prospectus supplement relating to and describing the terms of the offering was filed with
the SEC on February 25, 2021 (in the United States) and released on the ASX on March 1, 2021 (in Australia).
During the year ended June 30, 2020, we raised additional capital via a private placement in the amount of $81.7 million (through our former
parent company, AVITA Medical). We sold the equivalent of 2,033,898 shares at an issue price of $40.17 per share for total net proceeds of $76.6 million,
after deducting commission and offering expenses.
During the year ended June 30, 2019, we completed a series of equity transactions (through our former parent company, AVITA Medical). The
second tranche of the June 2018 Placement (defined below) closed on July 27, 2018, raising an aggregate of $2.4 million through the issuance of the
equivalent of 650,000 shares in the Company at $3.70 per share. During December 2018, we completed a placement to raise $28.8 million over two
tranches. We completed the first tranche on December 10, 2018 and issued the equivalent of 3,100,471 shares in the Company at a price of $5.76 per share
raising gross proceeds of $17.9 million. The settlement of the second tranche for $10.9 million was approved by the shareholders at an extraordinary
meeting held during January 2019. The second tranche closed on January 18, 2019 and raised gross proceeds of $10.9 million through the sale of the
equivalent of 1,899,530 shares in the Company at the same price as the first tranche, being $5.76 per share. In addition, on January 10, 2019, we completed
a Share Purchase Plan under which we effectively offered existing eligible shareholders the opportunity to purchase shares in the Company at a purchase
price of $5.74 per share. As part of the Share Purchase Plan, we received gross proceeds of $1.3 million for the issuance of the equivalent of 220,612 shares
in the Company.
The AVITA Group also benefits from cash inflows from the BARDA contract, awarded to the AVITA Group in September 2015 and
subsequently expanded through a series of modifications. These payments from BARDA offset operating costs from various activities undertaken to
support the FDA regulatory approval process for RECELL in the United States, preparation for the planned commercial launch of RECELL in the United
States, and RECELL clinical programs in the United States. Further, there were no material expenditure commitments from the BARDA contract. With the
U.S. FDA approval of RECELL for the treatment of burns in September 2018, and the U.S. market launch of the product in January 2019, sales of goods
are expected to be an increasing source of revenue in the future. On July 13, 2020, the Company announced that BARDA will procure the RECELL
System and agreed to the purchase, storage and delivery of RECELL Systems utilizing a vendor-managed inventory (“VMI”) plan valued at $7.6 million.
Further, BARDA has expanded the awarded contract to provide supplemental funding of $1.6 million to support emergency deployment of RECELL
Systems for use in mass casualty or other emergency situations. Delivery of RECELL system under the VMI plan commenced in the third quarter of fiscal
year 2021 and as of year-end a total of 5,614 RECELL system units have been delivered into the VMI and accepted by BARDA. As of June 30, 2021, we
had received cumulative payments of $30.9 million under the BARDA contract. For the year ended June 30, 2021, we have recognized $7.6 million of
revenue related to the sale of the RECELL system to BARDA and $154,000 related to services provided to BARDA for emergency preparedness.
Given the above, we believe there is presently sufficient working capital to support our committed research and development programs and other
activities over the next twelve months and the Company believes it has the ability to realize its assets and pay its liabilities and commitments in the normal
course of business.
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The following table summarizes our cash flows for the periods presented:
(In Thousands)
Net cash used in operations
Net cash used in investing activities
Net cash provided by financing activities
Effect of foreign exchange rate on cash and restricted cash
Net increase in cash and restricted cash
Cash and restricted cash at beginning of year
Cash and restricted cash at end of year
$
Years Ended June 30,
2021
2020
2019
(25,901) $
(1,174)
64,049
133
37,107
73,840
110,947
(22,747) $
(847)
77,057
3
53,466
20,374
73,840
(19,250)
(1,227)
29,709
156
9,388
10,986
20,374
Years Ended June 30, 2021, and 2020
Net cash used in operating activities was $25.9 million and $22.7 million during the years ended June 30, 2021, and 2020, respectively. The
increase was primarily due to higher BARDA receivables attributable from the purchase of RECELL units by BARDA.
Net cash used in investing activities was $1.2 million and $0.8 million during the years ended June 30, 2021, and 2020, respectively. Cash flows
used for investing activities was primarily attributable to payments for the purchase of a property and equipment.
Net cash provided by financing activities was $64 million and $77.1 million for the years ended June 30, 2021, and 2020, respectively. The
AVITA Group completed a series of financing transactions during the year ended June 30, 2021, and 2020 and received proceeds from the issuance of
shares and exercise of options.
Capital management
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 the Company. We regularly review the
Company’s capital structure and seek to take advantage of available opportunities to improve outcomes for the Company and its stockholders.
For the year ended June 30, 2021, there were no dividends paid and we have no plans to commence the payment of dividends. We have no
committed plans to issue further shares on the market but will continue to assess market conditions and the Company’s cash flow requirements to ensure
the Company is appropriately funded in order to pursue its various opportunities.
There is no significant external borrowing at the reporting date. Neither the Company nor any of the subsidiaries are subject to externally
imposed capital requirement.
C. Research and Development, Patents and Licenses
In recent years, we have continued our practice of building valuable research collaborations with institutions based primarily in the United States
and other regions to enable us to develop a point-of-care solution for the potential treatment of a wide range of skin injuries or defects which may be
suitable for use with the RECELL System. These collaborative arrangements ensure that we work with well-respected key option leaders and laboratories
without incurring significant ongoing administrative and personnel costs. All clinical, research and development of RECELL System, including clinical
studies, is performed in compliance with the appropriate governing authorities, regulators, and standards. We maintain in-house general counsel and
research and development project expertise to coordinate these research collaborations.
Our research and development expenses consist primarily of expenses for contracted research and development activities conducted by major
contract research organizations on our behalf, including personnel, testing facilities and other payments in accordance with our research and clinical
agreements. Research and development expenses were $14.8 million, and $9.2 million, during the years ended June 30, 2021, and 2020, respectively.
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D. Trend Information
While our RECELL System has reached commercialization for specific applications in certain jurisdictions, the United States remains our
primary point of commercial and clinical focus. In addition, we are currently seeking to expand the breadth of clinical indications for which the RECELL
System is approved for use in the United States we have no plans to conduct clinical studies outside of the United States at this time. While we seek to
advance the commercial opportunities for the RECELL System, it is not possible for us to predict with any degree of accuracy the outcome of our business
in the future.
E. Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements (as defined in the rules and regulations of 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 that is material investors.
F. Contractual Obligations and Commitments
The Company does not have any contractual obligations or purchase commitments, except for lease obligations for the period ended June 30,
2021. For details of lease obligations refer to Note 4 in the consolidated financial statements.
G. Critical Accounting Policies and Estimates
The SEC defines “critical accounting policies” as those that require the application of management’s most difficult, subjective, or complex
judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain and may change in subsequent periods.
The preparation of consolidated financial statements in conformity with U.S. Generally Accepted Accounting Practices, or U.S. GAAP, requires
us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenues and expenses during the reporting period. We base those estimates on historical experience
and on various assumptions that are believed to be reasonable under the circumstances. Actual results could differ from those estimates.
The following listing is not intended to be a comprehensive list of all of our accounting policies. Our significant accounting policies are
described in Note 2 to our consolidated financial statements contained elsewhere in this Annual Report. In many cases, the accounting treatment of a
particular transaction is dictated by U.S. GAAP, with no need for our judgment in its application. There are also areas in which our judgment in selecting an
available alternative would not produce a materially different result. We have identified the following as our critical accounting policies.
Revenue Recognition
The Company adopted ASC Topic 606 – Revenue from Contracts with Customers, on July 1, 2018. Under Topic 606, the Company recognizes
revenue when its customers obtain control of promised goods or services, in an amount that reflects the consideration which the Company expects to be
entitled in exchange for those goods or services.
To determine revenue recognition for arrangements that are within the scope of Topic 606, the Company performs the following five steps:
1.
2.
3.
4.
5.
Identify the contract with a customer
Identify the performance obligations
Determine the transaction price
Allocate the transaction price to the performance obligations
Recognize revenue when/as performance obligation(s) are satisfied
In order for an arrangement to be considered a contract, it must be probable that the Company will collect the consideration to which it is entitled
for goods or services to be transferred. Once the contract is determined to be within the scope of ASC 606, the Company assesses the goods or services
promised with each contract, determines whether those are performance obligations and the related transaction price. The Company then recognizes the
sale of goods based on the transaction price that is allocated to the respective performance obligation when the performance obligation is satisfied.
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The Company’s revenue consists primarily of the sale of the RECELL System to hospitals or other treatment centers and to BARDA
(collectively, “customers”), predominately in the United States. The Company evaluated the BARDA contract and concluded that a portion of the
arrangement, such as the procurement of the RECELL system and the emergency preparedness, represents a transaction with a customer and as such are in
the scope of ASC 606. Amounts received from BARDA for the research and development of the Company’s product are classified as BARDA income in
the consolidated statement of operations and are accounted for under IAS 20. For further details refer to BARDA Income and Receivables below.
Revenues for commercial customers (hospitals and treatment centers) are recognized as control of the product is transferred to customers, at an
amount that reflects the consideration expected to be received in exchange for the product. Revenues are recognized net of volume discounts. As such,
revenue is recognized only to the extent a significant reversal of revenues is not expected to occur in subsequent periods. For the Company’s contracts that
have an original duration of one year or less, the Company used the practical expedient applicable to such contracts and does not consider the time value of
money. Further, because of the short duration of these contracts, the Company has not disclosed the transaction price for the remaining performance
obligations as of each reporting period or when the Company expects to recognize this revenue. The Company has further applied the practical expedient to
exclude sales tax in the transaction price and expense contract fulfilment costs such as commissions and shipping and handling expenses as incurred.
For revenues related to the BARDA contract with-in the scope of ASC 606, the Company identified two performance obligations (i) the
procurement of 5,614 RECELL units, (ii) emergency preparedness services. Through this contract the Company promises to procure the product through a
vendor management inventory arrangement and to stand ready to provide emergency deployment services related to the product. Emergency preparedness
services include procuring necessary storage containers, housing, and maintaining the containers (and product), and providing shipping and handling
services in the event of an emergency situation. This stand ready obligation is a series of distinct services that are substantially the same and have the same
pattern of transfer to the customer, overtime as services are consumed.
The total transaction price for the portion of the BARDA contract that is with-in the scope of ASC 606, was determined to be $9.2 million. The
transaction price was allocated on a stand-alone selling price basis as follows: $7.6 million to the procurement of the RECELL product, which is classified
as revenues when recognized in the consolidated statement of operations and $1.6 million to the emergency deployment services is be classified as
revenues when recognized in the consolidated statement of operations. The $1.6 million for emergency deployment includes variable consideration which
is deemed immaterial to the contract as a whole. The Company estimated the stand-alone selling price of the procurement of the RECELL product based
on historical pricing of the Company’s product at the initial execution of the contract. The Company estimated the stand-alone selling price of the
emergency deployment services performed based on the Company’s projected cost of providing the services plus an applicable profit margin as denoted in
the contract.
The Company’s performance obligations are either satisfied at a point in time or over time as services are provided. The product procurement
performance obligation is satisfied at a point in time, upon transfer of control of the product. As such, the related revenue for these performance obligations
is recognized at a point in time as revenue within the Company’s consolidated statement of operations. In addition to guidance under ASC 606, the
Company recognizes revenue from the sales of RECELL product to BARDA for placement into vaccine stockpiles in accordance with Securities and
Exchange Commission (SEC) Interpretation, Commission Guidance regarding Accounting for Sale of Vaccines and BioTerror Countermeasures to the
Federal Government for Placement into the Pediatric Vaccine Stockpile or the Strategic National Stockpile (SNS). Under this guidance, revenue is
recognized when product is placed in the BARDA vendor-managed inventory as control of the product has been transferred to the customer at the time of
delivery to the VMI. RECELL units that have been delivered to BARDA have a product replacement obligation at no cost to BARDA due to product’s
limited shelf-life. The estimated cost of the expired inventory over the term of the contract is accrued on a per unit basis at the time of delivery. The
liability is released upon replacement of the product along with a corresponding reduction to inventory. The emergency preparedness services performance
obligation is satisfied over time. Revenue for the emergency deployment will be recognized on a straight-line basis during the term of the contract as
services are consumed over time. Services recognized are included in sales within the consolidated statement of operations. Contract costs to fulfil the
performance obligation are incremental and expected to be recovered are capitalized and amortized on a straight-line basis over the term of the contract.
Contract costs are included in other long-term assets, respectively.
Contract Liabilities
The Company receives payments from customers based on contractual terms. Trade receivables are recorded when the right to consideration
becomes unconditional. The Company satisfies its performance obligation on product sales when the products are shipped or delivered, depending on the
terms of the sale. Payment terms on invoiced amounts are typically 30-90 days, and do not
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include a financing component. Contract liabilities are recorded when the Company receives payment prior to satisfying its obligation to transfer goods to
a customer.
See Note 12 to our Consolidated Financial Statements included in this Annual Report for additional detail on revenue recognition.
Government Grants / BARDA Income and Receivables
The AVITA Group was granted a BARDA contract in September 2015, wherein BARDA provided funding to the AVITA Group to support the
ongoing U.S. clinical regulatory program towards FDA premarket approval, Compassionate Use program, clinical and health economics research, and U.S.
pediatric burn programs.
Income under the BARDA contract is earned under a cost-plus-fixed-fee arrangement in which the Company is reimbursed for direct costs
incurred plus allowable indirect costs and a fixed-fee earned. Billings under the contracts are based on approved provisional indirect billing rates, which
permit recovery of fringe benefits, general and administrative expenses and a fixed fee.
The Company has concluded that grants are not within the scope of ASC 606, as they do not meet the definition of a contract with a “customer”.
The Company has further concluded that Subtopic 958-605, Not-for-Profit-Entities-Revenue Recognition also does not apply, as the Company is a business
entity, and the grants are with governmental agencies. Government grants and related receivables are recognized when there is reasonable assurance that
the grant will be received, and all attaching conditions will be complied with. When the grant relates to an expense item, it is recognized as income over the
periods necessary to match the grant on a systematic basis to the costs that it is intended to compensate. When the grant relates to an asset, the fair value is
credited to deferred income and is released to the profit or loss over the expected useful life of the relevant asset by equal annual installments.
Share-Based Compensation
The Company records compensation expense for share-based payments to employees, including grants of stock options, restricted stock units and
performance-based awards based on the fair market value of the awards on the date of grant. The fair value of share-based compensation awards is
amortized over the vesting period of the award. Compensation expense for performance-based awards is measured based on the number of shares
ultimately expected to vest, estimated at each reporting date based on management’s expectations regarding the relevant performance criteria.
The Company estimates the fair value of tenure-based share options using the Black-Scholes option pricing model on the date of grant. The
Company estimates the fair value of options with a performance condition using the Monte-Carlo simulation model. Restricted stock units are valued
based on the market price on the grant date.
The following assumptions were used in the valuation of stock options.
•
•
•
•
Expected volatility – determined using the average of the historical volatility using daily intervals over the expected term and the derived
volatility using the longest term available of 12 months.
Expected dividends - based on the fact that the Company has never paid cash dividends and does not expect to pay any cash dividends in the
foreseeable future.
Expected term – the expected term of the Company’s stock options for tenure only vesting has been determined utilizing the
“simplified” method as described in the SEC’s Staff Accounting Bulletin No. 107 relating to stock-based compensation.
The simplified method was chosen because the Company has limited historical option exercise experience due to its short operating history of
awards granted, the first plan was established in 2016 and was primarily used for Executives awards. Further, the Company does not have
sufficient history of exercises in the U.S. market given the recent redomiciliation to the United States in the prior fiscal year. The expected term
of options with a performance condition was set to the contractual term of 10 years. The contractual term was used options with performance
condition were awarded to C-Suite executives and the Company assumes that they will hold them longer than rank and file executives.
Risk-free interest rate – the risk-free interest rate is based on the U.S. Treasury yield in effect at the time of grant for a period approximately
equal to the expected term of the award.
See Note 13 to our Consolidated Financial Statements included in this Annual Report for additional detail on share-based compensation.
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Income Taxes
Income taxes are accounted for using the liability method. Deferred tax assets and liabilities are recognized for the future tax consequences
attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax
assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are
expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that
includes the enactment date. Deferred tax assets are reduced by a valuation allowance if it is more likely than not that a portion of the deferred tax asset will
not be realized.
The Company reviews its uncertain tax positions regularly. An uncertain tax position represents the Company’s expected treatment of a tax
position taken in a filed return or planned to be taken in a future tax return or claim that has not been reflected in measuring income tax expense for
financial reporting purposes. The Company recognizes the tax benefit from an uncertain tax position when it is more-likely-than-not that the position will
be sustained upon examination on the basis of the technical merits or the statute of limitations for the relevant taxing authority to examine and challenge the
tax position has expired.
See Note 14 to our Consolidated Financial Statements included in this Annual Report for additional detail on income taxes.
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Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
During the year ended June 30, 2021, we invested cash in money market funds, which are classified as cash equivalents and carried at fair value
in the accompanying consolidated balance sheet included in this Annual Report on Form 10-K. The fair value of our cash equivalents is subject to changes
in market interest rates. Our earnings and cash flows are subject to fluctuations due to changes in interest rates, principally in connection with our cash and
cash equivalents. We do not believe we are materially exposed to changes in interest rates related to our cash and cash equivalents, and we do not currently
use interest rate derivative instruments or hedging transactions to manage exposure to interest rate changes. We estimate that a 100 basis point, or 1%,
unfavorable change in interest rates would have a minimal impact to the fair value of our cash equivalents as of June 30, 2021.
We have evaluated the potential credit risk exposure for our accounts receivable in accordance with ASC 326, Financial Instruments - Credit
Losses. See note 2, for further discussion.
We primarily operate in the United States with minimal activity outside the U.S. We are primarily exposed to foreign exchange risk with respect
to recognized assets and liabilities due to vendors in countries outside the United States which are typically paid in Euro and Australian dollars. We do not
enter into hedging transactions and do not purchase derivative instruments.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Our financial statements and supplementary data are attached hereto beginning on Page F-1 and are incorporated by reference herein.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
Item 9A. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Disclosure controls and procedures are controls and other procedures of a company that are designed to ensure that information required to be
disclosed by the company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time
periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure
that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to
the company’s management, including its chief executive officer and chief financial officer, or persons performing similar functions, as appropriate to
allow timely decisions regarding required disclosure. As required by Rules 13a-15(b) and 15d-15(b) under the Exchange Act, our management, with the
participation of our chief executive officer and chief financial officer, conducted an evaluation of the effectiveness of our disclosure controls and
procedures as of June 30, 2021. Based on this evaluation, our chief executive officer and chief financial officer concluded that our disclosure controls and
procedures were effective as of June 30, 2021.
Management’s Annual Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting for our company, as this term
is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. As required by Rules 13a-15(e) and 15d-15(e) under the Exchange Act, our
management, with the participation of our chief executive officer and chief financial officer, conducted an evaluation of the effectiveness of our internal
control over financial reporting as of June 30, 2021, based on the criteria set forth in the Internal Control—Integrated Framework (2013) issued by the
Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, our management concluded that our internal control over
financial reporting was effective as of June 30, 2021.
This report does not include an attestation report of our independent registered public accounting firm regarding our internal control over
financial reporting, in accordance with applicable SEC rules that permit us to provide only management’s report in this report.
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Changes in Internal Control over Financial Reporting
During the year ended June 30, 2021, there were no material changes made in our internal control over financial reporting (as such term is
defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act).
Inherent Limitations on Disclosure Controls and Procedures
Management recognizes that any controls and procedures, no matter how well-designed and operated, can provide only reasonable assurance of
achieving their objectives, and management necessarily applies its judgment in evaluating the benefits of possible controls and procedures relative to their
costs. Because of these inherent limitations, our disclosure controls and procedures may not prevent or detect all instances of fraud, misstatements, or other
control issues. In addition, projections of any evaluation of the effectiveness of disclosure or internal controls to future periods are subject to risks,
including, among others, that controls may become inadequate because of changes in conditions or that the degree of compliance with policies or
procedures may deteriorate.
Item 9B. OTHER INFORMATION
None
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PART III
Item 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Directors and Executive Officers
The following table sets forth our directors and executive officers, their ages and the positions they held as of the date of this Annual Report. All of our
directors and executive officers may be contacted at our registered office located at 28159 Avenue Stanford, Suite 220, Valencia, CA 91355.
Name
Lou Panaccio
Jeremy Curnock Cook
Louis Drapeau
Professor Suzanne Crowe
James Corbett
Jan Stern Reed
Dr. Michael Perry
Michael Holder
Kathy McGee
Erin Liberto
Andrew Quick
Donna Shiroma
Position
Non-Executive Chairman
Non-Executive Director
Non-Executive Director
Non-Executive Director
Non-Executive Director
Non-Executive Director
Executive Director and Chief Executive Officer
Chief Financial Officer
Chief Operating Officer
Chief Commercial Officer
Chief Technology Officer
General Counsel
Age
64
71
77
69
63
61
61
59
56
47
50
58
Date First Elected or Appointed
July 2014
October 2012
January 2016
January 2016
July 2021
July 2021
June 2017
March 2021
December 2020
August 2017
April 2019
June 2018
Lou Panaccio has served as Non-Executive Chairman of the Board of Directors since July 2014. Mr. Panaccio is a successful healthcare businessman with
extensive experience leading companies from concept to commercialization. Mr. Panaccio possesses more than 30 years of executive leadership experience
in healthcare services and life sciences, including more than 20 years of board-level experience. Mr. Panaccio is currently a Non-Executive Director of
ASX50 company and one of the world’s largest medical diagnostics companies, Sonic Healthcare Limited, where he has served since 2005. In addition,
Mr. Panaccio is Non-Executive Director of Unison Housing Limited, was Non-Executive Chairman of Genera Biosystems Limited until June 2019, and a
Non-Executive Director of Rhythm Biosciences Limited, a publicly listed (ASX) development-stage medical diagnostics company.
We believe Mr. Panaccio is qualified to serve on our board of directors based on his extensive experience in the healthcare services and life sciences and his
experience serving on boards.
Jeremy Curnock Cook has served as a Non-Executive Director of the Board since October 2012. Mr. Curnock Cook is currently the Managing Director of
Bioscience Managers Pty Ltd, a formerly a shareholder of the Company, responsible for the BM Asia Pacific Healthcare Fund, and serves as Chairman of
International Bioscience Managers Ltd. He is the former head of the life science private equity team at Rothschild Asset Management and was responsible
for the launch of the first dedicated biotechnology fund for the Australian market and the conception and launch of the International Biotechnology Trust.
Mr. Curnock Cook serves as a Non-Executive Director of Adherium Ltd, a public (ASX) company with a digital health platform focused on improving
medication adherence and patient outcomes. From November 2005, he also serves as a Director for AmpliPhi Biosciences Corporation, Inc. (which merged
to Armata Pharmaceuticals, Inc. in May 2019), a public (NYSE) clinical-stage biotechnology company focused on the development of bacteriophage-based
therapies for the treatment of antibiotic-resistant bacterial infections. He also serves as a Director for Sea Dragon Limited, a public (NZX) company
processing fish oils into marine bioactive compounds. Mr. Curnock Cook previously served as a Non-Executive Director of Phylogica Limited, a public
(ASX) company developing next generation intracellular biological therapeutics.
We believe Mr. Curnock Cook is qualified to serve on our board of directors based on his extensive experience in the life sciences.
Louis Drapeau has served as Non-Executive Director of our board since January 2016. Mr. Drapeau has considerable expertise in both the biotech sector
and with the financial reporting and other requirements of U.S. public companies. From March 2011 until May 2019, Mr. Drapeau served as an
Independent Director at AmpliPhi Biosciences Corporation, Inc., a public (NYSE) clinical-stage biotechnology company focused on the development of
bacteriophage-based therapies for the treatment of antibiotic-resistant bacterial infections. Mr. Drapeau has held senior positions with Insite Vision Inc.,
Nektar Therapeutics and BioMarin Pharmaceutical, Inc., and served as an Audit Partner at Arthur Andersen LLP. Mr. Drapeau was previously an
Independent Director at Bio-Rad Laboratories, a public (NYSE) company manufacturing products for the life science research and clinical diagnostics
markets, and InterMune, Inc., a public (NASDAQ) commercial-stage biotech company. He has an MBA from Stanford University.
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We believe Mr. Drapeau is qualified to serve on our board of directors based on his experience with financial reporting and other requirements of U.S.
public companies, and considerable expertise in the biotech sector.
Professor Suzanne Crowe AO has served as a Non-Executive Director since January 2016. Australian-based, she is a physician-scientist and company
director with extensive expertise in supporting companies with their medical and scientific strategies. Professor Crowe is a Principal Research Fellow of
the Australian National Health and Medical Research Council. She is a Principal Specialist in Infectious Diseases at The Alfred Hospital, Melbourne and
Adjunct Professor of Medicine and Infectious Diseases at Monash University, Melbourne, and has published more than 200 peer-reviewed papers.
Professor Crowe is a member of the Australian Institute of Company Directors and is a Director of St Vincents Health Australia, the country’s largest not-
for-profit health and aged care provider. Professor Crowe was appointed as a Member of the Order of Australia (AM) in 2011 to recognize her service to
medical research in HIV/AIDS. She has medical and MD degrees from Monash University, an internal medicine specialist qualification in Infectious
Diseases from the Royal Australasian College of Physicians, and a Diploma in Medical Laboratory Technology from the Royal Melbourne Institute of
Technology.
We believe Professor Crowe is qualified to serve on our board of directors based on her technical experience and extensive expertise in supporting
companies with their medical and scientific strategies.
James Corbett has served as a Non-Executive Director of our board of directors since July 2021. He has approximately 40 years of leadership experience
in the medical device field, most recently, as CEO of CathWorks Ltd., a software-based medical technology company. Mr. Corbett has extensive global
commercial and operating experience, serving as an expatriate General Manager of Baxter Japan and later as General Manager and President of Scimed
Life Systems Inc. and Boston Scientific International respectively. During his career he has served as CEO of three publicly listed companies;
Microtherapeutics Inc (MTIX), ev3 Inc (evvv), Alphatec Spine (ATEC). Mr. Corbett has also led two privately funded companies as CEO; Home
Diagnostics Inc. and Vertos Medical. Mr. Corbett has extensive capital market and governance experience from both public and private environments. Mr.
Corbett holds a Bachelor of Science in Business Administration from the University of Kansas.
We believe Mr. Corbett is qualified to serve on our board of directors based on his global commercial and operating expertise in supporting companies with
their medical and scientific strategies.
Jan Stern Reed has served as a Non-Executive Director of our board of directors since July 2021. She has more than 35 years of legal, management and
business leadership experience primarily within the healthcare industry, and brings significant expertise in corporate governance, compliance and risk
management. Ms. Reed served as Senior Vice President, General Counsel and Corporate Secretary at Walgreens Boots Alliance, Inc., a global pharmacy-
led, health and wellbeing company. Prior to Walgreens, Ms. Reed was Executive Vice President, Human Resources, General Counsel and Corporate
Secretary of Solo Cup Company, where she was responsible for the legal, human resources, internal audit, corporate communications, and compliance
functions. Prior to Solo Cup Company, she was Associate General Counsel, Corporate Secretary and Chief Corporate Governance Officer at Baxter
International, Inc. Ms. Reed holds a Bachelor of Arts degree from the University of Michigan and a Juris Doctor from the Northwestern University Pritzker
School of Law. Ms. Reed currently serves as a board member of Stepan Co. (NYSE:SCL), a major manufacturer of specialty and intermediate chemicals
used in a broad range of industries, and AngioDynamics, Inc. (NASDAQ: ANGO), a leading provider of innovative, minimally invasive medical devices
for vascular access, peripheral vascular disease and oncology.
We believe Ms. Reed is qualified to serve on our board of directors based on her executive leadership experience in legal, corporate governance, risk
management, health care regulatory, compliance, manufacturing, and strategic business matters, as well as her extensive experience with acquisitions and
employee development.
Dr. Michael Perry was appointed Chief Executive Officer and Executive Director in June 2017. Prior to this appointment, Dr. Perry served as a Non-
Executive Director commencing in February 2013. From 2016 to 2017, he served as Senior Vice President and Chief Scientific Officer of Global Business
Development and Licensing for Novartis AG. From 2014 to 2016, Dr. Perry served as Chief Scientific Officer of Novartis’ Cell and Gene Therapy Unit,
and from 2012 to 2014 he served as Vice President and Global Head of Stem Cell Therapy for Novartis Pharmaceuticals Corp, a U.S. affiliate of
Switzerland-based Novartis AG. Dr. Perry previously served as the Global Head of R&D at Baxter Healthcare, President and CEO of Cell & Gene Therapy
at Novartis affiliates Systemix Inc. and Genetic Therapy, Inc., VP Regulatory Affairs at Sandoz Pharmaceuticals Corp., Director of Regulatory Affairs at
Schering-Plough Corporation, and Chairman, CEO or CMO at several early stage biotech companies. He also previously served as a Venture Partner with
Bay City Capital, LLC, a life science investment firm managing venture capital funds, based in San Francisco California. Dr. Perry serves as a Director of
Arrowhead Pharmaceuticals, a public (NASDAQ) development stage company focused on medicines that treat intractable diseases by silencing genes. He
is also a Director at BioScience Managers Pty Ltd.
We believe Dr. Perry is qualified to serve on our board of directors based on our review of his experience, qualifications, attributes and skills, including his
executive leadership experience in the healthcare and biotechnology industries.
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Michael Holder was appointed Chief Financial Officer in March 2021. Mr. Holder is a seasoned executive with more than 25 years of experience serving
in senior financial, executive management and board roles with leading companies in the medtech, biotech and pharma industries. Most recently, Mr.
Holder served as Chief Financial Officer of ImmuneCyte Inc., a global clinical stage biopharmaceutical company with innovative cell and gene immune-
oncology therapeutics. Prior to that, Mr. Holder served as CEO and Portfolio Manager of Carolina Longevity Institute, a global investment company
focused on medtech, biotech and pharma investments in the healthspan and human longevity sectors. Prior to that, Mr. Holder was CFO, and then
promoted to Chairman and CEO of Organ Transport Systems, Inc. a medical device company in the organ transplantation industry. Prior to that, Mr.
Holder was CFO and then promoted to Vice President of Sales, Operations and Finance of Premier Sourcing Partners, the information and medical
technology subsidiary of Premier Inc. Prior to that, Mr. Holder was CFO of BeaconEye Inc., a publicly traded medtech company; Vice President of
Heartland Capital Partners, the Sam Walton family controlled private equity fund; and Principal in the Corporate Development Group of AMR
Corporation, a former Fortune 500 transportation and information technology company.
Mr. Holder holds a Master of Business Administration from the Wharton School of Business at the University of Pennsylvania and a Bachelor of Science in
Business Administration from the Kenan-Flagler Business School at the University of North Carolina at Chapel Hill.
Kathy McGee was appointed Chief Operating Officer in December 2020. She brings more than 25 years of biopharmaceutical and life sciences
experience to AVITA Medical, most recently serving as President of CnA Consulting Group, which focuses on providing specialized consulting services to
the life sciences industry. Prior to CnA Consulting, Ms. McGee was the Vice President of West Coast Operations at Shire Pharmaceuticals Regenerative
Medicine Division, formerly Advanced BioHealing, where she was a part of the leadership team responsible for manufacturing operations, strategic
planning, capital expansion, and real estate. At Advanced BioHealing, Ms. McGee served as the Senior Vice President of Operations and General Manager,
with responsibility for the company’s manufacturing operations in La Jolla, CA. She has also held senior operations leadership roles at Smith and Nephew
and Advanced Tissue Sciences. She earned her Bachelor of Science in Chemistry and Mathematics from University College Galway Ireland, and holds a
Master’s degree in Business and Management from Webster University
Erin Liberto has served as Chief Commercial Officer since August 2017. Ms. Liberto has more than 20 years of multifaceted global commercial
experience developing, launching, managing, and optimizing healthcare portfolios with products that span therapeutic and aesthetic indications for
international organizations including Allergan and Johnson & Johnson. Ms. Liberto’s proficiency in long-term strategic planning has led to more than a
dozen successful product launches across the United States, Europe, and Asia Pacific. Ms. Liberto holds an International MBA with a concentration in
Global Marketing from Thunderbird School of Global Management in Arizona and a Bachelor of Commerce from McMaster University in Canada.
Andrew Quick was appointed Chief Technology Officer in April 2019 and previous to that served as Senior Vice President, Clinical Development
beginning July 2010. Mr. Quick has more than 25 years of experience in medical device design, development, clinical research and medical affairs.
Mr. Quick has previously held leadership positions in the development of diagnostic instrumentation and active implantable therapeutics, including most
recently with Boston Scientific Neuromodulation / Advanced Bionics from 2006 to 2010 where he led U.S. investigational device and post-market clinical
research in the cochlear implant business. He also served in a series of positions with SonaMed Corporation from 1994 to 2005, including Vice President,
Products and Clinical Affairs. Mr. Quick has B.S. and M.S. degrees in Biomedical Engineering from Boston University.
Donna Shiroma has served as General Counsel since June 2018. Ms. Shiroma has more than 20 years of legal and compliance experience in the
pharmaceutical and medical device industries and has played an instrumental role in transitioning companies from clinical to commercial entities. Prior to
joining the Company, she served in roles of increasing responsibility as corporate counsel, general counsel, vice president of legal, chief privacy and
compliance officer, and chief commercial officer for Astrex Pharmaceuticals from 2017 to 2018, Ascend Therapeutics from 2008 to 2017, PDL BioPharma
from 2006 to 2008, and several Johnson & Johnson companies. Ms. Shiroma holds a B.S. in Environmental Sciences from University of California,
Berkley, and a Juris Doctor degree from Santa Clara University School of Law. She is licensed in the State of California as an attorney.
Term of Office
Our directors are elected for a term of one year and until their respective successors are elected and qualified, or until their earlier resignation,
disqualification or removal. Our executive officers are appointed by our board of directors and hold office for such terms as may be prescribed by our board
of directors and until their successors are appointed, or until their earlier resignation or removal.
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Family Relationships
There are no family relationships between our directors or executive officers.
Involvement in Certain Legal Proceedings
None of our directors or executive officers has been involved in any of the following events during the past ten years:
a)
b)
c)
d)
e)
f)
any bankruptcy petition filed by or against any business or property of such person or any partnership or business in which such person was
a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time;
any conviction in a criminal proceeding or being a named subject of a pending criminal proceeding (excluding traffic violations and other
minor offences);
being the subject of any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent
jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his or her involvement in any type of business,
securities or banking activities;
being found by a court of competent jurisdiction (in a civil action), the SEC or the Commodity Futures Trading Commission to have
violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated;
being the subject of, or a party to, any federal or state judicial or administrative order, judgment, decree, or finding, not subsequently
reversed, suspended or vacated, relating to an alleged violation of: (i) any federal or state securities or commodities law or regulation; or
(ii) any law or regulation respecting financial institutions or insurance companies including, but not limited to, a temporary or permanent
injunction, order of disgorgement or restitution, civil money penalty or temporary or permanent cease- and-desist order, or removal or
prohibition order; or (iii) any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or
being the subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory
organization (as defined in Section 3(a)(26) of the Exchange Act), any registered entity (as defined in Section 1(a)(40) of the Commodity
Exchange Act), or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons
associated with a member.
Gender Diversity
Under the 4th Edition of the ASX’s Corporate Governance Principles and Recommendations the Company is required to set measurable
objectives for achieving gender diversity in the composition of its board, senior executives and workforce generally.
In the Company’s 2020 Form 10-K, the Company confirmed that it had set a target of having at least 30% of its directors being of each gender by
2024. As at the date of this Annual Report, the Company has almost achieved that target as the directors of the Company are 28.6% female and 71.4%
male.
The Company is also in the process of developing measurable objectives for achieving gender diversity in the composition of its senior
executives and workforce generally in accordance with its Code of Ethics and Business Conduct. The Company will disclose its measurable objectives, the
time period for achieving those objectives and the Company’s progress towards achieving those objectives in future reporting periods.
Performance Evaluations
The Company undertook an evaluation of the performance of the board of directors and the Company’s senior executive team during the fiscal
year ended June 30, 2021. An evaluation of the board of directors was completed on October 7, 2020 and an evaluation of the performance of the
Company’s senior executive team was completed during March 2021. The Company has not yet undertaken an evaluation of the performance of its
committees and individual directors in respect of the fiscal year ended June 30, 2021.
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Code of Ethics
We have adopted a Code of Conduct, or the Code, that constitutes a “code of ethics” as that term is defined in paragraph (b) of Item 406 of Regulation S-K
and that applies to our executive officers, management and employees of the Company. A copy of the Code is included as Exhibit 14.1 to this Annual
Report and is available on our website at www.avitamedical.com.
If we make any amendments to the Code or grant any waivers, including any implicit waiver, from a provision of the Code, we will disclose the
nature of such amendment or waiver on our website. The information on our website is not incorporated by reference into this Annual Report.
Section 16(a) Beneficial ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act requires the Company’s directors and certain of its executive officers and persons who beneficially
own more than 10% of the Company’s common shares to file reports of and changes in ownership with the SEC. Based solely on the Company’s review of
copies of SEC filings it has received or filed, the Company believes that each of its directors, executive officers, and beneficial owners of more than 10% of
the shares satisfied the Section 16(a) filing requirements during fiscal year ended June 30, 2021.
Election of Directors
Our board of directors consists of seven members. Directors are elected at our annual general meeting of stockholders, and hold office for a term
of one year and until their successors have been elected and qualified or until the earlier of their resignation or removal. Any newly created directorship or
any vacancy occurring on our board of directors may be filled only by a majority of the remaining members of our board, even if such majority is less than
a quorum, and each director so elected shall hold office until the expiration of the term of office of the director whom he or she has replaced or until his or
her successor is elected and qualified. Under ASX Listing Rule 14.4, any directors of the Company (except a managing director) must not hold office
without re-election past the third annual general meeting following the director’s appointment or three years, whichever is longer.
Committees of the Board of Directors
Our board of directors has established an audit committee, a compensation committee and a nomination and corporate governance committee,
each of which operates pursuant to a written charter adopted by our board of directors. Our board of directors may also establish other committees from
time to time to assist the board of directors. The composition and functioning of all of our committees comply with all applicable requirements of the
Sarbanes-Oxley Act, NASDAQ and SEC rules and regulations and the ASX Listing Rules and also align with the ASX Corporate Governance Council’s
4th Edition Corporate Governance Principles and Recommendations. Each committee has a charter, which is available on our website at
www.avitamedical.com. As of the date of this report, the composition of our audit, compensation and nomination and corporate governance committees
were as follows:
Director
Lou Panaccio
Jeremy Curnock Cook
Louis Drapeau
Professor Suzanne Crowe
James Corbett*
Jan Stern Reed*
Compensation
Committee
Member
Member
Chair
Audit
Committee
Member
Member
Chair
Nomination and
Corporate Governance
Committee
Member
Member
Chair
Independent
X
X
X
X
X
X
*Directors were appointed July 1, 2021 and were not part of any Committees during the fiscal year.
During the fiscal year ended June 30, 2021, the Board of Directors met a total of nine times (August 7, 2020, August 25, 2020, September 30,
2020, October 8, 2020, November 17, 2020, December 22. 2020, January 6, 2021, February 10, 2021, and May 11, 2021) and had full attendance of each
Board of Directors member (six Board of Directors members) at six of those meetings, as well as attendance by at least four Board of Directors members at
all nine meetings.
Audit Committee
NASDAQ Marketplace Rules require us to establish an audit committee comprised of at least three members, each of whom is financially literate
and satisfies the respective “independence” requirements of the SEC and NASDAQ and one of whom has accounting or related financial management
expertise at senior levels within a company. In addition, the ASX Listing Rules and the 4th
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Edition of the ASX’s Corporate Governance Principles and Recommendations require us to have an audit committee comprised of at least three members,
all of whom are non-executive directors and a majority of whom are “independent” directors and which is chaired by an independent director who is not the
chair of the board.
We have a separately-designated standing Audit Committee established in accordance with Section 3(a)(58)(A) of the Exchange Act. Our Audit
Committee assists our board of directors in overseeing the accounting and financial reporting processes of our company and audits of our financial
statements, including the integrity of our financial statements, compliance with legal and regulatory requirements, our registered public accounting firm’s
qualifications and independence, and registered public accounting firm, and such other duties as may be directed by our board of directors. The Audit
Committee is also required to assess risk management in conjunction with the board.
Our Audit Committee currently consists of three board members, each of whom satisfies the “independence” requirements of the SEC,
NASDAQ Marketplace Rules, the ASX Listing Rules and the 4th Edition of the ASX’s Corporate Governance Principles and Recommendations. Our Audit
Committee is currently composed of Louis Drapeau, Lou Panaccio, and Jeremy Curnock Cook (who joined the Audit Committee in April 2021) until a new
director is assigned to replace Jeremy Curnock Cook. Each qualifies as an “independent director” within the meaning of NASDAQ Marketplace Rules and
the 4th Edition of the ASX’s Corporate Governance Principles and Recommendations. Mr. Drapeau is the chairman of the audit committee (being an
independent director who is not the chair of the board). The Audit Committee meets at least two times per year. During the fiscal year ended June 30, 2021,
the Audit Committee met a total of four times (August 25, 2020, November 9, 2020, February 10, 2021, and May 10, 2021). For the February 10, 2021
Audit Committee meeting, the Audit Committee was only comprised of two members (due to there being a vacancy as a result of a prior director resigning
from their role as a director of the Company with effect from November 9, 2020 and prior to Mr. Curnock Cook joining the Audit Committee in April
2021). All other meetings had full Audit Committee members in attendance. In addition, all four meetings had the Chief Executive Officer in attendance.
Our board of directors has determined that Louis Drapeau is an “audit committee financial expert,” as defined in item 407(d)(5)(ii) of Regulations S-K.
Compensation Committee
Our board of directors has established a Compensation Committee, which is comprised of independent directors, within the meaning of
NASDAQ Marketplace Rules and also the 4th Edition of the ASX’s Corporate Governance Principles and Recommendations. The Compensation
Committee must be comprised solely of non-executive directors in accordance with the ASX Listing Rules and must also be chaired by an independent
director in accordance with the 4th Edition of the ASX’s Corporate Governance Principles and Recommendations. The Compensation Committee is
responsible for reviewing the salary, incentives and other benefits of our directors, senior executive officers and employees, and to make recommendations
on such matters for approval by our board of directors. The Compensation Committee is also responsible for overseeing and advising our board of directors
with regard to the adoption of policies that govern our compensation programs. Suzanne Crowe, Louis Drapeau, and Jeremy Curnock Cook are the current
members of the Compensation Committee and each qualifies as an “independent director” within the meaning of NASDAQ Marketplace Rules and the 4th
Edition of the ASX’s Corporate Governance Principles and Recommendations. Professor Crowe is the chairman of this committee (being an independent
director who is not the chair of the board). During the fiscal year ended June 30, 2021, the Compensation Committee met a total of five times (August 7,
2020, October 8, 2020, November 5, 2020, February 10, 2021, and May 6, 2021) and had full attendance of each Compensation Committee member (three
Compensation Committee members) at all five of those meetings.
Nomination and Corporate Governance Committee
Our board of directors has established a Nomination and Corporate Governance Committee. Under the 4th Edition of the ASX’s Corporate
Governance Principles and Recommendations, our Nomination and Corporate Governance Committee should have at least three members, a majority of
whom are independent director and should also be chaired by an independent director. Suzanne Crowe, Louis Drapeau, and Jeremy Cook are the current
members of the Nomination and Corporate Governance Committee and each qualifies as an “independent director” within the meaning of NASDAQ
Marketplace Rules and the 4th Edition of the ASX’s Corporate Governance Principles and Recommendations. Professor Crowe is the chairman of this
committee (being an independent director). The Nomination and Corporate Governance Committee is responsible for identifying individuals qualified to
become members of our board of directors, recommending nominees for election at the stockholders meetings or to fill vacancies that arise on our board of
directors, and recommending qualified and experienced directors to serve on the committees of our board of directors. In addition, the Nomination and
Corporate Governance Committee is responsible for leading the board of directors to complete a self-evaluation of the board, its committees, and the
individual directors. During the fiscal year ended June 30, 2021, the Nomination and Corporate Governance Committee met six times (August 7, 2020,
October 8, 2020, November 5, 2020, February 9, 2021, April 13, 2021, and May 6, 2021) and had full attendance of each Nomination and Corporate
Governance Committee member (three Nomination and Corporate Governance Committee members) at all six of those meetings.
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Item 11. EXECUTIVE COMPENSATION
The particulars of the compensation paid to our “named executive officers” of our company are set out in the summary compensation below. For the fiscal
year ended June 31, 2021, our “named executive officers” and their positions were as follows:
• Michael Perry, Chief Executive Officer
• Michael Holder, Chief Financial Officer
•
•
•
•
Kathy McGee, Chief Operating Officer
Erin Liberto, Chief Commercial Officer
Andrew Quick, Chief Technology Officer
Donna Shiroma, General Counsel
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Table of Contents
Name and
Position
Michael Perry
Chief Executive Officer
Michael Holder
Chief Financial Officer
Kathy McGee
Chief Operating Officer
Erin Liberto,
Chief Commercial Officer
Andrew Quick
Chief Technology Officer
Donna Shiroma
General Counsel
Sean Ekins
Former Interim Chief Principal Financial and Accounting
Officer
David McIntyre
Former Chief Financial Officer
Timothy Rooney, former
Chief Administrative Officer and Former Chief Financial
Officer
Dale Sander
Former Chief Financial Officer
(6)
(7)
(8)
(9)
SUMMARY COMPENSATION TABLE
Year Salary (1) Bonus (2) Awards (3) Awards (4) Compensation (5)
($)
($)
($)
($)
($)
Total
($)
Stock
Option
All Other
-
-
2021 497,087 414,960
-
2020 475,000 415,625 15,424,774
-
2019 475,000 365,750
594,425
- 1,966,472
-
2021 114,423
-
-
-
-
2020
-
2019
-
-
-
- 1,893,473
2021 199,646 35,350
-
-
-
-
2020
-
-
2019
-
-
—
-
2021 335,572 125,058
-
2020 310,539 114,548
—
350,162
-
2019 285,000 105,000
-
-
2021 329,648 117,936
-
97,231
2020 314,717
-
691,617
-
2019 288,750
85,000
-
-
2021 335,572 116,721
60,136
2020 313,064 103,022
-
570,754
83,000
2019 300,000
-
-
113,250
-
2021 102,340
-
2020
2019
-
2021 166,957
2020 242,079
-
2019
36,101
2021
-
-
-
25,062
-
-
1,804,073
-
-
-
-
-
-
-
-
3,702,477
-
-
2020 315,716 143,280
2019 316,000 105,000
-
-
2021
2020
-
-
2019 273,239 175,500
100,226
-
-
-
-
-
229,459
-
-
350,162
(10)
1,058,847
146,800
991,473 (11) 17,306,872
1,485,921
50,746
2,131,903
51,008 (12)
-
-
-
-
2,149,896
21,427
-
-
-
-
515,266
54,636
475,540
50,452
786,192
46,030
491,697
44,113
454,267
42,319
1,108,560
43,194
473,706
21,413
512,312
36,090
982,734
28,981
229,858
14,268
-
-
52,154
59,659 (13)
-
661,825
(14)
24,319
28,390
-
-
227,231 (15)
-
-
219,111
5,833,350
-
697,926
583,542
678,848
-
-
1,026,131
(1)
(2)
(3)
Amounts in this column represent dollar value of base salary (cash and non-cash) earned by the named executive officer during the fiscal year
covered.
Amounts in this column represent dollar value of bonus (cash and non-cash) earned by the named executive officer during the fiscal year covered.
Amounts in this column represent awards of restricted stock units with the aggregate grant date fair value computed in accordance with FASB ASC
Topic 718. The fair value determined at the date of grant in accordance with U.S. GAAP based on the closing price of our common stock on the
applicable grant date. The vesting of these stock awards are subject to various performance or related criteria, including continuation of employment
over the relevant vesting period.
Amounts in this column represent awards of stock options with the aggregate grant date fair value computed in accordance with FASB ASC Topic
718. Amounts in this column represent option awards issued to the individuals noted, based on the fair value determined at the date of grant in
accordance with U.S. GAAP. See Note 13- Share-Based Payment Plans to our Consolidated Financial Statements included in Part II, Item 8.
“Financial Statements and Supplementary Data” for the assumptions used in determining the grant date fair value of option awards. The vesting of
these option awards are subject to various performance or related criteria, including continuation of employment over the relevant vesting period.
Amounts in this column represent all other compensation for the covered fiscal year that the smaller reporting company could not properly report in
any other column of the Summary Compensation Table. This includes the 401-k Match, superannuation (pension) and health care benefits.
(6) Former Interim Chief Principal Financial and Accounting Officer from November 24, 2020 – March 22, 2021. Salary represents amounts earned
(4)
(5)
during this period.
(7) Mr. McIntyre resigned as Chief Financial Officer as of November 23, 2020.
(8) Mr. Rooney’s employment with the Company ended on July 31, 2020.
(9) Mr. Sander resigned as Chief Financial Officer as of May 15, 2019.
(10) Comprises (a) $114,408 in relation to the travel, flight and accommodation costs associated with the executive commuting from his home on
Colorado to our offices in Valencia, California (including an amount necessary to gross up these cost for income
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tax purposes under U.S. federal, California and Colorado State laws); (b) $26,217 associated with medical benefits (including an amount necessary
to gross up these cost for income tax purposes under U.S. federal, California and Colorado State laws), and (c) $6,175 associated with 401-k
matching contributions.
(11) Comprises (a) $204,682 in relation to the travel, flight and accommodation costs associated with the executive commuting from his home on
Colorado to our offices in Valencia, California (including an amount necessary to gross up these cost for income tax purposes under U.S. federal,
California and Colorado State laws); (b) $723,620 associated with profession legal, financial and tax advice associated with the conclusion of
various employment, financial and income tax issues in connection with the executive’s revised employment arrangement (including an amount
necessary to gross up these cost for income tax purposes under U.S. federal, California and Colorado State laws); and (c) $50,419 associated with
medical benefits (including an amount necessary to gross up these cost for income tax purposes under U.S. federal, California and Colorado State
laws), and (d) $12,752 associated with 401-k matching contributions.
(12) Comprises $47,923 of relocation expenses and $3,085 of 401(k) employer match contribution.
(13) Comprises (a) $35,945 in relation to the travel, flight and accommodation costs associated with the executive commuting from his home in New
Jersey to our offices in Valencia, California (including an amount necessary to gross up these costs for income tax purposes under relevant U.S.
federal, California and New Jersey income tax laws); $16,712 associated with health care benefits pursuant to the Company’s health care plan; and
(b) $9,001 associated with 401-k matching contributions.
(14) Includes severance payments of $661,825, as part of employment agreement.
(15)
Includes severance payments of $187,788, and health care benefits of $39,443 pursuant to the Company’s health care plan.
Employment Contracts
The following table outlines the specified terms of the relevant employment contracts for the Named Executive Officers of the Company and non-
Employee Directors of the Company:
Role
Name
Contract Duration
Period of Notice
Chief Executive Officer
Dr. Michael Perry
Open ended contract
(CEO)
Voluntary Termination: not
less than 30 days nor more than
90 days.
Termination for Good
Reason: Not to exceed 90 days
Termination payments
provided for by contract (1)
12 months
Chief Financial Officer
Chief Operating Officer
(COO)
Chief Commercial
Officer (CCO)
Chief Technology
Officer (CTO)
General Counsel (GC)
Non-Executive
Chairman
Michael Holder
Kathy McGee
Open ended contract
Open ended contract
3-month notice period 9 months
3-month notice period 9 months
Erin Liberto
Open ended contract
No notice period 6 months
Andrew Quick
Open ended contract
No notice period 6 months
Donna Shiroma
Lou Panaccio
Open ended contract
Open ended contract
No notice period 6 months
No notice period None
All other Non-Executive
Jeremy Curnock Cook
Open ended contract
No notice period
Directors
Louis Drapeau
James Corbett
Jan Stern Reed
Professor Suzanne Crowe
Open ended contract
Open ended contract
Open ended contract
Open ended contract
No notice period
No notice period
No notice period
No notice period
None
None
None
None
None
(1) Severance payments only in the event of employment termination for involuntary termination without cause or termination for good reason.
Good reason is defined as (i) a material diminution in executive’s authority, duties or responsibilities in effect at the time of this agreement; (ii)
any reduction in the executive’s then-current base salary, (iii) relocation of executive’s principal place of work by a distance of fifty miles or
more from the executive’s then current principal place of work without the executive’s consent; (iv) material breach by the company of any
provision of the executive’s employment agreement or (v) the occurrence of a change in control provided (i) through (iv) if such conduct is not
cured within thirty days of receipt of written notice by the executive.
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Compensation Principles
The Compensation Committee has a formal Compensation Governance Framework which, at the core, consists of a revised Compensation
Committee Charter (the “Charter”). The Charter outlines responsibilities and duties of the members, sets forth the frequency of meetings, establishes and
reviews the overall compensation philosophy of the Company as well as review and approve the executive compensation program for the Chief Executive
Officer and other executive officers, and make appropriate recommendations to the board of directors.
Compensation Committee
The Compensation Committee approves or makes recommendations to our Board of Directors on decisions concerning compensation of the
executive management team and board of directors on a periodic basis to ensure that it is consistent with our short-term and long-term goals. The
Compensation Committee assess the appropriateness of the nature and amount of compensation of our executives by reference to relevant employment
market conditions with the overall objective of ensuring maximum stakeholder benefit from the recruitment and retention of a high-quality board and
executive team.
Additionally, the Compensation Committee is responsible for evaluating the performance of the Company’s key senior executives. Our Chief
Executive Officer and other members of management regularly discuss our compensation issues with Compensation Committee members. Subject to
Compensation Committee review, modification and approval, our Chief Executive Officer typically makes recommendations respecting bonuses and equity
incentive awards for the other members of the executive management team. The Compensation Committee establishes all bonus and equity incentive
awards for all executive members of the management team.
Executive Compensation Philosophy
Our executive compensation philosophy reflects our fundamental objectives:
•
•
•
provide competitive rewards to attract, motivate and retain highly skilled directors and executives;
align our executive officers’ interests with those of our stockholders by rewarding short-term and long-term performance to increase stockholder
value; and
establish appropriate, demanding performance hurdles as a prerequisite to payment of variable executive compensation.
Executive Compensation Policies and Practices
We endeavor to maintain sound governance standards consistent with our executive compensation policies and practices. The following
summarizes our executive compensation and related policies and practices:
•
•
•
•
maintain an Independent Compensation Committee;
retain an Independent Compensation Advisor/Firm When Needed. For fiscal year ended June 30, 20201, the Company utilized a third party for
industry benchmarking information;
acceptability to stockholders through transparency and engagement, and ensuring that compensation frameworks and practices are appropriate to
the circumstances of the Company as it evolves; and
annual review and approval of our compensation strategy, including a review of our compensation peer group used for comparative purposes and
a review of our compensation-related risk profile to ensure that our compensation programs do not encourage excessive or inappropriate risk-
taking and that the level of risk that they do encourage is not reasonably likely to have a material adverse effect on us.
Specific Objectives for Fiscal Year Ending June 30, 2021
We believe that the compensation of our executive officers should be directly linked to the achievement of specific objectives that are expected
to increase stockholder value. In furtherance of this goal, the main focus of executives and of performance assessment was to increase U.S. revenue in
calendar year 2021 over 2020 revenues, complete enrollment in the vitiligo program, complete recruitment of soft tissue subjects required for interim
analysis, progress scientific research in our two partnerships in epidermolysis bullosa and rejuvenation/telomerase, expand our intellectual property
portfolio with patent submissions resulting from scientific research activities and/or in-house development along with entering into new business
development opportunities.
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Executive Compensation Objective
The Company aims to reward executives with a level and mix of compensation commensurate with their position and responsibilities within the
Company so as to:
•
•
•
reward executives for Company and individual performance against targets set by reference to appropriate benchmarks as well as to specific
short- and long-term goals of the Company;
align the interests of executives with those of stockholders; and
ensure total compensation is competitive by market standards.
Executive Compensation Framework
The Company’s broad framework for the Compensation Committee requires the Committee to ensure that
•
•
•
executive compensation packages may involve a balance between fixed and incentive pay, reflection short and/or long-term performance
objectives appropriate to the Company’s objectives;
executives’ compensation is structured in a manner designed to link reward to corporate performances but at the same time, linking those
corporate goals to strong individual performances but requires all executives to be aligned in working towards achieving the same goals; and
recommendations are made to our board with respect to the quantum of bonuses to be paid to executives.
To the extent that the Company adopts a different compensation structure for its Non-Executive Directors, the Compensation Committee shall document its
reasons for the purpose of disclosure to stakeholders.
Structure
The Compensation Committee determines the level and make-up of the Chief Executive Officer’s compensation. The Compensation Committee
reviews and approves the corporate goals and objectives relevant to the Chief Executive Officer’s compensation and evaluates the Chief Executive
Officer’s performance in light of those goals and objectives, on an annual basis. The Compensation Committee takes advice from the Chief Executive
Officer with input from industry benchmarking data to set and approve all other executive compensation. To assist in achieving the Company’s objectives,
the Compensation Committee links the nature and number of officers’ emoluments to the Company’s performance. Compensation may consist of the
following key elements:
•
•
•
•
Fixed Compensation
Variable Compensation
Short Term Incentive (“STI”) and/or
Long Term Incentive (“LTI”)
The proportion of fixed compensation and variable compensation (potential short term and long-term incentives) is established for each
executive by the Compensation Committee annually.
Fixed Compensation Objective and Structure
The level of fixed compensation is set to provide a base level of compensation which is both appropriate to the position and is competitive in the
market. Fixed Compensation is reviewed annually by the Compensation Committee and the process consists of a review of Company-wide and individual
performance and relevant comparative compensation in the market.
Variable Compensation –STI Objective and Structure
The objective of variable compensation is to link the achievement of the Company’s operational targets with the compensation received by the
executives charged with meeting those targets. The Company’s operational targets are set by the Compensation Committee and the targets are based upon
financial and non-financial measures. For fiscal year ended June 30, 2021, STI objectives consisted mainly of non-financial measures, primarily based
around commercialization of the RECELL System in the
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United States. The target range was between 25-75% of base salary for the named executive officers. The Company’s STI objectives are designed to:
• Motivate senior executives to achieve the short-term annual objectives linked to Company success and shareholder value creation;
•
•
•
Create a strong link between performance and reward;
Share company success with the senior executives that contribute to it; and
Create a component of the employment cost that is responsive to short to medium term changes in the circumstances of the Company.
All key objectives were assessed by the Compensation Committee as being fully met. All named executive officers achieved 100% of the maximum bonus
available to them under the STI plan and were paid in the current year.
Resignation, Retirement, Termination for Cause, or Resignation without Good Reason Arrangements
The Company does not have any agreements or plans in place for the named executive officers that would provide additional compensation in
connection with a resignation, retirement, termination for cause, or resignation without good reason.
Potential Payments upon Involuntary Termination, Resignation without Good Reason or Change-In-Control
The employment agreements provide for the following severance payments upon termination by us without cause or by the employee for good
reason: (i) payment of the employee’s then-current base salary for a period of six months (in the case of the CCO, CTO and GC), nine months (in the case
of COO and CFO) or twelve months (in the case of the CEO), following termination; (ii) a pro-rated target bonus for the period during which the employee
was employed in the year of termination; and (iii) continued coverage under our group health and benefits plan consistent with the term of the base salary;
and (iv) immediate acceleration of unvested stock options. Further, in the case of the Chief Executive Officer, if his employment terminates as a result of
disability or death, he or his representative will be entitled to receive: (i) a lump sum payment equal to 12 months of the employee’s then-current base
salary, (ii) any unpaid vacation, and (iii) any unpaid expense reimbursements due and owing. Payment in each case is subject to the employee’s execution
of a release.
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Outstanding Equity Awards at Fiscal Year End
The following table presents information regarding outstanding equity awards held by our named executive officers as of June 30, 2021.
Option awards
Stock awards
Number of
securities
underlying
unexercised
options (#)
exercisable
Number of
securities
underlying
unexercised
unearned
options (#)
Option exercise
price ($)
Number of
unearned shares,
units or other
rights have not
vested (#)
Market or payout
value of unearned
shares, units or
other rights have
not vested ($) (1)
Option expiration date
11/30/2028
150,000
— $
5.99
95,014 $
1,949,687
—
150,000
$19.91 - $22.25
— $
—
(2 )
3/22/31 - 5/11/31
(2 )
—
128,000 $
21.88
3/4/2031
77,900
42,900
$5.03 - $6.38
(2 )
9/6/2027 -11/30/2028
(2 )
82,993
37,806
$5.99 - $21.35
60,400
47,400
$4.38 - $6.38
(2 )
6/25/2028 - 11/30/2028
(2 )
(2 )
5/18/2027 - 4/1/2029
(2 )
— $
— $
— $
— $
—
—
—
—
Name
Michael Perry, Chief
Executive Officer (3)
Michael Holder, Chief
Financial Officer
Kathy McGee, Chief
Operating Officer
Erin Liberto, Chief
Commercial Officer
Andrew Quick, Chief
Technology Officer
Donna Shiroma, General
Counsel
(1)
(2)
(3)
Amounts in this column are calculated by multiplying the closing market price of the Company’s stock as of June 30, 2021 by the number of shares
or units of stock awards.
Represents range of exercise price and expiration dates as options were granted on different dates throughout their tenure.
On November 26, 2019 shareholders approved the equivalent of 395,543 long term incentives that vest over tenure and performance metrics
Compensation of Directors
Objective
Our board seeks to set aggregate compensation at a level which provides the Company with the ability to attract and retain directors of the
highest caliber, whilst incurring a cost which is acceptable to stockholders.
Policy
The amount of aggregate compensation sought to be approved by stockholders and the fee structure is to be commercially acceptable,
competitive and subject to an annual review. Our board considers industry benchmarking data regarding the fees paid to Non-Executive Directors of
comparable companies when undertaking the annual review process.
Structure
In accordance with best practice corporate governance, the structure of Non-Executive Director and Senior Management compensation is
separate and distinct. The Constitution of our former parent company AVITA Medical and the ASX Listing Rules specify that the aggregate compensation
of Non-Executive Directors shall be determined from time to time by a general meeting. The latest determination was at the Annual General Meeting held
on November 2020 when shareholders approved an aggregate compensation of $600,000 per year in respect of fees payable to Non-Executive
Directors. Each director receives a fee for being a director of the Company and includes attendance and participation at board and committee meetings.
The Non-Executive Directors do not participate in any incentive programs.
The following table sets forth certain information regarding the compensation earned by or awarded to each non-employee director who served
on our board during the fiscal year ended June 30, 2021. We do not provide separate compensation to our
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Table of Contents
executive directors, such as Dr. Michael Perry, our Chief Executive Officer. Dr. Perry’s compensation is reported in this Annual Report under “Item 11.
Executive Compensation.”
Short-term
Benefits
Salary, fees
and leave
$
Post-employment
Benefits
401K Match and
Superannuation
$
Equity-settled
Share-based
Payments
Shares/Units
$
$
(1)
(1)
$
90,191
71,074
79,146
36,259
68,220
-
-
344,890
$
$
8,568
-
-
-
6,481
-
-
15,049
$
$
-
-
-
-
-
-
-
-
$
$
Proportion of
Elements of
Compensation
Not Related to
Performance
%
100%
100%
100%
100%
100%
0%
0%
Total
$
98,759
71,074
79,146
36,259
74,701
-
-
359,939
Non-Executive Directors
L Panaccio - Chairman
J Curnock Cook
L Drapeau
D McDonald
S Crowe
J Corbett
J Reed
Total Non-Executive Directors
(1)
Board members appointed July 1, 2021.
Compensation Committee Interlocks and Insider Participation
During fiscal year ended June 30, 2021, Suzanne Crowe, Louis Drapeau, and Jeremy Curnock Cook served as members of our Compensation
Committee. None of the members of our Compensation Committee were an officer, former officer or employee of the Company during the period ended
June 30, 2021. None of the members of our Compensation Committee had any relationship requiring disclosure by us under any paragraph of Item 404 of
Regulation S-K. None of our executive officers currently serve, nor in the past fiscal year have served, as a member of the board of directors or
Compensation Committee of any entity that has one or more executive officers serving on our board of directors or Compensation Committee.
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Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER
MATTERS
Principal Stockholders and Management
The following table provides certain information regarding the ownership of our common stock (including our CDIs), as of July 31, 2021 by each person or
group of affiliated persons known to us to be the beneficial owner of more than 5% of our common stock (including our CDIs); each of our named
executive officers; each of our directors; and all of our executive officers and directors as a group. The table also sets out the names of all persons (of which
the Company is aware) who have disclosed pursuant to the Corporations Act 2001 (Cth) that they are “substantial shareholders” of the Company and carry
5% or more of the voting rights attached to the issued securities of the Company.
Title of Class
Common Stock
Common Stock
Common Stock
Common Stock
Common Stock
Common Stock
Common Stock
Common Stock
Common Stock
Common Stock
Common Stock
Common Stock
Common Stock
Name and Address of Beneficial Owner
More than 5% stockholders:
Redmile Group, LLC, One Letterman Drive, Bldg. D, Ste D3-300, San Francisco, CA 94129
Directors and named executive officers:
Lou Panaccio 28159 Avenue Stanford Suite 220 Valencia, CA 91355
Jeremy Curnock Cook 28159 Avenue Stanford Suite 220 Valencia, CA 91355
Louis Drapeau 28159 Avenue Stanford Suite 220 Valencia, CA 91355
Professor Suzanne Crowe 28159 Avenue Stanford Suite 220 Valencia, CA 91355
James Corbett 28159 Avenue Stanford Suite 220 Valencia, CA 91355
Jan Stern Reed 28159 Avenue Stanford Suite 220 Valencia, CA 91355
Dr. Michael Perry 28159 Avenue Stanford Suite 220 Valencia, CA 91355
Michael Holder 28159 Avenue Stanford Suite 220 Valencia, CA 91355
Kathy McGee 28159 Avenue Stanford Suite 220 Valencia, CA 91355
Erin Liberto 28159 Avenue Stanford Suite 220 Valencia, CA 91355
Andrew Quick 28159 Avenue Stanford Suite 220 Valencia, CA 91355
Donna Shiroma 28159 Avenue Stanford Suite 220 Valencia, CA 91355
All executive officers and directors as a group (12 persons)
Amount and
Nature of
Beneficial
Ownership (1)
Percentage
of Class (2)
1,668,327 (3)
6.70%
20,064 (4)
-
339 (5)
3,046 (6)
- (9)
- (9)
528,333 (7)
14,063 (8)
19,000 (8)
80,400 (8)
82,993 (8)
60,400 (8)
808,638
*
*
*
*
*
*
2.12%
*
*
*
*
*
3.25%
*
(1)
(2)
(3)
Represents beneficial ownership of less than 1% of the outstanding common stock.
Except as otherwise indicated, we believe that the beneficial owners of the common stock (and CDIs) listed above, based on information furnished
by such owners, have sole investment and voting power with respect to such shares, subject to community property laws where applicable.
Beneficial ownership is determined in accordance with the rules of the SEC and generally includes voting or investment power with respect to
securities.
Percentage of ownership is based on 24,895,864 shares of our common stock issued (including all common stock represented by CDIs) and
outstanding as of July 31, 2021. Common stock (or CDIs) subject to options or RSUs exercisable within 60 days of July 31, 2021 are deemed
outstanding for purposes of computing the percentage ownership of the person holding such option or RSUs, but are not deemed outstanding for
purposes of computing the percentage ownership of any other person.
Redmile Group, LLC’s beneficial ownership is comprised of 1,668,327 shares of common stock owned by certain private investment vehicles and/or
separately managed accounts managed by Redmile Group, LLC, which shares of common stock may be deemed beneficially owned by Redmile
Group, LLC as investment manager of such private investment vehicles and/or separately managed accounts. The reported securities may also be
deemed beneficially owned by Jeremy C. Green as the principal of Redmile Group, LLC. Redmile Group, LLC and Mr. Green each disclaim
beneficial ownership of these shares, except to the extent of its or his pecuniary interest in such shares, if any. Mr. Green serves as the managing
member of Redmile Group, LLC, and as such has a deemed relevant interest in the shares under section 608(3) of the Corporations Act 2001(Cth).
(4)
Reflects 100,320 CDIs, which represent 20,064 shares of common stock. Amount includes 29,860 CDIs which represent 5,972 shares of common
stock that are held by The Panaccio Superannuation Fund.
(5)
Reflects 1,695 CDIs which represent 339 shares of common stock.
(6)
Reflects 15,230 CDIs which represent 3,046 shares of common stock.
(7)
Includes 1,266,125 CDIs which represent 253,225 shares of common stock, which includes 631,523 CDIs (which represent 126,305 shares of
common stock) held by the spouse of Dr. Perry and 101,354 shares of common stock. In addition, the amount
56
Table of Contents
includes 150,00 stock options and 23,754 RSUs which give Dr. Perry the right to acquire 173,754 shares of common stock and are exercisable
within 60 days of July 31, 2021.
(8)
Amount represents stock options to acquire shares of common stock exercisable within 60 days of July 31, 2021.
(9)
Board members effective July 1, 2021.
Securities Authorized for Issuance under Equity Compensation Plans
The following table sets out equity compensation plan information as of June 30, 2021.
Plan Category
Equity compensation plans approved by security
holders
2016 Equity Incentive Plan
RSU Awards
2020 Equity Incentive Plan
Equity compensation plans not approved by
security holders
Total
Number of securities
to be issued upon
exercise of outstanding
options, warrants and
rights
Weighted-average
exercise price of
outstanding options,
warrants and rights
Number of securities
remaining available for
future issuance under
equity compensation plans
(excluding securities
reflected in the second
column)
(2)
1,058,295 $
95,014 $
440,200 $
—
1,593,509 $
11.72
—
21.37
—
13.62
— (1)
1,309,800
—
1,309,800
(1)
Upon closing of the Redomiciliation, the 2016 Plans were terminated with respect to future grants and accordingly, there are no more shares
available to be issued under the 2016 Plans.
(2)
The 2016 Plans were previously approved and adopted by the shareholders of AVITA Medical, the former parent company.
Australian Disclosure Requirements
In addition to the Company’s primary listing on the NASDAQ Global Market, the Company’s shares of common stock are also quoted in the
form of CDIs on the ASX and trade under the ticker symbol “AVH”. As part of our ASX listing, we are required to comply with the various disclosure
requirements as set out under the ASX Listing Rules. The following information is intended to comply with the ASX Listing Rules (where that information
has not been provided elsewhere in this Annual Report).
Jurisdiction of incorporation and restrictions on the acquisition of securities
The Company is incorporated in the State of Delaware in the United States of America. As a foreign company registered in Australia, the
Company is not subject to Chapters 6, 6A, 6B and 6C of the Corporations Act 2001 (Cth) dealing with the acquisition of its shares (including substantial
holdings and takeovers).
Under the Delaware General Corporation Law, the Company’s shares are generally freely transferable, subject to restrictions imposed by United
States federal or state securities laws, by the Company’s certificate of incorporation or by-laws or by an agreement signed with the holders of shares on
issue. The Company’s certificate of incorporation and by-laws do not impose any specific restrictions on the transfer of its shares. Repurchases of the
Company’s securities are governed by the safe harbor provisions set forth in Rule 10b-18 of the Securities Exchange Act of 1934. However, provisions of
the Delaware General Corporation Law, the Company’s certificate of incorporation and the Company’s by-laws could make it more difficult to acquire the
Company by means of a tender offer (takeover), a proxy contest or otherwise, or to remove incumbent officers and directors of the Company. These
provisions could discourage certain types of coercive takeover practices and takeover bids that the Company’s board may consider inadequate and
encourage persons seeking to acquire control of the Company to first negotiate with the board.
Australian Corporate Governance Statement
The board of directors and employees of the Company are committed to developing, promoting and maintaining a strong culture of good
corporate governance and ethical conduct. The board of directors confirm that the Company’s corporate governance framework is generally consistent with
the ASX’s Corporate Governance Council’s “Corporate Governance Principles and Recommendations” (4th Edition) (“ASX Governance
Recommendations”). The Company’s Corporate Governance Statement is
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available for viewing at https://ir.avitamedical.com/corporate-governance. The Corporate Governance Statement sets out the ASX Governance
Recommendations and the Company’s response as to how and whether it follows those recommendations. Where the Company’s practices depart from a
recommendation, the board of directors have disclosed in the Corporate Governance Statement the departure along with reasons for the adoption of its own
practices. The Company’s most recent Corporate Governance Statement, dated August 26, 2021 and approved by the board of directors remains accurate as
of the date of this annual report on Form 10-K.
Issued capital
As of July 31, 2021, the Company’s issued share capital was as follows:
•
24,895,864 shares of common stock, of which:
•
•
11,053,273 shares of common stock were held by 92 stockholders and quoted on NASDAQ; and
13,842,591 shares of common stock were held by CHESS Depositary Nominees Pty Limited (“Authorised Nominee”) (on behalf of
26,390 CDI holders) representing 69,212,955 CDIs quoted on ASX.
As of July 31, 2021, the following unquoted securities are on issue, which entitle the holders of those securities, upon vesting of their conversion rights, to
be issued shares of common stock of the Company:
•
the equivalent of 1,618,570 unquoted options held amongst 113 option holders. Specifically:
•
•
the equivalent of 150,000 options are on issue to Dr Michael Perry, CEO;
the equivalent of 1,468,570 options were granted (and are on issue) to 112 employees of the AVITA Group under the 2016 and 2020 stock
option incentive plans; and
•
the equivalent of 187,514 unquoted restricted stock units (“RSUs”) held as follows:
the equivalent of 95,014 RSUs held by Dr Michael Perry, CEO; and
the equivalent of 92,500 RSUs held by 15 executives under Avita Medical’s Employee Incentive Option Plan.
•
•
Voting Rights
The Company’s by-laws provide that each stockholder has one vote for every share of common stock entitled to vote held of record by such
stockholder. If holders of CDIs wish to attend and vote at the Company’s general meetings, they will be able to do so. Under the ASX Listing Rules and
ASX Settlement Operating Rules, the Company must allow CDI holders to attend any meeting of the holders of the underlying securities, unless relevant
United States laws at the time of the meeting prevent CDI holders from attending those meetings.
In order to vote at such meetings, CDI holders have the following options:
•
•
instruct the Authorised Nominee (as the legal owner of the shares of common stock) to vote the common stock represented by their CDIs in a
particular manner. A voting instruction form will be sent to CDI holders with the notice of meeting or proxy statement for the meeting and that
instruction form must be completed and returned to the Company’s registry prior to the record date fixed for the relevant meeting (“CDI Voting
Instruction Receipt Time”), which is notified to the CDI holder in the voting instructions included in the notice of meeting; or
inform the Company that they wish to nominate themselves or a third party to be appointed as the Authorised Nominee’s proxy with respect to their
common stock underlying their CDIs for the purposes of attending and voting at the meeting. The instruction form must be completed and returned
to the Company’s registry prior to the CDI Voting Instruction Receipt Time.
Alternatively, a CDI holder can convert their CDIs into a holding of common stock and vote those shares of common stock at a meeting of stockholders.
Such a conversion must be undertaken prior to the record date fixed by the Company’s board of directors for determining the entitlement of stockholders to
attend and vote at the meeting. However, if the former CDI holder later wishes to sell their investment on the ASX, it would be necessary to convert those
shares of common stock back to CDIs.
As CDI holders will not appear on the Company’s register as the legal holders of the underlying common stock, they will not be entitled to vote at a
stockholder meeting unless one of the above steps is undertaken. As each CDI represents 1/5 of a share of common stock, if the CDI holder takes one of the
steps noted above to allow it to vote at a stockholder meeting, the CDI holder will be entitled to one vote for every five CDIs it holds.
Holders of options, warrants and RSUs are not entitled to vote.
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Substantial Shareholders
The information required in relation to the substantial shareholders of the Company is included in this Annual Report at Item 12 of Part III.
Distribution of Common Stock and CDI Holders at July 31, 2021
Below is a distribution schedule of the number of holders of CDIs, categorized by the size of their holdings, based on the Company’s registers as at July 31,
2021 (assuming all issued shares of common stock are held as CDIs).
1 - 1000
1,001 - 5,000
5,001 - 10,000
10,001 - 100,000
100,001 - and over
Number of Holders
Number of CDIs
CDIs
18,715
6,020
966
684
88
26,473
6,582,309
14,063,894
7,194,726
16,845,078
79,793,313
124,479,320
The number of stockholders and/or CDI holders holding less than a marketable parcel of shares of common stock and/or CDIs (where a “marketable
parcel” means a parcel of securities worth at least A$500, pursuant to the ASX Operating Rules) was 3,447 based on the closing market price of the
Company’s common stock and CDIs as of July 31, 2021.
There is no current on-market buy-back of our securities.
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Twenty Largest CDI Holders as of July 31, 2021
Below is a statement of the 20 largest holders of CDIs, and the number and percentage of issued CDIs held by those holders, based on the Company’s
registers as July 31, 2021 (assuming all shares of common stock of the Company are held as CDIs, with 5 CDIs representing a beneficial ownership interest
in one share of common stock in the Company).
Rank
Name
Number of
CDIs Held (1)
% of CDIs
Outstanding
1 Redmile Group, LLC
2 The Vanguard Group, Inc.
3 Montgomery Investment Management Pty Ltd
4 Pura Vida Investments, LLC
5 Farallon Capital Management, L.L.C.
6 Blackcrane Capital, LLC
7 SEI Investments Management Corporation
8 State Street Global Advisors (US)
9 Michael Perry
10 Norges Bank Investment Management (NBIM)
11 UBS Securities Australia Ltd.
12 RTW Investments L.P.
13 BlackRock Institutional Trust Company, N.A.
14 Millennium Management LLC
15 Lockheed Martin Investment Management Co.
16 Geode Capital Management, L.L.C.
17 Old Mission Capital LLC
18 BlackRock Investment Management (Australia) Ltd.
19 Driehaus Capital Management, LLC
20 Susquehanna International Group, LLP
8,341,635
6,132,985
5,575,665
4,083,120
4,000,000
3,002,460
2,852,265
2,252,995
1,772,895 (2)
1,683,705
1,512,375
1,400,000
1,383,115
1,342,905
1,118,030
982,860
718,210
659,380
650,000
601,105
6.70%
4.93%
4.48%
3.28%
3.21%
2.41%
2.29%
1.81%
1.42%
1.35%
1.21%
1.12%
1.11%
1.08%
0.90%
0.79%
0.58%
0.53%
0.52%
0.48%
(1)
(2)
Including shares of common stock represented as though they are held as CDIs (with 5 CDIs representing a beneficial ownership interest in one
share of common stock in the Company).
Includes 631,525 CDIs held by the spouse of Dr. Perry.
General Information
The name of our Secretary is Donna Shiroma.
The Company’s ASX liaison officer who is responsible for communications with the ASX is Mark Licciardo.
The complete mailing address, including zip code, of our principal executive office is 28159 Avenue Stanford, Suite 220, Valencia, CA 91355, USA. The
telephone number is +1(661) 367-9170.
The address of our registered office in Australia is c/- Mertons Corporate Services Pty Ltd, Level 7, 330 Collins Street, Melbourne VIC 3000, Australia and
our telephone number there is +61 3 8689 9997.
Registers of securities are held as follows:
•
•
for CDIs in Australia at Computershare Investor Services Pty Limited, Level 2, 45 St Georges Terrace, Perth WA 6000 Australia, Investor
Enquiries +61 8 9323 2000 (within Australia) +61 3 9415 4677 (outside Australia); and
for common stock in the United States at Computershare Investor Services, 250 Royall Street, Canton, MA 02021 USA, Tel: 866-644-4127.
Application of funds
The Company advises that it has used the cash and assets in a form readily convertible to cash that it had at the time of the Company’s admission to the
Official List of ASX in a way that is consistent with its business objectives.
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Directors’ Declaration
As at the date of this annual report, the directors confirm that they are of the opinion that there are reasonable grounds to believe that the members of the
“extended closed group” identified in Note 17, being the Company and the Australian Subsidiaries that are party to the deed of cross guarantee that is
detailed in Note 17, will be able to meet any liabilities to which they are, or may become, subject, by virtue of the deed of cross guarantee.
Item 13. CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS, AND DIRECTOR INDEPENDENCE
Transactions with Related Persons
The Board is committed to upholding the highest legal and ethical conduct in fulfilling its responsibilities and recognizes that related-party
transactions can present a heightened risk of potential or actual conflicts of interest. Accordingly, and as a general matter, it is the Company’s preference to
avoid related-party transactions.
Our Audit Committee has primary responsibility for reviewing and approving in advance, or ratifying, all related-party transactions. In
conformance with SEC regulations, we define related persons to include our executive officers, our directors and nominees to become a director of our
company, any person who is known to us to be a beneficial owner of more than 5% of any class of our voting securities, any immediate family member of
any of the foregoing persons, and any firm, corporation or other entity in which any of the foregoing persons is employed, is a general partner or in which
such a person has a 5% or greater beneficial ownership interest.
We have several processes that we use to ensure that we identify and review all related-party transactions. Firstly, each executive officer is
required to notify either our General Counsel of Chief Financial Officer of any potential transaction that could create a conflict of interest, and the General
Counsel or Chief Financial Officer is required to notify the Audit Committee of the potential conflict. The directors, Chief Executive Officer, Chief
Financial Officer and General Counsel are required to notify the Audit Committee of any potential transaction that could create a conflict of interest.
Secondly, each year, we require our directors and executive officers to complete directors’ and officers’ questionnaires identifying any transactions with us
in which the executive officer or director or their family members have an interest. The Audit Committee reviews related party transactions due to the
potential for such transactions to create a conflict of interest. A conflict of interest occurs when an individual’s private interest interferes, or appears to
interfere, with our interests. Our Board or its committees only approve a related party transaction if it is determined that the transaction is in the best
interests of shareholders or is at least not inconsistent with those interests.
There were no such reportable relationships or related party transactions during the fiscal year ended June 30, 2021.
Director Independence
Our board of directors has determined that all members of our board of directors, except Dr. Michael Perry, are independent directors for
purposes of the rules of NASDAQ and the SEC and for the purposes of the ASX Listing Rules and the ASX Corporate Governance Council’s 4th Edition
Corporate Governance Principles and Recommendations. In making this determination, our board of directors considered the relationships that each non-
executive director has with us and all other facts and circumstances that our board of directors deemed relevant, including the beneficial ownership of our
common stock by each non-executive director and Mr. Perry’s executive role within the Avita Group.
The composition and functioning of our board of directors and each of our committees complies with all applicable requirements of NASDAQ
and the rules and regulations of the SEC as well as the ASX Listing Rules and the ASX Corporate Governance Council’s 4th Edition Corporate Governance
Principles and Recommendations.
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Item 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
Principal Accounting Fees and Services
Grant Thornton LLP, the U.S. member of Grant Thornton International Ltd, independent registered public accountants have served as our
independent public accountant for the period ended June 30, 2021 and 2020. Grant Thornton Audit Pty Ltd, a subsidiary of Grant Thornton Australia Ltd,
independent registered public accountants served as our independent public accountant prior to the redomiciliation. The following table sets forth fees
billed or accrued by our independent registered public accountants during the fiscal years ended June 30, 2021, and 2020:
Audit fees - Grant Thornton LLP (1)
Audit fees - Grant Thornton Audit Pty Ltd (1)
Tax fees - Grant Thornton LLP (2)
Tax fees - Grant Thornton Audit Pty Ltd (2)
Total fees
Year Ended June 30,
2021
1,038,645 $
25,845
126,929
—
1,191,419 $
2020
265,423
212,147
90,737
20,815
589,122
$
$
(1)
(2)
Audit fees consist of fees billed for the professional services rendered by the principal accountant for the audit of the registrant’s annual financial
statements and review of financial statements included in the registrant’s Form 10-Q or services that are normally provided by the accountant in
connection with statutory and regulatory filings or engagements.
Tax fees include the aggregate fees billed in each of the last two fiscal years for professional services rendered by the principal accountant for tax
compliance, tax advice, and tax planning.
Pre-Approval Policies and Procedures
The Audit Committee’s policy is for the Audit Committee to approve all audit and non-audit services prior to such services being performed by
the independent registered public accounting firm. Before engaging an independent registered public accountant firm to render audit or non-audit services,
the engagement is approved by our audit committee or the engagement to render services is entered into pursuant to pre-approval policies and procedures
established by the audit committee.
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PART IV
Item 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
(a)
The following documents are filed as part of this Annual Report:
(1)
All Financial Statements
See Index to Financial Statements in Part II, Item 8 of this Annual Report.
(2)
Financial Statement Schedules
all financial statement schedules have been omitted since the required information was not applicable or was not present in amounts
sufficient to require submission of the schedules, or because the information required is included in the financial statements or the
accompanying notes.
(3)
Exhibits
The exhibits listed in the following Index to Exhibits are filed, furnished or incorporated by reference as part of this Annual Report
Exhibit
Number
Exhibit
Description
EXHIBITS
2.1
Scheme Implementation Agreement (incorporated by reference to Exhibit 99.2 of Form 6-K of Avita Medical Limited dated April 20,
2020)
3.1
3.2
3.3
4.1
10.1
10.2
10.3
Certificate of Incorporation (incorporated by reference to Exhibit 3.1 to the registrant’s Form 8-K12B filed on June 30, 2020)
Certificate of Amendment of Certificate of Incorporation**
Amended and Restated Bylaws
Description of Capital Stock (incorporated by reference to the registrant’s Form 8-K12B filed on June 30, 2020)
Employee Incentive Option Plan (incorporated by reference to Exhibit 4.1 of the Form 20-F of Avita Medical Limited filed September 27,
2019)†
Employee Share Plan (incorporated by reference to Exhibit 4.2 of the Form 20-F of Avita Medical Limited filed September 27, 2019)†
Award Contract dated September 29, 2015 by and between the registrant and the U.S. Department of Health and Human Services
Biomedical Advanced Research and Development Authority (BARDA) (incorporated by reference to Exhibit 4.3 of the Form 20-F of Avita
Medical Limited filed September 27, 2019)*
10.4
Award Contract dated September 29, 2015 by and between the registrant and BARDA (incorporated by reference to Exhibit 4.4 of the Form
20-F of Avita Medical Limited filed September 27, 2019) *
10.5
Amendment of Solicitation/Modification of Contract dated June 24, 2016 by and between the registrant and BARDA (incorporated by
reference to Exhibit 4.5 of the Form 20-F of Avita Medical Limited filed September 27, 2019) *
10.6
Amendment of Solicitation/Modification of Contract dated September 28, 2017 by and between the registrant and BARDA (incorporated
by reference to Exhibit 4.6 of the Form 20-F of Avita Medical Limited filed September 27, 2019) *
10.7
Amendment of Solicitation/Modification of Contract dated July 2, 2018 by and between the registrant and BARDA (incorporated by
reference to Exhibit 4.7 of the Form 20-F of Avita Medical Limited filed September 27, 2019) *
10.8
Lease Agreement between the registrant and Hartco Ventura Inc. dated January 25, 2018 (incorporated by reference to Exhibit 4.8 of the
Form 20-F of Avita Medical Limited filed September 27, 2019)
10.9
Lease Agreement between the registrant and RIF-Avenue Stanford LLC, dated October 3, 2016, as amended (incorporated by reference to
Exhibit 4.9 of the Form 20-F of Avita Medical Limited filed September 27, 2019)
63
Table of Contents
Exhibit
Number
Exhibit
Description
10.10
Third Amendment to the Lease Agreement between the registrant and RIF III-Avenue Stanford LLC, dated November 17, 2020, as
10.11
10.12
10.13
10.14
10.15
10.16
10.17
10.18
14.1
21.1
23.1
31.1
31.2
32.1
amended) **
Executive Employment Agreement between the registrant and Dr. Michael Perry, dated November 12, 2019.**
RSUs – Confirmatory Deed between the registrant and Dr. Michael Perry, dated November 12, 2019. **
Option Confirmatory Deed between the registrant and Dr. Michael Perry, dated November 12, 2019. **
Executive Employment Agreement between the registrant and Michael Holder, dated effective March 22, 2021. **
Executive Employment Agreement between the registrant and Kathy McGee, dated effective December 1, 2020. **
Executive Employment Agreement between the registrant and Erin Liberto, dated effective August 28, 2017. **
Executive Employment Agreement between the registrant and Andrew Quick, dated effective April 1, 2019. **
Executive Employment Agreement between the registrant and Donna Shiroma, dated effective June 25, 2018.**
Code of Ethics **
Subsidiaries of the Registrant **
Consent of Independent Registered Public Accounting Firm**
Certification of CEO pursuant to Section 302 of The Sarbanes-Oxley Act of 2002 **
Certification of CFO pursuant to Section 302 of The Sarbanes-Oxley Act of 2002 **
Certification of CEO and CFO pursuant to Section 906 of The Sarbanes-Oxley Act of 2002**
101.INS
Inline XBRL Instance Document.
101.SCH Inline XBRL Taxonomy Extension Schema Document.
101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF
Inline XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document.
101.PRE
Inline XBRL Taxonomy Extension Presentation Linkbase Document.
104
Cover Page Interactive Data File (embedded within the Inline XBRL document)
†
*
**
Management contract or compensation plan or arrangement.
Certain identified confidential information has been redacted from this exhibit because it is both (i) not material and (ii) would be competitively
harmful if publicly disclosed.
Filed herewith
Item 16. Form 10-K Summary
None
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
Date: August 26, 2021
Date: August 26, 2021
AVITA Medical, Inc.
(Registrant)
/s/ Dr. Michael Perry
Dr. Michael Perry
Chief Executive Officer (Principal Executive Officer)
/s/ Michael Holder
Michael Holder
Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant
and in the capacities and on the dates indicated.
Name
/s/ Dr. Michael Perry
Dr. Michael Perry
/s/ Michael Holder
Michael Holder
/s/ Lou Panaccio
Lou Panaccio
/s/ Jeremy Curnock Cook
Jeremy Curnock Cook
/s/ Louis Drapeau
Louis Drapeau
/s/ Suzanne Crowe
Suzanne Crowe
/s/ James Corbett
James Corbett
/s/ Jan Stern Reed
Jan Stern Reed
Title
Chief Executive Officer and Director
(Principal Executive Officer)
Chief Financial Officer
(Principal Financial and Accounting Officer)
Director
Director
Director
Director
Director
Director
65
Date
August 26, 2021
August 26, 2021
August 26, 2021
August 26, 2021
August 26, 2021
August 26, 2021
August 26, 2021
August 26, 2021
Table of Contents
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets as of June 30, 2021 and 2020
Consolidated Statements of Operations for the Years Ended June 30, 2021, 2020 and 2019
Consolidated Statements of Comprehensive Loss for the Years Ended June 30, 2021, 2020 and 2019
Consolidated Statements of Stockholders’ Equity for the Years Ended June 20, 2021, 2020 and 2019
Consolidated Statements of Cash Flows for the Years Ended June 30, 2021, 2020 and 2019
Notes to Consolidated Financial Statements
F-1
Page
F-2
F-3
F-4
F-5
F-6
F-7
F-8
Table of Contents
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Directors and Shareholders
AVITA Medical, Inc.
Opinion on the financial statements
We have audited the accompanying consolidated balance sheets of Avita Medical, Inc. (a Delaware corporation) and subsidiaries (the “Company”) as of
June 30, 2021 and 2020, the related consolidated statements of operations, comprehensive loss, shareholders’ equity, and cash flows for each of the three
years in the period ended June 30, 2021, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial
statements present fairly, in all material respects, the financial position of the Company as of June 30, 2021 and 2020, and the results of its operations and
its cash flows for each of the three years in the period ended June 30, 2021, in conformity with accounting principles generally accepted in the United
States of America.
Basis for opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial
statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States)
(“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules
and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor
were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of
internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over
financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and
performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in
the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as
evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/ GRANT THORNTON LLP
We have served as the Company’s auditor since 2020.
Los Angeles, California
August 26, 2021
F-2
Table of Contents
AVITA MEDICAL, INC.
Consolidated Balance Sheets
(In thousands, except share and per share data)
ASSETS
Cash and cash equivalents
Accounts receivable, net
BARDA receivables
Prepaids and other current assets
Restricted cash
Inventory
Total current assets
Plant and equipment, net
Operating lease right-of-use assets
Intangible assets, net
Other long-term assets
Total assets
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable and accrued liabilities
Accrued wages and fringe benefits
Other current liabilities
Total current liabilities
Contract liabilities
Operating lease liabilities, long term
Other long-term liabilities
Total liabilities
Contingencies (Note 10)
Shareholders' Equity:
Common stock, $0.0001 par value per share, 200,000,000 shares authorized, 24,895,864
and 21,467,912 shares issued and outstanding at June 30, 2021 and June 30, 2020,
respectively
Preferred stock, $0.0001 par value per share, 10,000,000 shares authorized, no shares
issued or outstanding at June 30, 2021 and June 30, 2020
Additional paid-in capital
Accumulated other comprehensive income
Accumulated deficit
Total shareholders' equity
Total liabilities and shareholders' equity
June 30, 2021
June 30, 2020
As of
110,746 $
3,467
3,936
1,333
201
1,647
121,330
1,458
1,480
472
761
125,501 $
3,120 $
3,321
949
7,390
1,075
878
503
9,846
73,639
2,076
356
990
201
1,125
78,387
1,363
2,347
364
1
82,462
4,333
2,816
560
7,709
435
1,917
-
10,061
3
3
-
328,889
8,259
(221,496)
115,655
125,501 $
-
259,165
8,146
(194,913)
72,401
82,462
$
$
$
$
The accompanying notes form part of the consolidated financial statements
F-3
Table of Contents
Revenues
Cost of sales
Gross profit
BARDA income
Operating expenses:
Sales and marketing expenses (1)
General and administrative expenses (1)
Research and development expenses (1)
Total operating expenses
Operating loss
Interest expense
Other income
Loss before income taxes
Income tax benefit/(expense)
Net loss
Net loss per common share:
Basic
Diluted
Weighted-average common shares:
Basic
Diluted
AVITA MEDICAL, INC.
Consolidated Statements of Operations
(In thousands, except share and per share data)
2021
$
Year Ended June 30,
2020
2019
29,232 $
(5,949)
23,283
2,055
(14,660)
(22,400)
(14,818)
(51,878)
(26,540)
(22)
17
(26,545)
(38)
(26,583) $
14,263 $
(2,973)
11,290
3,926
(15,706)
(33,025)
(9,164)
(57,895)
(42,679)
(33)
686
(42,026)
(4)
(42,030) $
5,474
(1,271)
4,203
5,921
(12,549)
(15,099)
(8,004)
(35,652)
(25,528)
(27)
332
(25,223)
121
(25,102)
(1.56)
(1.56)
$
$
$
(1.17) $
(1.17) $
(2.07) $
(2.07) $
22,674,313
22,674,313
20,290,966
20,290,966
16,064,588
16,064,588
(1)
Refer to Note 2 for reclassification of share-based compensation expense.
The accompanying notes form part of the consolidated financial statements
F-4
Table of Contents
Net loss
Foreign currency translation gain/(loss)
Comprehensive loss
AVITA MEDICAL, INC.
Consolidated Statements of Comprehensive Loss
(In thousands)
2021
Year ended June 30,
2020
$
$
(26,583) $
113
(26,470) $
(42,030) $
(38)
(42,068) $
2019
(25,102)
101
(25,001)
The accompanying notes form part of the consolidated financial statements
F-5
Table of Contents
AVITA MEDICAL, INC.
Consolidated Statements of Shareholders’ Equity
(In thousands, except shares)
Common Stock
Accumulated
Other
Comprehensive
Gain (Loss)
$
$
$
$
$
$
Balance at June 30, 2018
Net loss
Issuance of common stock under direct placement
Issuance costs associated with direct placement
Share-based compensation
Exercise of stock options
Translation gain
Balance at June 30, 2019
Net loss
Issuance of common stock under direct placement
Issuance costs associated with direct placement
Share-based compensation
Exercise of stock options
Vesting of RSU options
Issuance of common stock to director in lieu of directors fees
Beginning balance adjustment related to the adoption of ASC 842
Translation loss
Balance at June 30, 2020
Net loss
Issuance of common stock under direct placement
Issuance costs associated with direct placement
Share-based compensation
Exercise of stock options
Vesting of restricted stock units
Translation gain
Balance at June 30, 2021
Shares
12,773,783
-
5,870,613
-
-
68,600
-
18,712,996
-
2,033,898
-
-
99,982
605,183
15,853
-
-
21,467,912
-
3,214,250
-
-
14,359
199,343
-
24,895,864
Amount
$
$
$
$
2
-
1
-
-
-
-
3
-
-
-
-
-
-
-
-
-
3
-
-
-
-
-
-
-
3
Additional
Paid-in Capital
133,673
-
32,453
(2,934)
1,946
335
-
165,473
-
81,702
(5,077)
16,486
474
-
107
-
-
259,165
-
69,106
(5,109)
5,664
63
-
-
328,889
$
$
$
$
Accumulated
Deficit
(127,726) $
(25,102)
-
-
-
-
-
(152,828) $
(42,030)
-
-
-
-
-
-
(55)
-
8,083
-
-
-
-
-
101
8,184
-
-
-
-
-
-
-
-
(38)
8,146
-
-
-
-
-
-
113
8,259
$
(194,913) $
(26,583)
-
-
-
-
-
-
$
(221,496) $
Total
Shareholders'
Equity
14,032
(25,102)
32,454
(2,934)
1,946
335
101
20,832
(42,030)
81,702
(5,077)
16,486
474
-
107
(55)
(38)
72,401
(26,583)
69,106
(5,109)
5,664
63
-
113
115,655
The accompanying notes form part of the consolidated financial statements
F-6
Table of Contents
AVITA MEDICAL, Inc.
Consolidated Statement of Cash Flows
(in thousands)
Cash flow from operating activities:
Net loss
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization
Share-based compensation
Non-cash lease expense
Loss on fixed asset disposal
Remeasurement and foreign currency transaction loss
Excess and obsolete inventory related charges
BARDA deferred costs
Contract cost amortization
Provision for doubtful accounts
Issuance of common stock to directors in lieu of directors fees
R&D tax credit benefit
Changes in operating assets and liabilities:
Trade and other receivables
BARDA receivables
R&D tax credits
Prepaids and other current assets
Inventory
Operating lease liability
Other long-term assets
Accounts payable and accrued expenses
Accrued wages and fringe benefits
Other current liabilities
Contract liabilities
Other long-term liabilities
Net cash used in operations
Cash flows from investing activities:
Cash paid for property and equipment
Cash paid for patent filing fees
Net cash used in investing activities
Cash flow from financing activities:
Proceeds from direct placement of common stock
Issuance cost associated with direct placement
Principal repayment of finance lease
Proceeds from exercise of stock options
Net cash provided by financing activities
Effect of foreign exchange rate on cash and restricted cash
Net increase in cash and cash equivalents and restricted cash
Cash and cash equivalents and restricted cash beginning of the period
Cash and cash equivalents and restricted cash end of the period
Supplemental Disclosure of Cash Flow Information
Cash paid for income taxes
Cash paid for Interest
Plant and equipment purchases not yet paid
$
$
$
$
The accompanying notes form part of the consolidated financial statements
F-7
2021
Year Ended June 30,
2020
2019
$
(26,583) $
(42,030) $
(25,102)
715
5,664
591
130
228
226
343
129
12
-
-
(1,399)
(3,580)
-
(342)
(745)
(594)
(889)
(1,333)
493
155
640
238
(25,901)
(894)
(280)
(1,174)
69,106
(5,109)
(11)
63
64,049
133
37,107
73,840
110,947 $
42 $
3 $
20 $
465
16,486
502
259
7
84
-
-
43
107
-
(729)
26
121
219
(468)
(476)
-
2,308
693
(366)
6
(4)
(22,747)
(590)
(257)
(847)
81,702
(5,077)
(42)
474
77,057
3
53,466
20,374
73,840 $
- $
42 $
85 $
269
1,946
-
2
397
89
-
-
6
-
(129)
(1,291)
1,522
1,742
(315)
17
-
(4)
69
737
384
429
(18)
(19,250)
(1,021)
(206)
(1,227)
32,453
(2,934)
(62)
252
29,709
156
9,388
10,986
20,374
-
27
15
Table of Contents
1. The Company
AVITA MEDICAL, INC.
Notes to Consolidated Financial Statements
The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the
United States of America (“U.S. GAAP”). These financial statements include the assets, liabilities, revenues and expenses of all wholly-owned
subsidiaries.
Nature of the Business
The AVITA group of companies (comprising AVITA Medical, Inc. (“AVITA” or the “Company”) and its subsidiaries, including AVITA Medical
Pty Limited, previously known as AVITA Medical Limited, (“AVITA Medical”)) (collectively, “AVITA Group” or “we”, “us”, or “our”) is a commercial-
stage regenerative tissue company focused on the treatment of burns, trauma and other acute injuries, together with skin defects like vitiligo. The
Company’s lead product is the RECELL® System, a device that enables healthcare professionals to produce a suspension of Spray-On Skin™ Cells using a
small sample of the patient’s own skin. In September 2018, the United States Food & Drug Administration (“FDA”) granted premarket approval (“PMA”)
to the RECELL System for use in the treatment of acute thermal burns in patients eighteen years and older and pediatric acute full thermal burns in 2021.
Following receipt of our PMA, we commenced commercializing the RECELL System in January 2019 in the United States. In addition, the FDA has
granted the Company three Investigational Device Exemptions (“IDEs”) studies which have enabled the Company to initiate pivotal clinical investigational
studies to seek expanded FDA (supplementary) PMA of the RECELL System for each of soft tissue reconstruction, pediatric scalds, and
vitiligo. Enrollment of those clinical studies is ongoing and, if successful, those studies would enable the Company to commence commercializing the
RECELL System in the United States in each of those indications.
In March 2020, the World Health Organization declared the outbreak of a novel strain of the coronavirus (“COVID-19”) a pandemic. COVID-19
is having, and will likely continue to have, an effect on the Company’s business, results of operations, financial condition, and cash flows, and its future
impacts remain highly uncertain and unpredictable. The Company has considered the disruptions caused by COVID-19, including lower than forecasted
sales, delays to the speed of enrollment in the Company’s clinical trials that may, if successful, support commercial approval and new revenues in
additional markets, and macroeconomic factors, that may impact its estimates. The Company has assessed the potential impact of COVID-19 on certain
accounting matters including, but not limited to, the allowance for doubtful accounts, inventory reserves and return reserves, and impairment considerations
for long-lived assets and intangibles, as of June 30, 2021 and through the date of this report. The Company’s business and operations have been impacted
by COVID-19 as the effects of COVID-19 related travel restrictions have reduced accidents and the incidence of burns and burns admissions. With
respect to future operating results, it is not possible at this time to predict, with any degree of precision, the effects of COVID-19. Consequently, actual
results for accounting estimates and assumptions, particularly those relating to the recoverability of certain intangible assets and estimates of expected
credit losses on accounts receivable could differ from these estimates.
Recent Developments
In July 2020, Biomedical Advanced Research and Development Authority ("BARDA") initiated the procurement of the RECELL system valued
at $7.6 million as part of the U.S. Department of Health and Human Services emergency response preparedness. As part of the contract the Company
delivered 5,614 RECELL system units to BARDA. Units procured by BARDA as part of the emergency response preparedness are maintained and stored
by the Company under a vendor-managed inventory arrangement (“VMI”) during the term of the contract. In addition to procurement of the product,
BARDA has expanded its awarded contract to provide supplemental funding of $1.6 million to support the emergency deployment of the RECELL system
for use in mass casualty or other emergency situations. As of June 30, 2021, a total of 5,614 RECELL system units have been delivered into the VMI and
accepted by BARDA.
Effective December 2, 2020 (United States time), AVITA Therapeutics, Inc., changed its corporate name to AVITA Medical, Inc. after
successfully filing a Certificate of Amendment of Certificate of Incorporation with the Secretary of State of Delaware. The Company’s change of name was
registered with the Australian Securities and Investments Commission effective as from January 6, 2021. The Company’s common stock continues to trade
on The NASDAQ Stock Exchange LLC (“NASDAQ”) under the symbol “RCEL” and its CHESS Depositary Interests (“CDIs”) continue to trade on the
Australian Securities Exchange (“ASX”) under the ticker symbol, “AVH”.
F-8
Table of Contents
Redomiciliation
On June 29, 2020, a statutory scheme of arrangement under Australian law to effect a redomiciliation of the AVITA Group from Australia to the
United States of America was implemented (the “Redomiciliation”). The Redomiciliation was approved by shareholders on June 15, 2020 and approved
by the Federal Court of Australia on June 22, 2020.
Pursuant to the Redomiciliation, all ordinary shares in AVITA Medical, the former parent company of the AVITA Group, were exchanged for shares
of common stock in the Company. As a result, the Company became the sole shareholder of AVITA Medical and the new parent company of the AVITA
Group. In conjunction with the Redomiciliation, an implicit consolidation or reverse split on a 1 for 100 basis was implemented whereby shareholders of
AVITA Medical received one share of common stock in the Company for every 100 shares held in AVITA Medical.
Under the Redomiciliation, eligible shareholders in AVITA Medical received consideration in the form of:
•
•
five CDIs in the Company for every 100 ordinary shares in AVITA Medical that were held by them; or
one share of common stock in the Company for every 5 ADSs in AVITA Medical that were held by them.
The Company’s CDIs are quoted on the ASX under AVITA Medical’s previous ASX ticker code, “AVH”. The Company’s shares of common stock
are quoted on NASDAQ under AVITA Medical’s previous NASDAQ ticker code, “RCEL”. One share of common stock on NASDAQ is equivalent to five
CDIs on the ASX.
As a result of the ‘implicit consolidation’ that occurred under the Redomiciliation, the number of shares of common stock on issue in the
Company (as set out in the consolidated financial statements) is less than the number of ordinary shares issued and outstanding in AVITA Medical that was
previously set out in the consolidated financial statements of AVITA Medical. All common stock amounts included in these financial statements have been
retroactively reduced by a factor of one hundred and all per share amounts have been increased by a factor of one hundred, with the exception of the
Company’s common stock par value.
As a result of the Redomiciliation, the reporting currency of the AVITA Group has changed from the Australian dollar to the U.S. dollar. In
accordance with SEC regulation, SX Rule 320 (e), the impact of the change in the reporting currency was included in a component of other comprehensive
income (loss).
2. Summary of Significant Accounting Policies
Reclassification
Certain amounts in the prior period Consolidated Statement of Operations have been reclassified to conform to the presentation of the current
period financial statements. These reclassifications had no effect on the previously reported operating expense, loss before taxes, net loss and earnings per
share.
After the issuance of the consolidated financial statements for the year ended June 30, 2020, and the quarter ended September 30, 2020, the
Company concluded that the presentation of share-based compensation should be reclassified to the functional expense line items consistent with cash
compensation in accordance with SAB Topic 14. The Company has determined that such change in presentation of prior period amounts in the Statement
of Operations is not material to the consolidated financial statements.
F-9
Table of Contents
The Company reclassified share-based compensation expense of $16.5 million and $1.9 million to sales and marketing expense, general and
administrative expense and research and development expenses as detailed in the table below for the years ended June 30, 2020 and 2019, respectively (in
thousands).
Year-ended June 30, 2020
Year-ended June 30, 2019
As previously
reported
Amount
reclassified
As
Reported
As
previously
reported
Amount
reclassified
$
Sales and marketing expense
General and administrative expense
Research and development expense
Share-based compensation
Total operating expenses
Operating loss
Loss before income taxes
Net Loss
(14,813) $
(18,135)
(8,461)
(16,486)
(57,895)
(42,679)
(42,026)
(42,030)
$
(893) $
(14,890)
(703)
16,486
-
-
-
-
(15,706)
(33,025)
(9,164)
-
(57,895)
(42,679)
(42,026)
(42,030)
(12,253) $
(13,581)
(7,872)
(1,946)
(35,652)
(25,528)
(25,223)
(25,102)
As
Reported
(12,549)
(15,099)
(8,004)
-
(35,652)
(25,528)
(25,223)
(25,102)
(296) $
(1,518)
(132)
1,946
-
-
-
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. As a result of the
redomiciliation described above, the parent company of the AVITA group changed from AVITA Medical to the Company. All intercompany transactions
and balances have been eliminated on consolidation.
Use of Estimates
The preparation of the accompanying consolidated financial statements in conformity with U.S. GAAP requires management to make estimates
and assumptions that affect the reported amounts (including doubtful accounts, carrying value of long-lived asset, the useful lives of long-lived assets,
accounting for income taxes, stock-based compensation and the stand-alone selling price for the BARDA contract) and related disclosures. Estimates have
been prepared on the basis of the current and available information. However, actual results could differ from estimated amounts.
Foreign Currency Translation and Foreign Currency Transactions
The financial position and results of operations of the Company’s operating non-U.S. subsidiaries are generally determined using the respective
local currency as the functional currency of that subsidiary. Assets and liabilities of these subsidiaries are translated at the exchange rate in effect at each
period end. Income statement accounts are translated at the average rate of exchange prevailing during the period. Adjustments arising from the use of
differing exchange rates from period to period are included in accumulated other comprehensive gain (loss) in shareholders’ equity. Gains and losses
resulting from foreign currency transactions are included in general and administrative expenses and were a loss of $97,000, $7,000, and $397,000 for the
year ended June 30, 2021, 2020 and 2019, respectively.
The Company’s non-operating subsidiaries that use the U.S. dollar as their functional currency remeasure monetary assets and liabilities at
exchange rates in effect at the end of each period, nonmonetary assets and liabilities at historical rates. Gains and losses resulting from these
remeasurements and foreign currency transactions are included in general and administrative expenses. During the year ended June 30, 2021, the Company
recorded losses of $131,000. For the years ended June 30, 2020 and 2019 such amounts were not significant.
Comprehensive Income (Loss)
The components of comprehensive income (loss) consist of net income (loss) and changes in foreign currency exchange rate translation. The changes
in foreign currency exchange rate translation are excluded from earnings and reported as a component of shareholders’ equity. The foreign currency
translation adjustment results from those subsidiaries not using the United States dollar as their functional currency since the majority of their economic
activities are primarily denominated in their applicable local currency. Accordingly, all assets and liabilities related to these operations are translated at the
current exchange rates at the end of each period, whereas revenues and expenses are translated at average exchange rates in effect during the period. The
resulting cumulative translation adjustments are recorded directly to the accumulated other comprehensive gain/(loss) account in shareholders’ equity.
F-10
Table of Contents
Revenue Recognition
The Company adopted ASC Topic 606 – Revenue from Contracts with Customers, on July 1, 2018. Under Topic 606, the Company recognizes
revenue when its customers obtain control of promised goods or services, in an amount that reflects the consideration which the Company expects to be
entitled in exchange for those goods or services.
To determine revenue recognition for arrangements that are within the scope of Topic 606, the Company performs the following five steps:
1.
2.
3.
4.
5.
Identify the contract with a customer
Identify the performance obligations
Determine the transaction price
Allocate the transaction price to the performance obligations
Recognize revenue when/as performance obligation(s) are satisfied
In order for an arrangement to be considered a contract, it must be probable that the Company will collect the consideration to which it is entitled
for goods or services to be transferred. Once the contract is determined to be within the scope of ASC 606, the Company assesses the goods or services
promised with each contract, determines whether those are performance obligations and the related transaction price. The Company then recognizes the
sale of goods based on the transaction price that is allocated to the respective performance obligation when the performance obligation is satisfied.
The Company’s revenue consists primarily of the sale of the RECELL System to hospitals or other treatment centers and to BARDA
(collectively, “customers”), predominately in the United States. The Company evaluated the BARDA contract and concluded that a portion of the
arrangement, such as the procurement of the RECELL system and the emergency preparedness, represents a transaction with a customer and as such are in
the scope of ASC 606. Amounts received from BARDA for the research and development of the Company’s product are classified as BARDA income in
the consolidated statement of operations and are accounted for under IAS 20. For further details refer to BARDA Income and Receivables below.
Revenues for commercial customers (hospitals and treatment centers) are recognized as control of the product is transferred to customers, at an
amount that reflects the consideration expected to be received in exchange for the product. Revenues are recognized net of volume discounts. As such,
revenue is recognized only to the extent a significant reversal of revenues is not expected to occur in subsequent periods. For the Company’s contracts that
have an original duration of one year or less, the Company elected the practical expedient applicable to such contracts and does not consider the time value
of money. Further, because of the short duration of these contracts, the Company has not disclosed the transaction price for the remaining performance
obligations as of each reporting period or when the Company expects to recognize this revenue. The Company has further applied the practical expedient to
exclude sales tax in the transaction price and expense contract fulfilment costs such as commissions and shipping and handling expenses as incurred.
For revenues related to the BARDA contract with-in the scope of ASC 606, the Company identified two performance obligations (i) the
procurement of 5,614 RECELL units, (ii) emergency preparedness services. Through this contract the Company promises to procure the product through a
vendor management inventory arrangement and to stand ready to provide emergency deployment services related to the product. Emergency preparedness
services include procuring necessary storage containers, housing, and maintaining the containers (and product), and providing shipping and handling
services in the event of an emergency situation. This stand ready obligation is a series of distinct services that are substantially the same and have the same
pattern of transfer to the customer, overtime as services are consumed.
The total transaction price for the portion of the BARDA contract that is with-in the scope of ASC 606, was determined to be $9.2 million. The
transaction price was allocated on a stand-alone selling price basis as follows: $7.6 million to the procurement of the RECELL product, which is classified
as revenues when recognized in the consolidated statement of operations and $1.6 million to the emergency deployment services which is classified as
revenues when recognized in the consolidated statement of operations. The $1.6 million for emergency deployment includes variable consideration which
is deemed immaterial to the contract as a whole. The Company estimated the stand-alone selling price of the procurement of the RECELL product based
on historical pricing of the Company’s product at the initial execution of the contract. The Company estimated the stand-alone selling price of the
emergency deployment services performed based on the Company’s projected cost of providing the services plus an applicable profit margin as denoted in
the contract.
The Company’s performance obligations are either satisfied at a point in time or over time as services are provided. The product procurement
performance obligation is satisfied at a point in time, upon transfer of control of the product. As such, the related revenue for these performance obligations
is recognized at a point in time as revenue within the Company’s consolidated statement of operations. In addition to guidance under ASC 606, the
Company recognizes revenue from the sales of RECELL product to BARDA
F-11
Table of Contents
for placement into vaccine stockpiles in accordance with Securities and Exchange Commission (SEC) Interpretation, Commission Guidance regarding
Accounting for Sale of Vaccines and BioTerror Countermeasures to the Federal Government for Placement into the Pediatric Vaccine Stockpile or the
Strategic National Stockpile (SNS). Under this guidance, revenue is recognized when product is placed in the BARDA vendor-managed inventory as
control of the product has been transferred to the customer at the time of delivery to the VMI. RECELL units that have been delivered to BARDA have a
product replacement obligation at no cost to BARDA due to product’s limited shelf-life. The estimated cost of the expired inventory over the term of the
contract is recognized on a per unit basis at the time of delivery. The liability is released upon replacement of the product along with a corresponding
reduction to inventory. The emergency preparedness services performance obligation is satisfied over time. Revenue for the emergency deployment will be
recognized on a straight-line basis during the term of the contract as services are consumed over time. Services recognized are included in sales within the
consolidated statement of operations. Contract costs to fulfil the performance obligations are incremental and expected to be recovered are capitalized and
amortized on a straight-line basis over the term of the contract. Contract costs are included in other long-term assets.
Contract Liabilities
The Company receives payments from customers based on contractual terms. Trade receivables are recorded when the right to consideration
becomes unconditional. The Company satisfies its performance obligation on product sales when the products are shipped or delivered, depending on the
terms of the sale. Payment terms on invoiced amounts are typically 30-90 days, and do not include a financing component. Contract liabilities are recorded
when the Company receives payment prior to satisfying its obligation to transfer goods to a customer.
Cost of Sales
Cost of sales related to products includes costs to manufacture or purchase, package, and ship the Company’s products. Costs also include
relevant production overhead and depreciation and amortization. These costs are recognized when control of the product is transferred to the customer and
revenue is recognized.
Income Taxes
Income taxes are accounted for using the liability method. Deferred tax assets and liabilities are recognized for the future tax consequences
attributable to differences between the financial statement carrying amounts of assets and liabilities and their respective tax basis. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable income or loss in the years in which those temporary differences are expected
to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in operations in the period that includes the
enactment date. Deferred tax assets are reduced by a valuation allowance if it is more likely than not that a portion of the deferred tax asset will not be
realized. We recognize interest and penalties related to unrecognized tax benefits on the income tax expense line in the accompanying consolidated
statement of operations. Accrued interest and penalties are included on the related tax liability line in the consolidated balance sheet.
The Company reviews its uncertain tax positions regularly. An uncertain tax position represents the Company’s expected treatment of a tax
position taken in a filed return, or planned to be taken in a future tax return or claim that has not been reflected in measuring income tax expense for
financial reporting purposes. The Company recognizes the tax benefit from an uncertain tax position when it is more-likely-than-not that the position will
be sustained upon examination on the basis of the technical merits or the statute of limitations for the relevant taxing authority to examine and challenge the
tax position has expired.
Cash and Cash Equivalents
Consists of cash held at deposit institutions and cash equivalents. Cash equivalents consist of short-term highly liquid investments with original
maturities of three months or less from the date of purchase and consist primarily of money market funds. The Company holds cash at deposit institutions
in the amount of $54.2 million and $73.6 million of which $273,000 and $466,000 is denominated in foreign currencies in foreign institutions as of
June 30, 2021 and 2020, respectively. As of June 30, 2021 and 2020, the Company held cash equivalents in the amount of $56.5 million and $0,
respectively.
Restricted Cash
Pursuant to a contractual agreement with American Express to maintain the business credit card, the Company must maintain restricted cash
deposits which amounted to approximately $201,000 and $201,000 as of June 30, 2021 and 2020, respectively.
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Concentrations
Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash and cash equivalents, trade
receivable, BARDA receivables and other receivables. As of June 30, 2021, and 2020, substantially all of the Company’s cash was deposited in accounts at
financial institutions, and amounts may exceed federally insured limits. Management believes that the Company is not exposed to significant credit risk due
to the financial strength of the depository institutions in which its cash is held.
As of June 30, 2021 no single commercial customer accounted for more than 10% of total revenues or net accounts receivable. BARDA revenues
for the procurement of the RECELL system accounted for approximately 26% of total revenues. As of June 30, 2020, no single commercial customer
accounted for more than 10% of total revenues or net accounts receivable. As of June 30, 2019, one commercial customer accounted for approximately
10.5% of total revenues and three customers accounted for more than 10% of net accounts receivable, each representing approximately 14.6%, 10.3% and
10.1% of total net accounts receivable. BARDA receivables for the procurement of the RECELL system and emergency preparedness accounted for
approximately 91% of BARDA receivables. See table below for breakdown of BARDA receivables (in thousands).
BARDA procurement and emergency preparedness services
BARDA expense reimbursements
Total
As of
June 30,
2021
As of
June 30,
2020
$
$
3,583 $
353
3,936 $
—
356
356
Fair Value of Financial Instruments
The carrying values of the Company’s financial instruments, consisting of cash and cash equivalents, trade receivables, prepaids and other
receivables, accounts payable, accrued liabilities and contract liabilities, approximate fair value due to the relative short-term nature of these instruments.
Accounts Receivable
Accounts receivable are recorded net of customer allowances for doubtful accounts. The Company estimates an allowance for expected credit losses
(i.e., the inability of our customers to make required payments). These estimates are based on a combination of past experience and current trends. In
estimating the allowance for expected credit losses, consideration is given to the current aging of receivables, a specific review for potential bad debts and
an evaluation of historic write-offs. The resulting bad debt expense is included in sales and marketing expenses in the consolidated statement of operations.
Receivables are written-off when deemed uncollectible. As of June 30, 2021, and 2020 the allowance for doubtful accounts was $30,000 and $18,000,
respectively.
A rollforward of the activity in the Company’s allowance for doubtful account is as follows (in thousands):
Allowance for doubtful accounts at beginning of year
Bad debt expense
Deductions
Allowance for doubtful accounts, at end of year
2021
June 30,
2020
2019
$
$
18 $
12
-
30 $
18 $
43
(43)
18 $
17
6
(5)
18
BARDA Income and Receivables
The AVITA Group was awarded a BARDA grant in September 2015. Under this grant BARDA supports the Company’s research and development
for the Company’s product, including the ongoing U.S. clinical regulatory program targeted towards FDA PMA, our compassionate use program, clinical
and health economics research, and U.S. pediatric burn programs.
Consideration received under the BARDA grant is earned and recognized under a cost-plus-fixed-fee arrangement in which the Company is
reimbursed for direct costs incurred plus allowable indirect costs and a fixed-fee earned. Billings under the contracts are based on approved provisional
indirect billing rates, which permit recovery of fringe benefits, general and administrative expenses and a fixed fee.
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The Company has concluded that grants under the BARDA grant are not within the scope of ASC 606, as they do not meet the definition of a
contract with a “customer.” The Company has further concluded that Subtopic 958-605, Not-for-Profit-Entities-Revenue Recognition also does not apply, as
the Company is a business entity and the grants are with governmental agencies or units. With respect to the BARDA grant, we considered the guidance in
IAS 20, Accounting for Government Grants and Disclosure of Government Assistance, by analogy. BARDA income and related receivables are recognized
when there is reasonable assurance that the grant will be received, and all attaching conditions have been complied with. When the grant relates to an
expense item, the grant received is recognized as income over the period when the expense was incurred.
Inventory
Inventory is valued at the lower of cost or estimated net realizable value and is reflected in cost of sales. Costs incurred in bringing each product to
its present location and condition are accounted for at purchase cost on a first-in, first-out basis (“FIFO”). The Company capitalizes inventory costs
associated with the Company’s products when, based on management’s judgment, future commercialization is considered probable and the future economic
benefit is expected to be realized; otherwise, such costs are expensed as research and development. Inventory is evaluated for impairment periodically to
identify inventory obsolescence when an inventory item’s cost basis is in excess of its net realizable value. These adjustments are based upon multiple
factors, including inventory levels, projected demand, and product shelf life.
Net realizable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and costs to complete the
sale.
Leases
The Company has operating leases for corporate office space, manufacturing and warehouse facility. The Company has finance leases for
equipment and furniture, which are not material to the consolidated financial statements. The Company’s operating leases have remaining lease terms of
one year to three years, some of which include options to renew the lease. At contract inception, the Company determines whether the contract is a lease or
contains a lease. A contract contains a lease if the Company is both able to identify an asset and can conclude it has the right to control the identified asset
for a period of time. Leases with an initial term of twelve months or less are not recorded on the condensed consolidated balance sheet.
Right of use (“ROU”) assets represent the Company’s right to control an underlying asset for the lease term, and lease liabilities represent the
Company’s obligation to make lease payments arising from the lease. ROU assets and lease liabilities are recognized at commencement date based on the
present value of lease payments over the lease term. As the Company’s leases do not provide an explicit rate, the Company used its incremental borrowing
rate (“IBR”) based on the information available at commencement date in determining the discount rate used to present value lease payments. In
determining the IBR, the Company considered its credit rating and current market interest rates. The IBR used approximates the interest that the Company
would be required to pay for a collateralized loan over a similar term. The Company’s leases typically do not include any residual value guarantees or asset
retirement obligations.
The Company’s lease terms are only for periods in which it has enforceable rights. A lease is no longer enforceable when both the lessee and the
lessor each have the right to terminate the lease without permission from the other party with no more than an insignificant penalty. The Company has
options to renew some of these leases for three years after their expiration. The Company considers these options, which may be elected at the Company’s
sole discretion, in determining the lease term on a lease-by-lease basis. Lease expense is recognized on a straight-line basis over the lease term and is
primarily included in general and administrative expenses in the accompanying consolidated statements of operations.
The Company has lease agreements with lease and non-lease components, which are accounted for as a single lease component for all underlying
asset classes. Some leases require variable payments for common area maintenance, property taxes, parking, insurance and other variable costs. The
variable portion of lease payments is not included in operating lease assets or liabilities. Variable lease costs are expensed when incurred.
Property, Plant and Equipment
The Company’s property, plant and equipment are stated at cost, net of accumulated depreciation and amortization. Depreciation is computed based
on the straight-line method over the estimated useful lives of the various asset classes, generally three to seven years. Leasehold improvements are
amortized over the shorter of the life of the related asset or the remaining term of the lease. Costs associated with customized internal-use software systems
that have reached the application development stage and meet recoverability tests are capitalized and include external direct costs utilized in developing or
obtaining the applications and payroll and
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payroll-related expenses for employees who are directly associated with the application development. Maintenance and repairs are expensed as incurred.
Intangible Assets
The Company maintains definite-lived intangible assets related to patents initially measured at cost and amortized over estimated useful lives of
approximately 3—20 years. The Company had capitalized patent costs of $700,000 and $483,000 as of June 30, 2021 and 2020, respectively, related to
regulatory approval of the RECELL System, and are being amortized over their estimated useful lives.
Impairment of Long-Lived Assets
The Company evaluates long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset
may not be recoverable. If the sum of the estimated, undiscounted future cash flows is less than the carrying amount of the asset, then an impairment is
recognized for the amount by which the carrying value of the asset exceeds its estimated fair value. Fair value is determined using the market, income or
cost approaches as appropriate for the asset. Any write-downs are treated as permanent reductions in the carrying amount of the asset and recognized as an
operating loss. There were no impairments of long-lived assets in the years ended June 30, 2021, 2020 and 2019.
Sales and Marketing Expenses
Sales and marketing expenses consist primarily of compensation and employee benefits of sales and marketing personnel and related sales support
teams, marketing events, advertising costs, travel, trade shows and other marketing materials. The Company expenses all selling and marketing costs as
incurred. Advertising expense were $73,000, $51,000 and $186,000 for the year ended June 30, 2021, 2020 and 2019, respectively.
Research and Development Expenses
Research and development expenses represent costs incurred to develop the Company’s products. Research and development expenses consist
primarily of salaries and other personnel costs, clinical trial costs, regulatory costs and manufacturing costs for non-commercial products. The Company
expenses all research and development costs in the periods in which they are incurred.
Stock-Based Compensation
The Company records compensation expense for stock options based on the fair market value of the awards on the date of grant. The fair value of
stock-based compensation awards is amortized over the vesting period of the award. Compensation expense for performance-based awards is measured
based on the number of shares ultimately expected to vest, estimated at each reporting date based on management’s expectations regarding the relevant
performance criteria, if any. The Black-Scholes option pricing model and Monte Carlo Simulation were used to estimate the fair value of the time-based
and performance-based options, respectively. Under ASU 2016-09, Compensation – Stock Compensation (“ASC 718”) Improvements to Employee Share-
Based Payment Accounting, the Company elected to account for forfeitures as they occur.
The following assumptions were used in the valuation of stock options.
•
•
•
Expected volatility – determined using the average of the historical volatility using daily intervals over the expected term and the derived
volatility using the longest term available of 12 months.
Expected dividends - based on the fact that the Company has never paid cash dividends and does not expect to pay any cash dividends in the
foreseeable future
Expected term – the expected term of the Company’s stock options for tenure only vesting has been determined utilizing the
“simplified” method as described in the SEC’s Staff Accounting Bulletin No. 107 relating to stock-based compensation.
The simplified method was chosen because the Company has limited historical option exercise experience due to its short operating history of
awards granted, the first plan was established in 2016 and was primarily used for Executives awards. Further, the Company does not have
sufficient history of exercises in the U.S. market given the recent redomiciliation to the United States in the prior fiscal year. The expected term
of options with a performance condition was set to the contractual term of 10 years. The contractual term was used options with performance
condition were awarded to C-Suite executives and the Company assumes that they will hold them longer than rank and file executives.
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•
Risk-free interest rate – the risk-free interest rate is based on the U.S. Treasury yield in effect at the time of grant for a period approximately
equal to the expected term of the award.
Loss per Share
Basic net loss per share is computed by dividing net loss by the weighted-average number of common shares outstanding during the period. Diluted
earnings per share is computed by dividing net loss by the weighted-average number of common shares outstanding during the period, assuming potentially
dilutive ordinary shares from option exercises, employee share awards, and other dilutive instruments that have been issued. For periods where the
Company has presented a net loss, potentially dilutive securities are excluded from the computation of diluted net loss per share as they would be anti-
dilutive. The loss per share incorporates the impact of the reverse stock split that was effectuated in conjunction with the redomicilation. In accordance with
ASC 260, the impact of the reverse stock split was retrospectively applied for all periods presented.
Segment Reporting
Operating segments are defined as components of an enterprise for which separate discrete financial information is available for evaluation by the
chief operating decision-maker in making decisions regarding resource allocation and assessing performance. The Company’s chief operating decision
maker is its Chief Executive Officer. To date, the Company has viewed its operations and manages its business as one segment.
3. Accounting Standards Update
Recent Accounting Pronouncements Not Yet Adopted
In December 2019, the FASB issued ASU 2019-12, Simplifying the Accounting for Income Taxes, which includes amendments to simplify the
accounting for income taxes by removing certain exceptions to the general principles in ASC 740, Income Taxes, or ASC 740. The amendments also
improve consistent application of and simplify U.S. GAAP for other areas of ASC 740 by clarifying and amending existing guidance. The new guidance is
effective for the Company for annual periods beginning after December 15, 2021 and interim periods within fiscal years beginning after December 15,
2022. Early adoption of the amendments is permitted. The Company is currently evaluating the potential impact that the adoption of ASU 2019-12 will
have on its consolidated financial statements.
4. Leases
During November 2020, the Company remeasured the lease liability for an office lease due to a change in the lease term. As a result of the
remeasurement of the lease liability, there was a reduction of approximately $563,000 to the operating lease ROU assets and operating lease liabilities.
There was no impact on earnings as a result of the modification. In addition to the modification for the office lease, the Company entered into a new lease
in November 2020 for additional warehouse space. The new lease resulted in an increase of $236,000 to the operating lease ROU assets and operating lease
liabilities.
The following table sets forth the Company’s operating lease expenses which are included in general and administrative expenses in the
consolidated statements of operations (in thousands):
Operating lease cost
Variable lease cost
Total lease cost
2021
Year ended June 30,
2020
2019
$
$
731 $
48
779 $
701 $
47
748 $
-
-
-
Supplemental cash flow information related to operating leases was as follows (in thousands):
Cash paid for amounts included in the
measurement of lease liabilities:
Operating cash outflows from operating
leases
Year ended June 30,
2020
2019
2021
$
735 $
675 $
-
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Table of Contents
Supplemental balance sheet information, related to operating leases was as follows (in thousands):
Reported as:
Operating lease right-of-use assets
Total right-of-use assets
Other current liabilities:
Operating lease liabilities, short-term
Operating lease liabilities, long term
Total operating lease liabilities
Operating lease weighted average remaining
lease term (years)
Operating lease weighted average discount rate
As of
June 30,
2021
As of
June 30,
2020
$
$
$
$
1,480
1,480
$
$
702
878
1,580
$
$
2.67
6.70%
2,347
2,347
533
1,917
2,450
3.91
7.50%
As of June 30, 2021, maturities of the Company’s operating lease liabilities are as follows (in thousands):
2022
2023
2024
2025
Total lease payments
Less imputed interest
Total operating lease liabilities
At June 30, 2021, there were no leases entered into that had not yet commenced.
5. Inventory
The composition of inventories is as follows (in thousands):
Operating Leases
784
$
428
413
105
1,730
(150)
1,580
$
$
Raw materials
Work in process
Finished goods
Total inventory
June 30,
2021
2020
$
$
982 $
241
424
1,647 $
947
—
178
1,125
The Company has reduced the carrying value of its inventories to reflect the lower of cost or net realizable value. Charges for estimated excess and
obsolescence are recorded in cost of sales in the consolidated statement of operations and were $226,000, $84,000, and $89,000 for the years ended
June 30, 2021, 2020 and 2019, respectively.
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6. Intangible Assets
The composition of intangible assets is as follows (in thousands):
As of June 30, 2021
As of June 30, 2020
Weighted
Average Life
Gross
Amount
Accumulated
Amortization
Net
Carry
Amount
Gross
Amount
Accumulated
Amortization
Patent 1
Patent 2
Patent 3
Patent 5
Patent 6
Patent 8
Trademarks
Total intangible assets
3 $
14
15
20
20
20
Indefinite
$
264 $
138
163
46
39
3
47
700 $
(190) $
(16)
(19)
(2)
(1)
-
-
(228) $
74 $
122
144
44
38
3
47
472 $
235 $
74
125
26
-
-
23
483 $
Net
Carry
Amount
134
65
116
26
-
-
23
364
(101) $
(9)
(9)
-
-
-
-
(119) $
During the years ended June 30, 2021 and 2020, the Company did not identify any events or changes in circumstances that indicated the carrying value of
its intangibles may not be recoverable. As such, there was no impairment of intangibles assets recognized for the years ended June 30, 2021, 2020 and
2019. Amortization expense of intangibles included in the consolidated statements of operations was $109,000, $119,000 and $0 for the years ended
June 30, 2021, 2020 and 2019, respectively.
The Company expects the future amortization of amortizable intangible assets held at June 30, 2021 to be (in thousands):
2022
2023
2024
2025
2026
Thereafter
Total
Estimated Amortization
Expense
$
$
89
28
28
28
28
224
425
7. Property and Equipment, net
The composition of property and equipment, net is as follows (in thousands):
Computer equipment
Computer software
Construction in progress
Furniture and fixtures
Laboratory equipment
Leasehold improvements
RECELL Moulds
Less: accumulated amortization and depreciation
Total plant and equipment, net
Useful Lives
As of
June 30,
2021
As of
June 30,
2020
3 years $
3 years
7 years
5 years
Lesser of life
or lease term
5 years
$
722 $
775
48
440
523
242
129
(1,421)
1,458 $
802
369
138
425
194
216
100
(881)
1,363
Depreciation expense related to plant and equipment was $606,000, $346,000 and $269,000 for the years ended June 30, 2021, 2020 and 2019,
respectively.
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8. Prepaids and Other Current Assets and Other Long—Term Assets
Prepaids and other current assets consisted of the following (in thousands):
Prepaid expenses
Lease deposits
Other receivables
Total prepaids and other current assets
Prepaid expenses primarily consist of prepaid benefits and insurance.
Other long-term assets consisted of the following (in thousands):
BARDA contract costs
Long-term lease deposits
Long-term prepaids
Total other long-term assets
As of
June 30,
2021
As of
June 30,
2020
853 $
-
480
1,333 $
As of
June 30,
2021
As of
June 30,
2020
613 $
126
22
761 $
792
123
75
990
—
1
—
1
$
$
$
$
9. Reporting Segment and Geographic Information
The Company views its operations and manages its business in one reporting segment. Long-lived assets were primarily located in the United States
as of June 30, 2021, and 2020 with an insignificant amount located in Australia and the United Kingdom. Revenue by region for the years ended June 30,
2021, 2020 and 2019 were as follows (in thousands):
Revenue:
United States
Foreign:
Australia
United Kingdom
Total
2021
June 30,
2020
2019
$
28,955 $
13,800 $
4,404
207
70
29,232 $
292
171
14,263 $
806
264
5,474
$
Revenue by Customer type for the years ended June 30, 2021, 2020 and 2019 were as follows (in thousands):
Revenue:
Commercial sales
BARDA:
Product sales
Services for emergency preparedness
Total
2021
June 30,
2020
2019
$
21,483 $
14,263 $
5,474
7,595
154
29,232 $
—
—
14,263 $
—
—
5,474
$
Cost of sales by Customer type for the years ended June 30, 2021, 2020 and 2019 were as follows (in thousands):
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Cost of sales
Commercial cost
BARDA:
Product cost
Emergency preparedness service cost
Total
2021
June 30,
2020
2019
$
3,931 $
2,973 $
1,271
1,889
129
5,949 $
—
—
2,973 $
—
—
1,271
$
10. Contingencies
The Company is subject to certain contingencies arising in the ordinary course of business. The Company records accruals for these contingencies to
the extent that a loss is both probable and reasonably estimable. If some amount within a range of loss appears to be a better estimate than any other amount
within the range, that amount is accrued. Alternatively, when no amount within a range of loss appears to be a better estimate than any other amount, the
lowest amount in the range is accrued. The Company expenses legal costs associated with loss contingencies as incurred. As of June 30, 2021, the
Company does not have any outstanding or threatened litigation that would have a material impact to the financial statements.
11. Common and Preferred Stock
On June 29, 2020, a statutory scheme of arrangement under Australian law to effect a redomiciliation of the AVITA Group from Australia to the
United States of America was implemented (“the Redomiciliation”). The Redomiciliation was approved by shareholders on June 15, 2020 and approved by
the Federal Court of Australia on June 22, 2020.
Pursuant to the Redomiciliation, all ordinary shares in AVITA Medical, the former parent company of the AVITA Group, were exchanged for shares
of common stock in the Company. As a result, the Company became the sole shareholder of AVITA Medical and the new parent company of the AVITA
Group. In conjunction with the Redomiciliation, an implicit consolidation or reverse split on a 1 for 100 basis was implemented whereby shareholders of
AVITA Medical received one share of common stock in the Company for every 100 shares held in AVITA Medical.
Under the Redomiciliation, eligible shareholders in AVITA Medical received consideration in the form of:
•
•
five CDIs in the Company for every 100 ordinary shares in AVITA Medical that were held by them; or
one share of common stock in the Company for every 5 ADSs in AVITA Medical that were held by them.
The Company’s CDIs are quoted on the ASX under AVITA Medical’s previous ASX ticker code, “AVH”. The Company’s shares of common stock
are quoted on NASDAQ under AVITA Medical’s previous NASDAQ ticker code, “RCEL”. One share of common stock on NASDAQ is equivalent to five
CDIs on the ASX.
As a result of the ‘implicit consolidation’ that occurred under the Redomiciliation, the number of shares of common stock on issue in the Company
(as set out in the consolidated financial statements) is less than the number of ordinary shares on issue in AVITA Medical that was previously set out in the
consolidated financial statements of AVITA Medical. All common stock amounts included in these financial statements have been retroactively reduced by
a factor of one hundred and all per share amounts have been increased by a factor of one hundred, with the exception of the Company’s common stock par
value.
The Company is authorized to issue 200,000,000 shares of common stock, par value $0.0001 per share, and 10,000,000 shares of preferred stock,
par value $0.0001 per share, issuable in one or more series as designated by the Company’s board of directors. No other class of capital stock is authorized.
As of June 30, 2021, and 2020, 24,895,864 and 21,467,912 shares of common stock, respectively, were issued and outstanding and no shares of preferred
stock were outstanding.
On March 1, 2021, the Company issued 3,214,250 shares of common stock at the offering price of $21.50 per share. The gross proceeds from the
offering were approximately $69.1 million while the Company incurred $5.1 million in capital issuance expenses. The offering was made pursuant to a
shelf registration statement on Form S-3 (File No. 333-249419) that was previously filed with the Securities and Exchange Commission (the “SEC”) on
October 9, 2020 and declared effective on October 16, 2020. It was also publicly released on the ASX. The final prospectus supplement relating to and
describing the terms of the offering was filed with the SEC on February 25, 2021 (in the United States) and released on the ASX on March 1, 2021 (in
Australia).
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Table of Contents
During the year ended June 30, 2020, the AVITA Group raised additional capital via a private placement in the amount of $81.7 million (through our
former parent company, AVITA Medical). The Company sold the equivalent of 2,033,898 ordinary shares at an issue price of $40.17 per share for total net
proceeds of $76.6 million, after deducting commission and offering expenses. An aggregate of the equivalent of 15,853 ordinary shares were issued to the
directors of the Company in lieu of director fees during the year ended June 30, 2020, under the Director Share Plan that was approved in December 2017.
During the year ended June 30, 2019, the AVITA Group completed a series of equity transactions (through our former parent company, AVITA
Medical). The second tranche of the June 2018 Placement (defined below) closed on July 27, 2018, raising an aggregate of $2.4 million through the
issuance of the equivalent of 650,000 shares at $3.70 per share. During December 2018, AVITA Medical entered into a placement agreement to raise
$28.8 million over two tranches. AVITA Medical completed the first tranche on December 10, 2018 and issued the equivalent of 3,100,471 shares at a price
of $5.76 per share raising gross proceeds of $17.9 million. The settlement of the second tranche for $10.9 million was approved by the shareholders at an
extraordinary meeting held during January 2019. The second tranche closed on January 18, 2019 and raised gross proceeds of $10.9 million through the
sale of the equivalent of 1,899,530 shares at the same price as the first tranche, being $5.76 per share. In addition, on January 10, 2019, AVITA Medical
completed a Share Purchase Plan under which AVITA Medical offered to existing eligible shareholders the opportunity to purchase shares at a purchase
price equivalent to $5.74 per share. As part of the Share Purchase Plan AVITA Medical received gross proceeds of $1.3 million for the issuance of the
equivalent of 220,612 shares.
12. Revenue
The Company’s revenue consists of sale of the RECELL System to hospitals or other treatment centers and to BARDA (collectively
“customers”), predominately in the United States. In addition, the Company records service revenue for the emergency preparedness services provided to
BARDA.
Performance Obligations
For commercial contracts, we identified the hospital or treatment center as the customer in Step 1 of the ASC 606 5 step model and have
determined a contract exists with those customers in Step 1. As these contracts typically have a single performance obligation (i.e. product delivery), no
allocation of the transaction price is required in Step 4 of the model. Control of the product is transferred to the customer at a point in time. Specifically, we
determined the customer obtains control of the product at point in time at which the goods are either shipped or delivered to our customers’ facilities,
depending on the terms of the contract. The transaction price is stated within the contract and is therefore fixed consideration. The transaction price does
not include the sales tax that are imposed by governmental authorities.
For the contract with BARDA, the Company identified two performance obligations (i) the procurement of 5,614 RECELL units, (ii) emergency
preparedness services. The Company’s performance obligations are either satisfied at a point in time or over time as services are provided. The product
procurement performance obligation is satisfied at a point in time, upon transfer of control of the product. RECELL units that have been delivered to
BARDA have a product replacement obligation at no cost to BARDA due to product’s limited shelf-life. The estimated cost of the expired inventory over
the term of the contract is recognized on a per unit basis at the time of delivery. The liability is released upon replacement of the product along with a
corresponding reduction to inventory. The Company has estimated deferred cost of approximately $343,000 and $0 as of June 30, 2021 and 2020,
respectively, for the rotation cost of the product. Such amounts are recorded in other current liabilities and other long-term liabilities in the amounts of
$77,000 and $266,000, respectively. The emergency preparedness services performance obligation is satisfied over time. Revenue for the emergency
deployment will be recognized on a straight-line basis during the term of the contract as services are consumed over time. Services recognized for the year
ended June 30, 2021 of $154,000 and are included in sales within the consolidated statement of operations. For the years ended June 30, 2020 and 2019,
the Company did not have any service revenue with BARDA. Contract costs to fulfil the performance obligation are incremental and expected to be
recovered are capitalized and amortized on a straight-line basis over the term of the contract. As of June 30, 2021 and June 30, 2020 contract costs of
$613,000 and $0 are included in other long-term assets, respectively.
Remaining Performance Obligations
Revenues from remaining performance obligations are calculated as the dollar value of the remaining performance obligations on executed
contracts. The estimated revenue expected to be recognized in the future related to performance obligations that are unsatisfied (or partially unsatisfied)
pursuant to the Company’s existing customer agreements is $1.1 million, $435,000 and $429,000 as of June 30, 2021, 2020 and 2019,
respectively. Approximately $665,000 of this amount relates to our July 2020 contract with BARDA for the purchase, delivery and storage of RECELL
Systems for emergency response preparedness for a period of three years. The Company expects to recognize this amount as services are provided to
BARDA. For the remaining balance of $435,000 the Company expects to recognize revenue upon receiving Japanese Pharmaceuticals and Medical Device
Act approval of the RECELL System in Japan. For the contract with BARDA, we recognized $7.6 million of revenue for the RECELL product and
$154,000 of service revenue related to the emergency readiness performance obligation during the year ended June 30, 2021. There were no purchases by
BARDA during the years ended June 30, 2020 and 2019. We are contracted to manage this inventory of product until the federal government requests
shipment or at contract termination on December 31, 2023.
F-21
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Variable Consideration
The Company evaluates its contracts with customers for forms of variable consideration, which may require an adjustment to the transaction
price based on their estimated impact. For commercial customers, revenue from the sale of goods is recognized net of volume discounts. The Company
uses the expected value method when estimating variable consideration. Revenue is only recognized to the extent that it is probable that a significant
reversal will not occur. Variable consideration under the BARDA contract is not material to the consolidated financial statements.
Volume Discounts — The Company generally provides contracted customers with volume discounts that are explicitly stated in the Company’s
customer contracts. The RECELL system is sold with respective volume discounts based on aggregated sales over a 12-month period on a customer-by-
customer basis. Revenue from these sales is recognized based on the price specified in the contract, net of estimated volume discounts, and net of any sales
tax charged. Goods sold are not eligible for return. The Company has determined such discounts are not distinct from the Company’s sale of products to the
customer and, therefore, these payments have been recorded as a reduction of revenue and as a reduction to accounts receivable, net.
Contract Assets and Contract Liabilities
Contract assets include amounts related to the Company’s contractual right to consideration for both completed and partially completed
performance for which the Company does not have the right to payment. As of the period ended June 30, 2021 and 2020, the Company does not have any
contract assets.
Contract liabilities are recorded when the Company receives payment prior to satisfying its obligation to transfer goods to a customer. The
Company had $1.1 million, $435,000 and $429,000 of contract liabilities as of June 30, 2021, 2020 and 2019, respectively. The increase in contract liability
primarily relates to the unsatisfied performance obligation for emergency preparedness under the BARDA contract. Performance obligation will be
recognized over time over the term of the contract. For the years ended June 30, 2021 and 2020, revenue recognized from amounts included in the
beginning balance of contract liabilities was not significant.
Cost to Obtain and Fulfill a Contract
Contract fulfillment costs include commissions and shipping expenses. The Company has opted to immediately expense the incremental cost of
obtaining a contract when the underlying related asset would have been amortized over one year or less. The Company generally does not incur costs to
obtain new contracts.
Contract Costs
Cost to fulfil the BARDA emergency preparedness performance obligation, which primarily consist of billed costs to BARDA incurred in
connection with the emergency deployment services, are incremental and expected to be recovered. Costs are capitalized and amortized on a straight-line
basis over the term of the contract. As of June 30, 2021 and 2020, the Company had $613,000 and $0 of contracts costs included in other long-term
assets. Amortization expense related to deferred contract costs were $129,000 , $0, and $0 during year ended June 30, 2021, 2020 and 2019, respectively,
and are classified as cost of sales on the accompanying consolidated Statements of Operations. There was no impairment loss in relation to
deferred contract costs during year ended June 30, 2021.
Disaggregated Revenue
The Company disaggregates revenue from contracts with customers into geographical regions and by customer type. As noted in the segment
footnote, the Company’s business consists of one reporting segment. A reconciliation of disaggregated revenue by geographical region and customer type
is provided in Segment Note 9.
F-22
Table of Contents
13. Share-Based Payment Plans
Overview of Employee Share-Based Compensation Plans
In November 2014, our former parent company, AVITA Medical, adopted the Employee Share Plan and the Incentive Option Plan (collectively,
the “2016 Plans”). Upon completion of the Redomiciliation, the 2016 Plans were terminated with respect to future grants and accordingly, there are no
more shares available to be issued under the 2016 Plans. In addition, upon completion of the Redomiciliation, the Company had an implicit consolidation
or reverse stock split of 100-1 and all share information presented below has been presented on a reverse split stock basis. During November 2020, the
Company, pursuant to Rule 416 under the Securities Act of 1933, filed a registration statement on form S-8 to register a total of 1,750,000 shares of
common stock which may be issued pursuant to the terms of the Company’s 2020 Omnibus Incentive Plan (“2020 Plan”).
The 2020 Plan provides for the grant of the following Grants: (a) Incentive Stock Options, (b) Nonstatutory Stock Options, (c) Stock
Appreciation Rights, (d) Restricted Stock Grants, (e) Restricted Stock Unit Grants, (f) Performance Grants, and (g) Other Grants. The 2020 Plan will be
administered by the Compensation Committee or by the Board acting as the Compensation Committee. Subject to the general purposes, terms and
conditions of the 2020 Plan, Applicable Law and any charter adopted by the Board governing the actions of the Compensation Committee, the
Compensation Committee will have full power to implement and carry out the 2020 Plan. Without limitation, the Compensation Committee will have the
authority to, interpret the plan, approve persons to receive grants, determine the terms and number of shares of the grants, determine vesting and
exercisability of grants, and make all other determinations necessary or advisable in connection with the administration of this Plan.
The contractual term of awards granted under the 2020 Plan is ten years from the date of its grant. Unless otherwise specified, the vesting period
of awards under the 2020 Plan was: (i) vest over a four year period in four equal installments, 25% at the end of each year from the date of grant, and /or
(ii) subject to other performance criteria and hurdles, as determined by the Compensation Committee.
The following table summarizes information about the Company’s share-based award plans as of June 30, 2021:
2016 Plan
RSU Awards
2020 Plan
Share-Based Payment Expenses
Outstanding Options
1,058,295
-
435,200
Outstanding
Restricted Stock
Units
Shares available for
future issuance
-
95,014
5,000
-
-
1,309,800
Share-based payment transactions are recognized as compensation expense based on the fair value of the instrument on the date of grant. The
Company uses the graded-vesting method to recognize compensation expense. Compensation cost is reduced for forfeitures as they occur in accordance
with ASU 2016-09, Simplifying the Accounting for Share-Based Payments ("ASU 2016-09"). During the years ended June 30, 2021, 2020 and 2019, the
Company recorded share-based compensation expense of $5.7 million, $16.5 million, and $1.9 million, respectively. No income tax benefit was recognized
in the consolidated statement of operations for share-based payment arrangements for June 30, 2021, 2020 and 2019.
The Company has included share-based compensation expense as part of operating expenses in the accompanying consolidated statements of
operations as follows (in thousands):
Sales and marketing expenses
General and administrative expenses
Research and development expenses
Total
2021
Year ended June 30,
2020
2019
$
$
925 $
4,095
644
5,664 $
893 $
14,890
703
16,486 $
296
1,518
132
1,946
F-23
Table of Contents
A summary of share option activity as of June 30, 2021 and changes during the year then ended is presented below:
Outstanding shares at June 30, 2020
Granted
Exercised
Expired
Forfeited
Outstanding shares at June 30, 2021
Exercisable at June 30, 2021
Service Only
Share
Options
Performance
Based Share
Options
Total Share
Options
Weighted-
Average
Exercise
Price
904,353
229,500
(13,859)
(20,690)
(101,478)
997,826
449,599
356,171
207,500
(500)
(45,002)
(22,500)
495,669
283,769
1,260,524 $
437,000
(14,359)
(65,692)
(123,978)
1,493,495
733,368 $
14.72
21.37
7.77
36.44
29.45
14.53
8.97
Weighted-
Average
Remaining
Contractual
Term (in years)
8.42
Aggregate
Intrinsic Value
$
22,185,034
7.99
7.06
12,233,949
$
9,412,064
The weighted-average grant-date fair value of options granted during the years 2021, 2020, and 2019 was $14.08, $26.56, and $6.67,
respectively. The total intrinsic value of options exercised during the years ended June 30, 2021, 2020 and 2019 was $221,000, $3.1 million, and $1.7
million, respectively. Intrinsic value is measured using the fair market value at the date of exercise for options exercised, or at June 30 for outstanding
options, less the applicable exercise price.
Cash received from the exercise of options was approximately $63,000 and $474,000 and $252,000 for the year ended June 30, 2021, 2020 and
2019, respectively.
As of June 30, 2021, there was approximately $7.0 million of total unrecognized compensation cost related to share-based compensation
expense. Of this amount $4.5 million relates to service only share options to be recognized over a weighted average period of 1.57 years and $2.5 million
related to performance-based share options to be recognized over a weighted average period of 2.14 years.
Option Pricing Model
The Company estimates the fair value of tenure-based share options using the Black-Scholes option pricing model on the date of grant. The
Company estimates the fair value of options with a performance condition using the Monte-Carlo simulation model.
The valuation of the options is affected by the Company's share price as well as assumptions regarding a number of highly complex and
subjective variables. These variables include, but are not limited to, expected share price volatility over the term of the awards and actual and projected
employee share option exercise behaviors. The risk-free rate is based on the U.S. Treasury rate for the expected life at the time of grant, volatility is based
on the average historical and implied volatility and the expected life is based on the estimated average of the life of options using the simplified method as
prescribed by SAB 107. The Company utilizes the simplified method to determine the expected life of the options due to insufficient exercise activity
during recent years. The expected dividend assumption is based on the Company’s history and expectation of dividend payouts.
Included in the following table is a summary of the grant-date fair value of share options granted and the related assumptions used in the Black-
Scholes Option pricing model and Monte-Carlo simulation in fiscal year 2021 and the Binomial models for share options granted in 2020, and 2019.
Expected volatility
Weighted-average volatility
Expected dividends
Expected term (in years)
Risk-free interest rate
2021
65% - 80%
73%
0%
5 - 10
0.77% - 1.64%
Year Ended June 30,
2020
2019
75% - 90%
88%
0%
90%
90%
0%
10
0.68% - 2.65%
10
1.50% - 2.65%
F-24
Table of Contents
Restricted Stock Units
Restricted stock units (“RSUs”) are granted to executives as part of their long-term incentive compensation. RSUs granted prior to the current year
and under the 2020 Plan, arise out of contracts between the Company and the holders of such securities. These RSU awards were approved by the
Compensation Committee as determined necessary. They have a contractual term of 10 years and vest in accordance with the tenure or performance
conditions as determined by the Compensation Committee. The grant date fair value is determined based on the price of the Company stock price on the
date of grant (stock price determined on NASDAQ post redomiciliation and ASX prior to the redomiciliation). RSUs primarily consist of awards to the
CEO and other executives. The CEO RSU awards are described below:
CEO RSUs
On November 30, 2017, the equivalent of 500,000 RSUs were issued to the CEO. As of June 30, 2020, 83,333 of these RSUs with a performance
condition of procurement of the RECELL system to BARDA were outstanding. This performance condition was satisfied during the year and awards were
released to the CEO. As of June 30, 2021, no grants remain outstanding for this award date.
On November 2019,the equivalent of 395,542 RSUs were issued to the CEO with the following vesting terms:
a)
b)
Tenure – the equivalent of 142,521 RSUs with a vesting period of three-years commencing on June 1, 2020.
Milestone performance – 253,021 of the RSUs will vest upon satisfaction of the following milestones:
a.
b.
c.
d.
e.
First patient visit for treatment in an FDA approved U.S. soft tissue and trauma trial by the Company prior to March 3,
2020. – Performance criteria was satisfied in the prior year
First patient visit for treatment in an FDA approved U.S pediatric trial by the Company prior to June 30, 2020. –
Performance criteria was satisfied in the prior year
First patient visit for treatment in an FDA approved U.S pilot vitiligo trial by the Company prior to September 30, 2020. -
Performance criteria was satisfied in the current year and award appropriately released.
FDA application submission for approval of the next generation RECELL device prior to June 30, 2021. – Satisfaction of
the performance criteria is pending ratification by the Compensation Committee once this is approved by the Compensation
Committee the awards will be released to the CEO.
FDA approval of the next generation RECELL device prior to June 30, 2022. – Performance criteria has been assessed as
not probable.
As of June 30, 2021, a total of 47,507 tenure based RSU awards and 47,507 performance based RSU awards from the above CEO November 2019
grant date remain outstanding.
A summary of the status of the Company’s unvested RSUs as of June 30, 2021, and changes that occurred during the year is presented below:
Unvested Shares
Unvested RSUs outstanding at June 30, 2020
Granted
Vested
Forfeited
Unvested RSUs outstanding at June 30, 2021
Service Condition
RSU
Performance Condition
RSU
Total RSU's
Weighted Average
Grant Date Fair
Value per Unit
95,013
-
(47,506)
-
47,507
244,346
5,000
(151,837)
(45,002)
52,507
339,359 $
5,000
(199,343)
(45,002)
100,014 $
30.70
22.65
24.62
40.04
38.17
The weighted-average grant-date fair value of the RSUs granted during 2021, 2020 and 2019 was $22.65, $39.12 and $0 per unit, respectively. The
total fair value of shares vested during the years ended June 30, 2020, 2019 and 2018 was $4.9 million, $9.2, and $0, respectively.
As of June 30, 2021, there was $1.6 million of total unrecognized compensation cost related to unvested share-based compensation arrangements
granted under the RSU award agreements. This amount includes $926,000 for performance share awards that have been determined to be not probable. The
associated expense will be recognized if the performance conditions is determined
F-25
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to be probable. The remaining unrecognized expense of $722,000 is expected to be recognized over a weighted average period of 0.87 years .
14. Income Taxes
Geographic sources of income (loss) from continuing operations before income taxes are as follows:
(amounts in thousands)
United States
Foreign
Income (loss) from continuing operations before
income taxes
Year Ended
June 30,
2021
Year Ended
June 30,
2020
Year Ended
June 30,
2019
$
(26,478) $
(67)
(20,793) $
(21,233)
(19,899)
(5,324)
$
(26,545) $
(42,026) $
(25,223)
The income tax benefit (expense) as shown in the accompanying consolidated statements of operations includes the following:
(amounts in thousands)
Current:
Federal
State
Foreign
Deferred:
Federal
State
Foreign
Total Income Tax Expense (Benefit)
Year Ended
June 30,
2021
Year Ended
June 30,
2020
Year Ended
June 30,
2019
$
$
— $
38
—
38
—
—
—
—
38 $
— $
4
—
4
—
—
—
—
4 $
—
—
(121)
(121)
—
—
—
—
(121)
The provision for income taxes differs from the tax computed using the statutory United States federal income tax rate of 21%, 21% and 21% for
June 30, 2021,2020, and 2019 as a result of the following items:
(amounts in thousands)
Tax expense (benefit) at U.S. statutory rate
State income taxes
Foreign rate differential
Tax Credits
Share-based compensation
Permanent differences
Change in tax rate
Net change in valuation allowance
Income tax expense (benefit)
Year Ended
June 30,
2021
Year Ended
June 30,
2020
Year Ended
June 30,
2019
$
$
(5,574) $
36
(5)
—
(27)
233
—
5,375
38 $
(8,827) $
4
(1,389)
—
(3,794)
669
—
13,341
4 $
(5,297)
—
(299)
(121)
535
84
—
4,977
(121)
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Table of Contents
A summary of deferred income tax assets is as follows (in thousands):
Deferred tax liabilities
ROU Asset
Property, plant and equipment
Total deferred tax liabilities
Deferred tax assets
Property, plant and equipment
Accrued expenses
Intangible assets
Stock based compensation
Lease liability
Net operating loss carryforward
Other
Total deferred tax assets
Less valuation allowance
Net deferred tax assets
Net deferred tax assets / (liabilities)
Year Ended
June 30,
2021
Year Ended
June 30,
2020
$
$
$
$
$
$
(389) $
(5)
(394) $
— $
686
262
3,215
415
44,282
609
49,469 $
(49,075)
394 $
— $
(608)
(608)
17
564
255
2,996
634
37,756
285
42,507
(41,899)
608
—
At June 30, 2021, the Company and its subsidiaries had net operating loss carryforwards for federal, state, United Kingdom, and Australia income
tax purposes of $111.8 million, $66.5 million, $32.8 million and $38.2 million respectively. The net operating loss carryforwards may be subject to
limitation regarding their utilization against taxable income in future periods due to “change of ownership” provisions of the Internal Revenue Code and
similar state and foreign provisions. Of these carryforwards, $21.7 million will expire, if not utilized, between 2026 through 2038. The remaining
carryforwards have no expiration.
In assessing the recoverability of its deferred tax assets, the Company considers whether it is more likely than not that its deferred assets will be
realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income in those periods in which temporary
differences become deductible and/or net operating losses can be utilized. The Company considers all positive and negative evidence when determining the
amount of the net deferred tax assets that are more likely than not to be realized. This evidence includes, but is not limited to, historical earnings, scheduled
reversal of taxable temporary differences, tax planning strategies and projected future taxable income. Based upon the weight of available evidence
including the uncertainty regarding the Company’s ability to utilize certain net operating losses and tax credits in the future, the Company has established a
valuation allowance against its net deferred tax assets of $49.1 million and $41.9 million as of June 30, 2021 and 2020, respectively. The deferred tax assets
are primarily net operating loss carryforwards for which management has determined it is more likely than not that the deferred tax assets will not be
realized.
The Company recognizes the tax benefit from an uncertain tax positions only if it is more likely than not that the tax position will be sustained on
examination by the taxing authorities based on the technical merits of the position. The tax benefits recognized in the consolidated financial statements
related to a particular tax position are measured based on the largest benefit that has a greater than a 50% likelihood of being realized upon settlement. The
amount of unrecognized tax benefits is adjusted as appropriate for changes in facts and circumstances, such as significant amendments to existing tax law,
new regulations or interpretations by the taxing authorities, new information obtained during a tax examination, or resolution of an examination.
The Company has not identified any uncertain tax positions as of June 30, 2021 or June 30, 2020.
The Company files income tax returns in the U.S. federal, California and certain other state and foreign jurisdictions. The Company remains subject
to income tax examinations for its U.S. federal and state income taxes generally for fiscal years ended June 30, 2006 and forward. The Company also
remains subject to income tax examinations for international income taxes for fiscal years ended June 30, 2017 through June 30, 2020, and for certain other
U.S. state and local income taxes generally for the fiscal years ended June 30, 2017 through June 30, 2020.
The Tax Cuts and Jobs Act (“the Tax Act”) was enacted on December 22, 2017 and reduced U.S. corporate income tax rates to 21% as of January 1,
2018. The rate change became effective during tax year June 30, 2018, resulting in a blended statutory tax rate of 28% and a decrease in the Company’s
deferred tax assets and the associated valuation allowance in tax year June 30, 2018.
F-27
Table of Contents
On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) was enacted in the United States. The CARES Act
provides numerous tax provisions and other stimulus measures, including temporary changes regarding the prior and future utilization of net operating
losses and technical corrections from prior tax legislation for tax depreciation of certain qualified improvement property. The Company evaluated the
provisions of the CARES Act and does not anticipate the associated impacts, if any, will have a material effect on our financial position.
On December 27, 2020, the Consolidated Appropriations Act, 2021 (CAA 2021) was signed into law which included a number of provisions
including, but not limited to the extension of numerous CARES Act provisions such as employment tax credits and enhanced business meals deductions.
Accordingly, the effects of the CCA have been incorporated into the income tax provision computation for the year ended June 30, 2021. These provisions
did not have a material impact on the income tax provision.
15. Loss per Share
The following is a reconciliation of the basic and diluted loss per share computations:
Net Loss
Weighted-average common shares—outstanding, basic
Weighted-average common shares—outstanding, diluted
Net loss per common share, basic
Net loss per common share, diluted
2021
Year Ended June 30,
2020
2019
(in thousands, except per share amounts)
26,583 $
22,674
22,674
1.17 $
1.17 $
42,030 $
20,291
20,291
2.07 $
2.07 $
25,102
16,065
16,065
1.56
1.56
$
$
$
The Company’s basic net loss per share is calculated by dividing the net loss by the weighted-average number of shares of common stock
outstanding for the relevant period. For the purposes of the calculation of diluted net loss per share options to purchase common stock, restricted stock units
and unvested shares of common stock issued upon the early exercise of stock options have been excluded from the calculation of diluted net loss per share
as their effect is anti-dilutive. Because the Company has reported a net loss for the years ended June 30, 2021, 2020 and 2019, diluted net loss per common
share is the same as the basic net loss per share for those years.
16. Retirement Plans
The Company offers a 401(k)-retirement savings plan (the “401(k) Plan”) for its employees, including its executive officers, who satisfy certain
eligibility requirements. The Internal Revenue Code of 1986, as amended, allows eligible employees to defer a portion of their compensation, within
prescribed limits, on a pre-tax basis through contributions to the 401(k) Plan. The Company matches contributions to the 401(k) Plan based on the amount
of salary deferral contributions the participant makes to the 401(k) Plan. The Company will match up to 6% of an employee’s compensation that the
employee contributes to his or her 401(k) Plan account. Total Company matching contributions to the 401(k) Plan were $733,000, $713,000 and $ 594,000
in the years ended June 30, 2021, 2020 and 2019, respectively.
17. Deed of Cross Guarantee
The Company (as the parent entity of the AVITA Group) is party to a deed of cross guarantee dated June 29, 2020 (“Deed”) with each of its
Australian wholly-owned subsidiaries, namely:
•
•
•
•
AVITA Medical Pty Ltd (ACN 058 466 523;
C3 Operations Pty Ltd (ACN 090 161 505);
Visiomed Group Pty Ltd (ACN 003 010 580); and
Infamed Pty Limited (ACN 084 800 653),
(together, the “Australian Subsidiaries”).
The Company and the Australian Subsidiaries were the only parties to the Deed at June 30, 2021 and comprise the “closed group” for the purposes
of the Deed (and also the “extended closed group”). No parties were added to or removed from the Deed, or subject to a notice of disposal, during or since
the financial year ended June 30, 2021. Since June 30, 2021, there has been no change in ownership of any of the Australian Subsidiaries.
F-28
Table of Contents
By entering into the Deed, the Company and the Australian Subsidiaries have guaranteed the debts of each other.
Relief under ASIC Corporations (Wholly-owned Companies) Instrument 2016/785
By entering into the Deed, the Australian Subsidiaries have been relieved from the requirement to prepare a financial report and directors’ report for
the financial year ended June 30, 2021 under ASIC Corporations (Wholly-owned Companies) Instrument 2016/785.
Consolidated financial information of parties to the Deed
The financial statements below are additional disclosure items specifically required by the Australian Securities and Investments Commission and
represent the consolidated financial statements of the entities that are party to the Deed only (being the ‘closed group’ and also the ‘extended closed group’
under the Deed).
(in thousands)
Revenues
Cost of sales
Gross profit
Operating Expenses:
Sales and marketing expenses
General and administrative expenses
Product development expense
Total operating expenses
Other Income
Net loss
(in thousands)
ASSETS
Cash
Accounts receivable, net
Prepaids and other current assets
Inventory
Total assets
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable and accrued liabilities
Accrued wages and fringe benefits
Other current liabilities
Total liabilities
Contributed equity
Reserves
Accumulated deficit
Total stockholders' equity (deficit)
Total liabilities and stockholders' equity (deficit)
F-29
Year Ended
June 30,
2021
380
(75)
305
(208)
(182)
1
(389)
3
(81)
As of June 30,
2021
223
5
2,312
32
2,572
12
84
2,455
2,551
232,747
31,803
(264,529)
21
2,572
$
$
$
$
Table of Contents
18. Quarterly Results (Unaudited)
(in thousands, except per share data)
Quarter ended
Revenues
Cost of sales
Gross profit
BARDA income
Operating Expenses:
Sales and marketing expenses (1)
General and administrative expenses (1)
Research and development expenses (1)
Total operating expenses
Operating loss
Interest expense
Other income/(expense)
Loss before income taxes
Income tax benefit (expense)
Net loss
Net loss per common share:
Basic
Diluted
Weighted-average common shares:
Basic
Diluted
September 30,
December 31,
2020
2020
March 31,
2021
June 30,
2021
$
$
$
$
5,060 $
(929)
4,131
596
(3,265)
(8,302)
(3,374)
(14,941)
(10,214)
(7)
4
(10,217)
(10)
(10,227) $
5,103
$
(821)
4,282
449
(3,600)
(3,401)
(3,361)
(10,362)
(5,631)
(3)
4
(5,630)
(11)
(5,641) $
8,765
$
(2,146)
6,619
570
(3,649)
(5,422)
(4,109)
(13,180)
(5,991)
(3)
7
(5,987)
(10)
(5,997) $
10,304
(2,053)
8,251
440
(4,146)
(5,275)
(3,974)
(13,395)
(4,704)
(9)
2
(4,711)
(7)
(4,718)
(0.48) $
(0.48) $
(0.26) $
(0.26) $
(0.26) $
(0.26) $
(0.19)
(0.19)
21,503,643 21,623,509
21,503,643 21,623,509
22,734,335
22,734,335
24,860,738
24,860,738
(in thousands, except per share data)
Quarter ended
Revenues
Cost of sales
Gross profit
BARDA income
Operating Expenses:
Sales and marketing expenses (1)
General and administrative expenses (1)
Research and development expenses (1)
Total operating expenses
Operating loss
Interest expense
Other income/(expense)
Loss before income taxes
Income tax benefit (expense)
Net loss
Net loss per common share:
Basic
Diluted
Weighted-average common shares:
Basic
Diluted
September 30,
December 31,
2019
2019
March 31,
2020
June 30,
2020
$
$
$
$
$
3,250
(619)
2,631
2,051
(3,099)
(3,422)
(1,819)
(8,340)
(3,658)
(11)
103
(3,566)
0
(3,566) $
$
3,259
(846)
2,413
386
$
3,877
(634)
3,243
1,008
(3,972)
(7,107)
(2,312)
(13,391)
(10,592)
(9)
99
(10,502)
0
(4,375)
(12,787)
(2,495)
(19,657)
(15,406)
(5)
363
(15,048)
0
(10,502) $
(15,048) $
3,877
(874)
3,003
481
(4,260)
(9,709)
(2,538)
(16,507)
(13,023)
(8)
121
(12,910)
(4)
(12,914)
(0.19) $
(0.19) $
(0.53) $
(0.53) $
(0.71) $
(0.71) $
(0.60)
(0.60)
18,719,857
18,719,857
19,877,676
19,877,676
21,215,246
21,215,246
21,372,892
21,372,892
(1) After the issuance of the consolidated financial statements for the year ended June 30, 2020, and the quarter ended September 30, 2020, the
Company concluded that the presentation of share-based compensation should be reclassified to the functional expense line items consistent with
cash compensation in accordance with SAB Topic 14. The Company has determined that
F-30
Table of Contents
such change in presentation of prior period amounts in the Statement of Operations is not material to the consolidated financial statements. The
following amounts have been reclassified in each of the quarters.
Quarter-ended September 30, 2019 Quarter-ended December 31, 2019
As
previously
reported
Amount
reclassified
As
Reported
As
previously
reported
Amount
reclassified
As
Reported
Quarter-ended March 31, 2020
As
previously
reported
Amount
reclassified
As
Reported
(2,962) $
(137) $ (3,099) $
(3,738) $
(234) $ (3,972) $
(4,162) $
(213) $ (4,375)
(3,071)
(351)
(3,422)
(4,558)
(2,549)
(7,107)
(4,145)
(8,642)
(12,787)
(1,635)
(184)
(1,819)
(2,192)
(120)
(2,312)
(2,302)
(193)
(2,495)
(672)
(8,340)
(3,658)
(3,566)
(3,566)
672
-
-
-
(8,340)
(3,658)
(2,903)
(13,391)
(10,592)
2,903
-
-
-
(13,391)
(10,592)
(9,048)
(19,657)
(15,406)
9,048
-
-
-
(19,657)
(15,406)
-
-
(3,566)
(3,566)
(10,502)
(10,502)
-
-
(10,502)
(10,502)
(15,048)
(15,048)
-
-
(15,048)
(15,048)
$
(in thousands)
Sales and marketing
expense
General and
administrative expense
Research and
development expense
Share-based
compensation
Total operating expenses
Operating loss
Loss before income
taxes
Net Loss
Quarter-ended June 30, 2020
Quarter-ended September 30, 2020
As previously
reported
$
(3,951)
(6,361)
(2,332)
(3,863)
(16,507)
(13,023)
(12,910)
(12,914)
Amount
reclassified
$
(309)
(3,348)
(206)
3,863
-
-
-
-
As
Reported
(4,260)
$
(9,709)
(2,538)
-
(16,507)
(13,023)
(12,910)
(12,914)
As
previously
reported
$
(2,935)
(5,536)
(3,204)
(3,266)
(14,941)
(10,214)
(10,217)
(10,227)
Amount
reclassified
$
(330)
(2,766)
(170)
3,266
-
-
-
-
As
Reported
$
(3,265)
(8,302)
(3,374)
-
(14,941)
(10,214)
(10,217)
(10,227)
(in thousands)
Sales and marketing expense
General and administrative expense
Research and development expense
Share-based compensation
Total operating expenses
Operating loss
Loss before income taxes
Net Loss
19. Subsequent Events
The Company has considered all events occurring subsequent to June 30, 2021 and has concluded that all significant events have been disclosed in
the financial statements and accompanying notes.
F-31
Delaware
The First State
Exhibit 3.2
Page 1
I, JEFFREY W. BULLOCK, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO
HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF
AMENDMENT OF “AVITA THERAPEUTICS, INC.”, CHANGING ITS NAME FROM "AVITA
THERAPEUTICS, INC." TO "AVITA MEDICAL, INC.", FILED IN THIS OFFICE ON THE
SECOND DAY OF DECEMBER, A.D. 2020, AT 8:40 O`CLOCK A.M.
7906862 8100
SR# 20208532389
Authentication: 204206702
Date: 12-02-20
You may verify this certificate online at corp.delaware.gov/authver.shtml
AVITA THERAPEUTICS, INC.
CERTIFICATE OF AMENDMENT OF
CERTIFICATE OF INCORPORATION
State of
Delaware
Secretary of
State Division
of Corporations
Delivered 08:40
AM 12/02/2020
FILED
08:40AM
12/02/2020
SR
20208532389 -
File Number
7906862
Avita Therapeutics, Inc. (the "Corporation"), a corporation organized and existing under and by virtue of the
General Corporation Law of the State of Delaware (the "DGCL"), for the purpose of amending its Certificate of
Incorporation, hereby certifies as follows:
FIRST: That by resolution of the Board of Directors of the Corporation setting forth a proposed amendment of
the Certificate of Incorporation of the Corporation, the Board of Directors declared said amendment to be advisable and
authorized, approved and adopted said amendment. The resolution setting forth the proposed amendment is as follows:
NOW, THEREFORE, BE IT RESOLVED, that Section 1.01 of Article 1 of the Certificate of Incorporation
shall be amended in its entirety to read as follows:
"SECTION 1.01 Name. The name of the Corporation is "AVITA Medical, Inc." (the "Corporation")."
SECOND: That said amendment of the Certificate of Incorporation of the Corporation herein certified was duly
adopted pursuant to the provisions of Section 242 of the DGCL.
IN WITNESS WHEREOF, the Corporation has caused this Certificate of Amendment to be executed on this 25th
day of November, 2020.
AVITA THERAPEUTICS, INC.
THIRD AMENDMENT TO LEASE
Exhibit 10.10
THIS THIRD AMENDMENT TO LEASE AGREEMENT (the “Amendment”) is entered into as of the 17th day of November, 2020, by and
between RIF III – Avenue Stanford, LLC, a California limited liability company (“Landlord”) and Avita Medical Americas, LLC, a Delaware limited
liability company (“Tenant”).
W I T N E S S E T H:
WHEREAS, Landlord and Tenant have entered into a Lease dated October 3, 2016, as amended by that certain First Amendment to Lease, dated
as of December 14, 2016, and as amended by that certain Second Amendment to Lease, dated as of December 4, 2017 (as amended, the “Existing Lease”)
pursuant to which Landlord leased to Tenant certain premises consisting of approximately 17,465 square feet located at 28159 Avenue Stanford, Suites 200
and 220, Valencia, California, 91355 (the “Premises”), such Existing Lease, as heretofore modified, being herein referred to as the “Lease”.
WHEREAS, the current Expiration Date of the Lease is January 31, 2021. Landlord and Tenant desire to modify the Lease to, among other
things, extend the term of the Lease, on the terms and conditions set forth below.
A G R E E M E N T:
NOW THEREFORE, in consideration of the Premises and the mutual covenants hereinafter contained, the parties hereto agree as follows:
1.
The Lease Term is extended such that the Lease shall terminate on July 31, 2022 (the “Third Extension Term”). The monthly Base Rent
during the Third Extension Term shall be as follows:
Period
February 1, 2021 – January 31, 2022
February 1, 2022 – July 31, 2022
Monthly Base Rent
$33,183.50
$34,179.01
2.
3.
Except as otherwise expressly provided herein, all defined terms used in this Amendment shall have the same respective meanings as are
provided for such defined terms in the Lease. Tenant shall accept the Premises in its “as is” condition, without any representations or
warranties, and shall pay increases in Common Area Operating Expenses, over the Base Years as provided in the Lease during the Third
Extension Term.
Landlord’s address for notice purposes is hereby amended as follows: Any notices or demands directed to Landlord shall be delivered to
Rexford Industrial Realty, L.P., 11620 Wilshire Boulevard, Suite 1000, Los Angeles, California, 90025; Tel. 310.966.1680, Fax
310.966.1690; Attn.: General Counsel,
INITIALS
DLanzer@rexfordindustrial.com.
4.
5.
6.
7.
8.
9.
Tenant warrants, represents and certifies to Landlord that as of the date of this Amendment, (i) Landlord is not in default under the Lease,
(ii) Tenant does not have any defenses or offsets to payment of rent and performance of its obligations under the Lease as and when the
same become due; and (iii) Tenant has no remaining renewal, extension or termination options or rights of first offer or first refusal.
Tenant represents and warrants that it has dealt with no broker, agent or other person in connection with this transaction and that no broker,
agent or other person brought about this transaction, other than CBRE, Inc., and Tenant agrees to indemnify and hold Landlord harmless
from and against any claims by any other broker, agent or other person claiming a commission or other form of compensation by virtue of
having dealt with Tenant with regard to this leasing transaction.
Insofar as the specific terms and provisions of this Amendment purport to amend or modify or are in conflict with the specific terms,
provisions and exhibits of the Lease, the terms and provisions of this Amendment shall govern and control; in all other respects, the terms,
provisions and exhibits of the Lease shall remain unmodified and in full force and effect.
Landlord and Tenant hereby agree that (i) this Amendment is incorporated into and made a part of the Lease, (ii) any and all references to
the Lease hereinafter shall include this Amendment, and (iii) the Lease and all terms, conditions and provisions of the Lease are in full
force and effect as of the date hereof, except as expressly modified and amended hereinabove.
Notwithstanding anything to the contrary contained in the Lease, in the event the so-called “split roll” property tax ballot initiative passes
in California thereby removing certain Proposition 13 tax protections applicable to commercial properties (the “Split Roll Initiative”), the
amount of Real Property Taxes applicable to the Base Year shall not include the amount of any increase in Real Property Taxes resulting
from a reassessment triggered by the Split Roll Initiative.
Annually, Tenant at Tenant’s sole cost and expense, shall deliver to Landlord data regarding the electricity consumed in the operation of
the Premises (the “Energy Data”) for purposes of regulatory compliance, manual and automated benchmarking, energy management,
building environmental performance labeling and other related purposes, including but not limited, to the Environmental Protection
Agency’s Energy Star rating system and other energy benchmarking systems. Tenant agrees to update such benchmarking information for
Tenant’s operations conducted during the year. Landlord shall use commercially reasonable efforts to utilize automated data transmittal
services offered by utility companies to access the Energy Data.
10.
In accordance with the California Consumer Privacy Act (“CCPA”), Landlord makes the following disclosure: Landlord collects certain
categories of personal information about tenants including identifiers (such as names, email addresses and telephone numbers) and
commercial information relating to tenants’ business operations. Such personal information is collected by Landlord for use in providing
services under the Lease and for other internal business purposes. Landlord does not sell personal information. To learn more about
Landlord’s privacy policy, please visit https://www.rexfordindustrial.com/privacy-policy.
INITIALS
11. Each party hereto, and their respective successors and assigns shall be authorized to rely upon the signatures of all of the parties hereto on
this Amendment which are delivered by facsimile or PDF as constituting a duly authorized, irrevocable, actual, current delivery of this
Amendment with original ink signatures of each person and entity. Further, the parties hereto expressly consent and agree that this
Amendment may be electronically signed and that electronic signatures appearing on this Amendment shall be treated, for purposes of
validity, enforceability and admissibility, the same as hand-written signatures. This Amendment may be executed in counterparts, each of
which shall be deemed an original part and all of which together shall constitute a single agreement.
12. The ACM Notification is attached hereto as Exhibit “A” and shall be incorporated into the Lease.
13. The Coronavirus Acknowledgement is attached hereto as Addendum One and shall be incorporated into the Lease.
14. The Option to Extend is attached hereto as Addendum Two and shall be incorporated into the Lease.
[Signature Page Follows]
INITIALS
IN WITNESS WHEREOF, the parties hereto have signed this Amendment as of the day and year first above written.
TENANT:
AVITA MEDICAL AMERICAS, LLC,
a Delaware limited liability company
By:
Name:
Title:
Date:
Michael Perry
Dr. Michael Perry
CEO
Nov 20, 2020
7:35 AM PST
LANDLORD:
RIF III – AVENUE STANFORD,
LLC,
a California limited liability
company
By:
Rexford Industrial Realty, L.P.,
a Maryland limited partnership,
Its Managing Member
Rexford Industrial Realty, Inc.,
a Maryland corporation,
Its General Partner
By:
Name
Printed:
Title:
Date:
Howard Schwimmer
Howard Schwimmer
Co-Chief Executive Officer
Nov 20,2020
2:55 PM PST
EXHIBIT “A”
ACM Notification
This Exhibit is attached to and made a part of the Amendment by and between RIF III – Avenue Stanford, LLC, a California limited liability company
(“Landlord”), and Avita Medical Americas, LLC, a Delaware limited liability company (“Tenant”), for space in the building located at 28159 Avenue
Stanford, Valencia, California, 91355 (the “Building”).
Asbestos-containing materials ("ACMs") were historically commonly used in the construction of commercial buildings across the country. ACMs were
commonly used because of their beneficial qualities; ACMs are fire-resistant and provide good noise and temperature insulation.
Some common types of ACMs include surfacing materials (such as spray-on fireproofing, stucco, plaster and textured paint), flooring materials (such as vinyl
floor tile and vinyl floor sheeting) and their associated mastics, carpet mastic, thermal system insulation (such as pipe or duct wrap, boiler wrap and cooling
tower insulation), roofing materials, drywall, drywall joint tape and drywall joint compound, acoustic ceiling tiles, transits board, base cove and associated
mastic, caulking, window glazing and fire doors. These materials are not required under law to be removed from any building (except prior to demolition
and certain renovation projects). Moreover, ACMs generally are not thought to present a threat to human health unless they cause a release of asbestos
fibers into the air, which does not typically occur unless (1) the ACMs are in deteriorated condition, or (2) the ACMs have been significantly disturbed
(such as through abrasive cleaning, or maintenance or renovation activities).
It is possible that some of the various types of ACMs noted above (or other types) are present at various locations in the Building. Anyone who finds any
such materials in the Building should assume them to contain asbestos unless those materials are properly tested and found to be otherwise. In addition,
under applicable law, certain of these materials are required to be presumed to contain asbestos in the Building if the Building was built prior to 1981 (these
materials are typically referred to as "Presumed Asbestos Containing Materials" or "PACM"). PACM consists of thermal system insulation and surfacing
material found in buildings constructed prior to 1981, and asphalt or vinyl flooring installed prior to 1981. If the Building was built prior to 1981 and any
thermal system insulation, asphalt or vinyl flooring or surfacing materials are found to be present in the Building, such materials must be considered PACM
unless properly tested and found otherwise. In addition, Landlord has identified the presence of certain ACMs in the Building. For information about the
specific types and locations of these identified ACMs, please contact the Building manager. The Building Manager maintains records of the Building's
asbestos information including any Building asbestos surveys, sampling and abatement reports. This information is maintained as part of Landlord's
asbestos Operations and Maintenance Plan ("O&M Plan").
The O&M Plan is designed to minimize the potential of any harmful asbestos exposure to any person in the Building. Because Landlord is not a physician,
scientist or industrial hygienist, Landlord has no special knowledge of the health impact of exposure to asbestos. Therefore, Landlord hired an independent
environmental consulting firm to prepare an O&M Plan. The O&M Plan includes a schedule of actions to be taken in order to (1) maintain any building
ACMs in good condition, and (2) to prevent any significant disturbance of such ACMs. Appropriate Landlord personnel receive regular periodic training on
how to properly administer the O&M Plan.
The O&M Plan describes the risks associated with asbestos exposure and how to prevent such exposure. The O&M Plan describes those risks, in general, as
follows: asbestos is not a significant health concern unless asbestos fibers are released and inhaled. If inhaled, asbestos fibers can accumulate in the lungs
and, as exposure increases, the risk of disease (such as asbestosis and cancer) increases. However, measures taken to minimize exposure and consequently
minimize the
INITIALS
accumulation of fibers, can reduce the risk of adverse health effects.
The O&M Plan also describes a number of activities which should be avoided in order to prevent a release of asbestos fibers. In particular, some of the
activities which may present a health risk (because those activities may cause an airborne release of asbestos fibers) include moving, drilling, boring or
otherwise disturbing ACMs. Consequently, such activities should not be attempted by any person not qualified to handle ACMs. In other words, the
approval of Building management must be obtained prior to engaging in any such activities. Please contact the Building manager for more information in
this regard. A copy of the written O&M Plan is located in the Building Management Office and, upon your request, will be made available to tenants for
you to review and copy during regular business hours.
Because of the potential or presumed presence of ACM in the Building, we are also providing the following warning, which is commonly known as a
California Proposition 65 warning: WARNING: This building contains asbestos, a chemical known to the State of California to cause cancer.
Please contact the Building manager with any questions regarding the contents of this notification.
INITIALS
ADDENDUM ONE
CORONAVIRUS ACKNOWLEDGEMENT
ATTACHED TO AND A PART OF THE THIRD AMENDMENT TO LEASE
DATED NOVEMBER 17, 2020, BETWEEN
RIF III – AVENUE STANFORD, LLC, A CALIFORNIA LIMITED LIABILITY COMPANY
and
AVITA MEDICAL AMERICAS, LLC, A DELAWARE LIMITED LIABILITY COMPANY
The parties hereby acknowledge that, as of the date of this Amendment, the coronavirus outbreak, including, without limitation Covid-19 and any mutations
thereof (the “Coronavirus Situation”) has resulted in various governmental entities at various levels (federal, state, county, city and local) to issue various
laws, ordinances, regulations, orders and controls directly in response to the Coronavirus Situation (collectively and as hereinafter promulgated, the
“Coronavirus Governmental Actions”), which have included, without limitation, orders that may give tenants the right to withhold or defer rent
payments without late fees or interest (“Coronavirus Rent Deferrals”). Landlord and Tenant acknowledge that this Amendment is being entered into while
both parties have knowledge and awareness of the Coronavirus Situation and the ongoing Coronavirus Governmental Actions, and Tenant acknowledges
and agrees that Landlord would not lease the Premises to Tenant without Tenant expressly waiving any current or future rights to Coronavirus Rent
Deferrals and all other rights now or in the future to withhold any payments to Landlord arising in any way from the Coronavirus Governmental Actions.
Therefore, in consideration of the foregoing and Landlord’s willingness to enter into this Amendment, to the maximum extent allowed by Legal
Requirements, Tenant hereby expressly and irrevocably waives any and all current or future rights to Coronavirus Rent Deferrals and all other rights now or
in the future to withhold any payments of Rent to Landlord arising in any way from the Coronavirus Governmental Actions. Tenant acknowledges and
agrees that Landlord is under no obligation to provide notice of any incidents of coronavirus infections within the Project, and the presence of coronavirus
infected individuals within the Project is not an excuse or basis for not making payments to Landlord otherwise due under this Amendment, including, without
limitation, Rent.
Notwithstanding the foregoing, in the event Tenant ever seeks to defer or withhold Rent, Tenant shall promptly provide Landlord with the following
documentation for Tenant and any Guarantors to substantiate the impact of the Coronavirus Situation, it being understood that failure to provide any such
documentation by Tenant while withholding any rent shall be considered an Event of Default by Tenant under this Agreement: (a) projected cash flow
statements covering the next six (6) months, showing all sources and uses of cash; (b) summary of all cash receipts and expenditures for the six (6) most
recent calendar months, and for the current month to date; (c) schedule of liabilities identifying for each, the nature and amount of the debt, the monthly
payment amount, any collateral for the debt, whether and to what extent any defaults, and what relief, if any, was requested or granted by the creditor; (d)
current balance sheet along with profit and loss statements for the prior two (2) years and monthly to date; (e) list of all bank and other cash deposit accounts
held by (i) Tenant or any Guarantor, (ii) any other entity that is owned or controlled, directly or indirectly, by Tenant or any Guarantor and (iii) the primary
owners of the business; (f) six (6) most recent monthly statements for each of the accounts described above; (g) complete tax returns for the prior two (2)
years filed by Tenant, any Guarantor and the primary owners of the business; (h) all owners’ or stockholders’ individual monetary contributions in helping to
sustain the monthly operations of the Tenant entity during the prior twelve (12) month period; and (i) submission of the applicable Corona Virus Situation
disaster assistance program and related materials.
INITIALS
ADDENDUM TWO
OPTION TO EXTEND
ATTACHED TO AND A PART OF THE THIRD AMENDMENT TO LEASE
DATED NOVEMBER 17, 2020, BETWEEN
RIF III – AVENUE STANFORD, LLC, A CALIFORNIA LIMITED LIABILITY COMPANY
AND
AVITA MEDICAL AMERICAS, LLC, A DELAWARE LIMITED LIABILITY COMPANY
(a)
Provided that as of the time of the giving of the Extension Notice and the Commencement Date of the Extension Term, (x) Tenant is the
Tenant originally named herein, (y) Tenant actually occupies all of the Premises initially demised under this Lease and any space added to the Premises, and (z)
no Default exists or would exist but for the passage of time or the giving of notice, or both; then Tenant shall have the right to extend the Term of the Lease for an
additional term of three (3) years (such additional term is hereinafter called the "Extension Term") commencing on the day following the expiration of the Third
Extension Term (hereinafter referred to as the "Commencement Date of the Extension Term"). In order to properly exercise Tenant’s right to the Extension
Term, Tenant shall give Landlord written notice (hereinafter called the "Extension Notice") of its election to extend the Term of the Lease at least 6 months, but
not more than 9 months, prior to the scheduled expiration date of the Third Extension Term.
(b)
The Base Rent payable by Tenant to Landlord during the first year of the Extension Term shall be the greater of (i) an amount equal to
103% of the Base Rent applicable to the last year of the Third Extension Term and (ii) the then prevailing market rate for comparable space in the Project and
comparable buildings in the vicinity of the Project, taking into account the size of the Lease, the length of the renewal term, market escalations and the credit of
Tenant. The Base Rent shall not be reduced by reason of any costs or expenses saved by Landlord by reason of Landlord's not having to find a new tenant for
such premises (including, without limitation, brokerage commissions, costs of improvements, rent concessions or lost rental income during any vacancy period).
In the event Landlord and Tenant fail to reach an agreement on such rental rate and execute the Amendment (defined below) prior to the expiration of the Lease,
then Tenant's exercise of the renewal option shall be deemed withdrawn and the Lease shall terminate on its original expiration date. Upon each anniversary of the
Commencement Date of the Extension Term, the Base Rent shall be increased by 3%.
(c)
The determination of Base Rent does not reduce the Tenant's obligation to pay or reimburse Landlord for Common Area Operating
Expenses, Insurance Cost Increases, Increases above the Base Real Property Taxes and other reimbursable items as set forth in the Lease, and Tenant shall
reimburse and pay Landlord as set forth in the Lease with respect to such Common Area Operating Expenses, Insurance Cost Increases, Increases above the Base
Real Property Taxes and other items with respect to the Premises during the Extension Term without regard to any cap on such expenses set forth in the Lease.
(d)
Except for the Base Rent as determined above, Tenant's occupancy of the Premises during the Extension Term shall be on the same terms
and conditions as are in effect immediately prior to the expiration of the Third Amendment Extension Term; provided, however, Tenant shall have no further right
to any allowances, credits or abatements or any options to expand, contract, renew or extend the Lease.
(e)
If Tenant does not give the Extension Notice within the period set forth in paragraph (a) above, Tenant's right to extend the Lease Term
shall automatically terminate. Time is of the essence as to the giving of the Extension Notice.
INITIALS
(f)
Landlord shall have no obligation to refurbish or otherwise improve the Premises for the Extension Term. The Premises shall be tendered
on the Commencement Date of the Extension Term in "as-is" condition.
(g)
If the Lease is extended for the Extension Term, then Landlord shall prepare and Tenant shall execute an amendment to the Lease
confirming the extension of the Lease Term and the other provisions applicable thereto (the "Amendment").
(h)
If Tenant exercises its right to extend the Term of the Lease for the Extension Term pursuant to this Addendum, the term "Term" as used in
the Lease, shall be construed to include, when practicable, the Extension Term except as provided in (d) above.
INITIALS
EXECUTIVE EMPLOYMENT AGREEMENT
Exhibit 10.11
This EXECUTIVE EMPLOYMENT AGREEMENT ("Agreement") is made and entered into on November 12, 2019, by and between
Avita Medical Ltd., an Australian corporation (the "Company"), Avita Medical Americas, LLC ("Avita America ") and Michael Perry, an individual
(the " Executive") with reference to the following:
RECITALS
WHEREAS, the Executive has been serving in the role of Chief Executive Officer of the Company since June 1, 2017,
WHEREAS the Board of Directors of the Company (the " Board") desires to employ Executive to serve as the Chief Executive Officer
of the Company and to manage the operations of the Company and its subsidiaries pursuant to this Agreement.
WHEREAS the Executive is willing to continue to serve in the role of Chief Executive Office of the Company and provide services to the
Company and its subsidiaries under the terms and conditions stated herein,
WHEREAS, the Executive will serve as Chief Executive Officer of the Company, but will be paid through Avita America (so long as
Avita America remains a wholly owned subsidiary of the Company), effective as of September 1, 2019 (the " Effective Date"); and the parties agree
that the terms of this Agreement will apply from the Effective Date and replaces all prior agreements, arrangements or understandings concerning
the appointment of the Executive;
NOW, THEREFORE, in consideration of the mutual covenants and promises contained herein, and intending to be legally bound, it is
hereby agreed by and between the parties hereto as follows:
1.
Employment and Duties
1.1Employment. The Company here by employs the Executive as the Chief Executive Officer ("CEO") of the Company and the Executive hereby
accepts such employment as of the Effective Date pursuant to the terms and conditions set forth herein. The Executive shall report directly to the Board.
1.2Duties. The Executive shall perform, to the best of his ability and in a manner satisfactory to the Board, all such duties that are
consistent with his title and position as the most senior executive officer of the Company, and such other duties as ma y reasonably be assigned to him by
the Board. The Executive's duties will be conducted principally from the Company ' s North America office, currently located in Valencia, California, or at
such other location as determined by the Board (but subject to the terms of this Agreement), with travel to such other locations from time to time as
reasonably required. For absence of doubt, Executive can perform his duties from any location. Executive shall continue to commute as necessary from his
principle residence in Denver, CO, at Company's reasonable expense, as further detailed in Section 3.4. The Board will not require Executive to relocate
from Denver, CO.
1.3
Time and Efforts. The Executive shall devote his full business time and provide his best efforts, attention, and
energies to the business of the Company and its subsidiaries and to the performance of Executive's duties hereunder, and Executive shall not engage
in any other business, profession or occupation for compensation or otherwise during the employment period without the prior written consent of the
Board; provided that, nothing herein shall preclude Executive from serving in any capacity with any civic, educational, or charitable organization,
and provided, further that, in each case, and in the aggregate, such services do not materially conflict or interfere with Executive's obligations to the
Company or its subsidiaries hereunder and
such service is disclosed in advance by Executive to the Board. The Board has issued
approval for Executive to maintain the following appointments:
(a) University of Colorado School of Medicine, Adjunct Professor
(b) Houston Methodist Research Institute /Cornell School of Medicine, Adjunct Professor
(c) Houston Methodist, External Advisory Board for Translational Medicine, Chair
(d) Gamida Cell Ltd., Non-executive director
(e) Arrowhead Pharmaceuticals Inc., Non-executive director
(f) Armata Pharmaceuticals, Non-executive director
(g) Bioscience Managers Pty Ltd, Managing Director
The Company will also reimburse the Executive for fees related to the maintenance of Veterinary Licensure in the U.S. and Canada and A VMA, CVMA
and DEA licensures.
2.
Employment Period
The Company and the Executive hereby agree that the Executive' s employment by the Company shall be "at -will" and for an indefinite
period of time, such that either the Executive or the Company may terminate this Agreement and the employment relationship at any time and for
any reason, with or without Cause, with or without notice , but subject to the severance pay provisions (if applicable) as set forth below in
Sections 5 and 6 of this Agreement.
3.
Compensation
As the total consideration for the Executive' s services rendered here under, Executive shall be entitled to the following:
3.1
Base Salary. The Executive shall be paid an annual base salary of Four Hundred and Seventy-Five Thousand United States
Dollars ($475,000.00) per year ("Base Salary"), subject to applicable tax deductions and withholdings, beginning on the Effective Date of the
Agreement payable in regular installments in accordance with the customary payroll practices of Avita America. The Executive's salary will be
subject to annual review by the Board and may be increased or decreased in the sole discretion of the Board.
3.2
Annual Performance Bonus. In addition to the Base Salary, the Executive shall be eligible to receive an annual
performance bonus as determined by the Board with the exception of the guaranteed portion of the Annual Bonus which is to be paid in accordance
with clause 3.2(b). ("Annual Bonus") based upon the Company's performance for the preceding calendar year of service (each year being regarded
as a "Bonus Period"), as measured against certain performance targets as mutually established by the parties to be paid to Executive no later than
March 15 of the year following the Bonus Period. The Annual Bonus shall be determined as follows:
(a) As ultimately determined in the Board' s discretion, the target amount of the Annual Bonus shall be seventy percent
(70%) of Executive's Base Salary ("Target Bonus").
(b)
For calendar year 2019, the Annual Bonus shall be prorated for 7/12ths of the year guaranteed at 50% of Executive's
Base Salary and the remaining 7/12ths at the Board' s discretion for the remainder of the year.
(c) At the sole discretion of the Board, Executive may be entitled to an additional amount of up to fifty percent (50%) of
the Target Bonus ("Additional Bonus") i.e., up to 105%
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of base salary when combined with the Target Bonus.
(d)
In order to be eligible and entitled to receive any Annual Bonus or Additional Bonus payment, the Executive must have
been and is still employed on the last day of the Bonus Period and the Company must not have given Executive notice
of termination for Cause and the Executive also must not have given notice of termination pursuant to section 5.4 (other
than for termination due to Disability or Death), on or before the date the Annual Bonus or Additional Bonus is to be
paid.
3.3
Long Term Incentive. The Company agreed upon employment of Executive to grant equity to Executive. All Restricted
Stock Units ("RSUs") and Options referred to herein, as well as any future grants, shall be issued as soon as administratively feasible following their
respective grant dates, but no later than thirty (30) business days following such date. The Company has issued to the Executive equity in the form of
RSUs under the terms and conditions contained in the RSUs Confirmatory Deed and options on the terms of the Option Deed, a copy of each of
which is attached to this Agreement as Annexure A and Annexure B, respectively.
3.4
Business Expenses. During the Employment Term, the Executive is entitled to reimbursement (through Avita America) for
reasonable and necessary business expenses incurred by Executive in connection with the performance of Executive's duties, subject to proper
documentation and approval as required pursuant to the applicable Company expense reimbursement policies. For air travel incurred in commuting
from Denver, CO, Executive shall be entitled to fly business class (or a lesser flight class if business class is not available). The Company shall pay
those of the Executive’s reasonable commuting expenses, as well as Executive's reasonable housing expenses of hotel stays or a corporate apartment
and automobile lease or rental, whichever Executive elects. In addition, the Company shall pay that amount that is necessary to compensate
Executive for the U.S. federal and applicable state income tax due as a consequence of the Company's payment of such travel and housing and
automobile expenses, which amount shall be withheld from his compensation and paid to the appropriate governmental authority. To the extent any
of these expense payments are taxable income to the Executive, the Company shall pay an additional amount intended to gross-up for any income tax
impact. The Executive is entitled to reimbursement of eligible expenses incurred while employed but paid following termination of employment.
Avita Americas will conduct standard audits of expenses incurred by the Executive and C-suite employees.
3.5
Vacation, Personal Time. and Sick Leave. The Executive shall be entitled each year to a vacation, during which time his
compensation shall be paid in full. The time allotted for such vacation shall be an aggregate of five (5) weeks per year. There is a cap on the
amount of unused vacation time that can be accumulated and carried forward to subsequent years. Executive can never accumulate in excess of a
total of (8) weeks. Consequently, if less than the full five (5) weeks is used by the Executive in any given year, the amount of the unused vacation
can be carried forward, but the vacation total can never exceed eight (8) weeks at any point in time. If the cap of eight (8) weeks is ever reached,
Executive cannot accrue any additional vacation time until he uses some of the vacation time and the amount drops below the cap. Once the
amount drops below the cap, Executive will begin accruing vacation time again (pro-rated on an annual basis), but subject to the cap. In the year
Executive's employment as CEO terminates, he shall be paid, at his regular rate of pay, for unused vacation (which can never exceed the amount of
the eight (8) week cap). The Executive agrees to schedule planned vacation to be taken at a time mutually convenient to the Executive and the
Company.
Executive shall also be entitled to five (5) paid personal days each year. Executive shall accrue five (5) personal days for calendar year
2017 as of the Effective Date of this Agreement. There is a cap on the amount of unused personal days that can be carried forward to subsequent
years, and that amount is seven days (7) total. The cap shall operate in the same way as the cap described in the paragraph above related to
vacation. To the extent possible, Executive agrees to schedule personal days to be taken at a time convenient to the Company.
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Executive shall also be entitled to forty-eight (48) hours of sic k leave each year. There is a cap on the amount of unused sick leave
that can be carried forward to subsequent years, and that amount is sixty (60) hours total. The cap shall operate in the same way as the cap
described in the paragraph above related to vacation. However, the Company shall have no obligation to pay for unused sick time when
Executive’s employment terminates.
3.6
Health Insurance. The Company shall pay to Executive on an after-tax basis an amount equal to I 00 % of the monthly
premiums for the Executive and his family (spouse, eligible children) under the medical and dental plans of his former employer. The Company shall
pay 100% of the monthly premiums for Executive and his family (spouse, eligible children) under the Company-provided vision plan. If in the
future, the Executive, and his family (spouse, eligible children) cease to be covered under the medical and dental plans of his former employer and
begin coverage under the Company-provided medical and dental programs then the Company shall pay 100% of the monthly premiums for that
coverage. The Company reserves the right and may at any time, in its sole discretion, terminate, change, or modify any employee benefit plans,
policies or programs that it offers or provides. The Executive is entitled to reimbursement of eligible expenses incurred while employed but paid
following termination of employment. For absence of doubt, the Company shall not discontinue payment s under this Section without consent of
Executive.
3.7
Disability Insurance. Executive and the Company shall agree upon a disability insurance policy (the "Policy") to insure
solely to Executive and/or his beneficiaries. The Company shall during the Employment Term purchase and pay all premiums on the Policy. Such
policy shall be in an amount equal to the Executive' s annual Base Salary plus Executive's Target Annual Bonus of 70% of Base Salary.
4.
Proprietary Information
The Executive acknowledge s that: (i) the Executive has a major responsibility for the operation, development and growth of the
Company's business and subsidiaries; (ii) the Executive's work for the Company and its subsidiaries has brought the Executive and will continue to
bring the Executive into close contact with "Confidential Information" (as defined below); and (iii) the agreements and covenants contained in this
Section 4 are essential to protect the business interests of the Company and its subsidiaries and that the Company will not enter into this Agreement
but for such agreements and covenants. Accordingly, the Executive covenants and agrees to the following:
4.1 Confidential Information. Both during the term of the Executive’s employment under this Agreement and indefinitely after
the Executive is no longer employed as CEO of the Company, the Executive shall not, directly or indirectly, (i) knowingly use for an improper or
personal benefit any "Confidential Information" (as defined below) that was acquired by, learned by or disclosed to Executive during or by reason of
the Executive's employment as CEO of the Company (before or after the date of this Agreement) , or ( ii) disclose any such Confidential Information
to any person, business or entity, except in the proper course of the Executive's duties as CEO of the Company. As used in this Agreement,
"Confidential Information" means any and all confidential or proprietary information of the Company and its subsidiaries or affiliates that is not
generally known to the public, including, without limitation, business, financial , marketing , technical , developmental, operating, performance,
know-how, and process information, drawings and designs, customer information
4
(including contact information, pricing and buying trends and needs), employee information (including the skills, abilities and compensation of other
employees), and other trade secret information, now existing or hereafter discovered or developed during the course of employment with the
Company. Confidential Information shall include information in any form whatsoever, including, without limitation, any digital or electronic record-
bearing media containing or disc lo s in g such information. The provisions of this Section 4 shall not apply to information that has become generally
available to the public other than as a result of a disclosure by the Executive. In the event that the Executive is requested or required (including under
applicable securities laws, such as the ASX Listing Rule s) (or by oral question or request for information or document s in any legal proceeding, inter
rogatory, subpoena, civil investigative demand, or similar process) to disclose any Confidential Information, then the Executive will notify the
Company within two (2) business days of receiving the request or requirement so that the Company may seek an appropriate protective order. If
required under applicable securities laws (including the ASX Listing Rules) the Executive must disclose such Confidential Information as and to the
extent required under those securities laws. If, in the absence of a protective order or the receipt of a waiver hereunder (and other than as a
requirement under applicable securities law s), the Executive is, on the advice of counsel compelled to disclose any Confidential Information to any
tribunal or else stand liable for contempt, the Executive may disclose such Confidential information to the tribunal; provided, however, that the
Executive shall use the Executive's reasonable best efforts to obtain, at the expense and reasonable request of the Company, an order or other
assurance that confidential treatment will be accorded to such portion of the Confidential Information required to be disclosed as the Company shall
designate. The Executive acknowledges that all Confidential Information is the exclusive property of the Company. The Executive further
acknowledges that the Executive' s entire work product, including working drafts and work sheets, shall be the sole property of the Company, and that
the Executive will have no rights, title or interest in any such material whether prepared by the Executive alone, by others or by the Executive in
conjunction with others. Executive agrees as a condition of continued employment to execute (at the same time as executing this Agreement) the
Company's standard form Intellectual Property Agreement protecting the trade secrets and other intellectual property of the Company.
4.2Duty of Loyalty and Non-Competition. During the Employment Term, the Executive shall not, without the prior written
consent of the Company, participate, directly or in directly, as an individual proprietor, partner, stockholder, officer, employee, director, manager, joint
venture, investor, lender, consultant or in any capacity whatsoever (within the United States of America, or in any country where the Company or its
subsidiaries or affiliates do business or have reasonable plans to do business) in a business engaged in competition with the Company or any of its
subsidiaries or affiliates, or in a business that the Company or any of its subsidiaries or affiliates has taken reasonable steps to engage in (including,
but not limited to, meeting with management teams or entering into preliminary or definitive term sheets, letters of intent, purchase agreements , or
other similar arrangements or agreements) of which the Executive has knowledge at the time of Executive's employment; provided, however, that
such participation shall not include the mere ownership of not more than one percent (1%) (on a fully diluted basis) of the total outstanding stock of a
publicly held company. At all times following the termination of Executive's employment as CEO of the Company for any reason as specified in
Section 5 hereof, Executive shall not, either directly or indirectly, engage in any unlawful competitive activities or use Confidential Information to
engage in any competition against the Company. Any technologies used by the Company in the course of Executive's employment are restricted to a
specific field of use or therapeutic area used or planned to be used by the Company will only be considered confidential or competitive in that specific
defined field of use. Executive is free to pursue interests and/or employment with other companies using these technologies in other fields of use
outside those used by the Company, including without limitation for example oncology, diabetes and/or endocrine fields.
4.3
Non-Solicitation. For a period beginning on the Effective Date and ending one year after the date on which the Executive is no
longer employed as CEO of the Company (the "Non-Solicitation Period"), the
5
Executive shall not in any capacity, either separately or in association with others: (i) solicit for employment or endeavor in any way to entice away
from employment with the Company or its subsidiaries or affiliates any employee of the Company or its subsidiaries or affiliates, or any person or
entity that had been an employee or affiliate of the Company or its subsidiaries within the six month period preceding the commencement of a
solicitation; nor (ii) use Confidential Information to solicit or use any other unlawful means to induce or influence any supplier, customer, agent,
consultant or other person or entity that has a business relationship with the Company or its subsidiaries to discontinue, reduce or modify such
relationship with the Company or its subsidiaries.
4.4
Non-disparagement. The Executive agrees (whether during or after Executive's employment as CEO of the Company) not to
issue, circulate, publish or utter any comments or statements to the press or other media, or to any third parties, or to any employees of the Company or
its subsidiaries or affiliates, or any consultants or any individual or entity with whom the Company or its subsidiaries or affiliates has a business
relationship, which could reasonably be expected to adversely affect in any manner: (i) the conduct of the business of the Company or its subsidiaries
or affiliates (including, without limitation, any products, services, or business plans or prospects); or (ii) the business reputation of the Company or its
subsidiaries or affiliates (including its financial condition or the direction of the business), or any of their respective products or services, or their past
or present officers, directors, executives or employees. Notwithstanding the foregoing, nothing contained in this Agreement will be deemed to restrict
Executive from providing truthful information to any governmental or regulatory agency (or in any way limit the content of any such information) to
the extent requested or required to provide such information pursuant to applicable law or regulation. Nothing in this section is intended to limit
Executive's rights under Section 7 of the National Labor Relations Act.
The Company agrees (whether during or after Executive's employment as CEO of the Company) not to issue, circulate, publish or utter any
comments or statements to the press or other media, or to any third parties, or to any employees of the Company or its subsidiaries or affiliates, or any
consultants or any individual or entity with whom the Executive has a busine ss relationship, which could reasonably be expected to adversely affect
in any manner the business or personal reputation of the Executive. Notwithstanding the foregoing, nothing contained in this Agreement will be
deemed to restrict the Company from providing truthful information to any governmental or regulatory agency or under applicable securities laws
(including the ASX Lis ting Rules) (or in any way limit the content of any such information) to the extent requested or required to provide such
information pursuant to applicable law or regulation.
4.5
Return of Property. Upon termination of his employment as CEO of the Company or at any time as the Company requests,
the Executive will promptly deliver to the Company all Confidential Information and other documents (whether prepared by the Company, a
subsidiary, an affiliate, the Executive or a third party) relating to the Company, any of its subsidiaries, an affiliate or any of their businesses or property
that the Executive may possess or have under the Executive's direction or control other than documents provided to the Executive in the Executive's
capacity as a participant in any employee benefit plan, policy or program of the Company.
4.6
Remedies. The Executive acknowledges that (i) the Executive has had an opportunity to seek the advice of counsel in
connection with this Agreement; (ii) the provisions of this Section 4 are reasonable in scope and in all other respects; (iii) any violation of these
provisions will res ult in irreparable injury to the Company; (iv) money damages may not be an adequate remedy for the Company in the event of a
breach of any of these provisions by the Executive; and (v) specific performance in the form of injunctive relief would be an appropriate remedy for
the Company. If the Executive breaches or threaten s to breach any of the provision of this section 4, the Company shall be entitled, in addition to all
other remedies, to seek an injunction restraining any such breach, without any bond or other security being required and without the necessity of
showing actual
6
damages.
As it relates to Section 4.4, only, Executive shall be entitled to seek any remedy available to him under applicable law and is not limited by
the provisions of Section 11 of this Agreement.
4.7
Severability. If any of the provisions of this Section 4, or any part thereof, are held to be invalid or unenforceable, the same
shall not affect the remainder of the covenant or covenants, which shall be given full effect, without regard to the invalid or unenforceable portions.
Without limiting the generality of the foregoing, if any of the provisions, or any part thereof, are held to be unenforceable because of the duration of
such provision or the area covered thereby, the parties hereto agree that the court making such determination shall have the power to reduce the
duration and/or area of such provision and, in its reduced form, such provision shall then be enforceable.
5.
Termination
The Executive’s employment shall terminate upon the happening of the following:
5.1
Termination For Cause. The Company may immediately terminate this Agreement for Cause at any time if the Board
determines that Cause exists. For purposes of this Agreement, "Cause" shall mean:
(a) An act of intentional dishonesty, fraud, embezzlement, or misappropriation of money, property, or proprietary information in connection with the
Executive's responsibilities as an Executive.
(b) The Executive's conviction of, or plea of nolo contendere to, a felony offense or to any crime involving moral turpitude;
(c) The Executive’s willful misconduct in connection with his employment duties, as reasonably determined by the Board, that is detrimental to the
Company, and which is not cured on reasonable notice to Executive;
(d) The Executive’s unsatisfactory performance, as determined by the Board, including but not limited to, habitual failure or refusal to perform his
employment duties under this Agreement if such failure or refusal is not cured by Executive within twenty (20) days after receiving written notice
thereof from the Board; or
(e) The Executive's breach of any material provision of this Agreement or any other material agreement between Executive and the Company, or
Executive’s breach or violation of any lawful employment policy of the Company, including those prohibiting harassment of another employee,
which has or could reasonably have a material detrimental effect on the Company or its reputation.
5.2
Termination Without Cause. The Company may terminate this Agreement and all of the Company' s obligations hereunder
(except as hereinafter provided) Without Cause at any time during the Employment term by giving the Executive twelve (12) months’ notice or payment of
twelve (12) months Base Salary in lieu of notice (as described in Section 6.2 below). For purposes of this Agreement, "Without Cause" shall mean
termination by the Company of Executive's employment for any reason, other than as specified in Sections 5.1 or 5.3 hereof. Upon a termination by the
Company Without Cause, Executive shall receive the compensation and benefit continuation required by Section 6.2 below.
5.3
Termination Due to Disability or Death. Executive's employment hereunder may be terminated by the Company as follows:
(a) To the extent permitted by law, upon thirty (30) days' written notice to Executive in the event that Executive is unable to perform the duties
specified in this Agreement by reason of any medically determinable physical or mental impairment that can be expected to result in death
or can be expected to
7
last for a continuous period of not less than twelve (12) months; or
(b)
Immediately upon the death of Executive.
5.4
Voluntary Termination by Executive. Executive’s employment hereunder may be terminated by Executive for any reason
upon Executive providing Company with written notice to terminate ("Termination Notice"). Executive shall provide such Termination Notice as soon
reasonably possible prior to Executive’s termination date given Executive's future plans, but in no event less than 30 days nor more than 120 days prior
to termination. As from receipt by the Company of the Termination Notice the Company shall pay Executive his Base Salary, and any bonus decided
by the Board shall be prorated through his termination date.
5.5
Good Reason. Executive shall be considered to have resigned for Good Reason in any of the following events or conditions
which occur without the Executive's written consent, and which remain in effect after notice has been provided by the Executive to the Company of
such material reduction and the expiration of a 30 day cure period, unless those events constitute or arise as a result of the occurrence of a
"Cause" event or circumstance as defined in Section 5.1, above: (i) a material reduction in the Executive’s Base Salary unless a proportionate
reduction is made to the Base Salary of all members of the Company's senior management; (ii) a material diminution in the Executive's authority,
duties or responsibilities including a requirement that the CEO report to a corporate officer or employee instead of reporting directly to the Board; (iii)
a decision by the Company which would require the Executive to change his principle residence from Denver, CO; or (iv) any other action or inaction
that constitutes a material breach by the Company of this Agreement. The Executive' s notification to the Company must be in writing and must occur
within a reasonable period of time, not to exceed 90 days, following the Executive's discovery of the relevant event or condition.
5.6
Definition of Termination of Employment or Separation from Service: The terms "termination," "resignation," "termination
of employment," or any other term reasonably interpreted to mean a separation from service, will be used interchangeably to mean "Separation from
Service" under Section 409A of the Internal Revenue Code of the United States Department of Treasury ("Section 409A"), unless specifically stated
otherwise herein. Separation From Service shall mean:
(a)
the date upon which the Company and Executive reasonably anticipate that Executive will perform no services; or
the date Executive’s level of bona fide services to the Company permanently decrease to no more than twenty (20)
(b)
percent of the average level of bona fide services performed over the immediately preceding 36-month period (or the full period of
services if Executive has been providing services for less than 36-months).
6.
Effect of Termination
6.1
In the event that Executive's employment is terminated by the Company for Cause pursuant to Section 5.1 or by Executive due
to a voluntary resignation pursuant to Section 5.4 above:
a.
b.
The Company (through Avita America) shall pay to Executive, or his representatives, on the date of termination of
employment (the 'Termination Date") only that portion of the Base Salary provided in Section 3.1 that has been earned
but unpaid to the Termination Date, and any accrued but unpaid Vacation pay provided in Section 3.5, and any expense
reimbursements due and owing to Executive as of the Termination Date; and
Executive shall not be entitled to (i) any other salary or compensation, (ii) any Annual Bonus or any other bonus pursuant
to Section 3.2, any Long-Term Incentive pursuant to Section 3.3, nor (iii) any Benefits pursuant to Section 3.6.
8
Termination Without Cause. In the event Executive's employment is terminated Without Cause pursuant to
Section 5.2 above, the Company (through Avita America) shall pay to Executive, or his representatives, on the Termination Date the following:
6.2
(a)
(b)
The payments, if any, referred to in Section 6.1(a) above; and
Subject to the Executive’s execution and delivery to the Company of a written general release in the standard form, a sample of
which is attached to this Agreement as Annexure C, requested by the Company, and the Executive’s continued compliance with the terms of such release
and Section 4 hereof, the Company (through Avita America) shall pay Executive as severance pay a lump-sum payment (less applicable withholding
taxes) equal to twelve (12) months of Executive’s annual Base Salary as in effect immediately prior to Executive’s termination date. In no event shall the
lump sum severance payment be made later than March 15th following the year in which the Termination Date occurs.
6.3
Termination Due to Disability or Death. In the event Executive 's employment is terminated due to Disability or
death pursuant to Section 5.3 above, the Company (through Avita America) shall pay to Executive, or his representatives, on the Termination Date the
following:
a.
b.
The payments, if any, referred to in Section 6.1(a) above; and
For a Termination Due to Disability or Death, and subject to the Executive' s execution and delivery to the Company of a written general
release in the standard form, a sample of which is attached to this Agreement as Annexure C, requested by the Company, and the
Executive's continued compliance with the terms of such release and Section 4 hereof, Company (through Avita America) shall pay
Executive as severance pay a lump-sum payment (less applicable withholding taxes) equal to twelve (12) month s of Executive's annual
Base Salary as in effect immediately prior to Executive 's Termination Date. In the event Executive is unable, for any reason, to accept the
payments contemplated by this provision, any amounts due under this provision shall be paid to Executive's guardian, conservator, estate
or other applicable person or entity. In no event shall the lump sum severance payment be made later than March 15th following the year
in which the Termination Date occurs.
6.4
Resignation for Good Reason. ln the event the Executive' resign s for Good Reason pursuant to Section 5.5 above, the
Company (through Avita America) shall pay to the Executive, or his representatives, on the Termination Date the following:
a. The payments, if any, referred to in Section 6.1(a) above; and
b. For a Resignation for Good Reason, and subject to the Executive's execution and delivery to the Company of a written general release in the
standard form, a sample of which is attached to this Agreement as Annexure C, requested by the Company, and the Executive’s continued compliance
with the terms of such release and Section 4 hereof, Company (through Avita America) shall pay Executive as severance pay a lump-sum payment (less
applicable withholding taxes) equal to twelve (12) months of Executive's annual Base Salary as in effect immediately prior to Executive 's termination
date. In no event shall the lump sum severance payment be made later than March 15th following the year in which the Termination Date occurs.
6.5
Pay In Lieu of Notice. Except as expressly provided in Sections 6.1 through 6.4 and Sections 6.6 and 6.7 hereof or as required by
applicable law, upon the termination of the Executive' s employment hereunder, the Executive shall have no further rights to any compensation or benefits
from the Company or Avita America. The Company reserves the right to relieve Executive of all duties during any notice period that is required pursuant
to the
9
provisions of Section 5 above and provide comparable pay and benefits in lieu of notice during such notice period. Nothing in this Section 6.5 shall limit
Executive's entitlement to benefits to the extent outlined elsewhere in this Agreement.
6.6
Payment Restriction under Corporations Act 2001. The Parties agree and acknowledge that notwithstanding any other
provision of this Agreement (and in particular, sections 6.1 through 6.5) to the contrary, the Company is subject to, and must comply with, the
provisions of the Australian Corporations Act 2001 (Cth) and the ASX Listing Rules. Without limiting the generality of the foregoing, sections 5
and 6 of this Agreement are subject to prohibition under the Corporations Act 2001 (Cth) that a company may not give a person a benefit in
connection with a person's retirement from an office (being a managerial or executive position within the 3 years prior to retirement), or position of
employment, in a company (or an associate of that company), in aggregate value in excess of the equivalent of the average of the Employee' s
annual base salary for each of the previous 3 years, without prior approval of the Company’s shareholders. For these purposes, a ' benefit' includes
a payment or other valuable consideration and ‘retirement' includes loss of office or position, resignation from the office and death of the
officeholder.
7.
Directors and Officers Insurance Coverage.
The Company hereby covenants and agrees that, so long as the Executive shall continue to serve as an officer of the Company and
thereafter so long as the Executive shall be subject to any possible proceedings by reason of the fact that Executive was an officer of the Company,
the Company shall use reasonable efforts to obtain and maintain in full force and effect directors' and officers' liability insurance ("D&O Insurance")
in reasonable amounts from established and reputable insurers to the extent permitted by applicable Australian law, and Executive shall be a covered
party under such D&O Insurance to the maximum extent of the coverage available for any director or officer of the Company.
Notwithstanding the foregoing, the Company shall have no obligation to obtain or maintain D&O Insurance if the Company determines
in good faith that such insurance is not reasonably available, the premium costs for such insurance are disproportionate to the amount of coverage
provided, the coverage is reduced by exclusions so as to provide an insufficient benefit or such insurance is not permitted under applicable law. For
absence of doubt, so long as the Company maintains D&O insurance for any Officer or Director of the Company, Company shall maintain D&O
Insurance for Executive subject to the terms of this Section 7.
In the event of a change in control of the Company pursuant to which the Company or any successor is obligated to provide D&O
Insurance for a period following the effective date of the transaction or to purchase a D&O Insurance tail policy, Executive shall be a covered party
under such D&O Insurance or tail policy to the maximum extent of the coverage permitted by applicable Australian law and otherwise available for
any director or officer of the Company.
8.
Post-Termination Litigation.
Subject to the terms of this Section 8, Executive agrees to participate in any litigation relating to his actions while serving as the CEO
of the Company. ln such event, the Company shall, to the extent not provided by the D&O Insurance contemplated by Section 7, above, pay to
Executive $3,000 per day for each day or part day he participates in Company litigation, each day or part day he reasonably spends preparing for
such litigation and each day or part day he spends traveling on behalf of the Company, traveling to or from any required meetings, proceeding or
preparations. Additionally, Company shall pay executive an amount equal to Executive's after-tax cost of any reasonable expenses incurred
traveling to or from such required meetings, proceedings, or preparations.
9.
Assignment
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This Agreement is personal in nature, and neither this Agreement nor any part of any obligation herein shall be assignable by Executive.
The Company shall be entitled to assign this Agreement to any affiliate of the Company or any entity that assumes the ownership and control of the
business of the Company.
10.
Severability
Should any term, provision, covenant, or condition of this Agreement be held to be void or invalid, the same shall not affect any other
term, provision, covenant, or condition of this Agreement, but such remainder shall continue in full force and effect as though each such voided
term, provision, covenant, or condition is not contained herein.
11.
Binding Arbitration
Any and all disputes which involve or relate in any way to this Agreement and/or to Executive's employment or termination of
employment as CEO of the Company, whether initiated by Executive or by the Company and whether based on contract, tort, statute, or common
law, shall be submitted to and resolved by final and binding arbitration as the exclusive method for resolving all such disputes. The arbitration shall
be private and confidential and conducted in Los Angeles, California pursuant to the Federal Arbitration Act and applicable California la w, and
pursuant to the applicable rules of the American Arbitration Association ("AAA") relating to employment disputes, unless the parties otherwise
mutually agree to modify the AAA Rules. A copy of the AAA Employment Rules are available for review at www.adr.org/employment and are
incorporated herein by reference.
The party demanding arbitration shall submit a written claim to the other party, setting
out the bas is of the claim or claims, within the time period of any applicable statute of limitations relating to such claim(s). If the parties cannot
mutually agree upon an Arbitrator, then the parties shall select a neutral Arbitrator through the procedures established by the AAA. The Arbitrator
shall have the powers provided under the California Code of Civil Procedure relating to the arbitration of disputes, except as expressly limited or
otherwise provided in this Agreement. The parties shall have the right to reasonable disco very. The parties agree that the Company shall pay the
administration costs of the AAA arbitration, including payment of the fees for the Arbitrator, and any other costs directly related to the
administration of the arbitration. The parties shall otherwise be responsible for their own respective costs and attorney' s fees relating to the dispute,
such as deposition costs, expert witnesses and similar expenses, except as otherwise provided in this Agreement to the prevailing party.
The Arbitrator may award, if properly proven, any damages or remedy that a party could recover in a civil litigation, and shall award costs
and reasonable attorneys ' fees to the prevailing party as provided by la w. The award of the Arbitrator shall be issued in writing, setting forth the basis
for the decision, and shall be binding on the parties to the fullest extent permitted by law, subject to any limited statutory right to appeal as provided
by law. Judgment upon the award of the Arbitrator may be entered in any stat e or federal court sitting in Los Angeles, California.
Nothing in this Section shall prevent Executive from filing or maintaining a claim for workers' compensation, state disability insurance, or
unemployment insurance benefits, and nothing in this section shall be construed to prevent or excuse Executive or the Comp any from using existing
internal procedures for the resolution of complaints. Employee may bring claims before administrative agencies when the la w permit s the agency to
adjudicate those claims, even when there is an agreement to arbitrate; examples include claims or charges with the United States Equal Employment
Opportunity Commission (or comparable state agency), the National Labor Relations Board, the U.S. Department of Labor, or the Office of Federal
Contract Compliance
11
Programs. Nothing in this Section shall required arbitration of disputes that are excluded from coverage by this section of by law.
The Company and Executive agree that any dispute in arbitration will be brought on an individual basis only, and not on a class,
collective, or representative basis on behalf of others (this agreement to be referred to hereafter as the Class Action Waiver). The Class Action
Waiver does not apply to any claim that Executive brings on behalf of both himself and others under the California Private Attorneys General Act of
2004. Executive will not be subject to any retaliation or discrimination if Executive seeks to challenge this arbitration provision or participate in a
class, collective, or representative action in any forum, but Company may lawfully see k enforcement of this Agreement under the Federal
Arbitration Act and seek dismissal of any class, collective, or representative actions or claims to the fullest extent allowed by law.
This provision shall not apply if all or any portion of the dispute falls within the provisions of Section 4.6 of this Agreement.
12.
Governing Law
This Agreement shall be governed by and construed in accordance with the laws of the State of California applicable to contracts made
and to be carried out in California. Each of the parties agrees to submit to the personal jurisdiction of any state or federal court sitting in Los
Angeles, California in any action or proceeding arising out of or relating to this Agreement.
13. Compliance with IRC Section 409A
This Agreement is intended to comply with Section 409A of the Internal Revenue Code of 1986, as amended ("Section 409A") or an
exemption thereunder and shall be construed and administered in accordance with Section 409A. Notwithstanding any other provision of this
Agreement, payments provided under this Agreement ma y only be made upon an event and in a manner that complies with Section 409A or an
applicable exemption. Any payment s under this Agreement that may be excluded from Section 409A either as separation pay due to an involuntary
separation from serv ice or as a short-term deferral shall be excluded from Section 409A to the maximum extent possible. For purposes of Section
409A, each payment made under this Agreement shall be designated as a " separate payment" within the meaning of Section 409A.
Notwithstanding anything herein to the contrary, (i) if at the time of Executive' s termination of employment as CEO of the Company
Executive is a "specified employee" as defined in Section 409A of the Code, and the deferral of the commencement of any payment s or benefits
otherwise payable hereunder as a result of such termination of employment is necessary in order to prevent any accelerated or additional tax under
Section 409A of the Code, then the Company will defer the commencement of the payment of any such payments or benefits hereunder (without
any reduction in such payment s or benefits ultimately paid or provided to Executive) until the date that is six (6) months following Executive's
termination of employment as CEO of the Company (or the earliest date as is permitted under Section 409A of the Code) and (ii) if any other
payments of money or other benefits due to Executive here und er could cause the application of an accelerated or additional tax under Section
409A of the Code, such payments or other benefits shall be deferred if deferral will make such payment or other benefits compliant under Section
409A of the Code, or otherwise such payment or other benefits shall be restructured, to the extent possible, in a manner, determined by the Board,
that does not cause such an accelerated or additional tax. In the event that payments under this Agreement are deferred pursuant to this Section 13
in order to prevent any accelerated tax or additional tax under Section 409A of the Code, then such payments shall be paid at the time specified
under this Section 13 without any interest thereof.
12
Notwithstanding anything to the contrary herein, a termination of employment shall not be deemed to have occurred for purposes of any
provision of this Agreement providing for the payment of amounts or benefits upon or following a termination of employment unless such
termination is also a "Separation from Service" within the meaning of Section 409A of the Code and, for purposes of any such provision of this
Agreement, references to a "resignation," "Termination," " termination of employment " or like terms shall mean Separation from Service.
Notwithstanding anything to the contrary herein, except to the extent any expense, reimbursement or in-kind benefit provided pursuant to
this Agreement does not constitute a "deferral of compensation" within the meaning of Section 409A of the Code: (x) the amount of expenses eligible
for reimbursement or in-kind benefits provided to Executive during any calendar year will not affect the amount of expenses eligible for
reimbursement or in-kind benefits provided to Executive in any other calendar year, (y) the reimbursements for expenses for which Executive is
entitled to be reimbursed shall be made on or before the last day of the calendar year following the calendar year in which the applicable expense is
incurred, and (z) the right to payment or reimbursement or in-kind benefits hereunder may not be liquidated or exchanged for any other benefit.
The Company shall consult with Executive in good faith regarding the implementation of this Section 13; provided that neither the
Company nor any of its employees or representative s shall have any liability to Executive with respect thereto.
14. Notice
All notices and other communications under this Agreement shall be in writing and mailed, telegraphed, telecopied, or delivered by hand (by a
party or a recognized courier service) to the other party at the following address (or to such other address as such party may have specified by notice given
to the other party pursuant to this provision):
If to the Company:
Chief Financial Officer
28159 Avenue Stanford, Suite 220
Valencia, CA 91355
With a copy to the General Counsel
If to Executive:
Dr. Michael Perry
At current home address on file with the Company
15. Miscellaneous
a.
successors, and assigns.
Binding Agreement. This Agreement shall inure to the benefit of and shall be binding upon the Company, its
b.
Entire Agreement. This Agreement contains the entire agreement of the parties relating to the subject matter
hereof, and the parties hereto have made no agreements, representations or warranties relating to the subject matter of this Agreement that are not set
forth otherwise herein. In this regard, each of the parties represents and warrants to the other party that such party is not relying on any promises or
representations that
13
do not appear in writing herein. This Agreement supersedes any prior verbal or written agreements with the Company regarding Executive's
employment or offer of employment, except as specifically referenced herein. Each of the parties further agrees and understands that this Agreement
can be amended or modified only by a written agreement signed by all parties.
c.
Representations and Warranties. Executive and the Company hereby represent and warrant to the other that: (a) he
or it has full power, authority and capacity to execute and deliver this Agreement, and to perform his or its obligations hereunder; (b) such
execution, delivery and performance will not (and with the giving of notice or lapse of time or both would not) result in the breach of any
agreements or other obligations to which he or it is a party or he or it is otherwise bound; (c) this Agreement is his or it is valid and binding
obligation in accordance with its terms; (d) Executive represents and warrants that he is under no other obligations, contractual or otherwise, that
could impair his ability to perform fully and satisfactorily all of his obligations under this Agreement; (e) Executive has had full opportunity to
review this Agreement , to obtain all legal advice he has deemed necessary or appropriate and has either done so, or voluntarily and knowingly
declined to do so; and (f) neither party has been induced to enter into this Agreement through any promises, threats, coercion, or benefits not set
forth expressly in writing in this Agreement.
d.
Attorney’s Fees. In the event that any party shall bring an action or proceeding in connection with the performance,
breach or interpretation of this Agreement , then the prevailing party in any such action or proceeding, as determined by the court, arbitrator or other
body having jurisdiction, shall be entitled to recover from the losing party all reasonable costs and expenses of such action or proceeding , including
reasonable attorneys' fees, court costs, costs of investigation, expert witness fees and other costs reasonably related to such action or proceeding.
Company shall reimburse Executive for attorney's fees incurred in the negotiation and drafting of this Agreement and any
other agreement implementing the terms of this Agreement including but not limited to RSU and option documents and plans, reflected in
Executive's counsel's current invoice (June 15-mid August 2019). Company shall also reimburse Executive for reasonable attorney's fees incurred
for any continuing work with respect to the same matter until it is finalized. However, any additional attorney's fees invoice(s) submitted to the
Company for payment shall list thereon, for each entry, the time spent, who performed the work, and an appropriately redacted description of the
work performed sufficient to understand the nature of the work performed without waiving any applicable privileges or protections. Deficient
invoices may be returned for further detail, and, if reasonable, non-privileged detail is not thereafter provided, the deficiency may result in non-
payment of said invoice(s).
e.
Counterparts. This Agreement may be executed on separate copies, any one of which need not contain
signatures of more than one party but all of which taken together shall constitute one and the same Agreement.
f.
Negotiated Agreement. This Agreement was jointly negotiated by Executive and the Company and/or their
respective attorneys. Should any dispute arise concerning the meaning or construction of any term or terms of this Agreement, no presumption for or
against either as the drafting party, as set forth in California Civil Code Section 1654, shall apply.
g.
Change in Exchange Upon Which Company is Traded. In the event the Company is no longer listed on the
Australian Securities Exchange the attached Appendix I shall take effect thereby adding, replacing, or amending the corresponding provisions of this
Agreement as outlined in Appendix I.
[Signatures on following page]
14
IN WITNESS WHEREOF, this Agreement is executed as of November 12, 2019 ("Execution Date").
" COMPANY"Avita Medical Ltd., an Australian corporation By: /s/ Lou Panaccio Name: Lou Panaccio Title: Chairman of the Board and EXECUTIVE MICHAEL PERRY By: /s/ Michael Perry MICHAEL PERRY “avita Americas” avita medical Americas,LLC.,a limited liability company incorporated in Delaware By: /s/ Lou Panaccio Name: Lou Panaccio Title: Chairman of the Board
15
Exhibit 10.12
K&L GATES
RSUs - Confirmatory Deed
Dr Michael Perry
and
AVITA MEDICAL LIMITED
ACN 058 466 523
RSUs - Confirmatory Deed
Date: 12 November 2019
Parties:
1.
2.
Dr Michael Perry of 300 Cook St., Denver, CO, 80206, United States (Dr Perry)
Avita Medical Limited ACN 058 466 523 of 28159 Avenue Stanford, Suite 220, Valencia, CA 91355, United States (Company)
Background:
A
B.
C.
D.
At the Company's 2017 AGM on 30 November 2017 shareholders approved the issue to the Company's Managing Director Dr
Michael Perry of 50,000,000 RSUs in the nature of employee LTi s.
An RSU is a "restricted security unit", which is an unfunded and unsecured contractual entitlement to be issued or transferred a Share for each RSU on a
future date (after vesting of the RSU entitlement.)
The Company also will, subject to shareholder approval at the Company's 2019 AGM, issue 39,554,252 RSUs on the Terms and Conditions.
This Deed now confirms and records the offer by the Company and the acceptance of the RSUs by Dr Perry.
Agreed terms:
1.
1.1
Definitions and interpretation
Definitions
In this Deed:
Board means the board of directors of the Company or a committee appointed by the board of directors of the Company;
Business Day means a day that is not a Saturday, Sunday, public holiday or bank holiday in Melbourne, Victoria;
Cause has the meaning as provided in section 5.1 of the Employment Agreement;
Constitution means the constitution of the Company as may be amended from time to time;
Company means Avita Medical Limited ACN 058 466 523;
Control Event means any of the following:
(a)
One person (or more than one person acting as a group) acquires ownership of stock of the Company that, together with the
stock held by such person or group, constitutes more than 50% of the total fair market value or total voting power of the stock
of the Company; provided that a Control Event shall not occur if any person (or more than one person acting as a group) owns
more than 50% of the total fair market value or total voting power of the Company's stock and acquires additional stock; or
2
(b)
(c)
(d)
One person (or more than one person acting as a group) acquires (or has acquired during the twelve-month period ending on
the date of the most recent acquisition) ownership of the Company's stock possessing 30% or more of the total voting power of
the stock of such corporation; or
A majority of the members of the Board is replaced during any twelve month period by directors whose appointment or election
is not endorsed by a majority of the Board before the date of appointment or election; or
One person (or more than one person acting as a group), acquires (or has acquired during the twelve-month period ending on
the date of the most recent acquisition) assets from the Company that have a total gross fair market value equal to or more
than 40% of the total gross fair market value of all of the assets of the Company immediately before such acquisition(s,)
in all of the above events a "Control Event" will only occur if it qualifies as a change in control event under Section 409A of the
Internal Revenue Code but for clarity a "Control Event" excludes any solvent reconstruction or re organization of the Company or its
entities (including without limitation the interposition of a new holding entity to the group);
Corporations Act means the Corporations Act 2001 (Cth);
Deed means this deed including the background, any schedules and any annexures.
Employment Agreement means the agreement dated 12 November 2019 containing the terms and conditions upon which Dr Perry
is employed by the Company as CEO of the Company.
Fair Market Value means, in relation to Shares issued resulting from the vesting of RSUs:
(a)
(b)
(c)
the closing sale price per share of ordinary shares of the Company on a recognized securities exchange or over-the-counter
market on which the ordinary shares of the Company are principally traded on the date on which Fair Market Value is being
determined.
if the ordinary shares of the Company are not traded on the date the Shares are issued due to a trading suspension or trading
halt undertaken to facilitate a private placement of the Company, the value of ordinary shares of the Company sold in the
private placement; or
1f the ordinary shares of the Company are not then listed on any recognized securities exchange or traded in an over-the-
counter market or the value of such Shares is not otherwise determinable, the value as reasonably determined by the Board in
good faith.
Initial Vesting Date means 12 November 2019 ;
LTis means long term incentive rights;
Reorganization means any merger, consolidation, reconstruction or other reorganization in respect of the Company, including any
compromise or arrangement for the purposes of or in connection with a scheme for the reconstruction of the Company or its
amalgamation with any other company;
3
RSUs means restricted security units, each unit convertible into one fully paid Share in the Company, which is an unfunded and
unsecured contractual entitlement to be issued or transferred a Share on future dates;
Security Interest means:
(a)
(b)
(c)
an interest or power reserved in or created or otherwise arising in or over an interest in any asset whether under a bill of sale,
mortgage, charge, lien, pledge, other security interest or preferential arrangement (including retention of title), trust or power or
otherwise by way of, or having similar commercial effect to, security for the payment of a debt, any other monetary obligation or
the performance of any other obligation;
a security interest as defined in Personal Property Securities Act 2009 (Cth) (PPSA) and to which the PPSA applies; or
any agreement to grant or create anything referred to in either of paragraph (a) or (b) of this definition and any other thing
which gives a creditor priority to any other creditor with respect to any asset or an interest in any asset;
Share means a fully paid ordinary share in the capital of the Company;
Terms and Conditions means the RSUs terms and conditions set out in Schedule 1 of this Deed;
Termination for Cause has the meaning in section 5.1 of the Employment Agreement;
Termination Due to Disability or Death has the meaning in section 5.3 of the Employment Agreement;
Termination By the Company Without Cause has the meaning in section 5.2 of the Employment Agreement;
Vesting Conditions means the vesting conditions of the RSUs as defined in Schedule 1 of this Deed;
Voluntary Termination has the meaning as provided in section 5.4 of the Employment Agreement;
Voluntary Termination for Good Cause has the meaning as provided in section 5.5 of the Employment Agreement.
1.2
Interpretation
In this Deed, unless the context requires otherwise:
(a)
(b)
(c)
(d)
(e)
the singular includes the plural and vice versa;
a gender includes the other genders;
headings are used for convenience only and do not affect the interpretation of this Deed,
other grammatical forms of a defined word or expression have a corresponding meaning;
a reference to a document is lo that document as amended, novated, supplemented, extended or restated from time to time,
4
(f)
(g)
(h)
(i)
(j)
(k)
a reference to a party is to a party to this Deed and includes that party's executors, administrators, successors, permitted
assigns and permitted substitutes ;
if something is to be or may be done on a day that is not a Business Day then it must be done on the next Business Day;
"person" includes a natural person, partnership, body corporate, association, joint venture, governmental or local authority, and
any other body or entity whether incorporated or not;
"month" means calendar month and "year" means 12 consecutive months;
a reference to a thing (including a right) includes a part of it but nothing in this clause implies that part performance of an
obligation constitutes performance of that obligation;
a reference to all or any part of a statute, rule, regulation or ordinance (statute) is to that statute as amended, consolidated,
re-enacted or replaced from time to time;
(I)
''include", "for example" and any similar expressions are not used, and must not be interpreted, as words of limitation;
(m)
money amounts are stated in Australian currency unless otherwise specified;
(n)
(o)
(p)
a reference to a time of day 1s to that time in Melbourne, Victoria;
a reference to any agency or body that ceases to exist, is reconstituted, renamed or replaced, or has its powers or functions
removed (defunct body) is to the agency or body that performs most closely the powers or functions of the defunct body;
any provision in this Deed which is in favour of more than one person benefits all of them jointly and each of them severally;
and
(q)
any provision in this Deed which binds more than one person binds all of them jointly and each of them severally.
2.
2.1
Terms and conditions of RSUs
Terms and conditions approved by Shareholders
The parties agree that:
(a)
(b)
(c)
50 million RSUs have been issued to Dr Perry prior to the date of this Deed;
subject to shareholder approval at the Company's 2019 AGM, a further 39,554,252 RSUs will be issued to Dr Perry; and
all of the RSUs (as referred to in paragraphs (a) and (b) above) are governed by the terms of this Deed (including the attached
Terms and Conditions).
2.2
Issue of Shares on vesting
As soon as administratively practical (including in consideration of the ability of the Company to cleanse any trading in the resulting
Shares under section 708A of the Corporations Act) but in any event within 5 Business Days after the vesting of Dr Perry's RSUs, the
Company will in accordance with the Terms and Conditions issue to Dr Perry an equal number of Shares
5
represented by the vested RSUs (in cancellation of the corresponding number of vested RSUs) and Dr Perry agrees to hold those
Shares issued pursuant to the RSUs in accordance with the Company's Constitution (as amended from time to time) and the ASX
Listing Rules. Other than compliance with Section 1043A of the Corporations Act (possession of inside information) and the
Company's then applicable securities trading policy (as applicable to all of the Company's employees), on filing a cleansing notice by
the Company under section 708A of the Corporations Act (which the Company shall use its best endeavours to file on or within 5
Business Days of the relevant issue of Shares), there will be no restriction under Australian law on Dr Perry dealing in those Shares.
2.3
Re-organization
Where for any reason the Company undertakes a solvent reconstruction or re organization of the Company or its entities (including
without limitation the interposition of a new holding entity to the group), Dr Perry agrees to exchange (on a "like for like" basis) his
RSUs for new restricted stock units (on substantially the same terms and conditions as provided in this Deed) in the new parent entity
which arises on such solvent reconstruction or re organization.
3.
3.1
Contracts of employment and other employment rights
No change to employment terms
The participation in the issue of the RSUs does not change or vary any of the terms and conditions of Dr Perry's employment
pursuant to the Employment Agreement.
3.2
No right to future employment or engagement
Without limiting clause 3.1 above, this Deed does not confer on Dr Perry any right to future employment or engagement and does not
affect any rights which the Company may have to terminate his employment or engagement.
3.3
Acknowledgments
It is acknowledged and accepted by Dr Perry and the Company that the terms of this Deed creates legally binding obligations on the
parties but do not form part of the terms and conditions of Dr Perry's employment or other engagement contract, nor do the terms of
this Deed constitute a contract or arrangement (including any related condition or collateral arrangement) in relation to Dr Perry's
employment or other engagement contract.
4.
4.1
Powers of the Board
Powers of the Board
This Deed will be managed by the Board, which will have power (which must be exercised reasonably and in good faith) to
(a)
(b)
(c)
determine appropriate procedures for the administration of this Deed;
resolve conclusively all questions of fact or interpretation arising in connection with this Deed;
determine matters falling for determination under this clause in its discretion having regard to the interests of and for the benefit
of the Company;
6
(d)
(e)
exercise the discretions conferred on it by this clause or which may otherwise be required in relation to this Deed; and
delegate to any one or more persons (for such period and on such conditions as it may determine) the exercise of any of its
powers or discretions arising under this Deed.
5.
Notices
Any notice or other communication to or by a party under this Deed:
(a)
(b)
(c)
must be given in accordance with this clause 5;
may be given by personal service or certified return post (signature required by Dr Perry or Mrs. Arlene Perry);
must be in writing, legible and in English addressed (depending on the manner in which it is given) as shown below:
(i)
If to Dr Perry and Mrs. Arlene Perry:
Address:300 Cook St., Denver, CO, 80206, United States
Attention:Dr. Michael Perry and Mrs. Arlene Perry
(ii)
If to the Company:
Address:
Attention:Chief Financial Officer
28159 Avenue Stanford, Suite 220, Valencia, CA 91355, United States
or addressed in accordance with any updated details last notified by the party to the sender by notice given in accordance
with this clause;
(d)
must be signed:
(i)
(ii)
in the case of a corporation registered 1n Australia, by any authorized representative or by the appropriate office
holders of that corporation under section 127 of the Corporations Act; or
in the case of a corporation registered outside of Australia, by a person duly authorized by the sender in accordance
with the laws governing the place of registration of that corporation; and
(e)
is deemed to be given by the sender and received by the addressee:
(i)
(ii)
if delivered in person, when delivered to the addressee;
if posted, at 9.00 am on the fourth Business Day after the date of posting to the addressee whether delivered or not;
but if the delivery or receipt 1s on a day which is not a Business Day or is after 4.00 pm (addressee's time), it is deemed to
have been received at 9 00 am on the next Business Day
7
6.
6.1
General
Entire understanding
(a)
(b)
This Deed contains the entire understanding between the parties concerning the subject matter of this Deed and supersedes,
terminates and replaces all prior agreements and communications between the parties concerning that subject matter.
All terms, warranties and conditions implied or imposed by statute or general law are excluded from this Deed, except any
term, warranty or condition the exclusion of which would:
(i)
(ii)
contravene the statute or general law which implied or imposed it; or
cause this clause to be void
(c)
Each party acknowledges that, except as expressly stated in this Deed, it has not relied on any representation, warranty,
undertaking or statement made by or on behalf of another party in relation to this Deed or its subject matter.
6.2
No adverse construction
No provision of this Deed is to be construed to the disadvantage of a party solely because that party was responsible for preparing or
proposing this Deed or the provision.
6.3
No waiver
(a)
(b)
A failure to exercise, a delay in exercising or partially exercising any power, right or remedy conferred on a party by or in
respect of this Deed does not operate as a waiver by that party of the power, right or remedy.
A single or partial exercise of any power, right or remedy does not preclude a further exercise of it or the exercise of any other
power, right or remedy.
(c)
A waiver of a breach does not operate as a waiver of any other breach.
6.4
Remedies cumulative
Except as set out in this Deed, the powers, rights and remedies under this Deed are cumulative with and not exclusive of any
powers, rights and remedies provided by law independently of this Deed
6.5
Severability
Any provision of this Deed which is invalid in any jurisd1ct1on must, in relation to that jurisdiction, be:
(a)
(b)
read down to the minimum extent necessary to achieve its validity, if applicable; and
severed from this Deed in any other case,
without invalidating or affecting the remaining provisions of this Deed or the validity of that provision in any other jurisdiction.
8
6.6
Consents and approvals
Unless this Deed provides otherwise, where anything depends on the consent or approval of a party, then that consent or approval
may be given conditionally, unconditionally or withheld, in the absolute discretion of that party.
6.7
No variation
This Deed cannot be amended or varied except in writing signed by the parties.
6.8
Execution and delivery
(a)
By executing this Deed, a party intends:
(i)
(ii)
to be immediately bound by this Deed; and
for such execution to constitute delivery of this Deed to each other party.
(b)
(c)
Nothing in this clause 6.8 should be taken to exclude any statutory or common law principle applicable to the proper execution
and delivery of a deed.
This clause 6.8 supersedes, terminates and replaces any prior agreements and communications between the parties which
indicate that the agreements recorded in this Deed are "subject to contract" or similar arrangements.
6.9
Conflicting provisions
If there is any conflict between the main body of this Deed and any schedules or annexures comprising it, then the provisions of the
schedules and annexures of this Deed prevail.
6.10
No right of set-off
Unless this Deed expressly provides otherwise, a party has no right of set-off against a payment due to another party under this
Deed.
6.11
Relationship of parties
Unless this Deed expressly provides otherwise, nothing in this Deed may be construed as creating a relationship of partnership, of
principal and agent or of trustee and beneficiary.
6.12
Counterparts
If this Deed consists of a number of signed counterparts, each is an original and all of the counterparts together constitute the same
document. A party may sign a counterpart by executing a signature page and electronically transmitting a copy of the signed page to
each other party or their authorized representative.
6.13 Governing law and jurisdiction
(a)
(b)
This Deed is governed by and must be construed in accordance with the laws of the State of Victoria, Australia.
The parties submit to the exclusive jurisdiction of the courts of that State and the Commonwealth of Australia in respect of all
matters arising out of or relating to this Deed, its performance or subject matter.
9
(c)
Each party waives any rights to:
(i)
(ii)
object to the venue of any proceedings; or
claim that the proceedings have been brought in an inconvenient forum or that the courts of another place are a more
convenient forum,
if the proceedings have been brought in a court referred to in clause 6.13(b).
6.14
Section 409A of the Code
The RSUs are intended to comply with the "short-term deferral" rule set forth in
U.S. Treasury Regulation Section 1.409A-1(b)(4). Notwithstanding the foregoing, if it is determined that the RSUs fail to satisfy the
requirements of the short-term deferral rule, the RSUs are intended to comply with Section 409A of the Code (Section 409A ). If the
RSUs are deferred compensation subject to Section 409A, and if Dr. Perry is a "Specified Employee" (within the meaning set forth
Section 409A(a)(2)(B){i)} as of the date of his separation from service (within the meaning of Treasury Regulation Section 1.409A-
1(h)), then notwithstanding anything to the contrary in Schedule 1 the issuance of any Shares that would otherwise be made upon
the date of the separation from service or within the first six months thereafter will not be made on the originally scheduled date(s)
and will instead be issued on the date that is six months and one day after the date of the separation from service, with the balance
of the Shares issued thereafter in accordance with the original vesting and issuance schedule set forth above, but if and only if such
delay in the issuance of the Shares is necessary to avoid the imposition of taxation on Dr. Perry in respect of the shares under
Section 409A. Each instalment of Shares that is issued is intended to constitute a "separate payment” for purposes of Treasury
Regulation Section 1.409A-2(b)(2). Notwithstanding the foregoing, the Company makes no representations that the payments and
benefits provided under this Deed comply with Section 409A and in no event shall the Company be liable for all or any portion of any
taxes, penalties, interest or other expenses that may be incurred by Dr. Perry on account of non-compliance with Section 409A.
10
Schedule 1 - Terms and Conditions of the RSUs
(clause 2)
1
Grant of RSUs
The Company has issued to the Participant a holding statement for the 50 million RSUs already issued to the Participant. Upon the
issue of the additional 39,554,252 RSUs (additional RSUs) under paragraphs 3.3(c) to (e) and 3.5(c) to (g) below the Company will
issue to the Participant a holding statement for the additional RSUs. All RSUs granted (and Shares issued or transferred on their
vesting) will be registered in the appropriate register of the Company.
For the purposes of these Terms and Conditions, Dr Perry is referred to as the ‘Participant’.
2
Restrictions on dealing with RSUs
Except to a designated beneficiary upon the Participant's death or by will or the laws of descent and distribution, the Participant may
not without prior written approval of the Board sell, assign, transfer or otherwise deal with, or grant a Security Interest over, an RSU
granted to the Participant. Except to a designated beneficiary upon the Participant's death or by will or the laws of descent and
distribution, the RSU lapses immediately on purported sale, assignment, transfer, dealing or the grant of Security Interest, unless the
Board in its absolute discretion approves the dealing, or the transfer or transmission is effected by force of law on death or legal
incapacity to the Participant's legal personal representative.
3
Operation of RSUs
3.1
Consideration
No cash consideration will be payable on the grant of the RSUs unless otherwise specified in these Terms and Conditions.
3.2
Vesting Conditions
Where the RSUs are subject to Vesting Conditions detailed in paragraphs 3.3 or 3.5 below; and those RSUs will only vest as the
respective Vesting Conditions are met and if not met by the specified date, the relevant RSUs will, in the absence of a resolution of
the Board of the Company to the contrary, automatically lapse.
The Vesting Conditions relate to the continued tenure (of Dr Perry) as Chief Executive Officer (CEO) in accordance with his
employment agreement (Tenure Vesting), Company Share Price (Share Price Vesting) and Milestone performance (Milestone
Vesting} - as set by the Board of Directors (specified below).
3.3
Tenure Vesting
The Tenure Vesting is deemed satisfied and a maximum of RSUs vest in the following numbers on the following dates, provided the
Participant has been [continuously employed by the Company as CEO of the Company as at the relevant date since the grant of the
RSUs (Continuously Employed}]:
(a)
existing RSUs issued pursuant to Avita shareholder approval at the 2017 AGM -
(i)
11,111,110 RSUs where the tenure conditions have already been satisfied, to vest on the Initial Vesting Date;
11
(ii)
5,555,556 RSUs are to vest on 1 June 2020, provided the Participant has been Continuously Employed for the period
to 31 May 2020;
(b)
subject to shareholder approval at the 2019 AGM the following additional new RSUs -
(i)
(ii)
(iii)
4,750 ,700 RSUs are to vest on 1 June 2020, provided the Participant has been Continuously Employed for the period
to 31 May 2020;
4,750,700 RSUs are to vest on 1 June 2021, provided the Participant has been Continuously Employed for the period
to 31 May 2021;
4,750,700 RSUs are to vest on 1 June 2022, provided the Participant has been Continuously Employed for the period
to 31 May 2022.
For clarity if the issue of the RSUs the subject of paragraph 3.3(b) is not approved by shareholders at the Company's 2019 AGM,
those RSUs will not be issued by the Company and the Participant will not have any claim or entitlement of any nature against the
Company for the failure to issue those RSUs.
3.4
Share Price Vesting
Provided the Participant is and has been Continuously Employed at the relevant time:
(a)
16,666,666 existing RSUs issued pursuant to Avita shareholder approval at the 2017 AGM, where the share price conditions
have already been satisfied, to vest on the Initial Vesting Date.
3.5
Performance Vesting
Provided the Participant is and has been Continuously Employed at the relevant time, the Performance Vesting is satisfied the
following RSUs will vest in the following numbers on the following dates:
(a)
existing RSUs issued pursuant to Avita shareholder approval at the 2017 AGM -
(i)
(ii)
8,333,334 RSUs to vest on the Initial Vesting Date;
8,333,334 RSUs to vest upon the date there is Initial BARDA Procurement under CLIN2 of the BARDA contract for
5,614 ReCell devices totaling USO $7,594,620;
(b)
subject to shareholder approval at the 2019 AGM the following additional new RSUs -
(i)
(ii)
(iii)
(iv)
6,850,484 RSUs to vest where the first patient first visit for treatment in an FDA approved US soft tissue/trauma trial by
the Company prior to 31 March 2020;
6,850,484 RSUs to vest where the first patient first visit for treatment in an FDA approved US pilot vitiligo trial by the
Company prior to 30 September 2020;
6,850,485 RSUs to vest where the first patient first visit for treatment in an FDA approved US pediatric trial by the
Company prior to 30 June 2020;
2,375,350 RSUs to vest on the submission before 30 June 2021 to the FDA of an application for approval of a next
generation RECELL device (being an improvement of the current RECELL device and providing for ease of clinician
use);
12
(v)
2,375,349 RSUs to vest on approval by FDA approval prior to 30 June 2022 of a next generation RECELL device
(being an improvement of the current RECELL device and providing for ease of clinician use).
For clarity if the issue of the RSUs the subject of paragraph 3.5(b) is not approved by shareholders at the Company's 2019
AGM, those RSUs will not be issued by the Company and the Participant will not have any claim or entitlement against the
Company of any nature for the failure to issue those RSUs.
3.6
RSU Conversion and Expiry
Each RSU, once vested, will convert into one (1) Share credited as fully paid
All RSUs will expire and cannot be exercised, converted or transferred if they have not vested on or before:
in the case of the RSUs detailed in paragraphs 3.3(a), paragraph 3.4(a) and paragraph 3.S(a) - 30 November 2027; and
in the case of the RSUs detailed in paragraphs 3.3(b) and 3.5(b) - 22 November 2029.
(a)
(b)
3.7
Unvested RSUs re termination of employment
Unless an RSU has already vested, in the event of the termination of employment of the Participant:
(a)
(b)
(c)
(d)
Termination for Cause: All the Participant's unvested RSUs will lapse automatically
Termination by the Company Without Cause: All the Participant's unvested RSUs will vest;
Termination Due to Disability or Death: All the Participant's unvested RSUs will vest;
Voluntary Termination for Good Cause: All the Participant's unvested RSUs will vest;
3.8
(e)
Lapsed RSUs do not vest
VoluntaryTerminationinall other circumstances : All the Participant's unvested RSUs will lapse automatically.
A RSU which has lapsed will not vest.
3.9
No vesting of RSU on bankruptcy
It is a condition precedent to the vesting of a RSU that if the Participant 1s an individual the Participant is not bankrupt and has not
committed an act of bankruptcy or, if the Participant is deceased, the Participant's estate is not bankrupt or if the Participant is not an
individual, the Participant is not insolvent or subject to a resolution or order for winding up.
3.10 Occurrence of a "Change in Control"
Notwithstanding any other paragraph in this Schedule 2 but subject to all applicable laws upon the occurrence of a Control Event
(provided that the Participant is as at the date of occurrence of a Control Event is still Continuously Employed) , all of the unvested
RSUs held by the Participant are deemed to be vested (without the need for any other action by the Company) and any Vesting
Conditions are deemed to have been waived or so modified from such occurrence.
13
4
4.1
Delivery of Shares on vesting of RSUs
Issue or transfer
If the Participant or the Company is liable for taxes, duties or other amounts on the issuance of the resulting Shares on vesting of an
RSU and as a consequence the Company is liable to make a payment(s) for whatever reason (including withholding) to the
appropriate authorities on account of that liability, unless the Participant and the Company agree otherwise:
(a)
(b)
the Company will use its reasonable endeavours to introduce potential purchasers for some of the resulting Shares held by the
Participant; and
in any event, the Participant must pay to the Company within 5 Business Days of the Taxing Event an amount equal to the Tax
Payment and the Company must pay the Tax Payment to the appropriate authorities.
For the purposes of this clause 4 .1.
"Taxing Event" means . in relation to an RSU, the date on which the RSU first became vested pursuant to these Terms and
Conditions; and
''Tax Paymen"t means, in relation to any Shares issued pursuant to the vesting of RSUs, the amount of the Company's liability for
withholding tax as calculated by the Company (acting reasonably and in good faith) by reference to the extent required by law to the
Fair Market Value of the relevant Shares as at the date of the Taxing Event, and notified to the Participant in writing by no later than
the Taxing Event.
4.2
Shares issued by the Company to rank pari passu
All Shares issued on the vesting of a Participant's RSUs will rank pari passu in all respects with the Shares of the same class for the
time being on issue, except for any rights attaching to the Shares by reference to a record date prior to the date of the allotment of
the Shares upon that vesting.
4.3
Shares to be quoted on ASX
If Shares of the same class as those issued or transferred on the vesting of a Participant's RSUs are quoted on the ASX, the
Company will apply to the ASX
as required by the Listing Rules for those Shares to be quoted. In the event that the Company undergoes a reorganization that
results in the conversion of Shares quoted on the ASX into shares quoted on another exchange, then the Company will apply to the
relevant exchange and /or securities regulator (as required) for those converted shares (related to the RSUs that have vested) to be
quoted.
5
5.1
Reorganization and winding-up
RSUs may vest at a time earlier than the Prescribed Vesting Date
Notwithstanding any of the above provisions, if the Board, in its absolute discretion but subject to applicable laws, gives notice that
any or all of the Participant's RSUs may vest as determined by the Board within a particular time, then the RSUs may vest within that
time in addition to any other period during which the RSUs vest.
14
5.2
Compulsory acquisition, Reorganization or winding up
If:
(a)
(b)
a person becomes bound or entitled to compulsorily acquire Shares under the Company's Constitution; or
a Reorganization is sanctioned by one or more of the following under the Company's Constitution or otherwise:
(i)
(ii)
(iii)
a court;
a general meeting or other meeting of holders of the Company's securities; or
a meeting of the Company's creditors; or
(c)
the Company passes a resolution for voluntary winding up or an order is made for the compulsory winding up of the Company,
then the Board may vest RSUs within a specified period of up to 30 days after the occurrence of the relevant event.
6
6.1
Adjustment of RSUs
No bonus issue
Subject to the preceding paragraphs, during the currency of a Participant's RSU and before its vests, the Participant is not entitled to
participate in any bonus issue of Shares pro rata to shareholders of securities of the Company as a result of holding the RSU.
6.2
Sub-division, consolidation, reduction or return
If there is any Reorganization, including any subdivision, consolidation, reduction or return of the issued capital of the
Company, the number of RSUs to which each Participant is entitled will be adjusted in the way specified by the Listing Rules (as
apply to adjustments for options from time to time).
6.3
No right to participate in new issues
Subject to the preceding paragraphs, during the currency of a Participant's RSU and before its vests, the Participant is not entitled to
participate in any new issue of securities of the Company as a result of holding the RSU.
6.4
Accumulation of adjustments
Full effect must be given to these paragraphs 6.1, 6.2 and 6.3 as and when occasions of their application arise and in such manner
that the effects of the successive applications of them are cumulative, the intention being that the adjustments they progressively
effect must be such as to reflect in relation to the Shares comprised in an RSU.
A Participant has no right to change the number of Shares into which the RSU vests.
15
Executed as a deed
Signed, Sealed and Delivered by
Dr Michael Perry in the presence of:
/s/ Donna Shiroma
Signature of Witness
Donna Shiroma
Name of Witness (please print)
Executed by Avita Medical Limited
ACN 058 466 523 in accordance with
section 127(1) of the Corporations Act
2001 Cth):
/s/ Lou Panaccio
Signature of director
Lou Panaccio, Chairman of the Board
Name (please print)
16
)
)
)
)
)
)
16
Signature
/s/ Dr. Michael Perry
/s/ Suzanne Crowe
Signature of director or company*
secretary••delete whichever does not apply
Name (please print)
Suzanne Crowe
Exhibit 10.13
K&L GATES
Option Confirmatory Deed
DR MICHAEL PERRY
and
AVITA MEDICAL LIMITED
ACN 058 466 523
Option Confirmatory Deed
Date: 12 November 2019 Parties:
1.
2.
Dr Michael Perry of 300 Cook St., Denver, CO, 80206, United States (Dr Perry or the Participant)
Avita Medical Limited ACN 058 466 523 of 28159 Avenue Stanford. Suite 220, Valencia, CA 91355, United States (Company)
Background:
A.
B.
At the Company's 2018 AGM on 30 November 2018 shareholders approved the issue to the Company's Managing Director Dr Perry
of 15,000,000 Options and those Options were issued on 30 November 2018.
This Deed now confirms and records the offer by the Company and the acceptance of those Options by Dr Perry on the terms and
conditions of this Deed.
Agreed terms:
1.
Definitions and interpretation
1.1
Definitions
In this Deed (including the Schedule):
Board means the board of directors of the Company or a committee appointed by the board of directors of the Company;
Business Day means a day that is not a Saturday, Sunday, public holiday or bank holiday in Melbourne, Victoria;
Constitution means the constitution of the Company as may be amended from time to time;
Company means Avita Medical Limited ACN 058 466 523;
Control Event means any of the following:
(a)
(b)
(c)
(d)
One person (or more than one person acting as a group) acquires ownership of stock of the Company that, together with the
stock held by such person or group, constitutes more than 50% of the total fair market value or total voting power of the stock
of the Company; provided that a Control Event shall not occur if any person (or more than one person acting as a group)
owns more than 50% of the total fair market value or total voting power of the Company's stock and acquires additional stock;
or
One person (or more than one person acting as a group) acquires (or has acquired during the twelve-month period ending on
the date of the most recent acquisition) ownership of the Company's stock possessing 30% or more of the total voting power
of the stock of such corporation; or
A majority of the members of the Board is replaced during any twelve month period by directors whose appointment or
election is not endorsed by a majority of the Board before the date of appointment or election; or
One person (or more than one person acting as a group), acquires (or has acquired during the twelve-month period ending
on the date of the most recent acquisition) assets from the Company that have a total gross fair market value equal to or
more than 40% of the total gross fair market value of all of the assets of the Company immediately before such acquisition(s),
2
in all of the above events a “Control Event” will only occur if it qualifies as a change in control event under Section 409A of the
Internal Revenue Code but for clarity a “Control Event” excludes any solvent reconstruction or re organization of the Company or its
entities (including without limitation the interposition of a new holding entity to the group);
Corporations Act means the Corporations Act 2001 (Cth);
Deed means this deed including the background, any schedules and any annexures;
Employment Agreement means the agreement dated 12 November 2019 containing the terms and conditions upon which Dr Perry
is employed by the Company as CEO of the Company;
Fair Market Value means, in relation to Shares issued resulting from the exercise of Options:
(a)
(b)
(c)
the closing sale price per share of ordinary shares of the Company on a recognized securities exchange or over-the-counter
market on which the ordinary shares of the Company are principally traded on the date on which Fair Market Value is being
determined;
if the ordinary shares of the Company are not traded on the date the Shares are issued due to a trading suspension or
trading halt undertaken to facilitate a private placement of the Company, the value of ordinary shares of the Company sold in
the private placement or
if the ordinary shares of the Company are not then listed on any recognized securities exchange or traded in an over-the-
countermarket or the value of such Shares is not otherwise determinable, the value as reasonably determined by the Board
in good faith.
Liquidation means the passing of a resolution for voluntary winding up, or the making of an order for the compulsory winding up of
the Company;
Options means 15,000,000 unlisted options to acquire 15,000,000 fully paid ordinary Shares in the capital of the Company;
Reorganization means any merger, consolidation, reconstruction or other reorganization in respect of the Company, including any
compromise or arrangement for the purposes of or in connection with a scheme for the reconstruction of the Company or its
amalgamation with any other company;
Security Interest means:
(a)
(a)
(b)
an interest or power reserved in or created or otherwise arising in or over an interest in any asset whether under a bill of sale,
mortgage, charge, lien, pledge, other security interest or preferential arrangement (including retention of title). trust or power
or otherwise by way of, or having similar commercial effect to, security for the payment of a debt, any other monetary
obligation or the performance of any other obligation;
a security interest as defined in Personal Property Securities Act 2009 (Cth) (PPSA) and to which the PPSA applies; or
any agreement to grant or create anything referred to in either of paragraph (a) or (b) of this definition and any other thing
which gives a creditor priority to any other creditor with respect to any asset or an interest in any asset;
Share means a fully paid ordinary share in the capital of the Company;
“Taxing Event” means the date on which any Shares are issued to Participant pursuant to exercise of Options;
“Tax Payment” means. in relation to any Shares issued pursuant to the exercise of Options, the amount of the Company's liability
for withholding tax as calculated by the Company (acting
AU_Active01 903886972v15 MILLERN
reasonably and in good faith) by reference to the extent required by law to the Fair Market Value of the relevant Shares as at the date
of the Taxing Event, and notified to the Participant in writing by no later than the Taxing Event;
Terms and Conditions means the Options terms and conditions set out in Schedule 1 of this Deed as approved by shareholders at
the Company's 2018 Annual General Meeting;
Unvested Options means Options for which their respective vesting conditions have not been met;
Termination for Cause has the meaning in section 5.1 of the Employment Agreement;
Termination Due to Disability or Death has the meaning in section 5.3 of the Employment Agreement;
Termination Without Cause has the meaning in section 5.2 of the Employment Agreement;
Vested Option means an Option in respect of which all vesting conditions have been met or which are otherwise exercisable (as
contemplated by Schedule 1);
Voluntary Termination has the meaning as provided in section 5.4 of the Employment Agreement;
Voluntary Termination for Good Cause has the meaning as provided in section 5.5 of the Employment Agreement.
1.2
Interpretation
In this Deed. unless the context requires otherwise:
(a)
(b)
(c)
(d)
(e)
(f)
(g)
(h)
(i)
U)
(k)
the singular includes the plural and vice versa;
a gender includes the other genders;
headings are used for convenience only and do not affect the interpretation of this Deed;
other grammatical forms of a defined word or expression have a corresponding meaning;
a reference to a document is to that document as amended, novated, supplemented, extended or restated from time to time;
a reference to a party is to a party to this Deed and includes that party's executors, administrators, successors, permitted
assigns and permitted substitutes;
if something is to be or may be done on a day that is not a Business Day then it must be done on the next Business Day;
“person” includes a natural person, partnership, body corporate, association, joint venture, governmental or local authority,
and any other body or entity whether incorporated or not:
“month” means calendar month and “year” means 12 consecutive months ;
a reference to a thing (including a right) includes a part of it but nothing in this clause implies that part performance of an
obligation constitutes performance of that obligation;
a reference to all or any part of a statute, rule, regulation or ordinance (statute) is to that statute as amended, consolidated,
re-enacted or replaced from time to time;
(I)
“include”, “for example” and any similar expressions are not used, and must not be interpreted, as words of limitation;
AU_Active01 903886972v15 MILLERN
(m)
money amounts are stated in Australian currency unless otherwise specified;
(n)
(o)
(p)
a reference to a time of day is to that time in Melbourne, Victoria;
a reference to any agency or body that ceases to exist, is reconstituted, renamed or replaced, or has its powers or functions
removed (defunct body ) is to the agency or body that performs most closely the powers or functions of the defunct body;
any provision in this Deed which is in favor of more than one person benefits all of them jointly and each of them severally;
and
(q)
any provision in this Deed which binds more than one person binds all of them jointly and each of them severally.
2.
Terms and conditions of Options
2.1
Terms and conditions approved by Shareholders
The parties agree that the Options are issued and governed by the terms of this Deed (including the Terms and Conditions as set out
in Schedule 1).
2.2
Agreement by Dr Perry
Dr Perry agrees that he will hold the Options on the terms and conditions set out in this Deed (including the Terms and Conditions as
set out in Schedule 1).
2.3
Issue of Shares on exercise of the Options
On exercise of the Options (or any of them). the Company will in accordance with the Terms and Conditions issue to Dr Perry that
number of Shares represented by the exercised Options and Dr Perry agrees to hold those Shares issued in accordance with the
Company's Constitution (as amended from time to time). Other than compliance with Section 1043A of the Corporations Act
(possession of inside information) and the Company's then applicable securities trading policy (as applicable to all of the Company's
employees), on filing a cleansing notice by the Company under section 708A of the Corporations Act (which the Company shall use
its best endeavours to file on or within 5 Business Days of the relevant issue of Shares), there will be no restriction under Australian
law on Dr Perry dealing in those Shares.
If the Participant or the Company is liable for taxes, duties or other amounts on the issuance of the resulting Shares and as a
consequence the Company is liable to make a payment(s) for whatever reason (including withholding) to the appropriate authorities
on account of that liability, unless the Participant and the Company agree otherwise:
(a)
(b)
the Company will use its reasonable endeavours to introduce potential purchasers for some of the resulting Shares held by
the Participant and
in any event, the Participant must pay to the Company within 5 Business Days of the Taxing Event an amount equal to the
Tax Payment and the Company must pay the Tax Payment to the appropriate authorities.
2.4
Re-organization
Where for any reason the Company undertakes a solvent reconstruction or re organization of the Company or its entities (including
without limitation the interposition of a new holding entity to the group), Dr Perry agrees to exchange (on a “like for like” basis) his
Options for new options (on substantially the same terms and conditions as provided in this Deed) in the new parent entity which
arises on such solvent reconstruction or re-organization.
AU_Active01 903886972v15 MILLERN
3.
Contracts of employment and other employment rights
3.1
No change to employment terms
The participation in the issue of the Options does not change or vary any of the terms and conditions of employment of Dr Perry as
set out in the Employment Agreement.
3.2
No right to future employment or engagement
Without limiting clause 3.1 above, this Deed does not confer on Dr Perry any right to future employment or engagement and does not
affect any rights which the Company may have to terminate his employment or engagement.
3.3
Acknowledgments
It is acknowledged and accepted by Dr Perry and the Company that the terms of this Deed creates legally binding obligations on the
parties but do not form part of the terms and conditions of Dr Perry's employment or other engagement contract, nor do the terms of
this Deed constitute a contract or arrangement (including any related condition or collateral arrangement) in relation to Dr Perry's
employment or other engagement contract.
4.
Cessation of appointment/employment and lapsing of options
4.1
Unvested Options re Termination
Unless an Option has already vested, if Dr Perry ceases to be appointed or employed by the Company for any reason:
(a)
(b)
(c)
(d)
(e)
Termination for Cause: All the Participant's unvested Options will lapse automatically;
Termination Without Cause: All the Participant's unvested Options will vest;
Termination Due to Disability or Death: All the Participant's unvested Options will vest;
Voluntary Termination for Good Cause: All the Participant's unvested Options will vest;
Voluntary Termination in all other circumstances: All the Participant’s unvested Options will lapse automatically.
4.2
Vested Options re Termination
In respect of vested Options, if Dr Perry ceases to be appointed or employed by the Company for any reason:
(a)
(b)
(c)
(d)
(e)
Termination for Cause: The Participant may for up to 30 days exercise his vested Options and if not exercised in that
period, all unexercised Options will lapse automatically;
Termination Without Cause: The Participant may for up to 60 days exercise his vested Options and if not exercised in that
period, all unexercised Options will lapse automatically;
Termination Due to Disability or Death: The Participant may for up to 60 days exercise his vested Options and if not
exercised in that period, all unexercised Options will lapse automatically;
Voluntary Termination for Good Cause: The Participant may for up to 30 days exercise his vested Options and if not
exercised in that period, all unexercised Options will lapse automatically;
Voluntary Termination in all other circumstances: The Participant may for up to 30 days exercise his vested Options and
if not exercised in that period, all unexercised Options will lapse automatically.
AU_Active01 903886972v15 MILLERN
4.3
Liquidation
On Liquidation, all Options which have not been exercised will lapse with immediate effect upon such Liquidation.
4.4
Control Event
On the occurrence of a Control Event, all Options (notwithstanding any the existence of any vesting conditions unsatisfied
immediately prior to the occurrence of a Control Event) may be exercised during the period being the lesser of the following periods:
(a)
(b)
90 day period following the occurrence of that event. or
the period from the occurrence of that event to the expiry date of the Options,
after the expiry of which all unexercised Options shall lapse with immediate effect.
5.
Administration by the Board
5.1
Powers of the Board
This Deed will be managed by the Board. which will have power (which must be exercised reasonably and in good faith) to:
(a)
(b)
(c)
(d)
(e)
determine appropriate procedures for the administration of this Deed;
resolve conclusively all questions of fact or interpretation arising in connection with this Deed;
determine matters falling for determination under this clause in its discretion having regard to the interests of and for the
benefit of the Company;
exercise the discretions conferred on it by this clause or which may otherwise be required in relation to this Deed; and
delegate to any one or more persons (for such period and on such conditions as it may determine) the exercise of any of its
powers or discretions arising under this Deed.
6.
Notices
Any notice or other communication to or by a party under this Deed:
(a)
(b)
(c)
must be given in accordance with this clause;
may be given by personal service, or certified return post (signature required by Dr Perry or Mrs. Arlene Perry);
must be in writing, legible and in English addressed (depending on the manner in which it is given) as shown below:
(i)
If to Dr Perry:
Address:300 Cook St., Denver. CO, 80206. United States
Attention:Dr. Michael Perry or Mrs. Arlene Perry
AU_Active01 903886972v15 MILLERN
(ii)
If to the Company:
Address:28159 Avenue Stanford, Suite 220, Valencia, CA 91355, United States
Attention:Chief Financial Officer
or addressed in accordance with any updated details last notified by the party to the sender by notice given in accordance
with this clause;
(d)
must be signed:
(i)
(ii)
in the case of a corporation registered in Australia, by any authorized representative or by the appropriate office
holders of that corporation under section 127 of the Corporations Act; or
in the case of a corporation registered outside of Australia, by a person duly authorized by the sender in accordance
with the laws governing the place of registration of that corporation; and
(e)
is deemed to be given by the sender and received by the addressee:
(i)
(ii)
if delivered in person, when delivered to the addressee;
if posted, at 9.00 am on the fourth Business Day after the date of posting to the addressee whether delivered or not;
or
but if the delivery or receipt is on a day which is not a Business Day or is after 4.00 pm (addressee's
time), it is deemed to have been received at 9.00 am on the next Business Day.
7.
General
7.1
Entire understanding
(a)
(b)
This Deed contains the entire understanding between the parties concerning the subject matter of this Deed and supersedes,
terminates and replaces all prior agreements and communications between the parties concerning that subject matter.
All terms, warranties and conditions implied or imposed by statute or general law are excluded from this Deed, except any
term, warranty or condition the exclusion of which would:
(i)
(ii)
contravene the statute or general law which implied or imposed it; or
cause this clause to be void.
(c)
Each party acknowledges that, except as expressly stated in this Deed, it has not relied on any representation, warranty,
undertaking or statement made by or on behalf of another party in relation to this Deed or its subject matter.
7.2
No adverse construction
No provision of this Deed is to be construed to the disadvantage of a party solely because that party was responsible for preparing or
proposing this Deed or the provision.
7.3
No waiver
(a)
A failure to exercise, a delay in exercising or partially exercising any power, right or remedy conferred on a party by or in
respect of this Deed does not operate as a waiver by that party of the power, right or remedy.
AU_Active01 903886972v15 MILLERN
(b)
A single or partial exercise of any power, right or remedy does not preclude a further exercise of it or the exercise of any other
power, right or remedy.
(c)
A waiver of a breach does not operate as a waiver of any other breach.
7.4
Remedies cumulative
Except as set out in this Deed, the powers, rights and remedies under this Deed are cumulative with and not exclusive of any
powers, rights and remedies provided by law independently of this Deed.
7.5
Severability
Any provision of this Deed which is invalid in any jurisdiction must, in relation to that jurisdiction, be:
(a)
(b)
read down to the minimum extent necessary to achieve its validity, if applicable; and
severed from this Deed in any other case,
without invalidating or affecting the remaining provisions of this Deed or the validity of that provision in any other jurisdiction.
7.6
Consents and approvals
Unless this Deed provides otherwise, where anything depends on the consent or approval of a party, then that consent or approval
may be given conditionally, unconditionally or withheld, in the absolute discretion of that party.
7.7
No variation
This Deed cannot be amended or varied except in writing signed by the parties.
7.8
Assignment
Except to a designated beneficiary upon Dr Perry's death or by will or the laws of descent and distribution, Dr Perry may not without
prior written approval of the Board sell, assign, transfer or otherwise deal with, or grant a Security Interest over, an Option granted to
Dr Perry.
Except to a designated beneficiary upon Dr Perry's death or by will or the laws of descent and distribution, the Option lapses
immediately on purported sale, assignment transfer, dealing or the grant of Security Interest, unless the Board in its absolute
discretion approves the dealing, or the transfer or transmission is effected by force of law on death or legal incapacity to Dr Perry's
legal personal representative.
7.9
Execution and delivery
(a)
By executing this Deed, a party intends:
(i)
(ii)
to be immediately bound by this Deed; and
for such execution to constitute delivery of this Deed to each other party.
(b)
(c)
Nothing in this clause 7.9 should be taken to exclude any statutory or common law principle applicable to the proper
execution and delivery of a deed.
This clause 7.9 supersedes, terminates and replaces any prior agreements and communications between the parties which
indicate that the agreements recorded in this Deed are “subject to contract” or similar arrangements .
AU_Active01 903886972v15 MILLERN
7.10
Conflicting provisions
If there is any conflict between the main body of this Deed and any schedules or annexures comprising it, then the provisions of the
schedules and annexures of this Deed prevail.
7.11
No right of set-off
Unless this Deed expressly provides otherwise, a party has no right of set-off against a payment due to another party under this
Deed.
7.12
Relationship of parties
Unless this Deed expressly provides otherwise, nothing in this Deed may be construed as creating a relationship of partnership, of
principal and agent or of trustee and beneficiary.
7.13
Counterparts
If this Deed consists of a number of signed counterparts, each is an original and all of the counterparts together constitute the same
document. A party may sign a counterpart by executing a signature page and electronically transmitting a copy of the signed page to
each other party or their authorized representative.
7.14
Section 409A of the Code
The Company makes no representation or warranty regarding the proper treatment of the Options issued under this Deed or Shares
issued on exercise of the Options for purposes of Code Section 409A. Notwithstanding the foregoing, in no event shall the Company
be liable for all or any portion of any taxes, penalties, interest or other expenses that may be incurred by Or. Perry on account of non-
compliance with Section 409A.
7.15 Governing law and jurisdiction
(a)
(b)
This Deed is governed by and must be construed in accordance with the laws of the State of Victoria, Australia.
The parties submit to the exclusive jurisdiction of the courts of that State and the Commonwealth of Australia in respect of all
matters arising out of or relating to this Deed, its performance or subject matter.
(c)
Each party waives any rights to:
(i)
(ii)
object to the venue of any proceedings; or
claim that the proceedings have been brought in an inconvenient forum or that the courts of another place are a more
convenient forum,
if the proceedings have been brought in a court referred to in clause 7.15(b).
AU_Active01 903886972v15 MILLERN
Executed as a deed
Signed, Sealed and Delivered by Dr Michael
Perry in the presence of:
)
)
/s/ Chris Soto
Signature
/s/ Donna Perry
Signature of Witness
DONNA PERRY
Name of Witness (please print)
Executed by Avita Medical Limited ACN 058 466 523 in accordance
with section 127(1) of the Corporations Act 2001 (Cth):
/s/ Lou Panaccio
Signature of director
/s/ Suzanne Crowe
Signature of director or company secretary*
*delete whichever does not apply
Lou Panaccio. Chairman of the Board
Name (please print)
SUZANNE CROWE
Name (please print)
AU_Active01 903886972v15 MILLERN
Schedule 1 — Terms and Conditions of the Options
Each Option entitles the holder (Option Holder) to subscribe for and be issued one fully paid ordinary share (Share) in Avita Medical Ltd
ACN 058 466 523 (Company) on terms including the following:
1.
2.
3.
4.
5.
6.
7.
Subject to clauses 2 and 3 of this Schedule and any restrictions imposed by the Australian Securities Exchange (ASX}, each Option
is exercisable at any time after the date on which the relevant Option has vested (Vesting Date) up and until the expiry date being 30
November 2028 (Expiry Date). Any Options not exercised by the Expiry Date will automatically lapse on the Expiry Date.
The aggregate of 15,000,000 Options is subject to vesting conditions based on tenure of Dr Perry, (ii) the Company's Share Price and
(iii) milestone performance by the Company as follows:
(a)
(b)
(c)
Tenure - A tranche of 3,333.333 Options, with 1,666,666 which the Company acknowledges have already vested prior to the
date of this deed in accordance with the tenure conditions as specified in the Company's 2018 AGM notice, and 1,666,667 to
vest on 1 June 2020;
Company Share Price - In aggregate the Company acknowledges that a further 9,166,667 Options have prior to the date of
this deed already vested in Dr Perry in accordance with the share price vesting conditions as specified in the Company's 2018
AGM notice;
Milestone Performance - Provided Dr Perry is still employed by the Company, a further tranche of 2,500,000Options to vest
upon the achievement of the milestones “Initial procurement under the BARDA contract” under CLIN2 of the BARDA contract
for 5,614 ReCell devices totaling USD $7,594,620.
The Options may be exercised for part or all of the Options issued by the Option Holder giving written notice in the form set out below
(Notice of Exercise) to the Company at its registered office prior to the Expiry Date.
On exercise the Company will issue to the holder for each Option exercised one ordinary share in the capital of the Company credited
as fully paid. The exercise price per Option is $0.082 per Share (Exercise Price).
On receipt by the Company of the Notice of Exercise and payment of the Exercise Price, the Company must, within 3 Business Days
and if the Shares are listed on the ASX within the time period prescribed by the Listing Rules of the ASX (ASX Listing Rules):
(a)
(b)
allot to the Option Holder one Share in the Company for each Option exercised by the Option Holder;
cause to be dispatched to the Option Holder the relevant acknowledgement of issue, a holding statement or share certificate
(as applicable) as soon as is reasonably practicable detailing the issue of the relevant Share/s; and
(c)
issue (if applicable) a new holding statement (or option certificate) for the balance of the Options that remain unexercised.
Shares allotted on the exercise of Options will rank equally in all respects with the then existing issued ordinary fully paid shares in the
capital of the Company (except in respect to any dividends which shall have been declared but not yet distributed before the actual
exercise of an Option) and will be subject to the provisions of the Constitution of the Company.
If any Reorganization (including consolidation, subdivision, reduction, return or cancellation) of the issued capital of the Company
occurs before the expiry of any Options, the number of Options to
AU_Active01 903886972v15 MILLERN
which each Option Holder is entitled or the Exercise Price of his or her Options or both must be reorganized in accordance with the
ASX Listing Rules applying to a Reorganization at the time of the Reorganization (which adjustment formula will apply even where the
Company is not admitted to the ASX Official List).
An Option does not confer the right to participate in new issues of capital offered to holders of Shares (Rights Entitlement) during the
currency of the Options without exercising the Options. However, the Company will ensure that for the purpose of determining Rights
Entitlements to any such issue, the Option Holder is to receive at least 10 Business Days written notice from the Company of the
pending closing or record date and sufficient time for the Option Holder to exercise the Options prior to that closing or record date in
order to qualify for the participation in the Rights Entitlement.
If the Shares are listed for quotation on the ASX, the Company will apply to the ASX for, and will use its best endeavours to obtain,
quotation or listing of all Shares allotted on the exercise of any Options within 10 Business Days (as defined in the Listing Rules of the
ASX) of allotment. In the event that the Company undergoes a reorganization that results in the conversion of Shares quoted on the
ASX into shares quoted on another exchange, then the Company will apply to the relevant exchange and for securities regulator as
required for those converted shares related to the Option shares to be quoted.
In the event of the Liquidation of the Company, all unexercised Options will lapse upon the occurrence of that Liquidation.
The Options do not provide any entitlement to dividends paid to ordinary shareholders.
The Options do not entitle the Option Holder to vote at any meeting of shareholders.
To the extent (if any) that any of these Option Terms and Conditions or this Deed are inconsistent with or contrary to the ASX Listing
Rules, the ASX Listing Rules provisions will prevail and these Option Terms and Conditions are deemed to incorporate the relevant
ASX Listing Rules provisions as an amendment to these terms; and
These Terms and Conditions are governed by the laws of Victoria. The parties submit to the non-exclusive jurisdiction of the courts of
Victoria.
8.
9.
10.
11.
12.
13.
14.
AU_Active01 903886972v15 MILLERN
Exhibit 10.14
EXECUTIVE EMPLOYMENT AGREEMENT
This EXECUTIVE EMPLOYMENT AGREEMENT (the "Agreement") is made and entered into by and
between AVITA Medical, Inc. and AVITA Medical Americas, LLC. (collectively, the "Company") and Michael Holder,
an individual (the "Executive") with reference to the following:
RECITALS
WHEREAS the Company desires to employ Executive to serve as the Chief Financial Officer of the Company;
WHEREAS the Executive is willing to serve in the role of Chief Financial Officer of the Company and provide
services to the Company and its subsidiaries and affiliates under the terms and conditions stated herein,
WHEREAS, the Executive would serve as Chief Financial Officer of the Company, effective as of March 22,
2021 (the "Effective Date"),
NOW, THEREFORE, in consideration of the mutual covenants and promises contained herein, and intending to
be legally bound, it is hereby agreed by and between the parties hereto as follows:
1.
Employment and Duties
1.
Employment. The Company hereby employs the Executive as the Chief Financial Officer of the
Company and the Executive hereby accepts such employment as of the Effective Date pursuant to the terms and conditions
set forth herein. The Executive shall report directly to the Chief Executive Officer ("CEO").
1
1.2
Duties. The Executive shall perform, to the best of his ability and in a manner satisfactory to the CEO,
all such duties that are consistent with Executive's title and position, and such other duties as may reasonably be assigned
to him by the CEO. The Executive's duties will be conducted principally from the Company's North America office,
currently located in Valencia, California, or at such other location as determined by the CEO (but subject to the terms of this
Agreement), with travel to such other locations from time to time as reasonably required.
1.3
Time and Efforts. The Executive shall devote his full business time and provide his best efforts,
attention, and energies to the business of the Company, and its subsidiaries and affiliates, and to the performance of
Executive's duties hereunder, and Executive shall not engage in any other business, profession or occupation for
compensation or otherwise during the employment period without the prior written consent of the Board of Directors (the
"Board"); provided that, nothing herein shall preclude Executive from serving in any capacity with any civic, educational, or
charitable organization , and provided, further that, in each case, and in the aggregate, such services do not materially conflict
or interfere with Executive's obligations to the Company, and its subsidiaries and affiliates hereunder and such service is
disclosed in advance by Executive to the Board. Notwithstanding the above, the Executive may serve as outside
director of up to two (2) corporate or advisory boards subject to CEO approval and provided that such service does not materially
conflict or interfere with Executive's obligations to the Company and there are no real or perceived conflicts of interest.
Executive further acknowledges that he owes the Company both a fiduciary duty and a duty of loyalty while employed
during the employment period to act at all times in the best interests of the Company, and its subsidiaries and affiliates.
2.
Compensation
As the total consideration for the Executive's services rendered hereunder, Executive shall be entitled to the following:
2.1
Base Salary. The Executive shall be paid an annual base salary of Four Hundred Twenty-Five Thousand
Dollars ($425,000.00) per year ("Base Salary"), subject to applicable tax deductions and withholdings, beginning on the Effective
Date of the Agreement and payable in regular installments in accordance with the customary payroll practices of the Company.
The Executive's salary will be subject to annual review by the Board and may be increased in the sole discretion of the Board.
2.2
Bonus and Relocation Expenses.
(a)
Annual Performance Bonus. In addition to Base Salary, the Executive shall be eligible to receive an annual
performance bonus ("Annual Bonus") based upon the Company's performance and Executive's performance for the preceding
year as measured against certain performance targets as mutually established by the parties to this Agreement as determined by
the Board and CEO. The Annual Bonus, if earned, shall be paid on or around the March timeframe of the following year. The
amount of the Annual Bonus shall be forty percent (40%) of Executive's Base Salary ("Target Bonus"). For 2021, Executive will
be eligible to receive an Annual Bonus of up to forty percent (40%) of the pro-rata share of the Base Salary (excluding any other
bonus or compensation) Executive earned in 2021. At the sole discretion of the Board, Executive may be entitled to an additional
amount of up to fifty percent (50%) of the Target Bonus based upon performance. For the Annual Bonus to be deemed earned,
and in order to be eligible and entitled to receive any Annual Bonus payment, the Executive must be employed by, and not have
given notice of resignation to the Company or have been given notice of termination by the Company at the time the Annual
Bonus is determined and paid to Executive.
(b)
Relocation Expenses. Executive shall be given a lump sum of Thirty Thousand Dollars ($30,000) grossed
up as subject to applicable federal, state, local taxes, and withholdings. Executive will be required to move to the Valencia
area upon the opening up of businesses by the Governor of California or when employees are required to return to the
workplace, whichever is earlier. Executive will be required to reimburse the Company in full
should he fail to relocate to the Valencia area within three (3) months of the Company returning to the workplace following the
current pandemic.
2.3
Equity. Subject to approval of the Company's Board, Executive shall be eligible for 150,000 options which
will vest as follows:
•
•
112,500 options will vest based upon Executive achieving certain established metrics as agreed
upon between Executive and the CEO;
37,500 options will vest based on Executive's continued employment with the Company at a rate of
9,375 per year for four (4) years, commencing with the first 9,375 option installment, which will vest
upon the completion of Executive's first year of service.
Any such equity grants shall be subject to the terms of a Share Option Agreement and the governing equity plan
which will be provided to the Executive within thirty (30) days of his Effective Date. In addition, Executive shall be
eligible for the annual equity grants under the 2020 Omnibus Incentive Plan once the plan has been implemented.
2.4
Business Expenses. During employment, the Executive is entitled to reimbursement for reasonable
and necessary business expenses incurred by Executive in connection with the performance of Executive's duties,
subject to proper documentation and approval as required pursuant to the applicable Company expense reimbursement
policies.
2.5
Fringe Benefits. The Executive shall be entitled to fringe benefits in accordance with the plans,
practices, programs and policies applicable to other peer executives of the Company.
2.6
Vacation. The Executive shall be entitled each year to a vacation, during which time his compensation
shall be paid in full. The time allotted for such vacation shall be four (4) weeks per year. Executive can accrue up to six (6)
weeks of vacation time, at which point no additional vacation may accrue beyond the six (6) weeks until a portion
thereof is used. Any accrued vacation will roll over into the following calendar year and will not be forfeited. The
Executive agrees to schedule planned vacation to be taken at a time mutually convenient to the Executive, CEO, and the
Company.
2.7
Health Insurance and Benefits. The Executive shall be eligible to participate in the Company's health,
dental and vision plans, as well as the Company's 401k program, pursuant to the terms of these plans and programs.
3.
Term and Termination of Employment
3.1
At-Will Employment. The Company and the Executive hereby agree that the Executive's employment
by the Company shall be "at-will" and for an indefinite period of time. Subject to the provisions of this Section, both the
Executive and the Company shall have the right to terminate this Agreement and the employment relationship at any
time and for any reason, with or without Cause, with or without Good Reason, and with or without advance notice.
3.2
Definitions.
(a)
Cause. For purposes of this Agreement, "Cause" shall mean the occurrence of one or more of
the following: (i) conviction of, or a plea of guilty or nolo contendere to, a felony or crime involving moral turpitude;
(ii) participation in an act of fraud
or theft against the Company; (iii) willful and material breach of any contractual, statutory, fiduciary, or common law duty owed
to the Company including without limitation Section 4.1 of this Agreement; (iv) intentional and repeated failure of Executive
to perform Executive's job duties after receiving notice of the stated deficiencies and Executive willfully failing to address the
deficiencies and deliberately continuing to not perform stated job duties; or (v) any willful, deliberate, premeditated act by
Executive that materially and demonstrably injures the reputation, business, or a business relationship of the Company.
(b)
Good Reason. For purposes of this Agreement, "Good Reason" shall mean: (i) a material diminution
in Executive's authority, duties, or responsibilities in effect at the time of this Agreement; (ii) any reduction in the Executive' s
then-current base salary; (iii) relocation of Executive' s principal place of work by a distance of fifty (50) miles or more from the
Executive' s then-current principal place of work without the Executive's consent; (iv) material breach by the Company of any
provision of this Agreement; or (v) the occurrence of a Change in Control of the Company as defined in Section 3.2(c) below,
provided, however , that the conduct described in the foregoing subsections (i) through (iv) will only constitute Good Reason if
such conduct is not cured within thirty (30) days after the Company's receipt of written notice from the Executive specifying the
particulars of the conduct the Executive believes constitutes Good Reason and such notice shall be given within thirty (30) days
of the occurrence of such event or conduct.
(c)
Change in Control. For purposes of this Agreement, "Change in Control" shall mean any of the
following events occurring after the date of this Agreement: (i) a sale or transfer of all or substantially all of the assets of the
Company; (ii) any merger, consolidation or acquisition of the Company with, by or into another corporation, entity or person;
(iii) any change in ownership of more than fifty percent (50%) of the voting capital stock of Company in one or more related
transactions such as a buy out or exit of the Company (but excluding any change in stock listing).
3.3
Termination
(a)
Termination for Cause or Resignation without Good Reason. In the event that the Company
terminates the Executive' s employment for Cause or the Executive resigns his employment without Good Reason, this
Agreement will terminate without further obligations to Executive other than the following: Executive shall be entitled to
receive his unpaid base salary earned through his last day of employment, accrued but unused vacation pay, and vested
benefits through and including Executive's last day of employment.
(b)
Involuntary Termination Without Cause or Resignation With Good Reason. In the event of
either an involuntary termination of the Executive' s employment Without Cause or a voluntary resignation by the Executive for
Good Reason, in exchange for the Executive signing a separation and release of all claims agreement in a form acceptable to
the Company, the Company shall provide the Executive with the following severance benefits in accordance with the timing set
forth in Section 3.3(b)(v) below:
(i)
Base Salary: The Company shall pay the Executive the equivalent of nine (9) months of
the Executive's annual base salary in effect
(ii)
(iii)
(iv)
(v)
at the time of the termination Without Cause or resignation with Good Reason in one
lump sum payment, less standard deductions and withholdings.
Three Months Notice: The Company shall provide the Executive three (3) months
prior written notice in the event of an involuntary termination of the Executive's
employment Without Cause or a voluntary resignation by the Executive for Good
Reason.
Benefits Coverage. The Company shall continue to provide group health, vision, and
dental plan benefits to the Executive for a period of nine (9) months from and after
the date of termination, with the cost of all regular premiums for such benefits paid
by the Company (or its successor).
Equity. Executive's stock options shall immediately accelerate so that l 00% of any
then unvested stock options shall immediately vest and become exercisable upon the
date of Executive's termination Without Cause or resignation with Good Reason and
shall continue to be exercisable for three (3) months
Timing of Payments. The severance benefits in the above subsection 3.3(b)(i) shall be
paid to Executive no later than fifteen
(15) days from the date the Executive signs the severance and release agreement and
the revocation period, if any, has expired.
(c)
Termination or Resignation In Connection With Change In Control. In the event Executive
is terminated or resigns in connection with or within one (1) year following a Change in Control or for Good Reason as
defined in 3.2(b) and 3.2(c), respectively, the Executive shall be entitled to all of the severance benefits set forth in
Section 3.3(b) above.
4.
Proprietary Information
The Executive acknowledges that: (i) the Executive has a major responsibility for the operation, development and
growth of the Company's business, and its subsidiaries and affiliates; (ii) the Executive's work for the Company, and its
subsidiaries, and affiliates has brought the Executive and will continue to bring the Executive into close contact with
"Confidential Information" (as defined below); and (iii) the agreements and covenants contained in this Section 4 are
essential to protect the business interests of the Company, and its subsidiaries and affiliates, and that the Company will
not enter into this Agreement but for such agreements and covenants. Accordingly, the Executive covenants and agrees to the
following:
4.l
Confidential Information. Both during the term of the Executive's employment under this Agreement
and indefinitely after the Executive is no longer employed as Chief Financial Officer of the Company, the Executive
shall not, directly or indirectly, (i) knowingly use for an improper personal benefit any "Confidential Information" that
was acquired by,
learned by or disclosed to Executive by reason of the Executive's employment as Chief Financial Officer of the Company
(before or after the date of this Agreement), or (ii) disclose any such Confidential Information to any person, business or
entity, except in the proper course of the Executive' s duties as Chief Financial Officer, of the Company. As used in this
Agreement, "Confidential Information" means any and all confidential or proprietary information of the Company, and its
subsidiaries and affiliates that is not generally known to the public, including, without limitation, business, financial,
marketing, technical, developmental, operating, performance, know-how, and process information, drawings and designs,
customer information (including contact information, pricing and buying trends and needs), employee information (including
the skills, abilities and compensation of other employees), and other trade secret information, now existing or hereafter
discovered or developed. Confidential Information shall include information in any form whatsoever, including, without
limitation, any digital or electronic record-bearing media containing or
disclosing such information. The provisions of this Section 4 shall not apply to information that has become generally available
to the public other than as a result of a disclosure by the Executive. In the event that the Executive is requested or required (by
oral question or request for information or documents in any legal proceeding, interrogatory, subpoena, civil investigative
demand, or similar process) to disclose any Confidential Information, then the Executive will notify the Company within two
(2) business days of receiving the request or requirement so that the Company may seek an appropriate protective order. If, in
the absence of a protective order or the receipt of a waiver hereunder, the Executive is, on the advice of counsel, compelled to
disclose any Confidential Information to any tribunal or else stand liable for contempt, the Executive may disclose such
Confidential Information to the tribunal; provided, however, that the Executive shall use the Executive's reasonable best
efforts to obtain, at the expense and reasonable request of the Company, an order or other assurance that confidential treatment
will be accorded to such portion of the Confidential Information
required to be disclosed as the Company shall designate. The Executive acknowledges that all Confidential Information is the
exclusive property of the Company. The Executive further acknowledges that the Executive' s entire work product, including
working drafts and work sheets, shall be the sole property of the Company, and that the Executive will have no rights, title or
interest in any such material whether prepared by the Executive alone, by others or by the Executive in conjunction with others.
Executive agrees as a condition of continued employment to execute the Company's Proprietary Information Agreement
protecting the trade secrets and other intellectual property of the Company. Defend Trade Secrets Act
Notice. Executive is hereby notified in accordance with the Defend Trade Secrets Act of 2016 that he will not be held
criminally or civilly liable under any federal or state trade secret law for the disclosure of a trade secret that: (i) is made in
confidence to a federal, state, or local government official, either directly or indirectly, or to an attorney, and solely for the
purpose of reporting or investigating a suspected violation of la w; or (ii) is made in a complaint or other document that is filed
under seal in a lawsuit or other proceeding. Executive is further notified that if Executive files a lawsuit for retaliation by an
employer for reporting a suspected violation of law, Executive may disclose the employer's trade secrets to Executive' s
attorney
and use the trade secret information in the court proceeding if Executive: (i) files any document containing the trade secret
under seal; and (ii) does not disclose the trade secret, except
pursuant to court order.
4.2
Duty of Loyalty and Non-Competition. While employed by the Company, the Executive shall not, without
the prior written consent of the Company, participate, directly or indirectly, as an individual proprietor, partner, stockholder,
officer, employee, director, manager, joint venture participant, investor, lender, consultant or in any capacity whatsoever
(within the United States of America, or in any country where the Company or its subsidiaries or affiliates do business or have
reasonable plans to do business) in a business engaged in competition with the Company or any of its subsidiaries or
affiliates, or in a business that the Company or any of its subsidiaries or affiliates has taken reasonable steps to engage in
(including, but not limited to, meeting with management teams or entering into preliminary or definitive term sheets, letters of
intent, purchase agreements, or other similar arrangements or agreements) of which the Executive has knowledge at the time
of Executive's employment; provided, however, that such participation shall not include the mere ownership of not more than
one percent (1%) of the total outstanding stock of a publicly held company. At all times following the termination of
Executive's employment as Chief Financial Officer of the Company for any reason, Executive shall not, either directly or
indirectly, engage in any unlawful competitive activities or use confidential trade secret information for any purpose.
4.3
Non-Solicitation. For a period beginning on the Effective Date and ending two
(2) years after the date on which the Executive is no longer employed as Chief Financial Officer of the Company (the "Non-
Solicitation Period"), the Executive shall not in any capacity, either separately or in association with others: (i) unlawfully
solicit for employment or endeavor in any way to unlawfully entice away from employment with the Company, its
subsidiaries or affiliates any employee of the Company, its subsidiaries or its affiliates, or any person or entity that had been
an employee of the Company or its subsidiaries or affiliates within the six (6) month period preceding the commencement of
such activity; nor (ii) use confidential trade secret information to solicit or use any other unlawful means to induce or
influence any supplier, customer, agent, consultant or other person or entity that has a business relationship with the
Company, or its subsidiaries or affiliates to discontinue , reduce or modify such relationship with the Company or its
subsidiaries or affiliates.
4.4
Non-disparagement. The Executive agrees (whether during or after Executive's employment as Chief
Financial Officer of the Company) not to issue, circulate, publish or utter any comments or statements to the press or other
media, or to any third parties, or to any employees of the Company, and its subsidiaries and affiliates, or any consultants or
any individual or entity with whom the Company or its subsidiaries or affiliates has a business relationship, which could
reasonably be expected to adversely affect in any manner: (i) the conduct of the business of the Company, or its subsidiaries
or affiliates (including, without limitation, any products, services, or business plans or prospects); or (ii) the business
reputation of the Company or its subsidiaries or affiliates (including its financial condition or the direction of the business), or
any of their respective products or services, or their past or present officers, directors, executives or employees.
Notwithstanding the foregoing, nothing contained in this Agreement will be deemed to restrict Executive from providing
truthful information to any governmental or regulatory agency (or in any way limit the content of any such information) to the
extent requested or required to provide such information pursuant to applicable law or regulation. Nothing in this section is
intended to limit Executive' s rights under Section 7 of the National Labor Relations Act.
4.5
Return of Property. Upon termination of his employment as Chief Financial Officer of the Company or at
any time as the Company requests, the Executive will promptly deliver to the Company all documents (whether prepared by
the Company, a subsidiary, an affiliate, the Executive or a third party) relating to the Company, any of its subsidiaries or
affiliates or any of their businesses or property that the Executive may possess or have under the Executive's direction or
control other than documents provided to the Executive in the Executive's capacity as a participant in any employee benefit
plan, policy or program of the Company.
4.6
Remedies. The Executive acknowledges that (i) the Executive has had an opportunity to seek the advice of
counsel in connection with this Agreement; (ii) the provisions of this Section 4 are reasonable in scope and in all other
respects; (iii) any violation of these provisions will result in irreparable injury to the Company; (iv) money damages may not
be an adequate remedy for the Company in the event of a breach of any of these provisions by the Executive; and (v)
specific performance in the form of injunctive relief would be an appropriate remedy for the Company. If the Executive
breaches or threatens to breach any of these provisions, the Company shall be entitled, in addition to all other remedies, to seek
an injunction restraining any such breach, without any bond or other security being required and without the necessity of
showing actual damages.
5.
Assignment
This Agreement is personal in nature, and neither this Agreement nor any part of any obligation herein shall be
assignable by Executive. The Company shall be entitled to assign this Agreement to any subsidiary or affiliate of the
Company or any entity that assumes the ownership and control of the business of the Company.
6.
Severability
Should any term, provision, covenant or condition of this Agreement be held to be void or invalid, the same shall not
affect any other term, provision, covenant or condition of this Agreement, but such remainder shall continue in full force
and effect as though each such voided term, provision, covenant or condition is not contained herein.
7.
Binding Arbitration
Any and all disputes which involve or relate in any way to this Agreement and/or to Executive's employment or
tem1ination of employment as Chief Financial Officer of the Company, whether initiated by Executive or by the Company
and whether based on contract, tort, statute, or common law, shall be submitted to and resolved by final, binding and
confidential arbitration as the exclusive method for resolving all such disputes. The arbitration shall be private and confidential
and conducted in Los Angeles, California pursuant to the Federal Arbitration Act and applicable California law, and pursuant
to the applicable rules of the Judicial Arbitration and Mediation Services ("JAMS") relating to employment disputes, unless
the parties otherwise mutually agree to modify the JAMS Rules. A copy of the AAA Employment Rules are available for
review at
https://www. jamsadr.com/rules-employment -arbitration and are incorporated herein by reference.
The party demanding arbitration shall submit a written claim to the other party, setting out the basis of the claim or
claims, within the time period of any applicable statute of limitations relating to such claim(s). If the parties cannot
mutually agree upon an arbitrator, then the parties shall select a neutral arbitrator through the procedures established by the
AAA. The arbitrator shall have the powers provided under the Federal Arbitration Act relating to the arbitration of disputes,
except as expressly limited or otherwise provided in this Agreement. The parties shall have the right to reasonable
discovery. The parties agree that the Company shall pay the administration costs of the AAA arbitration, including payment
of the fees for the Arbitrator, and any other costs directly related to the administration of the arbitration. The parties shall
otherwise be responsible for their own respective costs and attorneys' fees relating to the dispute, such as deposition costs,
expert witnesses and similar expenses, except as otherwise provided in this Agreement to the prevailing party.
The arbitrator may award, if properly proven, any damages or remedy that a party could recover in a civil litigation and
shall award costs and reasonable attorneys' fees to the prevailing party as provided by law. The award of the arbitrator shall
be issued in writing, setting forth the basis for the decision, and shall be binding on the parties to the fullest extent permitted
by law, subject to any limited statutory right to appeal as provided by Jaw.
Judgment upon the award of the arbitrator may be entered in any state or federal court sitting in Los Angeles, California.
Nothing in this Section shall prevent Executive from filing or maintaining a claim for workers' compensation, state
disability insurance, or unemployment insurance benefits, and nothing in this section shall be construed to prevent or excuse
Executive or the Company from using existing internal procedures for the resolution of complaints. Employee may bring
claims before administrative agencies when the law permits the agency to adjudicate those claims, even when there is an
agreement to arbitrate; examples include claims or charges with the United States Equal Employment Opportunity
Commission (or comparable state agency), the National Labor Relations Board, the U.S. Department of Labor, or the Office
of Federal Contract Compliance Programs. Nothing in this Section shall require arbitration of disputes that are excluded from
coverage by this section or by law.
The Company and Executive agree that any dispute in arbitration will be brought on an individual basis only, and not
on a class, collective, or representative basis on behalf of others (this agreement to be referred to hereafter as the "Class
Action Waiver"). The Class Action Waiver does not apply to any claim that Executive brings on behalf of both herself and
others under the California Private Attorney General Act of 2004. Executive will not be subject to any retaliation or
discrimination if Executive seeks to challenge this arbitration provision or participate in a class, collective, or
representative action in any forum, but Company may lawfully seek enforcement of this Agreement under the Federal
Arbitration Act and seek dismissal of any class, collective, or representative actions or claims to the fullest extent allowed
by law.
8. Governing Law
This Agreement shall be governed by and construed in accordance with the laws of the State of California applicable to
contracts made and to be carried out in California. Each of the parties agrees to submit to the personal jurisdiction of any
state or federal court sitting in Los Angeles, California in any action or proceeding arising out of or relating to this
Agreement.
9. Notice
All notices and other communications under this Agreement shall be in writing and mailed, telegraphed, telecopied, or
delivered by hand (by a party or a recognized courier service) to the other party at the following address (or to such other
address as such party may have specified by notice given to the other party pursuant to this provision):
If to the Company:
AVITA Medical Americas, LLC 28159 Avenue
Stanford
Suite 220
Valencia, CA 91355
If to Executive:
Michael Holder
At current home address on file with the Company
10. Miscellaneous
10.1
Binding Agreement. This Agreement shall inure to the benefit of and shall be binding upon the
Company, its successors and assigns.
10.2
Entire Agreement. This Agreement contains the entire agreement of the parties relating to the subject
matter hereof, and the parties hereto have made no agreements, representations or warranties relating to the subject matter of
this Agreement that are not set forth otherwise herein. In this regard, each of the parties represents and warrants to the other
party that such party is not relying on any promises or representations that do not appear in writing herein. This Agreement
supersedes any prior verbal or written agreements with the Company regarding Executive's employment or offer of
employment, except as specifically referenced herein. Each of the parties further agrees and understands that this Agreement
can be amended or modified only by a written agreement signed by all parties.
10.3
Representations and Warranties. Executive and the Company hereby represent and warrant to the other
that: (a) he or it has full power, authority and capacity to execute and deliver this Agreement, and to perform his or its
obligations hereunder; (b) such execution, delivery and performance will not (and with the giving of notice or lapse of time
or both would not) result in the breach of any agreements or other obligations to which he or it is a party or he or it is
otherwise bound; (c) this Agreement is a valid and binding obligation in accordance with its terms for both parties; (d)
Executive represents and warrants that he is under no other obligations, contractual or otherwise, that could impair his
ability to perform fully and satisfactorily all of his obligations under this Agreement; (e) Executive has had full opportunity to
review this Agreement, to obtain all legal advice he has deemed necessary or appropriate and has either done so, or
voluntarily and knowingly declined to do so; and (f) neither party has been induced to enter into this Agreement through any
promises, threats, coercion, or benefits not set forth expressly in writing in this Agreement.
10.4
Attorney's Fees. In the event that any party shall bring an action or proceeding in connection with the
performance, breach or interpretation of this Agreement, then the prevailing party in any such action or proceeding, as
determined by the court, arbitrator or other body having jurisdiction, shall be entitled to recover from the losing party all
reasonable costs and expenses of such action or proceeding, including reasonable attorneys' fees and court costs.
10.5
Counterparts. This Agreement may be executed on separate copies, any one of which need not
contain signatures of more than one party but all of which taken together shall constitute one and the same Agreement.
[Signatures to follow on next page]
IN WITNESS WHEREOF, this Agreement is executed as of March 11, 2021. “COMPANY” AVITA Medical, Inc. and AVITA Medical Americas, LLC By: Name: Dr. Michael S. Perry Title: Chief Executive Officer Date: 03/12/2021and “EXECUTIVE” Michael Holder By: Michael Holder Date: March 11, 2021
EXECUTIVE EMPLOYMENT AGREEMENT
Exhibit 10.15
This EXECUTIVE EMPLOYMENT AGREEMENT (the “Agreement”) is made and entered into by and between
AVITA Medical Americas, LLC, (the “Company”) and Kathy McGee, an individual (the “Executive”) with reference to the
following:
RECITALS
WHEREAS, the Company desires to employ Executive to serve as the Chief Operating Officer of the Company;
WHEREAS, the Executive is willing to serve in the role of Chief Operating Officer of the Company and provide
services to the Company and its subsidiaries and affiliates under the terms and conditions stated herein,
WHEREAS, the Executive would serve as Chief Operating Officer, of the Company, effective as of December
1, 2020 (the “Effective Date”),
NOW, THEREFORE, in consideration of the mutual covenants and promises contained herein, and intending to be
legally bound, it is hereby agreed by and between the parties hereto as follows:
1.
Employment and Duties
1.1
Employment. The Company hereby employs the Executive as the Chief Operating Officer of the
Company and the Executive hereby accepts such employment as of the Effective Date pursuant to the terms and conditions
set forth herein. The Executive shall report directly to the Chief Executive Officer (“CEO”).
1.2
Duties. The Executive shall perform, to the best of her ability and in a manner satisfactory to the
CEO, all such duties that are consistent with Executive’s title and position, and such other duties as may reasonably be
assigned to her by the CEO. The Executive’s duties will be conducted principally from the Company’s North America office,
currently located in Valencia, California, or at such other location as determined by the CEO (but subject to the terms of this
Agreement), with travel to such other locations including the manufacturing facility in Ventura, California from time to time
as reasonably required.
1.3
Time and Efforts. The Executive shall devote her full business time and provide her best efforts,
attention, and energies to the business of the Company, and its subsidiaries and affiliates, and to the performance of
Executive’s duties hereunder, and Executive shall not engage in any other business, profession or occupation for
compensation or otherwise during the employment period without the prior written consent of the Board; provided that,
nothing herein shall preclude Executive from serving in any capacity with any civic, educational, or charitable organization,
and provided, further that, in each case, and in the aggregate, such services do not materially conflict or interfere with
Executive’s obligations to the Company, and its subsidiaries and affiliates hereunder and such service is disclosed in advance
by Executive to the Board.
Executive further acknowledges that she owes the Company both a fiduciary duty and a duty of loyalty while
employed during the employment period to act at all times in the best interests of the Company, and its subsidiaries and
affiliates.
2.
Compensation
As the total consideration for the Executive’s services rendered hereunder, Executive shall be entitled to the
following:
2.1
Base Salary. The Executive shall be paid an annual base salary of Three Hundred Forty Five
Thousand Dollars ($345,000.00) per year (“Base Salary”), subject to applicable tax deductions and withholdings, beginning
on the Effective Date of the Agreement and payable in regular installments in accordance with the customary payroll
practices of the Company. The Executive’s salary will be subject to annual review by the Board and may be increased in the
sole discretion of the Board.
2.2
(a)
Bonus and Relocation Expenses.
Annual Performance Bonus. In addition to Base Salary, the Executive shall be eligible to receive
an annual performance bonus (“Annual Bonus”) based upon the Company’s performance and Executive’s performance for
the preceding year as measured against certain performance targets as mutually established by the parties to this Agreement
as determined by the Board of Directors (the “Board”) and CEO. The Annual Bonus, if earned, shall be paid on or around the
March timeframe of the following year. The amount of the Annual Bonus shall be thirty percent (30%) of Executive’s Base
Salary (“Target Bonus”). For 2020, Executive will be eligible to receive an Annual Bonus of up to thirty percent (30%) of
the pro-rata share of the Base Salary (excluding any other bonus or compensation) Executive earned in 2020. For the Annual
Bonus to be deemed earned, and in order to be eligible and entitled to receive any Annual Bonus payment, the Executive
must be employed by, and not have given notice of resignation to the Company, or have been given notice of termination by
the Company at the time the Annual Bonus is determined and paid to Executive.
(b)
Relocation Expenses. Executive shall be given a lump sum of Twenty Five Thousand Dollars
($25,000) for housing and living expenses to relocate to the Los Angeles area, subject to applicable federal, state, local
taxes and withholdings which will be paid to Executive in her first payroll check. Executive will be required to reimburse
the Company in full should she fail to relocate to the Los Angeles area within three (3) months of the Company announcing
the date of the return to workplace following the current pandemic.
2.3
Equity. Subject to approval of the Company’s Board, Executive shall be eligible for 128,000
options which will vest as follows:
•
•
95,000 options will vest based upon Executive achieving certain established metrics as agreed upon
between Executive and the CEO;
33,000 options will vest based on Executive’s continued employment with the Company at a rate of
8,250 per year for four (4) years, commencing with the
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first 8,250 option installment, which will vest upon the completion of Executive’s first
year of service.
Any such equity grants shall be subject to the terms of a Share Option Agreement and the governing equity plan
which will be provided to the Executive within thirty (30) days of her Effective Date.
2.4
Business Expenses. During employment, the Executive is entitled to reimbursement for
reasonable and necessary business expenses incurred by Executive in connection with the performance of Executive’s
duties, subject to proper documentation and approval as required pursuant to the applicable Company expense
reimbursement policies.
2.5
Fringe Benefits. The Executive shall be entitled to fringe benefits in accordance with the plans,
practices, programs and policies applicable to other peer executives of the Company.
2.6
Vacation. The Executive shall be entitled each year to a vacation, during which time her
compensation shall be paid in full. The time allotted for such vacation shall be four (4) weeks per year. Executive can accrue
up to six (6) weeks of vacation time, at which point no additional vacation may accrue beyond the six (6) weeks until a
portion thereof is used. Any accrued vacation will roll over into the following calendar year and will not be forfeited. The
Executive agrees to schedule planned vacation to be taken at a time mutually convenient to the Executive, CEO, and the
Company.
2.7
Health Insurance and Benefits. The Executive shall be eligible to participate in the Company’s
health, dental and vision plans, as well as the Company’s 401k program, pursuant to the terms of these plans and programs.
3.
Term and Termination of Employment
3.1
At-Will Employment. The Company and the Executive hereby agree that the Executive’s
employment by the Company shall be “at-will” and for an indefinite period of time. Subject to the provisions of this
Section, both the Executive and the Company shall have the right to terminate this Agreement and the employment
relationship at any time and for any reason, with or without Cause, with or without Good Reason, and with or without
advance notice.
3.2
Definitions.
(a)
Cause. For purposes of this Agreement, “Cause” shall mean the occurrence of
one or more of the following: (i) conviction of, or a plea of guilty or nolo contendere to, a felony or crime involving moral
turpitude; (ii) participation in an act of fraud or theft against the Company; (iii) willful and material breach of any
contractual, statutory, fiduciary, or common law duty owed to the Company including without limitation Section 4.1 of this
Agreement; (iv) willful and repeated failure to satisfactorily perform job duties; or (v) any willful act that is likely to and
which does in fact have the effect of injuring the reputation, business, or a business relationship of the Company.
3
(b)
Good Reason. For purposes of this Agreement, “Good Reason” shall mean: (i) a
material diminution in Executive’s authority, duties, or responsibilities in effect at the time of this Agreement; (ii) any
reduction in the Executive’s then-current base salary; (iii) relocation of Executive’s principal place of work by a distance of
fifty (50) miles or more from the Executive’s then-current principal place of work without the Executive’s consent; (iv)
material breach by the Company of any provision of this Agreement; or (v) the occurrence of a Change in Control of the
Company as defined in Section 3.2(c) below, provided, however, that the conduct described in the foregoing subsections (i)
through (iv) will only constitute Good Reason if such conduct is not cured within thirty (30) days after the Company’s
receipt of written notice from the Executive specifying the particulars of the conduct the Executive believes constitutes
Good Reason and such notice shall be given within thirty (30) days of the occurrence of such event or conduct.
(c)
Change in Control. For purposes of this Agreement, “Change in Control” shall
mean any of the following events occurring after the date of this Agreement: (i) a sale or transfer of all or substantially all of
the assets of the Company; (ii) any merger, consolidation or acquisition of the Company with, by or into another
corporation, entity or person; (iii) any change in ownership of more than fifty percent (50%) of the voting capital stock of
Company in one or more related transactions such as a buy out or exit of the Company (but excluding any change in stock
listing).
3.3
Termination.
(a)
Termination for Cause or Resignation without Good Reason. In the event
that the Company terminates the Executive’s employment for Cause or the Executive resigns her employment without
Good Reason, this Agreement will terminate without further obligations to Executive other than the following: Executive
shall be entitled to receive he unpaid base salary earned through her last day of employment, accrued but unused vacation
pay, and vested benefits through and including Executive’s last day of employment.
(b)
Involuntary Termination Without Cause or Resignation With Good
Reason. In the event of either an involuntary termination of the Executive’s employment Without Cause or a voluntary
resignation by the Executive for Good Reason, in exchange for the Executive signing a separation and release of all claims
agreement in a form acceptable to the Company, the Company shall provide the Executive with the following severance
benefits in accordance with the timing set forth in Section 3.3(b)(iv) below:
(i)
(ii)
Base Salary: The Company shall pay the Executive the equivalent of nine (9) months
of the Executive’s annual base salary in effect at the time of the termination Without
Cause or resignation with Good Reason in one lump sum payment, less standard
deductions and withholdings.
Three Months Notice: The Company shall provide the Executive three (3) months
prior written notice in the event of an involuntary termination of the Executive’s
employment Without Cause or a voluntary resignation by the Executive for Good
Reason.
4
(iii)
(iv)
(v)
Benefits Coverage. The Company shall continue to provide group health, vision, and
dental plan benefits to the Executive for a period of nine (9) months from and after the
date of termination, with the cost of all regular premiums for such benefits paid by the
Company (or its successor).
Equity. Executive's stock options shall immediately accelerate so that 100% of any
then unvested stock options shall immediately vest and become exercisable upon the
date of Executive’s termination Without Cause or resignation with Good Reason and
shall continue to be exercisable for twelve (12) months
Timing of Payments. The severance benefits in the above subsection 3.3(b)(i) shall be
paid to Executive no later than fifteen
(15) days from the date the Executive signs the severance and release agreement
and the revocation period, if any, has expired.
(c)
Termination or Resignation In Connection With Change In Control. In the
event Executive is terminated or resigns in connection with or within one (1) year following a Change in Control or for
Good Reason as defined in 3.2(b) and 3.2(c), respectively, the Executive shall be entitled to all of the severance benefits set
forth in Section 3.3(b) above.
4.
Proprietary Information
The Executive acknowledges that: (i) the Executive has a major responsibility for the operation, development and
growth of the Company’s business, and its subsidiaries and affiliates; (ii) the Executive’s work for the Company, and its
subsidiaries, and affiliates has brought the Executive and will continue to bring the Executive into close contact with
“Confidential Information” (as defined below); and (iii) the agreements and covenants contained in this Section 4 are
essential to protect the business interests of the Company, and its subsidiaries and affiliates, and that the Company will not
enter into this Agreement but for such agreements and covenants. Accordingly, the Executive covenants and agrees to the
following:
4.1
Confidential Information. Both during the term of the Executive’s employment under this
Agreement and indefinitely after the Executive is no longer employed as Chief Operating Officer of the Company, the
Executive shall not, directly or indirectly, (i) knowingly use for an improper personal benefit any “Confidential
Information” that was acquired by, learned by or disclosed to Executive by reason of the Executive’s employment as Chief
Operating Officer of the Company (before or after the date of this Agreement), or (ii) disclose any such Confidential
Information to any person, business or entity, except in the proper course of the Executive’s duties as Chief Operating
Officer, of the Company. As used in this Agreement, “Confidential Information” means any and all confidential or
proprietary information of the Company, and its subsidiaries and affiliates that is not generally known to the public,
including, without limitation, business, financial, marketing, technical, developmental, operating, performance, know-how,
and process information, drawings and
5
designs, customer information (including contact information, pricing and buying trends and needs), employee information
(including the skills, abilities and compensation of other employees), and other trade secret information, now existing or
hereafter discovered or developed. Confidential Information shall include information in any form whatsoever, including,
without limitation, any digital or electronic record-bearing media containing or disclosing such information. The provisions
of this Section 4 shall not apply to information that has become generally available to the public other than as a result of a
disclosure by the Executive. In the event that the Executive is requested or required (by oral question or request for
information or documents in any legal proceeding, interrogatory, subpoena, civil investigative demand, or similar process)
to disclose any Confidential Information, then the Executive will notify the Company within two (2) business days of
receiving the request or requirement so that the Company may seek an appropriate protective order. If, in the absence of a
protective order or the receipt of a waiver hereunder, the Executive is, on the advice of counsel, compelled to disclose any
Confidential Information to any tribunal or else stand liable for contempt, the Executive may disclose such Confidential
Information to the tribunal; provided, however, that the Executive shall use the Executive’s reasonable best efforts to obtain,
at the expense and reasonable request of the Company, an order or other assurance that confidential treatment will be
accorded to such portion of the Confidential Information required to be disclosed as the Company shall designate. The
Executive acknowledges that all Confidential Information is the exclusive property of the Company. The Executive further
acknowledges that the Executive’s entire work product, including working drafts and work sheets, shall be the sole property
of the Company, and that the Executive will have no rights, title or interest in any such material whether prepared by the
Executive alone, by others or by the Executive in conjunction with others. Executive agrees as a condition of continued
employment to execute the Company’s Proprietary Information Agreement protecting the trade secrets and other intellectual
property of the Company. Defend Trade Secrets Act
Notice. Executive is hereby notified in accordance with the Defend Trade Secrets Act of 2016 that she will not be held
criminally or civilly liable under any federal or state trade secret law for the disclosure of a trade secret that: (i) is made in
confidence to a federal, state, or local government official, either directly or indirectly, or to an attorney, and solely for the
purpose of reporting or investigating a suspected violation of law; or (ii) is made in a complaint or other document that is
filed under seal in a lawsuit or other proceeding. Executive is further notified that if Executive files a lawsuit for retaliation
by an employer for reporting a suspected violation of law, Executive may disclose the employer's trade secrets to
Executive’s attorney and use the trade secret information in the court proceeding if Executive: (i) files any document
containing the trade secret under seal; and (ii) does not disclose the trade secret, except pursuant to court order.
4.2
Duty of Loyalty and Non-Competition. While employed by the Company, the Executive shall
not, without the prior written consent of the Company, participate, directly or indirectly, as an individual proprietor,
partner, stockholder, officer, employee, director, manager, joint venture participant, investor, lender, consultant or in any
capacity whatsoever (within the United States of America, or in any country where the Company or its subsidiaries or
affiliates do business or have reasonable plans to do business) in a business engaged in competition with the Company or
any of its subsidiaries or affiliates, or in a business that the Company or any of its subsidiaries or affiliates has taken
reasonable steps to engage in (including, but not limited to, meeting with management teams or entering into preliminary
or
6
definitive term sheets, letters of intent, purchase agreements, or other similar arrangements or agreements) of which the
Executive has knowledge at the time of Executive’s employment; provided, however, that such participation shall not
include the mere ownership of not more than one percent (1%) of the total outstanding stock of a publicly held company.
At all times following the termination of Executive’s employment as Chief Operating Officer of the Company for any
reason, Executive shall not, either directly or indirectly, engage in any unlawful competitive activities or use confidential
trade secret information for any purpose.
4.3
Non-Solicitation. For a period beginning on the Effective Date and ending two
(2) years after the date on which the Executive is no longer employed as Chief Operating Officer of the Company (the
“Non-Solicitation Period”), the Executive shall not in any capacity, either separately or in association with others: (i)
unlawfully solicit for employment or endeavor in any way to unlawfully entice away from employment with the
Company, its subsidiaries or affiliates any employee of the Company, its subsidiaries or its affiliates, or any person or
entity that had been an employee of the Company or its subsidiaries or affiliates within the six (6) month period
preceding the commencement of such activity; nor (ii) use confidential trade secret information to solicit or use any other
unlawful means to induce or influence any supplier, customer, agent, consultant or other person or entity that has a
business relationship with the Company, or its subsidiaries or affiliates to discontinue, reduce or modify such relationship
with the Company or its subsidiaries or affiliates.
4.4
Non-disparagement. The Executive agrees (whether during or after Executive’s employment as
Chief Operating Officer of the Company) not to issue, circulate, publish or utter any comments or statements to the press
or other media, or to any third parties, or to any employees of the Company, and its subsidiaries and affiliates, or any
consultants or any individual or entity with whom the Company or its subsidiaries or affiliates has a business
relationship, which could reasonably be expected to adversely affect in any manner: (i) the conduct of the business of the
Company, or its subsidiaries or affiliates (including, without limitation, any products, services, or business plans or
prospects); or (ii) the business reputation of the Company or its subsidiaries or affiliates (including its financial condition
or the direction of the business), or any of their respective products or services, or their past or present officers, directors,
executives or employees. Notwithstanding the foregoing, nothing contained in this Agreement will be deemed to restrict
Executive from providing truthful information to any governmental or regulatory agency (or in any way limit the content
of any such information) to the extent requested or required to provide such information pursuant to applicable law or
regulation. Nothing in this section is intended to limit Executive’s rights under Section 7 of the National Labor Relations
Act.
4.5
Return of Property. Upon termination of her employment as Chief Operating Officer of the
Company or at any time as the Company requests, the Executive will promptly deliver to the Company all documents
(whether prepared by the Company, a subsidiary, an affiliate, the Executive or a third party) relating to the Company, any
of its subsidiaries or affiliates or any of their businesses or property that the Executive may possess or have under the
Executive’s direction or control other than documents provided to the Executive in the Executive’s capacity as a
participant in any employee benefit plan, policy or program of the Company.
7
4.6
Remedies. The Executive acknowledges that (i) the Executive has had an opportunity to seek the
advice of counsel in connection with this Agreement; (ii) the provisions of this Section 4 are reasonable in scope and in all
other respects; (iii) any violation of these provisions will result in irreparable injury to the Company; (iv) money damages
may not be an adequate remedy for the Company in the event of a breach of any of these provisions by the Executive; and
(v) specific performance in the form of injunctive relief would be an appropriate remedy for the Company. If the
Executive breaches or threatens to breach any of these provisions, the Company shall be entitled, in addition to all other
remedies, to seek an injunction restraining any such breach, without any bond or other security being required and without
the necessity of showing actual damages.
5.
Assignment
This Agreement is personal in nature, and neither this Agreement nor any part of any obligation herein shall be
assignable by Executive. The Company shall be entitled to assign this Agreement to any subsidiary or affiliate of the
Company or any entity that assumes the ownership and control of the business of the Company.
6.
Severability
Should any term, provision, covenant or condition of this Agreement be held to be void or invalid, the same shall
not affect any other term, provision, covenant or condition of this Agreement, but such remainder shall continue in full
force and effect as though each such voided term, provision, covenant or condition is not contained herein.
7.
Binding Arbitration
Any and all disputes which involve or relate in any way to this Agreement and/or to Executive’s employment or
termination of employment as Chief Operating Officer of the Company, whether initiated by Executive or by the
Company and whether based on contract, tort, statute, or common law, shall be submitted to and resolved by final,
binding and confidential arbitration as the exclusive method for resolving all such disputes. The arbitration shall be
private and confidential and conducted in Los Angeles, California pursuant to the Federal Arbitration Act and applicable
California law, and pursuant to the applicable rules of the Judicial Arbitration and Mediation Services (“JAMS”)
relating to employment disputes, unless the parties otherwise mutually agree to modify the JAMS Rules. A copy of the
AAA Employment Rules are available for review at https://www.jamsadr.com/rules-employment-arbitration and are
incorporated herein by reference.
The party demanding arbitration shall submit a written claim to the other party, setting out the basis of the claim or
claims, within the time period of any applicable statute of limitations relating to such claim(s). If the parties cannot
mutually agree upon an arbitrator, then the parties shall select a neutral arbitrator through the procedures established by
the AAA. The arbitrator shall have the powers provided under the Federal Arbitration Act relating to the arbitration of
disputes, except as expressly limited or otherwise provided in this Agreement. The parties shall have the right to
reasonable discovery. The parties agree
8
that the Company shall pay the administration costs of the AAA arbitration, including payment of the fees for the
Arbitrator, and any other costs directly related to the administration of the arbitration. The parties shall otherwise be
responsible for their own respective costs and attorneys' fees relating to the dispute, such as deposition costs, expert
witnesses and similar expenses, except as otherwise provided in this Agreement to the prevailing party.
The arbitrator may award, if properly proven, any damages or remedy that a party could recover in a civil litigation
and shall award costs and reasonable attorneys’ fees to the prevailing party as provided by law. The award of the
arbitrator shall be issued in writing, setting forth the basis for the decision, and shall be binding on the parties to the
fullest extent permitted by law, subject to any limited statutory right to appeal as provided by law.
Judgment upon the award of the arbitrator may be entered in any state or federal court sitting in Los Angeles, California.
Nothing in this Section shall prevent Executive from filing or maintaining a claim for workers’ compensation, state
disability insurance, or unemployment insurance benefits, and nothing in this section shall be construed to prevent or
excuse Executive or the Company from using existing internal procedures for the resolution of complaints. Employee
may bring claims before administrative agencies when the law permits the agency to adjudicate those claims, even when
there is an agreement to arbitrate; examples include claims or charges with the United States Equal Employment
Opportunity Commission (or comparable state agency), the National Labor Relations Board, the U.S. Department of
Labor, or the Office of Federal Contract Compliance Programs. Nothing in this Section shall require arbitration of
disputes that are excluded from coverage by this section or by law.
The Company and Executive agree that any dispute in arbitration will be brought on an individual basis only, and
not on a class, collective, or representative basis on behalf of others (this agreement to be referred to hereafter as the
“Class Action Waiver”). The Class Action Waiver does not apply to any claim that Executive brings on behalf of both
herself and others under the California Private Attorney General Act of 2004. Executive will not be subject to any
retaliation or discrimination if Executive seeks to challenge this arbitration provision or participate in a class,
collective, or representative action in any forum, but Company may lawfully seek enforcement of this Agreement
under the Federal Arbitration Act and seek dismissal of any class, collective, or representative actions or claims to the
fullest extent allowed by law.
8. Governing Law
This Agreement shall be governed by and construed in accordance with the laws of the State of California
applicable to contracts made and to be carried out in California. Each of the parties agrees to submit to the personal
jurisdiction of any state or federal court sitting in Los Angeles, California in any action or proceeding arising out of or
relating to this Agreement.
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9. Notice
All notices and other communications under this Agreement shall be in writing and mailed, telegraphed,
telecopied, or delivered by hand (by a party or a recognized courier service) to the other party at the following
address (or to such other address as such party may have specified by notice given to the other party pursuant to this
provision):
If to the Company:
AVITA Medical Americas, LLC 28159
Avenue Stanford
Suite 220
Valencia, CA 91355
If to Executive:
Kathy McGee
At current home address on file with the Company
10. Miscellaneous
10.1
Binding Agreement. This Agreement shall inure to the benefit of and shall be
binding upon the Company, its successors and assigns.
10.2
Entire Agreement. This Agreement contains the entire agreement of the parties
relating to the subject matter hereof, and the parties hereto have made no agreements, representations or warranties
relating to the subject matter of this Agreement that are not set forth otherwise herein. In this regard, each of the parties
represents and warrants to the other party that such party is not relying on any promises or representations that do not
appear in writing herein. This Agreement supersedes any prior verbal or written agreements with the Company
regarding Executive’s employment or offer of employment, except as specifically referenced herein. Each of the parties
further agrees and understands that this Agreement can be amended or modified only by a written agreement signed by
all parties.
10.3
Representations and Warranties. Executive and the Company hereby represent and
warrant to the other that: (a) she or it has full power, authority and capacity to execute and deliver this Agreement, and to
perform his or its obligations hereunder; (b) such execution, delivery and performance will not (and with the giving of
notice or lapse of time or both would not) result in the breach of any agreements or other obligations to which she or it is
a party or she or it is otherwise bound; (c) this Agreement is a valid and binding obligation in accordance with its terms
for both parties; (d) Executive represents and warrants that she is under no other obligations, contractual or otherwise,
that could impair her ability to perform fully and satisfactorily all of her obligations under this Agreement; (e) Executive
has had full opportunity to review this Agreement, to obtain all legal advice she has deemed necessary or appropriate and
has either done so, or voluntarily and knowingly declined to do so; and (f) neither party has been induced to enter into
this Agreement through any promises, threats, coercion, or benefits not set forth expressly in writing in this Agreement.
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10.4
Attorney’s Fees. In the event that any party shall bring an action or proceeding in connection
with the performance, breach or interpretation of this Agreement, then the prevailing party in any such action or
proceeding, as determined by the court, arbitrator or other body having jurisdiction, shall be entitled to recover from the
losing party all reasonable costs and expenses of such action or proceeding, including reasonable attorneys’ fees and
court costs.
10.5
Counterparts. This Agreement may be executed on separate copies, any one of
which need not contain signatures of more than one party but all of which taken together shall constitute one and the
same Agreement.
[Signatures to follow on next page]
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IN WITNESS WHEREOF, this Agreement is executed as of 11/17/2020 2020. “COMPANY” AVITA Medical Americas, LLC By: Name: Dr. Michael S. Perry Chief Executive Title: Officer Date: 11/18/2020 And “EXECUTIVE” Kathy McGee By: Kathy McGee 11/17/2020
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EXECUTIVE EMPLOYMENT AGREEMENT
Exhibit 10.16
This EXECUTIVE EMPLOYMENT AGREEMENT ("Agreement") is made and entered into by and between Avita
Medical Ltd., an Australian corporation (the "Company"), and Erin Liberto, an individual (the "Executive") with reference to the
following:
RECITALS
WHEREAS, the Board of Directors of the Company (the "Board") desires to employ Executive to serve as the Chief
Commercial Officer of the Company;
WHEREAS, the Executive is willing to serve in the role of Chief Commercial Officer of the Company and provide
services to the Company and its subsidiaries under the terms and conditions stated herein,
WHEREAS, the Executive would serve as Chief Commercial Officer of the Company, but her direct employer shall be
Avita Medical Americas, LLC ("Avita America"), effective as of August 28, 2017 (the Effective Date");
NOW, THEREFORE, in consideration of the mutual covenants and promises contained herein, and intending to be
legally bound, it is hereby agreed by and between the parties hereto as follows:
1.
Employment and Duties
1.1
Employment. The Company hereby employs the Executive as the Chief Commercial Officer ("CCO") of
the Company and the Executive hereby accepts such employment as of the Effective Date pursuant to the terms and conditions
set forth herein. The Executive shall report directly to the Chief Executive Officer ("CEO").
1.2
Duties. The Executive shall perform, to the best of her ability and in a manner satisfactory to the CEO, all
such duties that are consistent with her title and position, and such other duties as may reasonably be assigned to her by the
CEO. The Executive's duties will be conducted principally from the Company's North America office, currently located in
Valencia, California, or at such other location as determined by the CEO (but subject to the terms of this Agreement), with travel
to such other locations from time to time as reasonably required.
1.3
Time and Efforts. The Executive shall devote her full business time and provide her best efforts, attention,
and energies to the business of the Company and its subsidiaries and to the performance of Executive's duties hereunder, and
Executive shall not engage in any other business, profession or occupation for compensation or otherwise during the employment
period without the prior written consent of the Board; provided that, nothing herein shall preclude Executive from serving in any
capacity with any civic, educational, or charitable organization, and provided, further that, in each case, and in the aggregate, such
services do not materially conflict or interfere with Executive's obligations to the Company or its subsidiaries hereunder and such
service is disclosed in advance by Executive to the Board.
Executive further acknowledges that she owes the Company both a fiduciary duty and a duty of loyalty while employed
during the employment period to act at all times in the best interests of the Company and its subsidiaries.
2.Compensation
As the total consideration for the Executive's services rendered hereunder, Executive shall be entitled to the following:
2.1
Base Salary. The Executive shall be paid an annual base salary of Two Hundred Eighty-Five Thousand
Dollars ($285,000.00) per year ("Base Salary"), subject to applicable tax deductions and withholdings, beginning on the
Effective Date of the Agreement and payable in regular installments in accordance with the customary payroll practices of Avita
America. The Executive's salary will be subject to annual review by the Board and may be increased in the sole discretion of
the Board.
2.2Bonus.
Annual Performance Bonus. In addition to Base Salary, the Executive shall be eligible to receive an annual performance
bonus ("Annual Bonus") based upon the Executive's performance for the preceding year as measured against certain performance
targets as mutually established by the parties to this Agreement. The Annual Bonus, if earned, shall be paid 60 days after the close
of the fiscal year. The amount of the Annual Bonus shall be thirty percent (30%) of Executive's Base Salary ("Target Bonus").
For 2017, Executive will be eligible to receive an Annual Bonus that is equal to 30% of the pro-rata share of the Base Salary
(excluding any other bonus or compensation) Executive earned in 2017. At the sole discretion of the Board, Executive may be
entitled to an additional amount of up to fifty percent (150%) of the Target Bonus based upon performance. For the Annual Bonus
to be deemed earned, and in order to be eligible and
entitled to receive any Annual Bonus payment, the Executive must be employed by, and not have given notice of resignation to the
Company or have been given notice of termination by the Company.
Retention Bonus. In addition to Base Salary and Annual Performance Bonus, the Executive shall be eligible to receive a
retention bonus ("Retention Bonus") of $150,000. The Retention Bonus shall be paid as follows:
•
Full amount of $150,000 shall be paid upon Executive' s completion of 60 days' employment with the Company
with the express understanding that it is being paid with the expectation that Executive shall remain employed with
the Company for at least one year following the Effective Date. Accordingly, despite its being paid after 60 days'
employment, the Retention Bonus is an advance that will not be considered earned by either Executive or the
Company until Executive has completed one year of employment with the Company. If Executive's employment is
terminated either by Executive without Good Reason or the Company for Cause before Executive has completed a
year of employment, Executive agrees to return the Retention Bonus to the Company.
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2.3
Equity. Executive shall be eligible for 4,000,000 options, which will vest as follows:
•
•
3,000,000 options will vest based upon Executive's achieving certain established metrics as
agreed upon between Executive and the CEO;
1,000,000 options will vest based on Executive's continued employment with the Company at a rate of
250,000 per year for four years, commencing with the first 250,000 option installment, which will vest
upon the completion of Executive's first year of service.
2.4
Business Expenses. During employment, the Executive is entitled to reimbursement (through Avita
America) for reasonable and necessary business expenses incurred by Executive in connection with the performance of
Executive's duties, subject to proper documentation and approval as required pursuant to the applicable Company expense
reimbursement policies.
2.5
Fringe Benefits. The Executive shall be entitled to fringe benefits in accordance with the plans, practices,
programs and policies as in effect generally with respect to other peer executives of the Company.
2.6
Vacation. The Executive shall be entitled each year to a vacation, during which time her compensation
shall be paid in full. The time allotted for such vacation shall be four (4) weeks per year. Executive can accrue up to six (6)
weeks of vacation time, at which point no additional vacation may accrue beyond the six (6) weeks until a portion thereof is
used. Any accrued vacation will roll over into the following calendar year and will not be forfeited. The
Executive agrees to schedule planned vacation to be taken at a time mutually convenient to the Executive and the Company.
2.7
Health Insurance and Benefits. The Executive shall be eligible to participate in the Company's health, dental
and vision plans, as well as the Company's 401k program.
3.
Term and Termination of Employment
3.1
At-Will Employment. The Company and the Executive hereby agree that the Executive' s employment by
the Company shall be "at-will" and for an indefinite period of time. Subject to the provisions of this Section, both the Executive
and the Company shall have the right to terminate this Agreement and the employment relationship at any time and for any
reason, with or without Cause, with or without Good Reason, and with or without advance notice.
3.2
Definitions.
(a)
Cause. For purposes of this Agreement, "Cause" shall mean the occurrence of one or more of the
following: (i) conviction of, or a plea of guilty or nolo contendere to, a felony or crime involving moral turpitude; (ii) participation
in an act of fraud or theft against the Company; (iii) willful and material breach of Section 4.1 of this Agreement; (iv) willful and
repeated failure to satisfactorily perform job duties; or (v) any willful act that is likely to and which does in fact have the effect of
injuring the reputation, business, or a business
3
relationship of the Company, provided however, that the conduct described in the foregoing subsections (ii) through (v) will only
constitute Cause if such conduct is not cured within thirty
(30) days after the Executive's receipt of written notice from the Company specifying the particulars of the conduct the Company
believes constitutes Cause.
(b)
Good Reason. For purposes of this Agreement, "Good Reason" shall mean: (i) a material diminution
in Executive' s authority, duties, or responsibilities in effect at the time of this Agreement; (ii) any reduction in the Executive's then-
current base salary; (iii) relocation of Executive's principal place of work by a distance of fifty (50) miles or more from the Executive's
then-current principal place of work without the Executive's consent; (iv) material breach by the Company of any provision of this
Agreement; (v) material reduction of the Target Bonus for the then-current fiscal year before the end of the then-current fiscal year;
or
(vi) the occurrence of a Change in Control of the Company as defined in Section 3.3(c) below, provided, however, that the conduct
described in the foregoing subsections (i) through (v) will only constitute Good Reason if such conduct is not cured within thirty (30)
days after the Company's receipt of written notice from the Executive specifying the particulars of the conduct the Executive believes
constitutes Good Reason.
(c)
Change in Control. For purposes of this Agreement, "Change in Control" shall mean any of the following
events occurring after the date of this Agreement: (i) a sale or transfer of all or substantially all of the assets of the Company; (ii) any
merger, consolidation or acquisition of the Company with, by or into another corporation, entity or person; (iii) any
change in ownership of more than fifty percent (50%) of the voting capital stock of Company in one or more related transactions such as
a buy out or exit of the Company (but excluding any change in stock listing).
3.3
Termination.
(a)
Termination for Cause or Resignation without Good Reason. In the event that the Company
terminates the Executive' s employment for Cause or the Executive resigns her employment without Good Reason, this Agreement will
terminate without further obligations to Executive other than the following: Executive shall be entitled to receive her unpaid base salary
earned through her last day of employment, accrued but unused vacation pay, and vested benefits through and including Executive's last
day of employment.
(b)
Involuntary Termination Without Cause or Resignation With Good Reason. In the event of
either an involuntary termination of the Executive's employment Without Cause or a voluntary resignation by the Executive for
Good Reason, in exchange for the
Executive signing a separation and release of all claims agreement in a form acceptable to the Company, the Company shall provide
the Executive with the following severance benefits in accordance with the timing set forth in Section 3.3(b)(v) below:
(i)
Base Salary: The Company shall pay the Executive the equivalent of six (6) months of the
Executive's annual base salary in effect at the time of the termination Without Cause or
resignation with Good Reason in one lump sum payment, less standard deductions and
withholdings.
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(ii)
(iii)
(iv)
Benefits Coverage. The Company shall continue to provide group health, vision, and
dental plan benefits to the Executive for a period of six (6) months from and after the date
of termination, with the cost of all regular premiums for such benefits paid by the
Company (or its successor).
Pro-Rated Annual Bonus. The Company shall pay the Executive a pro-rata portion of her
Annual Bonus payment for the then-current fiscal year. The pro-rata Annual Bonus
calculation shall assume that the Executive attained 100% of the performance target
established for the then-current fiscal year and then will be prorated for the time the
Executive actually remained employed during the then-current fiscal year.
Equity. Executive's stock options shall immediately accelerate so that 100% of any then
unvested stock options shall immediately vest and become exercisable upon the date of
Executive's termination Without Cause or resignation with Good Reason and shall continue
to be exercisable for either a period of 180 days after such termination or resignation or for
the period specified in the vesting schedule of the applicable stock agreement, whichever is
longer.
(v)
Timing of Payments. The severance benefits in the above subsections 3.3(b)(i) and
3.3(b)(iii) shall be paid to executive within 15 days of the date the Executive signs the
severance and release agreement and the revocation period, if any, has expired.
(c)
Termination or Resignation In Connection With Change In Control. In the event Executive
is terminated or resigns in connection with or within one (1) year following a Change in Control, the Executive shall be entitled to
all of the severance benefits set forth in Section 3.3(b) above.
4.
Proprietary Information
The Executive acknowledges that: (i) the Executive has a major responsibility for the operation, development and
growth of the Company's business and subsidiaries; (ii) the Executive's work for the Company and its subsidiaries has brought
the Executive and will continue to bring the Executive into close contact with "Confidential Information" (as defined below);
and (iii) the agreements and covenants contained in this Section 4 are essential to protect the business interests of the Company
and its subsidiaries and that the Company will not enter into this Agreement but for such agreements and covenants. Accordingly,
the Executive covenants and agrees to the following:
4.1
Confidential Information. Both during the tenn of the Executive's employment under this Agreement and
indefinitely after the Executive is no longer employed as CCO of the Company, the Executive shall not, directly or indirectly,
(i) knowingly use for an improper
5
personal benefit any "Confidential Information" (as defined below) that was acquired by, learned by or disclosed to Executive by
reason of the Executive' s employment as CCO of the Company (before or after the date of this Agreement), or (ii) disclose any
such Confidential Information to any person, business or entity, except in the proper course of the Executive's duties as CCO of
the Company. As used in this Agreement, "Confidential Information" means any and all confidential or proprietary
information of the Company and its subsidiaries or affiliates that is not generally known to the public, including, without
limitation, business, financial, marketing, technical, developmental, operating, performance, know-how, and process information,
drawings and designs, customer information (including contact information, pricing and buying trends and needs), employee
information (including the skills, abilities and compensation of other employees), and other trade secret information, now existing
or hereafter discovered or
developed. Confidential Information shall include information in any form whatsoever, including, without limitation, any digital or
electronic record-bearing media containing or disclosing such information. The provisions of this Section 5 shall not apply to
information that has become generally available to the public other than as a result of a disclosure by the Executive. In the event
that the Executive is requested or required (by oral question or request for information or documents in any legal proceeding,
interrogatory, subpoena, civil investigative demand, or similar process) to disclose any Confidential Information, then the
Executive will notify the Company within two (2) business days of receiving the request or requirement so that the Company may
seek an appropriate protective order. If, in the absence of a protective order or the receipt of a waiver hereunder, the Executive is,
on the advice of counsel, compelled to disclose any Confidential Information to any tribunal or else stand liable for contempt, the
Executive may disclose such Confidential Information to the tribunal; provided, however, that the Executive
shall use the Executive's reasonable best efforts to obtain, at the expense and reasonable request of the Company, an order or
other assurance that confidential treatment will be accorded to such portion of the Confidential Information required to be
disclosed as the Company shall designate. The Executive acknowledges that all Confidential Information is the exclusive property
of the Company. The Executive further acknowledges that the Executive's entire work product, including working drafts and work
sheets, shall be the sole property of the Company, and that the Executive will have no rights, title or interest in any such material
whether prepared by the Executive alone, by others or by the Executive in conjunction with others. Executive agrees as a
condition of continued employment to execute the Company's standard form Intellectual Property and Confidentiality Agreement
protecting the trade secrets and other intellectual property of the Company.
4.2
Duty of Loyalty and Non-Competition. While employed by the Company, the Executive shall not, without
the prior written consent of the Company, participate, directly or indirectly, as an individual proprietor, partner, stockholder,
officer, employee, director, manager, joint venturer, investor, lender, consultant or in any capacity whatsoever (within the United
States of America, or in any country where the Company or its subsidiaries or affiliates do business or have reasonable plans to
do business) in a business engaged in competition with the Company or any of its subsidiaries or affiliates, or in a business that
the Company or any of its subsidiaries or affiliates has taken reasonable steps to engage in (including, but not limited to, meeting
with management teams or entering into preliminary or definitive term sheets, letters of intent, purchase agreements, or other
similar arrangements or agreements) of which the Executive has knowledge at the time of Executive's employment; provided,
however, that such participation shall not include the mere ownership of not more than one percent (I%) of the total
6
outstanding stock of a publicly held company. At all times following the termination of Executive's employment as CCO of the
Company for any reason, Executive shall not, either directly or indirectly, engage in any unlawful competitive activities or use
confidential trade secret information for any purpose.
4.3
Non-Solicitation. For a period beginning on the Effective Date and ending two years after the date on which
the Executive is no longer employed as CCO of the Company (the "Non-Solicitation Period"), the Executive shall not in any
capacity, either separately or in association with others: (i) unlawfully solicit for employment or endeavor in any way to
unlawfully entice away from employment with the Company or its subsidiaries or affiliates any employee of the Company or its
subsidiaries or affiliates, or any person or entity that had been an employee or affiliate of the Company or its subsidiaries within
the six month period preceding the commencement of such activity; nor (ii) use confidential trade secret information to solicit or
use any other unlawful means to induce or influence any supplier, customer, agent, consultant or other person or entity that has a
business relationship with the Company or its subsidiaries to discontinue, reduce or modify such relationship with the Company or
its subsidiaries.
4.4
Nondisparagement. The Executive agrees (whether during or after Executive's employment as CCO of the
Company) not to issue, circulate, publish or utter any comments or statements to the press or other media, or to any third parties,
or to any employees of the Company or its subsidiaries or affiliates, or any consultants or any individual or entity with whom the
Company or its subsidiaries or affiliates has a business relationship, which could reasonably be expected to adversely affect in
any manner: (i) the conduct of the business of the Company or its subsidiaries or affiliates (including, without limitation, any
products, services, or business plans or prospects); or (ii) the business reputation of the Company or its subsidiaries or affiliates
(including its financial condition or the direction of the business), or any of their respective products or services, or their past or
present officers, directors, executives or employees. Notwithstanding the foregoing, nothing contained in this Agreement will be
deemed to restrict Executive from providing truthful information to any governmental or regulatory agency (or in any way limit
the content of any such information) to the extent requested or required to provide such information pursuant to applicable law
or regulation. Nothing in this section is intended to limit Executive's rights under Section 7 of the National Labor Relations Act.
4.5
Return of Property. Upon termination of her employment as CCO of the Company or at any time as the
Company requests, the Executive will promptly deliver to the Company all documents (whether prepared by the Company, a
subsidiary, an affiliate, the Executive or a third party) relating to the Company, any of its subsidiaries, an affiliate or any of their
businesses or property that the Executive may possess or have under the Executive's direction or control other than documents
provided to the Executive in the Executive's capacity as a participant in any employee benefit plan, policy or program of the
Company.
4.6
Remedies. The Executive acknowledges that (i) the Executive has had an opportunity to seek the advice of
counsel in connection with this Agreement; (ii) the provisions of this Section 4 are reasonable in scope and in all other respects;
(iii) any violation of these provisions will result in irreparable injury to the Company; (iv) money damages may not be an
adequate remedy for the Company in the event of a breach of any of these provisions by the
7
Executive; and (v) specific performance in the form of injunctive relief would be an appropriate remedy for the Company. If the
Executive breaches or threatens to breach any of these provisions, the Company shall be entitled, in addition to all other remedies,
to seek an injunction restraining any such breach, without any bond or other security being required and without the necessity of
showing actual damages.
5.
Assignment
This Agreement is personal in nature, and neither this Agreement nor any part of any obligation herein shall be
assignable by Executive. The Company shall be entitled to assign this Agreement to any affiliate of the Company or any entity
that assumes the ownership and control of the business of the Company.
6.
Severability
Should any term, provision, covenant or condition of this Agreement be held to be void or invalid, the same shall not
affect any other term, provision, covenant or condition of this Agreement, but such remainder shall continue in full force and
effect as though each such voided term, provision, covenant or condition is not contained herein.
7.
Binding Arbitration
Any and all disputes which involve or relate in any way to this Agreement and/or to Executive's employment or
termination of employment as CCO of the Company, whether initiated by Executive or by the Company and whether based on
contract, tort, statute, or common law, shall be submitted to and resolved by final and binding arbitration as the exclusive method
for resolving all such disputes. The arbitration shall be private and confidential and conducted in Los Angeles, California
pursuant to the Federal Arbitration Act and applicable California law, and pursuant to the applicable rules of the American
Arbitration Association
(" AAA") relating to employment disputes, unless the parties otherwise mutually agree to modify the AAA Rules. A copy of the
AAA Employment Rules are available for review at www.adr.org/employment and are incorporated herein by reference.
The party demanding arbitration shall submit a written claim to the other party, setting out the basis of the claim or
claims, within the time period of any applicable statute of limitations relating to such claim(s). If the parties cannot mutually agree
upon an Arbitrator, then the parties shall select a neutral Arbitrator through the procedures established by the AAA. The Arbitrator
shall have the powers provided under the California Code of Civil Procedure relating to the arbitration of disputes, except as
expressly limited or otherwise provided in this Agreement. The parties shall have the right to reasonable discovery. The parties
agree that the Company shall pay the administration costs of the AAA arbitration, including payment of the fees for the Arbitrator,
and any other costs directly related to the administration of the arbitration. The parties shall otherwise be responsible for their own
respective costs and attorneys fees relating to the dispute, such as deposition costs, expert witnesses and similar expenses, except
as otherwise provided in this Agreement to the prevailing party.
The Arbitrator may award, if properly proven, any damages or remedy that a party could recover in a civil litigation, and
shall award costs and reasonable attorneys' fees to the prevailing
8
party as provided by law. The award of the Arbitrator shall be issued in writing, setting forth the basis for the decision, and shall be
binding on the parties to the fullest extent permitted by law, subject to any limited statutory right to appeal as provided by law.
Judgment upon the award of the Arbitrator may be entered in any state or federal court sitting in Los Angeles, California.
Nothing in this Section shall prevent Executive from filing or maintaining a claim for workers' compensation, state
disability insurance, or unemployment insurance benefits, and nothing in this section shall be construed to prevent or excuse
Executive or the Company from using existing internal procedures for the resolution of complaints. Employee may bring claims
before administrative agencies when the law permits the agency to adjudicate those claims, even when there is an agreement to
arbitrate; examples include claims or charges with the United States Equal Employment Opportunity Commission (or comparable
state agency), the National Labor Relations Board, the U.S. Department of Labor, or the Office of Federal Contract Compliance
Programs. Nothing in this Section shall require arbitration of disputes that are excluded from coverage by this section or by law.
The Company and Executive agree that any dispute in arbitration will be brought on an individual basis only, and not on
a class, collective, or representative basis on behalf of others (this agreement to be referred to hereafter as the Class Action Waiver).
The Class Action Waiver does not apply to any claim that Executive brings on behalf of both herself and others under the
California Private Attorneys General Act of 2004. Executive will not be subject to any retaliation or discrimination if Executive
seeks to challenge this arbitration provision or participate in a class, collective, or representative action in any forum, but
Company may lawfully seek enforcement of this Agreement under the Federal Arbitration Act and seek dismissal of any class,
collective, or representative actions or claims to the fullest extent allowed by law.
8.
Governing Law
This Agreement shall be governed by and construed in accordance with the laws of the State of California applicable
to contracts made and to be carried out in California. Each of the parties agrees to submit to the personal jurisdiction of any
state or federal court sitting in Los Angeles, California in any action or proceeding arising out of or relating to this Agreement.
9.
Notice
All notices and other communications under this Agreement shall be in writing and mailed, telegraphed, telecopied, or
delivered by hand (by a party or a recognized courier service) to the other party at the following address (or to such other
address as such party may have specified by notice given to the other party pursuant to this provision):
If to the Company:
Avita Medical
28159 Avenue Stanford
Suite 220
Valencia, CA 91355
If to Executive:
Erin Liberto
9
At current home address on file with the Company
10.
Miscellaneous
10.1
Binding Agreement. This Agreement shall inure to the benefit of and shall be binding upon the
Company, its successors and assigns.
10.2
Entire Agreement. This Agreement contains the entire agreement of the parties relating to the subject
matter hereof, and the parties hereto have made no agreements, representations or warranties relating to the subject matter of
this Agreement that are not set forth otherwise herein. In this regard, each of the parties represents and warrants to the other
party that such party is not relying on any promises or representations that do not appear in writing herein. This Agreement
supersedes any prior verbal or written agreements with the Company regarding Executive's employment or offer of
employment, except as specifically referenced herein. Each of the parties further agrees and understands that this Agreement can
be amended or modified only by a written agreement signed by all parties.
10.3
Representations and Warranties. Executive and the Company hereby represent and warrant to the other that:
(a) she or it has full power, authority and capacity to execute and deliver this Agreement, and to perform her or its obligations
hereunder; (b) such execution, delivery and performance will not (and with the giving of notice or lapse of time or both would
not) result in the breach of any agreements or other obligations to which she or it is a party or she or it is otherwise bound; (c) this
Agreement is her or its valid and binding obligation in accordance with its terms; (d) Executive represents and warrants that she
is under no other obligations, contractual or otherwise, that could impair her ability to perform fully and satisfactorily all of her
obligations under this Agreement; (e) Executive has had full opportunity to review this Agreement, to obtain all legal advice she
has deemed necessary or appropriate and has either done so, or voluntarily and knowingly declined to do so; and (f) neither party
has been induced to enter into this Agreement through any promises, threats, coercion, or benefits not set forth expressly in
writing in this Agreement.
10.4
Attorneys Fees. In the event that any party shall bring an action or proceeding in connection with the
performance, breach or interpretation of this Agreement, then the prevailing party in any such action or proceeding, as
determined by the court, arbitrator or other body having jurisdiction, shall be entitled to recover from the losing party all
reasonable costs and expenses of such action or proceeding, including reasonable attorneys' fees and court costs.
10.5
Counterparts. This Agreement may be executed on separate copies, any one of which need not contain
signatures of more than one party but all of which taken together shall constitute one and the same Agreement.
10
IN WITNESS WHEREOF, this Agreement is executed as of 09/09/2017.
"COMPANY"
Avita Medical Ltd., an Australian corporation
By:
Name
Title:
and
"EXECUTIVE"
Erin Liberto
By:
Erin Liberto
11
EXECUTIVE EMPLOYMENT AGREEMENT
Exhibit 10.17
This EXECUTIVE EMPLOYMENT AGREEMENT (the “Agreement”) is made and entered into by and
between Avita Medical Americas, LLC, (the “Company”) and Andrew Quick, an individual (the “Executive”) with
reference to the following:
RECITALS
WHEREAS, the Board of Directors of the Company (the “Board”) desires to employ Executive to serve as the
Chief Technology Officer;
WHEREAS, the Executive is willing to serve in the role of Chief Technology Officer of the Company and provide
services to the Company and its subsidiaries and affiliates under the terms and conditions stated herein,
WHEREAS, the Executive has served as Chief Technology Officer, of the Company, since April 1, 2019 (the
“Effective Date”),
NOW, THEREFORE, in consideration of the mutual covenants and promises contained herein, and intending to be
legally bound, it is hereby agreed by and between the parties hereto as follows:
1.
Employment and Duties
1.1
Employment. The Company hereby employs the Executive as the Chief Technology Officer
of the Company and the Executive hereby accepts such employment as of the Effective Date pursuant to the terms and
conditions set forth herein. The Executive shall report directly to the Chief Executive Officer (“CEO”).
1.2
Duties. The Executive shall perform, to the best of his ability and in a manner satisfactory to
the CEO, all such duties that are consistent with his title and position, and such other duties as may reasonably be assigned
to him by the CEO. The Executive’s duties will be conducted principally from the Company’s North America office,
currently located in Valencia, California, or at such other location as determined by the CEO (but subject to the terms of this
Agreement) from time to time as reasonably required.
1.3
Time and Efforts. The Executive shall devote his full business time and provide his best efforts,
attention, and energies to the business of the Company, and its subsidiaries and affiliates, and to the performance of
Executive’s duties hereunder, and Executive shall not engage in any other business, profession or occupation for
compensation or otherwise during the employment period without the prior written consent of the Board; provided that,
nothing herein shall preclude Executive from serving in any capacity with any civic, educational, or charitable organization,
and provided, further that, in each case, and in the aggregate, such services do not materially conflict or interfere with
Executive’s obligations to the Company, and its subsidiaries and affiliates hereunder and such service is disclosed in advance
by Executive to the Board.
Executive further acknowledges that he owes the Company both a fiduciary duty and a duty of loyalty while
employed during the employment period to act at all times in the best interests of the Company, and its subsidiaries and
affiliates.
2.
Compensation
As the total consideration for the Executive’s services rendered hereunder, Executive shall be entitled to the
following:
2.1
Base Salary. The Executive shall be paid an annual base salary of Three Hundred Thirty Seven
Thousand Four Hundred Twenty Eight Dollars ($337,428.00) per year (“Base Salary”), subject to applicable tax deductions
and withholdings, beginning on the Effective Date of the Agreement and payable in regular installments in accordance with
the customary payroll practices of the Company. The Executive’s salary will be subject to annual review by the Board and
may be increased in the sole discretion of the Board.
2.2
Bonus and Relocation Expenses.
Annual Performance Bonus. In addition to Base Salary, the Executive shall be eligible to receive an annual
performance bonus (“Annual Bonus”) based upon the Executive’s performance for the preceding year as measured against
certain performance targets as mutually established by the parties to this Agreement. The Annual Bonus, if earned, shall be
paid on or around the March timeframe of the following year. The amount of the Annual Bonus shall be thirty percent (30%)
of Executive’s Base Salary (“Target Bonus”). For the Annual Bonus to be deemed earned, and in order to be eligible and
entitled to receive any Annual Bonus payment, the Executive must be employed by, and not have given notice of resignation
to the Company, or have been given notice of termination by the Company.
2.3
Equity. Executive shall be eligible for 120,799 options:
•
•
•
20,187 options vested based upon Executive achieving certain established metrics as agreed
upon between Executive and the CEO;
15,000 immediately vested as of May 18, 2017;
85,612.50 options vested based on Executive’s continued employment as follows:
▪
▪
▪
▪
10,000 options granted on May 18, 2017
5,000 options granted on November 1, 2018
30,212 options granted on November 30, 2018
40,400 options granted on April 1, 2019
2
Further information as to the terms of Executive’s equity grant are contained in the Share Option Agreement.
2.4
Business Expenses. During employment, the Executive is entitled to reimbursement for
reasonable and necessary business expenses incurred by Executive in connection with the performance of Executive’s
duties, subject to proper documentation and approval as required pursuant to the applicable Company expense
reimbursement policies.
2.5
Fringe Benefits. The Executive shall be entitled to fringe benefits in accordance with the plans,
practices, programs and policies as in effect with respect to other peer executives of the Company.
2.6
Vacation. The Executive shall be entitled each year to a vacation, during which time his
compensation shall be paid in full. The time allotted for such vacation shall be four (4) weeks per year. Executive can
accrue up to six (6) weeks of vacation time, at which point no additional vacation may accrue beyond the six (6) weeks
until a portion thereof is used. Any accrued vacation will roll over into the following calendar year and will not be
forfeited. The Executive agrees to schedule planned vacation to be taken at a time mutually convenient to the Executive,
CEO, and the Company.
2.7
Health Insurance and Benefits. The Executive shall be eligible to participate in the Company’s
health, dental and vision plans, as well as the Company’s 401k program.
3.
Term and Termination of Employment
3.1
At-Will Employment. The Company and the Executive hereby agree that the Executive’s
employment by the Company shall be “at-will” and for an indefinite period of time. Subject to the provisions of this
Section, both the Executive and the Company shall have the right to terminate this Agreement and the employment
relationship at any time and for any reason, with or without Cause, with or without Good Reason, and with or without
advance notice.
3.2
Definitions.
(a)
Cause. For purposes of this Agreement, “Cause” shall mean the occurrence of
one or more of the following: (i) conviction of, or a plea of guilty or nolo contendere to, a felony or crime involving moral
turpitude; (ii) participation in an act of fraud or theft against the Company; (iii) willful and material breach of Section 4.1
of this Agreement; (iv) willful and repeated failure to satisfactorily perform job duties; or (v) any willful act that is likely
to and which does in fact have the effect of injuring the reputation, business, or a business relationship of the Company.
(b)
Good Reason. For purposes of this Agreement, “Good Reason” shall mean: (i) a
material diminution in Executive’s authority, duties, or responsibilities in effect at the time of this Agreement; (ii) any
reduction in the Executive’s then-current base salary; (iii) relocation of Executive’s principal place of work by a distance of
fifty (50) miles or more from the Executive’s then-current principal place of work without the Executive’s consent; (iv)
material breach by the Company of any provision of this Agreement; (v) material reduction of
3
the Target Bonus for the then-current fiscal year before the end of the then-current fiscal year; or (vi) the occurrence of a
Change in Control of the Company as defined in Section 3.2(c) below, provided, however, that the conduct described in
the foregoing subsections (i) through
(iv) will only constitute Good Reason if such conduct is not cured within thirty (30) days after the Company’s receipt of
written notice from the Executive specifying the particulars of the conduct the Executive believes constitutes Good
Reason.
(c)
Change in Control. For purposes of this Agreement, “Change in Control” shall
mean any of the following events occurring after the date of this Agreement: (i) a sale or transfer of all or substantially all of
the assets of the Company; (ii) any merger, consolidation or acquisition of the Company with, by or into another
corporation, entity or person; or (iii) any change in ownership of more than fifty percent (50%) of the voting capital stock of
Company in one or more related transactions such as a buy out or exit of the Company (but excluding any change in stock
listing).
3.3
Termination.
(a)
Termination for Cause or Resignation without Good Reason. In the event
that the Company terminates the Executive’s employment for Cause or the Executive resigns his employment without
Good Reason, this Agreement will terminate without further obligations to Executive other than the following: Executive
shall be entitled to receive his unpaid base salary earned through his last day of employment, accrued but unused
vacation pay, and vested benefits through and including Executive’s last day of employment.
(b)
Involuntary Termination Without Cause or Resignation With Good Reason.
In the event of either an involuntary termination of the Executive’s employment by the Company Without Cause or a
voluntary resignation by the Executive for Good Reason, in exchange for the Executive signing a separation and release of
all claims agreement related solely to the Executive’s employment in a form acceptable to the Company, the Company shall
provide the Executive with the following severance benefits in accordance with the timing set forth in Section 3.3(b)(iv)
below:
(i)
(ii)
Base Salary: The Company shall pay the Executive the equivalent of six (6) months of
the Executive’s annual base salary in effect at the time of the termination Without
Cause or resignation with Good Reason in one lump sum payment, less standard
deductions and withholdings.
Bonus: The Company shall pay the Executive a pro-rata portion of his Annual Bonus
payment for the then current fiscal year. The pro-rata Annual Bonus calculation shall
assume that the Executive attained 100% of the performance target established for the
then current fiscal year and will be prorated for the time the Executive remained
employed during the then current fiscal year.
(iii)
Benefits Coverage. The Company shall continue to provide group health, vision, and
dental plan benefits to the Executive for a
4
(iv)
(v)
period of six (6) months from and after the date of termination, with the cost of all
regular premiums for such benefits paid by the Company (or its successor).
Equity. Executive's stock options shall immediately accelerate so that 100% of any
then unvested stock options shall immediately vest and become exercisable upon the
date of Executive’s termination Without Cause or resignation with Good Reason and
shall continue to be exercisable for either a period of one hundred eighty (180) days
after such termination or resignation or for the period specified in the vesting
schedule of the applicable stock agreement, whichever is longer.
Timing of Payments. The severance benefits in the above subsection 3.3(b)(i) shall be
paid to Executive no later than fifteen
(15) days from the date the Executive signs the severance and release agreement
and the revocation period, if any, has expired.
(c)
Termination or Resignation In Connection With Change In Control. In the
event Executive is terminated or resigns in connection with or within one (1) year following a Change in Control or for
Good Reason as defined in 3.2(b) and 3.2(c), respectively, the Executive shall be entitled to all of the severance benefits
set forth in Section 3.3(b) above.
4.
Proprietary Information
The Executive acknowledges that: (i) the Executive has a major responsibility for the operation, development and
growth of the Company’s business, and its subsidiaries and affiliates; (ii) the Executive’s work for the Company, and its
subsidiaries, and affiliates has brought the Executive and will continue to bring the Executive into close contact with
“Confidential Information” (as defined below); and (iii) the agreements and covenants contained in this Section 4 are
essential to protect the business interests of the Company, and its subsidiaries and affiliates, and that the Company will
not enter into this Agreement but for such agreements and covenants. Accordingly, the Executive covenants and agrees to
the following:
4.1
Confidential Information. Both during the term of the Executive’s employment under this
Agreement and indefinitely after the Executive is no longer employed as Chief Technology Officer of the Company, the
Executive shall not, directly or indirectly, (i) knowingly use for an improper personal benefit any “Confidential
Information” that was acquired by, learned by or disclosed to Executive by reason of the Executive’s employment as Chief
Technology Officer of the Company (before or after the date of this Agreement), or (ii) disclose any such Confidential
Information to any person, business or entity, except in the proper course of the Executive’s duties as Chief Technology
Officer, of the Company. As used in this Agreement, “Confidential Information” means any and all confidential or
proprietary information of the Company, and its subsidiaries and affiliates that is not generally known to the public,
including, without limitation, business, financial, marketing, technical,
5
developmental, operating, performance, know-how, and process information, drawings and designs, customer information
(including contact information, pricing and buying trends and needs), employee information (including the skills, abilities
and compensation of other employees), and other trade secret information, now existing or hereafter discovered or
developed. Confidential Information shall include information in any form whatsoever, including, without limitation, any
digital or electronic record-bearing media containing or disclosing such information. The provisions of this Section 4 shall
not apply to information that has become generally available to the public other than as a result of a disclosure by the
Executive. In the event that the Executive is requested or required (by oral question or request for information or
documents in any legal proceeding, interrogatory, subpoena, civil investigative demand, or similar process) to disclose any
Confidential Information, then the Executive will notify the Company within two (2) business days of receiving the request
or requirement so that the Company may seek an appropriate protective order. If, in the absence of a protective order or the
receipt of a waiver hereunder, the Executive is, on the advice of counsel, compelled to disclose any Confidential
Information to any tribunal or else stand liable for contempt, the Executive may disclose such Confidential Information to
the tribunal; provided, however, that the Executive shall use the Executive’s reasonable best efforts to obtain, at the
expense and reasonable request of the Company, an order or other assurance that confidential treatment will be accorded to
such portion of the Confidential Information required to be disclosed as the Company shall designate. The Executive
acknowledges that all Confidential Information is the exclusive property of the Company. The Executive further
acknowledges that the Executive’s entire work product, including working drafts and work sheets, shall be the sole
property of the Company, and that the Executive will have no rights, title or interest in any such material whether prepared
by the Executive alone, by others or by the Executive in conjunction with others. Executive agrees as a condition of
continued employment to execute the Company’s Proprietary Information Agreement protecting the trade secrets and other
intellectual property of the Company.
4.2
Duty of Loyalty and Non-Competition. While employed by the Company, the Executive shall
not, without the prior written consent of the Company, participate, directly or indirectly, as an individual proprietor,
partner, stockholder, officer, employee, director, manager, joint venture participant, investor, lender, consultant or in any
capacity whatsoever (within the United States of America, or in any country where the Company or its subsidiaries or
affiliates do business or have reasonable plans to do business) in a business engaged in competition with the Company or
any of its subsidiaries or affiliates, or in a business that the Company or any of its subsidiaries or affiliates has taken
reasonable steps to engage in (including, but not limited to, meeting with management teams or entering into preliminary
or definitive term sheets, letters of intent, purchase agreements, or other similar arrangements or agreements) of which the
Executive has knowledge at the time of Executive’s employment; provided, however, that such participation shall not
include the mere ownership of not more than one percent (1%) of the total outstanding stock of a publicly held company.
At all times following the termination of Executive’s employment as Chief Technology Officer of the Company for any
reason, Executive shall not, either directly or indirectly, engage in any unlawful competitive activities or use confidential
trade secret information for any purpose.
4.3
Non-Solicitation. For a period beginning on the Effective Date and ending two (2) years after the
date on which the Executive is no longer employed as Chief Technology
6
Officer of the Company (the “Non-Solicitation Period”), the Executive shall not in any capacity, either separately or in
association with others: (i) unlawfully solicit for employment or endeavor in any way to unlawfully entice away from
employment with the Company, its subsidiaries or affiliates any employee of the Company, its subsidiaries or its
affiliates, or any person or entity that had been an employee of the Company or its subsidiaries or affiliates within the six
(6) month period preceding the commencement of such activity; nor (ii) use confidential trade secret information to
solicit or use any other unlawful means to induce or influence any supplier, customer, agent, consultant or other person
or entity that has a business relationship with the Company, or its subsidiaries or affiliates to discontinue, reduce or
modify such relationship with the Company or its subsidiaries or affiliates.
4.4
Non-disparagement. The Executive agrees (whether during or after Executive’s employment as
Chief Technology Officer of the Company) not to issue, circulate, publish or utter any comments or statements to the
press or other media, or to any third parties, or to any employees of the Company, and its subsidiaries and affiliates, or
any consultants or any individual or entity with whom the Company or its subsidiaries or affiliates has a business
relationship, which could reasonably be expected to adversely affect in any manner: (i) the conduct of the business of the
Company, or its subsidiaries or affiliates (including, without limitation, any products, services, or business plans or
prospects); or (ii) the business reputation of the Company or its subsidiaries or affiliates (including its financial condition
or the direction of the business), or any of their respective products or services, or their past or present officers, directors,
executives or employees. Notwithstanding the foregoing, nothing contained in this Agreement will be deemed to restrict
Executive from providing truthful information to any governmental or regulatory agency (or in any way limit the content
of any such information) to the extent requested or required to provide such information pursuant to applicable law or
regulation. Nothing in this section is intended to limit Executive’s rights under Section 7 of the National Labor Relations
Act.
4.5
Return of Property. Upon termination of his employment as Chief Technology Officer of
the Company or at any time as the Company requests, the Executive will promptly deliver to the Company all
documents (whether prepared by the Company, a subsidiary, an affiliate, the Executive or a third party) relating to the
Company, any of its subsidiaries or affiliates or any of their businesses or property that the Executive may possess or
have under the Executive’s direction or control other than documents provided to the Executive in the Executive’s
capacity as a participant in any employee benefit plan, policy or program of the Company.
4.6
Remedies. The Executive acknowledges that (i) the Executive has had an opportunity to seek
the advice of counsel in connection with this Agreement; (ii) the provisions of this Section 4 are reasonable in scope and
in all other respects; (iii) any violation of these provisions will result in irreparable injury to the Company; (iv) money
damages may not be an adequate remedy for the Company in the event of a breach of any of these provisions by the
Executive; and (v) specific performance in the form of injunctive relief would be an appropriate remedy for the Company.
If the Executive breaches or threatens to breach any of these provisions, the Company shall be entitled, in addition to all
other remedies, to seek an injunction restraining any such breach, without any bond or other security being required and
without the necessity of showing actual damages.
7
5.
Assignment
This Agreement is personal in nature, and neither this Agreement nor any part of any obligation herein shall be
assignable by Executive. The Company shall be entitled to assign this Agreement to any subsidiary or affiliate of the
Company or any entity that assumes the ownership and control of the business of the Company.
6.
Severability
Should any term, provision, covenant or condition of this Agreement be held to be void or invalid, the same shall
not affect any other term, provision, covenant or condition of this Agreement, but such remainder shall continue in full
force and effect as though each such voided term, provision, covenant or condition is not contained herein.
7.
Binding Arbitration
Any and all disputes which involve or relate in any way to this Agreement and/or to Executive’s employment or
termination of employment as Chief Technology Officer of the Company, whether initiated by Executive or by the
Company and whether based on contract, tort, statute, or common law, shall be submitted to and resolved by final and
binding arbitration as the exclusive method for resolving all such disputes. The arbitration shall be private and
confidential and conducted in Los Angeles, California pursuant to the Federal Arbitration Act and applicable California
law, and pursuant to the applicable rules of the American Arbitration Association (“AAA”) relating to employment
disputes, unless the parties otherwise mutually agree to modify the AAA Rules. A copy of the AAA Employment Rules
are available for review at www.adr.org/employment and are incorporated herein by reference.
The party demanding arbitration shall submit a written claim to the other party, setting out the basis of the claim or
claims, within the time period of any applicable statute of limitations relating to such claim(s). If the parties cannot
mutually agree upon an arbitrator, then the parties shall select a neutral arbitrator through the procedures established by
the AAA. The arbitrator shall have the powers provided under the California Code of Civil Procedure relating to the
arbitration of disputes, except as expressly limited or otherwise provided in this Agreement. The parties shall have the
right to reasonable discovery. The parties agree that the Company shall pay the administration costs of the AAA
arbitration, including payment of the fees for the Arbitrator, and any other costs directly related to the administration of
the arbitration. The parties shall otherwise be responsible for their own respective costs and attorneys' fees relating to
the dispute, such as deposition costs, expert witnesses and similar expenses.
The arbitrator may award, if properly proven, any damages or remedy that a party could recover in a civil
litigation and shall award costs to the prevailing party as provided by law. The award of the arbitrator shall be issued in
writing, setting forth the basis for the decision, and shall be binding on the parties to the fullest extent permitted by law,
subject to any limited statutory right to appeal as provided by law. Judgment upon the award of the arbitrator may be
entered in any state or federal court sitting in Los Angeles, California.
8
Nothing in this Section shall prevent Executive from filing or maintaining a claim for workers’ compensation, state
disability insurance, or unemployment insurance benefits, and nothing in this section shall be construed to prevent or
excuse Executive or the Company from using existing internal procedures for the resolution of complaints. Employee
may bring claims before administrative agencies when the law permits the agency to adjudicate those claims, even when
there is an agreement to arbitrate; examples include claims or charges with the United States Equal Employment
Opportunity Commission (or comparable state agency), the National Labor Relations Board, the U.S. Department of
Labor, or the Office of Federal Contract Compliance Programs. Nothing in this Section shall require arbitration of
disputes that are excluded from coverage by this section or by law.
The Company and Executive agree that any dispute in arbitration will be brought on an individual basis only, and
not on a class, collective, or representative basis on behalf of others (this agreement to be referred to hereafter as the
“Class Action Waiver”). The Class Action Waiver does not apply to any claim that Executive brings on behalf of both
herself and others under the California Private Attorney General Act of 2004. Executive will not be subject to any
retaliation or discrimination if Executive seeks to challenge this arbitration provision or participate in a class,
collective, or representative action in any forum, but Company may lawfully seek enforcement of this Agreement
under the Federal Arbitration Act and seek dismissal of any class, collective, or representative actions or claims to the
fullest extent allowed by law.
8. Governing Law
This Agreement shall be governed by and construed in accordance with the laws of the State of California
applicable to contracts made and to be carried out in California. Each of the parties agrees to submit to the personal
jurisdiction of any state or federal court sitting in Los Angeles, California in any action or proceeding arising out of or
relating to this Agreement.
9. Notice
All notices and other communications under this Agreement shall be in writing and mailed, telegraphed,
telecopied, or delivered by hand (by a party or a recognized courier service) to the other party at the following
address (or to such other address as such party may have specified by notice given to the other party pursuant to
this provision):
If to the Company:
Avita Medical Americas, LLC 28159
Avenue Stanford
Suite 220
Valencia, CA 91355
If to Executive:
Andrew Quick
At current home address on file with the Company
9
10. Miscellaneous
10.1
Binding Agreement. This Agreement shall inure to the benefit of and shall be
binding upon the Company, its successors and assigns.
10.2
Entire Agreement. This Agreement contains the entire agreement of the parties
relating to the subject matter hereof, and the parties hereto have made no agreements, representations or warranties
relating to the subject matter of this Agreement that are not set forth otherwise herein. In this regard, each of the parties
represents and warrants to the other party that such party is not relying on any promises or representations that do not
appear in writing herein. This Agreement supersedes any prior verbal or written agreements with the Company
regarding Executive’s employment or offer of employment, except as specifically referenced herein. Each of the parties
further agrees and understands that this Agreement can be amended or modified only by a written agreement signed by
all parties.
10.3
Representations and Warranties. Executive and the Company hereby represent and
warrant to the other that: (a) he or it has full power, authority and capacity to execute and deliver this Agreement, and to
perform his or its obligations hereunder; (b) such execution, delivery and performance will not (and with the giving of
notice or lapse of time or both would not) result in the breach of any agreements or other obligations to which he or it is
a party or he or it is otherwise bound; (c) this Agreement is a valid and binding obligation in accordance with its terms
for both parties; (d) Executive represents and warrants that he is under no other obligations, contractual or otherwise,
that could impair his ability to perform fully and satisfactorily all of his obligations under this Agreement; (e) Executive
has had full opportunity to review this Agreement, to obtain all legal advice he has deemed necessary or appropriate and
has either done so, or voluntarily and knowingly declined to do so; and (f) neither party has been induced to enter into
this Agreement through any promises, threats, coercion, or benefits not set forth expressly in writing in this Agreement.
10.4
Counterparts. This Agreement may be executed on separate copies, any one of
which need not contain signatures of more than one party but all of which taken together shall constitute one and the
same Agreement.
[Signatures to follow on next page]
10
IN WITNESS WHEREOF, this Agreement is executed as
of
By:
and
By:
, 2021.
“COMPANY”
Avita Medical Americas, LLC
Name: Dr. Michael S. Perry
Title:
Chief Executive Officer
Date:
06/28/2021
“EXECUTIVE”
Andrew Quick
Date:
25-Jun 2021
11
EXECUTIVE EMPLOYMENT AGREEMENT
Exhibit 10.18
This EXECUTIVE EMPLOYMENT AGREEMENT ("Agreement") is made and entered into by and between Avita
Medical Ltd., an Australian corporation (the "Company"), and Donna Shiroma, an individual (the "Executive") with reference to
the following:
RECITALS
WHEREAS, the Board of Directors of the Company (the "Board") desires to employ Executive to serve as the General
Counsel of the Company;
WHEREAS, the Executive is willing to serve in the role of General Counsel of the Company and provide services to the
Company and its subsidiaries under the terms and conditions stated herein,
WHEREAS, the Executive would serve as General Counsel, of the Company, but her direct employer shall be Avita
Medical Americas, LLC ("Avita America"), effective as of June 25, 2018 (the Effective Date");
NOW, THEREFORE, in consideration of the mutual covenants and promises contained herein, and intending to be
legally bound, it is hereby agreed by and between the parties hereto as follows:
1.
Employment and Duties
1.1
Employment. The Company hereby employs the Executive as the General Counsel, of the Company
and the Executive hereby accepts such employment as of the Effective Date pursuant to the terms and conditions set forth herein.
The Executive shall report directly to the Chief Executive Officer ("CEO").
1.2
Duties. The Executive shall perform, to the best of her ability and in a manner satisfactory to the
CEO, all such duties that are consistent with her title and position, and such other duties as may reasonably be assigned to her by
the CEO. The Executive's duties will be conducted principally from the Company's North America office, currently located in
Valencia, California, or at such other location as determined by the CEO (but subject to the terms of this Agreement), with travel
to such other locations from time to time as reasonably required.
1.3
Time and Efforts. The Executive shall devote her full business time and provide her best efforts,
attention, and energies to the business of the Company and its subsidiaries and to the performance of Executive's duties hereunder,
and Executive shall not engage in any other business, profession or occupation for compensation or otherwise during the
employment period without the prior written consent of the Board; provided that, nothing herein shall preclude Executive from
serving in any capacity with any civic, educational, or charitable organization, and provided, further that, in each case, and in the
aggregate, such services do not materially conflict or interfere with Executive's obligations to the Company or its subsidiaries
hereunder and such service is disclosed in advance by Executive to the Board.
Executive further acknowledges that she owes the Company both a fiduciary duty and a duty of loyalty while employed
during the employment period to act at all times in the best interests of the Company and its subsidiaries.
2.
Compensation
As the total consideration for the Executive's services rendered hereunder, Executive shall be entitled to the
following:
2.1
Base Salary. The Executive shall be paid an annual base salary of Three Hundred Thousand Dollars
($300,000.00) per year ("Base Salary"), subject to applicable tax deductions and withholdings, beginning on the Effective Date of
the Agreement and payable in regular installments in accordance with the customary payroll practices of Avita America. The
Executive's salary will be subject to annual review by the Board and may be increased in the sole discretion of the Board.
2.2
Bonus and Relocation Expenses.
Annual Performance Bonus. In addition to Base Salary, the Executive shall be eligible to receive an annual performance
bonus ("Annual Bonus") based upon the Executive's performance for the preceding year as measured against certain performance
targets as mutually established by the parties to this Agreement. The Annual Bonus, if earned, shall be paid 60 days after the close
of the fiscal year. The amount of the Annual Bonus shall be twenty-five percent (25%) of Executive's Base Salary ("Target
Bonus"). For 2018, Executive will be eligible to receive an Annual Bonus that is equal to 25% of the pro-rata share of the Base
Salary (excluding any other bonus or compensation) Executive earned in 2018. At the sole discretion of the Board, Executive may
be entitled to an additional amount of up to fifty percent (an additional 12.5%) of the Target Bonus based upon performance. For the
Annual Bonus to be deemed earned, and in order to be eligible and entitled to receive any Annual Bonus payment, the Executive
must be employed by, and not have given notice of resignation to the Company, or have been given notice of termination by the
Company.
Retention Bonus. In addition to Base Salary and Annual Performance Bonus, the Executive shall be eligible to receive a
retention bonus ("Retention Bonus") of $15,000. The Retention Bonus shall be paid as follows:
•
Bonus amount will be paid after twelve (12) months employment. This payment is provided with the express
understanding that it is being paid with the expectation that Executive shall remain employed with the Company for
at least one year following the Effective Date. Accordingly, the Retention Bonus is an advance that will not be
considered earned by either Executive or the Company until Executive has completed one year of employment with
the Company.
Relocation Expenses. The Company will provide reimbursement of shipment of reasonable household goods to the Los
Angeles area. In addition, the Company will reimburse temporary housing expenses in the Valencia area of up to
$4,000 per month from June 25, 2018 through October 31, 2018.
2
2.3
Equity. Executive shall be eligible for 3,000,000 options, which will vest as follows:
e
•
2,220,000 options will vest based upon Executive's achieving certain established metrics as
agreed upon between Executive and the CEO;
800,000 options will vest based on Executive's continued employment with the Company at a rate of
200,000 per year for four years, commencing with the first 200,000 option installment, which will vest
upon the completion of Executive's first year of service.
2.4
Business Expenses. During employment, the Executive is entitled to reimbursement (through
Avita America) for reasonable and necessary business expenses incurred by Executive in connection with the performance of
Executive's duties, subject to proper documentation and approval as required pursuant to the applicable Company expense
reimbursement policies.
2.5
Fringe Benefits. The Executive shall be entitled to fringe benefits in accordance with the plans,
practices, programs and policies as in effect generally with respect to other peer executives of the Company.
2.6
Vacation. The Executive shall be entitled each year to a vacation, during which time her
compensation shall be paid in full. The time allotted for such vacation shall be four (4) weeks per year. Executive can accrue up to
six (6) weeks of vacation time, at which point no additional vacation may accrue beyond the six (6) weeks until a portion thereof
is used. Any accrued vacation will roll over into the following calendar year and will not be forfeited. The Executive agrees to
schedule planned vacation to be taken at a time mutually convenient to the Executive and the Company.
2.7
Health Insurance and Benefits. The Executive shall be eligible to participate in the Company's health,
dental and vision plans, as well as the Company's 401k program.
3.
Term and Termination of Employment
3.1
At-Will Employment. The Company and the Executive hereby agree that the Executive's
employment by the Company shall be "at-will" and for an indefinite period of time. Subject to the provisions of this Section, both
the Executive and the Company shall have the right to terminate this Agreement and the employment relationship at any time and
for any reason, with or without Cause, with or without Good Reason, and with or without advance notice.
3.2
Definitions.
(a)
Cause. For purposes of this Agreement, "Cause" shall mean the occurrence of one or
more of the following: (i) conviction of, or a plea of guilty or nolo contendere to, a felony or crime involving moral turpitude; (ii)
participation in an act of fraud or theft against the Company; (iii) willful and material breach of Section 4.1 of this Agreement; (iv)
willful and repeated failure to satisfactorily perform job duties; or (v) any willful act that is likely
3
to and which does in fact have the effect of injuring the reputation, business, or a business relationship of the Company, provided,
however, that the conduct described in the foregoing subsections (ii) through (v) will only constitute Cause if such conduct is not
cured within thirty
(30) days after the Executive's receipt of written notice from the Company specifying the particulars of the conduct the Company
believes constitutes Cause.
(b)
Good Reason. For purposes of this Agreement, "Good Reason" shall mean: (i) a
material diminution in Executive's authority, duties, or responsibilities in effect at the time of this Agreement; (ii) any reduction in the
Executive's then-current base salary; (iii) relocation of Executive's principal place of work by a distance of fifty (50) miles or more
from the Executive's then-current principal place of work without the Executive's consent; (iv) material breach by the Company of
any provision of this Agreement; (v) material reduction of the Target Bonus for the then-current fiscal year before the end of the then-
current fiscal year; or
(vi) the occurrence of a Change in Control of the Company as defined in Section 3.3(c) below, provided, however, that the conduct
described in the foregoing subsections (i) through (v) will only constitute Good Reason if such conduct is not cured within thirty
(30) days after the Company's receipt of written notice from the Executive specifying the particulars of the conduct the Executive
believes constitutes Good Reason.
(c)
Change in Control. For purposes of this Agreement, "Change in Control" shall
mean any of the following events occurring after the date of this Agreement: (i) a sale or transfer of all or substantially all of the
assets of the Company; (ii) any merger, consolidation or acquisition of the Company with, by or into another corporation, entity or
person; (iii) any change in ownership of more than fifty percent (50%) of the voting capital stock of Company in one or more related
transactions such as a buy out or exit of the Company (but excluding any change in stock listing).
3.3
Termination.
(a)
Termination for Cause or Resignation without Good Reason. In the event that
the Company terminates the Executive's employment for Cause or the Executive resigns her employment without Good Reason, this
Agreement will terminate without further obligations to Executive other than the following: Executive shall be entitled to receive
her unpaid base salary earned through her last day of employment, accrued but unused vacation pay, and vested benefits through and
including Executive's last day of employment.
(b)
Involuntary Termination Without Cause or Resignation With Good Reason. In
the event of either an involuntary termination of the Executive's employment Without Cause or a voluntary resignation by the
Executive for Good Reason, in exchange for the Executive signing a separation and release of all claims agreement in a form
acceptable to the Company, the Company shall provide the Executive with the following severance benefits in accordance with the
timing set forth in Section 3.3(b)(v) below:
(i)
Base Salary: The Company shall pay the Executive the equivalent of six (6) months of the
Executive's annual base salary in effect at the time of the termination Without Cause or
resignation with
4
Good Reason in one lump sum payment, less standard deductions and withholdings.
Benefits Coverage. The Company shall continue to provide group health, vision, and dental
plan benefits to the Executive for a period of six (6) months from and after the date of
termination, with the cost of all regular premiums for such benefits paid by the Company (or
its successor).
Pro-Rated Annual Bonus. The Company shall pay the Executive a pro-rata portion of her
Annual Bonus payment for the then-current fiscal year. The pro-rata Annual Bonus calculation
shall assume that the Executive attained 100% of the performance target established for the
then-current fiscal year and then will be prorated for the time the Executive actually remained
employed during the then-current fiscal year.
Equity. Executive's stock options shall immediately accelerate so that 100% of any then
unvested stock options shall immediately vest and become exercisable upon the date of
Executive's termination Without Cause or resignation with Good Reason and shall continue to be
exercisable for either a period of 180 days after such termination or resignation or for the period
specified in the vesting schedule of the applicable stock agreement, whichever is longer.
Timing of Payments. The severance benefits in the above subsections 3.3(b)(i) and 3.3(b)
(iii) shall be paid to executive within 15 days of the date the Executive signs the severance
and release agreement and the revocation period, if any, has expired.
(iii)
(iv)
(v)
(c)
Termination or Resignation In Connection With Change In Control. In the
event Executive is terminated or resigns in connection with or within one (1) year following a Change in Control and for Good Reason
as defined in 3.2(b), the Executive shall be entitled to all of the severance benefits set forth in Section 3.3(b) above.
4.
Proprietary Information
The Executive acknowledges that: (i) the Executive has a major responsibility for the operation, development and growth of
the Company's business and subsidiaries; (ii) the Executive's work for the Company and its subsidiaries has brought the Executive and
will continue to bring the Executive into close contact with "Confidential Information" (as defined below); and (iii) the agreements and
covenants contained in this Section 4 are essential to protect the business interests of the Company and its subsidiaries and that the
Company will not enter into this Agreement but for such agreements and covenants. Accordingly, the Executive covenants and agrees to
the following:
5
4.1
Confidential Information. Both during the term of the Executive's employment under this Agreement
and indefinitely after the Executive is no longer employed as General Counsel of the Company, the Executive shall not, directly or
indirectly, (i) knowingly use for an improper personal benefit any "Confidential Information" (as defined below) that was acquired
by, learned by or disclosed to Executive by reason of the Executive's employment as General Counsel of the Company (before or
after the date of this Agreement), or (ii) disclose any such Confidential Information to any person, business or entity, except in the
proper course of the Executive's duties as General Counsel, of the Company. As used in this Agreement, "Confidential
Information" means any and all confidential or proprietary information of the Company and its subsidiaries or affiliates that is not
generally known to the public, including, without limitation, business, financial, marketing, technical, developmental, operating,
performance, know-how, and process information, drawings and designs, customer information (including contact information,
pricing and buying trends and needs), employee information (including the skills, abilities and compensation of other employees),
and other trade secret information, now existing or hereafter discovered or developed. Confidential Information shall include
information in any form whatsoever, including, without limitation, any digital or electronic record-bearing media containing or
disclosing such information. The provisions of this Section 5 shall not apply to information that has become generally available to
the public other than as a result of a disclosure by the Executive. In the event that the Executive is requested or required (by oral
question or request for information or documents in any legal proceeding, interrogatory, subpoena, civil investigative demand, or
similar process) to disclose any Confidential Information, then the Executive will notify the Company within two (2) business days
of receiving the request or requirement so that the Company may seek an appropriate protective order. If, in the absence of a
protective order or the receipt of a waiver hereunder, the Executive is, on the advice of counsel, compelled to disclose any
Confidential Information to any tribunal or else stand liable for contempt, the Executive may disclose such Confidential Information
to the tribunal; provided, however, that the Executive shall use the Executive's reasonable best efforts to obtain, at the expense and
reasonable request of the Company, an order or other assurance that confidential treatment will be accorded to such portion of the
Confidential Information required to be disclosed as the Company shall designate. The Executive acknowledges that all
Confidential Information is the exclusive property of the Company. The Executive further acknowledges that the Executive's entire
work product, including working drafts and work sheets, shall be the sole property of the Company, and that the Executive will
have no rights, title or interest in any such material whether prepared by the Executive alone, by others or by the Executive in
conjunction with others. Executive agrees as a condition of continued employment to execute the Company's standard form
Intellectual Property and Confidentiality Agreement protecting the trade secrets and other intellectual property of the Company.
4.2
Duty of Loyalty and Non-Competition. While employed by the Company, the Executive shall not,
without the prior written consent of the Company, participate, directly or indirectly, as an individual proprietor, partner, stockholder,
officer, employee, director, manager, joint venture participant, investor, lender, consultant or in any capacity whatsoever (within the
United States of America, or in any country where the Company or its subsidiaries or affiliates do business or have reasonable
plans to do business) in a business engaged in competition with
6
the Company or any of its subsidiaries or affiliates, or in a business that the Company or any of its subsidiaries or affiliates has
taken reasonable steps to engage in (including, but not limited to, meeting with management teams or entering into preliminary or
definitive term sheets, letters of intent, purchase agreements, or other similar arrangements or agreements) of which the Executive
has knowledge at the time of Executive's employment; provided, however, that such participation shall not include the mere
ownership of not more than one percent (1%) of the total outstanding stock of a publicly held company. At all times following the
termination of Executive's employment as General Counsel of the Company for any reason, Executive shall not, either directly or
indirectly, engage in any unlawful competitive activities or use confidential trade secret information for any purpose.
4.3
Non-Solicitation. For a period beginning on the Effective Date and ending two years after the date
on which the Executive is no longer employed as General Counsel of the Company (the "Non-Solicitation Period"), the
Executive shall not in any capacity, either separately or in association with others: (i) unlawfully solicit for employment or
endeavor in any way to unlawfully entice away from employment with the Company or its subsidiaries or affiliates any employee
of the Company or its subsidiaries or affiliates, or any person or entity that had been an employee or affiliate of the Company or its
subsidiaries within the six month period preceding the commencement of such activity; nor (ii) use confidential trade secret
information to solicit or use any other unlawful means to induce or influence any supplier, customer, agent, consultant or other
person or entity that has a business relationship with the Company or its subsidiaries to discontinue, reduce or modify such
relationship with the Company or its subsidiaries.
4.4
Non-disparagement. The Executive agrees (whether during or after Executive's employment as
General Counsel of the Company) not to issue, circulate, publish or utter any comments or statements to the press or other media,
or to any third parties, or to any employees of the Company or its subsidiaries or affiliates, or any consultants or any individual or
entity with whom the Company or its subsidiaries or affiliates has a business relationship, which could reasonably be expected to
adversely affect in any manner: (i) the conduct of the business of the Company or its subsidiaries or affiliates (including, without
limitation, any products, services, or business plans or prospects); or (ii) the business reputation of the Company or its subsidiaries
or affiliates (including its financial condition or the direction of the business), or any of their respective products or services, or
their past or present officers, directors, executives or employees. Notwithstanding the foregoing, nothing contained in this
Agreement will be deemed to restrict Executive from providing truthful information to any governmental or regulatory agency (or
in any way limit the content of any such information) to the extent requested or required to provide such information pursuant to
applicable law or regulation. Nothing in this section is intended to limit Executive's rights under Section 7 of the National Labor
Relations Act.
4.5
Return of Property. Upon termination of her employment as General Counsel of the Company or at
any time as the Company requests, the Executive will promptly deliver to the Company all documents (whether prepared by the
Company, a subsidiary, an affiliate, the Executive or a third party) relating to the Company, any of its subsidiaries, an affiliate or
any of their businesses or property that the Executive may possess or have under the Executive's
7
direction or control other than documents provided to the Executive in the Executive's capacity as a participant in any employee benefit
plan, policy or program of the Company.
4.6
Remedies. The Executive acknowledges that (i) the Executive has had a..11 opportunity to seek the
advice of counsel in connection with this Agreement; (ii) the provisions of this Section 4 are reasonable in scope and in all other
respects; (iii) any violation of these provisions will result in irreparable injury to the Company; (iv) money damages may not be an
adequate remedy for the Company in the event of a breach of any of these provisions by the Executive; and (v) specific performance in
the form of injunctive relief would be an appropriate remedy for the Company. If the Executive breaches or threatens to breach any of
these provisions, the Company shall be entitled, in addition to all other remedies, to seek an injunction restraining any such breach,
without any bond or other security being required and without the necessity of showing actual damages.
5.
Assignment
This Agreement is personal in nature, and neither this Agreement nor any part of any obligation herein shall be assignable by
Executive. The Company shall be entitled to assign this Agreement to any affiliate of the Company or any entity that assumes the
ownership and control of the business of the Company.
6.
Severability
Should any term, provision, covenant or condition of this Agreement be held to be void or invalid, the same shall not affect any
other term, provision, covenant or condition of this Agreement, but such remainder shall continue in full force and effect as though each
such voided term, provision, covenant or condition is not contained herein.
7.
Binding Arbitration
Any and all disputes which involve or relate in any way to this Agreement and/or to Executive's employment or termination of
employment as General Counsel of the Company, whether initiated by Executive or by the Company and whether based on contract, tort,
statute, or common law, shall be submitted to and resolved by final and binding arbitration as the exclusive method for resolving all such
disputes. The arbitration shall be private and confidential and conducted in Los Angeles, California pursuant to the Federal Arbitration Act
and applicable California law, and pursuant to the applicable rules of the American Arbitration Association ("AAA") relating to
employment disputes, unless the parties otherwise mutually agree to modify the AAA Rules. A copy of the AAA Employment Rules are
available for review at www.adr.org/employment and are incorporated herein by reference.
The party demanding arbitration shall submit a written claim to the other party, setting out the basis of the claim or claims,
within the time period of any applicable statute of limitations relating to such claim(s). If the parties cannot mutually agree upon an
Arbitrator, then the parties shall select a neutral Arbitrator through the procedures established by the AAA. The Arbitrator shall have the
powers provided under the California Code of Civil Procedure relating to the arbitration of disputes, except as expressly limited or
otherwise provided in this Agreement. The parties shall have the right to reasonable discovery. The parties agree that the Company shall
pay
8
the administration costs of the AAA arbitration, including payment of the fees for the Arbitrator, and any other costs directly related
to the administration of the arbitration. The parties shall otherwise be responsible for their own respective costs and attorneys' fees
relating to the dispute, such as deposition costs, expert witnesses and similar expenses, except as otherwise provided inthis
Agreement to the prevailing party.
The Arbitrator may award, if properly proven, any damages or remedy that a party could recover in a civil litigation and
shall award costs and reasonable attorneys' fees to the prevailing party as provided by law. The award of the Arbitrator shall be
issued in writing, setting forth the basis for the decision, and shall be binding on the parties to the fullest extent permitted by law,
subject to any limited statutory right to appeal as provided by law. Judgment upon the award of the Arbitrator may be entered in any
state or federal court sitting in Los Angeles, California.
Nothing in this Section shall prevent Executive from filing or maintaining a claim for workers' compensation, state
disability insurance, or unemployment insurance benefits, and nothing in this section shall be construed to prevent or excuse
Executive or the Company from using existing internal procedures for the resolution of complaints. Employee may bring claims
before administrative agencies when the law permits the agency to adjudicate those claims, even when there is an agreement to
arbitrate; examples include claims or charges with the United States Equal Employment Opportunity Commission (or comparable
state agency), the National Labor Relations Board, the U.S. Department of Labor, or the Office of Federal Contract Compliance
Programs. Nothing in this Section shall require arbitration of disputes that are excluded from coverage by this section or by law.
The Company and Executive agree that any dispute in arbitration will be brought on an individual basis only, and not on
a class, collective, or representative basis on behalf of others (this agreement to be referred to hereafter as the Class Action
Waiver). The Class Action Waiver does not apply to any claim that Executive brings on behalf of both herself and others under the
California Private Attorneys General Act of 2004. Executive will not be subject to any retaliation or discrimination if Executive
seeks to challenge this arbitration provision or participate in a class, collective, or representative action in any forum, but Company
may lawfully seek enforcement of this Agreement under the Federal Arbitration Act and seek dismissal of any class, collective, or
representative actions or claims to the fullest extent allowed by law.
8.
Governing Law
This Agreement shall be governed by and construed in accordance with the laws of the State of California applicable to
contracts made and to be carried out in California. Each of the parties agrees to submit to the personal jurisdiction of any state or
federal court sitting in Los Angeles, California in any action or proceeding arising out of or relating to this Agreement.
9.
Notice
All notices and other communications under this Agreement shall be in writing and mailed, telegraphed, telecopied, or
delivered by hand (by a party or a recognized courier service) to the other party at the following address (or to such other address as
such party may have specified by notice given to the other party pursuant to this provision):
9
If to the Company:
Avita Medical
28159 Avenue Stanford
Suite 220
Valencia, CA 91355
If to Executive:
Donna Shiroma
At current home address on file with the Company
10.
Miscellaneous
10.1
Binding Agreement. This Agreement shall inure to the benefit of and shall be binding upon the
Company, its successors and assigns.
10.2
Entire Agreement. This Agreement contains the entire agreement of the parties relating to the
subject matter hereof, and the parties hereto have made no agreements, representations or warranties relating to the subject matter
of this Agreement that are not set forth otherwise herein. In this regard, each of the parties represents and warrants to the other
party that such party is not relying on any promises or representations that do not appear in writing herein. This Agreement
supersedes any prior verbal or written agreements with the Company regarding Executive's employment or offer of employment,
except as specifically referenced herein. Each of the parties further agrees and understands that this Agreement can be amended or
modified only by a written agreement signed by all parties.
10.3
Representations and Warranties. Executive and the Company hereby represent and warrant to
the other that: (a) she or it has full power, authority and capacity to execute and deliver this Agreement, and to perform her or its
obligations hereunder; (b) such execution, delivery and performance will not (and with the giving of notice or lapse of time or both
would not) result in the breach of any agreements or other obligations to which she or it is a party or she or it is otherwise bound; (c)
this Agreement is her or its valid and binding obligation in accordance with its terms; (d) Executive represents and warrants that she
is under no other obligations, contractual or otherwise, that could impair her ability to perform fully and satisfactorily all of her
obligations under this Agreement; (e) Executive has had full opportunity to review this Agreement, to obtain all legal advice she
has deemed necessary or appropriate and has either done so, or voluntarily and knowingly declined to do so; and (f) neither party
has been induced to enter into this Agreement through any promises, threats, coercion, or benefits not set forth expressly in writing
in this Agreement.
10.4
Attorney's Fees. In the event that any party shall bring an action or proceeding in connection with
the performance, breach or interpretation of this Agreement, then the prevailing party in any such action or proceeding, as
determined by the court, arbitrator or other body having jurisdiction, shall be entitled to recover from the losing party all reasonable
costs and expenses of such action or proceeding, including reasonable attorneys' fees and court costs.
10.5
Counterparts. This Agreement may be executed on separate copies, any one of which need not
contain signatures of more than one party but all of which taken together shall constitute one and the same Agreement.
IN WITNESS WHEREOF, this Agreement is executed as of May 7, 2018.
"COMPANY"
Avita Medical Ltd., an Australian corporation
NameDr. Michael S. Perry Title:CEO
"EXECUTIVE"
Donna Shiroma
Donna Shiroma
By:
and
By:
11
CODE OF CONDUCT AVITA MEDICAL, INC. (“COMPANY”)
Exhibit 14.1
This Code of Conduct sets out the principles and standards which the Board, management and employees of the Company are encouraged to strive towards
when dealing with each other, shareholders and the broad community.
1. RESPONSIBILITY TO SHAREHOLDERS The Company aims: a) to increase shareholder value within an appropriate framework which safeguards the
rights and interests of the Company’s shareholders and the financial community; and b) to comply with systems of control and accountability which the
Company has in place as part of its corporate governance with openness and integrity.
2. INTEGRITY AND HONESTY Directors, management and staff shall deal with the Company’s customers, suppliers, competitors and each other with
the highest level of honesty, fairness and integrity and observe the rule and spirit of the legal and regulatory environment in which the Company operates.
3. RESPECT FOR THE LAW The Company is to comply with all legislative and common law requirements which affect its business, in particular those in
respect of occupational health and safety, the environment, native title and cultural heritage. Any transgression from the applicable legal rules is to be
reported to the managing director as soon as a person becomes aware of such a transgression.
4. CONFLICTS OF INTEREST Directors, management and staff must not involve themselves in situations where there is a real or apparent conflict of
interest between them as individuals and the interest of the Company. Where a real or apparent conflict of interest arises, the matter should be brought to
the attention of: a) the chairperson in the case of a Board member; b) the managing director in the case of a member of management; and c) a supervisor in
the case of an employee, so that it may be considered and dealt with in an appropriate manner for all concerned. 5. Protection of Assets Directors,
management and staff must protect the assets of the Company to ensure availability for legitimate business purposes and ensure all corporate opportunities
are enjoyed by the Company and that no property, information or position belonging to the Company or opportunity arising from these are used for
personal gain or to compete with the Company.
6. CONFIDENTIAL INFORMATION Directors, management and staff must respect confidentiality of all information of a confidential nature which is
acquired in the course of the Company’s business and not disclose or make improper use of such confidential information to any person unless specific
authorization is given for disclosure or disclosure is legally mandated.
7. EMPLOYMENT PRACTICES The Company will employ the best available staff with skills required to carry out vacant positions. The Company will
ensure a safe work place and maintain proper occupational health and safety practices commensurate with the nature of the Company’s business and
activities.
8. RESPONSIBILITY TO THE COMMUNITY The Company will recognize, consider and respect environmental issues which arise in relation to the
Company’s activities and comply with all applicable legal requirements.
9. RESPONSIBILITY TO THE INDIVIDUAL The Company recognizes and respects the rights of individuals and to the best of its ability will comply
with the applicable legal rules regarding privacy, privileges, private and confidential information.
10. OBLIGATIONS RELATIVE TO FAIR TRADING AND DEALING The Company will deal with others in a way that is fair and will not engage in
deceptive practices.
11. COMPLIANCE WITH THE CODE OF CONDUCT Any breach of compliance with this Code of Conduct is to be reported directly to the managing
director or chairperson, as appropriate.
12. PERIODIC REVIEW OF CODE The Company will monitor compliance with this Code of Conduct periodically by liaising with the Board,
management and staff especially in relation to any areas of difficulty which arise from this Code of Conduct and any other ideas or suggestions for
improvement of it. Suggestions for improvements or amendments to this Code of Conduct can be made at any time by providing a written note to the
managing director.
List of Subsidiaries
Subsidiary Name
AVITA Medical Pty Limited
AVITA Medical Americas, LLC
AVITA Medical Europe Limited
Visiomed Group Pty Ltd
C3 Operations Pty Ltd
Infamed Pty Ltd
Exhibit 21.1
Place of
Incorporation
Australia
Delaware
United Kingdom
Australia
Australia
Australia
%
Held
100
100
100
100
100
100
Business Purpose
Operating Company
U.S. operations
EMEA operations
Asia Pacific Operations
Holding company
Inactive
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We have issued our report dated August 26, 2021, with respect to the consolidated financial statements included in the Annual Report of Avita Medical,
Inc. on Form 10-K for the year ended June 30, 2021. We consent to the incorporation by reference of said report in the Registration Statements of Avita
Medical, Inc. on Form S-3 (File No. 333-249419) and on Forms S-8 (File No. 333-248446 and File No. 333-250924).
Exhibit 23.1
/s/ GRANT THORNTON LLP
Los Angeles, California
August 26, 2021
CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Michael Perry, certify that:
Exhibit 31.1
1.
2.
3.
4.
I have reviewed this annual report on Form 10-K of Avita Medical, Inc.;
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the
period covered by this report;
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15I and 15d-15I) and internal control over financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15d-15(f)) for the registrant and have:
a)
b)
c)
d)
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the registrant, is made known to us by others within those entities,
particularly during the period in which this report is being prepared;
designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed
under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with generally accepted accounting principles;
evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions
about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on
such evaluation; and
disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the
registrant’s fourth fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal
control over financial reporting; and
5.
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial
reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent
functions):
a)
b)
all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which
are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information;
and
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s
internal controls over financial reporting.
Date: August 26, 2021
/s/ Michael Perry
Name: Michael Perry
Title:
President and Chief Executive Officer
CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Michael Holder, certify that:
Exhibit 31.2
1.
2.
3.
4.
I have reviewed this annual report on Form 10-K of Avita Medical, Inc.;
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the
period covered by this report;
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15I and 15d-15I) and internal control over financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15d-15(f)) for the registrant and have:
a)
b)
c)
d)
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the registrant, is made known to us by others within those entities,
particularly during the period in which this report is being prepared;
designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed
under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with generally accepted accounting principles;
evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions
about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on
such evaluation; and
disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the
registrant’s fourth fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal
control over financial reporting; and
5.
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial
reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent
functions):
a)
b)
all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which
are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information;
and
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s
internal controls over financial reporting.
Date: August 26, 2021
/s/ Michael Holder
Name:
Title:
Michael Holder
Chief Financial Officer
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Exhibit 32.1
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code), each of
the undersigned officers of Avita Medical, Inc. (the “Company”), does hereby certify, to such officer’s knowledge, that:
The Annual Report on Form 10-K for the year ended June 30, 2021 of the Company fully complies with the requirements of Section 13(a) or 15(d) of the
Securities Exchange Act of 1934 and information contained in the Form 10-K fairly presents, in all material respects, the financial condition and results of
operations of the Company.
Dated: August 26, 2021
Dated: August 26, 2021
/s/ Michael Perry
Name: Michael Perry
Title:
President and Chief Executive Officer
/s/ Michael Holder
Name: Michael Holder
Title:
Chief Financial Officer
The foregoing certification is being furnished solely pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of
Section 1350, Chapter 63 of Title 18, United States Code) and is not being filed as part of the Form 10-K or as a separate disclosure document.