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, 2020 and 2019,
should be read in conjunction with our consolidated financial statements and related notes included in this Annual Report.
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Results of Operations
The table below summarizes the results of our continuing operations for each of the periods presented.
Year Ended June 30, $ %
Statement of Operations Data: 2020 2019 Change Change
Operating Expenses:
Income tax benefit (expense) (4 ) 121 (125 ) (103 %)
Year Ended June 30, 2020 compared to Year Ended June 30, 2019
Revenue of the RECELL System totaled $14.3 million for the year ended June 30, 2020, an increase of $8.8 million or 161% over the
$5.5 million for the year ended June 30, 2019. 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 margin for the year ended June 30, 2020 was 79% compared to 77%
for the same period in 2019.
BARDA income consisted of funding from 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, 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.
Operating costs for the year ended June 30, 2020
totaled $57.9 million, a $22.2 million or 62% increase over the $35.7 million incurred during the year ended June 30, 2019. Sales and marketing expenses for the year ended June 30, 2020 totaled $14.8 million, an
increase of $2.6 million or 21% over the $12.3 million recognized during the year ended June 30, 2019. 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 totaled $18.1 million for the year ended June 30, 2020, an increase of $4.6 million
or 34% over the $13.6 million recognized during the year ended June 30, 2019. The increase was primarily a result of the costs related to the Redomicile Transaction, together with additional headcount associated with the growth of the
Company and the Company’ status as a cross listed entity on NASDAQ and the ASX. Research and development expenses for the year ended June 30, 2020 totaled $8.5 million, an increase of $0.6 million or 7% over the $7.9 million
recognized during the year ended June 30, 2019. Share-based compensation also increased to $16.5 million for the year ended June 30, 2020, an increase of $14.6 million or 747% over the $1.9 million recognized during the year
ended June 30, 2019 primarily due to the increase in the grant date fair value of awards granted during the year. The increase in the grant date fair value of the awards is due to the increase in the Company’s stock price.
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Net loss after tax for the year ended June 30, 2020 was $42 million, an increase of
$16.9 million or 67% over the $25.1 million recognized during the year ended June 30, 2019. The increase in net loss was driven by the higher operating costs 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.
The table below summarizes the results of our continuing operations for each of the periods presented.
Year Ended June 30, $ %
Statement of Operations Data: 2019 2018 Change Change
Operating Expenses:
Year Ended June 30, 2019 compared to Year Ended June 30, 2018
Revenue of the RECELL System totaled $5.5 million for the year ended June 30, 2019, an increase of $4.6 million or 489% over the
$0.9 million for the year ended June 30, 2018. Most of the current year increase in sales occurred in the U.S. 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, 2019 totaled $4.4 million compared to zero in the prior year. Gross margin for the year ended June 30, 2019 was 77% compared to 41% for the same period in 2018, and management
expects gross margins to further increase as sales ramp up within the U.S.
BARDA income of $5.9 million was recognized during the year ended
June 30, 2019 compared to income of $7.7 million for the year ended June 30, 2018. The decrease was the result of wind-down of certain activities associated with supporting the U.S. FDA approval of the RECELL System as well as the
compassionate use and continued access programs.
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Operations for the first half of the year ended June 30, 2019 were focused primarily on preparation for
the January 2019 U.S. market launch of the RECELL System. Sales and marketing expenses for the year ended June 30, 2019 totaled $12.3 million, an increase of $7.4 million or 151% over the $4.9 million recognized during the year
ended June 30, 2018. This increase was primarily attributed to the recruitment, hiring and training of a U.S. sales force and the associated product launch sales and marketing materials and activities. Research and development expenses for the
year ended June 30, 2019 totaled $7.9 million an increase of $1.6 million or 26% over the $6.3 million recognized during the year ended June 30, 2018. General and administrative expenses totaled $13.6 million for the
year ended June 30, 2019, an increase of $4.2 million or 44% over the $9.4 million recognized during the year ended June 30, 2018. As the result of investments in commercial, manufacturing, and system capabilities for the U.S.
market launch of the RECELL System and related initiatives, operating costs for the year ended June 30, 2019 totaled $35.7 million, a $13.7 million or 62% increase over the $22 million incurred during the year ended June 30,
2018 and were in line with management expectations.
Net loss after tax for the year ended June 30, 2019 was $25.1 million, an increase of
$12.4 million or 97% over $12.7 million recognized during the year ended June 30, 2018. The increase in net loss was driven by the higher operating costs described above, partially offset by the higher sale of goods 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, operating expenses will increase in future periods. These expenses are expected to be partially offset by increased
commercial sales of goods as well as income under the BARDA grant.
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.
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 pursuant to a Share Purchase Plan. 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.
During the year ended June 30, 2018, the Company completed a
series of equity transactions (through our former parent company, AVITA Medical). During October 2017, we announced a capital raising in aggregate to raise $13.2 million over two tranches; the first a private placement and the second a rights
offering to existing shareholders. On October 17, 2017, we completed the private placement of the equivalent of 1,009,830 shares at a price of $3.53 per share raising gross proceeds of $3.6 million. On November 2, 2017, we completed
the rights offering resulting in a total issue of the equivalent of 2,765,029 shares to raise a gross total of $9.6 million. During June 2018, we announced an institutional placement to raise an aggregate of $13.3 million over two tranches
(“June 2018 Placement”). The first tranche closed on June 13, 2018 and raised an aggregate of $9.7 million by issuing the equivalent of 2,554,756 shares at a price of $3.79 per share. The second tranche for an aggregate of
$2.4 million (referenced above) was issued on July 27, 2018.
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During December 2017, the board of directors approved the 2016 Director Share Plan which previously allowed
directors to convert their compensation into our shares.
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 Systems under the VMI plan is expected to commence in the second half of the 2020
calendar year. As of June 30, 2020, we had received cumulative payments of $24.4 million under the BARDA contract.
The Company’s research
and development activities are eligible to receive an incentive under an Australian Government tax incentive for eligible expenditure incurred on or after July 1, 2012 (“R&D Incentive”). Our management has assessed these
activities and expenditure to determine our likely eligibility under the R&D Incentive. For the years ended June 30, 2020 and 2019, the Company has received $0.1 million and $1.6 million, respectively related to this R&D
Incentive.
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.
The following table summarizes our cash flows for the periods presented:
As of June 30,
Net cash used in operations $ (22,747 ) $ (19,250 )
Net cash used in investing activities (847 ) (1,227 )
Net cash provided by financing activities 77,057 29,709
Effect of foreign exchange rate on cash and restricted cash 3 156
Net increase in cash and restricted cash 53,466 9,388
Cash and restricted cash at beginning of year 20,374 10,986
Cash and restricted cash at end of year 73,840 20,374
Years Ended June 30, 2020, and 2019
Net cash used in operating activities was $22.7 million and $19.3 million during the years ended June 30, 2020 and 2019, respectively. The
increase was primarily due to higher operating costs associated with a full year of commercialization of the RECEL System in the United States, and the expansion of research and development.
Net cash used in investing activities was $0.8 million and $1.2 million during the years ended June 30, 2020 and 2019, respectively. Cash flows
used for investing activities was primarily attributable to payments for the purchase of a property and equipment.
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Net cash provided by financing activities was $77.1 million and $29.7 million for the years ended
June 30, 2020 and 2019, respectively. The AVITA Group completed a series of financing transactions 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 s tockholders 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, 2020, 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 but also in
Australia, Japan and Europe 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 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 $8.5 million, and $7.9 million, during the years ended June 30, 2020, and 2019, respectively.
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 ut 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.
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F. Contractual Obligations and Commitments
The following summarizes our contractual obligations and commitments as of June 30, 2020:
Payments due by period
Less than 2-3 4-5 More than
Contractual Obligations (in thousands) Total 1 year years years 5 years
Operating lease obligations (1) $ 607 $ 530 $ 77 $ — $ —
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
Revenues 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. Effective July 1, 2018, the Company adopted ASC 606, Revenue from Contracts with Customers, using the modified retrospective method applicable to all
contracts that were not completed at the date of initial application. This update outlined a comprehensive new revenue recognition model designed to depict the transfer of promised goods or services to customers in an amount that reflects the
consideration to which the entity expects to be entitled in exchange for those goods or services. The new standard also required additional qualitative disclosures. Upon adoption, the ASC 606 did not have a material impact on the financial
statements. Refer to Note 12 – Revenues for further information. 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.
See Note 12 to our Consolidated Financial Statements included in this Annual Report for additional detail on revenue recognition.
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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.
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.
For certain awards, the Company estimates the fair value of share options and
other equity-based compensation using a Binomial option pricing model on the date of grant.
See Note 13 to our Consolidated Financial Statements
included in this Annual Report for additional detail on stock based compensation.
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.
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See Note 14 to our Consolidated Financial Statements included in this Annual Report for additional
detail on income taxes.
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Please see the Company’s audited financial statements for the year ended June 30, 2020, beginning at page F-1
under Note 19 “Financial Risk management Objectives and Policies” for a description of interest rate risk, foreign currency risk, credit risk and liquidity risk and how such risks affect the Company.
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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, 2020. 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, 2020.
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 disclosure controls and
procedures as of June 30, 2020, 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 disclosure controls and procedures were effective as of June 30, 2020.
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
Remediation of Material Weakness
Throughout the year
ended June 30, 2020, the Company undertook remediation measures related to the previously reported material weaknesses in internal control over financial reporting. We completed these remediation measures during the year ended June 30,
2020, including testing of the design and implementation of the related controls. Specifically, we implemented a more rigorous process to track and monitor our accumulated tax losses and we have hired an external income tax specialist to review our
application of tax legislation across jurisdictions. Based on these procedures, we believe that the previously reported material weakness has been remediated.
Other than described above, there was no change in our internal control over financial reporting during the year ended June 30, 2020, that has materially
affected, or is reasonably likely to materially affect, our internal control over financial reporting.
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
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.
Any references in this section to a director’s role prior to completion of the Redomicile Transaction are references to
that director’s role as a director of AVITA Medical (being the former parent company of the AVITA Group).
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.
Name Position Age Date First Elected or Appointed
Lou Panaccio Non-Executive Chairman 62 July 2014
Jeremy Curnock Cook Non-Executive Director 70 October 2012
Louis Drapeau Non-Executive Director 75 January 2016
Damien McDonald Non-Executive Director 54 January 2016
Professor Suzanne Crowe Non-Executive Director 68 January 2016
Dr. Michael Perry Executive Director and Chief Executive Officer 60 June 2017
David McIntyre Chief Financial Officer 49 November 2019
Erin Liberto Chief Commercial Officer 45 August 2017
Andrew Quick Chief Technology Officer 49 April 2019
Donna Shiroma General Counsel 57 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.
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Louis Drapeau has served as Non-Executive
Director of our board since January 2016. Mr. Drapeau has considerable expertise in both the biotechsector 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.
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.
Damien McDonald has served as a Non-Executive Director of our board of directors since January
2016. Mr. McDonald has a proven track record of achieving value in themedical device space. Mr. McDonald is currently Chief Executive Officer and a Director of the Board of LivaNova plc, having previously served as Chief Operating
Officer. LivaNova plc is a public (NASDAQ) company that is a leader in cardiovascular and neuromodulation solutions. Prior to that, he was a Group Executive and Corporate Vice President at NYSE-listed Danaher Corporation, a multinational science and
technology innovation company that acquires and produces life science and industrial products and brands, where he led a $1.5 billion group of dental consumable companies. Earlier in his tenure, Mr. McDonald was Group President of Kerr
where he and his team focused on building a strong research and development pipeline while improving operational performance utilizing the Denaher Business System. He has also previously worked for Merck & Co, Johnson & Johnson and
Zimmer. Mr. McDonald has B.S. degrees in both pharmacy and economics from the University of Queensland, a master’s degree in International Economics from the University of Wales, and an MBA from IMD of Lausanne, Switzerland.
We believe Mr. McDonald is qualified to serve on our board of directors based on his extensive experience in the biotech and medical
device industries, and his proven track record of achieving value in themedical device space.
Professor Suzanne Crowe AM
has served as a Non-Executive Director since January 2016. Australian-based, she is a physician-scientist and companydirector 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.
Dr. Michael Perry was appointed Chief Executive Officer and Executive Director in June 2017. Prior to this
appointment, Dr. Perry served as aNon-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
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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.
David McIntyre
was appointed Chief Financial Officer in November 2019. Mr. McIntyre has more than 20 years of executive experience having held senior financial, legal and operational roles across multinational and growth-stage entities. Most recently,
Mr. McIntyre served as a Partner with Apple Tree Partners (ATP), a multibillion-dollar venture capture and growth equity fund focused exclusively on life sciences. At ATP, Mr. McIntyre was responsible for the medical device portfolio,
together with various operating and board functions, including acting as Executive Vice President, Chief Financial Officer and Head of Technical Operations at Braeburn, Inc. Prior to ATP, Mr. McIntyre was Executive Vice President, Chief
Financial Officer and Chief Operating Officer at HeartWare® International, Inc. (previously ASX:HIN; NASDAQ: HTWR) where he oversaw HeartWare’s financial, supply chain and operating
functions as it transitioned from pre-clinical stage through commercialization across more than 20 countries. Prior to HeartWare, Mr. McIntyre practiced as a senior attorney in private practice
specializing in corporate, mergers and acquisitions and equity capital markets with Baker & McKenzie and KPMG as well as holding various senior financial roles in multi-national companies, including within the Rio Tinto Group of companies.
Mr. McIntyre holds a Bachelor of Economics (Accounting) from the University of Sydney (Australia), a Bachelor of Law from the
University of Technology, Sydney (Australia) and a Master of Business Administration (Fuqua Scholar) from Duke University. He is also a Certified Practicing Accountant (CPA) and is admitted as a Legal Practitioner of the Supreme Court of New South
Wales (in Australia).
Erin Liberto has served as Chief Commercial Officer since August 2017. Ms. Liberto has more than 19
years of multifaceted global commercialexperience 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
Developmentbeginning 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 thepharmaceutical 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:
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.
As a newly incorporated company, the Company is in the process of developing measurable objectives for achieving gender diversity in the
composition of its board, senior executives and workforce generally in accordance with its Code of Ethics and Business Conduct. However, the Company has a target to have at least 30% of its directors of each gender by 2024. 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.
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Performance Evaluations
As a newly incorporated entity, the Company has not yet undertaken an evaluation of the performance of the board of directors or of the
Company’s senior executive team in respect of the fiscal year ended June 30, 2020.
Code of Ethics
We have adopted a Code of Conduct, or the Code, that constitutes a “codes of ethics” as that term is defined in paragraph (b) of
Item 406 of Regulation S-K and that applies to our executive officers and persons performing similar functions, including our chief executive officer, chief financial officer, chief accounting officer and
controller. 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 amendment to the Code or grant any waivers, including any implicit waiver, from a provision of the Code, which applies to our
chief executive officer, chief financial officer, chief accounting officer and controller, or persons performing similar functions, 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.
Election of Directors
Our board of directors consists of six 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 nominations 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 nominations and corporate governance committees were as follows:
Director Independent CompensationCommittee AuditCommittee Nomination
Committee
Lou Panaccio X Member
Jeremy Curnock Cook X Member Member
Louis Drapeau X Member Chair Member
Damien McDonald X Member
Professor Suzanne Crowe X Chair Chair
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During the fiscal year ended June 30, 2020, the Board of Directors met a total of
twelve times (July 29, 2019, September 10, 2019, October 30, 2019, November 4, 2019, February 13, 2020, March 9, 2020, April 8, 2020, April 16, 2020, April 19, 2020, May 4, 2020, May 29, 2020, and
June 22, 2020) and had full attendance of each Board of Directors member (six Board of Directors members) at nine of those meetings, as well as attendance by at least four Board of Directors members at all twelve 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 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 Damien McDonald. 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, 2020, the audit committee met a total of four times (August 21, 2019, September 18, 2019, September 26, 2019, and
February 12, 2020) and had full attendance at two of the meetings (three audit committee members) and two of the meetings had two audit committee members attending as well as 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 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, 2020, the Compensation Committee met a total of seven times (July 29, 2019, August 29, 2019, September 9, 2019, October 10, 2019, October 14, 2019, February 12, 2020, and
March 11, 2020) and had full attendance of each Compensation Committee member (three Compensation Committee members) at five of those meetings, as well as attendance by at least two Compensation Committee members at all seven 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
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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 to our board of directors nominees for election at meetings of our stockholders or to fill vacancies that arise on our board of directors, and recommending to our board of directors 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, 2020, the Nomination and Corporate Governance Committee met one time on February 12, 2020 and had full attendance of each Nomination and Corporate Governance
Committee member (three Nomination and Corporate Governance Committee members) at that meeting.
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 30, 2020, our “named executive officers” and their positions were as follows:
• Michael Perry, Chief Executive Officer
• David McIntyre, Chief Financial Officer
• Andrew Quick, Chief Technology Officer
• Erin Liberto, Chief Commercial Officer
• Donna Shiroma, General Counsel
• Tim Rooney, Former Chief Administrative Officer
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SUMMARY COMPENSATION TABLE
Name and Stock Option Incentive Plan Compensation All Other
($) ($) ($) ($) ($) ($) ($) ($)
Chief Financial Officer 2019 — — — — — — — —
Dale Sander 2020 — — — — — — — —
(5) Includes retroactive pay from the prior year of $39,584.
(7) Mr. Rooney’s employment with the Company ended on July 31, 2020.
(8) Mr. Sander resigned as Chief Financial Officer as of May 15, 2019.
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Employment Contracts
The following table outlines the specified terms of the relevant employment contracts for the Key Management Personnel of the Company:
Compensation Principles
In prior years we identified a number of key areas for additional emphasis which has resulted in a review of compensation practices, policies and plans
associated with key management personnel compensation. To develop an appropriate foundation for future practices the Compensation Committee has a formal Compensation Governance Framework which, at the core, consists of:
• A Senior Executive Compensation Policy;
• A Short-Term Incentive (“STI”) Policy & Procedure document; and
• A Long-Term Incentive (“LTI”) Policy & Procedure document.
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Compensation Committee: The Compensation Committee of the Board of Directors of the Company is
responsible for determining and reviewing compensation arrangements for the board and our executives. The Compensation Committee assesses the appropriateness of the nature and amount of compensation of our executives on a periodic basis by reference
to relevant employment market conditions with the overall objective of ensuring maximum stakeholder benefit from the retention of a high-quality board and executive team. In addition, the Compensation Committee is responsible for evaluating the
performance of the Company’s key senior executives.
Use of Compensation Consultants: The Company did not make use of any external
compensation consultants during the fiscal year ended June 30, 2020, although it did obtain from third parties industry benchmarking information.
Compensation Framework, Philosophy and Policies: The performance of the Company depends upon the quality of its directors and executives. To prosper,
the Company must attract, motivate and retain highly skilled directors and executives. To this end, the Company embodies the following principles in its compensation framework:
• Provide competitive rewards to attract and retain high caliber executives;
• Performance linkage to and alignment with executive compensation; and
The main focus of executives and of performance assessment for fiscal year ended June 30, 2020 was the
commercialization of the RECELL® System within the United States, together with the approval by the FDA of various Investigational Device Exemptions which would support the commencement of
additional pivotal clinical studies. Other important activities, including advancement of the Company’s pipeline and successful completion of the listing of our ADSs on NASDAQ were items of key focus in the fiscal year. Incentives are intended
to be linked to shareholder value via milestone completion and clinical trial outcomes.
Executive Compensation
Objective: The Company aims to reward executives with a level and mix of compensation commensurate with their position and responsibilitieswithin the Company so as to:
• align the interests of executives with those of stockholders; and
• ensure total compensation is competitive by market standards.
Policy: The Company’s broad framework for the Compensation Committee requires the committee to ensure that:
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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 advicefrom 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 so as to provide a base level
of compensation which is bothappropriate 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, 2020, STI objectives consisted mainly of non-financial measures,
primarily based around commercialization of the RECELL System in the United States. The target range was between 25-75% of base salary for the key management personnel. The Company’s STI objectives are
designed to:
• Create a strong link between performance and reward;
• Share company success with the senior executives that contribute to it; and
All key objectives were assessed by the Compensation Committee as being fully met. All key management personnel
achieved 100% of the maximum bonus available to them under the STI plan and were paid in the current year.
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Resignation, Retirement, Other Termination, or Change in Control 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 or other termination or a change in control.
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, 2020.
Option awards Stock awards
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Approval for the issue of the above mentioned equity awards to Mr. Perry was obtained under
ASX Listing Rule 10.14.
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 Limited 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 29, 2005 when
shareholders approved an aggregate compensation of A$450,000 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, 2020. We do not provide separate compensation to our
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.”
$ $ $ $ % % %
Non-Executive Directors
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Compensation Committee Interlocks and Insider Participation
During fiscal year ended June 30, 2020, Suzanne Crowe, Louis Drapeau, and Jeremy Cook served as members of our Compensation Committee. None of the members
of our Compensation Committee was, during fiscal year ended June 30, 2020, an officer or employee of the Company and none of the members of our Compensation Committee was formerly an officer of the Company. 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 serves, nor in the past fiscal year has
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.
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, as of August 20, 2020 by each person or group of affiliated persons known to us to be the beneficial owner of more than 5% of our common stock; 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) to be “substantial shareholders” of the Company and carry 5% or more of the voting rights attached to the issued securities of the Company.
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More than 5% stockholders:
Directors and named executive officers:
*
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Securities Authorized for Issuance under Equity Compensation Plans
The following table sets out equity compensation plan information as at June 30, 2020.
Equity compensation plans approved by security holders (2) 1,260,524 $ 14.72 0
Equity compensation plans not approved by security holders — — —
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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 CHESS
Depositary Interests (“CDIs”) on the Australian Securities Exchange (“ASX”) and trade under 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 or 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 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 adoption of its own practices.
The Company’s Corporate Governance Statement is accurate and up to date as at August 24, 2020 and has been approved by the board of directors.
Issued capital
As at August 14, 2020, the
Company’s issued share capital was as follows:
• 21,468,494 shares of common stock, of which:
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In addition, the following unquoted securities in AVITA Medical are on issue, which entitle the holders of
those securities, upon vesting of their conversion rights, to be issued shares of our common stock in the Company rather than shares in AVITA Medical on a 100:1 consolidation ratio in accordance with, and pursuant to, their terms of issue and the
deed poll entered into by the Company on or about May 6, 2020 in favor of, amongst others, the holders of those securities:
• 150,000 options are on issue to Dr Michael Perry, CEO;
• 7,761 options are on issue to 3 warrant holders.
• 339,359 unquoted restricted stock units (“RSUs”) held by:
• Dr Michael Perry, CEO (294,359 RSUs); and
• David McIntyre, CFO (45,000 RSUs).
Voting Rights