UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
For the quarterly period ended
or
For the transition period from to
Commission File Number:
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation or organization) |
(IRS Employer Identification No.) |
(Address of principal executive offices and Zip Code)
Registrant’s telephone number, including area code:
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
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Trading Symbol |
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Name of each exchange on which registered |
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The |
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.
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).
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 |
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Accelerated filer |
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Smaller reporting company |
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Emerging growth company |
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If an emerging growth company, indicate by check mark if the registrant has selected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
The number of shares of the registrant’s common stock, par value $0.0001, outstanding as of November 4, 2024 was
TABLE OF CONTENTS
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Item 1. |
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Consolidated Balance Sheets – As of September 30, 2024 (unaudited) and December 31, 2023 |
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Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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Item 3. |
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Item 4. |
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Item 1. |
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Item 1A |
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Item 2. |
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Item 3. |
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Item 4. |
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Item 5. |
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Item 6. |
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NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains forward-looking statements. We intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. All statements other than statements of historical facts contained in this Quarterly Report on Form 10-Q, including statements regarding our future revenues; solvency; future industry market conditions; future changes in our capacity and operations; future operating and overhead costs; intellectual property; regulatory and related approvals; the conduct or outcome of pre-clinical or clinical (human) studies; operational and management restructuring activities (including implementation of methodologies and changes in the board of directors); our ability to expand our sales and marketing organizations to address effectively existing and new markets that we intend to target; future employment and contributions of personnel; tax and interest rates; productivity, business process, rationalization, investment, mergers and acquisitions (and related integration activities), consulting, operational, tax, financial and capital projects and/or initiatives; inflationary pressures on the U.S. and global economies, respectively; changes in the legal or regulatory environments; and future working capital, costs, revenues, business opportunities, cash flows, margins, earnings and growth. These statements involve known and unknown risks, uncertainties and other important factors that may cause our actual results, performance, or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements.
In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “expect,” “plan,” “anticipate,” “could,” "would," “intend,” “target,” “project,” “contemplate,” “believe,” “estimate,” “predict,” “potential”, or “continue” or the negative of these terms or other similar expressions.
The forward-looking statements in this Quarterly Report on Form 10-Q are only predictions. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our business, financial condition, and results of operations. These forward-looking statements speak only as of the date of this Quarterly Report on Form 10-Q and are subject to a number of important factors that could cause actual results to differ materially from those in the forward-looking statements, including the factors described under the sections in this Quarterly Report on Form 10-Q titled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”
Moreover, we operate in an evolving environment. New risk factors and uncertainties may emerge from time to time, and it is not possible for our management to predict all risk factors and uncertainties.
You should read this Quarterly Report on Form 10-Q and the documents that we reference in this Quarterly Report on Form 10-Q completely and with the understanding that our actual future results may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary statements. Except as required by applicable law, we do not plan to publicly update or revise any forward-looking statements contained herein, whether as a result of any new information, future events, changed circumstances or otherwise.
3
PART I – Financial Information
Item 1. FINANCIAL STATEMENTS
AVITA MEDICAL, INC.
Consolidated Balance Sheets
(In thousands, except share and per share data)
(Unaudited)
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As of |
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September 30, 2024 |
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December 31, 2023 |
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ASSETS |
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Cash and cash equivalents |
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$ |
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$ |
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Marketable securities |
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Accounts receivable, net |
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BARDA receivables |
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Prepaids and other current assets |
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Inventory |
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Total current assets |
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Plant and equipment, net |
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Operating lease right-of-use assets |
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Corporate-owned life insurance (“COLI”) asset |
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Intangible assets, net |
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Other long-term assets |
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Total assets |
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$ |
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$ |
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LIABILITIES, NON-QUALIFIED DEFERRED COMPENSATION PLAN SHARE AWARDS AND STOCKHOLDERS’ EQUITY |
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Accounts payable and accrued liabilities |
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$ |
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$ |
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Accrued wages and fringe benefits |
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Current non-qualified deferred compensation (“NQDC”) liability |
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Other current liabilities |
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Total current liabilities |
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Long-term debt |
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Non-qualified deferred compensation liability |
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Contract liabilities |
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Operating lease liabilities, long term |
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Warrant liability |
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Total liabilities |
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Non-qualified deferred compensation plan share awards |
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Stockholders' equity: |
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Common stock, $ |
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Preferred stock, $ |
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Company common stock held by the non-qualified deferred compensation plan |
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( |
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( |
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Additional paid-in capital |
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Accumulated other comprehensive loss |
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( |
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( |
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Accumulated deficit |
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( |
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( |
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Total stockholders’ equity |
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Total liabilities, non-qualified deferred compensation plan share awards and stockholders’ equity |
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$ |
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$ |
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The accompanying notes form part of the unaudited Consolidated Financial Statements.
4
AVITA MEDICAL, INC.
Consolidated Statements of Operations
(In thousands, except share and per share data)
(Unaudited)
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Three-Months Ended |
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Nine-Months Ended |
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September 30, 2024 |
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September 30, 2023 |
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September 30, 2024 |
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September 30, 2023 |
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Sales revenue |
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$ |
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$ |
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$ |
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$ |
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Lease revenue |
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- |
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- |
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Total revenues |
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Cost of sales |
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( |
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( |
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( |
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Gross profit |
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BARDA income |
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- |
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- |
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Operating expenses: |
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Sales and marketing |
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( |
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( |
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( |
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( |
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General and administrative |
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( |
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( |
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( |
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( |
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Research and development |
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( |
) |
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( |
) |
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( |
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( |
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Total operating expenses |
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( |
) |
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( |
) |
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( |
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( |
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Operating loss |
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( |
) |
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( |
) |
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( |
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( |
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Interest expense |
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( |
) |
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( |
) |
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( |
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( |
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Other (expense) income, net |
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( |
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Loss before income taxes |
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( |
) |
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( |
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( |
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( |
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Income tax benefit (expense) |
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( |
) |
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( |
) |
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( |
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Net loss |
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$ |
( |
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$ |
( |
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$ |
( |
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$ |
( |
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Net loss per common share: |
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Basic and diluted |
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$ |
( |
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$ |
( |
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$ |
( |
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$ |
( |
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Weighted-average common shares: |
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Basic and diluted |
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The accompanying notes form part of the unaudited Consolidated Financial Statements.
5
AVITA MEDICAL, INC.
Consolidated Statements of Comprehensive Loss
(In thousands)
(Unaudited)
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Three-Months Ended |
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Nine-Months Ended |
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September 30, 2024 |
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September 30, 2023 |
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September 30, 2024 |
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September 30, 2023 |
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Net loss |
$ |
( |
) |
$ |
( |
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$ |
( |
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$ |
( |
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Foreign currency translation loss |
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- |
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( |
) |
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- |
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( |
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Change in fair value due to credit risk on long-term debt loss |
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( |
) |
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- |
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( |
) |
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- |
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Net unrealized gain/(loss) on marketable securities |
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( |
) |
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Comprehensive loss |
$ |
( |
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$ |
( |
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$ |
( |
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$ |
( |
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The accompanying notes form part of the unaudited Consolidated Financial Statements.
6
AVITA MEDICAL, INC.
(In thousands, except shares)
(Unaudited)
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Three-Months Ended September 30, 2024 |
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Common Stock |
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Shares |
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Amount |
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Company common stock held by the NQDC Plan |
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Additional |
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Accumulated Other |
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Accumulated |
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Total |
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Balance at June 30, 2024 |
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$ |
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$ |
( |
) |
$ |
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$ |
( |
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$ |
( |
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$ |
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Net loss |
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- |
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- |
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- |
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- |
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- |
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( |
) |
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( |
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Stock-based compensation |
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- |
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- |
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- |
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- |
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- |
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Vesting of restricted stock units |
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- |
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- |
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- |
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- |
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- |
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- |
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Exercise of stock options |
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- |
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- |
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- |
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- |
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Distribution/diversification of Company common stock held by the NQDC Plan |
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- |
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- |
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( |
) |
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- |
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- |
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Vesting of Company common stock held by the NQDC Plan |
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- |
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( |
) |
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- |
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- |
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- |
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Change in redemption value of share awards in NQDC Plan |
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- |
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- |
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- |
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( |
) |
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- |
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- |
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( |
) |
Net unrealized gain on marketable securities |
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- |
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- |
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- |
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- |
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- |
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Change in fair value due to credit risk on long-term debt |
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- |
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- |
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- |
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- |
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( |
) |
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- |
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( |
) |
Balance at September 30, 2024 |
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$ |
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$ |
( |
) |
$ |
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$ |
( |
) |
$ |
( |
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$ |
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Three-Months Ended September 30, 2023 |
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Common Stock |
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Shares |
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Amount |
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Company common stock held by the NQDC Plan |
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Additional |
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Accumulated Other |
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Accumulated |
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Total |
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Balance at June 30, 2023 |
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$ |
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$ |
( |
) |
$ |
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$ |
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$ |
( |
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$ |
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Net loss |
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- |
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- |
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- |
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- |
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- |
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( |
) |
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( |
) |
Stock-based compensation |
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- |
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- |
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- |
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- |
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- |
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Exercise of stock options |
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- |
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- |
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- |
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- |
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Vesting of restricted stock units |
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- |
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- |
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- |
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- |
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- |
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- |
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Vesting of Company common stock held by the NQDC Plan |
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- |
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( |
) |
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- |
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- |
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- |
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Distribution of Company common stock held by the NQDC Plan |
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- |
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- |
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- |
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- |
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Change in redemption value of share awards in NQDC Plan |
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- |
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- |
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- |
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- |
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- |
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Net unrealized gain on marketable securities |
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- |
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- |
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- |
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- |
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- |
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Foreign currency translation gain |
|
- |
|
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- |
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- |
|
|
- |
|
|
( |
) |
|
- |
|
|
( |
) |
Balance at September 30, 2023 |
|
|
$ |
|
$ |
( |
) |
$ |
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$ |
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$ |
( |
) |
$ |
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7
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Nine-Months Ended September 30, 2024 |
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Common Stock |
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|||||||||
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Shares |
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Amount |
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Company common stock held by the NQDC Plan |
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Additional |
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Accumulated Other |
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Accumulated |
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Total |
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|||||||
Balance at December 31, 2023 |
|
|
$ |
|
$ |
( |
) |
$ |
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$ |
( |
) |
$ |
( |
) |
$ |
|
||||
Net loss |
|
- |
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- |
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- |
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- |
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|
- |
|
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( |
) |
|
( |
) |
Stock-based compensation |
|
- |
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- |
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- |
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- |
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- |
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||
Vesting of restricted stock units |
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|
- |
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|
- |
|
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- |
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- |
|
|
- |
|
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- |
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|
Exercise of stock options |
|
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- |
|
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- |
|
|
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- |
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- |
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|||
ESPP purchase |
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- |
|
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- |
|
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- |
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- |
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|||
Distribution/diversification of Company common stock held by the NQDC Plan |
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- |
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- |
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- |
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- |
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|||
Vesting of Company common stock held by the NQDC Plan |
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|
|
- |
|
|
( |
) |
|
|
|
- |
|
|
- |
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|
- |
|
||
Change in redemption value of share awards in NQDC Plan |
|
- |
|
|
- |
|
|
- |
|
|
|
|
- |
|
|
- |
|
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Net unrealized loss on marketable securities |
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
( |
) |
|
- |
|
|
( |
) |
Change in fair value due to credit risk on long-term debt |
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
( |
) |
|
- |
|
|
( |
) |
Balance at September 30, 2024 |
|
|
$ |
|
$ |
( |
) |
$ |
|
$ |
( |
) |
$ |
( |
) |
$ |
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||||
|
Nine-Months Ended September 30, 2023 |
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Common Stock |
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|||||||||
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Shares |
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Amount |
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Company common stock held by the NQDC Plan |
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Additional |
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Accumulated Other |
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Accumulated |
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Total |
|
|||||||
Balance at December 31, 2022 |
|
|
$ |
|
$ |
( |
) |
$ |
|
$ |
|
$ |
( |
) |
$ |
|
|||||
Net loss |
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
( |
) |
|
( |
) |
Stock-based compensation |
|
- |
|
|
- |
|
|
- |
|
|
|
|
- |
|
|
- |
|
|
|
||
Exercise of stock options |
|
|
|
- |
|
|
- |
|
|
|
|
- |
|
|
- |
|
|
|
|||
Vesting of Company common stock held by the NQDC Plan |
|
|
|
- |
|
|
( |
) |
|
|
|
- |
|
|
- |
|
|
- |
|
||
Vesting of restricted stock units |
|
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
Distribution of Company common stock held by the NQDC Plan |
|
- |
|
|
- |
|
|
|
|
|
|
- |
|
|
- |
|
|
|
|||
Change in redemption value of share awards in NQDC Plan |
|
- |
|
|
- |
|
|
- |
|
|
( |
) |
|
- |
|
|
- |
|
|
( |
) |
Foreign currency translation loss |
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
( |
) |
|
- |
|
|
( |
) |
Net unrealized gain on marketable securities |
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
|
|
- |
|
|
|
||
Balance at September 30, 2023 |
|
|
$ |
|
$ |
( |
) |
$ |
|
$ |
|
$ |
( |
) |
$ |
|
|||||
The accompanying notes form part of the unaudited Consolidated Financial Statements.
8
AVITA Medical, Inc.
Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
|
|
Nine-Months Ended |
|
|||||
|
|
September 30, 2024 |
|
|
September 30, 2023 |
|
||
Cash flow from operating activities: |
|
|
|
|
|
|
||
Net loss |
|
$ |
( |
) |
|
$ |
( |
) |
Adjustments to reconcile net loss to net cash used in operating activities: |
|
|
|
|
|
|
||
Change in fair value of long-term debt |
|
|
|
|
|
- |
|
|
Change in fair value of warrant liability |
|
|
( |
) |
|
|
- |
|
Depreciation and amortization |
|
|
|
|
|
|
||
Stock-based compensation |
|
|
|
|
|
|
||
Non-cash lease expense |
|
|
|
|
|
|
||
Loss on fixed asset disposal |
|
|
|
|
|
|
||
Investment losses |
|
|
- |
|
|
|
|
|
Loss on patent disposal |
|
|
16 |
|
|
|
4 |
|
Remeasurement and foreign currency transaction gain/(loss) |
|
|
|
|
|
( |
) |
|
Excess and obsolete inventory related charges |
|
|
|
|
|
|
||
BARDA deferred costs |
|
|
- |
|
|
|
( |
) |
Contract cost amortization |
|
|
- |
|
|
|
|
|
Provision for credit losses |
|
|
|
|
|
|
||
Amortization of premium of marketable securities |
|
|
( |
) |
|
|
( |
) |
Non-cash changes in the fair value of NQDC plan |
|
|
|
|
|
|
||
Changes in operating assets and liabilities: |
|
|
|
|
|
|
||
Trade and other receivables |
|
|
( |
) |
|
|
( |
) |
BARDA receivables |
|
|
( |
) |
|
|
|
|
Prepaids and other current assets |
|
|
( |
) |
|
|
( |
) |
Inventory |
|
|
( |
) |
|
|
( |
) |
Operating lease liability |
|
|
( |
) |
|
|
( |
) |
Corporate-owned life insurance (“COLI”) asset |
|
|
( |
) |
|
|
( |
) |
Other long-term assets |
|
|
( |
) |
|
|
( |
) |
Accounts payable and accrued expenses |
|
|
( |
) |
|
|
( |
) |
Accrued wages and fringe benefits |
|
|
|
|
|
|
||
Current non-qualified deferred compensation liability |
|
|
|
|
|
( |
) |
|
Other current liabilities |
|
|
|
|
|
|
||
Non-qualified deferred compensation plan liability |
|
|
( |
) |
|
|
|
|
Contract liabilities |
|
|
( |
) |
|
|
( |
) |
Net cash used in operations |
|
$ |
( |
) |
|
$ |
( |
) |
Cash flows from investing activities: |
|
|
|
|
|
|
||
Purchase of marketable securities |
|
|
( |
) |
|
|
( |
) |
Sale of marketable securities |
|
|
- |
|
|
|
|
|
Maturities of marketable securities |
|
|
|
|
|
|
||
Purchase of plant and equipment |
|
|
( |
) |
|
|
( |
) |
Patent filing fees |
|
|
( |
) |
|
|
( |
) |
Net cash provided by investing activities |
|
$ |
|
|
$ |
|
||
Cash flow from financing activities: |
|
|
|
|
|
|
||
Proceeds from exercise of stock options |
|
|
|
|
|
|
||
Employee stock purchase plan (“ESPP”) purchases |
|
|
|
|
|
- |
|
|
Net cash provided by financing activities |
|
$ |
|
|
$ |
|
||
Effect of foreign exchange rate on cash and cash equivalents |
|
|
- |
|
|
|
( |
) |
Net increase/(decrease) in cash and cash equivalents |
|
|
( |
) |
|
|
|
|
Cash and cash equivalents beginning of the period |
|
$ |
|
|
$ |
|
||
Cash and cash equivalents end of the period |
|
$ |
|
|
$ |
|
||
Supplemental Disclosure of Cash Flow Information: |
|
|
|
|
|
|
||
Income taxes paid during the period |
|
$ |
|
|
$ |
|
||
Interest paid during the period |
|
$ |
|
|
$ |
|
||
Non-cash investing and financing activities: |
|
|
|
|
|
|
||
Plant and equipment purchases not yet paid |
|
$ |
|
|
$ |
|
||
Right-of-use-asset obtained in exchange for lease liabilities |
|
$ |
|
|
$ |
- |
|
|
The accompanying notes form part of the unaudited Consolidated Financial Statements.
9
AVITA MEDICAL, INC.
Notes to Consolidated Financial Statements
(Unaudited)
1. The Company
Nature of the Business
AVITA Medical, Inc. (collectively with its subsidiaries, “AVITA Medical”, “we”, “our”, “us”, or the “Company”) is a commercial-stage regenerative medicine company transforming the standard of care in wound management and skin restoration with innovative devices. At the forefront of the Company's portfolio is its patented and proprietary RECELL® technology (“RECELL”). RECELL harnesses the regenerative properties of a patient’s own skin to create an autologous skin cell suspension, Spray-On Skin™ Cells, delivering a transformative solution at the point of care. This breakthrough technology serves as the catalyst for a new treatment paradigm enabling improved clinical outcomes. The Company also holds the right to market, sell, and distribute PermeaDerm®, a biosynthetic wound matrix, in the United States under the terms of an exclusive multi-year distribution agreement with Stedical Scientific, Inc. (“Stedical”). The Company also entered into an exclusive multi-year development and distribution agreement with Regenity Biosciences (“Regenity”). Following 510(k) approval, Regenity will manufacture and supply Cohealyx™, an AVITA-medical branded collagen-based dermal matrix. Under the agreement, the Company will hold the exclusive rights to market, sell, and distribute Cohealyx in the U.S., with potential expansion into the European Union, as well as in Australia and Japan.
The single-use RECELL Autologous Cell Harvesting Device (“RECELL Ease-of-Use” or “RECELL EOU”) is approved by the U.S. Food and Drug Administration (the “FDA”) for the treatment of thermal burn wounds and full-thickness skin defects, and repigmentation of stable depigmented vitiligo lesions. The Company's next-generation device, RECELL GO™ Autologous Cell Harvesting Device (“RECELL GO”), is FDA-approved to treat thermal burn wounds and full-thickness skin defects. RECELL GO introduces enhanced features that streamline the preparation of Spray-On Skin Cells and improves workflow efficiency in the operating room. It consists of two components: a multi-use, AC-powered RECELL GO Processing Device (the “RPD”) and a RECELL GO Preparation Kit (the “RPK”). The RPK contains the single-use RECELL GO Cartridge, disaggregation head, RECELL Enzyme™, and other components. The RPD provides the control for the RPK, manages the pressure applied to disaggregate the donor skin cells, and precisely regulates the incubation times of the RECELL Enzyme and solutions to optimize cell yield and promote cell viability.
2. Summary of Significant Accounting Policies
Basis of Presentation
The accompanying unaudited Consolidated Financial Statements of the Company have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X of the Securities and Exchange Commission (the “SEC”). Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, the Consolidated Financial Statements reflect all adjustments of a normal and recurring nature that are considered necessary for a fair presentation of the results for the interim periods presented. The information included in this quarterly report on Form 10-Q should be read in conjunction with the audited Consolidated Financial Statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year-ended December 31, 2023 filed with the SEC on February 22, 2024 and the Australian Securities Exchange (“ASX”) on February 23, 2024 (the “2023 Annual Report”).
Except for revenue recognition, related to the RECELL GO system, as described below, there have been no changes to the Company’s significant accounting policies as described in the 2023 Annual Report that have had a material impact on the Company’s Consolidated Financial Statements. See the summary of the Company’s significant accounting policies set forth in the notes to its Consolidated Financial Statements included in the 2023 Annual Report.
Principles of Consolidation
The accompanying Consolidated Financial Statements include the accounts of the Company and its wholly-owned subsidiaries. All intercompany transactions and balances have been eliminated upon consolidation.
Recent Accounting Pronouncements
In November 2023, the Financial Accounting Standards Board (the “FASB”) issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. The ASU expands public entities’ segment disclosures by requiring
10
disclosure of significant segment expenses that are regularly reviewed by the Chief Operating Decision Maker (“CODM”) and included within each reported measure of segment profit or loss, an amount and description of its composition for other segment items, and interim disclosures of a reportable segment’s profit or loss and assets. The ASU also allows, in addition to the measure that is most consistent with GAAP, the disclosure of additional measures of segment profit or loss that are used by the CODM in assessing segment performance and deciding how to allocate resources. All disclosure requirements under ASU 2023-07 are also required for public entities with a single reportable segment. The ASU is effective for fiscal years beginning after December 15, 2023, and interim periods beginning after December 15, 2024, with early adoption permitted. The Company is currently evaluating the impact of adopting this ASU on its Consolidated Financial Statements and disclosures.
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. The amendments affected by this ASU require (i) enhanced disclosures in connection with an entity's effective tax rate reconciliation and (ii) income taxes paid disaggregated by jurisdiction. These amendments are effective for annual periods beginning after December 15, 2024. The Company is currently evaluating the impact of adopting this ASU on its Consolidated Financial Statements and disclosures.
Use of Estimates
The preparation of the accompanying Consolidated Financial Statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts (including the stand-alone selling price (“SSP”) for the RPD, allowance for credit losses, reserves for inventory excess and obsolescence, carrying value of long-lived assets, the useful lives of long-lived assets, accounting for marketable securities, income taxes, fair value of debt, fair value of warrants and stock-based compensation) and related disclosures. Estimates have been prepared based on 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 loss in the Consolidated Balance Sheets.
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 and nonmonetary assets and liabilities at historical rates. Gains and losses resulting from these remeasurements are included in earnings in the Consolidated Statement of Operations. Gains and losses for remeasurement were minimal during the three-months and nine-months ended September 30, 2024 and 2023.
The Company records certain revenues and operating expenses in foreign currencies. These revenues and expenses are translated into U.S. Dollars based on the average exchange rate for the reporting period. Assets and liabilities denominated in foreign currencies are translated into U.S. Dollars at the exchange rate in effect as of the balance sheet date. For the three and nine-months ended September 30, 2024, the Company incurred approximately $
Cash and Cash Equivalents
Cash and cash equivalents consist of cash held at deposit institutions and cash equivalents. Cash equivalents consist primarily of money market funds. Cash equivalents also include short-term highly liquid investments with original maturities of three months or less from the date of purchase. The Company holds cash at deposit institutions in the amount of $
Rabbi Trust
During April 2022, the Company established a rabbi trust to hold the assets of the NQDC Plan. The rabbi trust holds the COLI asset and the Common stock from deferred restricted stock unit awards that have vested. The NQDC Plan permits
11
diversification of fully vested shares into other equity securities subject to a six-month-and-one-day holding period. In accordance with ASR 268, Redeemable Preferred Stock, and ASC 718, Compensation — Stock Compensation, prior to vesting, the deferred share awards are classified as an equity instrument and changes in fair value of the amount owed to the participant are not recognized. The redemption amounts of the deferred awards are based on the vested percentage and are recorded outside of permanent equity as Non-qualified deferred compensation share awards on the Consolidated Balance Sheets. Common stock held in the rabbi trust is classified in a manner similar to treasury stock and presented separately on the Consolidated Balance Sheets as Company common stock held by the NQDC plan. As of September 30, 2024 and December 31, 2023, a total of
Concentrations
Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash and cash equivalents, marketable securities, trade receivables, and debt and other liabilities. As of September 30, 2024 and December 31, 2023, substantially all the Company’s cash and cash equivalents were deposited in accounts at financial institutions, and those deposited amounts exceed federally insured limits and are subject to the risk of bank failure.
As of September 30, 2024 and December 31, 2023,