Revenues

9 Months Ended

Sep. 30, 2024

Revenue, Performance Obligation [Abstract]

Revenues

5. Revenues

The Company generates revenues primarily from:

•The sale of RECELL Ease of Use (“EOU”), RECELL GO RPK, and PermeaDerm products to hospitals, other treatment centers, and distributors.

•Maintenance fee received from BARDA in exchange for first right of access to our inventory. In the prior year, the Company recorded service revenues for the emergency preparedness services provided to BARDA.

•Lease revenue for the RECELL GO RPD.

The Company’s sale of the EOU and PermeaDerm products are accounted for under ASC 606, as discussed in Note 2 of our Consolidated Financial Statements. Revenue for the RECELL GO device is disaggregated between two accounting standards: (1) ASC 606 for the RPK and (2) ASC 842 for the RPD.

RECELL GO

The RECELL GO device consists of a single-use RPK and a durable AC powered device, RPD. The Company enters into contracts with customers where it receives consideration for the single-use RPK and does not receive additional consideration for the RPD. The consideration in the contract is allocated based on the SSP. Upon sale of the RPK the consideration is allocated to the lease and non-lease components. Consideration received for the RPK is recorded in Sales revenues in the Consolidated Statement of Operations and consideration for the lease is recorded in Lease revenue in the Consolidated Statement of Operations. During the three and nine-months ended September 30, 2024, the Company recorded approximately $7.6 million and $8.2 million in Sales revenue related to the RPK and $152,000 and $164,000 in Lease revenue related to the RPD in the Consolidated Statement of Operations, respectively.

Distributor Transactions

For international markets, the Company exclusively partners with third-party distributors (currently, COSMOTEC in Japan, and PolyMedics Innovation GmbH, in Germany). Revenue recognition occurs when the distributors obtain control of the product. The terms of sales transactions through distributors are generally consistent with the terms of direct sales to customers and do not contain return rights. These transactions are accounted for in accordance with the Company’s revenue recognition policy described in Note 2, Summary of Significant Accounting Policies in our Consolidated Financial Statements.

PermeaDerm Sales

As provided in the Distribution Agreement with Stedical, the Company’s gross margin from the sale of PermeaDerm is 50% of the average sales price (“ASP”). The Company and Stedical share the gross revenue from the sale of the products evenly at 50% of ASP. The Company recognizes revenue when the customer obtains control of promised goods, in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods.

Remaining Performance Obligations

Contract liabilities are calculated as the dollar value of the remaining performance obligations on executed contracts and primarily relate to COSMOTEC and other customers. The estimated revenue expected to be recognized in the future once the performance obligation is satisfied under the Company’s existing customer agreements is $365,000 and $390,000 as of September 30, 2024 and December 31, 2023, respectively. These amounts are classified between current and long-term in Other current liabilities and Contract liabilities in the Consolidated Balance Sheets.

Contract Assets and Contract Liabilities

Contract assets include amounts related to the Company’s contractual right to consideration for both completed and partially completed performance for which the Company does not have the right to payment. As of September 30, 2024 and December 31, 2023, the Company does not have any contract assets.

Contract liabilities are recorded when the Company receives payment prior to satisfying its obligation to transfer goods to a customer. Contract liability balance primarily relates to unsatisfied performance obligation with COSMOTEC of $365,000 and $390,000 as of September 30, 2024 and December 31, 2023, respectively. This balance is classified between current and long-term. As of September 30, 2024 and December 31, 2023, a total of $33,000 and $33,000, respectively, was included in Other current liabilities and $332,000 and $357,000, respectively, in Contract liabilities in the Consolidated Balance Sheets.

The Company recognized approximately $8,000 and $25,000 of revenue from COSMOTEC for amounts included in the beginning balance of Contract liabilities for the three-months and nine-months ended September 30, 2024 and 2023, respectively.

Disaggregated Revenue

The Company disaggregates revenue from contracts with customers into geographical regions, by customer type and by product. As noted in the segment footnote, the Company’s business consists of one reporting segment. A reconciliation of revenue by geographical region, customer type and product is provided in Note 10 of our Consolidated Financial Statements.