REVA Medical (RVALL) 10-Q 2011 Q3 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2011

or

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from              to             

Commission file number: 000-54192

REVA MEDICAL, INC.

(Exact name of registrant as specified in its charter)

Delaware	33-0810505
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
5751 Copley Drive San Diego, CA 92111	(858) 966-3000
(Address of principal executive offices)	(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files).    Yes  x    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer	¨	Accelerated filer	¨
Non-accelerated filer	x	Smaller reporting company	¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).    Yes  ¨    No  x

As of November 10, 2011, a total of 32,784,003 shares of the registrant’s Common Stock, $0.0001 par value per share, were outstanding.

REVA MEDICAL, INC.

FORM 10-Q — QUARTERLY REPORT

For the Quarter Ended September 30, 2011

Table of Contents

			Page
PART I. FINANCIAL INFORMATION				1
	Item 1.	Unaudited Consolidated Financial Statements		1
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		11
	Item 3.	Quantitative and Qualitative Disclosures about Market Risk		18
	Item 4.	Controls and Procedures		19
PART II. OTHER INFORMATION				20
	Item 1.	Legal Proceedings		20
	Item 1A.	Risk Factors		20
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		21
	Item 3.	Defaults upon Senior Securities		22
	Item 4.	(Removed and Reserved)		22
	Item 5.	Other Information		22
	Item 6.	Exhibits		22
SIGNATURES				23
	EX-31.1			26
	EX-31.2			27
	EX-32.1			28

REFERENCES

Corporate Information

We were incorporated in Delaware in October, 2010. Our principal executive offices are located at 5751 Copley Drive, San Diego, CA 92111, U.S.A., and our telephone number is (858) 966-3000. Our website address iswww.revamedical.com. The information on, or accessible through, our website is not part of this report. Unless the context implies otherwise, references in this report and the information incorporated herein by reference to “REVA Medical,” “REVA,” the “Company,” “we,” “us,” and “our” refer to REVA Medical, Inc.

Currency

Unless indicated otherwise in this report, all references to “$” or “dollars” refer to United States dollars, the lawful currency of the United States of America. References to “A$” refer to Australian dollars, the lawful currency of the Commonwealth of Australia.

Trademarks

We have applied for registration of the trademarkReZolve^™ in the United States, European Union, Brazil, and Australia. All other trademarks, trade names, and service marks appearing in this report are the property of their respective owners. Use or display by us of other parties’ trademarks, trade dress, or products is not intended to and does not imply a relationship with, or endorsement or sponsorship of, us by the trademark or trade dress owner.

i

PART I. FINANCIAL INFORMATION

Item 1. Unaudited Consolidated Financial Statements

REVA Medical, Inc.

(a development stage company)

Consolidated Balance Sheets

(in thousands, except share and per share amounts)

	December 31, 2010			September 30, 2011 (Unaudited)
Assets
Current Assets:
Cash and cash equivalents	$	81,747		$	64,971
Short-term investments		—			996
Prepaid expenses and other current assets		765			219
Total current assets		82,512			66,186
Property and equipment, net		963			1,274
Long-term investments		—			3,234
Total Assets	$	83,475		$	70,694
Liabilities and Stockholders’ Equity
Current Liabilities:
Accounts payable	$	937		$	718
Accrued expenses and other current liabilities		591			923
Total Current Liabilities		1,528			1,641
Commitments and Contingencies (Note 5)
Stockholders’ Equity:
Common stock — $0.0001 par value; 100,000,000 shares authorized; 32,760,503 and 32,783,003 shares issued and outstanding at December 31, 2010 and September 30, 2011, respectively		3			3
Class B common stock — $0.0001 par value; 25,000,000 shares authorized; no shares issued or outstanding		—			—
Undesignated preferred stock — $0.0001 par value; 5,000,000 shares authorized; no shares issued or outstanding		—			—
Additional paid-in capital		210,847			213,092
Deficit accumulated during the development stage		(128,903	)		(144,042	)
Total Stockholders’ Equity		81,947			69,053
Total Liabilities and Stockholders’ Equity	$	83,475		$	70,694

The accompanying notes are an integral part of these financial statements

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REVA Medical, Inc.

(a development stage company)

Consolidated Statements of Operations

(Unaudited)

(in thousands, except share and per share amounts)

	Three Months Ended September 30,						Nine Months Ended September 30,						Period from June 3, 1998 (inception) to September  30, 2011
	2010			2011			2010			2011
Operating Expense:
Research and development	$	1,828		$	2,957		$	5,668		$	9,684		$	84,005
General and administrative		663			1,747			1,672			5,603			25,795
Loss from operations		(2,491	)		(4,704	)		(7,340	)		(15,287	)		(109,800	)
Other Income (Expense):
Interest income		7			42			9			158			1,253
Related party interest expense		(466	)		—			(1,241	)		—			(21,113	)
Interest expense		(11	)		—			(32	)		—			(952	)
Interest from amortization of notes payable premium		—			—			—			—			2,283
Gain (loss) on change in fair value of preferred stock rights and warrant liabilities		(75	)		—			(830	)		—			1,795
Loss on extinguishment of notes payable		—			—			—			—			(13,285	)
Other income (expense)		(37	)		7			(2	)		(10	)		(50	)
Net Loss		(3,073	)		(4,655	)		(9,436	)		(15,139	)		(139,869	)
Cumulative dividends and deemed dividends on Series H convertible preferred stock		(797	)		—			(6,521	)		—			(10,695	)
Net Loss Attributable to Common Stockholders	$	(3,870	)	$	(4,655	)	$	(15,957	)	$	(15,139	)	$	(150,564	)
Net Loss Per Common Share:
Net loss per share, basic and diluted	$	(1.41	)	$	(0.14	)	$	(5.82	)	$	(0.46	)
Shares used to compute net loss per share, basic and diluted		2,741,943			32,778,666			2,741,356			32,772,452

The accompanying notes are an integral part of these financial statements

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REVA Medical, Inc.

(a development stage company)

Consolidated Statements of Cash Flows

(Unaudited)

(in thousands)

	September 30,						Period from June 3, 1998 (inception) to September 30,
	2010			2011			2011
Cash Flows from Operating Activities:
Net loss	$	(9,436	)	$	(15,139	)	$	(139,869	)
Non-cash adjustments to reconcile net loss to net cash used for operating activities:
Depreciation and amortization		358			356			3,197
Loss (gain) on property and equipment disposal and impairment		—			(1	)		584
Stock-based compensation		253			2,229			4,257
Interest on notes payable		1,273			—			8,562
Repayment premium on notes payable		—			—			11,100
Loss on change in fair value of preferred stock warrant liability		830			—			970
Gain on change in fair value of preferred stock rights liability		—			—			(2,765	)
Loss on extinguishment of notes payable		—			—			13,285
Other non-cash expenses (income)		(27	)		31			74
Changes in operating assets and liabilities:
Prepaid expenses and other current assets		1			546			(219	)
Accounts payable		(602	)		(219	)		718
Accrued expenses and other current liabilities		420			301			861
Net cash used for operating activities		(6,930	)		(11,896	)		(99,245	)
Cash Flows from Investing Activities:
Purchases of property and equipment		(107	)		(673	)		(5,223	)
Sales of property and equipment		—			7			168
Purchases of short-term investments		—			(996	)		(18,882	)
Purchases of long-term investments		—			(3,234	)		(3,234	)
Maturities of short-term investments		—			—			17,886
Net cash used for investing activities		(107	)		(4,896	)		(9,285	)
Cash Flows from Financing Activities:
Proceeds from issuances of convertible preferred stock, net of costs		8,034			—			68,917
Proceeds from issuances of common stock		—			16			84,949
Initial public offering costs		(1,532	)		—			(8,490	)
Proceeds from exercises of warrants		—			—			263
Repurchases of stock		(550	)		—			(638	)
Proceeds from issuances of notes payable		—			—			28,600
Repayments of notes payable		—			—			(100	)
Net cash provided by financing activities		5,952			16			173,501
Effect of foreign exchange rates		(1	)		—			—
Net increase (decrease) in cash and cash equivalents		(1,086	)		(16,776	)		64,971
Cash and cash equivalents at beginning of period		7,233			81,747			—
Cash and cash equivalents at end of period	$	6,147		$	64,971		$	64,971
Supplemental Cash and Non-Cash Information
Cash paid for interest	$	—		$	—		$	126
Non-cash conversions of notes payable, accrued interest, note premiums and discounts, preferred stock, non-voting common stock, preferred warrants, and common warrants upon initial public offering in December 2010	$	—		$	—		$	120,349

The accompanying notes are an integral part of these financial statements.

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REVA Medical, Inc.

(a development stage company)

Notes to Consolidated Financial Statements

(Unaudited)

(in thousands, except share, per share, and per unit amounts)

1. Background and Basis of Presentation

Background: REVA Medical, Inc. (“REVA”) was incorporated in California in 1998 under the name MD3, Inc. In March 2002, we changed our name to REVA Medical, Inc. In October 2010, we reincorporated in Delaware. We established a non-operating wholly owned subsidiary, REVA Germany GmbH, in 2007. In these notes the terms “us,” “we,” or “our” refer to REVA and our consolidated subsidiary unless context dictates otherwise.

In December 2010, we completed an initial public offering of our common stock, as more fully described below.

We are currently developing proprietary designs and biomaterial technologies that will be used primarily for a bioresorbable stent to treat vascular disease in humans. We initiated the first human clinical trial of our bioresorbable stent during 2007 and plan to initiate a pilot clinical trial following completion of design confirmation tests, which are currently scheduled to finish during the fourth quarter 2011.

Basis of Presentation: We have prepared the accompanying consolidated financial statements in accordance with U.S. generally accepted accounting principles (“GAAP”) and the rules and regulations of the Securities and Exchange Commission (“SEC”) for reporting of interim financial information and, therefore, certain information and footnote disclosures normally included in annual financial statements have been omitted. Accordingly, these interim financial statements should be read in conjunction with Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in this report and with the audited financial statements and accompanying footnotes included in our Annual Report on Form 10-K for the year ended December 31, 2010.

The consolidated financial statements include the accounts of REVA and our wholly owned subsidiary, REVA Germany GmbH. All intercompany transactions and balances, if any, have been eliminated in consolidation. The interim consolidated balance sheet as of September 30, 2011, the consolidated statements of operations for the three and nine months ended September 30, 2010 and 2011 and the period from June 3, 1998 (inception) through September 30, 2011 and the consolidated statements of cash flows for the nine months ended September 30, 2010 and 2011 and the period from June 3, 1998 through September 30, 2011 are unaudited. The unaudited interim financial statements have been prepared on the same basis as the annual financial statements and, in our opinion, all adjustments, consisting only of normal recurring accruals, considered necessary for a fair statement of the results of these interim periods have been included. The results of operations for the three and nine months ended September 30, 2011 are not necessarily indicative of the results to be expected for the year ending December 31, 2011 or for any other interim period.

Development Stage and Capital Resources: We are considered a “development stage” enterprise, as we have not yet generated revenues from the sale of products. Although we have been researching and developing new technologies and product applications and have initiated the first human clinical trial of our bioresorbable stent, we do not anticipate having a product available for sale for at least the next several years. Until revenue is generated from a saleable product, we expect to continue to incur substantial operating losses and experience significant net cash outflows. As discussed below, we completed an initial public offering of our common stock in December 2010. We believe that we have sufficient capital to fund our operations at least through September 30, 2012.

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Notes to Consolidated Financial Statements

(Unaudited)

(in thousands, except share, per share, and per unit amounts)

1. Background and Basis of Presentation(continued)

Initial Public Offering: In December 2010 we completed an initial public offering (the “IPO”) of our common stock in Australia. We issued 7,727,273 shares of common stock at $10.9065 per share for gross proceeds of $84,278. We incurred $8,490 in issuance costs in connection with the IPO. Our stock is traded in the form of CHESS Depository Interests (“CDIs”) on the Australian Securities Exchange; each share of our common stock is equivalent to ten CDIs. Our trading symbol is “RVA.”

Concurrent with the completion of our IPO, all of our outstanding convertible preferred stock, non-voting common stock, notes payable, and accrued interest on notes payable converted to common stock. Additionally, all outstanding warrants were exercised for common stock, either through a cash payment to us or on a net exercise basis. We also issued common stock for cumulative dividends on our Series H convertible preferred stock. A total of 22,419,771 shares of common stock were issued from these conversions, exercises, and dividends.

Use of Estimates: In order to prepare our financial statements in conformity with GAAP, we are required to make estimates and assumptions that affect the reported amounts in the financial statements and accompanying notes. Our most significant estimates relate to, or have related to, expense accruals and fair market value determinations of notes payable and embedded conversion features, common and preferred stock warrants, preferred stock rights liability, and stock-based compensation. Actual results could differ from our estimates.

Recent Accounting Pronouncements: There were no accounting pronouncements issued or adopted by us during the nine months ended September 30, 2011 that had a material effect on our consolidated financial statements or that are reasonably certain to have a material impact on the consolidated financial statements in future periods.

2. Balance Sheet Details

Investments:Our investments are classified as either short- or long-term based on their maturity dates at the time of purchase. Investments with an original maturity of less than one year are classified as short-term; all others are classified as long-term. We have categorized the investments as “held-to-maturity” based on our intent and ability to hold to maturity. Our investments are stated at cost; their fair value is determined each reporting period through quoted market prices and market interest rates. During the reporting period there were no declines in fair value that were deemed to be other than temporary.

The cost, gross unrealized losses, and approximate fair values of our investments at September 30, 2011 are as follows:

	Cost		Gross Unrealized				Fair Value
			Gains		Losses
Time deposits:
Due in one year or less	$	996	$	—	$	3	$	993
Due after one year through two years		3,234		—		27		3,207
	$	4,230	$	—	$	30	$	4,200

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Notes to Consolidated Financial Statements

(Unaudited)

(in thousands, except share, per share, and per unit amounts)

2. Balance Sheet Details (continued)

	December 31, 2010			September 30, 2011
Property and equipment:
Furniture and office equipment	$	351		$	374
Laboratory equipment		2,400			3,006
Leasehold improvements		559			569
		3,310			3,949
Accumulated depreciation and amortization		(2,347	)		(2,675	)
	$	963		$	1,274
Accrued expenses and other current liabilities:
Accrued salaries and other employee costs	$	353		$	496
Accrued operating expenses		192			388
Accrued use taxes		15			39
Deferred rent		31			—
	$	591		$	923

3. Income Taxes

We have reported net losses for all periods through September 30, 2011; therefore, no provision for income taxes has been recorded since our inception. The net operating loss carryforwards arising from our net losses may be available to offset future taxable income for income tax purposes; however, under Internal Revenue Code (“IRC”) Sections 382 and 383, use of the net operating loss carryforwards, as well as our research tax credit carryforwards, may be limited based on cumulative changes in ownership. Since we have not completed an IRC Section 382/383 analysis regarding the limitations on carryforwards, we have removed the deferred tax assets arising from net operating losses and research credits from our deferred tax asset schedule. We have established a valuation allowance against the remainder of our net deferred tax assets due to the uncertainty surrounding the realization of those assets. We periodically evaluate the recoverability of the deferred tax assets and, when it is determined that it is more-likely-than-not that the deferred tax assets are realizable, the valuation allowance will be reduced. Due to the existence of the valuation allowance, future changes in our unrecognized tax benefits will not impact our effective tax rate.

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Notes to Consolidated Financial Statements

(Unaudited)

(in thousands, except share, per share, and per unit amounts)

4. Stock-Based Compensation

The Plan:Our 2010 Equity Incentive Award Plan was adopted in October 2010; this plan was a follow-on to our 2001 Stock Option/Stock Issuance Plan, which would have expired in May 2011. The two plans are collectively referred to as the “Plan.” The Plan provides for restricted stock awards as well as grants of incentive and non-qualified stock options for purchase of our common stock at a price per share equal to the closing market price of our stock on the date of grant. The number of shares reserved under the Plan may be increased annually by up to three percent of the outstanding stock of the Company. On January 1, 2011, an additional 981,615 shares were added, resulting in a total of 5,160,953 shares reserved under the Plan as of September 30, 2011. The term of the options granted under the Plan may not exceed ten years. Vesting periods of stock awards and option grants are determined by the Board of Directors and are generally four- or five-year periods. All options are immediately exercisable upon grant and are subject to repurchase by us at the exercise price in the event an optionee terminates service prior to being fully vested.

Option activity under the Plan is as follows:

	Options Outstanding			Weighted Average Exercise Price
Balance at December 31, 2010		3,016,800		$	5.96
Granted		401,000		$	13.70
Forfeited		(2,300	)	$	9.37
Exercised		(12,500	)	$	1.20
Balance at September 30, 2011		3,403,000		$	6.89

During the nine months ended September 30, 2011, we awarded 5,000 shares of restricted stock; we had not previously awarded any restricted stock under the Plan. Fifty percent of the restricted stock award vested in May 2011, 25 percent vests in May 2012, and the remaining 25 percent vests in May 2013.

No tax benefits arising from stock-based compensation have been recognized in the consolidated statements of operations through September 30, 2011.

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Notes to Consolidated Financial Statements

(Unaudited)

(in thousands, except share, per share, and per unit amounts)

4. Stock-Based Compensation(continued)

Stock Options and Restricted Stock to Employees:We account for option grants and restricted stock awards to employees based on their estimated fair values on the date of grant or award, with the resulting stock-based compensation recorded over the vesting period on a straight-line basis. We include non-employee directors as employees for this purpose.

Expense recorded for employee options and awards under the Plan is as follows:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2010		2011		2010		2011
Research and development	$	21	$	213	$	63	$	490
General and administrative		18		587		53		1,812
Total stock-based compensation	$	39	$	800	$	116	$	2,302

No options were granted to employees during the nine months ended September 30, 2010. The fair value of options granted and restricted stock awarded during the nine months ended September 30, 2011 was estimated using a dividend yield of zero percent, an expected life of 6.25 years, a risk-free interest rate of 2.68 percent, and an expected volatility of 63.9 percent. The assumed risk-free interest rate was based on the implied yield on a U.S. Treasury zero-coupon issue with a remaining term equal to the expected life of the option. The assumed volatility was calculated from the historical market prices of a selected group of publicly traded companies considered to be our peers. We used peer group data due to the fact that we have limited historical trading data. The expected option life was calculated using the simplified method under the accounting standard for stock compensation and a ten-year option expiration. The simplified method is used since we believe our option activity as a public company will differ from that of our own historical experience. The expected dividend yield of zero reflects that we have not paid cash dividends since inception and do not intend to pay cash dividends in the foreseeable future. The options granted to employees had a weighted average grant date fair value of $8.35 per share.

The aggregate intrinsic value of options exercised during the nine months ended September 30, 2010 and 2011 was $1 and $97, respectively.

Stock Options to Consultants:We account for stock options granted to consultants at their fair value. Under this method, the fair value is estimated at each reporting date during the vesting period using the Black-Scholes option-pricing model. The resulting stock-based compensation expense, or income if the fair value declines in a reporting period, is recorded over the consultant’s service period. During September 2009, consultants were granted options to purchase 50,000 shares of common stock. Stock-based compensation, which was recorded as research and development expense (income), arising from these options totaled $55 and $(88) for the three months ended September 30, 2010 and 2011, respectively and $137 and $(73) for the nine months ended September 30, 2010 and 2011, respectively. The fair value of consultant options at September 30, 2010 and 2011 was estimated to be $7.90 and $4.89 per share, respectively, based on the following assumptions:

	Nine Months Ended September 30,
	2010			2011
Dividend yield		0.00	%		0.00	%
Expected life - years		8.96			7.96
Risk-free interest rate		1.27	%		1.68	%
Expected volatility of common stock		78.40	%		63.90	%

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Notes to Consolidated Financial Statements

(Unaudited)

(in thousands, except share, per share, and per unit amounts)

4. Stock-Based Compensation(continued)

Non-Plan Options:Prior to establishment of the Plan, we had issued non-qualified options to purchase common stock under terms similar to those of the Plan. As of December 31, 2010, a total of 10,000 of these options were outstanding. During the nine months ended September 30, 2011, a total of 5,000 of the options were exercised and 5,000 expired; none remained outstanding as of September 30, 2011. All stock-based compensation expense related to these options was recorded prior to 2010.

5. Commitments and Contingencies

We have licensed certain patents and other intellectual property rights related to the composition and coating of our bioresorbable stent and our other biomaterial products. Terms of these licenses include provisions for royalty payments on future sales of products, if any, utilizing this technology, with provisions for minimum royalties once product sales begin. The amount of royalties varies depending upon type of product, use of product, stage of product, location of sale, and ultimate sales volume, and ranges from a minimum of approximately $70.00 per unit to a maximum of approximately $100.00 per unit sold, with license provisions for escalating minimum royalties that could be as high as $2,200 per year. Additionally, in the event we sublicense the technology and receive certain milestone payments, the licenses require that 20 percent of the milestone amounts be paid to the licensors.

Additional terms of the technology licenses include annual licensing payments of $175 until the underlying technology has been commercialized; the $175 for 2011 was paid prior to September 30, 2011. Terms of the licenses also include other payments to occur during commercialization that could total $950, payment of $350 upon a change in control of ownership, and payment of patent filing, maintenance, and defense fees. The license terms remain in effect until the last patent expires.

6. Comprehensive Loss

Our net loss reconciles to comprehensive loss as follows:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2010			2011			2010			2011
Net loss, as reported	$	(3,073	)	$	(4,655	)	$	(9,436	)	$	(15,139	)
Currency translation adjustments		3			(2	)		(1	)		—
Comprehensive loss	$	(3,070	)	$	(4,657	)	$	(9,437	)	$	(15,139	)

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Notes to Consolidated Financial Statements

(Unaudited)

(in thousands, except share, per share, and per unit amounts)

7. Net Loss Per Common Share

Basic net loss per common share is calculated by dividing the net loss attributable to common stockholders by the weighted average number of common shares outstanding for the period, without consideration for common stock equivalents. Diluted net loss per share is computed by dividing the net loss attributable to common stockholders by the weighted average number of common share equivalents outstanding for the period determined using the treasury-stock method and the if-converted method, as applicable. For purpose of this calculation, convertible preferred stock, common stock options, preferred and common stock warrants, and convertible notes payable are considered to be common stock equivalents and are included in the calculation of diluted net loss per share only when their effect is dilutive. The calculation excludes any impact related to accrued but undeclared dividends.

The following table presents the potential common shares outstanding or common share equivalents that were excluded from the computation of diluted net loss per share because including them would have been antidilutive:

	Nine Months Ended September 30,
	2010		2011
Convertible preferred stock		14,929,713		—
Common stock options		1,560,500		3,403,000
Convertible notes payable and accrued interest		3,225,975		—
Convertible preferred stock warrants		289,851		—
Common stock warrants		1,449,725		—
		21,455,764		3,403,000

8. Subsequent Event

During October 2011, after a successful ruling from the Australian tax authority, we received a payment of $423 for Australian Goods and Services Tax that had been withheld from the IPO proceeds in December 2010.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

You should read the following discussion and analysis of our financial condition and results of operations in conjunction with our unaudited consolidated financial statements and related notes thereto included in this Quarterly Report on Form 10-Q and with our consolidated financial statements and the related notes thereto that are contained in our Annual Report on Form 10-K for the year ended December 31, 2010. In addition to historical information, the following discussion and analysis includes forward-looking information that involves risks, uncertainties, and assumptions. Actual results and the timing of events could differ materially from those anticipated by these forward-looking statements as a result of many factors, including those discussed under “Risk Factors” elsewhere in this Form 10-Q and in our Form 10-K.

Overview

We are a development stage medical device company working toward commercialization of our proprietary technologies to provide minimally invasive medical devices for treatment of conditions in the human body. Since the inception of our company in 1998, our efforts have been concentrated on the development of a stent for use in coronary applications. We currently are in the later stages of developing a bioresorbable drug-eluting coronary stent that we have named theReZolve^™stent. In a clinical use, this stent will be implanted by an interventional cardiologist during a minimally invasive surgery to a coronary artery location with a delivery catheter system. The stent combines our proprietary stent design with a proprietary polymer that is metabolized and cleared from the body over time, leaving the body free of a permanently implanted device. We have invested significant time and funds in the scientific research, engineering development, and testing of the stent in laboratory and preclinical studies. We believe the results of this testing have shown the technology to be safe and effective and that it is suitable for final development and human clinical studies.

In 2007, we enrolled patients in a small clinical study that proved the viability of our stent technology while confirming the areas needing further development. We have been advancing the product design and features since that study. We intend to initiate a pilot human clinical trial of theReZolve^™ stent after we complete the preclinical tests, including all design confirmation tests, which are currently scheduled to finish during the fourth quarter of 2011. We have secured regulatory approval to proceed with the trial in several locations outside the United States and will most likely begin enrollment in the trial directly following completion of the preclinical and design confirmation tests. Assuming acceptable results from the pilot clinical trial, we will initiate a larger scale human clinical trial that will provide the data needed to apply for CE Mark approval in Europe. If and when we receive CE Mark approval, we plan to sell our stent in Europe. In order to produce quantities of the stent large enough to accommodate the clinical trials and commercial needs, when that time arrives, we will need to scale-up our manufacturing processes and expand our capabilities to allow for additional stent dimensions and other aspects. We have begun preliminary development of the methods and processes for the manufacturing scale-up and we plan to work on the dimensional and other aspects during the remainder of this year and in 2012.

We have invented, co-invented, and licensed a portfolio of proprietary technologies. Our design-related technologies have been invented by our employees and consultants and our materials-related technologies have been either invented by our employees or licensed from, or co-invented with, Rutgers, The State University of New Jersey. We consider our patent portfolio to be significant and have invested considerable time and funds to develop and maintain it. Our goal is to perform feasibility tests on additional technologies in our patent portfolio at the same time we are finalizing ourReZolve^™stent and, if feasibility is proven, determine a course of development for potential products and, thus, provide a follow-on product pipeline.

We have performed all of our research and development activities from our location in San Diego, California. As of September 30, 2011, we had 63 employees, a significant number of whom are degreed professionals and four of whom are PhDs. We leverage our internal expertise with contract research and preclinical laboratories, outside polymer and catheter manufacturing, and other outside services as needed. We have two clean rooms and multiple engineering and chemistry labs at our facility, in addition to our corporate and administrative office. We are ISO certified to the medical device standard 13485:2003 and intend to maintain the certification to support our commercialization plans.

We have not yet developed a product to a saleable stage and, therefore, we have not generated any product or other revenues. Our development efforts have been funded with a variety of capital received from angel investors, venture capitalists, strategic partners, hedge funds, and individuals. We completed an initial public offering (“IPO”) of our common stock in December 2010 with a listing on the Australian Securities Exchange. Since our inception,

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we have received approximately $153.5 million in equity proceeds and $28.5 million from issuance of notes payable (such notes payable were converted to common stock upon the IPO). As of September 30, 2011, we had approximately $66.0 million in cash and investments available for operations and $3.2 million in long-term investments. We have incurred substantial losses since our inception. As of September 30, 2011, we had accumulated a deficit of approximately $144.0 million. We expect our losses to continue for the next several years as we continue our development work and clinical trials and, if these efforts are successful and we are able to obtain approval to sell our products, we expect to commence commercial sales thereafter.

Our company was founded in California in June 1998 and named MD3, Inc. We changed our name to REVA Medical, Inc. in March 2002. We reincorporated from the State of California to the State of Delaware in October 2010; as a result, the rights of our stockholders are governed by the Delaware General Corporation Law. We formed a wholly owned subsidiary in Germany in 2007 to facilitate our clinical trials and our planned commercialization of products; we have not used this subsidiary yet for any operating activities.

Key Components of our Results of Operations

Since we are still in a pre-revenue stage and our activities are focused on further developing and testing our bioresorbable coronary stent with the goal of commercially selling it, as well as performing minimal research and tests to determine the feasibility of other product possibilities, our operating results primarily consist of research and development expenses and general and administrative expenses.

Research and Development Expenses: Our research and development expenses arise from a combination of internal and external costs. Our internal costs primarily consist of employee salaries and benefits, facility and other overhead expenses, and engineering and other supplies that we use in our labs for prototyping, testing, and producing our stents and other product possibilities. Our external costs primarily consist of contract research, engineering consulting, polymer production costs, polymer lasing costs, catheter system and restenotic drug purchases, preclinical and clinical study expenses, and license fees paid for the technology underlying our polymer materials. All research and development costs are expensed when incurred. We have increased the level of our research and development activities in 2011 as we prepare for human clinical trials. We expect a significant increase in our clinical study costs once we begin our pilot clinical trial and, if the pilot trial is successful, our larger scale follow-on clinical trial that will provide the data for a CE Mark application in Europe.

General and Administrative Expenses: Our general and administrative expenses consist primarily of salaries and benefits for our executive officers and administrative staff, corporate office and other overhead expenses, legal expenses including patent filing and maintenance costs, audit and tax fees, investor relations and other public company costs, and travel expenses. Although our patent portfolio is one of our most valuable assets, we record legal costs related to patent development, filing, and maintenance as expense when the costs are incurred since the underlying technology associated with these assets is purchased or incurred in connection with our research and development efforts and the future realizable value cannot be determined. We anticipate that we will continue to invest in patents at similar levels as we have in the past. Upon completion of our initial public offering (“IPO”) in December 2010, we began to expand our corporate infrastructure and also began to incur public company reporting and other costs. We anticipate that we will continue to expand our corporate infrastructure, including the addition of personnel and reporting systems, to support the needs of being a public company and to prepare for commercial sales of our products, which will increase our general and administrative expenses significantly.

Other Expense and Income: After completion of our IPO in December 2010, our non-operating income and expense primarily consist of interest income earned on our investments. Prior to completion of the IPO, non-operating expenses primarily arose from interest expense on notes payable, losses from the change in value of outstanding warrants to purchase preferred stock, and losses from the extinguishment of notes payable. All the notes payable, along with the accumulated accrued interest, converted into common stock upon our IPO and all the warrants for purchase of preferred stock were exercised for cash and on a net issuance basis upon the IPO. No notes payable or warrants remained outstanding after the IPO and, therefore, we have no continuing expense related to them.

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Critical Accounting Policies and Estimates

Our consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States. The preparation of our financial statements and related disclosures requires us to make estimates, assumptions, and judgments that affect the reported amounts of assets, liabilities, stockholders’ equity, expenses, and the presentation and disclosures related to those items. We base our estimates and assumptions on historical experience and other factors that we believe to be reasonable under the circumstances. We evaluate our estimates and assumptions on an ongoing basis; changes in our estimates and assumptions are reasonably likely to occur from period to period. Additionally, actual results could differ significantly from the estimates we make. To the extent there are material changes in our estimates or material differences between our estimates and our actual results, our future financial statement presentation, financial condition, results of operations, and cash flows will be affected.

While we have other key accounting policies that are less subjective and, therefore, their application would not have a material impact on our reported results, we believe the following accounting policies involve a greater degree of judgment and complexity than our other accounting policies and, therefore, are the most critical to understanding and evaluating our consolidated financial condition and results of operations.

Research and Development Costs: We expense research and development costs as incurred. Our preclinical and clinical study costs are incurred on a contract basis and generally span a period from a few months to longer than a year. We record costs incurred under these contracts as the work occurs and make payments according to contractual terms. Until a contract is completed, we estimate the amount of work performed and accrue for estimated costs that have been incurred but not paid. As actual costs become known, we adjust our accruals. We expect our clinical expense accruals to increase as we enroll patients in our pilot trial, which we expect to initiate following completion of design confirmation tests, which are currently scheduled to finish during the fourth quarter 2011, and, if successful, our follow-on larger clinical trial. We expect to make estimates as to the work performed throughout the term of these trials, which is expected to be five years. As a public company, we are required to make these estimates in shorter time frames and with less actual data than we have in the past, which may result in our estimates being less accurate and subject to possible material changes in our accruals, which could also materially affect our results of operations within any fiscal period. To date, there have been no material changes in our research and development expense estimates.

Income Taxes: We are currently subject to taxation in U.S. and California jurisdictions, but because we have not yet reached the stage of generating revenue and we have accumulated significant tax losses, we have not been required to pay income taxes. To account for the tax effects of our accumulated losses and other tax-related items, we use the asset and liability method, as defined by accounting standards. Under this accounting, we determine our deferred tax assets and liabilities based on the estimated future tax consequences of current temporary differences between the financial statement carrying amounts of the assets and liabilities and their respective tax bases, using tax rates that we expect to be in effect when the temporary difference will be realized. After we have quantified our deferred tax assets and liabilities, we evaluate their ability to be realized. If a deferred tax asset or liability is determined to have less than a 50 percent likelihood of being upheld upon an examination by taxing authorities, or if we are unable to make such a determination, we do not recognize the tax asset or liability. We also establish a valuation allowance for a deferred tax asset or liability when we determine that it is likely to not be realized; since our inception, we have recorded valuation allowances for the full amount of our net deferred tax assets, as the realization of the deferred tax asset is uncertain. In determining our tax accounting, we use estimates and make assumptions that we believe are reasonable; however, the ultimate tax determination involves significant judgment that is subject to audit by tax authorities and actual tax outcomes could vary significantly from our estimates. Additionally, as a result of our using estimates, if factors change and we use different estimates, the amounts we have determined related to our tax positions could be materially different in the future.

Stock-Based Compensation: We recognize stock-based compensation expense in connection with stock option grants to employees, directors, and consultants and restricted stock awards to employees. For grants and awards to employees and directors, we determine the amount of compensation expense by estimating the fair value of the option or stock on the date of grant or award, and then amortize that fair value on a straight-line basis over the period the recipient provides service, which generally is four or five years, and record the expense in our statement of operations as either research and development expense or general and administrative expense based on the recipient’s work classification. We estimate the fair value by using the Black-Scholes option pricing model. For the model inputs, we use the fair value of the underlying common stock, a risk-free interest rate that corresponds to the expected life of the option, an expected option life between six and 6.5 years, and an estimate of volatility based on the market trading prices of comparative peer companies. Additionally, we reduce the amount of recorded compensation expense to allow for potential forfeitures of the options; the forfeiture rate is based on our actual

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historical forfeitures and has ranged from approximately 2.5 percent to 5.3 percent. For options granted to consultants, we estimate the fair value at the date of grant and at each subsequent accounting date and record compensation expense in our statement of operations based on the fair value during the service period of the consultant, which is generally a five-year vesting period. We estimate the fair value by using the Black-Scholes option pricing model with the same approach to inputs and assumptions as described above. As a result of our use of estimates, if factors change and we use different assumptions, the amount of our stock-based compensation expense could be materially different in the future.

Results of Operations

In both 2010 and 2011, our primary focus was continuing the development of ourReZolve^™stent. During 2010, our activities centered around refining the stent’s design and delivery system, while in 2011 our activities have been centered around testing and readying the stent for human clinical trials and increasing manufacturing capabilities. Following are discussions of our 2011 operating results as compared to our 2010 operating results.

Comparison of the Three Months Ended September 30, 2010 and 2011

Our operating results for the three month periods indicated are as follows:

	Three Months Ended September 30,				% Change
	2010		2011
	(In thousands)
Research and development expense	$	1,828	$	2,957		62	%
General and administrative expense	$	663	$	1,747		>100	%
Interest income	$	7	$	42		>100	%
Interest expense	$	(477)	$	—		(100	%)
Loss on change in fair value of preferred stock warrant liability	$	(75)	$	—		(100	%)
Other income (expense)	$	(37)	$	7		>(100	%)
Cumulative dividends on Series H convertible preferred stock	$	(797)	$	—		(100	%)

Research and development expense increased $1.13 million, or 62 percent, for the three months ended September 30, 2011 compared to the three months ended September 30, 2010. The increase was due to several factors. Personnel costs, including recruitment costs and stock-based compensation expense, increased $592,000 primarily due to increased headcounts for engineering, manufacturing, and clinical employees. Stent material costs increased $300,000 primarily due to polymer and lasing needs in 2011 as design finalization, preclinical testing, and manufacturing process development required greater quantities. Preclinical study costs increased $73,000 as a result of additional quantities and varieties of studies performed to test the stent. Other engineering and testing costs, including lab supplies and consultants, increased $53,000 in support of the testing and manufacturing development efforts. Clinical costs increased $56,000 as we continued trial submission and site selection activities. The remainder of the change in research and development expenses between periods is due to increases in facilities costs offset by a small decrease in license fees.

General and administrative expense increased $1.08 million, or more than 100 percent, for the three months ended September 30, 2011 compared to the three months ended September 30, 2010. Stock-based compensation expense increased $569,000 primarily due to stock option grants made to senior executives and non-employee directors in October 2010. Other personnel costs increased $102,000 mainly due to our employment of a chief executive officer in August 2010 and other administrative hires in 2011 to support public company needs. Marketing costs increased $100,000 due to trademarking and branding initiatives in 2011 to support entry into clinical trials. Legal fees increased $75,000 primarily as a result of greater patent maintenance and foreign filing costs and greater general counsel costs related to both U.S. and Australian public company reporting requirements. Board costs were $48,000 and investor relations and other costs of being a public company approximated $43,000 in 2011; we had minimal corresponding costs in the prior year period. The remainder of the change in general and administrative expenses between periods was due to increases in general office and other expenses.

Interest income increased $35,000 for the three months ended September 30, 2011 compared to the three months ended September 30, 2010 as a result of interest earned on proceeds from our initial public offering (“IPO”) that was completed in December 2010.

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Interest expense and the change in the fair value of preferred stock warrant liability were zero for the three months ended September 30, 2011 due to the conversion to common stock of all outstanding notes payable and the exercise of all warrants upon our IPO in December 2010.

Other income and expense remained relatively immaterial for the three months ended September 30, 2011 and did not change significantly compared to the same period in 2010. This income or expense primarily arises from gains and losses in foreign currency exchange rates when we purchase goods or services from foreign suppliers.

Comparison of the Nine Months Ended September 30, 2010 and 2011

Our operating results for the nine month periods indicated are as follows:

	Nine Months Ended September 30,						%
	2010			2011			Change
	(In thousands)
Research and development expense	$	5,668		$	9,684			71	%
General and administrative expense	$	1,672		$	5,603			>100	%
Interest income	$	9		$	158			>100	%
Interest expense	$	(1,273	)	$	—			(100	%)
Loss on change in fair value of preferred stock warrant liability	$	(830	)	$	—			(100	%)
Other income (expense)	$	(2	)	$	(10	)		>100	%
Cumulative dividends on Series H convertible preferred stock	$	(6,521	)	$	—			(100	%)

Research and development expense increased $4.02 million, or 71 percent, for the nine months ended September 30, 2011 compared to the nine months ended September 30, 2010. The increase was due to several factors. Personnel costs, including recruitment costs and stock-based compensation expense, increased $1.72 million primarily due to increased headcounts for engineering, manufacturing, and clinical employees. Stent material costs increased $1.02 million primarily due to polymer and lasing needs in 2011 as design finalization, preclinical testing, and manufacturing process development required greater quantities. Preclinical study costs increased $363,000 as a result of additional quantities and varieties of studies performed to test the stent. Other engineering and testing costs, including lab supplies and consultants, increased $380,000 in support of the testing and manufacturing development efforts. Clinical costs increased $306,000 as we prepared and submitted requests for trial approval and began site selection activities. The remainder of the change in research and development expenses between periods is due to increases in facilities costs and other individually immaterial items.

General and administrative expense increased $3.93 million, or more than 100 percent, for the nine months ended September 30, 2011 compared to the nine months ended September 30, 2010. Stock-based compensation expense increased $1.76 million primarily due to stock option grants made to senior executives and non-employee directors in October 2010. Other personnel costs increased $642,000 due to our employment of a chief executive officer in August 2010 and other administrative hires in 2011 to support public company needs. Legal fees increased $412,000 primarily as a result of greater patent maintenance and foreign filing costs and greater general counsel costs related to both U.S. and Australian public company reporting requirements. Travel and entertainment expenses increased $158,000 due to increased travel outside the U.S. for shareholder relations and clinical trial preparation. Audit fees increased $146,000 due to public company requirements. Marketing costs increased $235,000 due to trademarking and branding initiatives in 2011 to support entry into clinical trials. Board costs were $143,000 and investor relations and other costs of being a public company approximated $194,000 in 2011; we had minimal corresponding costs in the prior year period. The remainder of the change in general and administrative expenses between periods was due to increases in general office, insurance, and other expenses.

Interest income increased $149,000 for the nine months ended September 30, 2011 compared to the nine months ended September 30, 2010 as a result of interest earned on proceeds from our initial public offering (“IPO”) that was completed in December 2010.

Interest expense and the change in the fair value of preferred stock warrant liability were zero in 2011 due to the conversion to common stock of all outstanding notes payable and the exercise of all warrants upon our IPO in December 2010.

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Other income and expense remained relatively immaterial in 2011 and did not change significantly compared to 2010. This income or expense primarily arises from gains and losses in foreign currency exchange rates when we purchase goods or services from foreign suppliers and our purchasing activity has not changed significantly in 2011.

Liquidity and Capital Resources

Sources of Liquidity

We are considered a “development stage” enterprise, as we have not yet generated revenues from the sale of products. Although we have been researching and developing new technologies and product applications and we enrolled patients in a small clinical study of our bioresorbable stent in 2007, we do not anticipate having a product available for sale for at least the next several years. Until revenue is generated from a saleable product, we expect to continue to incur substantial operating losses and experience significant net cash outflows. We have incurred losses since our inception in June 1998 and, through September 30, 2011, we had an accumulated deficit of approximately $144.0 million.

In December 2010 we completed an initial public offering (“IPO”) of our common stock on the Australian Securities Exchange in the form of CHESS Depositary Interests, or “CDIs,” primarily to investors in Australia, the United States, Hong Kong, and London. We issued 7,727,273 shares of common stock at $10.91 per share for gross proceeds of $84.3 million. We incurred $8.5 million in issuance costs in connection with our IPO. Concurrent with the completion of our IPO, all of our outstanding convertible preferred stock, non-voting common stock, notes payable, and accrued interest on notes payable converted to common stock. Additionally, all outstanding warrants were exercised for common stock, either through a cash payment to us or on a net exercise basis. We also issued common stock for cumulative dividends on our Series H convertible preferred stock. A total of 22,419,771 shares of common stock were issued from these conversions, exercises, and dividends.

Prior to our IPO, we funded our operations from a combination of private placements of our equity securities, for which we received aggregate net proceeds of $68.9 million, and issuances of notes payable, for which we received $28.5 million in net proceeds.

Based on our current operating plans, we believe that our cash and investments as of September 30, 2011 of $69.2 million, which represents the remaining proceeds from our IPO, will be sufficient to meet our capital and operating needs beyond the next year and will be sufficient to satisfy our liquidity requirements and provide sufficient working capital to carry out our business objectives during that time.

Cash Flows

Our cash flows for the periods indicated are as follows:

	Nine Months Ended September 30,
	2010			2011
	(In thousands)
Net cash used for operating activities	$	(6,930	)	$	(11,896	)
Net cash used for investing activities		(107	)		(4,896	)
Net cash provided by financing activities		5,952			16
Effect of foreign exchange rates		(1	)		—
Net decrease in cash and cash equivalents	$	(1,086	)	$	(16,776	)

Net Cash Flow from Operating Activities

Net cash used for operating activities during the nine months of 2010 primarily reflects the net loss of $9.44 million. A total of $181,000 was used by the net changes in operating assets and liabilities. Non-cash expenses included $1.27 million for interest on notes payable, $830,000 for the change in fair value of the preferred stock warrant liability, $358,000 of depreciation and amortization, and $226,000 of stock-based compensation and other expense.

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Net cash used for operating activities during the first nine months of 2011 primarily reflects the net loss of $15.14 million. A total of $628,000 was provided from the net changes in operating assets and liabilities. Non-cash expenses included $356,000 of depreciation and amortization, $2.23 million of stock-based compensation, and $30,000 of other expense.

Net Cash Flow from Investing Activities

Net cash used in investing activities during the nine months ended September 30, 2011 primarily comprised $4.2 million for short- and long-term investments and $673,000 for lab and office equipment.

Net cash used in investing activities during the nine months ended September 30, 2010 consisted of the purchases of lab and office equipment of $107,000.

Net Cash Flow from Financing Activities

Cash provided by financing activities during the first nine months of 2010 related primarily to the sale of our Series H convertible preferred stock in June 2010. The proceeds were partially offset by $1.53 million in costs related to preparing our initial public offering (“IPO”) that was completed in December 2010.

Cash provided by financing activities during the first nine months of 2011 resulted from issuances of common stock upon the exercise of employee stock options.

Operating Capital and Capital Expenditure Requirements

To date, we have not commercialized any products. We do not anticipate generating any revenue unless and until we successfully obtain CE Mark or FDA marketing approval for, and begin selling, theReZolve^™ stent or one of our other product possibilities. We anticipate that we will continue to incur substantial net losses for the next several years as we continue our development work, conduct and complete preclinical and clinical trials, expand our corporate infrastructure, and prepare for the potential commercial launch of our products.

We believe that our existing cash and cash equivalents will be sufficient to meet our anticipated cash requirements beyond the next year. If our available cash and cash equivalents are insufficient to satisfy our liquidity requirements, or if we develop additional products or pursue additional applications for our products, we may seek to sell additional equity or debt securities, or obtain a credit facility. The sale of additional equity and debt securities may result in additional dilution to our stockholders. If we raise additional funds through the issuance of debt securities, these securities could have rights senior to those of our common stock and could contain covenants that would restrict our operations. We may require additional capital beyond our currently forecasted amounts. For example, we will need to raise additional funds in order to build our sales force and commercialize our products. Any such required additional capital may not be available on reasonable terms, if at all. If we are unable to obtain additional financing, we may be required to reduce the scope of, delay, or eliminate some or all of our planned clinical trials, research, development, and commercialization activities, which could materially harm our business.

Our forecasts for the period of time through which our financial resources will be adequate to support our operations and the costs to complete development of products are forward-looking statements and involve risks and uncertainties, and actual results could vary materially and negatively as a result of a number of factors. We have based these estimates on assumptions that may prove to be wrong, and we could utilize our available capital resources sooner than we currently expect.

Because of the numerous risks and uncertainties associated with the development of medical devices, such as ourReZolve^™ stent, we are unable to estimate the exact amounts of, or timing of, capital outlays and operating expenditures necessary to complete development, continue ongoing preclinical studies, conduct human clinical trials, and successfully deliver a commercial product to market. Our future funding requirements will depend on many factors, including, but not limited to:

• the time and effort it will take to successfully complete the development and testing of theReZolve^™ stent;

• the time and effort it will take to identify, develop, and scale-up manufacturing processes;

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• the scope, enrollment rate, and costs of our human clinical trials;

• the scope of research and development for any of our other product opportunities;

• the cost of filing and prosecuting patentable technologies and defending and enforcing our patent and other intellectual property rights;

• the terms and timing of any collaborative, licensing, or other arrangements that we may establish;

• the requirements, cost, and timing of regulatory approvals;

• the cost and timing of establishing sales, marketing, and distribution capabilities;

• the cost of establishing clinical and commercial supplies of our products and any products that we may develop;

• the effect of competing technological and market developments; and

• the cost and ability to license technologies for future development.

Future capital requirements will also depend on the extent to which we acquire or invest in businesses, products, and technologies, although we currently have no commitments or agreements relating to any of these types of transactions.

Contractual Obligations, Commitments, and Contingencies

The following table summarizes our outstanding contractual obligations as of September 30, 2011:

	Payments Due by Period
	(In thousands)
	Total		Under 1 Year		Over 1 Year
Operating lease obligations	$	4	$	4	$	—
Purchase obligations		335		323		12
Employment agreements		508		508		—
Total contractual obligations	$	847	$	835	$	12

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements.

Recent Accounting Pronouncements

Occasionally, new accounting standards are issued or proposed by the Financial Accounting Standards Board or other standards-setting bodies and we adopt them by the effective date specified within the standard. Unless otherwise discussed, standards that do not require adoption until a future date are not expected to have a material impact on our financial statements upon adoption.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

Interest Rate Sensitivity

Our cash, cash equivalents and short-term investments of $66.0 million at September 30, 2011 consisted of cash, money market funds and time deposits that will be used for working capital purposes. Our long-term investments of $3.2 million at September 30, 2011 consisted of fixed maturity time deposits. We have the positive intent and ability to hold both our short- and long-term investments to maturity. We do not enter into investments for trading or speculative purposes. Our primary exposure to market risk is interest income sensitivity, which is affected by changes in the general level of interest rates in the U.S. Because of the short-term nature of our cash, cash

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equivalents and short-term investments and our positive intent and ability to hold our long-term investments to maturity, we do not believe that we have any material exposure to changes in their fair values as a result of changes in interest rates.

Foreign Currency Risk

To date, our purchases from foreign suppliers and consultants have been minimal and have been denominated primarily in the currencies of Australia and the European Union. Although minimal, we have had and will continue to have exposure to foreign currency exchange rate fluctuations. We do not enter into foreign currency hedging transactions. Although our German subsidiary is non-operational, its functional currency is the Euro; accordingly, the effects of exchange rate fluctuations on the net assets of the subsidiary are accounted for as translation gains or losses in accumulated other comprehensive income within stockholders’ equity. A change of ten percent or more in foreign currency exchange rates of the Australian dollar or the Euro would have a material impact on our financial position and results of operations if we continue or increase our purchases denominated in these currencies.

Related Party Transactions

Our related parties include the members of our Board of Directors and investors with five percent or more of our outstanding securities. As of September 30, 2011, our related parties collectively represented approximately 67 percent of our outstanding stock. Transactions with our related parties historically consisted of notes payable issued to members of our board of directors, or firms they represented, or to the investors that held in excess of five percent of our securities. All of our notes payable together with accrued interest converted into common stock upon our initial public offering in December 2010.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Our management, including our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of September 30, 2011, the end of the period covered by this Quarterly Report on Form 10-Q. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated, recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable, and not absolute, assurance of achieving the desired objectives. In reaching a reasonable level of assurance, management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of September 30, 2011 at the reasonable assurance level.

Changes in Internal Control Over Financial Reporting

There has been no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the nine months ended September 30, 2011 that materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION

Item 1. Legal Proceedings

We may from time to time be subject to various claims and legal actions during the ordinary course of our business. We believe that there are currently no claims or legal actions that would reasonably be expected to have a material adverse effect on our results of operations or financial condition.

Item 1A. Risk Factors

Investing in our common stock or our CHESS Depository Interests (or “CDIs”) involves a high degree of risk. Our Annual Report on Form 10-K for the year ended December 31, 2010 includes a detailed discussion of our risk factors in the section, “Item 1A. Risk Factors.” Set forth below are certain material changes from the risk factors previously disclosed in the Form 10-K. You should carefully consider the risk factors discussed in our Form 10-K and in this Quarterly Report on Form 10-Q, as well as our other public filings, before deciding whether to invest in our common stock or CDIs. The occurrence of any of the items discussed in the Form 10-K or in this Form 10-Q could harm our business, financial condition, results of operations, or growth prospects, any of which could cause the trading price of our CDIs to decline and you may lose all or part of your investment.

Risks Related to Our Business

We rely on specialized suppliers for certain components and processes in the manufacture of our ReZolve^™ stent.

We rely on suppliers for several critical components used in ourReZolve^™ stent, including the stent polymer, the process of lasing the polymer, and the supply of delivery catheters. We also outsource the sterilization of the finished product. Our reliance on third-party suppliers subjects us to risks that could harm our business, including:

• we are not a major customer of many of our suppliers, and these suppliers may therefore give other customers’ needs higher priority than ours;

• our suppliers have no contractual obligation to supply, and we are not obligated to purchase, any components used in ourReZolve^™ stent, which may result in supply interruptions;

• our suppliers source raw materials through supply chains that periodically are unable to provide needed materials in a timely manner, which may cause delays in providing critical components to us;

• our polymer is complex and must be manufactured to extremely tight tolerances and specifications with the result that our suppliers, especially new suppliers, may make errors in manufacturing that could negatively affect the efficacy or safety of theReZolve^™ stent or cause our components not to be delivered on time or at all or to be delivered outside of specifications;

• the availability of second-source suppliers may be extremely limited or their implementation as a supplier may be lengthy due to the tight tolerances and specifications which we require for theReZolve^™ stent; and

• switching suppliers or changes to our service providers may require product redesign and submission to the regulatory authorities to whom we are seeking approval for ourReZolve^™ stent.

Additionally, we may experience problems or delays in our own manufacturing and assembly process. Our current product development plan is predicated on maintaining strong relationships and supply with several external parties to manufacture components of ourReZolve^™stent. If we are unsuccessful in this regard or are unable to secure or maintain agreements with these manufacturers on favorable terms or at all, our ability to obtain regulatory approval for our products will be harmed.

Risks Related to Our CDIs and Common Stock

Future sales of our common stock may depress our share price.

Sales of a substantial number of CDIs in the public market, or the perception that these sales may occur, could cause the market price of our CDIs to decline. The holders of an aggregate of approximately 21.5 million shares of

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our outstanding common stock have certain rights to cause us to file a registration statement on their behalf and to include their shares in registration statements that we may file on behalf of other stockholders. Additionally, the holders of an aggregate of approximately 21.1 million shares of our outstanding common stock had been subject to escrow agreements prohibiting sales since the date of our initial public offering; the escrow agreements expired on June 23, 2011 and, therefore, those shares are no longer restricted from sale.

In April 2011, we filed a registration statement covering common stock issued or reserved for issuance under our stock incentive plans; the underlying shares can now be freely sold under the federal securities laws and may be tradable under state securities laws if a holder satisfies such laws or is exempt from them, subject to vesting provisions or other contractual arrangements. In addition, our 2010 Equity Incentive Plan provides for annual increases in the number of shares available for issuance under the plan.

We may sell additional common stock in subsequent public offerings, which may adversely affect the market price for our CDIs and common stock.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Unregistered Sales of Equity Securities

None.

Use of Proceeds from Registered Securities

On December 16, 2010, we closed our initial public offering, in which we sold 77,272,730 CDIs, representing 7,727,273 shares of our common stock, at a price to the public of A$1.10 per CDI or A$11.00 per share. The aggregate offering price for CDIs sold in the offering was A$85.0 million (which equated to approximately US$84.3 million). The offer and sale of all of the CDIs in the initial public offering were registered under the Securities Act pursuant to a registration statement on Form S-1 (File No. 333-168852), which was declared effective by the SEC on November 15, 2010. We also lodged a Prospectus with the Australian Securities and Investments Commission prior to the allotment and issuance of CDIs under the offering. The offering commenced as of November 29, 2010 and did not terminate before all of the securities registered in the registration statement were sold. There was no underwriter and no selling stockholders in the offering. Inteq Limited (“Inteq”), acted as our placement agent in connection with the offering of our CDIs outside of the United States to non-U.S. residents. We raised approximately $75.8 million in net proceeds after deducting placement agent fees and other offering expenses. No payments were made by us to directors, officers, or persons owning ten percent or more of our common stock or to their associates, or to our affiliates, other than payments in the ordinary course of business to officers for salaries and to non-employee directors as compensation for board or board committee service.

Of the net proceeds received in the initial public offering, we expect to use approximately:

• $40.0 million for research and development activities, including continuing development of ourReZolve^™ stent;

• $10.0 million for clinical trials;

• $4.0 million for building commercial infrastructure, including manufacturing capacity expansion; and

• the balance for working capital and other general corporate purposes.

The foregoing expected use of the net proceeds represents our current intentions based upon our present plans and business condition. The amounts and timing of our actual expenditures may vary significantly and will depend upon numerous factors, including the timing and success of our development efforts and clinical trials. We plan to commence clinical trials in the U.S. after we receive acceptable data from the European clinical trials. Due to the regulatory requirements in the U.S. that require a study with a large number of patients, we anticipate needing additional funding in order to carry out the U.S. clinical trials.

Pending the use of net proceeds, we invest the offering proceeds in accordance with our investment policy, which allows short- and long-term interest-bearing obligations, investment grade instruments, certificates of deposit, or guaranteed obligations of the U.S. government.

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Item 3. Defaults upon Senior Securities

None

Item 4. (Removed and Reserved)

Item 5. Other Information

Not applicable.

Item 6. Exhibits

The exhibits listed in the accompanying Index to Exhibits are filed or incorporated by reference as part of this Quarterly Report on Form 10-Q.

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SIGNATURES

Pursuant to the requirements the Securities Exchange Act of 1934, the Registrant has duly caused this Quarterly Report on Form 10-Q to be signed on its behalf by the undersigned, thereunto duly authorized.

	REVA Medical, Inc.
Date: November 14, 2011	/s/ Robert B. Stockman
	Robert B. Stockman
	Chairman of the Board and Chief Executive Officer (Principal Executive Officer)
Date: November 14, 2011	/s/ Katrina L. Thompson
	Katrina L. Thompson
	Chief Financial Officer and Secretary (Principal Financial Officer and Principal Accounting Officer)

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INDEX TO EXHIBITS

Exhibit Number	Description of Exhibits
3.1	Amended and Restated Certificate of Incorporation.*
3.2	Amended and Restated Bylaws to be effective upon completion of this offering.*
4.1	Form of Stock Certificate.*
4.2	Form of Amended and Restated Investors’ Rights Agreement, by and among REVA Medical, Inc. and the holders of our preferred stock set forth therein.*
10.1	Telecom Business Center Business Lease between FSP Telecom Business Center Limited Partnership and REVA Medical, Inc. dated December 18, 2001.*
10.2	First Amendment to Telecom Business Center Business Lease between FSP Telecom Business Center Limited Partnership and REVA Medical, Inc. dated January 3, 2005.*
10.3	Second Amendment to Telecom Business Center Business Lease between ARI Commercial Properties, Inc. and REVA Medical, Inc. dated February 18, 2006.*
10.4	Third Amendment to Telecom Business Center Business Lease between ARI Commercial Properties, Inc. and REVA Medical, Inc. dated December 14, 2006.*
10.5	Fourth Amendment to Telecom Business Center Business Lease between ARI Commercial Properties, Inc. and REVA Medical, Inc. dated May 7, 2008.*
10.6	Agreement and Plan of Merger, dated October 13, 2004, by and among REVA Medical, Inc., Boston Scientific Corporation, RMI Acquisition Corp. and certain stockholder representatives set forth therein.*
10.7	Amendment No. 1 to the Agreement and Plan of Merger, dated December 7, 2007, by and among REVA Medical, Inc., Boston Scientific Corporation, RMI Acquisition Corp. and certain stockholder representatives set forth therein.*
10.8	Securities Purchase Agreement between Boston Scientific Corporation and REVA Medical, Inc. dated October 13, 2004.*
10.9	Amendment No. 1 to Securities Purchase Agreement between Boston Scientific Corporation and REVA Medical, Inc. dated December 7, 2007.*
10.10	Distribution Option Agreement, dated December 7, 2007, by and between REVA Medical, Inc. and Boston Scientific Corporation.*
10.11	Exclusive License Agreement Number between Rutgers, The State University of New Jersey and REVA Medical, Inc. dated July 1, 2010.++*
10.12	Royalty and License Agreement between Integra/LifeSciences Corporation and REVA Medical, Inc. dated February 2, 2004.++*
10.13	2001 Stock Option/Stock Issuance Plan.+*
10.14	Form of Stock Option Agreement.+*
10.15	Form of Addendum to Stock Option Agreement.+*
10.16	2010 Equity Incentive Plan.+*
10.17	Form of Stock Option Agreement.+*
10.18	Form of Stock Option Agreement entered into with Robert Thomas and Anne Keating.+*
10.19	Form of Director and Officer Indemnification Agreement.+*
10.20	Employment Agreement, dated July 1, 2010, by and between REVA Medical, Inc. and Robert B. Stockman.+*
10.21	Employment Agreement, dated October 21, 2010, by and between REVA Medical, Inc. and Robert Schultz.+*
10.22	Employment Agreement, dated October 21, 2010, by and between REVA Medical, Inc. and Katrina Thompson.+*
10.23	Form of Offer Management Agreement between REVA Medical, Inc. and Inteq Limited.*
10.24	Form of CDI Subscription Application for non U.S. investors.*
10.25	Form of CDI Subscription Application for U.S. investors.*
10.26	Form of Escrow Deed between REVA Medical, Inc. and Computershare Investor Services Pty Limited.*
21.1	List of Subsidiaries.*

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Exhibit Number	Description of Exhibits
31.1	Certification of Principal Executive Officer Required Under Rule 13a-14(a) and 15d-14(a) of the Securities Exchange Act of 1934, as amended.
31.2	Certification of Principal Financial Officer Required Under Rule 13a-14(a) and 15d-14(a) of the Securities Exchange Act of 1934, as amended.
32.1(1)	Certification of Principal Executive Officer and Principal Financial Officer Required Under Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended, and 18 U.S.C. §1350.
99.1	Section 13 of the ASX Settlement Rules.*
101(2)	XBRL Instance Document
101(2)	XBRL Taxonomy Extension Schema Document
101(2)	XBRL Calculation Linkbase Document.
101(2)	XBRL Taxonomy Label Linkbase Document.
101(2)	XBRL Taxonomy Presentation Linkbase Document
101(2)	XBRL Taxonomy Definition Linkbase Document

+ Management Compensation Plan

++ Confidential Treatment Request

* Filed as exhibits to the registrant’s Registration Statement on Form S-1 (File No. 333-168852), effective November 15, 2010, and incorporated herein by reference.

(1) These certifications are being furnished solely to accompany this quarterly report pursuant to 18 U.S.C. Section 1350, and are not being filed for purposes of Section 18 of the Securities Exchange Act of 1934 and are not to be incorporated by reference into any filing of REVA Medical, Inc., whether made before or after the date hereof, regardless of any general incorporation language in such filing.

(2) Pursuant to applicable securities laws and regulations, we are deemed to have complied with the reporting obligation relating to the submission of interactive data files in such exhibits and are not subject to liability under any anti-fraud provisions of the federal securities laws as long as we have made a good faith attempt to comply with the submission requirements and promptly amend the interactive data files after becoming aware that the interactive data files fail to comply with the submission requirements. Users of this data are advised that, pursuant to Rule 406T, these interactive data files are deemed not filed and otherwise are not subject to liability.

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