ELUTIA INC. 10-Q

Item 1. Financial Statements. ELUTIA INC. CONDENSED CONSOLIDATED BALANCE SHEETS (In Thousands, Except for Share and Per Share Data) (UNAUDITED) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ March 31, ​ December 31, ​ ​ 2024 2023 Assets ​ ​ ​ ​ ​ ​ ​ Current assets: ​ ​ ​ ​ ​ ​ ​ Cash ​ $ 12,551 ​ $ 19,276 ​ Accounts receivable, net ​ 4,406 ​ 3,263 ​ Inventory ​ 3,052 ​ 3,853 ​ Receivables of litigation costs ​ ​ 2,031 ​ ​ 2,696 ​ Prepaid expenses and other current assets ​ 1,946 ​ 2,165 ​ Total current assets ​ 23,986 ​ 31,253 ​ ​ ​ ​ ​ ​ ​ ​ ​ Property and equipment, net ​ 171 ​ 172 ​ Intangible assets, net ​ 10,822 ​ 11,671 ​ Operating lease right-of-use assets and other ​ 383 ​ 332 ​ Total assets ​ $ 35,362 ​ $ 43,428 ​ ​ ​ ​ ​ ​ ​ ​ ​ Liabilities and Stockholders’ Deficit ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Current liabilities: ​ ​ ​ ​ ​ ​ ​ Accounts payable ​ $ 4,156 ​ $ 2,285 ​ Accrued expenses ​ 9,022 ​ 9,485 ​ Payables to tissue suppliers ​ 907 ​ 906 ​ Current portion of long-term debt ​ ​ 2,274 ​ ​ 3,321 ​ Current portion of revenue interest obligation ​ 5,900 ​ 11,741 ​ Contingent liability for FiberCel litigation ​ ​ 15,591 ​ ​ 15,024 ​ Current operating lease liabilities ​ 217 ​ 275 ​ Total current liabilities ​ 38,067 ​ 43,037 ​ ​ ​ ​ ​ ​ ​ ​ ​ Long-term debt ​ 19,738 ​ 20,356 ​ Long-term revenue interest obligation ​ 7,659 ​ 5,360 ​ Warrant liability ​ 19,503 ​ 12,760 ​ Other long-term liabilities ​ 694 ​ 515 ​ Total liabilities ​ 85,661 ​ 82,028 ​ ​ ​ ​ ​ ​ ​ ​ ​ Commitments and contingencies (Note 10) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Stockholders’ equity (deficit): ​ ​ ​ ​ ​ ​ ​ Class A Common stock, $ 0.001 par value per share, 200,000,000 shares authorized as of March 31, 2024 and December 31, 2023, and 20,036,508 and 18,884,196 shares issued and outstanding as of March 31, 2024 and December 31, 2023, respectively ​ ​ 20 ​ ​ 19 ​ Class B Common stock, $ 0.001 par value per share, 20,000,000 shares authorized as of March 31, 2024 and December 31, 2023 and 4,313,406 issued and outstanding as of March 31, 2024 and December 31, 2023 ​ ​ 4 ​ ​ 4 ​ Additional paid-in capital ​ 143,315 ​ 137,021 ​ Accumulated deficit ​ ( 193,638 ) ​ ( 175,644 ) ​ Total stockholders’ deficit ​ ( 50,299 ) ​ ( 38,600 ) ​ Total liabilities and stockholders' deficit ​ $ 35,362 ​ $ 43,428 ​ ​ The accompanying notes are an integral part of these condensed consolidated financial statements. ​ ​ 5 Table of Contents ELUTIA INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In Thousands, Except Share and Per Share Data) (UNAUDITED) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended ​ ​ ​ ​ March 31, ​ ​ ​ 2024 2023 Net sales ​ $ 6,694 ​ $ 6,392 ​ ​ Cost of goods sold ​ 3,851 ​ 3,018 ​ ​ Gross profit ​ 2,843 ​ 3,374 ​ ​ Sales and marketing ​ 3,309 ​ 4,691 ​ ​ General and administrative ​ 5,056 ​ 3,520 ​ ​ Research and development ​ 1,172 ​ 1,591 ​ ​ FiberCel litigation costs, net ​ ​ 1,785 ​ ​ 1,911 ​ ​ Total operating expenses ​ ​ 11,322 ​ ​ 11,713 ​ ​ Loss from operations ​ ( 8,479 ) ​ ( 8,339 ) ​ ​ Interest expense ​ 1,313 ​ 1,430 ​ ​ Loss on revaluation of warrant liability ​ ​ 9,637 ​ ​ — ​ ​ Gain on revaluation of revenue interest obligation ​ ( 1,443 ) ​ — ​ ​ Loss before provision for income taxes ​ ( 17,986 ) ​ ( 9,769 ) ​ ​ Income tax expense ​ 8 ​ 12 ​ ​ Net loss from continuing operations ​ ​ ( 17,994 ) ​ ​ ( 9,781 ) ​ ​ Income from discontinued operations ​ ​ — ​ ​ 1,807 ​ ​ Net loss ​ $ ( 17,994 ) ​ $ ( 7,974 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net loss from continuing operations per share - basic and diluted ​ $ ( 0.75 ) ​ $ ( 0.61 ) ​ ​ Net income from discontinued operations per share - basic and diluted ​ $ — ​ $ 0.11 ​ ​ Net loss - basic and diluted ​ $ ( 0.75 ) ​ $ ( 0.49 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted average common shares outstanding - basic and diluted ​ 23,912,326 ​ 16,149,567 ​ ​ ​ The accompanying notes are an integral part of these condensed consolidated financial statements. ​ ​ 6 Table of Contents ​ ELUTIA INC. CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT) (In Thousands, Except Share Amounts) (UNAUDITED) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Class A ​ Class B ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Common Stock ​ Common Stock ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Additional ​ ​ ​ Total ​ ​ Number of ​ ​ ​ ​ Number of ​ ​ ​ ​ Paid-in ​ Accumulated ​ Stockholders' ​ Shares Amount Shares Amount ​ Capital ​ Deficit Equity (Deficit) Balance, December 31, 2023 18,884,196 ​ $ 19 ​ 4,313,406 ​ $ 4 ​ $ 137,021 ​ $ ( 175,644 ) ​ $ ( 38,600 ) Exercises of Common Warrants and Prefunded Warrants ​ 1,075,825 ​ ​ 1 ​ — ​ ​ — ​ ​ 4,033 ​ ​ — ​ 4,034 Issuance of common stock under Employee Stock Purchase Plan ​ 65,459 ​ ​ — ​ — ​ ​ — ​ 70 ​ — ​ 70 Vesting of restricted stock units, net of shares withheld and taxes paid ​ 11,028 ​ ​ — ​ — ​ ​ — ​ ​ ( 6 ) ​ ​ — ​ ​ ( 6 ) Stock-based compensation — ​ ​ — ​ — ​ ​ — ​ 2,197 ​ — ​ 2,197 Net loss — ​ ​ — ​ — ​ ​ — ​ — ​ ( 17,994 ) ​ ( 17,994 ) Balance, March 31, 2024 20,036,508 ​ $ 20 ​ 4,313,406 ​ $ 4 ​ $ 143,315 ​ $ ( 193,638 ) ​ $ ( 50,299 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Balance, December 31, 2022 11,823,445 ​ $ 12 ​ 4,313,406 ​ $ 4 ​ $ 132,939 ​ $ ( 137,988 ) ​ $ ( 5,033 ) Issuance of common stock under Employee Stock Purchase Plan ​ 41,277 ​ ​ — ​ — ​ ​ — ​ 148 ​ — ​ ​ 148 Vesting of restricted stock units ​ 12,070 ​ ​ — ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — Stock-based compensation ​ — ​ ​ — ​ — ​ ​ — ​ 684 ​ — ​ ​ 684 Net loss ​ — ​ ​ — ​ — ​ ​ — ​ — ​ ( 7,974 ) ​ ​ ( 7,974 ) Balance, March 31, 2023 11,876,792 ​ $ 12 ​ 4,313,406 ​ $ 4 ​ $ 133,771 ​ $ ( 145,962 ) ​ $ ( 12,175 ) ​ The accompanying notes are an integral part of these condensed consolidated financial statements. ​ ​ 7 Table of Contents ELUTIA INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In Thousands) (UNAUDITED) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended ​ ​ March 31, ​ ​ 2024 2023 Net loss ​ $ ( 17,994 ) $ ( 7,974 ) Adjustments to reconcile net loss to net cash used in operating activities: ​ Depreciation and amortization ​ 864 947 Loss on revaluation of warrant liability ​ 9,637 — Gain on revaluation of revenue interest obligation ​ ( 1,443 ) — Amortization of deferred financing costs and debt discount ​ 54 53 Interest expense recorded as additional revenue interest obligation and long-term debt ​ 781 796 Stock-based compensation ​ 2,197 684 Changes in operating assets and liabilities: ​ ​ ​ Accounts receivable ​ ( 1,143 ) ( 504 ) Inventory ​ 801 ( 1,003 ) Receivables of litigation costs ​ ​ 665 ​ ​ 2,892 Prepaid expenses and other ​ 168 648 Accounts payable and accrued expenses and payables to tissue suppliers ​ 2,026 ( 56 ) Contingent liability for FiberCel litigation ​ ​ 567 ​ ​ ( 1,729 ) Other liabilities ​ 179 80 Net cash used in operating activities ​ ( 2,641 ) ( 5,166 ) INVESTING ACTIVITIES: ​ ​ Expenditures for property, plant and equipment ​ ( 15 ) ( 182 ) Net cash used in investing activities ​ ( 15 ) ( 182 ) FINANCING ACTIVITIES: ​ Repayments of long-term debt ​ ( 2,000 ) — Proceeds from exercises of Common Warrants and Prefunded Warrants ​ ​ 1,140 ​ ​ — Payments on revenue interest obligation ​ ( 2,600 ) — Repayments of insurance premium financings ​ ​ ( 673 ) ​ ​ — Payments for taxes upon vesting of restricted stock units ​ ​ ( 6 ) ​ ​ — Proceeds from issuance of common stock under Employee Stock Purchase Plan ​ 70 148 Net cash provided by (used in) financing activities ​ ( 4,069 ) 148 ​ ​ ​ ​ ​ ​ ​ Net decrease in cash and restricted cash ​ ( 6,725 ) ( 5,200 ) ​ ​ ​ ​ ​ ​ ​ Cash, beginning of period ​ 19,276 16,989 Cash, end of period ​ $ 12,551 $ 11,789 ​ ​ ​ ​ ​ ​ ​ Supplemental Cash Flow and Non-Cash Financing Activities Disclosures: ​ Cash paid for interest ​ $ 2,541 $ 572 Conversion of Common Warrants and Prefunded Warrants to common stock ​ $ 2,894 ​ $ — ​ The accompanying notes are an integral part of these condensed consolidated financial statements. ​ ​ 8 Table of Contents ELUTIA INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) Note 1. Organization and Description of Business Elutia Inc. (together with its consolidated subsidiaries, "Elutia” or the “Company”) is a commercial-stage company leveraging its unique understanding of biologics to improve the interaction between implanted medical devices and patients by reducing complications associated with these surgeries. The Company has developed a portfolio of products using both human and porcine tissue that are designed to be as close to natural biological material as possible. Elutia’s portfolio of products spans the Device Protection, Women’s Health and Cardiovascular markets. These products are primarily sold to healthcare providers or commercial partners. Note 2. Summary of Significant Accounting Policies Basis of Presentation and Liquidity The unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all the information and footnotes required by GAAP for complete financial statements and should be read in conjunction with the Company’s condensed consolidated financial statements and accompanying notes included in the Company's annual report on Form 10-K (“Annual Report”) for the fiscal year ended December 31, 2023. The financial information as of March 31, 2024 and for the three months ended March 31, 2024 and 2023 is unaudited, but in the opinion of management, all adjustments considered necessary for a fair statement of the results for these interim periods have been included. The condensed consolidated balance sheet data as of December 31, 2023 was derived from audited financial statements but does not include all disclosures required by GAAP. The results of the Company’s operations for any interim period are not necessarily indicative of the results that may be expected for any other interim period or any future year or period. ​ The condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. Intercompany accounts and transactions have been eliminated in consolidation. ​ On November 8, 2023, the Company completed the sale of substantially all of the assets relating to its Orthobiologics segment (the “Orthobiologics Business”) to Berkeley Biologics, LLC (“Berkeley”). The Orthobiologics Business was comprised of assets relating to researching, developing, administering, insuring, operating, commercializing, manufacturing, selling and marketing the Company’s Orthobiologics products, and the business of contract manufacturing of particulate bone, precision milled bone, cellular bone matrix, acellular dermis, soft tissue and other products. The assets sold represent the entirety of the Company’s Orthobiologics segment. In the sale, the Company received approximately $ 14.6 million, and the Company may earn up to an additional $ 20 million, in the aggregate, in the form of earn-out payments. The earn-out payments are equal to 10 % of the actual revenue earned by Berkeley in each of the five years after the closing of the sale from sales of specified Orthobiologics products under the purchase agreement (including improvements, modifications, derivatives and enhancements related to those products). There were no earn-out payments earned or paid in the three months ended March 31, 2024. Additionally, the purchase agreement provides for a customary indemnity holdback in the amount of $ 1.5 million to be retained by Berkeley for 24 months after close. The Company recognized a gain of approximately $ 6.0 million on the sale of the Orthobiologics Business in the fourth quarter of 2023. Should the Company receive incremental proceeds in the future through an earn-out payment or payment of the holdback amount, an additional gain will be recorded upon the receipt of such amounts. See Note 4 for further discussion of the sale of the Orthobiologics Business and the presentation of such business as discontinued operations for the three months ended March 31, 2023. Unless indicated otherwise, the information in the notes to condensed consolidated financial statements for the three months ended March 31, 2023 relates to continuing operations. ​ 9 Table of Contents In accordance with Accounting Standards Update (“ASU”) 2014-15, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern (Subtopic 205-40) , the Company has evaluated whether there are conditions and events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date that the condensed consolidated financial statements are issued. For the three months ended March 31, 2024, the Company incurred a net loss of $ 18.0 million, and as of March 31, 2024, the Company had an accumulated deficit of $ 193.6 million. In addition, during the three months ended March 31, 2024, the Company used $ 2.6 million of cash in operating activities and expects to continue to incur cash outflows in 2024. Because of the numerous risks and uncertainties associated with the Company’s commercialization and development efforts, the Company is unable to predict when it will become profitable, and it may never become profitable. The Company’s inability to achieve and then maintain profitability would negatively affect its business, financial condition, results of operations and cash flows. Furthermore, even if the Company does achieve profitability, it may not be able to sustain or increase profitability on an ongoing basis, or, in general, be able to satisfy its obligations, including those related to the FiberCel Recall described in Note 10, when they become due. ​ In order to mitigate the current and potential future liquidity issues caused by the matters noted above, we may seek to raise capital through the issuance of common stock or pursue asset sales or other transactions, such as the sale of the Orthobiologics Business described above. However, such transactions may not be successful, and we may not be able to raise additional equity, refinance our debt instruments, or sell assets on acceptable terms, or at all. As such, based on our current operating plans, we believe there is uncertainty as to whether our future cash flows along with our existing cash, issuances of additional equity and cash generated from expected future sales will be sufficient to meet our anticipated operating needs through twelve months from the condensed consolidated financial statement issuance date. Due to these factors, there is substantial doubt about our ability to continue as a going concern within one year after the issuance of the condensed consolidated financial statements. The accompanying condensed consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. That is, the accompanying financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates continuity of operations, realization of assets, and satisfaction of liabilities in the ordinary course of business. ​ Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Estimates and assumptions relating to inventories, receivables, long-lived assets, the valuation of stock-based awards, the valuation of the revenue interest obligation, the valuation of the warrant liability, the contingent liability for the FiberCel Litigation and deferred income taxes are made at the end of each financial reporting period by management. Management continually re-evaluates its estimates, judgments and assumptions, and management's evaluation could change. Actual results could differ from those estimates. Net Loss per Share Attributable to Common Stockholders Our common stock has a dual class structure, consisting of Class A common stock, $ 0.001 par value per share (the “Class A common stock”) and Class B common stock, $ 0.001 par value per share (the “Class B common stock”). Other than voting rights, the Class B common stock has the same rights as the Class A common stock, and therefore both are treated as the same class of stock for purposes of the earnings per share calculation. Basic net loss per share attributable to common stockholders is calculated by dividing the net loss attributable to common stockholders by the weighted-average shares outstanding during the period. For purposes of the diluted net income (loss) per share attributable to common stockholders calculation, stock options, restricted stock units (“RSUs”) and warrants are considered to be common stock equivalents. All common stock equivalents have been excluded from the calculation of diluted net loss per share attributable to common stockholders, as their effect would be anti-dilutive for all periods presented. Therefore, basic and diluted net loss per share were the same for both periods presented. 10 Table of Contents Fair Value of Financial Instruments Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. To increase the comparability of fair value measures, the following hierarchy prioritizes the inputs to valuation methodologies used to measure fair value: Level 1 -  Valuations based on quoted prices for identical assets and liabilities in active markets. Level 2 -  Valuations based on observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data. Level 3 -  Valuations based on unobservable inputs reflecting the Company’s own assumptions, consistent with reasonably available assumptions made by other market participants. These valuations require significant judgment. The estimated fair value of financial instruments disclosed in the financial statements has been determined by using available market information and appropriate valuation methodologies. The carrying value of all current assets and current liabilities approximates fair value because of their short-term nature. Cash and Cash Equivalents The Company maintains its cash balances at banks and financial institutions. The balances are insured up to the legal limit. The Company maintains cash balances that may, at times, exceed this insured limit. The Company considers cash on hand, demand deposits in a bank, money market funds, and all highly liquid investments with an original maturity of 90 days or less to be cash and cash equivalents. ​ Accounts Receivable and Allowances Accounts receivable in the accompanying balance sheets are presented net of allowances for credit losses. The Company grants credit to customers in the normal course of business, but generally does not require collateral or any other security to support its receivables. The Company evaluates the collectability of accounts receivable based on a combination of factors. In circumstances where a specific customer is unable to meet its financial obligations to the Company, a provision to the allowance for doubtful accounts is recorded to reduce the net recognized receivable to the amount that is reasonably expected to be collected. For all other customers, a provision to the allowance for credit losses is recorded based on factors including the length of time the receivables are past due, the current business environment and the Company’s historical experience. Provisions to the allowance for doubtful accounts are recorded to general and administrative expenses. Account balances are charged off against the allowance when it is probable that the receivable will not be recovered. Inventory Inventory, consisting of purchased materials, direct labor and manufacturing overhead, is stated at the lower of cost or net realizable value, with cost determined generally using the average cost method. At each balance sheet date, the Company also evaluates inventory for excess quantities, obsolescence or shelf life expiration. This evaluation includes analysis of the Company’s current and future strategic plans, historical sales levels by product, projections of future demand, the risk of technological or competitive obsolescence for products, general market conditions and a review of the shelf life expiration dates for products. To the extent that management determines there is excess or obsolete inventory or quantities with a shelf life that is too near its expiration for the Company to reasonably expect that it can sell those products prior to their expiration, the Company adjusts the carrying value to estimated net realizable value. 11 Table of Contents Property and Equipment Property and equipment are stated at cost less accumulated depreciation. Depreciation is computed on the straight-line method over the following estimated useful lives of the assets: ​ ​ ​ ​ Processing and research equipment 5 to 10 years Office equipment and furniture 3 to 5 years Computer hardware and software 3 years ​ Leasehold improvements are amortized on the straight-line method over the shorter of the lease term or the estimated useful life of the asset. Repairs and maintenance costs are expensed as incurred. Leases In February 2016, the Financial Accounting Standards Board (“FASB”) issued ASU No 2016-02, Leases to increase the transparency and comparability about leases among entities. ASU 2016-02 and certain additional ASUs are now codified as ASC 842, Leases . ASC 842 supersedes the lease accounting guidance in ASC 840 and requires lessees to recognize a lease liability and a corresponding lease asset for virtually all lease contracts. The Company determines if an arrangement contains a lease at inception. Right-of-use (“ROU”) assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from that lease. For leases with a term greater than 12 months, ROU assets and liabilities are recognized at the lease commencement date based on the estimated present value of lease payments over the lease term. The lease term includes the option to extend the lease when it is reasonably certain the Company will exercise that option. When available, the Company uses the rate implicit in the lease to discount lease payments to present value. In the case the implicit rate is not available, the Company uses its incremental borrowing rate based on information available at the lease commencement date, including publicly available data for instruments with similar characteristics, to determine the present value of lease payments. The Company combines lease and non-lease elements for office leases. Long-Lived Assets Purchased intangible assets with finite lives are carried at acquired fair value, less accumulated amortization. Amortization is computed over the estimated useful lives of the respective assets. The Company periodically evaluates the period of depreciation or amortization for long-lived assets to determine whether current circumstances warrant revised estimates of useful lives. The Company reviews its property and equipment and intangible assets for impairment whenever events or changes in circumstances indicate the carrying value of an asset may not be recoverable. Impairment exists when the carrying value of the company’s asset exceeds the related estimated undiscounted future cash flows expected to be derived from the asset. If impairment exists, the carrying value of that asset is adjusted to its fair value. A discounted cash flow analysis is used to estimate an asset’s fair value, using assumptions that market participants would apply. The results of impairment tests are subject to management’s estimates and assumptions of projected cash flows and operating results. Changes in assumptions or market conditions could result in a change in estimated future cash flows and could result in a lower fair value and therefore an impairment, which could impact reported results. There were no impairment losses for the three months ended March 31, 2024 or 2023. Warrant Liability The Company accounts for its warrants in accordance with ASC 815, Derivatives and Hedging – Contracts in Entity's Own Equity , as either liabilities or as equity instruments depending on the specific terms of the warrant agreement. The Prefunded and Common Warrants issued in connection with the September 2023 private placement (see Note 14) are classified as liabilities and are recorded at fair value. The warrants are subject to re-measurement at each settlement date and at each balance sheet date and any change in fair value is recognized in other expense (income), net in the condensed consolidated statements of operations. The Company estimates the fair value of the warrant liability using a Black-Scholes pricing model. We are required to make assumptions and estimates in determining an appropriate term, risk-free interest 12 Table of Contents rate, volatility factor, dividend yield, and the fair value of common stock. Any significant adjustments to the unobservable inputs would have a direct impact on the fair value of the warrant liability. Revenue Recognition The Company’s revenue is generated from contracts with customers in accordance with ASC 606. The core principle of ASC 606 is that the Company recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods or services. The ASC 606 revenue recognition model consists of the following five steps: (1) identify the contracts with a customer, (2) identify the performance obligations in the contract, (3) determine the transaction price, (4) allocate the transaction price to the performance obligations in the contract and (5) recognize revenue when (or as) the entity satisfies a performance obligation. As noted above, the Company enters into contracts to primarily sell and distribute products to healthcare providers or commercial partners. Revenue is recognized when the Company has met its performance obligations pursuant to its contracts with its customers in an amount that the Company expects to be entitled to in exchange for the transfer of control of the products to the Company’s customers. For all product sales, the Company has no further performance obligations and revenue is recognized at the point control transfers which occurs either when: i) the product is shipped via common carrier; or ii) the product is delivered to the customer or distributor, in accordance with the terms of the agreement. A portion of the Company’s product revenue is generated from consigned inventory maintained at hospitals and from inventory physically held by distributors and direct sales representatives. For these types of products sales, the Company retains control until the product has been used or implanted, at which time revenue is recognized. The Company elected to account for shipping and handling activities as a fulfillment cost rather than a separate performance obligation. Amounts billed to customers for shipping and handling are included as part of the transaction price and recognized as revenue when control of the underlying products is transferred to the customer. The related shipping and freight charges incurred by the Company are included in sales and marketing costs. Contracts with customers state the final terms of the sale, including the description, quantity, and price of each implant distributed. The payment terms and conditions in the Company’s contracts vary; however, as a common business practice, payment terms are typically due in full within 30 to 60 days of delivery. The Company, at times, extends volume discounts to customers. The Company permits returns of its products in accordance with the terms of contractual agreements with customers. Allowances for returns are provided based upon analysis of the Company’s historical patterns of returns matched against the revenues from which they originated. The Company records estimated returns as a reduction of revenue in the same period revenue is recognized. Stock-Based Compensation Plans The Company accounts for its stock-based compensation plans in accordance with ASC 718, Accounting for Stock Compensation . ASC 718 requires the measurement and recognition of compensation expense for all stock-based awards made to employees and directors, including employee stock options and restricted stock. Stock-based compensation cost is measured at the grant date, based on the calculated fair value of the award, and is recognized as an expense on a straight-line basis over the requisite service period of the entire award. Research and Development Costs Research and development costs, which include mainly salaries, outside services and supplies, are expensed as incurred. 13 Table of Contents Concentration of Credit Risk Financial instruments that potentially subject the Company to significant concentrations of credit risk consist primarily of cash. The Company’s cash balances with the individual institutions may at times exceed the federally insured limits. There was one customer that represented 17 % of the Company’s net sales for the three months ended March 31, 2024 and 29 % of the Company’s accounts receivable as of March 31, 2024. ​ Comprehensive Income (Loss) Comprehensive income (loss) comprises net income (loss) and other changes in equity that are excluded from net income (loss). For the three months ended March 31, 2024 and 2023, the Company’s net loss equaled its comprehensive loss and accordingly, no additional disclosure is presented. Income Taxes The Company uses the asset and liability method of accounting for income taxes. Deferred income taxes are recorded to reflect the tax consequences on future years for differences between the tax basis of assets and liabilities and their financial reporting amounts at each year-end based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to amounts that are more likely than not to be realized. The Company is subject to income taxes in the federal and state jurisdictions. Tax regulations within each jurisdiction are subject to the interpretation of the related tax laws and regulations and require significant judgment to apply. In accordance with the authoritative guidance on accounting for uncertainty in income taxes, the Company recognizes tax liabilities for uncertain tax positions when it is more likely than not that a tax position will not be sustained upon examination and settlement with various taxing authorities. Liabilities for uncertain tax positions are measured based upon the largest amount of benefit that is more likely than not (greater than 50%) of being realized upon settlement. The Company’s policy is to recognize interest and/or penalties related to income tax matters in income tax expense. ​ Note 3. Recently Issued Accounting Standards In November 2023, the FASB issued ASU No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. This update improves reportable segment disclosure requirements, primarily through enhanced disclosures of significant segment expenses. The amendments in this update should be applied retrospectively to all prior periods presented in the condensed consolidated financial statements and are effective for fiscal years beginning after December 31, 2023 and interim periods within fiscal years beginning after December 31, 2024. Early adoption is permitted. The Company is currently evaluating the potential impact of this guidance on its condensed consolidated financial statements. ​ In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvement to Income Tax Disclosures. This update improves income tax disclosure requirements, primarily through enhanced transparency and decision usefulness of disclosures. The amendments in this update should be applied prospectively with the option to apply retrospectively and are effective for fiscal years beginning after December 15, 2024. Early adoption is permitted. The Company is currently evaluating the potential impact of this guidance on its condensed consolidated financial statements. Note 4. Sale of Orthobiologics Business As described in Note 2, on November 8, 2023, the Company completed the sale of its Orthobiologics Business. Accordingly, the Orthobiologics Business is reported as discontinued operations in accordance with ASC 205-20 - Discontinued Operations and the amounts for the three months ended March 31, 2023 have been recast to conform to this discontinued operations presentation. ​ 14 Table of Contents In accordance with ASC 205-20, only expenses specifically identifiable and related to a business to be disposed may be presented in discontinued operations. The following table shows the financial results of the discontinued operations for the three months ended March 31, 2023: ​ ​ ​ ​ Net sales $ 6,658 Cost of goods sold 3,701 Gross profit 2,957 Sales and marketing 665 General and administrative 159 Research and development 212 Total operating expenses ​ 1,036 Interest expense ​ 114 Net income $ 1,807 ​ ​ ​ ​ Total operating and investing cash flows of discontinued operations for the three months ended March 31, 2023 are comprised of the following: ​ ​ ​ ​ Significant operating non-cash reconciliation items ​ ​ Depreciation $ 56 Stock-based compensation 34 Changes in operating assets and liabilities: ​ ​ Accounts receivable ( 1,023 ) Inventory ( 454 ) Prepaid expenses and other 37 Accounts payable and accrued expenses and other current liabilities ​ 538 Obligations to tissue suppliers ​ ( 29 ) ​ ​ ​ Significant investing items ​ ​ Expenditures for property, plant and equipment ​ 146 ​ ​ ​ ​ ​ ​ ​ Note 5. Stock-Based Compensation In 2015, the Company established the Elutia Inc. 2015 Stock Option/Stock Issuance Plan, as amended (the “2015 Plan”) which provided for the granting of incentive and non-qualified stock options to employees, directors and consultants of the Company. On October 7, 2020, in connection with the Company’s initial public offering (“IPO”), the Company adopted the Elutia Inc. 2020 Incentive Award Plan, and on June 8, 2023, the Company’s stockholders approved the amendment and restatement of that plan (as amended and restated, the “2020 Plan”), which authorizes the grant of incentive and non-qualified stock options, restricted stock, restricted stock units and stock appreciation rights to employees, directors and consultants. Shares of Class A common stock totaling 1,636,000 were initially reserved for issuance pursuant to the 2020 Plan, and in June 2023, the number of shares of Class A common stock reserved for issuance under the 2020 Plan was increased by 2,000,000 shares. In addition, the shares reserved for issuance under the 2020 Plan also include shares reserved but not issued under the 2015 Plan as well as an annual increase as set forth in the 2020 Plan. As of March 31, 2024, the Company had 484,774 shares of Class A common stock available for issuance under the 2020 Plan. Stock Options The Company’s policy is to grant stock options at an exercise price equal to 100 % of the market value of a share of Class A common stock at closing on the date of the grant. The Company’s stock options generally have contractual terms of ten years and vest over a period of either three or four years from the date of grant. 15 Table of Contents A summary of stock option activity under the Company’s 2015 Plan and 2020 Plan for the three months ended March 31, 2024 is as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted- ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Average ​ ​ ​ ​ ​ ​ Weighted- ​ Remaining ​ Aggregate ​ ​ ​ ​ Average ​ Contractual ​ Intrinsic ​ ​ Exercise Term Value ​ ​ Number of Shares ​ Price ​ (years) ​ (in thousands) Outstanding, December 31, 2023 ​ 1,501,193 ​ $ 8.37 ​ ​ 7.8 $ - Granted ​ 1,615,561 ​ $ 3.61 ​ ​ ​ ​ ​ ​ Forfeited ​ ( 47,107 ) ​ $ 11.03 ​ ​ ​ ​ ​ ​ Outstanding, March 31, 2024 ​ 3,069,647 ​ $ 5.34 ​ ​ 7.9 ​ $ - Vested and exercisable, March 31, 2024 ​ 888,140 ​ $ 7.84 ​ ​ 7.9 ​ $ - ​ The weighted average grant date fair value of options granted during the three months ended March 31, 2024 was $ 2.35 . As of March 31, 2024, there was approximately $ 5.1 million of total unrecognized compensation expense related to unvested stock options. These costs are expected to be recognized over a weighted-average period of 2.3 years. The Company uses the Black-Scholes model to value its stock option grants that vest based on the passage of time or the achievement of certain performance criteria and expenses the related compensation cost using the straight-line method over the vesting period. The fair value of stock options is determined on the grant date using assumptions for the estimated fair value of the underlying common stock, expected term, expected volatility, dividend yield, and the risk-free interest rate. Before the completion of the Company’s IPO, the Board of Directors determined the fair value of common stock considering the state of the business, input from management, third party valuations and other considerations. The Company uses the simplified method for estimating the expected term used to determine the fair value of options. The expected volatility of the Class A common stock is partially based on the historical volatility of comparable companies in the industry whose share prices are publicly available. The Company uses a zero -dividend yield assumption as the Company has not paid dividends since inception nor does it anticipate paying dividends in the future. The risk-free interest rate approximates recent U.S. Treasury note auction results with a similar life to that of the option. The period expense is then determined based on the valuation of the options and is recognized on a straight-line basis over the requisite service period for the entire award. The following weighted-average assumptions were used to determine the fair value of time-based options granted during the three months ended March 31, 2024 and 2023: ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended ​ ​ ​ March 31, ​ ​ 2024 2023 ​ Expected term (years) ​ 5.9 ​ 6.0 ​ Risk-free interest rate ​ 3.2 % 4.3 % Volatility factor ​ 100.9 % 63.8 % Dividend yield ​ — ​ — ​ ​ During the three months ended March 31, 2024, the Company granted 397,640 options that vest on the 10 th business day following the FDA’s clearance of the Company’s CanGarooRM product. As noted above, these performance vesting options have been valued using the Black-Scholes model. The Company has also granted 156,250 stock options that vest in equal installments upon the achievement of certain share price thresholds for twenty consecutive days of trading at each respective threshold. For these stock options, the Company accounted for the awards as market condition awards and used an option pricing model, the Monte Carlo model, to determine the fair value of the respective equity instruments and an expense recognition term of approximately three years . As of March 31, 2024, there were a total of 338,761 stock options outstanding that are market condition stock option awards. ​ 16 Table of Contents Restricted Stock Units Restricted stock units (“RSUs”) represent rights to receive common shares at a future date. There is no exercise price and no monetary payment is required for receipt of restricted stock units or the shares issued in settlement of the award. A summary of the RSU activity under the Company’s 2020 Plan for the three months ended March 31, 2024 is as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted- ​ ​ ​ ​ Average ​ ​ Number of Shares ​ Grant Date ​ ​ Underlying RSUs ​ Fair Value Unvested, December 31, 2023 335,608 ​ $ 3.64 Granted 2,267,500 ​ $ 3.59 Vested ( 12,968 ) ​ $ 8.47 Forfeited ( 64,660 ) ​ $ 2.48 Unvested, March 31, 2024 2,525,480 ​ $ 3.60 ​ The total fair value of the RSUs granted during the three months ended March 31, 2024 of $ 8.2 million was based on the fair market value of the Company's Class A common stock on the date of grant. The fair value at the time of the grant is amortized to expense on a straight-line basis over the vesting period of three to four years . ​ As of March 31, 2024, $ 7.7 million of unrecognized compensation costs related to RSUs is expected to be recognized over a weighted average period of 2.2 years During the three months ended March 31, 2024, the Company granted 560,625 RSUs that vest on the 10 th business day following the FDA’s clearance of the Company’s CanGarooRM product. These performance vesting RSUs have been valued using the fair value of the Company’s Class A common stock on the date of grant. The Company has also granted 156,250 RSUs that vest in equal installments upon the achievement of certain share price thresholds for twenty consecutive days of trading at each respective threshold. For these RSUs, the Company accounted for the awards as market condition awards and used a Monte Carlo model to determine the fair value of these RSUs as well as the expense recognition term of approximately three years using the graded vesting method. As of March 31, 2024, there were 246,144 RSUs outstanding that were market condition RSU awards. ​ Employee Stock Purchase Plan The Company makes shares of its Class A common stock available for purchase under its 2020 Employee Stock Purchase Plan (the “ESPP”). The ESPP provides for separate six-month offering periods that begin in March and September of each year. Under the ESPP, employees may purchase a limited number of shares of Elutia Class A common stock at 85 % of the fair market value on either the first day of the offering period or the purchase date, whichever is lower. The ESPP is considered compensatory for purposes of stock-based compensation expense. The number of shares reserved under the ESPP will automatically increase on the first day of each fiscal year through January 1, 2030, in an amount as set forth in the ESPP. As of March 31, 2024, the total shares of Class A common stock authorized for issuance under the ESPP was 774,341 , of which 502,325 remained available for future issuance. During the three months ended March 31, 2024, 65,459 shares of Class A common stock were issued under the ESPP. 17 Table of Contents Stock-Based Compensation Expense Stock-based compensation expense recognized during the three months ended March 31, 2024 and 2023 was comprised of the following (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended ​ ​ ​ ​ March 31, ​ ​ ​ 2024 2023 Sales and marketing $ 448 $ 140 ​ General and administrative ​ 1,423 ​ 450 ​ ​ Research and development ​ 254 ​ 23 ​ ​ Cost of goods sold ​ 72 ​ 40 ​ ​ Total stock-based compensation expense ​ $ 2,197 ​ $ 653 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Note 6. Inventory Inventory was comprised of the following (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ March 31, ​ December 31, ​ ​ 2024 2023 Raw materials ​ $ 333 ​ $ 242 ​ Work in process ​ ​ 433 ​ ​ 286 ​ Finished goods ​ ​ 2,286 ​ ​ 3,325 ​ Total ​ $ 3,052 ​ $ 3,853 ​ ​ ​ ​ ​ ​ ​ ​ Note 7. Long-Term Debt O n August 10, 2022, the Company entered into a senior secured term loan facility with SWK Funding LLC, as agent, and other lenders party thereto for an aggregate principal amount of $ 25 million, and the Company amended the facility on May 12, 2023 (as amended, the “SWK Loan Facility”). An initial draw of $ 21 million was made in August 2022, with the additional $ 4 million drawn on December 14, 2022 upon satisfaction of the amended terms enabling such receipt. The SWK Loan Facility also allows for the establishment of a separate, new asset-based revolving loan facility of up to $ 8 million, which has not been entered into to date. The SWK Loan Facility matures on August 10, 2027 and accrues interest, payable quarterly in arrears. Principal amortization of the SWK Loan Facility starts on November 15, 2024, which amortization may be extended to November 17, 2025 if certain conditions have been satisfied. Principal payments during the amortization period will be limited based on revenue-based caps. As of March 31, 2024, quarterly principal payments are scheduled to begin on November 15, 2024, in an amount equal to 5 % of the aggregate principal amount funded with the balance paid at maturity. T he SWK Loan Facility also includes both revenue and liquidity covenants, restrictions as to payment of dividends, and is secured by all assets of the Company, subject to certain customary exceptions. As of March 31, 2024, Elutia was in compliance with its financial covenants under the agreement governing the SWK Loan Facility (“SWK Loan Facility Agreement”). All of the SWK Loan Facility borrowings take the form of Secured Overnight Financing Rate (“SOFR”) loans and bear interest at a rate per annum equal to the sum of an applicable margin of (i) 7.75 % and the “Term SOFR Rate” (based upon an interest period of 3 months), or (ii) if the Company has elected the PIK Interest option (as defined below), 3.75 % and the “Term SOFR Rate.” The Company may elect a portion of the interest due, to be paid in-kind at a rate per annum of 4.5 % (“PIK Interest”), and such election may be made (x) until November 15, 2024 if certain conditions, as defined, have not been met, or (y) if such conditions have been satisfied, until November 17, 2025. The “Term SOFR Rate” is subject to a floor of 2.75 %. The agreement governing the SWK Loan Facility also includes an exit fee equal to 6.5 % of the aggregate principal amount funded prior to termination plus $ 62,500 and prepayment penalties equal to: (i) if such prepayment occurs prior to the first anniversary of the Closing Date, 2 % of the aggregate principal amount funded prior to the termination plus remaining unpaid interest payments scheduled to be paid during the first year of the loan or (ii) if such prepayment occurs after the first anniversary of the Closing Date but prior to the second anniversary of the Closing Date, 2 % of the aggregate principal amount funded prior to the termination. The weighted average interest rate on the SWK Loan Facility was 13.5 % and 13.7 % for the three months ended March 31, 2024 and 2023, respectively. 18 Table of Contents On August 10, 2022, the Company issued to SWK Funding LLC a warrant (“Class A Warrant”) to purchase, in the aggregate, up to 187,969 shares of Class A common stock of the Company, $ 0.001 par value per share at an exercise price of $ 6.65 per share. The Class A Warrant is immediately exercisable for up to 187,969 shares of Class A common stock from time to time on or after the Closing Date. The exercise price and number of shares of Class A common stock issuable upon exercise of the Class A Warrant are subject to adjustment in the event of stock dividends, stock splits and certain other events affecting the Class A common stock. Unless earlier exercised or terminated in accordance with its terms, the Class A Warrant will expire on the seventh anniversary of the Closing Date. Upon issuance, the Company valued the Class A Warrant at approximately $ 0.6 million using the Black-Scholes model. The recognition of the Class A Warrant as well as deferred financing costs of approximately $ 0.5 million incurred in securing the SWK Loan Facility served to reduce the recorded value of the associated debt. The debt discount and deferred financing costs will be recognized as interest expense through the maturity of the loan. ​ The SWK Loan Facility Agreement requires certain mandatory prepayments, subject to certain exceptions, with: (1) 100 % of any net casualty proceeds in excess of $ 250,000 and (2) for non-ordinary course asset sales, an amount equal to the difference between (x) the proportion of divested gross profit (as defined in the SWK Loan Facility Agreement) to the Company’s total gross profit (as defined in the SWK Loan Facility Agreement) multiplied by the outstanding loans under the SWK Loan Facility and (y) the difference between $ 1,000,000 and the aggregate sale proceeds of any assets previously sold during the fiscal year. No such mandatory prepayments were required during the three months ended March 31, 2024 and 2023. ​ Long-term debt was comprised of the following (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ March 31, December 31, ​ ​ 2024 ​ 2023 Term Loan Facility, net of unamortized discount and deferred financing costs ​ $ 22,012 ​ $ 23,677 Current Portion ​ ( 2,274 ) ​ ( 3,321 ) Long-Term Debt ​ $ 19,738 ​ $ 20,356 ​ The fair value of all debt instruments, which is based on inputs considered to be Level 2 under the fair value hierarchy, approximates the respective carrying values as of March 31, 2024 and December 31, 2023. ​ Note 8. Revenue Interest Obligation On May 31, 2017, the Company completed an asset purchase agreement with CorMatrix Cardiovascular, Inc. (“CorMatrix”) and acquired all CorMatrix commercial assets and related intellectual property (the “CorMatrix Acquisition”). As part of the CorMatrix Acquisition, the Company assumed a restructured, long-term obligation (the “Revenue Interest Obligation”) to Ligand Pharmaceuticals Incorporated (“Ligand”) with an estimated present value on the acquisition date of $ 27.7 million. Subject to annual minimum payments of $ 2.75 million per year, the terms of the Revenue Interest Obligation required Elutia to pay Ligand, 5 % of future sales of the products Elutia acquired from CorMatrix, including CanGaroo, ProxiCor, Tyke and VasCure, as well as products substantially similar to those products, such as the version of CanGaroo Elutia is currently developing that is designed to include antibiotics. Furthermore, a $ 5.0 million payment would be due to Ligand if cumulative sales of these products exceed $ 100 million and a second $ 5.0 million will be due if cumulative sales exceed $ 300 million during the ten-year term of the agreement which expires on May 31, 2027. On January 10, 2024, the Company entered into an amendment to the Revenue Interest Obligation (the “Amended Revenue Interest Obligation”). Pursuant to the Amended Revenue Interest Obligation, the parties modified and restructured the Revenue Interest Obligation by revising the annual minimum payments for 2024 and each subsequent fiscal year during the term of the agreement from $ 2.75 million to $ 4.4 million. Additionally, the Company made payments totaling $ 3.0 million (50% paid in January 2024 and 50% paid in April 2024) in satisfaction of all royalty obligations for the first three fiscal quarters of 2023 and made a payment in February 2024 of $ 1.1 million in satisfaction of the royalty obligations for the fourth quarter of 2023. Furthermore, as part of the Amended Revenue Interest Obligation, Ligand waived the Company’s obligation to make the $ 5.0 million milestone payment that became due to Ligand in the second quarter of 2023. ​ 19 Table of Contents The Company records the present value of the estimated total future payments under both the Revenue Interest Obligation and Amended Revenue Interest Obligation as a long-term obligation, with the short-term portion being recorded as described below. At each reporting period, the value of the Revenue Interest Obligation is re-measured based on current estimates of future payments, with changes to be recorded in the condensed consolidated statements of operations using the catch-up method. The Amended Revenue Interest Obligation changed the timing and extent of future payments by the Company to Ligand and such change to the estimated future payments yielded a reduction to the total obligation of approximately $ 1.4 million for the three months ended March 31, 2024. The resulting gain was recognized as other expense (income), net in the accompanying condensed consolidated statement of operations. Interest expense related to the Revenue Interest Obligation of approximately $ 0.5 million was recorded for both the three months ended March 31, 2024 and 2023. ​ As of March 31, 2024, the short-term portion of the Amended Revenue Interest Obligation is comprised of the newly-established annual minimum payments of $ 4.4 million and an additional $ 1.5 million representing the remaining portion of the $ 3.0 million payment noted above which was paid in April 2024. As of December 31, 2023, the short-term portion of the Initial Revenue Interest Obligation is comprised of (i) the 2023 and 2024 minimum payments, (ii) the first $ 5.0 million sales milestone payment noted above and (iii) the unpaid portion of the 2022 minimum payments. ​ Note 9: Common Stock and Warrants ​ Private Placement of Common Stock and Warrants ​ On September 21, 2023, the Company sold, in a private offering an aggregate of (i) 6,852,811 units (“Common Units”) each comprised of (a) one share of the Company’s Class A common stock and (b) a warrant (“Common Warrant”) to purchase one and one half shares of Class A Common Stock, and (ii) 503,058 units (the “Prefunded Units”), each comprised of (a) a prefunded warrant (“Prefunded Warrant”) to purchase one share of Class A Common Stock, and (b) a Common Warrant. The Common Units were sold at a purchase price of $ 1.4275 per unit, and the Prefunded Units were sold at a purchase price of $ 1.4265 per unit, for aggregate gross proceeds of approximately $ 10.5 million, before deducting offering expenses. Each Common Warrant is exercisable at any time until the earlier of (a) 30 trading days after the clearance by the FDA of the Company’s CanGarooRM antibiotic-eluting biologic envelope or (b) five years from the date of the offering, at an exercise price per share of $ 1.4275 . Each Prefunded Warrant is exercisable at any time at a nominal exercise price per share of $ 0.001 (with the remainder of the exercise price per share of Class A Common Stock having been prefunded to the Company). ​ The Company incurred transaction fees, including commissions and legal fees, of approximately $ 1.1 million in connection with the private placement, of which $ 0.4 million were allocated to the issuance of the common stock. See below for discussion of the accounting for warrants and the allocation of the remainder of the transaction fees. ​ Warrant Liabilities ​ The Company has concluded that the Common Warrants and the Prefunded Warrants (collectively, the “Offering Warrants”) do not meet the equity contract scope exception under ASC 815-40 as in the event of a (i) fundamental transaction such as a merger and (ii) failure to timely delivery warrant shares upon exercise, certain provisions may require the Company to adjust the settlement value that is not consistent with a fixed-for-fixed option pricing model. As a result, as of the September 21, 2023 issuance date, the Company allocated $ 8.6 million of the gross proceeds from the offering to the Offering Warrants based on their fair value, and the remaining $ 1.9 million was allocated to the common stock and recorded as permanent equity. The liability associated with the Offering Warrants is recorded as warrant liability in the accompanying condensed consolidated balance sheet as of March 31, 2024 and December 31, 2023. ​ A summary of the Offering Warrants activity for the three months ended March 31, 2024 is as follows: 20 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Common Warrants Prefunded Warrants ​ Outstanding, December 31, 2023 ​ 11,033,804 503,058 ​ Exercised ​ ( 814,361 ) ( 261,470 ) ​ Outstanding, March 31, 2024 ​ 10,219,443 241,588 ​ ​ ​ ​ ​ ​ ​ The valuation of the Offering Warrants is adjusted to fair value (Level 3) at each subsequent balance sheet date until the warrants are settled. The following table provides a rollforward of the aggregate fair value of the warrant liability for the three months ended March 31, 2024 (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Common Warrants Prefunded Warrants Total Offering Warrants ​ Warrant liability, December 31, 2023 ​ $ 11,670 $ 1,090 $ 12,760 ​ Fair value adjustment ​ 8,899 738 9,637 ​ Exercised ​ ( 1,830 ) ( 1,064 ) ( 2,894 ) ​ Warrant liability, March 31, 2024 ​ $ 18,739 $ 764 $ 19,503 ​ ​ The fair value adjustments, which were driven mainly by increases in the Company’s stock price since December 31, 2023, have been recorded as other expense (income), net in the accompanying condensed consolidated statements of operations for the three months ended March 31, 2024. ​ The Company calculated the fair value of the Offering Warrants as of March 31, 2024 using the Black-Scholes option pricing model with the following inputs as of March 31, 2024 and December 31, 2023: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ March 31, ​ December 31, ​ ​ 2024 ​ 2023 Common stock price ​ $ 3.15 ​ ​ $ 2.16 ​ ​ Expected term (years) ​ 0.4 ​ ​ 0.7 ​ ​ Risk-free interest rate ​ 5.4 % ​ 5.1 % ​ Volatility factor ​ 105.5 % ​ 107.3 % ​ Dividend yield ​ — % ​ — % ​ ​ ​ The expected term of the Common Warrants and Prefunded Warrants is a significant unobservable input, which includes the Company’s probability-weighted expectations relative to the timing of the clearance by the U.S. Food & Drug Administration of the Company’s CanGarooRM antibiotic-eluting biologic envelope. ​ Note 10. Commitments and Contingencies Cook Biotech License and Supply Agreements Elutia has entered into a license agreement with Cook Biotech (“Cook”) for an exclusive, worldwide license to the porcine tissue for use in the Company’s Cardiac Patch and CanGaroo products, subject to certain co-exclusive rights retained by Cook (the “Cook License Agreement”). The term of such license is through the date of the last to expire of the licensed Cook patents, which is anticipated to be July 2031. Along with this license agreement, Elutia entered into a supply agreement whereby Cook would be the exclusive supplier to Elutia of licensed porcine tissue. Under certain limited circumstances, Elutia has the right to manufacture the licensed product and pay Cook a royalty of 3 % of sales of the Elutia-manufactured tissue. The supply agreement expires on the same date as the related license agreement. No royalties were paid to Cook during the three months ended March 31, 2024 or 2023. Elutia has also entered into an amendment to the Cook License Agreement (the “Cook Amendment”) in order to add fields of exclusive use. Specifically, the Cook Amendment provides for a worldwide exclusive license to the porcine tissue for use with neuromodulation devices in addition to cardiovascular devices. The Cook Amendment includes license fee payments of $ 0.1 million per year in each of the years 2021 through 2026. Such license payments would accelerate if a change in control, as defined in the Cook 21 Table of Contents Amendment, occurs within Elutia. The Company, in its sole discretion, can terminate the Cook License Agreement at any time. Legal Proceedings From time to time, the Company may be involved in claims and proceedings arising in the course of the Company’s business. The outcome of any such claims or proceedings, regardless of the merits, is inherently uncertain. The Company records accruals for contingencies when it is probable that a liability has been incurred and the amount can be reasonably estimated. Where the available information is only sufficient to establish a range of probable liability, and no point within the range is more likely than any other, the lower end of the range has been used. When a material loss contingency is reasonably possible, but not probable, the Company does not record a liability, but instead discloses the nature of the matter and an estimate of the loss or range of loss, to the extent such estimate can be made. Accruals recorded are adjusted periodically as assessments change or additional information becomes available, and management's judgments may be materially different than the actual outcomes. ​ FiberCel Litigation In June 2021, the Company announced a voluntary recall of a single lot of FiberCel fiber viable bone matrix. Since September 2021, 109 lawsuits or claims have been filed or asserted against the Company. The lawsuits, which have been filed against Elutia, certain Medtronic entities, and others, allege that the plaintiffs were exposed to and/or contracted tuberculosis and/or suffered substantial symptoms and complications following the implantation of FiberCel during orthopedic fusion operations. Such lawsuits were filed in the Superior Court of Marion County, Indiana (collectively, the “Indiana State Complaints”); the Superior Court of the State of Delaware (collectively, the “Delaware State Complaints”); the Circuit Court of Maryland (collectively, the “Maryland State Complaints”); the Court of Common Pleas of Montgomery County, Ohio and the U.S. District Court of the Southern District of Ohio (the “Ohio Complaints”); the U.S. District Court for the Western District and Eastern District of North Carolina (collectively, the “North Carolina Federal Complaints”); the Circuit Court of Okaloosa County, Florida, and the U.S. District Court for the Northern District and the Southern District of Florida (collectively, the “Florida Complaints”); the U.S. District Courts for the Eastern District of Michigan (collectively “Michigan Federal Complaints.”); the U.S. District Court for the District of Colorado (“Colorado Federal Complaint”); the U.S. District Court for the District of Oregon (“Oregon Federal Complaint”); the Circuit Court of Fayette County, Kentucky and the U.S. District Court for the Eastern District of Kentucky (collectively, “Kentucky Complaints.”); the U.S. District Court for the Western District of Louisiana (“Louisiana Federal Complaint”);the Circuit Court of Cook County, Illinois and the U.S. District Court for the Northern District of Illinois (collectively, the “Illinois Complaints”); the U.S. District Court for the Eastern District of Pennsylvania (“Pennsylvania Federal Complaint); the U.S. District Court for the Eastern District of Virginia (“Virginia Federal Complaint”); the U.S. District Court for the Central District of California (“California Federal Complaint”); and the U.S. District Court of Arizona (“Arizona Federal Complaint"). Plaintiffs in the Indiana State Complaints allege a cause of action under Indiana’s Product Liability Act, citing manufacturing defects, defective design and failure to properly warn and instruct, and several of the complaints allege loss of consortium. Plaintiffs in these actions assert that the defendants are strictly liable or have breached the duty of care owed to plaintiffs by failing to exercise reasonable care in designing, manufacturing, marketing and labeling FiberCel and seek various types of damages, including economic damages, non-economic damages and loss of consortium. Plaintiffs in one of the Indiana State Complaints allege causes of action for product liability, negligence, breach of express and implied warranties, and punitive damages. Each of the plaintiffs in the Delaware State Complaints alleges negligence, breach of implied warranty, breach of express warranty, medical monitoring, and punitive damages, and two also allege loss of consortium. Plaintiffs in the Delaware State Complaints seek economic, consequential, and punitive damages. The Maryland State Complaints assert claims of negligence, breach of implied warranty, breach of express warranty, medical monitoring, and loss of consortium. The Florida Complaints contain three strict liability claims for defective design, defective manufacture, and failure to warn. A claim for punitive damages is also pled. The Ohio State Complaint alleges causes of action for product liability and negligence and seeks compensatory damages. The Colorado Federal Complaint asserts causes of action for strict product liability, misrepresentation, negligence, breach of express warranty, and breach of implied warranty of merchantability. The Michigan Federal Complaints assert causes of action for negligence, gross negligence breach of implied warranty, breach of express warranty, intentional infliction of emotional distress, and liability 22 Table of Contents under the res ipsa loquitur doctrine. The Michigan Federal Complaints seek compensatory damages and punitive damages. The North Carolina Federal Complaints allege causes of action for negligence, defective design, breach of implied warranty, breach of express warranty, and loss of consortium, and seek both compensatory and punitive damages. The Oregon Federal Complaint asserts strict liability claims for defective design, defective manufacture, and failure to warn, and seeks compensatory damages. The Ohio Federal Complaint asserts strict liability claims for defective manufacturing, inadequate warning, nonconformance with representations, and also alleges loss of consortium and seeks compensatory damages. The Kentucky Complaints assert strict liability claims based on manufacturing defect, design defect, failure to warn, negligence, breach of implied warranty, breach of express warranty, and seek recovery for medical monitoring, loss of consortium, compensatory damages, and punitive damages. The Louisiana Federal Complaint asserts claims of violation of the Louisiana products liability act, negligence and gross negligence, breach of implied warranty, and breach of express warranty and seeks recovery for medical monitoring. The Illinois Complaints contain claims of strict liability, defective design and manufacturing, breach of express warranty, breach of implied warranty and negligence and seek compensatory damages. The Pennsylvania Federal Complaint asserts claims for strict liability, negligence, breach of implied warranty, and breach of express warranty, as well as claims under the Wrongful Death Act and the Survival Act, and seeks compensatory and punitive damages. The Virginia Federal Complaint asserts causes of action for negligent failure to warn, negligence, breach of implied warranty, and breach of express warranty and seeks recovery for medical monitoring, compensatory damages and punitive damages. The California Federal Complaint advances claims of strict liability (defective design and manufacture), negligence and breach of implied warranty and seeks compensatory damages and recovery for medical monitoring. The Arizona Federal Complaint asserts strict product liability claims for defective design, manufacture, and failure to warn, negligence, breach of implied warranty and breach of express warranty and seeks recovery for medical monitoring, loss of consortium, compensatory damages, and punitive damages. The Company refers to all of the aforementioned litigation, or claim notices, collectively as the “FiberCel Litigation.” Since August 2022, the Company has engaged in a process to negotiate and attempt to resolve many of the cases in the FiberCel Litigation. In total, Elutia’s liability in 29 of the cases was settled for a total cash outlay of approximately $ 9.1 million. For the remaining 80 cases for which settlements have not been reached, the Company estimated a probable loss related to each case and has recorded a liability at an estimated amount of $ 15.6 million at March 31, 2024, which is recorded as Contingent liability for FiberCel litigation in the accompanying condensed consolidated balance sheets. In order to reasonably estimate the liability for the unsettled FiberCel Litigation cases, the Company, along with outside legal counsel, has assessed a variety of factors, including (i) the extent of the injuries incurred, (ii) recent experience on the settled claims, (iii) settlement offers made to the other parties to the litigation and (iv) any other factors that may have a material effect on the FiberCel Litigation. While the Company believes its estimated liability to be reasonable, the actual loss amounts are highly variable and are dependent upon the relevant facts and case by case resolutions. As more information is learned about asserted claims and potential future trends, adjustments may be made to this Contingent Liability for FiberCel Litigation as appropriate. Management believes that it is reasonably possible that the Company could incur liabilities in excess of amounts accrued and the ultimate liability could be material to the Company’s financial position, results of operations and cash flows in the period recognized. The Company, however, is unable to estimate the possible loss or range of loss in excess of the amount recognized at this time. Defense costs are recognized in the accompanying condensed consolidated statements of operations as incurred. The Company has purchased insurance coverage that, subject to common contract exclusions, provided coverage for the FiberCel Litigation product liability losses as well as legal defense costs. Additionally, the Company has various potential indemnity and/or contribution rights against third party sources with respect to certain product liability losses. When settlements are reached and/or amounts are recorded in the related Contingent Liability for FiberCel Litigation, the Company calculates amounts due to be reimbursed pursuant to the terms of the coverage and related agreements, and pursuant to other indemnity or contribution claims, in respect of product liability losses and related defense costs. The amounts probable of reimbursement or recovery from this calculation are recorded as receivables. The determination that the recorded receivables are probable of collection is based on the terms of agreements reached in respect of indemnity and contribution claims as well as the advice of the Company’s outside legal counsel. These receivables at March 31, 2024 totaled $ 1.8 million and are recorded as Receivables of Litigation Costs in the accompanying condensed consolidated balance sheets. 23 Table of Contents ​ The indemnity and contribution receivables amount at March 31, 2024 represents amounts that are not believed to be subject to any current dispute. At March 31, 2024, the Company continues to pursue up to $ 3.8 million or more in additional amounts in respect of such indemnity and contribution claims and as such, has not been reflected as part of this receivable. The Company will vigorously pursue its position with respect to this amount. ​ Viable Bone Matrix Recall ​ In July 2023, the Company announced a voluntary recall of a single lot of a certain viable bone matrix (“VBM”) product and the market withdrawal of all of its VBM products produced after a specified date (the “VBM Recall”). Notice of the voluntary recall was issued to centers after the Company learned of post-surgical Mycobacterium tuberculosis (“MTB”) infections in two patients treated with a VBM product from a single donor lot. Prior to release, samples from this specific lot had tested negative for MTB by an independent laboratory using a nucleic acid test that is designed to specifically detect the MTB organism. At present, four lawsuits have been filed, and 15 claims have been asserted as a result of the VBM Recall. ​ Management has determined that there is a reasonably possible likelihood of material claims due to the VBM Recall, but does not believe that an estimate of the loss or range of loss can be made. This is mainly due to the early stages of the lawsuits and claims and the lack of receipt by the Company of the medical records needed to assess any possible loss. Consequently, management has determined that a probable liability does not exist as of March 31, 2024. While unknown at this time, possible losses in connection with the VBM Recall could have a material effect on the Company’s financial position and results of operations. Consistent with the FiberCel Litigation above, the Company has purchased insurance coverage that, subject to common contract exclusions, provide coverage for the possible claims associated with the VBM Recall as well as legal defense costs. As of March 31, 2024, the Company has recorded a legal fee liability and related insurance receivable totaling $ 0.2 million for legal services rendered in defending Elutia in the VBM Recall. ​ As of both March 31, 2024 and 2023, the Company was not a party to, or aware of, any legal matters or claims with material financial exposure, except for the FiberCel Litigation and the VBM Recall. ​ Note 11. Net Loss Per Share ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended ​ (in thousands, except share and per share data) ​ March 31, ​ ​ 2024 2023 Numerator: ​ ​ Net loss from continuing operations ​ $ ( 17,994 ) ​ $ ( 9,781 ) ​ Income (loss) from discontinued operations ​ $ — ​ $ 1,807 ​ Net loss ​ $ ( 17,994 ) ​ $ ( 7,974 ) ​ Denominator: ​ ​ ​ Weighted average number of common shares - basic and diluted ​ 23,912,326 ​ 16,149,567 ​ ​ ​ ​ ​ ​ ​ ​ ​ Net loss from continuing operations per share - basic and diluted ​ $ ( 0.75 ) ​ $ ( 0.61 ) ​ Net income (loss) from discontinued operations per share - basic and diluted ​ $ — ​ $ 0.11 ​ Net loss per share - basic and diluted ​ $ ( 0.75 ) ​ $ ( 0.49 ) ​ ​ 24 Table of Contents The Company’s potential dilutive securities have been excluded from the computation of diluted net loss per share as the effect would be anti-dilutive. Therefore, the weighted average number of common shares outstanding used to calculate both basic and diluted net loss per share attributable to common stockholders is the same. The Company excluded the following potential common shares, presented based on amounts outstanding at period end, from the computation of diluted net loss per share attributable to common stockholders: ​ ​ ​ ​ ​ ​ ​ ​ ​ March 31, ​ ​ 2024 2023 Options to purchase common stock 3,069,647 ​ 1,569,869 Restricted stock units ​ 2,525,480 ​ 326,859 ​ Class A common stock warrants ​ 187,969 ​ 187,969 ​ Common Warrants ​ 10,219,443 ​ — ​ Prefunded Warrants ​ 241,588 ​ — ​ Total 16,244,127 ​ 2,084,697 ​ ​ Note 12. Segment Information With the sale of the Orthobiologics Business, the Company now operates in three segments. These segments are based on financial information that is utilized by the Company’s chief operating decision maker to assess performance and allocate resources. The Company determined its operating and reportable segments to be consistent with its major product groupings – Device Protection, Women’s Health and Cardiovascular. The Company’s net sales disaggregated by segment were as follows (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended ​ ​ ​ March 31, ​ ​ 2024 2023 Net sales: ​ ​ ​ ​ ​ ​ ​ Device protection ​ $ 2,357 ​ ​ 2,350 ​ Women's health ​ ​ 3,567 ​ ​ 2,295 ​ Cardiovascular ​ ​ 770 ​ ​ 1,747 ​ Total net sales ​ $ 6,694 ​ $ 6,392 ​ ​ The Company’s gross profit disaggregated by segment were as follows (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended ​ ​ ​ March 31, ​ ​ 2024 2023 Gross profit: ​ ​ ​ ​ ​ ​ ​ Device protection ​ $ 1,628 ​ $ 1,796 ​ Women's health ​ ​ 1,567 ​ ​ 1,052 ​ Cardiovascular ​ ​ 497 ​ ​ 1,375 ​ Gross profit, excluding intangible asset amortization ​ $ 3,692 ​ ​ 4,223 ​ Intangible asset amortization expense ​ ​ 849 ​ ​ 849 ​ Gross profit ​ $ 2,843 ​ $ 3,374 ​ ​ The following table is a reconciliation of segment gross profit to the consolidated loss before provision for income taxes (in thousands): ​ 25 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended ​ ​ ​ March 31, ​ ​ 2024 2023 Gross profit, excluding intangible asset amortization ​ $ 3,692 ​ $ 4,223 ​ ​ ​ ​ ​ ​ ​ ​ ​ Adjustments: ​ ​ ​ ​ ​ ​ ​ Intangible asset amortization expense ​ ​ ( 849 ) ​ ​ ( 849 ) ​ Sales and marketing ​ ​ ( 3,309 ) ​ ​ ( 4,691 ) ​ General and administrative ​ ​ ( 5,056 ) ​ ​ ( 3,520 ) ​ Research and development ​ ​ ( 1,172 ) ​ ​ ( 1,591 ) ​ FiberCel litigation costs ​ ​ ( 1,785 ) ​ ​ ( 1,911 ) ​ Loss from operations ​ ( 8,479 ) ​ ​ ( 8,339 ) ​ Interest expense ​ 1,313 ​ ​ 1,430 ​ Loss on revaluation of warrant liability ​ ​ 9,637 ​ ​ — ​ Gain on revaluation of revenue interest obligation ​ ( 1,443 ) ​ ​ — ​ Loss before provision for income taxes $ ( 17,986 ) ​ $ ( 9,769 ) ​ ​ ​ ​ ​ 26 Table of Contents