What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2024-08-13 compared with 2024-05-13 · 207 added, 155 removed, 450 unchanged (45% of the section changed)

3 unchanged sentences

Current assets:

Cash and cash equivalents

Accounts receivable, net

12 unchanged sentences

Current portion of revenue interest obligation

Contingent liability for FiberCel litigation

Contingent liability for legal proceedings

Current operating lease liabilities

7 unchanged sentences

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

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

Class A Common stock, $ 0.001 par value per share, 200,000,000 shares authorized as of June 30, 2024 and December 31, 2023, and 23,963,101 and 18,884,196 shares issued and outstanding as of June 30, 2024 and December 31, 2023, respectively

Class B Common stock, $ 0.001 par value per share, 20,000,000 shares authorized as of June 30, 2024 and December 31, 2023 and 4,313,406 issued and outstanding as of June 30, 2024 and December 31, 2023

Additional paid-in capital

6 unchanged sentences

Three Months Ended

Six Months Ended

Cost of goods sold

7 unchanged sentences

Loss on revaluation of warrant liability

Gain on revaluation of revenue interest obligation

Other expense (income), net

Loss before provision for income taxes

Income tax expense

Income tax expense (benefit)

Net loss from continuing operations

Income from discontinued operations

Income (loss) from discontinued operations

Net loss from continuing operations per share - basic and diluted

Net income from discontinued operations per share - basic and diluted

Net loss - basic and diluted

Net income (loss) from discontinued operations per share - basic and diluted

Net loss per share - basic and diluted

Weighted average common shares outstanding - basic and diluted

4 unchanged sentences

Equity (Deficit)

Balance, March 31, 2024

Issuance of common stock in connection with registered direct offering, net of issuance costs of $ 1.1 million

Exercises of Common Warrants and Prefunded Warrants

Vesting of restricted stock units, net of shares withheld and taxes paid

Stock-based compensation

Balance, June 30, 2024

Balance, March 31, 2023

Vesting of restricted stock units, net of shares withheld and taxes paid

Stock-based compensation

Balance, June 30, 2023

Stockholders'

Equity (Deficit)

Balance, December 31, 2023

Issuance of common stock in connection with registered direct offering, net of issuance costs of $ 1.1 million

Exercises of Common Warrants and Prefunded Warrants

2 unchanged sentences

Stock-based compensation

Balance, March 31, 2024

Balance, June 30, 2024

Balance, December 31, 2022

2 unchanged sentences

Stock-based compensation

Balance, March 31, 2023

Balance, June 30, 2023

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

1 unchanged sentence

(In Thousands)

Three Months Ended

Six Months Ended

Adjustments to reconcile net loss to net cash used in operating activities:

Depreciation and amortization

Gain on sale of Orthobiologics Business

Loss on revaluation of warrant liability

3 unchanged sentences

Stock-based compensation

Bad debt expense

Losses associated with viable bone matrix recall and market withdrawal

Changes in operating assets and liabilities:

3 unchanged sentences

Accounts payable and accrued expenses and payables to tissue suppliers

Contingent liability for FiberCel litigation

Contingent liability for legal proceedings

Other liabilities

1 unchanged sentence

INVESTING ACTIVITIES:

Proceeds from sale of Orthobiologics Business

Expenditures for property, plant and equipment

Net cash used in investing activities

Net cash provided by (used in) investing activities

FINANCING ACTIVITIES:

Proceeds from direct registered offering and warrants, net of offering costs

Repayments of long-term debt

4 unchanged sentences

Proceeds from issuance of common stock under Employee Stock Purchase Plan

Net cash provided by (used in) financing activities

Net cash provided by financing activities

Net decrease in cash and restricted cash

Cash, beginning of period

Cash, end of period

Cash and cash equivalents, beginning of period

Cash and cash equivalents, end of period

Supplemental Cash Flow and Non-Cash Financing Activities Disclosures:

Cash paid for interest

Fair value of warrants issued

Operating lease right-of-use asset extensions executed

Conversion of Common Warrants and Prefunded Warrants to common stock

10 unchanged sentences

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 financial information as of June 30, 2024 and for the three and six months ended June 30, 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.

7 unchanged sentences

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.

There were no earn-out payments earned or paid in the three or six months ended June 30, 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.

The Company recognized a gain of approximately $ 6.0 million on the sale of the Orthobiologics Business in the fourth quarter of 2023 and an additional gain of $ 0.2 million in the second quarter of 2024 from an adjustment payment related to the final working capital received by Berkeley at the sale date.

The indemnity holdback is available as a source of recovery for Berkeley for claims of indemnification under the purchase agreement, and some or all of the holdback may be retained by Berkeley if Berkeley is successful in asserting a claim or claims for indemnification against the Company.

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.

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 and six months

ended June 30, 2023.

Unless indicated otherwise, the information in the notes to condensed consolidated financial statements for the three and six months ended June 30, 2023 relates to continuing operations.

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.

For the six months ended June 30, 2024, the Company incurred a net loss of $ 46.2 million, and as of June 30, 2024, the Company had an accumulated deficit of $ 221.8 million.

In addition, during the six months ended June 30, 2024, the Company used $ 7.0 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.

6 unchanged sentences

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.

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 liabilities for legal proceedings 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.

52 unchanged sentences

The Company combines lease and non-lease elements for office leases.

During the six months ended June 30, 2024, the Company entered into lease extensions in Silver Spring, Maryland and Roswell, Georgia and entered into a new lease in San Diego, California, which collectively resulted in operating lease right-to-use assets and liabilities of $ 1.4 million.

Such new leases will result in future cash obligations of $ 0.3 million for the six months ended December 31, 2024 and $ 0.6 million, $ 0.7 million and $ 0.1 million for the years ended December 31, 2025, 2026 and 2027, respectively.

Long-Lived Assets

8 unchanged sentences

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.

There were no impairment losses for the three and six months ended June 30, 2024 or 2023.

Warrant Liability

3 unchanged sentences

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

rate, volatility factor, dividend yield, and the fair value of common stock.

We are required to make assumptions and estimates in determining an appropriate term, risk-free interest 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.

30 unchanged sentences

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.

There were two customers that represented 14 % and 11 %, respectively, of the Company’s net sales for the six months ended June 30, 2024.

Additionally, there were two customers that represented 26 % and 12 %, respectively, of the Company’s accounts receivable as of June 30, 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.

For the three and six months ended June 30, 2024 and 2023, the Company’s net loss equaled its comprehensive loss and accordingly, no additional disclosure is presented.

The Company uses the asset and liability method of accounting for income taxes.

23 unchanged sentences

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.

Accordingly, the Orthobiologics Business is reported as discontinued operations in accordance with ASC 205-20 - Discontinued Operations and the amounts for the three and six months ended June 30, 2023 have been recast to conform to this discontinued operations presentation.

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:

The following table shows the financial results of the discontinued operations for the three and six months ended June 30, 2023.

Additionally, a gain of $ 0.2 million was recognized in the second quarter of 2024 related to the final working capital adjustment received from Berkeley.

Three Months Ended

Six Months Ended

Cost of goods sold

4 unchanged sentences

Interest expense

Total operating and investing cash flows of discontinued operations for the three months ended March 31, 2023 are comprised of the following:

Total operating and investing cash flows of discontinued operations for the six months ended June 30, 2023 are comprised of the following:

Six Months Ended

Significant operating non-cash reconciliation items

12 unchanged sentences

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.

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.

As of June 30, 2024, the Company had 405,909 shares of Class A common stock available for issuance under the 2020 Plan.

Stock Options

1 unchanged sentence

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.

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:

A summary of stock option activity under the Company’s 2015 Plan and 2020 Plan for the six months ended June 30, 2024 is as follows:

Number of Shares

1 unchanged sentence

Outstanding, December 31, 2023

Outstanding, March 31, 2024

Vested and exercisable, March 31, 2024

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.

Outstanding, June 30, 2024

Vested and exercisable, June 30, 2024

The weighted average grant date fair value of options granted during the six months ended June 30, 2024 was $ 2.38 .

As of June 30, 2024, there was approximately $ 4.6 million of total unrecognized compensation expense related to unvested stock options.

These costs are expected to be recognized over a weighted-average period of 2.1 years.

8 unchanged sentences

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

The following weighted-average assumptions were used to determine the fair value of time-based options granted during the three and six months ended June 30, 2024 and 2023:

Six Months Ended

Expected term (years)

2 unchanged sentences

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.

During the six months ended June 30, 2024, the Company granted 397,640 options that vest on a defined date following the U.S.

Food and Drug Administration’s (“FDA”) clearance of the Company’s EluPro (referred to as

CanGarooRM during development) product.

With the FDA’s approval of EluPro in June 2024, such vesting will occur in mid-August 2024.

Consistent with the above, these performance vesting options have been valued using the Black-Scholes model.

The Company also granted 162,500 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.

As of June 30, 2024, there were a total of 345,011 stock options outstanding that are market condition stock option awards.

Restricted Stock Units

1 unchanged sentence

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:

A summary of the RSU activity under the Company’s 2020 Plan for the six months ended June 30, 2024 is as follows:

Number of Shares

1 unchanged sentence

Unvested, December 31, 2023

Unvested, March 31, 2024

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.

Unvested, June 30, 2024

The total fair value of the RSUs granted during the six months ended June 30, 2024 was $ 8.2 million.

For the performance vesting RSUs, the fair value was based on the fair market value of the Company's Class A common stock on the date of grant.

The market condition RSUs are valued as described below.

The respective fair values are amortized to expense on a straight-line basis over the vesting period of generally three to four years .

As of June 30, 2024, $ 5.9 million of unrecognized compensation costs related to RSUs is expected to be recognized over a weighted average period of 2.2 years

During the six months ended June 30, 2024, the Company granted 560,625 RSUs that vest on a defined date following the FDA’s clearance of the Company’s EluPro product.

With the FDA’s approval of EluPro in June 2024, such vesting will occur in mid-August 2024.

These performance vesting RSUs have been valued using the fair value of the Company’s Class A common stock on the date of grant.

1 unchanged sentence

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.

As of June 30, 2024, there were 252,394 RSUs outstanding that were market condition RSU awards.

Employee Stock Purchase Plan

4 unchanged sentences

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.

As of June 30, 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 and six months ended June 30, 2024, 65,459 shares of Class A common stock were issued under the ESPP.

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):

Stock-based compensation expense recognized during the three and six months ended June 30, 2024 and 2023 was comprised of the following (in thousands):

Three Months Ended

Six Months Ended

Sales and marketing

14 unchanged sentences

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.

As of June 30, 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”).

As of June 30, 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.

1 unchanged sentence

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.

(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 13.6 % and 13.0 % for the three months ended June 30, 2024 and 2023, respectively and 13.6 % and 12.9 % for the six months ended June 30, 2024 and 2023, respectively.

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.

7 unchanged sentences

(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.

No such mandatory prepayments were required during the three and six months ended June 30, 2024 and 2023.

Long-term debt was comprised of the following (in thousands):

2 unchanged sentences

Long-Term Debt

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.

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 June 30, 2024 and December 31, 2023.

Revenue Interest Obligation

2 unchanged sentences

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.

1 unchanged sentence

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.

Such minimums are payable quarterly within 30 days after each quarter-end date.

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.

Total payments to Ligand during the six months ended June 30, 2024 were $ 5.2 million comprised of the aforementioned 2023 amounts due and a 2024 quarterly minimum payment of $ 1.1 million.

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.

Interest expense related to the Revenue Interest Obligation of approximately $ 0.4 million and $ 0.5 million was recorded for the three months ended June 30, 2024 and 2023, respectively and approximately $ 0.9 million and $ 1.1 million was recorded for the six months ended June 30, 2024 and 2023, respectively.

As of June 30, 2024, the short-term portion of the Amended Revenue Interest Obligation is comprised of the newly established annual minimum payments of $ 4.4 million.

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.

Common Stock and Warrants

Registered Direct Offering of Common Stock and Warrants

On June 16, 2024, the Company sold, in a registered direct offering (“Registered Offering”) an aggregate of (i) 3,175,000 shares of the Company’s Class A common stock and (ii) prefunded warrants (“2024 Prefunded Warrants”) to purchase up to an aggregate of 725,000 shares of Class A Common Stock.

The public offering price for each share of Class A Common Stock was $ 3.40 , and the public offering price for each 2024 Prefunded Warrant was $ 3.399 , for aggregate gross proceeds of approximately $ 13.3 million, before deducting offering expenses.

The 2024 Prefunded Warrants have an exercise price of $ 0.001 per share of Class A Common Stock, are exercisable immediately and will expire when exercised in full.

The Company incurred transaction fees, including commissions and legal fees, of approximately $ 1.4 million in connection with the Registered Offering, of which $ 1.1 million were allocated to the issuance of the common stock.

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.

On September 21, 2023, the Company sold, in a private offering (“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 (“2023 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 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 EluPro product or (b) five years from the date of the offering, at an exercise price per share of $ 1.4275 .

Each 2023 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.

The Company incurred transaction fees, including commissions and legal fees, of approximately $ 1.1 million in connection with the Private Offering, of which $ 0.4 million were allocated to the issuance of the common stock.

See below for discussion of the accounting for the warrants and the allocation of the remainder of the transaction fees from both the Registered Offering and Private Offering.

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:

The Company has concluded that the 2024 Prefunded Warrants from the Registered Offering and the Common Warrants and the 2023 Prefunded Warrants from the Private Offering 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, with respect to the 2024 Prefunded Warrants, the Company allocated $ 2.5 million of the gross proceeds from the Registered Offering to such warrants based on their fair value.

Similarly, with respect to the Common Warrants and 2023 Prefunded Warrants, the Company allocated $ 8.6 million of the gross proceeds from the Private Offering to such warrants based on their fair value.

Additionally, the Company allocated a portion of the transaction fees from both the Registered Offering and the Private Offering to the respective warrants and expensed within other expense (income), net.

Such expenses totaled $ 0.3 million during the three and six months ended June 30, 2024.

No such expenses were recognized in the three and six months ended June 30, 2023.

The liability associated with the 2024 Prefunded Warrants, Common Warrants and 2023 Prefunded Warrants is recorded as warrant liability in the accompanying condensed consolidated balance sheet as of June 30, 2024 and December 31, 2023.

A summary of the warrant activity for the six months ended June 30, 2024 is as follows:

Common Warrants

2023 Prefunded Warrants

2024 Prefunded Warrants

Outstanding, December 31, 2023

Outstanding, March 31, 2024

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):

( 1,366,025 )

Outstanding, June 30, 2024

The valuation of the 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 six months ended June 30, 2024 (in thousands):

Common Warrants

2023 Prefunded Warrants

2024 Prefunded Warrants

Total Offering Warrants

Warrant liability, December 31, 2023

Fair value upon issuance

Fair value adjustment

Warrant liability, March 31, 2024

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:

Warrant liability, June 30, 2024

The fair value adjustments, which include $ 18.3 million recognized during the three months ended June 30, 2024, were driven mainly by increases in the Company’s stock price since December 31, 2023 and have been recorded as other expense (income), net in the accompanying condensed consolidated statements of operations for the three and six months ended June 30, 2024.

The Company calculated the fair value of the Common Warrants as of June 30, 2024 using the Black-Scholes option pricing model with the following inputs as of June 30, 2024 and December 31, 2023:

Common stock price

3 unchanged sentences

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.

The expected term of the Common Warrants was a significant unobservable input, which includes the Company’s probability-weighted expectations relative to the timing of the clearance by the FDA of the Company’s CanGarooRM antibiotic-eluting biologic envelope.

With the FDA’s approval of EluPro in June 2024, the last exercise date for the Common Warrants was July 31, 2024.

All Common Warrants outstanding as of June 30, 2024 were exercised by such date yielding exercise proceeds of $ 13.8 million in July 2024.

The Company has used the price of its Class A Common Stock to estimate the fair value of the 2024 Prefunded Warrants and 2023 Prefunded Warrants at each measurement date.

The price of the Company’s Class A Common Stock approximates fair value of the 2024 Prefunded Warrants and 2023 Prefunded Warrants due to the exercise price per share of $ 0.001 .

Commitments and Contingencies

5 unchanged sentences

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.

No royalties were paid to Cook during the three and six months ended June 30, 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.

1 unchanged sentence

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

Amendment, occurs within Elutia.

Such license payments would accelerate if a change in control, as defined in the Cook Amendment, occurs within Elutia.

The Company, in its sole discretion, can terminate the Cook License Agreement at any time.

7 unchanged sentences

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.

As previously disclosed, in June 2021, the Company announced a voluntary recall of a single lot of FiberCel fiber viable bone matrix (“FiberCel”).

Since September 2021, 110 product liability lawsuits or claims have been filed or asserted against the Company involving FiberCel.

As of June 30, 2024, there were 81 active lawsuits or claims 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”);

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”);

District Courts for the Eastern District of Michigan (collectively “Michigan Federal Complaints.”);

District Court for the District of Colorado (“Colorado Federal Complaint”);

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.”);

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”);

District Court for the Eastern District of Pennsylvania (“Pennsylvania Federal Complaint);

District Court for the Eastern District of Virginia (“Virginia Federal Complaint”);

District Court for the Central District of California (“California Federal Complaint”);

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

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.

Such lawsuits were filed in various U.S.

federal courts and in state courts in Indiana, Delaware, Florida, Kentucky Maryland, Illinois and Ohio.

The Company refers to all of the aforementioned litigation, or claim notices, collectively as the “FiberCel Litigation.”

Viable Bone Matrix Litigation

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.

It is the Company’s understanding that 36 individuals received tissue from the recalled VBM lot and since November 2023, 21 lawsuits or claims have been filed or asserted against the Company.

The lawsuits, which have been filed against Elutia and others, allege that the plaintiffs were exposed to and/or contracted tuberculosis and/or suffered substantial symptoms and complications following the implantation of VBM during orthopedic fusion operations.

To date, these lawsuits have been filed in California Superior Court (collectively, the “California State Complaints”), the United States District Court for the Eastern District of Louisiana (collectively, the “Louisiana Federal Complaints”), and the United States District Court for the Western District of Texas (the “Texas Federal Complaint”).

Plaintiffs in the California State Complaints 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 VBM and seek various types of damages, including economic damages, non-economic damages, and loss of consortium damages.

The Plaintiffs in one of the California State Complaints also assert claims for fraudulent inducement, misrepresentation, and intentional infliction of emotional distress.

Plaintiffs in the Louisiana Federal Complaints generally assert causes of action under the Louisiana Product Liability Act, citing design defects, manufacturing defects, and failure to properly warn, and several plaintiffs allege loss of consortium.

Plaintiffs in these actions also assert that 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 VBM and seek economic damages, non-economic damages and loss of consortium.

Some plaintiffs in the Louisiana Federal Complaints also allege claims for breach of implied warranty and breach of express warranty, medical monitoring, and punitive damages.

Plaintiffs in the Texas Federal Complaint assert violations of the Texas Business and Commerce Code, citing alleged breaches of the warranties of merchantability and fitness for a particular purpose.

Plaintiffs further assert that the defendants breached the duty of care owed to plaintiffs by failing to exercise reasonable care in designing, manufacturing, marketing, and labeling VBM and seek various types of damages, including economic damages, non-economic damages, exemplary damages, and loss of consortium damages.

The Company refers to all of the aforementioned litigation, or claim notices, collectively as the “VBM Litigation.”

Medtronic Litigation

In June 2024, the Company filed an action against Medtronic Sofamor Danek USA, Inc.

(“Medtronic”) in the Superior Court of the State of Delaware.

The Company’s complaint alleges breach of the 2019 Tissue Product Supply Agreement (the “Supply Agreement”) between the Company and Medtronic.

In particular, the complaint alleges that Medtronic did not honor its contractual obligations to obtain insurance coverage and to defend and indemnify the Company for over 100 lawsuits against the Company alleging claims arising from the use of FiberCel products distributed by Medtronic.

The complaint does not specify the amount of damages owed by Medtronic for these breaches.

Medtronic responded to the complaint on July 31, 2024, denying Elutia’s claims and asserting a single counterclaim alleging that Elutia breached certain representations and warranties under the Supply Agreement and owes ongoing indemnity obligations to Medtronic.

The counterclaim does not specify the amount of any alleged damages.

Medtronic has brought a motion for judgment on the pleadings as to Elutia’s claims, and a hearing is set for November 1, 2024.

Given the early stages of this matter and the Company’s intention to vigorously defend this counterclaim, we do not consider a loss to be probable or estimable at this time.

Contingent Liability for Legal Proceedings

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 total, Elutia’s liability in 29 of the cases has been settled for a total cash outlay of approximately $ 9.1 million.

For the remaining 81 cases for which settlements have not been reached or the settlements have been reached but have not yet been paid, the Company estimated a probable loss related to each case and has recorded a liability at an estimated amount of $ 16.4 million at June 30, 2024, which is recorded as Contingent Liability for Legal Proceedings 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.

As more information is learned about asserted claims and potential future trends, adjustments may be made to this Contingent Liability for Legal Proceedings 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.

VBM Litigation

Since June 2023, the Company has also engaged in a process to negotiate and attempt to resolve many of the cases in the VBM Litigation.

Certain settlements were reached during June 2024, but, at present, no settlements have been paid on the VBM Litigation cases.

Consequently, for all of the VBM Litigation cases, including cases where settlements have been agreed but not yet paid as well as unasserted claims that the Company believes are probable of assertion, the Company estimated a probable loss at an estimated amount of $ 3.8 million at June 30, 2024, which is recorded as Contingent Liability for Legal Proceedings in the accompanying condensed consolidated balance sheets.

The expense related to this estimate was recorded within Fibercel Litigation Costs, net in the accompanying condensed consolidated statement of operations, with the entirety of such expense offset by the insurance received or receivable as further described below.

In order to reasonably estimate the liability for the unsettled VBM Litigation cases and unasserted claims, 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 VBM 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 and unasserted claims and potential future trends, adjustments may be made to this Contingent Liability for Legal Proceedings as appropriate.

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 for both the FiberCel Litigation and VBM Litigation are recognized in the accompanying condensed consolidated statements of operations as incurred, with the entirety of such expense related to the VBM Litigation offset by the insurance received or receivable as further described below.

Receivable of Litigation Costs

The Company has purchased insurance coverage that, subject to common contract exclusions, provided coverage for the FiberCel Litigation and VBM 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 Legal Proceedings, 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.

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

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.

These receivables at June 30, 2024 totaled $ 4.4 million, with $ 0.4 million relating to the FiberCel Litigation and $ 4.0 million related to the VBM Litigation, and are recorded as Receivables of Litigation Costs in the accompanying condensed consolidated balance sheets.

At June 30, 2024, the Company continues to pursue additional amounts in respect of such indemnity and contribution claims which have not been reflected as part of this receivable.

The Company will vigorously pursue its position with respect to these amounts.

As of both June 30, 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, VBM Litigation and Medtronic matter.

Net Loss Per Share

Three Months Ended

Six Months Ended

(in thousands, except share and per share data)

13 unchanged sentences

2023 Prefunded Warrants

2024 Prefunded Warrants

Segment Information

4 unchanged sentences

Three Months Ended

Six Months Ended

Device protection

4 unchanged sentences

Three Months Ended

Six Months Ended

Gross profit:

6 unchanged sentences

Three Months Ended

Six Months Ended

Gross profit, excluding intangible asset amortization

3 unchanged sentences

Research and development

FiberCel litigation costs

FiberCel litigation costs, net

Loss from operations

1 unchanged sentence

Loss on revaluation of warrant liability

Gain on revaluation of revenue interest obligation

Other expense (income), net

Loss before provision for income taxes

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements