What changed in this filing

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Item 1. Financial Statements

2024-11-14 compared with 2024-08-13 · 233 added, 180 removed, 477 unchanged (46% of the section changed)

2 unchanged sentences

(In Thousands, Except for Share and Per Share Data)

September 30,

Current assets:

11 unchanged sentences

Accrued expenses

Payables to tissue suppliers

Current portion of long-term debt

10 unchanged sentences

Stockholders’ equity (deficit):

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

Class A Common stock, $ 0.001 par value per share, 200,000,000 shares authorized as of September 30, 2024 and December 31, 2023, and 30,248,692 and 18,884,196 shares issued and outstanding as of September 30, 2024 and December 31, 2023, respectively

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

Additional paid-in capital

6 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Cost of goods sold

2 unchanged sentences

Research and development

FiberCel litigation costs, net

Litigation costs, net

Total operating expenses

Loss from operations

Interest expense

Loss on revaluation of warrant liability

Interest expense, net

(Gain) loss on revaluation of warrant liability

Other expense (income), net

Loss before provision for income taxes

Income tax expense (benefit)

Net loss from continuing operations

Income (loss) before provision for income taxes

Income tax expense

Net income (loss) from continuing operations

Income (loss) from discontinued operations

Net loss from continuing operations per share - 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

Net income (loss)

Undistributed net income to participating securities

Net income (loss) attributable to common stockholders

dilutive gain on revaluation of warrant liability, net of addback for undistributed net income to participating securities

Net loss attributable to common stockholders for diluted earnings per share

Net income (loss) attributable to common stockholders from continuing operations per share - basic

Net loss per share attributable to common stockholders from continuing operations per share - diluted

Net income (loss) attributable to common stockholders from discontinued operations per share - basic and diluted

Net income (loss) attributable to common stockholders per share - basic

Net loss attributable to common stockholders per share - diluted

Weighted average common shares outstanding - basic

Weighted average common shares outstanding - diluted

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

3 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

Exercise of stock options

Exercise of Common Warrants

Issuance of common stock under Employee Stock Purchase Plan

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

Stock-based compensation

Balance, September 30, 2024

Balance, June 30, 2023

Issuance of common stock in connection with private placement, net of issuance costs of $ 0.2 million

Issuance of common stock under Employee Stock Purchase Plan

Vesting of restricted stock units

Stock-based compensation

Balance, September 30, 2023

Stockholders'

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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

Exercise of stock options

Exercise of Common Warrants and Prefunded Warrants

Issuance of common stock under Employee Stock Purchase Plan

1 unchanged sentence

Stock-based compensation

Balance, June 30, 2024

Balance, September 30, 2024

Balance, December 31, 2022

Issuance of common stock in connection with private placement, net of issuance costs of $ 0.2 million

Issuance of common stock under Employee Stock Purchase Plan

Vesting of restricted stock units

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

Stock-based compensation

Balance, June 30, 2023

Balance, September 30, 2023

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

1 unchanged sentence

(In Thousands)

Six Months Ended

Nine Months Ended

September 30,

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

1 unchanged sentence

Gain on sale of Orthobiologics Business

Loss on revaluation of warrant liability

(Gain) loss on revaluation of warrant liability

Gain on revaluation of revenue interest obligation

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Expenditures for property, plant and equipment

Net cash provided by (used in) investing activities

Net cash used in investing activities

FINANCING ACTIVITIES:

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

Proceeds from private placement and warrants, net of offering costs of $ 0.2 million

Repayments of long-term debt

3 unchanged sentences

Payments for taxes upon vesting of restricted stock units

Proceeds from issuance of common stock under Employee Stock Purchase Plan

Proceeds from stock option exercises and issuance of common stock under ESPP

Net cash provided by financing activities

Net decrease in cash and restricted cash

Net increase (decrease) in cash and cash equivalents

Cash and cash equivalents, beginning of period

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Organization and Description of Business

(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.

(together with its consolidated subsidiaries, "Elutia” or the “Company”) is a commercial-stage company leveraging its unique understanding of biologics combined with local drug delivery 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.

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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 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 financial information as of September 30, 2024 and for the three and nine months ended September 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.

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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 or six months ended June 30, 2024.

There were no earn-out payments earned or paid in the nine months ended September 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 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.

In the purchase agreement, the Company has retained the liabilities arising out of the VBM and FiberCel matters, as described in Note 10, both of which products were part of the Orthobiologics Business.

The Company recognized a gain of $ 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.

The Company is aware of certain indemnity-related claims raised, including a claim from a former supplier alleging breach of contract.

Based on the Company’s ongoing assessment

of these claims, along with the remaining indemnity holdback of $ 1.5 million, the Company does not consider a loss to be probable or estimable as of September 30, 2024.

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 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.

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 nine months ended September 30, 2023.

Unless indicated otherwise, the information in the notes to condensed consolidated financial statements for the three and nine months ended September 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 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.

For the nine months ended September 30, 2024, the Company incurred a net loss of $ 44.9 million, and as of September 30, 2024, the Company had an accumulated deficit of $ 220.5 million.

In addition, during the nine months ended September 30, 2024, the Company used $ 10.4 million of cash in operating activities and expects to continue to incur cash outflows during the remainder of 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.

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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.

Reclassifications

Certain reclassifications have been made to prior year amounts to conform to current year financial statement presentation.

Use of Estimates

3 unchanged sentences

Actual results could differ from those estimates.

Net Loss per Share Attributable to Common Stockholders

Net Income (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.

Basic net income per share is computed by dividing net income available to each class of shares by the weighted-average number of shares of common stock and participating securities outstanding during the period.

Participating securities include common and prefunded warrants.

Net loss is not allocated to participating securities as they do not have an obligation to fund losses.

For purposes of the diluted net income per share attributable to common stockholders calculation, stock options, restricted stock units (“RSUs”) and warrants are considered to be common stock equivalents.

See Note 11 for further discussion of net income per share attributable to common stockholders.

Fair Value of Financial Instruments

43 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.

During the nine months ended September 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, upon execution, collectively resulted in operating lease right-of-use assets and liabilities of $ 1.4 million.

Such new leases will result in future cash obligations of $ 0.2 million for the three 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

3 unchanged sentences

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.

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.

2 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 and six months ended June 30, 2024 or 2023.

There were no impairment losses for the three and nine months ended September 30, 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 9) are classified as liabilities and are recorded at fair value.

The warrants issued in connection with the September 2023 private placement and June 2024 registered direct offering (see Note 9) 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.

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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.

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.

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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 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.

The Company’s cash balances with individual institutions may at times exceed the federally insured limits.

There were two customers that represented 15 % and 10 %, respectively, of the Company’s net sales for the nine months ended September 30, 2024 and 15 % and 8 % of the Company’s net sales for the three months ended September 30, 2024.

Additionally, there was one customer that represented 14 % of the Company’s accounts receivable as of September 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 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.

For the three and nine months ended September 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.

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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.

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.

The Company does not expect the adoption of this guidance to have any material effects on its financial condition, results of operations or cash flows and upon adoption expects that any impact would be limited to additional segment expense disclosures in the footnotes to the Company’s consolidated financial statements.

The Company is currently evaluating any new disclosures that may be required upon adoption of ASU 2023-07.

In December 2023, the FASB issued ASU No.

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Early adoption is permitted.

The Company is currently evaluating the potential impact of this guidance on its condensed consolidated financial statements.

The Company does not expect the adoption of this guidance to have any material effects on its financial condition, results of operations or cash flows.

The Company is currently evaluating any new disclosures that may be required upon adoption of ASU 2023-09.

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 and six months ended June 30, 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 nine months ended September 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 and six months ended June 30, 2023.

The following table shows the financial results of the discontinued operations for the three and nine months ended September 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

Nine Months Ended

September 30,

Cost of goods sold

4 unchanged sentences

Interest expense

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

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

Nine Months Ended

September 30,

Significant operating non-cash reconciliation items

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

As of September 30, 2024, the Company had 389,075 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 six months ended June 30, 2024 is as follows:

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

Number of Shares

1 unchanged sentence

Outstanding, December 31, 2023

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.

Outstanding, September 30, 2024

Vested and exercisable, September 30, 2024

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

As of September 30, 2024, there was approximately $ 3.8 million of total unrecognized compensation expense related to unvested stock options.

These costs are expected to be recognized over a weighted-average period of 2.0 years.

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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 and six months ended June 30, 2024 and 2023:

Six Months Ended

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

Nine Months Ended

September 30,

Expected term (years)

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Dividend yield

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.

During the nine months ended September 30, 2024, the Company granted 397,640 options that vested on a defined date following the U.S.

Food and Drug Administration’s (“FDA”) clearance of the Company’s EluPro product (referred to as CanGarooRM during development) product.

With the FDA’s approval of EluPro in June 2024, such vesting occurred in August 2024.

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

During the nine months ended September 30, 2024, 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 June 30, 2024, there were a total of 345,011 stock options outstanding that are market condition stock option awards.

As of September 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 six months ended June 30, 2024 is as follows:

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

Number of Shares

1 unchanged sentence

Unvested, December 31, 2023

Unvested, June 30, 2024

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

( 1,004,270 )

Unvested, September 30, 2024

The total fair value of the RSUs granted during the nine months ended September 30, 2024 was $ 8.3 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.

1 unchanged sentence

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.

As of September 30, 2024, $ 4.9 million of unrecognized compensation costs related to RSUs is expected to be recognized over a weighted average period of 2.2 years.

During the nine months ended September 30, 2024, the Company granted 560,625 RSUs that vested 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 occurred in August 2024.

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

The Company has also granted 162,500 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 June 30, 2024, there were 252,394 RSUs outstanding that were market condition RSU awards.

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

Employee Stock Purchase Plan

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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 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.

As of September 30, 2024, the total shares of Class A common stock authorized for issuance under the ESPP was 774,341 , of which 471,126 remained available for future issuance.

During the three and nine months ended September 30, 2024, shares of Class A common stock totaling 31,199 and 96,658 , respectively were issued under the ESPP.

Stock-Based Compensation Expense

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

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

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Sales and marketing

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Inventory was comprised of the following (in thousands):

September 30,

Raw materials

2 unchanged sentences

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.

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 in May 2023, March 2024 and September 2024 (as amended, the “SWK Loan Facility”).

An initial draw of $ 21 million was made in August 2022, and an additional $ 4 million was made on December 14, 2022.

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 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.

Principal amortization of the SWK Loan Facility, as amended in September 2024, starts in November 2025.

Principal payments during the amortization period will be limited based on revenue-based caps, although as of September 30, 2024, no such caps are applicable and quarterly principal payments will be 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 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.

As of September 30, 2024, Elutia was in compliance with its financial covenants under the agreement governing the SWK Loan Facility (“SWK Loan Facility Agreement”).

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 13.6 % 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.

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 $ 112,500 .

The weighted average interest rate on the SWK Loan Facility was 13.5 % for the three months ended September 30, 2024 and 2023 and 13.5 % and 13.1 % for the nine months ended September 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 and six months ended June 30, 2024 and 2023.

The closing of the divestiture of the Orthobiologics Business in November 2023

triggered the mandatory prepayment of $ 4.0 million.

Of such amount, $ 2.0 million wa s paid shortly after closing of the divestiture in 2023 and the remainder was paid in February 2024 based on mutual agreement between the parties.

As noted above, the Company executed an amendment to the SWK Loan Facility in September 2024 which, among other items, served to defer the commencement of principal repayment from November 2024 to November 2025.

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

September 30,

Term Loan Facility, net of unamortized discount and deferred financing costs

1 unchanged sentence

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 June 30, 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 September 30, 2024 and December 31, 2023.

Revenue Interest Obligation

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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 recently-approved EluPro product.

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 recently-approved EluPro.

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.

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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.

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.

Total payments to Ligand during the nine months ended September 30, 2024 were $ 6.3 million comprised of the aforementioned 2023 amounts due and 2024 quarterly minimum payments of $ 2.2 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 during the six months ended June 30, 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 $ 0.4 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.

The resulting gain was recognized as other income in the accompanying condensed consolidated statement of operations.

Interest expense related to the Revenue Interest Obligation of approximately $ 0.4 million and $ 0.6 million was recorded for the three months ended September 30, 2024 and 2023, respectively and approximately $ 1.3 million and $ 1.6 million was recorded for the nine months ended September 30, 2024 and 2023, respectively.

As of September 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.

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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 EluPro product or (b) five years from the date of the offering, at an exercise price per share of $ 1.4275 .

Each Common Warrant was exercisable until July 31, 2024, the date which was 30 trading days after the clearance by the FDA of the Company’s EluPro product, at an exercise price per share of $ 1.4275 .

As discussed below, all Common Warrants were exercised before they expired.

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 Offering, of which $ 0.4 million were allocated to the issuance of the common stock.

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 ($ 0.2 million as of September 30, 2023) 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 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.

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 deliver warrant shares upon exercise, certain provisions of which may require the Company to adjust the settlement value in a manner 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:

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

Such expenses totaled $ 0.3 million during the nine months ended September 30, 2024, and $ 0.8 million during the three and nine months ended September 30, 2023.

No such expenses were incurred in the three months ended September 30, 2024.

As noted above, the last exercise date for the Common Warrants was July 31, 2024.

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

Certain of these exercises ultimately resulted in their conversion to 2023 Prefunded Warrants.

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

Common Warrants

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Outstanding, December 31, 2023

Conversions of Common Warrants to 2023 Prefunded Warrants

( 3,896,130 )

Outstanding, June 30, 2024

( 7,137,674 )

Outstanding, September 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):

The following table provides a rollforward of the aggregate fair value of the warrant liability for the nine months ended September 30, 2024 (in thousands):

Common Warrants

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Fair value upon issuance

Fair value adjustment

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:

Loss on revaluation of warrant liability

Conversions of Common Warrants to 2023 Prefunded Warrants

Warrant liability, September 30, 2024

The fair value adjustments, which include a $ 12.7 million gain recognized during the three months ended September 30, 2024, were driven mainly by changes in the Company’s stock price since December 31, 2023 and have been recorded as (gain) loss on revaluation of warrant liability in the accompanying condensed consolidated statements of operations for the three and nine months ended September 30, 2024.

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

Common stock price

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Dividend yield

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.

2 unchanged sentences

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”).

Elutia has entered into a license agreement with Cook Biotech (“Cook”), now owned by RTI Surgical, 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.

2 unchanged sentences

The supply agreement expires on the same date as the related license agreement.

No royalties were paid to Cook during the three and six months ended June 30, 2024 or 2023.

No royalties were paid to Cook during the three and nine months ended September 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.

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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.

As of September 30, 2024, there were 79 active lawsuits or claims against the Company, including 26 lawsuits or claims where settlements have been reached but not yet been paid by quarter-end.

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 various U.S.

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

federal courts and in state courts in Indiana, Delaware, Florida, Maryland 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.

As also previously disclosed, 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”).

As of September 30, 2024, there were 15 active lawsuits or claims 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.

Such lawsuits were filed in various U.S.

federal courts and in the California state court.

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

5 unchanged sentences

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.

On July 31, 2024, Medtronic responded to the complaint by 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.

On October 15, 2024, Medtronic filed a motion to dismiss Elutia’s claims, and a hearing is set for January 9, 2025.

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.

2 unchanged sentences

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 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 total, Elutia’s liability in 31 of the cases has been settled for a total cash outlay of $ 9.6 million.

For the remaining 79 cases, the Company estimated a probable loss related to each case and has recorded a liability at a total estimated amount of $ 20.4 million at September 30, 2024, which is recorded as Contingent Liability for Legal Proceedings in the accompanying condensed consolidated balance sheets.

Such liability includes $ 10.5 million for which the settlements have been reached but have not yet been paid.

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.

5 unchanged sentences

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 total, Elutia’s liability in nine of the cases has been settled for a total cash outlay of approximately $ 1.0 million.

For the remaining 26 cases, which includes unasserted claims that the Company believes are probable of assertion, the Company estimated a probable loss at an estimated amount of $ 3.9 million at September 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 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.

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.

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.

1 unchanged sentence

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

Receivables 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.

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.

1 unchanged sentence

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 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

These receivables at September 30, 2024 totaled $ 4.6 million, with $ 0.4 million relating to the FiberCel Litigation and $ 4.2 million related to the VBM Litigation, respectively and are recorded as Receivables of Litigation Costs in the accompanying condensed consolidated balance sheets.

The Company had been pursuing additional recovery amounts in respect of indemnity and contribution claims with certain insurance providers.

During the three months ended September 30, 2024, the Company resolved these matters through a settlement entered into in September 2024.

The settlement totaled $ 1.6 million, with such recovery being recognized during the three months ended September 30, 2024 and recorded within Litigation costs, net in the accompanying condensed consolidated statement of operations.

As of both September 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 Income (Loss) Per Share

Three Months Ended

Six Months Ended

Nine Months Ended

(in thousands, except share and per share data)

Net loss from continuing operations

Income (loss) from discontinued operations

Weighted average number of common shares - basic and diluted

Net loss from continuing operations per share - basic and diluted

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

Net loss per share - basic and diluted

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:

September 30,

Net income (loss) from continuing operations

Undistributed net income to participating securities

Net income (loss) from continuing operations attributable to common stockholders

Income (loss) attributable to common stockholders from discontinued operations

Net income (loss) attributable to common stockholders

dilutive gain on revaluation of warrant liability, net of addback for undistributed net income to participating securities

Net loss attributable to common stockholders for diluted earnings per share

Weighted average number of common shares - basic

Effect of dilutive common and prefunded warrants

Weighted average number of common shares - diluted

Net income (loss) attributable to common stockholders from continuing operations per share - basic

Net loss per share attributable to common stockholders from continuing operations per share - diluted

Net income (loss) attributable to common stockholders from discontinued operations per share - basic and diluted

Net income (loss) attributable to common stockholders per share - basic

Net loss attributable to common stockholders per share - diluted

Basic net loss per share is computed by dividing net loss for the period by the weighted average number of common shares outstanding during the period.

Diluted net loss per share is computed by dividing the net loss, adjusted for gains on the revaluation of warrant liability (see Note 9), by the weighted average number of common shares outstanding for the period, adjusted for the dilutive effect of shares of common stock equivalents resulting from the exercise of the Common Warrants, 2023 Prefunded Warrants and 2024 Prefunded Warrants.

The treasury stock method was used to calculate the potential dilutive effect of these common stock equivalents.

Potentially dilutive shares were excluded from the computation of diluted net loss when their effect was antidilutive.

The following outstanding common stock equivalents as of the end of their respective periods were excluded from the computation of diluted net loss per share for the periods presented because including them would have been anti-dilutive:

Three Months Ended

Nine Months Ended

September 30,

Options to purchase common stock

7 unchanged sentences

These segments are based on financial information that is utilized by the Company’s chief operating decision maker to assess performance and allocate resources.

This financial information does not include the assets by segment.

The Company determined its operating and reportable segments to be consistent with its major product groupings – Device Protection, Women’s Health and Cardiovascular.

1 unchanged sentence

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Device protection

4 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Gross profit:

6 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Gross profit, excluding intangible asset amortization

3 unchanged sentences

Research and development

FiberCel litigation costs, net

Litigation costs, net

Loss from operations

Interest expense

Loss on revaluation of warrant liability

Interest expense, net

(Gain) loss on revaluation of warrant liability

Other expense (income), net

Loss before provision for income taxes

Income (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