Item 2. Management’s Discussion and Analysis
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion and analysis should be read in conjunction with our unaudited condensed consolidated financial statements and the related notes included elsewhere in this Quarterly Report, as well as the audited financial statements and the related notes thereto, and the discussion under Part II, Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our Annual Report. This discussion contains forward-looking statements reflecting our current expectations, estimates, plans and assumptions concerning events and financial trends that involve risks and may affect our future operating results and financial position. Actual results and the timing of events may differ materially from those contained in these forward-looking statements due to a number of factors, including those discussed in the sections entitled “Forward-Looking Statements” and Part II, Item 1A. “Risk Factors” of this Quarterly Report and in the section entitled “Risk Factor Summary” and in Part I, Item IA. “Risk Factors” of our Annual Report.
Overview
At Elutia, our mission is to humanize medicine so that patients can thrive without compromise. As a commercial-stage company, we seek to leverage our 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. These complications include infection, device migration, erosion, implant rejection, non-union of implants, fibrosis and scar formation.
We estimate that in 2024, more than 700,000 surgical procedures were performed annually in the United States involving the implantation of medical devices such as pacemakers, defibrillators, neurostimulators or tissue expanders for breast reconstruction. This number has been driven by advances in medical device technologies, reimbursement models focused on patient outcomes, and an aging population with a growing incidence of comorbidities, including diabetes, obesity and cardiovascular and peripheral vascular diseases. These comorbidities can exacerbate various immune responses and contribute to other complications upon device implant.
Our products are targeted to address unmet clinical needs with the goal of promoting healthy tissue formation and avoiding complications associated with medical device implants, such as scar tissue formation, capsular contraction, erosion, migration and infection. We currently focus on two priority markets – Device Protection and Women’s Health.
In Device Protection, we sell EluPro, a unique bioenvelope designed to mitigate cardiac implantable electronic device complications including infection, device migration and erosion. The bioenvelope features a biomatrix comprised of extracellular matrix, which supports healthy wound healing and may facilitate re-operative procedures by reducing scar formation and fibrosis. Additionally, EluPro is embedded with the powerful antibiotics rifampin and minocycline, which are gradually released into the surrounding tissue over several weeks post-implantation to provide antimicrobial protection. Currently, EluPro is the only drug-eluting biomatrix (“DEB”) offering in the U.S. implantable electronic device protection market. Alongside EluPro, we market the CanGaroo bioenvelope, our first generation product, which uses the same biomatrix but does not contain antibiotics.
In Women’s Health, we have developed both patented and proprietary technologies, culminating in the creation of SimpliDerm—a novel biological matrix that leverages the inherent science of natural healing processes. SimpliDerm’s design uses human-based hydrated acellular dermal matrix (“ADM”) with heightened structural integrity and superior handling capabilities, which may mitigate inflammation and enhance tissue incorporation, leading to a better healing experience as compared to other ADM products. We believe that these acellular dermal matrices represent an ideal choice for tissue repair and reconstruction, finding applications in fields such as breast reconstruction, sports medicine, hernia repair and trauma reconstruction.
With respect to pipeline products, we plan to expand our DEB offerings beyond EluPro and are pioneering DEBs to help solve problems unaddressed by available options. We also intend to leverage our DEB platform technology by developing and commercializing products for markets with similar unmet needs, including breast reconstruction and neurostimulation.
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We sell EluPro and CanGaroo in the United States using our direct sales force and our commercial partner, Boston Scientific, which acts as a sales agent and gives us access to approximately 900 sales representatives and clinical specialists to further expand our footprint and accelerate our sales. Our primary customers are electrophysiologists, cardiac surgeons and neurosurgeons. Our direct sales force is focused on gaining additional market access and driving market penetration, not only by selling our products, but also, where appropriate, by managing our commercial partners and providing technical assistance for selling our products. Our sales team provides the critical knowledge of the advantages that EluPro and CanGaroo provide for patients over those of our competitors. We ship the product directly to hospitals.
We sell SimpliDerm through independent sales agents to plastic and reconstructive surgeons. Additionally, in March 2023, we entered into an agreement with Sientra, a medical aesthetics company uniquely focused on plastic surgery, to expand the distribution of SimpliDerm. In April 2024, the agreement was acquired by Tiger Aesthetics Medical (“Tiger”) in connection with their asset acquisition of Sientra. Under the agreement terms, Elutia has granted Tiger certain non-exclusive rights in the United States to market, sell and distribute SimpliDerm. This agreement with Tiger gives us access to approximately 50 sales representatives to further expand our footprint and accelerate our sales.
We also sell legacy products into the Cardiovascular market. In Cardiovascular, we sell our specialized porcine small intestine submucosa, which is based on the same biomatrix used to make EluPro and CanGaroo, for use as an intracardiac and vascular patch as well as for pericardial reconstruction. In addition, our TYKE product is designed for use in the neonatal patient population. From May 2017 through March 2023, we sold these products directly to hospitals and other healthcare facilities primarily through our sales force and independent sales agents. In April 2023, we entered into an exclusive distribution agreement with LeMaitre Vascular through which we sold these products in the United States. On May 1, 2025, the exclusive distribution agreement terminated and we began selling these products directly to hospitals and other healthcare facilities through independent sales agents.
We produce all of our EluPro, CanGaroo and cardiovascular products at our manufacturing facility in Roswell, Georgia and stock inventory of raw materials, supplies and finished goods at this location. We rely on a single or limited number of suppliers for certain raw materials and supplies. We have a long-term supply agreement with Cook Biotech, now owned by Evergen, the porcine tissue supplier of our raw materials for EluPro, CanGaroo and our cardiovascular products. SimpliDerm was historically processed by us at our Richmond, California facility; however, that facility was included with the divestiture of the Orthobiologics Business, and SimpliDerm is now provided to us through a long-term supply agreement with the purchaser of the Orthobiologics Business, Berkeley Biologics, LLC (“Berkeley”). We intend to develop our own in-house capability for the production of certain components of EluPro as well as the potential internal production of current and future Women’s Health products. To this end, in March 2025, we signed a lease for 26,598 square feet of production, laboratory and administrative space in Gaithersburg, Maryland and moved our executive offices to that location in May 2025. We anticipate being able to internally produce certain components of EluPro in the fourth quarter of 2025.
We have focused much of our attention recently on EluPro, which was cleared for marketing by the FDA in June 2024 and is indicated for use with implantable electronic devices including cardiac and neurostimulator devices. We believe the Company’s success is highly dependent on the successful commercialization, marketing and sale of EluPro, as well as the extension of our DEB technology into potential adjacent applications. Furthermore, we believe the commercialization and marketing efforts with respect to EluPro will require significant investments in time and resources. However, there can be no assurance that we will have or be able to obtain sufficient resources to make the necessary investments in order to increase the sales and market penetration of EluPro, or that if made, such investments will yield the results sought.
Discontinued Operations – Sale of Orthobiologics Business
On November 8, 2023, we completed the sale of substantially all of the assets relating to our former Orthobiologics Business to Berkeley. The Orthobiologics Business was comprised of assets relating to researching, developing, administering, insuring, operating, commercializing, manufacturing, selling and marketing our Orthobiologics products, and the business of contract manufacturing of particulate bone, precision milled bone, cellular bone matrix, acellular dermis, soft tissue and other products. The assets sold represent the entirety of our Orthobiologics segment. In the sale, we received $14.6 million, and we may earn up to an additional $20 million, in the aggregate, in the form of earn-
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out payments. The earn-out payments are equal to 10% of the actual revenue earned by Berkeley in each of the five years after the closing of the sale from sales of specified Orthobiologics products under the purchase agreement (including improvements, modifications, derivatives and enhancements related to those products). There have been no earn-out payments made to date. 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 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 us. In the purchase agreement, the Company has retained the liabilities arising out of the viable bone matrix (“VBM”) and FiberCel matters, as described in Note 9, both of which products were part of the Orthobiologics Business. We recognized a gain of $6.0 million on the sale of the Orthobiologics Business in 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. Should we 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.
Product Recalls
In June 2021, we issued a voluntary recall pertaining to a single donor lot of our FiberCel Fiber Viable Bone Matrix, a bone repair product formerly manufactured under a contract with Medtronic PLC, which also distributed the product. The recall was issued after learning of postsurgical infections reported in several patients treated with the product, including some patients that tested positive for tuberculosis. Additionally, i n July 2023, we announced a voluntary recall of a single lot of one of our viable bone matrix (“VBM”) products and the market withdrawal of all of our VBM products produced after a specified date. Notice of the voluntary recall was issued to centers after we learned of post-surgical tuberculosis infections in two patients treated with product from a single donor lot of our VBM product. Both of these products were part of our Orthobiologics Business, which we have fully divested as described above. For information about legal proceedings in which we are involved and the possible future financial implications, see Note 9 to the condensed consolidated financial statements included elsewhere in this Quarterly Report.
Components of Our Results of Operations
Net Sales
We recognize revenue on the sale of our products. Our Device Protection products are sold to hospitals and other healthcare facilities primarily through our direct sales force, commercial partners or independent sales agents. Our Women’s Health products are sold directly to hospitals and other healthcare facilities through independent sales agents or through our distribution agreement with Tiger. From April 2023 through April 2025, our cardiovascular products were sold through a distribution agreement with LeMaitre Vascular. In April 2025, this agreement with LeMaitre Vascular terminated, and, in May 2025, we began selling these products directly to hospitals and other healthcare facilities through independent sales agents.
Expenses
In recent years, we have incurred significant costs in the operation of our business. We expect that our recurring operating costs will largely stabilize, or increase at modest rates, in the near future through the identification of efficiencies as we grow. We may, however, still experience more significant expense increases to the extent we expand our sales and marketing, product development and clinical and research activities. As a result, we will need to generate significant net sales in order to achieve profitability. Below is a breakdown of our main expense categories and the related expenses incurred in each category:
Cost of Goods Sold
Our cost of goods sold relate to purchased raw materials and the processing and conversion costs of such raw materials consisting primarily of salaries and benefits, supplies, quality control testing and the manufacturing overhead incurred at our processing facility in Roswell, Georgia. The Roswell facility has additional capacity, which if utilized,
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would further leverage our fixed overhead. Cost of goods sold also includes the amortization of intangibles generated from the CorMatrix Acquisition in 2017.
Sales and Marketing Expenses
Sales and marketing expenses are primarily related to our direct sales force, consisting of salaries, commission compensation, fringe benefits, meals and other expenses. Auto and travel costs also contribute to sales and marketing expenses. Outside of our direct sales force, we incur significant expenses relating to commissions to our CanGaroo and SimpliDerm commercial partners and independent sales agents. Additionally, this expense category includes distribution costs as well as market research, trade show attendance, advertising and public relations related to our products, and customer service expenses.
General and Administrative Expenses
General and administrative (“G&A”) expenses consist primarily of compensation, consulting, legal, human resources, information technology, accounting, insurance and general business expenses. Our G&A expenses have increased as a result of operating as a public company, especially as a result of hiring additional personnel and incurring greater director and officer insurance premiums, greater investor relations costs, and additional costs associated with accounting, legal, tax-related and other services associated with maintaining compliance with exchange listing and SEC requirements.
Research and Development Expenses
Research and development (“R&D”) expenses consist primarily of salaries and fringe benefits, laboratory supplies, clinical studies and outside service costs. Over the last several years, our product development efforts have primarily related to activities associated with the development of EluPro, our initial DEB product offering, which gained FDA clearance in June 2024. Future development efforts are expected to focus on (i) expanding our EluPro offering with additional sizes and product features, (ii) developing new products within the DEB product portfolio and (iii) conducting clinical studies to validate the performance characteristics of our products and to capture patient data necessary to support our commercial efforts.
Litigation Costs, net
Litigation costs, net consist primarily of legal fees and the estimated and actual costs to resolve the outstanding FiberCel and VBM litigation cases offset by the estimated and actual amounts recoverable or recovered under insurance, indemnity and contribution agreements for such costs.
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Results of Operations
Comparison of the Three Months Ended June 30, 2025 and 2024
Three Months Ended June 30,
2025
2024
Change 2024 / 2025
% of Net
% of Net
(in thousands, except percentages)
Amount
Sales
Amount
Sales
$
%
Net sales
$
6,263
100.0
%
$
6,291
100.0
%
$
(28)
(0.4)
%
Cost of goods sold
3,205
51.2
%
3,492
55.5
%
(287)
(8.2)
%
Gross profit
3,058
48.8
%
2,799
44.5
%
259
9.3
%
Sales and marketing
3,778
60.3
%
3,330
52.9
%
448
13.5
%
General and administrative
3,695
59.0
%
4,689
74.5
%
(994)
(21.2)
%
Research and development
1,456
23.2
%
1,001
15.9
%
455
45.5
%
Litigation costs, net
4,004
63.9
%
2,289
36.4
%
1,715
74.9
%
Total operating expenses
12,933
206.5
%
11,309
179.8
%
1,624
14.4
%
Loss from operations
(9,875)
(157.7)
%
(8,510)
(135.3)
%
(1,365)
16.0
%
Interest expense, net
518
8.3
%
1,267
20.1
%
(749)
(59.1)
%
Gain on revaluation of warrant liability
(2,233)
(35.7)
%
18,337
291.5
%
(20,570)
NM
Other expense (income), net
1,442
23.0
%
257
4.1
%
1,185
NM
Loss before provision for income taxes
(9,602)
(153.3)
%
(28,371)
(451.0)
%
18,769
(66.2)
%
Income tax expense
8
0.1
%
(11)
(0.2)
%
19
(172.7)
%
Net income (loss) from continuing operations
(9,610)
(153.4)
%
(28,360)
(450.8)
%
18,750
(66.1)
%
Discontinued operations
—
—
%
180
2.9
%
(180)
(100.0)
%
Net income (loss)
$
(9,610)
(153.4)
%
$
(28,180)
(447.9)
%
$
18,570
65.9
%
NM = not meaningful
Net Sales
Net sales information for our products is summarized as follows:
Three Months Ended June 30,
2025
2024
% of Net
% of Net
Change 2024 / 2025
(in thousands, except percentages)
Amount
Sales
Amount
Sales
$
%
Products:
Device Protection
$
3,516
56.1
%
$
2,639
41.9
%
$
877
33.2
%
Women's Health
2,011
32.1
%
2,571
40.9
%
(560)
(21.8)
%
Cardiovascular
736
11.7
%
1,081
17.2
%
$
(345)
(31.9)
%
Total Net Sales
$
6,263
100.0
%
$
6,291
100.0
%
$
(28)
(0.4)
%
Total net sales were $6.3 million in both the three months ended June 30, 2025 and 2024. While total net sales were essentially unchanged, the revenues from Device Protection increased by $0.9 million compared to the prior year’s second quarter due to volume growth from EluPro, for which the full commercial launch commenced in January 2025 after FDA clearance in June 2024. Such increase, however, was offset by declines in Women’s Health and Cardiovascular. The decline in Women’s Health was caused by various physician users of SimpliDerm who transferred to hospitals where SimpliDerm is not yet available and by decreased sales generated by Tiger. With respect to Cardiovascular, as noted above, the exclusive distribution agreement with LeMaitre Vascular terminated in April 2025, and we recommenced selling these products directly through independent sales agents in May 2025. We anticipate Cardiovascular sales will increase in future quarters of 2025, both through volume growth and higher unit prices as such sales will be at end-user pricing versus contracted prices.
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Cost of Goods Sold
Cost of goods sold and gross margin percentage information for our products is summarized as follows:
Three Months Ended June 30,
2025
2024
Gross
Gross
Change 2024 / 2025
(in thousands, except percentages)
Amount
Margin %
Amount
Margin %
$
%
Products:
Device Protection
$
1,332
62.1
%
$
1,068
59.5
%
$
264
24.7
%
Women's Health
895
55.5
%
1,161
54.8
%
(266)
(22.9)
%
Cardiovascular
129
82.4
%
414
61.7
%
(285)
(68.8)
%
Cost of goods sold, excluding intangible asset amortization
2,356
62.4
%
2,643
58.0
%
(287)
(10.9)
%
Intangible asset amortization expense
849
(13.6)
%
849
(13.5)
%
—
—
%
Total Cost of Goods Sold
$
3,205
48.8
%
$
3,492
44.5
%
$
(287)
(8.2)
%
Total cost of goods sold decreased $0.3 million to $3.2 million in the three months ended June 30, 2025 compared to $3.5 million in the three months ended June 30, 2024. Gross margin was 48.8% in the three months ended June 30, 2025 compared to 44.5% in the three months ended June 30, 2024. Gross margin, excluding intangible asset amortization, was 62.4% in the three months ended June 30, 2025 compared to 58.0% in the three months ended June 30, 2024. The improvement between years was due primarily to favorability in Device Protection, where the gross margins in the 2024 period were impacted by certain production inefficiencies that were not present in the 2025 period with robust production being now required to ensure the supply of EluPro keeps pace with anticipated sales growth.
Operating Expenses
Sales and Marketing
Sales and marketing expenses increased $0.5 million, or 13.5%, to $3.8 million in the three months ended June 30, 2025 compared to $3.3 million in the three months ended June 30, 2024. As a percentage of sales, sales and marketing expenses increased to 60.3% in the three months ended June 30, 2025 from 52.9% in the three months ended June 30, 2024. The increase was largely attributable to sales commission expense growth commensurate with higher Device Protection revenues and a return in the second quarter of 2025 to the direct selling of our Cardiovascular products. These increases were partially offset by lower non-cash equity compensation in the 2025 period.
General and Administrative
G&A expenses decreased $1.0 million, or 21.2%, to $3.7 million in the three months ended June 30, 2025 compared to $4.7 million in the three months ended June 30, 2024. As a percentage of net sales, G&A expenses decreased to 59.0% in the three months ended June 30, 2025 from 74.5% in the three months ended June 30, 2024. The decrease in expense was primarily driven by lower non-cash equity compensation in the 2025 period.
Research and Development
R&D expenses increased $0.5 million, or 45.5% to $1.5 million in the three months ended June 30, 2025 compared to $1.0 million in the three months ended June 30, 2024. The increase in expense reflects our heightened development activity in the 2025 period. Our future development efforts are focused on expanding our EluPro offering with additional sizes and product features, (ii) developing new products within the DEB product portfolio and (iii) conducting clinical studies to validate the performance characteristics of our products and to capture patient data necessary to support our commercial efforts.
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Litigation Costs, net
Litigation costs, net increased to $4.0 million in the three months ended June 30, 2025 compared to $2.3 million in the three months ended June 30, 2024. The increase in expense was primarily due to the continued evaluation of the contingent FiberCel liability. As of June 30, 2025, insurance remains available to cover the cost of the VBM Litigation and related defense costs; however, we have no more insurance to cover the cost of the FiberCel Litigation and the related defense costs. See further discussion in Note 9 to the condensed consolidated financial statements.
Interest Expense
Interest expense was approximately $0.5 million in the three months ended June 30, 2025 compared to $1.3 million in the three months ended June 30, 2024. The decrease was primarily due to the error correction related to the January 2024 Ligand amendment described in Note 7 to the condensed consolidated financial statements.
Comparison of the Six Months Ended June 30, 2025 and 2024
Six Months Ended June 30,
2025
2024
Change 2024 / 2025
% of Net
% of Net
(in thousands, except percentages)
Amount
Sales
Amount
Sales
$
%
Net sales
$
12,293
100.0
%
$
12,985
100.0
%
$
(692)
(5.3)
%
Cost of goods sold
6,778
55.1
%
7,343
56.5
%
(565)
(7.7)
%
Gross profit
5,515
44.9
%
5,642
43.5
%
(127)
(2.3)
%
Sales and marketing
6,809
55.4
%
6,639
51.1
%
170
2.6
%
General and administrative
7,566
61.5
%
9,745
75.0
%
(2,179)
(22.4)
%
Research and development
2,361
19.2
%
2,173
16.7
%
188
8.7
%
Litigation costs, net
6,576
53.5
%
4,074
31.4
%
2,502
61.4
%
Total operating expenses
23,312
189.6
%
22,631
174.3
%
681
3.0
%
Loss from operations
(17,797)
(144.8)
%
(16,989)
(130.8)
%
(808)
(4.8)
%
Interest expense, net
1,603
13.0
%
2,580
19.9
%
(977)
(37.9)
%
(Gain) loss on revaluation of warrant liability
(7,420)
(60.4)
%
27,974
215.4
%
(35,394)
NM
Other expense (income), net
1,547
12.6
%
(1,186)
(9.1)
%
2,733
NM
Loss before provision of income taxes
(13,527)
(110.0)
%
(46,357)
(357.0)
%
32,830
(70.8)
%
Income tax expense
16
0.1
%
(3)
(0.0)
%
19
(633.3)
%
Net loss from continuing operations
(13,543)
(110.2)
%
(46,354)
(357.0)
%
32,811
70.8
%
Discontinued operations
—
—
%
180
1.4
%
(180)
(100.0)
%
Net loss
$
(13,543)
(110.2)
%
$
(46,174)
(355.6)
%
$
32,631
70.7
%
NM = not meaningful
Net Sales
Net sales information for our products is summarized as follows:
Six Months Ended June 30,
2025
2024
% of Net
% of Net
Change 2024 / 2025
(in thousands, except percentages)
Amount
Sales
Amount
Sales
$
%
Products:
Device protection
$
6,595
53.6
%
$
4,996
38.5
%
$
1,599
32.0
%
Women's health
4,636
37.7
%
6,138
47.3
%
(1,502)
(24.5)
%
Cardiovascular
1,062
8.6
%
1,851
14.3
%
$
(789)
(42.6)
%
Total Net Sales
$
12,293
100.0
%
$
12,985
100.0
%
$
(692)
(5.3)
%
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Total net sales decreased $0.7 million, or 5.3%, to $12.3 million in the six months ended June 30, 2025 compared to $13.0 million in the six months ended June 30, 2024. Revenues from Device Protection increased compared to the prior year period due to volume growth from EluPro, for which the full commercial launch commenced in January 2025 after FDA clearance in June 2024. Such increase, however, was offset by declines in Women’s Health and Cardiovascular. The decline in Women’s Health was caused by various physician users of SimpliDerm who transferred to hospitals where SimpliDerm is not yet available and by decreased sales generated by Tiger. With respect to Cardiovascular, as noted above, the exclusive distribution agreement with LeMaitre Vascular terminated in April 2025 and we recommenced selling these products directly through independent sales agents in May 2025. We anticipate Cardiovascular sales will increase in future quarters of 2025 both through volume growth and higher unit prices as such sales will be at end-user pricing versus contracted prices.
Cost of Goods Sold
Cost of goods sold and gross margin percentage information for our products is summarized as follows:
Six Months Ended June 30,
2025
2024
Gross
Gross
Change 2024 / 2025
(in thousands, except percentages)
Amount
Margin %
Amount
Margin %
$
%
Products:
Device protection
$
2,758
58.2
%
$
1,796
64.1
%
$
962
53.6
%
Women's health
2,068
55.4
%
3,162
48.5
%
(1,094)
(34.6)
%
Cardiovascular
253
76.2
%
686
62.9
%
(433)
(63.1)
%
Cost of goods sold, excluding intangible asset amortization
5,079
58.7
%
5,644
56.5
%
(565)
(10.0)
%
Intangible asset amortization expense
1,699
(13.8)
%
1,699
(13.1)
%
—
—
%
Total Cost of Goods Sold
$
6,778
44.9
%
$
7,343
43.5
%
$
(565)
(7.7)
%
Total cost of goods sold decreased $0.6 million to $6.8 million in the six months ended June 30, 2025 compared to $7.3 million in the six months ended June 30, 2024. Gross margin was 44.9% in the six months ended June 30, 2025 compared to 43.5% in the six months ended June 30, 2024. Gross margin, excluding intangible asset amortization, was 58.7% in the six months ended June 30, 2025 compared with 56.5% in the six months ended June 30, 2024. While the overall changes between years in the gross margin measures were modest, the overall increase included growth in the Women’s Health gross margin due to certain non-recurring write-offs in the prior year period, and declines to the Device Protection gross margin due to the addition of EluPro in 2025, which currently carries a lower gross margin than CanGaroo.
Operating Expenses
Sales and Marketing
Sales and marketing expenses increased $0.2 million, or 2.6%, to $6.8 million in the six months ended June 30, 2025 compared to $6.6 million in the six months ended June 30, 2024. As a percentage of sales, sales and marketing expenses increased to 55.4% in the six months ended June 30, 2025 from 51.1% in the six months ended June 30, 2024. The increase was largely attributable to sales commission expense growth commensurate with higher Device Protection revenues and a return in the second quarter of 2025 to the direct selling of our Cardiovascular products. These increases were partially offset by lower non-cash equity compensation in the 2025 period.
General and Administrative
G&A expenses decreased $2.2 million, or 22.4%, to $7.6 million in the six months ended June 30, 2025 compared to $9.7 million in the six months ended June 30, 2024. As a percentage of net sales, G&A expenses decreased to 61.5% in the six months ended June 30, 2025 from 75.0% in the six months ended June 30, 2024. The decrease in expense resulted largely from the non-cash equity compensation grants made in January 2024.
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Research and Development
R&D expenses increased to $2.4 million in the six months ended June 30, 2025 compared to $2.2 million in the six months ended June 30, 2024. The increase in expense reflects our heightened development activity in the 2025 period. Our future development efforts are focused on expanding our EluPro offering with additional sizes and product features, (ii) developing new products within the DEB product portfolio and (iii) conducting clinical studies to validate the performance characteristics of our products and to capture patient data necessary to support our commercial efforts.
Litigation Costs, net
FiberCel litigation costs increased to $6.6 million in the six months ended June 30, 2025 compared to $4.1 million in the six months ended June 30, 2024. The increase in expense was primarily due to the continued evaluation of the contingent FiberCel liability. As of June 30, 2025, insurance remains available to cover the cost of the VBM Litigation and related defense costs; however, we have no more insurance to cover the cost of the FiberCel Litigation and the related defense costs. See further discussion in Note 9 to the condensed consolidated financial statements.
Interest Expense
Interest expense was approximately $1.6 million in the six months ended June 30, 2025 compared to $2.6 million in the six months ended June 30, 2024. The decrease was primarily due to the error correction related to the January 2024 Ligand amendment described in Note 7 to the condensed consolidated financial statements.
Non-GAAP Financial Measures
This Quarterly Report presents our gross margin, excluding intangible asset amortization, for the three and six months ended June 30, 2025 and 2024. We calculate gross margin, excluding intangible asset amortization, as gross profit, excluding amortization expense relating to intangible assets we acquired in the CorMatrix Acquisition, divided by net sales. Gross margin, excluding intangible asset amortization, is a supplemental measure of our performance, is not defined by or presented in accordance with U.S. generally accepted accounting principles (“GAAP”), has limitations as an analytical tool and should not be considered in isolation or as an alternative to our GAAP gross margin, gross profit or any other financial performance measure presented in accordance with GAAP. We present gross margin, excluding intangible asset amortization, because we believe that it provides meaningful supplemental information regarding our operating performance by removing the impact of amortization expense, which is not indicative of our overall operating performance. We believe this provides our management and investors with useful information to facilitate period-to-period comparisons of our operating results. Our management uses this metric and the results of the segments in assessing the health of our business and our operating performance, and we believe investors’ understanding of our operating performance is similarly enhanced by our presentation of this metric.
Although we use gross margin, excluding intangible asset amortization, as described above, this metric has limitations as an analytical tool and should not be considered in isolation or as a substitute for financial information presented in accordance with GAAP. In addition, other companies, including companies in our industry, may use other measures to evaluate their performance, which could reduce the usefulness of this non-GAAP financial measure as a tool for comparison.
The following table presents a reconciliation of our gross margin, excluding intangible asset amortization, for the six months ended June 30, 2025 and 2024, to the most directly comparable GAAP financial measure, which is our GAAP gross margin (in thousands).
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Three Months Ended
Six Months Ended
June 30,
June 30,
2025
2024
2025
2024
Net sales
$
6,263
$
6,291
$
12,293
$
12,985
Cost of goods sold
3,205
3,492
6,778
7,343
Gross profit
3,058
2,799
5,515
5,642
Intangible asset amortization expense
849
849
1,699
1,699
Gross profit, excluding intangible asset amortization
$
3,907
$
3,648
$
7,214
$
7,341
Gross margin
48.8
%
44.5
%
44.9
%
43.5
%
Gross margin, excluding intangible asset amortization
62.4
%
58.0
%
58.7
%
56.5
%
Seasonality
Historically, we have experienced seasonality in our first and fourth quarters, and we generally expect this trend to continue but may also see quarter-to-quarter fluctuations that are inconsistent with this trend. We have experienced and may in the future experience higher sales in the fourth quarter as a result of hospitals in the United States increasing their purchases of our products to coincide with the end of their budget cycles. Satisfaction of patient deductibles throughout the course of the year also results in increased sales later in the year, once patients have paid their annual insurance deductibles in full, which reduces their out-of-pocket costs. Conversely, our first quarter generally has lower sales than the preceding fourth quarter as patient deductibles are re-established with the new year, which increases their out-of-pocket costs.
Liquidity and Capital Resources
As of June 30, 2025, we had cash of approximately $8.5 million compared to $13.2 million as of December 31, 2024. Since inception, we have financed our operations primarily through amounts borrowed under our credit facilities, proceeds from our initial public offering (“IPO”), sales of our products and more recently, the sale of our Orthobiologics Business, proceeds from follow-on offerings and private placements of our common stock and warrants and substitution of certain cash payment obligations with stock issuances. Our historical cash outflows have primarily been associated with acquisitions and integration, manufacturing and administrative costs, general and marketing, research and development, clinical activity, purchase of property and equipment used in our production activities, litigation defense and settlement costs and investing in our commercial infrastructure through our direct sales force and our commercial partners in order to expand our presence and to promote awareness and adoption of our products. Such commercial infrastructure costs are likely to become more significant in the future as we further commercialize the newly approved EluPro product. As of June 30, 2025, our accumulated deficit was $243.1 million.
On February 4, 2025, we sold, in a registered direct offering (“2025 Registered Offering”) an aggregate of (i) 5,520,000 shares of our Class A common stock and (ii) prefunded warrants (“2025 Prefunded Warrants”) to purchase up to an aggregate of 480,000 shares of Class A Common Stock. The public offering price for each share of Class A Common Stock was $2.50, and the public offering price for each 2025 Prefunded Warrant was $2.499 , for aggregate gross proceeds of approximately $15.0 million, before deducting offering expenses. The 2025 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.
On June 18, 2024, we sold, in a registered direct offering (“2024 Registered Offering”) an aggregate of (i) 3,175,000 shares of our 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.
On September 21, 2023, we sold, in a private offering (“Private Offering”) an aggregate of (i) 6,852,811 units (“Common Units”), each comprised of (a) one share of our 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
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(b) a Common Warrant. The Common Units were sold at a purchase price of $1.4275 per unit, and the 2023 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 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. All Common Warrants were exercised by such date yielding exercise proceeds of $15.7 million in 2024. Certain of these exercises ultimately resulted in their conversion to 2023 Prefunded Warrants. 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 us).
We expect our losses to continue for the foreseeable future and these losses will continue to have an adverse effect on our financial position. Because of the numerous risks and uncertainties associated with our commercialization and development efforts, including our ability to successfully commercialize our new EluPro product, we are unable to predict when we will become profitable, and we may never become profitable. Our inability to achieve and then maintain profitability would negatively affect our business, financial condition, results of operations and cash flows.
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 equity or debt securities, as we did in the 2025 Registered Offering, 2024 Registered Offering and Private Offering described above; issue common stock to satisfy certain obligations in lieu of cash, as we did in the May 2025 Ligand amendment described below or pursue asset sale or other transactions, such as the sale of the Orthobiologics Business described above. In the future, the Company may also seek to obtain waivers, amendments or other accommodations with lenders or other obligees in order to help manage the Company’s indebtedness and other obligations, such as the May 2025 amendment to the SWK Loan Facility described below. However, such transactions may not be successful, and we may not be able to raise additional equity, refinance our debt instruments, sell assets or obtain waivers or amendments to our obligations on acceptable terms, or at all. As such, based on our current operating plans, we believe there is uncertainty as to whether our future cash flows along with our existing cash, issuances of additional equity and cash generated from expected future sales will be sufficient to meet our anticipated operating needs through twelve months from the financial statement issuance date. Due to these factors, there is substantial doubt about our ability to continue as a going concern within one year after the issuance of the financial statements.
Cash Flows for the Six Months ended June 30, 2025 and 2024
Six Months Ended
June 30,
2025
2024
(in thousands)
Net cash provided by (used in):
Operating activities
$
(17,109)
$
(6,973)
Investing activities
(392)
167
Financing activities
12,762
5,718
Net decrease in cash and cash equivalents
$
(4,739)
$
(1,088)
Cash Flows From Operating Activities
Net cash used in operating activities for the six months ended June 30, 2025 was $17.1 million compared to $7.0 million for the six months ended June 30, 2024. The year-over-year increase was primarily due to inventory growth in the 2025 period to keep pace with EluPro sales growth, as well as FiberCel settlement payments of $7.1 million in the six months ended June 30, 2025.
Cash Flows From Investing Activities
Net cash used in investing activities for the six months ended June 30, 2025 was $0.4 million compared to net cash provided by investing activities of $0.2 million for the six months ended June 30, 2024. The current year period reflects purchases of property and equipment for our production facilities. The prior year period reflects our receipt of an adjustment payment related to the final working capital received by Berkeley at the sale date of our Orthobiologics Business.
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Cash Flows From Financing Activities
Net cash provided by financing activities for the six months ended June 30, 2025 was $12.8 million compared to cash used in financing activities of $5.7 million for the six months ended June 30, 2024. The current year’s cash generation was primarily through the 2025 Registered Offering which yielded net proceeds of $13.8 million. The prior year’s cash generation was primarily through the 2024 Registered Offering and warrant exercises, which yielded net proceeds of $12.4 million offset by long-term debt and the revenue interest obligation payments totaling $7.2 million.
Credit Facilities
General
As of June 30, 2025, we had $24.3 million of indebtedness outstanding, consisting of $23.8 million outstanding under our SWK Loan Facility described below and $1.0 million of exit fee liabilities, net of $0.5 million of unamortized discount and deferred financing costs. Such indebtedness currently has a principal payment commencement date of November 15, 2025, with quarterly principal payments in an amount equal to 5% of the outstanding principal.
O n August 10, 2022 (the “Closing Date”), we entered into a senior secured term loan facility with SWK Funding LLC (“SWK”), as agent, and other lenders party thereto (as amended and modified subsequent to the Closing Date, the “SWK Loan Facility”) for an aggregate principal amount of $25 million. An initial draw of $21 million was made on the Closing Date with the additional $4 million drawn 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. As of June 30, 2025, we had $23.8 million of indebtedness outstanding under our SWK Loan Facility and an exit fee liability to SWK of $1.0 million, with such balances being net of $0.5 million of unamortized discount and deferred financing costs.
Interest Rates
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 we have elected the PIK Interest option (as defined below), 3.75% and the “Term SOFR Rate.” We 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 until November 15, 2025. The “Term SOFR Rate” is subject to a floor of 2.75%.
Mandatory Prepayments
Prior to the May 2025 amendment described below, the SWK Loan Facility Agreement required certain mandatory prepayments, subject to certain exceptions, with: (1) 100% of any net casualty proceeds in excess of $250,000 and (2) for non-ordinary course asset sales, an amount equal to the difference between (x) the proportion of divested gross profit (as defined in the SWK Loan Facility) to the Company’s total gross profit (as defined in the SWK Loan Facility) 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. The closing of the sale 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 of the Orthobiologics Business in 2023 and the remainder was paid on February 15, 2024 based on mutual agreement between the parties. No such mandatory prepayments were required in the three months ended March 31, 2025.
Optional Prepayment
The agreement, as amended, 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.
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Amortization and Final Maturity
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, 2025. Principal payments during the amortization period will be limited based on revenue-based caps. As of June 30, 2025, quarterly principal payments will be in an amount equal to 5% of the aggregate principal amount funded with the balance paid at maturity.
Security
All obligations under the SWK Loan Facility are, and any future guarantees of those obligations will be, secured by, among other things, and in each case subject to certain exceptions, a first priority lien on and security interest in, upon, and to all of our assets, whether now owned or hereafter acquired, wherever located.
Covenants and Other Matters
The SWK Loan Facility Agreement that governs the SWK Loan Facility contains a number of covenants that, among other things and subject to certain exceptions, restrict our ability to:
● incur additional indebtedness;
● incur certain liens;
● pay dividends or make other distributions on equity interests;
● redeem, repurchase or refinance subordinated indebtedness;
● consolidate, merge or sell or otherwise dispose of assets;
● make investments, loans, advances, guarantees and acquisitions;
● enter into transactions with affiliates;
● amend or modify our governing documents;
● amend or modify certain material agreements; and
● alter the business conducted by us and our subsidiaries.
In addition, the SWK Loan Facility Agreement contains two financial covenants. The first covenant, which is measured quarterly, requires us to achieve a specified Minimum Aggregate Revenue (as defined in the SWK Loan Facility) for the preceding 12-month period or, alternatively, to maintain Consolidated Unencumbered Liquid Assets (as defined in the SWK Loan Facility) greater than either (i) the outstanding principal balance of the loan, or (ii) the aggregate operating cash burn (as defined in the SWK Loan Facility) for the preceding 12-month period. The second covenant initially required us to maintain a minimum liquidity (as defined in the SWK Loan Facility) of the greater of (a) $5.0 million and (b) the sum of the operating cash burn for the two prior consecutive fiscal quarters then ended (the “Liquidity Covenant”).
In May 2025, we entered into an amendment to the SWK Loan Facility. The amendment, among other things: (i) allowed for 100% of the interest payment due and owing in May 2025 to be paid as PIK interest, (ii) removed mandatory repayment obligations related to non-ordinary course asset sales, (iii) allowed us to request that SWK advance a new term loan in the amount of up to $5.0 million, which advance will be in the sole and absolute discretion of SWK and (iv) fixed the amount of the Liquidity Covenant to a minimum liquidity of $8.0 million. In consideration for the amendment, the Company agreed to issue SWK 50,000 shares of its Class A Common Stock in a private placement.
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The SWK Loan Facility Agreement contains events of default, including, most significantly, a failure to timely pay interest or principal, insolvency, or an action by the FDA or such other material adverse event impacting the operations of Elutia. As of June 30, 2025, we were in compliance with the financial covenants, as amended, and all other covenants.
Ligand Revenue Interest Obligation
We are also a party to a royalty agreement with Ligand Pharmaceuticals Incorporated (“Ligand”) pursuant to which we have incurred a long-term obligation to Ligand (the “Revenue Interest Obligation”). The Revenue Interest Obligation, as amended in January 2024, requires us to pay Ligand 5.0% of future sales of our CanGaroo, ProxiCor, Tyke and VasCure products, and substantially similar products, such as EluPro, through May 31, 2027, subject to annual minimum payments of $4.4 million.
Effective May 8, 2025, we entered into a subscription agreement and further amendment to the Revenue Interest Obligation with Ligand. Through the amendment, $2.2 million in outstanding royalty obligations (royalty obligations for the fiscal quarters ended December 31, 2024 and March 31, 2025) owed by Elutia to Ligand under the Revenue Interest Obligation as amended were satisfied by the issuance of 1,105,528 shares of Elutia’s Class A common stock to Ligand in a transaction registered with the Securities and Exchange Commission.
Funding Requirements
We expect to continue to incur significant expenses and operating losses for the foreseeable future as we further commercialize EluPro and expand our product development and clinical and research activities. In addition, we expect to continue to incur significant costs and expenses associated with operating as a public company.
If our available cash balances and cash flow from operations are insufficient to satisfy our liquidity requirements, we may seek to raise additional capital through equity offerings, debt financings, substitution of cash payment obligations with equity or asset sale or other transactions. In the future, we may also seek to preserve existing capital by obtaining waivers, amendments or similar accommodations from our lenders and other obligees. However, such transactions may not be successful and we may not be able to raise additional equity or debt, sell or license assets or obtain waivers or amendments on acceptable terms, or at all. We may also consider raising additional capital in the future to expand our business, pursue strategic investments or take advantage of financing opportunities. Our present and future funding requirements will depend on many factors, including, among other things:
● the cost of fully commercializing our EluPro product;
● the costs of defending against, or the damages payable in connection with the FiberCel Litigation and VBM Litigation, associated litigation related to indemnity claims by other defendants to the FiberCel Litigation and any future litigation that we may be subject to (to the extent above the applicable insurance coverage);
● continued patient, physician and market acceptance of our products;
● the scope, rate of progress and cost of our current and future pre-clinical and clinical studies;
● the cost of our research and development activities and the cost and timing of commercializing new products or technologies;
● the cost and timing of expanding our sales and marketing capabilities;
● the cost of filing and prosecuting patent applications and maintaining, defending and enforcing our patent or other intellectual property rights;
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● the cost of defending, in litigation or otherwise, any claims that we infringe, misappropriate or otherwise violate third-party patents or other intellectual property rights;
● the cost and timing of additional regulatory approvals;
● costs associated with any product recall that may occur;
● the effect of competing technological and market developments;
● the expenses we incur in manufacturing and selling our products;
● the extent to which we acquire or invest in products, technologies and businesses in the future, although we may currently have no commitments or agreements relating to any of these types of transactions;
● the costs of operating as a public company;
● unanticipated general, legal and administrative expenses; and
● the effects on any of the above from any pandemic, epidemic or outbreak of infectious disease or any other public health crisis.
In addition, our operating plans may change as a result of any number of factors, including those set forth above and other factors currently unknown to us, and we may need additional funds sooner than anticipated. To the extent that we raise additional capital through the sale of equity or convertible debt securities, your ownership interest may be materially diluted, and the terms of such securities could include liquidation or other preferences that adversely affect your rights as a common stockholder. Debt financing, if available, may involve agreements that include restrictive covenants that limit our ability to take specific actions, such as incurring additional debt, making capital expenditures, creating liens, redeeming shares of our common stock and/or declaring dividends. If we raise funds through collaborations, licensing agreements or other strategic alliances, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates, or grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds through equity or debt financings or other arrangements when needed, we may be required to delay the development or commercialization of our products, license to third parties the rights to commercialize products or technologies that we would otherwise seek to commercialize and reduce marketing, customer support or other resources devoted to our products or cease operations. See our Annual Report, Part I, Item 1A. “Risk Factors — Risks Related to Our Business — Our future capital needs are uncertain and we may need to raise funds in the future, and such funds may not be available on acceptable terms or at all .”
Based on our current operating plans, we believe there is uncertainty as to whether our future cash flows along with our existing cash, issuances of additional equity, cash saved through substitution of cash payment obligations with equity issuances and cash generated from expected future sales will be sufficient to meet our anticipated operating needs through twelve months from the financial statement issuance date. Due to these factors, there is substantial doubt about our ability to continue as a going concern within one year after the issuance of the financial statements.
Critical Accounting Policies and Estimates
The preparation of our unaudited condensed consolidated financial statements in accordance with GAAP requires us to make estimates and assumptions that affect reported amounts and related disclosures. We have discussed the policies and estimates that we believe are critical and require the use of complex judgment in their application in our Annual Report, and, during the six months ended June 30, 2025, there were no material changes to those previously disclosed other than those outlined in Note 2, “Summary of Significant Accounting Policies.”
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Recent Accounting Pronouncements
See Note 3, “Recently Issued Accounting Standards,” to our condensed consolidated financial statements included elsewhere in this Quarterly Report for information regarding recently issued accounting pronouncements.
JOBS Act
Section 107 of the JOBS Act permits us, as an “emerging growth company,” to take advantage of an extended transition period for adopting new or revised accounting standards until those standards would otherwise apply to private companies. We have elected to avail ourselves of this exemption and, as a result, for so long as we remain an emerging growth company, unless we subsequently choose to affirmatively and irrevocably opt out of the extended transition period, our financial statements may not be comparable to the financial statements of issuers who are required to comply with the effective dates for new or revised accounting standards that are applicable to public companies. Section 107 of the JOBS Act provides that we can elect to opt out of the extended transition period at any time, which election is irrevocable.
We will remain an emerging growth company, and will be able to take advantage of the foregoing exemptions, until the earliest of: (i) the last day of the first fiscal year in which our annual gross revenues are $1.235 billion or more; (ii) the last day of 2025; (iii) the date that we become a “large accelerated filer” as defined in Rule 12b-2 under the Exchange Act, which would occur if the market value of our common equity held by non-affiliates is $700 million or more as of the last business day of our most recently completed second fiscal quarter; or (iv) the date on which we have issued more than $1.0 billion in non-convertible debt securities during the previous three years.
.
Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.