0001558370-24-015748 | 10-Q | XBRL Viewer

Long-Term Debt

9 Months Ended

Sep. 30, 2024

Note 7. Long-Term Debt

On 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, 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. The 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 September 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 until November 15, 2025. The “Term SOFR Rate” is subject to a floor of 2.75%. The agreement governing the SWK Loan Facility also includes an exit fee equal to 6.5% of the aggregate principal amount funded prior to termination plus $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. The Class A Warrant is immediately exercisable for up to 187,969 shares of Class A common stock from time to time on or after the Closing Date. The exercise price and number of shares of Class A common stock issuable upon exercise of the Class A Warrant are subject to adjustment in the event of stock dividends, stock splits and certain other events affecting the Class A common stock. Unless earlier exercised or terminated in accordance with its terms, the Class A Warrant will expire on the seventh anniversary of the Closing Date. Upon issuance, the Company valued the Class A Warrant at approximately $0.6 million using the Black-Scholes model. The recognition of the Class A Warrant as well as deferred financing costs of approximately $0.5 million incurred in securing the SWK Loan Facility served to reduce the recorded value of the associated debt. The debt discount and deferred financing costs will be recognized as interest expense through the maturity of the loan.

The SWK Loan Facility Agreement requires certain mandatory prepayments, subject to certain exceptions, with: (1) 100% of any net casualty proceeds in excess of $250,000 and (2) for non-ordinary course asset sales, an amount equal to the difference between (x) the proportion of divested gross profit (as defined in the SWK Loan Facility Agreement) to the Company’s total gross profit (as defined in the SWK Loan Facility Agreement) multiplied by the outstanding loans under the SWK Loan Facility and (y) the difference between $1,000,000 and the aggregate sale proceeds of any assets previously sold during the fiscal year. 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 was 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,		December 31,
	2024		2023
Term Loan Facility, net of unamortized discount and deferred financing costs	$	22,641	$	23,677
Current Portion		—		(3,321)
Long-Term Debt	$	22,641	$	20,356

The fair value of all debt instruments, which is based on inputs considered to be Level 2 under the fair value hierarchy, approximates the respective carrying values as of September 30, 2024 and December 31, 2023.

- Definition

The entire disclosure for information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants.

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+ Details

Recently Issued Accounting Standards (Policies)	9 Months Ended
Sep. 30, 2024
Recently Issued Accounting Standards
Recently Issued Accounting Standards	In November 2023, the FASB issued ASU No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. This update improves reportable segment disclosure requirements, primarily through enhanced disclosures of significant segment expenses. The amendments in this update should be applied retrospectively to all prior periods presented in the condensed consolidated financial statements and are effective for fiscal years beginning after December 31, 2023 and interim periods within fiscal years beginning after December 31, 2024. Early adoption is permitted. The Company 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. 2023-09, Income Taxes (Topic 740): Improvement to Income Tax Disclosures. This update improves income tax disclosure requirements, primarily through enhanced transparency and decision usefulness of disclosures. The amendments in this update should be applied prospectively with the option to apply retrospectively and are effective for fiscal years beginning after December 15, 2024. Early adoption is permitted. The Company 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.

Recently Issued Accounting Standards (Policies)

9 Months Ended

Sep. 30, 2024

Recently Issued Accounting Standards

Recently Issued Accounting Standards

In November 2023, the FASB issued ASU No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. This update improves reportable segment disclosure requirements, primarily through enhanced disclosures of significant segment expenses. The amendments in this update should be applied retrospectively to all prior periods presented in the condensed consolidated financial statements and are effective for fiscal years beginning

after December 31, 2023 and interim periods within fiscal years beginning after December 31, 2024. Early adoption is permitted. The Company 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. 2023-09, Income Taxes (Topic 740): Improvement to Income Tax Disclosures. This update improves income tax disclosure requirements, primarily through enhanced transparency and decision usefulness of disclosures. The amendments in this update should be applied prospectively with the option to apply retrospectively and are effective for fiscal years beginning after December 15, 2024. Early adoption is permitted. The Company 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.

Common Stock and Warrants - Warrant Activity (Details) - USD ($) $ in Millions			1 Months Ended	3 Months Ended		9 Months Ended
	Jun. 16, 2024	Sep. 21, 2023	Jul. 31, 2024	Sep. 30, 2024	Sep. 30, 2023	Sep. 30, 2024	Sep. 30, 2023
Common stock warrants
Warrants
Proceeds from exercise of warrants			$ 13.8
Outstanding						11,033,804
Conversions of Common Warrants to 2023 Prefunded Warrants						(3,896,130)
Exercised						(7,137,674)
2024 Prefunded Warrants
Warrants
Issued						725,000
Outstanding				725,000		725,000
2023 Prefund Warrants
Warrants
Outstanding						503,058
Conversions of Common Warrants to 2023 Prefunded Warrants						3,896,130
Exercised						(261,470)
Outstanding				4,137,718		4,137,718
Registered Direct Offering of Common Stock and Warrants and Private Placement \| Prefunded Warrants
Warrants
Transaction fees				$ 0.0	$ 0.8	$ 0.3	$ 0.8
Registered Direct Offering of Common Stock and Warrants
Warrants
Transaction fees	$ 1.4
Registered Direct Offering of Common Stock and Warrants \| 2024 Prefunded Warrants
Warrants
Proceeds from private placement and warrants	$ 2.5
Private Placement
Warrants
Proceeds from private placement and warrants		$ 10.5
Transaction fees		1.1
Private Placement \| 2023 Prefund Warrants
Warrants
Proceeds from private placement and warrants		$ 8.6

Net Loss Per Share - Anti-dilutive securities (Details) - shares	3 Months Ended		9 Months Ended
	Sep. 30, 2024	Sep. 30, 2023	Sep. 30, 2024	Sep. 30, 2023
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Anti-dilutive securities (in shares)	8,855,177	13,742,546	9,821,765	13,742,546
Options to purchase common stock
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Anti-dilutive securities (in shares)	3,230,454	1,648,190	3,230,454	1,648,190
Restricted stock units
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Anti-dilutive securities (in shares)	1,540,624	369,525	1,540,624	369,525
Class A Warrants
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Anti-dilutive securities (in shares)	187,969	187,969	187,969	187,969
Common stock warrants
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Anti-dilutive securities (in shares)		11,033,804		11,033,804
2023 Prefund Warrants
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Anti-dilutive securities (in shares)	3,896,130	503,058	4,137,718	503,058
2024 Prefunded Warrants
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Anti-dilutive securities (in shares)			725,000

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT) (Parentheticals) - USD ($) $ in Millions	3 Months Ended	9 Months Ended
	Sep. 30, 2023	Sep. 30, 2024	Sep. 30, 2023
Registered Direct Offering of Common Stock and Warrants
Issuance and offering costs		$ 1.1
Private Placement
Issuance and offering costs	$ 0.2		$ 0.2

Pay vs Performance Disclosure - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
Pay vs Performance Disclosure - USD ($) $ in Thousands	Sep. 30, 2024	Sep. 30, 2023	Sep. 30, 2024	Sep. 30, 2023
Pay vs Performance Disclosure
Net Income (Loss)	$ 1,286	$ (9,747)	$ (44,888)	$ (28,342)

- Definition

The portion of profit or loss for the period, net of income taxes, which is attributable to the parent.

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-URI https://asc.fasb.org/1943274/2147480097/470-10-S99-1B

Reference 28: http://www.xbrl.org/2003/role/disclosureRef
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Reference 29: http://www.xbrl.org/2003/role/disclosureRef
-Topic 470
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-Subparagraph (SX 210.13-02(a)(4)(iii)(B))
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-URI https://asc.fasb.org/1943274/2147480097/470-10-S99-1B

Reference 30: http://www.xbrl.org/2003/role/disclosureRef
-Topic 470
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-Name Accounting Standards Codification
-Section S99
-Paragraph 1B
-Subparagraph (SX 210.13-02(a)(4)(iv))
-Publisher FASB
-URI https://asc.fasb.org/1943274/2147480097/470-10-S99-1B

Reference 31: http://www.xbrl.org/2003/role/disclosureRef
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-URI https://asc.fasb.org/1943274/2147480097/470-10-S99-1B

Reference 32: http://www.xbrl.org/2003/role/disclosureRef
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Reference 33: http://www.xbrl.org/2003/role/disclosureRef
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Reference 34: http://fasb.org/us-gaap/role/ref/legacyRef
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Reference 35: http://www.xbrl.org/2003/role/disclosureRef
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Reference 36: http://www.xbrl.org/2003/role/disclosureRef
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-URI https://asc.fasb.org/1943274/2147482790/220-10-45-1B

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-Paragraph 1
-Subparagraph (SX 210.9-04(22))
-Publisher FASB
-URI https://asc.fasb.org/1943274/2147478524/942-220-S99-1

+ Details

Common Stock and Warrants - Warrants fair value rollforward (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2024	Sep. 30, 2023	Sep. 30, 2024	Sep. 30, 2023
Warrants
Warrant liability			$ 12,760
Loss on revaluation of warrant liability	$ 12,653	$ 1,070	(15,321)	$ 1,070
Warrant liability	18,527		18,527
Offering Warrants
Warrants
Warrant liability			12,760
Fair value upon issuance			2,464
Loss on revaluation of warrant liability	12,700		(15,321)
Conversions of Common Warrants to 2023 Prefunded Warrants			5,558
Exercised			(17,576)
Warrant liability	18,527		18,527
Common stock warrants
Warrants
Warrant liability			11,670
Loss on revaluation of warrant liability			(13,740)
Conversions of Common Warrants to 2023 Prefunded Warrants			(8,898)
Exercised			(16,512)
2023 Prefund Warrants
Warrants
Warrant liability			1,090
Loss on revaluation of warrant liability			(1,282)
Conversions of Common Warrants to 2023 Prefunded Warrants			14,456
Exercised			(1,064)
Warrant liability	15,764		15,764
2024 Prefunded Warrants
Warrants
Fair value upon issuance			2,464
Loss on revaluation of warrant liability			(299)
Warrant liability	$ 2,763		$ 2,763

Summary of Significant Accounting Policies - Net Loss per Share (Details) - $ / shares	Sep. 30, 2024	Dec. 31, 2023
Class A Common stock
Net Loss per Share Attributable to Common Stockholders
Common stock, par value (in dollar per share)	$ 0.001	$ 0.001
Class B Common stock
Net Loss per Share Attributable to Common Stockholders
Common stock, par value (in dollar per share)	$ 0.001	$ 0.001

- Definition

Line items represent financial concepts included in a table. These concepts are used to disclose reportable information associated with domain members defined in one or many axes to the table.

+ References

Reference 1: http://www.xbrl.org/2003/role/exampleRef
-Topic 505
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 13
-Subparagraph (d)
-Publisher FASB
-URI https://asc.fasb.org/1943274/2147481112/505-10-50-13

Reference 2: http://www.xbrl.org/2003/role/recommendedDisclosureRef
-Topic 272
-SubTopic 10
-Name Accounting Standards Codification
-Section 45
-Paragraph 3
-Publisher FASB
-URI https://asc.fasb.org/1943274/2147483014/272-10-45-3

Reference 3: http://www.xbrl.org/2003/role/disclosureRef
-Topic 272
-SubTopic 10
-Name Accounting Standards Codification
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-Paragraph 1
-Publisher FASB
-URI https://asc.fasb.org/1943274/2147482987/272-10-50-1

Reference 4: http://www.xbrl.org/2009/role/commonPracticeRef
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-Paragraph 1
-Subparagraph (SX 210.4-08(d))
-Publisher FASB
-URI https://asc.fasb.org/1943274/2147480678/235-10-S99-1

Reference 5: http://www.xbrl.org/2003/role/disclosureRef
-Topic 505
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-Section 50
-Paragraph 13
-Subparagraph (a)
-Publisher FASB
-URI https://asc.fasb.org/1943274/2147481112/505-10-50-13

Reference 6: http://www.xbrl.org/2003/role/disclosureRef
-Topic 505
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 13
-Subparagraph (b)
-Publisher FASB
-URI https://asc.fasb.org/1943274/2147481112/505-10-50-13

Reference 7: http://www.xbrl.org/2003/role/disclosureRef
-Topic 505
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-Section 50
-Paragraph 13
-Subparagraph (e)
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-URI https://asc.fasb.org/1943274/2147481112/505-10-50-13

Reference 8: http://www.xbrl.org/2003/role/disclosureRef
-Topic 505
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 13
-Subparagraph (h)
-Publisher FASB
-URI https://asc.fasb.org/1943274/2147481112/505-10-50-13

Reference 9: http://www.xbrl.org/2003/role/disclosureRef
-Topic 505
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 14
-Subparagraph (b)
-Publisher FASB
-URI https://asc.fasb.org/1943274/2147481112/505-10-50-14

Reference 10: http://www.xbrl.org/2003/role/disclosureRef
-Topic 505
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 18
-Subparagraph (c)
-Publisher FASB
-URI https://asc.fasb.org/1943274/2147481112/505-10-50-18

Reference 11: http://www.xbrl.org/2003/role/disclosureRef
-Topic 210
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-Section S99
-Paragraph 1
-Subparagraph (SX 210.5-02(27)(b))
-Publisher FASB
-URI https://asc.fasb.org/1943274/2147480566/210-10-S99-1

Reference 12: http://www.xbrl.org/2003/role/disclosureRef
-Topic 210
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-Paragraph 1
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-URI https://asc.fasb.org/1943274/2147480566/210-10-S99-1

Reference 13: http://www.xbrl.org/2003/role/disclosureRef
-Topic 505
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 2
-Publisher FASB
-URI https://asc.fasb.org/1943274/2147481112/505-10-50-2

Reference 14: http://www.xbrl.org/2003/role/disclosureRef
-Topic 210
-SubTopic 10
-Name Accounting Standards Codification
-Section S99
-Paragraph 1
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-URI https://asc.fasb.org/1943274/2147480566/210-10-S99-1

Reference 15: http://www.xbrl.org/2003/role/disclosureRef
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Reference 16: http://www.xbrl.org/2003/role/disclosureRef
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-URI https://asc.fasb.org/1943274/2147479886/946-10-S99-3

Reference 17: http://www.xbrl.org/2003/role/disclosureRef
-Topic 946
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-Name Accounting Standards Codification
-Section S99
-Paragraph 3
-Subparagraph (SX 210.6-03(i)(2)(i))
-Publisher FASB
-URI https://asc.fasb.org/1943274/2147479886/946-10-S99-3

Reference 18: http://www.xbrl.org/2003/role/disclosureRef
-Topic 946
-SubTopic 10
-Name Accounting Standards Codification
-Section S99
-Paragraph 3
-Subparagraph (SX 210.6-03(i)(2)(ii))
-Publisher FASB
-URI https://asc.fasb.org/1943274/2147479886/946-10-S99-3

+ Details

Commitment and Contingencies

9 Months Ended

Sep. 30, 2024

Commitment and Contingencies.

Commitment and Contingencies

Note 10. Commitments and Contingencies

Cook Biotech License and Supply Agreements

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. Along with this license agreement, Elutia entered into a supply agreement whereby Cook would be the exclusive supplier to Elutia of licensed porcine tissue. Under certain limited circumstances, Elutia has the right to manufacture the licensed product and pay Cook a royalty of 3% of sales of the Elutia-manufactured tissue. The supply agreement expires on the same date as the related license agreement. No royalties were paid to Cook during the three 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. Specifically, the Cook Amendment provides for a worldwide exclusive license to the porcine tissue for use with neuromodulation devices in addition to cardiovascular devices. The Cook Amendment includes license fee payments of $0.1 million per year in each of the years 2021 through 2026. Such license payments would accelerate if a change in control, as defined in the Cook Amendment, occurs within Elutia. The Company, in its sole discretion, can terminate the Cook License Agreement at any time.

Legal Proceedings

From time to time, the Company may be involved in claims and proceedings arising in the course of the Company’s business. The outcome of any such claims or proceedings, regardless of the merits, is inherently uncertain. The Company records accruals for contingencies when it is probable that a liability has been incurred and the amount can be reasonably estimated. Where the available information is only sufficient to establish a range of probable liability, and no point within the range is more likely than any other, the lower end of the range has been used. When a material loss contingency is reasonably possible, but not probable, the Company does not record a liability, but instead discloses the nature of the matter and an estimate of the loss or range of loss, to the extent such estimate can be made. Accruals recorded are adjusted periodically as assessments change or additional information becomes available, and management's judgments may be materially different than the actual outcomes.

FiberCel Litigation

As previously disclosed, in June 2021, the Company announced a voluntary recall of a single lot of FiberCel fiber viable bone matrix (“FiberCel”). Since September 2021, 110 product liability lawsuits or claims have been filed or asserted against the Company involving FiberCel. As of 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, Maryland and Ohio. The Company refers to all of the aforementioned litigation, or claim notices, collectively as the “FiberCel Litigation.”

Viable Bone Matrix Litigation

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. 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.”

Medtronic Litigation

In June 2024, the Company filed an action against Medtronic Sofamor Danek USA, Inc. (“Medtronic”) in the Superior Court of the State of Delaware. The Company’s complaint alleges breach of the 2019 Tissue Product Supply Agreement (the “Supply Agreement”) between the Company and Medtronic. In particular, the complaint alleges that Medtronic did not honor its contractual obligations to obtain insurance coverage and to defend and indemnify the Company for over 100 lawsuits against the Company alleging claims arising from the use of FiberCel products distributed by Medtronic. The complaint does not specify the amount of damages owed by Medtronic for these breaches. 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. 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.

Contingent Liability for Legal Proceedings

FiberCel Litigation

Since August 2022, the Company has engaged in a process to negotiate and attempt to resolve many of the cases in the FiberCel Litigation. In total, Elutia’s liability in 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. While the Company believes its estimated liability to be reasonable, the actual loss amounts are highly variable and are dependent upon the relevant facts and case by case resolutions. As more information is learned about asserted claims and potential future trends, adjustments may be made to this Contingent Liability for Legal Proceedings as appropriate. Management believes that it is reasonably possible that the Company could incur liabilities in excess of amounts accrued and the ultimate liability could be material to the Company’s financial position, results of operations and cash flows in the period recognized. The Company, however, is unable to estimate the possible loss or range of loss in excess of the amount recognized at this time.

VBM Litigation

Since June 2023, the Company has also engaged in a process to negotiate and attempt to resolve many of the cases in the VBM Litigation. 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. Management believes that it is reasonably possible that the Company could incur liabilities in excess of amounts accrued and the ultimate liability could be material to the Company’s financial position, results of operations and cash flows in the period recognized. The Company, however, is unable to estimate the possible loss or range of loss in excess of the amount recognized at this time.

Defense costs 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.

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. When settlements are reached and/or amounts are recorded in the related Contingent Liability for Legal Proceedings, the Company calculates amounts due to be reimbursed pursuant to the terms of the coverage and related agreements, and pursuant to other indemnity or contribution claims, in respect of product liability losses and related defense costs. The amounts probable of reimbursement or recovery from this calculation are recorded as receivables. The determination that the recorded receivables are probable of collection is based on the terms of agreements reached in respect of indemnity and contribution claims as well as the advice of the Company’s outside legal counsel. These receivables at 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.

Sale of Orthobiologics Business - Non-cash reconciliation (Details) $ in Thousands	9 Months Ended
	Sep. 30, 2023 USD ($)
Significant operating non-cash reconciliation items:
Depreciation	$ 213
Stock-based compensation	115
Changes in operating assets and liabilities:
Accounts receivable	745
Inventory	1,757
Prepaid expenses and other	(326)
Accounts payable and accrued expenses and other current liabilities	(920)
Obligations to tissue suppliers	(857)
Significant investing items:
Expenditures for property, plant and equipment	$ (287)

Inventory

9 Months Ended

Sep. 30, 2024

Inventory

Inventory

Note 6. Inventory

Inventory was comprised of the following (in thousands):


	September 30,		December 31,
	2024		2023
Raw materials	$	555	$	242
Work in process		758		286
Finished goods		2,320		3,325
Total	$	3,633	$	3,853

Common Stock and Warrants - Private Placement of Common Stock (Details) $ / shares in Units, $ in Millions		3 Months Ended	9 Months Ended
	Sep. 21, 2023 USD ($) D $ / shares shares	Sep. 30, 2023 USD ($)	Sep. 30, 2023 USD ($)	Sep. 30, 2024 $ / shares	Dec. 31, 2023 $ / shares
Private Placement
Private Placement of Common Stock
Aggregate Common units sold \| shares	6,852,811
Number of Prefunded Units to sell \| shares	503,058
Common unit purchase price (in dollar per unit)	$ 1.4275
Prefunded unit purchase price (in dollar per unit)	$ 1.4265
Proceeds from private placement and warrants \| $	$ 10.5
Private placement fees \| $	$ 1.1
Amount allocated to issuance of the common stock \| $		$ 0.2	$ 0.2
Class A Common stock
Private Placement of Common Stock
Common stock, par value (in dollar per share)				$ 0.001	$ 0.001
Class A Common stock \| Private Placement
Private Placement of Common Stock
Number of common stock per warrant (in shares) \| shares	1.5
Amount allocated to issuance of the common stock \| $	$ 0.4		$ 0.2
Common stock warrants \| Private Placement
Private Placement of Common Stock
Number of common stock per unit \| shares	1
Number of trading days after clearance by the U.S. Food & Drug Administration of the Company's CanGarooRM antibiotic-eluting biologic envelope to exercise warrant \| D	30
Exercise price (in dollar per share)	$ 1.4275
2023 Prefund Warrants
Private Placement of Common Stock
Exercise price (in dollar per share)				$ 0.001
2023 Prefund Warrants \| Private Placement
Private Placement of Common Stock
Proceeds from private placement and warrants \| $	$ 8.6
Prefunded Warrants \| Private Placement
Private Placement of Common Stock
Number of common stock per warrant (in shares) \| shares	1
Exercise price (in dollar per share)	$ 0.001

Common Stock and Warrants (Tables)

9 Months Ended

Sep. 30, 2024

Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]

Summary of the Offering Warrants activity



	Common Warrants	2023 Prefunded Warrants	2024 Prefunded Warrants
Outstanding, December 31, 2023	11,033,804	503,058	—
Issued	-	—	725,000
Conversions of Common Warrants to 2023 Prefunded Warrants	(3,896,130)	3,896,130	—
Exercised	(7,137,674)	(261,470)	—
Outstanding, September 30, 2024	—	4,137,718	725,000

Warrant Liability [Member]

Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]

Schedule of rollforward of the aggregate fair value of the warranty liability

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		2023 Prefunded Warrants		2024 Prefunded Warrants		Total Offering Warrants
Warrant liability, December 31, 2023	$	11,670	$	1,090	$	-	$	12,760
Fair value upon issuance		-		-		2,464		2,464
Loss on revaluation of warrant liability		13,740		1,282		299		15,321
Conversions of Common Warrants to 2023 Prefunded Warrants		(8,898)		14,456		-		5,558
Exercised		(16,512)		(1,064)		-		(17,576)
Warrant liability, September 30, 2024	$	-	$	15,764	$	2,763	$	18,527

Schedule of inputs used to calculate fair value of Common Warrants


	December 31,
	2023
Common stock price	$ 2.16
Expected term (years)	0.7
Risk-free interest rate	5.1	%
Volatility factor	107.3	%
Dividend yield	—	%

Stock-Based Compensation (Tables)

9 Months Ended

Sep. 30, 2024

Stock-Based Compensation

Summary of stock options outstanding, exercisable and vested or expected to vest


				Weighted-
				Average
		Weighted-		Remaining		Aggregate
		Average		Contractual		Intrinsic
		Exercise		Term		Value
	Number of Shares	Price		(years)		(in thousands)
Outstanding, December 31, 2023	1,501,193	$	8.37		7.8	$	-
Granted	1,790,654	$	3.59
Exercised	(1,960)	$	3.61
Forfeited	(59,433)	$	10.21
Outstanding, September 30, 2024	3,230,454	$	5.23		7.5	$	621
Vested and exercisable, September 30, 2024	1,644,088	$	5.87		6.1	$	353

Summary of weighted-average assumptions were used to determine the fair value of options


	Nine Months Ended
	September 30,
	2024		2023
Expected term (years)	5.9		6.0
Risk-free interest rate	3.3	%	3.9	%
Volatility factor	100.9	%	63.8	%
Dividend yield	—		—

Schedule of RSU activity


		Weighted-
		Average
	Number of Shares	Grant Date
	Underlying RSUs	Fair Value
Unvested, December 31, 2023	335,608	$	3.64
Granted	2,327,500	$	3.58
Vested	(1,004,270)	$	3.70
Forfeited	(118,214)	$	3.04
Unvested, September 30, 2024	1,540,624	$	3.55

Schedule of stock-based compensation expense recognized

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				Nine Months Ended
	September 30,				September 30,
	2024		2023		2024		2023
Sales and marketing	$	355		164		1,288		466
General and administrative		1,219		373		4,421		1,264
Research and development		210		15		819		102
Cost of goods sold		(9)		14		155		40
Total stock-based compensation expense	$	1,775	$	566	$	6,683	$	1,872

Organization and Description of Business

9 Months Ended

Sep. 30, 2024

Organization and Description of Business

Organization and Description of Business

ELUTIA INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Note 1. Organization and Description of Business

Elutia Inc. (together with its consolidated subsidiaries, "Elutia” or the “Company”) is a commercial-stage company leveraging its unique understanding of biologics 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. Elutia’s portfolio of products spans the Device Protection, Women’s Health and Cardiovascular markets. These products are primarily sold to healthcare providers or commercial partners.

Stock-Based Compensation - Option Valuation Assumption (Details) - Employee Stock Option	9 Months Ended
	Sep. 30, 2024	Sep. 30, 2023
Weighted-average assumptions were used to determine the fair value of options
Dividend yield assumption to estimate fair value	0.00%	0.00%
Expected term (years)	5 years 10 months 24 days	6 years
Risk-free interest rate	3.30%	3.90%
Volatility factor	100.90%	63.80%
Dividend yield	0.00%	0.00%

Segment Information - Disaggregation (Details) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2024 USD ($)	Sep. 30, 2023 USD ($)	Sep. 30, 2024 USD ($) segment	Sep. 30, 2023 USD ($)
Segment Reporting Information [Line Items]
Number of operating segments \| segment			3
Total sales	$ 5,922	$ 6,127	$ 18,907	$ 18,870
Gross profit, excluding intangible asset amortization	3,590	3,690	10,930	11,474
Intangible asset amortization expense	849	849	2,547	2,547
Gross profit	2,741	2,841	8,383	8,927
Device Protection
Segment Reporting Information [Line Items]
Total sales	2,260	2,575	7,256	7,147
Gross profit, excluding intangible asset amortization	1,529	1,704	4,729	4,998
Women's Health
Segment Reporting Information [Line Items]
Total sales	3,100	2,614	9,238	7,309
Gross profit, excluding intangible asset amortization	1,739	1,417	4,716	3,376
Cardiovascular
Segment Reporting Information [Line Items]
Total sales	562	938	2,413	4,414
Gross profit, excluding intangible asset amortization	$ 322	$ 569	$ 1,485	$ 3,100

- Definition

Aggregate revenue less cost of goods and services sold or operating expenses directly attributable to the revenue generation activity.

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Summary of Significant Accounting Policies - Property and Equipment (Details)	Sep. 30, 2024
Computer hardware and software
Property, Plant and Equipment
Estimated useful lives	3 years
Minimum \| Processing and research equipment
Property, Plant and Equipment
Estimated useful lives	5 years
Minimum \| Office equipment and furniture
Property, Plant and Equipment
Estimated useful lives	3 years
Maximum \| Processing and research equipment
Property, Plant and Equipment
Estimated useful lives	10 years
Maximum \| Office equipment and furniture
Property, Plant and Equipment
Estimated useful lives	5 years

Stock-Based Compensation (Details) - shares	1 Months Ended	9 Months Ended
Stock-Based Compensation (Details) - shares	Jun. 30, 2023	Sep. 30, 2024	Jun. 08, 2023
Stock-Based Compensation
Options granted		1,790,654
2020 Plan \| Class A Common stock
Stock-Based Compensation
Common stock reserved for future issuance			1,636,000
Increase in number of shares reserve for issuance	2,000,000
Number of shares available for grant		389,075

- Definition

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+ Details

Inventory (Tables)

9 Months Ended

Sep. 30, 2024

Inventory

Summary of inventory

Inventory was comprised of the following (in thousands):


	September 30,		December 31,
	2024		2023
Raw materials	$	555	$	242
Work in process		758		286
Finished goods		2,320		3,325
Total	$	3,633	$	3,853

Sale of Orthobiologics Business

9 Months Ended

Sep. 30, 2024

Sale of Orthobiologics Business

Sale of Orthobiologics Business

Note 4. Sale of Orthobiologics Business

As described in Note 2, on November 8, 2023, the Company completed the sale of its Orthobiologics Business. Accordingly, the Orthobiologics Business is reported as discontinued operations in accordance with ASC 205-20 - Discontinued Operations and the amounts for the three 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 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		Nine Months Ended
		September 30,		September 30,
	2023		2023
Net sales	$	2,291	$	12,894
Cost of goods sold		1,839		11,218
Gross profit		452		1,676
Sales and marketing		374		1,636
General and administrative		927		1,231
Research and development		262		776
Total operating expenses		1,563		3,643
Interest expense		117		348
Net income	$	(1,228)	$	(2,315)

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,
	2023
Significant operating non-cash reconciliation items
Depreciation	$	213
Stock-based compensation		115
Changes in operating assets and liabilities:
Accounts receivable		745
Inventory		1,757
Prepaid expenses and other		(326)
Accounts payable and accrued expenses and other current liabilities		(920)
Obligations to tissue suppliers		(857)

Significant investing items
Expenditures for property, plant and equipment		287

Net Loss Per Share (Tables)

9 Months Ended

Sep. 30, 2024

Net Loss Per Share

Schedule of net loss per share attributable to common stockholders


	Three Months Ended				Nine Months Ended
(in thousands, except share and per share data)	September 30,				September 30,
	2024		2023		2024		2023
Numerator:
Net income (loss) from continuing operations	$	1,286	$	(8,519)	$	(45,068)	$	(26,027)
Less: Undistributed net income to participating securities		(219)		—		—		—
Net income (loss) from continuing operations attributable to common stockholders		1,067		(8,519)		(45,068)		(26,027)
Income (loss) attributable to common stockholders from discontinued operations		—		(1,228)		180		(2,315)
Net income (loss) attributable to common stockholders		1,067		(9,747)		(44,888)		(28,342)
Less: dilutive gain on revaluation of warrant liability, net of addback for undistributed net income to participating securities		(12,822)		—		—		—
Net loss attributable to common stockholders for diluted earnings per share	$	(11,755)	$	(9,747)	$	(44,888)	$	(28,342)

Denominator:
Weighted average number of common shares - basic		32,520,134		17,017,610		27,132,216		16,464,262
Effect of dilutive common and prefunded warrants		3,000,804		—		—		—
Weighted average number of common shares - diluted		35,520,938		17,017,610		27,132,216		16,464,262

Net income (loss) attributable to common stockholders from continuing operations per share - basic	$	0.03	$	(0.50)	$	(1.66)	$	(1.58)
Net loss per share attributable to common stockholders from continuing operations per share - diluted	$	(0.33)	$	(0.50)	$	(1.66)	$	(1.58)
Net income (loss) attributable to common stockholders from discontinued operations per share - basic and diluted	$	—	$	(0.07)	$	0.01	$	(0.14)
Net income (loss) attributable to common stockholders per share - basic	$	0.03	$	(0.57)	$	(1.65)	$	(1.72)
Net loss attributable to common stockholders per share - diluted	$	(0.33)	$	(0.57)	$	(1.65)	$	(1.72)

Schedule of potential common shares excluded from calculation, presented based on amounts outstanding at period end, from the computation of diluted net loss per share attributable to common stockholders


	Three Months Ended		Nine Months Ended
	September 30,		September 30,
	2024	2023	2024	2023
Options to purchase common stock	3,230,454	1,648,190	3,230,454	1,648,190
Restricted stock units	1,540,624	369,525	1,540,624	369,525
Class A common stock warrants	187,969	187,969	187,969	187,969
Common Warrants	—	11,033,804	—	11,033,804
2023 Prefunded Warrants	3,896,130	503,058	4,137,718	503,058
2024 Prefunded Warrants	—	—	725,000	—
Total	8,855,177	13,742,546	9,821,765	13,742,546

Inventory (Details) - USD ($) $ in Thousands	Sep. 30, 2024	Dec. 31, 2023
Inventory
Raw materials	$ 555	$ 242
Work in process	758	286
Finished goods	2,320	3,325
Total	$ 3,633	$ 3,853

Net Loss Per Share (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2024	Sep. 30, 2023	Sep. 30, 2024	Sep. 30, 2023
Numerator:
Net income (loss) from continuing operations	$ 1,286	$ (8,519)	$ (45,068)	$ (26,027)
Less: Undistributed net income to participating securities	(219)
Net income (loss) from continuing operations attributable to common stockholders - basic	1,067	(8,519)	(45,068)	(26,027)
Income (loss) attributable to common stockholders from discontinued operations		(1,228)	180	(2,315)
Net income (loss) attributable to common stockholders - basic	1,067	(9,747)	(44,888)	(28,342)
Less: dilutive gain on revaluation of warrant liability, net of addback for undistributed net income to participating securities	(12,822)
Net loss attributable to common stockholders - diluted	$ (11,755)	$ (9,747)	$ (44,888)	$ (28,342)
Denominator:
Weighted average number of common shares, basic ((in shares)	32,520,134	17,017,610	27,132,216	16,464,262
Effect of dilutive common and prefunded warrants (in shares)	3,000,804
Weighted average number of common shares - diluted (in shares)	35,520,938	17,017,610	27,132,216	16,464,262
Net income (loss) attributable to common stockholders from continuing operations per share - basic (in dollars per share)	$ 0.03	$ (0.50)	$ (1.66)	$ (1.58)
Net loss attributable to common stockholders from continuing operations per share - diluted (in dollars per share)	(0.33)	(0.50)	(1.66)	(1.58)
Net income (loss) attributable to common stockholders from discontinued operations per share - basic (in dollars per share)		(0.07)	0.01	(0.14)
Net income (loss) attributable to common stockholders from discontinued operations per share - diluted (In dollars per share)		(0.07)	0.01	(0.14)
Net income (loss) attributable to common stockholders per share - basic (in dollar per share)	0.03	(0.57)	(1.65)	(1.72)
Net loss attributable to common stockholders per share - diluted (in dollar per share)	$ (0.33)	$ (0.57)	$ (1.65)	$ (1.72)

Insider Trading Arrangements	3 Months Ended
Insider Trading Arrangements	Sep. 30, 2024
Trading Arrangements, by Individual
Rule 10b5-1 Arrangement Adopted	false
Non-Rule 10b5-1 Arrangement Adopted	false
Rule 10b5-1 Arrangement Terminated	false
Non-Rule 10b5-1 Arrangement Terminated	false

CONDENSED CONSOLIDATED BALANCE SHEETS (Parentheticals) - $ / shares	Sep. 30, 2024	Dec. 31, 2023
Class A Common stock
Common stock, par value (in dollar per share)	$ 0.001	$ 0.001
Common stock, shares authorized	200,000,000	200,000,000
Common stock, shares issued	30,248,692	18,884,196
Common stock, shares outstanding	30,248,692	18,884,196
Class B Common stock
Common stock, par value (in dollar per share)	$ 0.001	$ 0.001
Common stock, shares authorized	20,000,000	20,000,000
Common stock, shares issued	4,313,406	4,313,406
Common stock, shares outstanding	4,313,406	4,313,406

Revenue Interest Obligation - (Details) - USD ($) $ in Thousands			1 Months Ended		3 Months Ended		9 Months Ended
	Jan. 10, 2024	May 31, 2017	Apr. 30, 2024	Jan. 31, 2024	Sep. 30, 2024	Sep. 30, 2023	Sep. 30, 2024	Sep. 30, 2023
Revenue Interest Obligation.
Debt Instrument [Line Items]
Interest expense related to revenue interest obligation					$ 400	$ 600	$ 1,300	$ 1,600
Short term revenue interest obligation from current period amendment					$ 4,400		4,400
Ligand Pharmaceuticals
Debt Instrument [Line Items]
Present value of future minimum payments of obligation		$ 27,700
Ligand Pharmaceuticals \| Revenue Interest Obligation.
Debt Instrument [Line Items]
Annual minimum sale	$ 4,400	$ 2,750
Percentage of future sales		5.00%
Term of agreement		10 years
Payment period of minimum payable after each quarter end	30 days
Payment agreed upon satisfaction of royalty obligations for first three quarters	$ 3,000
Payment agreed upon satisfaction of royalty obligations for the fourth quarter of 2023	1,100
Percentage of payment made			50.00%	50.00%
Gains (Losses) on Restructuring of Debt							1,400
Milestone payment waived amount	$ 5,000
Total payments							6,300
2024 quarterly minimum payment							$ 2,200
Cumulative sales of products exceed $100M \| Ligand Pharmaceuticals \| Revenue Interest Obligation.
Debt Instrument [Line Items]
Payments due based on cumulative sales		$ 5,000
Cumulative sales		100,000
Cumulative sales of products exceed $300M \| Ligand Pharmaceuticals \| Revenue Interest Obligation.
Debt Instrument [Line Items]
Payments due based on cumulative sales		5,000
Cumulative sales		$ 300,000

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2024	Sep. 30, 2023	Sep. 30, 2024	Sep. 30, 2023
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Net sales	$ 5,922	$ 6,127	$ 18,907	$ 18,870
Cost of goods sold	3,181	3,286	10,524	9,943
Gross profit	2,741	2,841	8,383	8,927
Sales and marketing	2,989	2,802	9,628	10,514
General and administrative	4,521	2,757	14,266	10,137
Research and development	778	557	2,951	3,016
Litigation costs, net	4,683	4,096	8,757	7,278
Total operating expenses	12,971	10,212	35,602	30,945
Loss from operations	(10,230)	(7,371)	(27,219)	(22,018)
Interest expense, net	1,129	1,448	3,709	4,285
(Gain) loss on revaluation of warrant liability	(12,653)	(1,070)	15,321	(1,070)
Other expense (income), net		758	(1,186)	758
Income (loss) before provision for income taxes	1,294	(8,507)	(45,063)	(25,991)
Income tax expense (benefit)	8	12	5	36
Net income (loss) from continuing operations	1,286	(8,519)	(45,068)	(26,027)
Income (loss) from discontinued operations		(1,228)	180	(2,315)
Net income (loss)	1,286	(9,747)	(44,888)	(28,342)
Less: Undistributed net income to participating securities	(219)
Net income (loss) attributable to common stockholders - basic	1,067	(9,747)	(44,888)	(28,342)
Less: dilutive gain on revaluation of warrant liability, net of addback for undistributed net income to participating securities	(12,822)
Net loss attributable to common stockholders - diluted	$ (11,755)	$ (9,747)	$ (44,888)	$ (28,342)
Net income (loss) attributable to common stockholders from continuing operations per share - basic (in dollars per share)	$ 0.03	$ (0.50)	$ (1.66)	$ (1.58)
Net loss attributable to common stockholders from continuing operations per share - diluted (in dollars per share)	(0.33)	(0.50)	(1.66)	(1.58)
Net income (loss) attributable to common stockholders from discontinued operations per share - basic (in dollars per share)		(0.07)	0.01	(0.14)
Net income (loss) attributable to common stockholders from discontinued operations per share - diluted (In dollars per share)		(0.07)	0.01	(0.14)
Net income (loss) attributable to common stockholders per share - basic (in dollar per share)	0.03	(0.57)	(1.65)	(1.72)
Net loss attributable to common stockholders per share - diluted (in dollar per share)	$ (0.33)	$ (0.57)	$ (1.65)	$ (1.72)
Weighted average common shares outstanding - basic (in shares)	32,520,134	17,017,610	27,132,216	16,464,262
Weighted average common shares outstanding - diluted (in shares)	35,520,938	17,017,610	27,132,216	16,464,262

Stock-Based Compensation - Stock-Based Compensation Expense (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2024	Sep. 30, 2023	Sep. 30, 2024	Sep. 30, 2023
Stock-Based Compensation
Stock-based compensation expense	$ 1,775	$ 566	$ 6,683	$ 1,872
Sales and marketing
Stock-Based Compensation
Stock-based compensation expense	355	164	1,288	466
General and administrative
Stock-Based Compensation
Stock-based compensation expense	1,219	373	4,421	1,264
Research and development
Stock-Based Compensation
Stock-based compensation expense	210	15	819	102
Cost of goods sold
Stock-Based Compensation
Stock-based compensation expense	$ (9)	$ 14	$ 155	$ 40

Segment Information (Tables)

9 Months Ended

Sep. 30, 2024

Segment Information

Schedule of sales information

The Company’s net sales disaggregated by segment were as follows (in thousands):


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2024		2023		2024		2023
Net sales:
Device protection	$	2,260		2,575	$	7,256		7,147
Women's health		3,100		2,614		9,238		7,309
Cardiovascular		562		938		2,413		4,414
Total net sales	$	5,922	$	6,127	$	18,907	$	18,870

The Company’s gross profit disaggregated by segment were as follows (in thousands):


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2024		2023		2024		2023
Gross profit:
Device protection	$	1,529	$	1,704	$	4,729	$	4,998
Women's health		1,739		1,417		4,716		3,376
Cardiovascular		322		569		1,485		3,100
Gross profit, excluding intangible asset amortization	$	3,590		3,690		10,930		11,474
Intangible asset amortization expense		849		849		2,547		2,547
Gross profit	$	2,741	$	2,841	$	8,383	$	8,927

The following table is a reconciliation of segment gross profit to the consolidated loss before provision for income taxes (in thousands):


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2024		2023		2024		2023
Gross profit, excluding intangible asset amortization	$	3,590	$	3,690	$	10,930	$	11,474

Adjustments:
Intangible asset amortization expense		(849)		(849)		(2,547)		(2,547)
Sales and marketing		(2,989)		(2,802)		(9,628)		(10,514)
General and administrative		(4,521)		(2,757)		(14,266)		(10,137)
Research and development		(778)		(557)		(2,951)		(3,016)
Litigation costs, net		(4,683)		(4,096)		(8,757)		(7,278)
Loss from operations		(10,230)		(7,371)		(27,219)		(22,018)
Interest expense, net		1,129		1,448		3,709		4,285
(Gain) loss on revaluation of warrant liability		(12,653)		(1,070)		15,321		(1,070)
Other expense (income), net		—		758		(1,186)		758
Income (loss) before provision for income taxes	$	1,294	$	(8,507)	$	(45,063)	$	(25,991)

Summary of Significant Accounting Policies - Long-Lived Assets (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2024	Sep. 30, 2023	Sep. 30, 2024	Sep. 30, 2023
Long-Lived Assets
Impairment losses	$ 0	$ 0	$ 0	$ 0

Long-Term Debt - Long-Term Debt - Table (Details) - USD ($) $ in Thousands	Sep. 30, 2024	Dec. 31, 2023
Contractual maturities of the long-term debt
Term Loan Facility, net of unamortized discount and deferred financing costs	$ 22,641	$ 23,677
Current Portion		(3,321)
Long-term debt	$ 22,641	$ 20,356

- Definition

Amount, after deduction of unamortized premium (discount) and debt issuance cost, of long-term debt. Excludes lease obligation.

+ References + Details

Document and Entity Information - shares	9 Months Ended
Document and Entity Information - shares	Sep. 30, 2024	Nov. 11, 2024
Document Information [Line Items]
Document Type	10-Q
Document Quarterly Report	true
Document Transition Report	false
Document Period End Date	Sep. 30, 2024
Entity File Number	001-39577
Entity Registrant Name	Elutia Inc.
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	47-4790334
Entity Address, Address Line One	12510 Prosperity Drive
Entity Address, Adress Line Two	Suite 370
Entity Address, City or Town	Silver Spring
Entity Address State Or Province	MD
Entity Address, Postal Zip Code	20904
City Area Code	240
Local Phone Number	247-1170
Title of 12(b) Security	Class A Common Stock, par value $0.001 per share
Trading Symbol	ELUT
Security Exchange Name	NASDAQ
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Non-accelerated Filer
Entity Small Business	true
Entity Emerging Growth Company	true
Entity Ex Transition Period	false
Entity Shell Company	false
Entity Central Index Key	0001708527
Current Fiscal Year End Date	--12-31
Document Fiscal Year Focus	2024
Document Fiscal Period Focus	Q3
Amendment Flag	false
Class A Common stock
Document Information [Line Items]
Entity Common Stock, Shares Outstanding		30,248,692
Class B Common stock
Document Information [Line Items]
Entity Common Stock, Shares Outstanding		4,313,406

Segment Information

9 Months Ended

Sep. 30, 2024

Segment Information

Segment Information

Note 12. Segment Information

With the sale of the Orthobiologics Business, the Company now operates in three segments. These segments are based on financial information that is utilized by the Company’s chief operating decision maker to assess performance and allocate resources. 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.

The Company’s net sales disaggregated by segment were as follows (in thousands):


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2024		2023		2024		2023
Net sales:
Device protection	$	2,260		2,575	$	7,256		7,147
Women's health		3,100		2,614		9,238		7,309
Cardiovascular		562		938		2,413		4,414
Total net sales	$	5,922	$	6,127	$	18,907	$	18,870

The Company’s gross profit disaggregated by segment were as follows (in thousands):


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2024		2023		2024		2023
Gross profit:
Device protection	$	1,529	$	1,704	$	4,729	$	4,998
Women's health		1,739		1,417		4,716		3,376
Cardiovascular		322		569		1,485		3,100
Gross profit, excluding intangible asset amortization	$	3,590		3,690		10,930		11,474
Intangible asset amortization expense		849		849		2,547		2,547
Gross profit	$	2,741	$	2,841	$	8,383	$	8,927

The following table is a reconciliation of segment gross profit to the consolidated loss before provision for income taxes (in thousands):


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2024		2023		2024		2023
Gross profit, excluding intangible asset amortization	$	3,590	$	3,690	$	10,930	$	11,474

Adjustments:
Intangible asset amortization expense		(849)		(849)		(2,547)		(2,547)
Sales and marketing		(2,989)		(2,802)		(9,628)		(10,514)
General and administrative		(4,521)		(2,757)		(14,266)		(10,137)
Research and development		(778)		(557)		(2,951)		(3,016)
Litigation costs, net		(4,683)		(4,096)		(8,757)		(7,278)
Loss from operations		(10,230)		(7,371)		(27,219)		(22,018)
Interest expense, net		1,129		1,448		3,709		4,285
(Gain) loss on revaluation of warrant liability		(12,653)		(1,070)		15,321		(1,070)
Other expense (income), net		—		758		(1,186)		758
Income (loss) before provision for income taxes	$	1,294	$	(8,507)	$	(45,063)	$	(25,991)

- Definition

The entire disclosure for reporting segments including data and tables. Reportable segments include those that meet any of the following quantitative thresholds a) it's reported revenue, including sales to external customers and intersegment sales or transfers is 10 percent or more of the combined revenue, internal and external, of all operating segments b) the absolute amount of its reported profit or loss is 10 percent or more of the greater, in absolute amount of 1) the combined reported profit of all operating segments that did not report a loss or 2) the combined reported loss of all operating segments that did report a loss c) its assets are 10 percent or more of the combined assets of all operating segments.

+ References

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+ Details

Revenue Interest Obligation

9 Months Ended

Sep. 30, 2024

Revenue Interest Obligation

Revenue Interest Obligation

Note 8. Revenue Interest Obligation

On May 31, 2017, the Company completed an asset purchase agreement with CorMatrix Cardiovascular, Inc. (“CorMatrix”) and acquired all CorMatrix commercial assets and related intellectual property (the “CorMatrix Acquisition”). As part of the CorMatrix Acquisition, the Company assumed a restructured, long-term obligation (the “Revenue Interest Obligation”) to Ligand Pharmaceuticals Incorporated (“Ligand”) with an estimated present value on the acquisition date of $27.7 million. Subject to annual minimum payments of $2.75 million per year, the terms of the Revenue Interest Obligation required Elutia to pay Ligand 5% of future sales of the products Elutia acquired from CorMatrix, including CanGaroo, ProxiCor, Tyke and VasCure, as well as products substantially similar to those products, such as the 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.

On January 10, 2024, the Company entered into an amendment to the Revenue Interest Obligation (the “Amended Revenue Interest Obligation”). Pursuant to the Amended Revenue Interest Obligation, the parties modified and restructured the Revenue Interest Obligation by revising the annual minimum payments for 2024 and each subsequent fiscal year during the term of the agreement from $2.75 million to $4.4 million. Such minimums are payable quarterly within 30 days after each quarter-end date. Additionally, the Company made payments totaling $3.0 million (50% paid in January 2024 and 50% paid in April 2024) in satisfaction of all royalty obligations for the first three fiscal quarters of 2023 and made a payment in February 2024 of $1.1 million in satisfaction of the royalty obligations for the fourth quarter of 2023. Furthermore, as part of the Amended Revenue Interest Obligation, Ligand waived the Company’s obligation to make the $5.0 million milestone payment that became due to Ligand in the second quarter of 2023. Total payments to Ligand during the 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 nine months ended September 30, 2024. 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.

Summary of Significant Accounting Policies (Policies)

9 Months Ended

Sep. 30, 2024

Summary of Significant Accounting Policies

Basis of Presentation and Liquidity

The unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all the information and footnotes required by GAAP for complete financial statements and should be read in conjunction with the Company’s condensed consolidated financial statements and accompanying notes included in the Company's annual report on Form 10-K (“Annual Report”) for the fiscal year ended December 31, 2023. The financial information as of 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. The results of the Company’s operations for any interim period are not necessarily indicative of the results that may be expected for any other interim period or any future year or period.

The condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. Intercompany accounts and transactions have been eliminated in consolidation.

On November 8, 2023, the Company completed the sale of substantially all of the assets relating to its Orthobiologics segment (the “Orthobiologics Business”) to Berkeley Biologics, LLC (“Berkeley”). The Orthobiologics Business was comprised of assets relating to researching, developing, administering, insuring, operating, commercializing, manufacturing, selling and marketing the Company’s Orthobiologics products, and the business of contract manufacturing of particulate bone, precision milled bone, cellular bone matrix, acellular dermis, soft tissue and other products. The assets sold represent the entirety of the Company’s Orthobiologics segment. In the sale, the Company received approximately $14.6 million, and the Company may earn up to an additional $20 million, in the aggregate, in the form of earn-out payments. The earn-out payments are equal to 10% of the actual revenue earned by Berkeley in each of the five years after the closing of the sale from sales of specified Orthobiologics products under the purchase agreement (including improvements, modifications, derivatives and enhancements related to those products). There were no earn-out payments earned or paid in the 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. 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 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 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. The Company’s inability to achieve and then maintain profitability would negatively affect its business, financial condition, results of operations and cash flows. Furthermore, even if the Company does achieve profitability, it may not be able to sustain or increase profitability on an ongoing basis, or, in general, be able to satisfy its obligations, including those related to the FiberCel Litigation and VBM Litigation described in Note 10, when they become due.

In order to mitigate the current and potential future liquidity issues caused by the matters noted above, we may seek to raise capital through the issuance of common stock or pursue asset sales or other transactions, such as the sale of the Orthobiologics Business described above. However, such transactions may not be successful, and we may not be able to raise additional equity, refinance our debt instruments, or sell assets on acceptable terms, or at all. As such, based on our current operating plans, we believe there is uncertainty as to whether our future cash flows along with our existing cash, issuances of additional equity and cash generated from expected future sales will be sufficient to meet our anticipated operating needs through twelve months from the condensed consolidated financial statement issuance date. Due to these factors, there is substantial doubt about our ability to continue as a going concern within one year after the issuance of the condensed consolidated financial statements.

The accompanying condensed consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. That is, the accompanying financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates continuity of operations, realization of assets, and satisfaction of liabilities in the ordinary course of business.

Reclassifications

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

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Estimates and assumptions relating to inventories, receivables, long-lived assets, the valuation of stock-based awards, the valuation of the revenue interest obligation, the valuation of the warrant liability, the contingent liabilities for legal proceedings and deferred income taxes are made at the end of each financial reporting period by management. Management continually re-evaluates its estimates, judgments and assumptions, and management's evaluation could change. 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 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

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. To increase the comparability of fair value measures, the following hierarchy prioritizes the inputs to valuation methodologies used to measure fair value:

Level 1 - Valuations based on quoted prices for identical assets and liabilities in active markets.

Level 2 - Valuations based on observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data.

Level 3 - Valuations based on unobservable inputs reflecting the Company’s own assumptions, consistent with reasonably available assumptions made by other market participants. These valuations require significant judgment.

The estimated fair value of financial instruments disclosed in the financial statements has been determined by using available market information and appropriate valuation methodologies. The carrying value of all current assets and current liabilities approximates fair value because of their short-term nature.

Cash and Cash Equivalents

The Company maintains its cash balances at banks and financial institutions. The balances are insured up to the legal limit. The Company maintains cash balances that may, at times, exceed this insured limit. The Company considers cash on hand, demand deposits in a bank, money market funds, and all highly liquid investments with an original maturity of 90 days or less to be cash and cash equivalents.

Accounts Receivable and Allowances

Accounts receivable in the accompanying balance sheets are presented net of allowances for credit losses. The Company grants credit to customers in the normal course of business, but generally does not require collateral or any other security to support its receivables.

The Company evaluates the collectability of accounts receivable based on a combination of factors. In circumstances where a specific customer is unable to meet its financial obligations to the Company, a provision to the allowance for doubtful accounts is recorded to reduce the net recognized receivable to the amount that is reasonably expected to be collected. For all other customers, a provision to the allowance for credit losses is recorded based on factors including the length of time the receivables are past due, the current business environment and the Company’s historical experience. Provisions to the allowance for doubtful accounts are recorded to general and administrative expenses. Account balances are charged off against the allowance when it is probable that the receivable will not be recovered.

Inventories

Inventory

Property and Equipment

Inventory, consisting of purchased materials, direct labor and manufacturing overhead, is stated at the lower of cost or net realizable value, with cost determined generally using the average cost method. At each balance sheet date, the Company also evaluates inventory for excess quantities, obsolescence or shelf-life expiration. This evaluation includes analysis of the Company’s current and future strategic plans, historical sales levels by product, projections of future demand, the risk of technological or competitive obsolescence for products, general market conditions and a review of the shelf-life expiration dates for products. To the extent that management determines there is excess or obsolete inventory or quantities with a shelf life that is too near its expiration for the Company to reasonably expect that it can sell those products prior to their expiration, the Company adjusts the carrying value to estimated net realizable value.

Property and Equipment

Property and equipment are stated at cost less accumulated depreciation. Depreciation is computed on the straight-line method over the following estimated useful lives of the assets:


Processing and research equipment		5 to 10 years
Office equipment and furniture		3 to 5 years
Computer hardware and software		3 years

Leasehold improvements are amortized on the straight-line method over the shorter of the lease term or the estimated useful life of the asset. Repairs and maintenance costs are expensed as incurred.

Leases

In February 2016, the Financial Accounting Standards Board (“FASB”) issued ASU No 2016-02, Leases to increase the transparency and comparability about leases among entities. ASU 2016-02 and certain additional ASUs are now codified as ASC 842, Leases. ASC 842 supersedes the lease accounting guidance in ASC 840 and requires lessees to recognize a lease liability and a corresponding lease asset for virtually all lease contracts. The Company determines if an arrangement contains a lease at inception. Right-of-use (“ROU”) assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from that lease. For leases with a term greater than 12 months, ROU assets and liabilities are recognized at the lease commencement date based on the estimated present value of lease payments over the lease term. The lease term includes the option to extend the lease when it is reasonably certain the Company will exercise that option. When available, the Company uses the rate implicit in the lease to discount lease payments to present value. In the case the implicit rate is not available, the Company uses its incremental borrowing rate based on information available at the lease commencement date, including publicly available data for instruments with similar characteristics, to determine the present value of lease payments. The Company combines lease and non-lease elements for office leases.

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

Purchased intangible assets with finite lives are carried at acquired fair value, less accumulated amortization. Amortization is computed over the estimated useful lives of the respective assets.

The Company periodically evaluates the period of depreciation or amortization for long-lived assets to determine whether current circumstances warrant revised estimates of useful lives. The Company reviews its property and equipment and intangible assets for impairment whenever events or changes in circumstances indicate the carrying value of an asset may not be recoverable. Impairment exists when the carrying value of the company’s asset exceeds the related estimated

undiscounted future cash flows expected to be derived from the asset. If impairment exists, the carrying value of that asset is adjusted to its fair value. A discounted cash flow analysis is used to estimate an asset’s fair value, using assumptions that market participants would apply. The results of impairment tests are subject to management’s estimates and assumptions of projected cash flows and operating results. Changes in assumptions or market conditions could result in a change in estimated future cash flows and could result in a lower fair value and therefore an impairment, which could impact reported results. There were no impairment losses for the three 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 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. The Company estimates the fair value of the warrant liability using a Black-Scholes pricing model. We are required to make assumptions and estimates in determining an appropriate term, risk-free interest rate, volatility factor, dividend yield, and the fair value of common stock. Any significant adjustments to the unobservable inputs would have a direct impact on the fair value of the warrant liability.

Revenue Recognition

The Company’s revenue is generated from contracts with customers in accordance with ASC 606. The core principle of ASC 606 is that the Company recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods or services. The ASC 606 revenue recognition model consists of the following five steps: (1) identify the contracts with a customer, (2) identify the performance obligations in the contract, (3) determine the transaction price, (4) allocate the transaction price to the performance obligations in the contract and (5) recognize revenue when (or as) the entity satisfies a performance obligation.

As noted above, the Company enters into contracts to primarily sell and distribute products to healthcare providers or commercial partners. Revenue is recognized when the Company has met its performance obligations pursuant to its contracts with its customers in an amount that the Company expects to be entitled to in exchange for the transfer of control of the products to the Company’s customers. For all product sales, the Company has no further performance obligations and revenue is recognized at the point control transfers which occurs either when: i) the product is shipped via common carrier; or ii) the product is delivered to the customer or distributor, in accordance with the terms of the agreement.

A portion of the Company’s product revenue is generated from consigned inventory maintained at hospitals and from inventory physically held by distributors and direct sales representatives. For these types of products sales, the Company retains control until the product has been used or implanted, at which time revenue is recognized.

The Company elected to account for shipping and handling activities as a fulfillment cost rather than a separate performance obligation. Amounts billed to customers for shipping and handling are included as part of the transaction price and recognized as revenue when control of the underlying products is transferred to the customer. The related shipping and freight charges incurred by the Company are included in sales and marketing costs.

Contracts with customers state the final terms of the sale, including the description, quantity, and price of each implant distributed. The payment terms and conditions in the Company’s contracts vary; however, as a common business practice, payment terms are typically due in full within 30 to 60 days of delivery. The Company, at times, extends volume discounts to customers.

The Company permits returns of its products in accordance with the terms of contractual agreements with customers. Allowances for returns are provided based upon analysis of the Company’s historical patterns of returns

matched against the revenues from which they originated. The Company records estimated returns as a reduction of revenue in the same period revenue is recognized.

Stock-Based Compensation Plans

The Company accounts for its stock-based compensation plans in accordance with ASC 718, Accounting for Stock Compensation. ASC 718 requires the measurement and recognition of compensation expense for all stock-based awards made to employees and directors, including employee stock options and restricted stock. Stock-based compensation cost is measured at the grant date, based on the calculated fair value of the award, and is recognized as an expense on a straight-line basis over the requisite service period of the entire award.

Research and Development Costs

Research and development costs, which include mainly salaries, outside services and supplies, are expensed as incurred.

Concentration of Credit Risk

Financial instruments that potentially subject the Company to significant concentrations of credit risk consist primarily of cash. The Company’s cash balances with 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 nine months ended September 30, 2024 and 2023, the Company’s net loss equaled its comprehensive loss and accordingly, no additional disclosure is presented.

Income Taxes

The Company uses the asset and liability method of accounting for income taxes. Deferred income taxes are recorded to reflect the tax consequences on future years for differences between the tax basis of assets and liabilities and their financial reporting amounts at each year-end based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to amounts that are more likely than not to be realized.

The Company is subject to income taxes in the federal and state jurisdictions. Tax regulations within each jurisdiction are subject to the interpretation of the related tax laws and regulations and require significant judgment to apply. In accordance with the authoritative guidance on accounting for uncertainty in income taxes, the Company recognizes tax liabilities for uncertain tax positions when it is more likely than not that a tax position will not be sustained upon examination and settlement with various taxing authorities. Liabilities for uncertain tax positions are measured based upon the largest amount of benefit that is more likely than not (greater than 50%) of being realized upon settlement. The Company’s policy is to recognize interest and/or penalties related to income tax matters in income tax expense.

Common Stock and Warrants - Warrant pricing inputs (Details)	Sep. 30, 2024 $ / shares	Dec. 31, 2023 Y $ / shares	Sep. 21, 2023 $ / shares
Common stock warrants \| Common stock price
Warrant Liabilities
Fair value calculation input		2.16
Common stock warrants \| Expected term (years)
Warrant Liabilities
Fair value calculation input \| Y		0.7
Common stock warrants \| Risk-free interest rate
Warrant Liabilities
Fair value calculation input		5.1
Common stock warrants \| Volatility factor
Warrant Liabilities
Fair value calculation input		107.3
2023 Prefund Warrants
Warrant Liabilities
Exercise price (in dollar per share)	$ 0.001
2024 Prefunded Warrants
Warrant Liabilities
Exercise price (in dollar per share)	$ 0.001
Private Placement \| Common stock warrants
Warrant Liabilities
Exercise price (in dollar per share)			$ 1.4275

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2024	Sep. 30, 2023
OPERATING ACTIVITIES:
Net loss	$ (44,888)	$ (28,342)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	2,588	2,854
Gain on sale of Orthobiologics Business	(180)
(Gain) loss on revaluation of warrant liability	15,321	(1,070)
Gain on revaluation of revenue interest obligation	(1,443)
Interest expense recorded as additional revenue interest obligation or long-term debt	2,086	2,473
Amortization of deferred financing costs and debt discount	162	161
Stock-based compensation	6,683	1,987
Bad debt expense	251	590
Losses associated with viable bone matrix recall and market withdrawal		1,984
Changes in operating assets and liabilities:
Accounts receivable	81	1,045
Inventory	220	(2,490)
Receivables of litigation costs	(1,886)	6,361
Prepaid expenses and other	2,171	1,609
Accounts payable and accrued expenses and payables to tissue suppliers	(984)	1,513
Contingent liability for legal proceedings	9,265	(1,658)
Other liabilities	153	305
Net cash used in operating activities	(10,400)	(12,678)
INVESTING ACTIVITIES:
Proceeds from sale of Orthobiologics Business	180
Expenditures for property, plant and equipment	(560)	(329)
Net cash used in investing activities	(380)	(329)
FINANCING ACTIVITIES:
Proceeds from private placement and warrants, net of offering costs of $0.2 million	12,390	10,335
Repayments of long-term debt	(2,000)
Proceeds from exercises of Common Warrants and Prefunded Warrants, net	15,725
Payments on revenue interest obligation	(6,300)
Repayments of insurance premium financings	(1,721)
Payments for taxes upon vesting of restricted stock units	(1,011)	(19)
Proceeds from stock option exercises and issuance common stock under ESPP	162	219
Net cash provided by financing activities	17,245	10,535
Net increase (decrease) in cash and cash equivalents	6,465	(2,472)
Cash and cash equivalents, beginning of period	19,276	16,989
Cash and cash equivalents, end of period	25,741	14,517
Supplemental Cash Flow and Non-Cash Financing Activities Disclosures:
Cash paid for interest	4,421	$ 1,696
Fair value of warrants issued	2,464
Operating lease right-of-use asset extensions executed	1,379
Conversion of Common Warrants and Prefunded Warrants to common stock	$ 17,576

Long-Term Debt - SWK Loan Facility (Details) - USD ($)			1 Months Ended		3 Months Ended		9 Months Ended
Long-Term Debt - SWK Loan Facility (Details) - USD ($)	Dec. 14, 2022	Aug. 10, 2022	Nov. 30, 2023	Aug. 31, 2022	Sep. 30, 2024	Sep. 30, 2023	Sep. 30, 2024	Sep. 30, 2023	Dec. 31, 2023
Class A Common stock
Long-Term Debt
Common stock, par value (in dollar per share)					$ 0.001		$ 0.001		$ 0.001
SWK Loan Facility
Long-Term Debt
Maximum borrowing capacity		$ 25,000,000
Proceeds from Issuance of Debt	$ 4,000,000			$ 21,000,000
Quarterly principal amortization (percent)		5.00%
Debt Instrument, Variable Interest Rate, Type [Extensible Enumeration]		us-gaap:SecuredOvernightFinancingRateSofrMember
Basis spread on variable rate		7.75%
Interest in-kind spread basis		3.75%
Debt Instrument, Interest In Kind		4.50%
Exit fee (as a percent)		6.50%
Exit fee termination plus		$ 112,500
Weighted average interest rate					13.50%	13.50%	13.50%	13.10%
Percentage of casualty proceeds in excess of $250,000 to redeem loan balance		100.00%
Casualty proceeds threshold amount in excess of which is used to redeem loan balance		$ 250,000
Threshold amount in excess of which exempted from mandatory prepayment		$ 1,000,000
Mandatory prepayment triggered by divestiture of Orthobiologics Business			$ 4,000,000.0
Prepayment amount of loan			$ 2,000,000.0
SWK Loan Facility \| Class A Common stock
Long-Term Debt
Warrants issued		187,969
Common stock, par value (in dollar per share)		$ 0.001
Exercise price (in dollar per share)		$ 6.65
Maximum shares issuable at closing		187,969
Warrant value		$ 600,000
Deferred financing costs		$ 500,000
SWK Loan Facility \| Minimum
Long-Term Debt
Basis spread on variable rate		2.75%
New Asset-Based Revolving Loan Facility
Long-Term Debt
Maximum borrowing capacity		$ 8,000,000

Commitment and Contingencies - License and Supply (Details) - License agreement with Cook Biotech - USD ($) $ in Millions	9 Months Ended
	Sep. 30, 2024	Sep. 30, 2023
Cook Biotech License and Supply Agreements
Percentage of royalty on sales	3.00%
Royalty expense	$ 0.0	$ 0.0
License fee payments per year	$ 0.1

Stock-Based Compensation - Restricted Stock Units (Details) $ / shares in Units, $ in Millions	9 Months Ended
	Sep. 30, 2024 USD ($) $ / shares shares
Restricted stock units
Weighted-Average Grant Date Fair Value
Total fair value of the restricted stock units granted \| $	$ 8.3
Unrecognized compensation costs \| $	$ 4.9
Weighted-average recognition period	2 years 2 months 12 days
Restricted stock units \| Minimum
Weighted-Average Grant Date Fair Value
Vesting period	3 years
Restricted stock units \| Maximum
Weighted-Average Grant Date Fair Value
Vesting period	4 years
Restricted stock units \| 2020 Plan
Number of Shares Underlying RSUs
Unvested at the beginning	335,608
Granted	2,327,500
Vested	(1,004,270)
Forfeited	(118,214)
Outstanding at the end	1,540,624
Weighted-Average Grant Date Fair Value
Unvested at the beginning (in dollars per share) \| $ / shares	$ 3.64
Granted (in dollars per share) \| $ / shares	3.58
Vested (in dollars per share) \| $ / shares	3.70
Forfeited (in dollars per share) \| $ / shares	3.04
Unvested at the ending (in dollars per share) \| $ / shares	$ 3.55
RSUs that vest 10th day after FDA's approval of CanGarooRM product
Number of Shares Underlying RSUs
Granted	560,625
RSUs that vest on achievements of price thresholds
Number of Shares Underlying RSUs
Granted	162,500
Outstanding at the end	252,394
Weighted-Average Grant Date Fair Value
Period over which price must exceed $10 for awards to vest	20 days
Period to recognize costs	3 years

Summary of Significant Accounting Policies - Leases (Details) $ in Millions	Sep. 30, 2024 USD ($)
Summary of Significant Accounting Policies
Right-of-use assets	$ 1.4
Lease liabilities	1.4
Future minimum lease commitments under non-cancelable operating leases
For the six months ended December 31, 2024	0.2
Year ended December 31, 2025	0.6
Year ended December 31, 2026	0.7
Year ended December 31, 2027	$ 0.1

Summary of Significant Accounting Policies - Basis of Presentation and Liquidity (Details) - USD ($) $ in Thousands		3 Months Ended				9 Months Ended
	Nov. 08, 2023	Sep. 30, 2024	Jun. 30, 2024	Dec. 31, 2023	Sep. 30, 2023	Sep. 30, 2024	Sep. 30, 2023	Aug. 18, 2023
Accounting Policies [Line Items]
Proceeds from sale of Orthobiologics Business						$ 180
Net loss		$ (1,286)			$ 9,747	44,888	$ 28,342
Accumulated deficit		$ 220,532		$ 175,644		220,532
Cash used in operating activities						10,400	$ 12,678
Divestiture of Orthobiologics \| Discontinued Operations, Disposed of by Sale
Accounting Policies [Line Items]
Proceeds from sale of Orthobiologics Business	$ 14,600
Purchase price due after closing in the form of earn-out payments	$ 20,000
Earn-out payments, as a percent actual revenue	10.00%
Earn-out period	5 years
Earn-out payments received						$ 0
Indemnity holdback amount	$ 1,500							$ 1,500
Retainment Period	24 months
Recognized a gain			$ 200	$ 6,000

CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands	Sep. 30, 2024	Dec. 31, 2023
Current assets:
Cash and cash equivalents	$ 25,741	$ 19,276
Accounts receivable, net	2,931	3,263
Inventory	3,633	3,853
Receivables of litigation costs	4,582	2,696
Prepaid expenses and other current assets	431	2,165
Total current assets	37,318	31,253
Property and equipment, net	693	172
Intangible assets, net	9,123	11,671
Operating lease right-of-use assets and other	1,273	332
Total assets	48,407	43,428
Current liabilities:
Accounts payable	5,073	3,191
Accrued expenses	5,425	9,485
Current portion of long-term debt		3,321
Current portion of revenue interest obligation	4,400	11,741
Contingent liability for legal proceedings	24,289	15,024
Current operating lease liabilities	491	275
Total current liabilities	39,678	43,037
Long-term debt	22,641	20,356
Long-term revenue interest obligation	6,244	5,360
Warrant liability	18,527	12,760
Other long-term liabilities	1,555	515
Total liabilities	88,645	82,028
Commitments and contingencies
Stockholders' equity (deficit):
Additional paid-in capital	180,260	137,021
Accumulated deficit	(220,532)	(175,644)
Total stockholders' deficit	(40,238)	(38,600)
Total liabilities and stockholders' deficit	48,407	43,428
Class A Common stock
Stockholders' equity (deficit):
Common stock	30	19
Class B Common stock
Stockholders' equity (deficit):
Common stock	$ 4	$ 4

Stock-Based Compensation - Stock Options Activity (Details) $ / shares in Units, $ in Thousands	9 Months Ended	12 Months Ended
	Sep. 30, 2024 USD ($) $ / shares shares	Dec. 31, 2023 $ / shares shares
Number of Shares
Outstanding at the beginning	1,501,193
Granted	1,790,654
Exercised	(1,960)
Forfeited	(59,433)
Outstanding at the end	3,230,454	1,501,193
Vested and exercisable at the end	1,644,088
Weighted- Average Exercise Price
Outstanding at the beginning (in dollars per share) \| $ / shares	$ 8.37
Granted (in dollars per share) \| $ / shares	3.59
Exercised (in dollars per share) \| $ / shares	3.61
Forfeited (in dollars per share) \| $ / shares	10.21
Outstanding at the end (in dollars per share) \| $ / shares	5.23	$ 8.37
Vested and exercisable at the end (in dollars per share) \| $ / shares	$ 5.87
Weighted-Average Remaining Contractual Term (years)
Outstanding (in years)	7 years 6 months	7 years 9 months 18 days
Vested and exercisable (in years)	6 years 1 month 6 days
Aggregate Intrinsic Value
Aggregate Intrinsic Value (in dollars) \| $	$ 621
Vested and exercisable at the end (in dollars) \| $	$ 353
Other Disclosures
Weighted average grant date fair value of options granted \| $ / shares	$ 2.38
Employee Stock Option
Stock-Based Compensation
Exercise price as a percentage of market value of share of common stock at closing on the date of the grant	100.00%
Contractual term	10 years
Other Disclosures
Total unrecognized compensation expense \| $	$ 3,800
Weighted-average recognition period	2 years
Employee Stock Option \| Minimum
Stock-Based Compensation
Vesting period	3 years
Employee Stock Option \| Maximum
Stock-Based Compensation
Vesting period	4 years
Options that vest 10th day after FDA's approval of CanGarooRM product
Number of Shares
Granted	397,640
Options that vest on achievements of price thresholds
Number of Shares
Granted	162,500
Outstanding at the end	345,011
Other Disclosures
Share price threshold period	20 days
Period to recognize costs	3 years

Summary of Significant Accounting Policies - Revenue Recognition (Details)	9 Months Ended
	Sep. 30, 2024
Minimum
Disaggregation of Revenue
Term of payment	30 days
Maximum
Disaggregation of Revenue
Term of payment	60 days

- Definition

Line items represent financial concepts included in a table. These concepts are used to disclose reportable information associated with domain members defined in one or many axes to the table.

+ References + Details

Stock-Based Compensation - Employee Stock Purchase Plan (Details) - Employee Stock Purchase Plan	3 Months Ended	9 Months Ended
	Sep. 30, 2024 shares	Sep. 30, 2024 shares
Stock-Based Compensation
Offering period		6 months
Price of the common stock purchased as percentage of fair market value of common stock		85.00%
Grant of equity awards authorized	774,341	774,341
Awards available for grant	471,126	471,126
Shares issued under ESPP	31,199	96,658

Stock-Based Compensation

9 Months Ended

Sep. 30, 2024

Stock-Based Compensation

Stock-Based Compensation

Note 5. Stock-Based Compensation

In 2015, the Company established the Elutia Inc. 2015 Stock Option/Stock Issuance Plan, as amended (the “2015 Plan”) which provided for the granting of incentive and non-qualified stock options to employees, directors and consultants of the Company. On October 7, 2020, in connection with the Company’s initial public offering (“IPO”), the Company adopted the Elutia Inc. 2020 Incentive Award Plan, and on June 8, 2023, the Company’s stockholders approved the amendment and restatement of that plan (as amended and restated, the “2020 Plan”), which authorizes the grant of incentive and non-qualified stock options, restricted stock, restricted stock units and stock appreciation rights to employees, directors and consultants. Shares of Class A common stock totaling 1,636,000 were initially reserved for issuance pursuant to the 2020 Plan, and in June 2023, the number of shares of Class A common stock reserved for issuance under the 2020 Plan was increased by 2,000,000 shares. In addition, the shares reserved for issuance under the 2020 Plan also include shares reserved but not issued under the 2015 Plan as well as an annual increase as set forth in the 2020 Plan. As of September 30, 2024, the Company had 389,075 shares of Class A common stock available for issuance under the 2020 Plan.

Stock Options

The Company’s policy is to grant stock options at an exercise price equal to 100% of the market value of a share of Class A common stock at closing on the date of the grant. The Company’s stock options generally have contractual terms of ten years and vest over a period of either three or four years from the date of grant.

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:


				Weighted-
				Average
		Weighted-		Remaining		Aggregate
		Average		Contractual		Intrinsic
		Exercise		Term		Value
	Number of Shares	Price		(years)		(in thousands)
Outstanding, December 31, 2023	1,501,193	$	8.37		7.8	$	-
Granted	1,790,654	$	3.59
Exercised	(1,960)	$	3.61
Forfeited	(59,433)	$	10.21
Outstanding, September 30, 2024	3,230,454	$	5.23		7.5	$	621
Vested and exercisable, September 30, 2024	1,644,088	$	5.87		6.1	$	353

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.

The Company uses the Black-Scholes model to value its stock option grants that vest based on the passage of time or the achievement of certain performance criteria and expenses the related compensation cost using the straight-line method over the vesting period. The fair value of stock options is determined on the grant date using assumptions for the estimated fair value of the underlying common stock, expected term, expected volatility, dividend yield, and the risk-free interest rate. Before the completion of the Company’s IPO, the Board of Directors determined the fair value of common stock considering the state of the business, input from management, third party valuations and other considerations. The Company uses the simplified method for estimating the expected term used to determine the fair value of options. The expected volatility of the Class A common stock is partially based on the historical volatility of comparable companies in the industry whose share prices are publicly available. The Company uses a zero-dividend yield assumption as the Company has not paid dividends since inception nor does it anticipate paying dividends in the future. The risk-free interest rate approximates recent U.S. Treasury note auction results with a similar life to that of the option. The period expense is then determined based on the valuation of the options and is recognized on a straight-line basis over the requisite service period for the entire award.

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


	Nine Months Ended
	September 30,
	2024		2023
Expected term (years)	5.9		6.0
Risk-free interest rate	3.3	%	3.9	%
Volatility factor	100.9	%	63.8	%
Dividend yield	—		—

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

Restricted Stock Units

Restricted stock units (“RSUs”) represent rights to receive common shares at a future date. There is no exercise price and no monetary payment is required for receipt of restricted stock units or the shares issued in settlement of the award.

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


		Weighted-
		Average
	Number of Shares	Grant Date
	Underlying RSUs	Fair Value
Unvested, December 31, 2023	335,608	$	3.64
Granted	2,327,500	$	3.58
Vested	(1,004,270)	$	3.70
Forfeited	(118,214)	$	3.04
Unvested, September 30, 2024	1,540,624	$	3.55

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. The market condition RSUs are valued as described below. The respective fair values are amortized to expense on a straight-line basis over the vesting period of generally three to four years.

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

Employee Stock Purchase Plan

The Company makes shares of its Class A common stock available for purchase under its 2020 Employee Stock Purchase Plan (the “ESPP”). The ESPP provides for separate six-month offering periods that begin in March and September of each year. Under the ESPP, employees may purchase a limited number of shares of Elutia Class A common stock at 85% of the fair market value on either the first day of the offering period or the purchase date, whichever is lower. The ESPP is considered compensatory for purposes of stock-based compensation expense. The number of shares reserved under the ESPP will automatically increase on the first day of each fiscal year through January 1, 2030, in an amount as set forth in the ESPP. As of 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 nine months ended September 30, 2024 and 2023 was comprised of the following (in thousands):


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2024		2023		2024		2023
Sales and marketing	$	355		164		1,288		466
General and administrative		1,219		373		4,421		1,264
Research and development		210		15		819		102
Cost of goods sold		(9)		14		155		40
Total stock-based compensation expense	$	1,775	$	566	$	6,683	$	1,872

Common Stock and Warrants - Registered Direct Offering of Common Stock and Warrants (Details) - USD ($) $ / shares in Units, $ in Millions		9 Months Ended
	Jun. 16, 2024	Sep. 30, 2024
2024 Prefunded Warrants
Common Stock and Warrants
Exercise price (in dollar per share)		$ 0.001
Registered Direct Offering of Common Stock and Warrants
Common Stock and Warrants
Proceeds from issuance of shares	$ 13.3
Transaction fees	$ 1.4
Amount allocated to issuance of the common stock		$ 1.1
Registered Direct Offering of Common Stock and Warrants \| 2024 Prefunded Warrants
Common Stock and Warrants
Warrants sold	725,000
Price per warrant (in USD per share)	$ 3.399
Exercise price (in dollar per share)	$ 0.001
Registered Direct Offering of Common Stock and Warrants \| Class A Common stock
Common Stock and Warrants
Shares sold (in shares)	3,175,000
Price per share (in USD per share)	$ 3.40
Amount allocated to issuance of the common stock	$ 1.1

Commitment and Contingencies - Legal Proceedings (Details) $ in Millions	1 Months Ended	16 Months Ended	26 Months Ended	37 Months Ended
	Jun. 30, 2024 lawsuit	Sep. 30, 2024 USD ($) case lawsuit	Sep. 30, 2024 USD ($) case lawsuit	Sep. 30, 2024 USD ($) case lawsuit
Legal Proceedings
Receivable from litigation costs		$ 4.6	$ 4.6	$ 4.6
Litigation costs, net
Legal Proceedings
Insurance receivable		$ 1.6	$ 1.6	$ 1.6
FiberCel Litigation Product Lability
Legal Proceedings
Number of lawsuits filed or asserted \| lawsuit				110
Number of active lawsuits or claims filed or asserted \| lawsuit		79	79	79
Lawsuits or claims where settlements have been reached but not yet been paid \| lawsuit		26	26	26
Number of cases settled \| lawsuit			31
Total amount of settlements			$ 9.6
Total estimated liability		$ 20.4	20.4	$ 20.4
Litigation and claims settlement not paid		10.5	10.5	10.5
Receivable from litigation costs		$ 0.4	$ 0.4	$ 0.4
Viable Bone Matrix Litigation
Legal Proceedings
Number of active lawsuits or claims filed or asserted \| lawsuit		15	15	15
Number of cases settled \| case		9
Total amount of settlements		$ 1.0
Number of cases, including unasserted claims \| case		26	26	26
Total estimated liability		$ 3.9	$ 3.9	$ 3.9
Receivable from litigation costs		$ 4.2	$ 4.2	$ 4.2
Medtronic Litigation
Legal Proceedings
Number lawsuits not covered insurance by counter party contrary contractual obligations \| lawsuit	100

Sale of Orthobiologics Business (Tables)

9 Months Ended

Sep. 30, 2024

Sale of Orthobiologics Business

Schedules of assets and liabilities, financial results and cash flow reconciliation of the discontinued operations

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


		Three Months Ended		Nine Months Ended
		September 30,		September 30,
	2023		2023
Net sales	$	2,291	$	12,894
Cost of goods sold		1,839		11,218
Gross profit		452		1,676
Sales and marketing		374		1,636
General and administrative		927		1,231
Research and development		262		776
Total operating expenses		1,563		3,643
Interest expense		117		348
Net income	$	(1,228)	$	(2,315)

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,
	2023
Significant operating non-cash reconciliation items
Depreciation	$	213
Stock-based compensation		115
Changes in operating assets and liabilities:
Accounts receivable		745
Inventory		1,757
Prepaid expenses and other		(326)
Accounts payable and accrued expenses and other current liabilities		(920)
Obligations to tissue suppliers		(857)

Significant investing items
Expenditures for property, plant and equipment		287

- Definition

Tabular disclosure of information related to a disposal group. Includes, but is not limited to, a discontinued operation, disposal classified as held-for-sale or disposed of by means other than sale or disposal of an individually significant component.

+ References

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+ Details

Summary of Significant Accounting Policies - Concentration of Credit risk (Details) - Customer concentration risk - customer	3 Months Ended	9 Months Ended
	Sep. 30, 2024	Sep. 30, 2024
Revenues
Concentration Risk [Line Items]
Number of major customer	2	2
Revenues \| One Customer
Concentration Risk [Line Items]
Concentration risk (as a percent)	15.00%	15.00%
Revenues \| Another customer
Concentration Risk [Line Items]
Concentration risk (as a percent)	8.00%	10.00%
Accounts Receivable
Concentration Risk [Line Items]
Number of major customer		1
Accounts Receivable \| One Customer
Concentration Risk [Line Items]
Concentration risk (as a percent)		14.00%

Sale of Orthobiologics Business - Financial results (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Jun. 30, 2024	Sep. 30, 2023	Sep. 30, 2024	Sep. 30, 2023
Sale of Orthobiologics Business
Gain on sale of Orthobiologics Business			$ 180
Divestiture of Orthobiologics \| Discontinued Operations, Disposed of by Sale
Sale of Orthobiologics Business
Gain on sale of Orthobiologics Business	$ 200
Financial results
Net sales		$ 2,291		$ 12,894
Cost of goods sold		1,839		11,218
Gross profit		452		1,676
Sales and marketing		374		1,636
General and administrative		927		1,231
Research and development		262		776
Total operating expenses		1,563		3,643
Interest Expense		117		348
Net income (loss)		$ (1,228)		$ (2,315)

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Parenthetical) - USD ($) $ in Millions	3 Months Ended	9 Months Ended
	Sep. 30, 2023	Sep. 30, 2023
Private Placement
Issuance and offering costs	$ 0.2	$ 0.2

Segment Information - Reconciliation of segment gross profit (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2024	Sep. 30, 2023	Sep. 30, 2024	Sep. 30, 2023
Reconciliation of segment gross profit to the consolidated loss from operations
Gross Profit, Before Intangible Asset Amortization	$ 3,590	$ 3,690	$ 10,930	$ 11,474
Adjustments:
Intangible asset amortization expense	(849)	(849)	(2,547)	(2,547)
Sales and marketing	(2,989)	(2,802)	(9,628)	(10,514)
General and administrative	(4,521)	(2,757)	(14,266)	(10,137)
Research and development	(778)	(557)	(2,951)	(3,016)
Litigation costs, net	(4,683)	(4,096)	(8,757)	(7,278)
Loss from operations	(10,230)	(7,371)	(27,219)	(22,018)
Interest expense, net	1,129	1,448	3,709	4,285
(Gain) loss on revaluation of warrant liability	(12,653)	(1,070)	15,321	(1,070)
Other expense (income), net		758	(1,186)	758
Income (loss) before provision for income taxes	$ 1,294	$ (8,507)	$ (45,063)	$ (25,991)

Summary of Significant Accounting Policies (Tables)

9 Months Ended

Sep. 30, 2024

Summary of Significant Accounting Policies

Summary of estimated useful lives of the assets


Processing and research equipment		5 to 10 years
Office equipment and furniture		3 to 5 years
Computer hardware and software		3 years

Net Loss Per Share

9 Months Ended

Sep. 30, 2024

Net Loss Per Share

Net Loss Per Share

Note 11. Net Income (Loss) Per Share


	Three Months Ended				Nine Months Ended
(in thousands, except share and per share data)	September 30,				September 30,
	2024		2023		2024		2023
Numerator:
Net income (loss) from continuing operations	$	1,286	$	(8,519)	$	(45,068)	$	(26,027)
Less: Undistributed net income to participating securities		(219)		—		—		—
Net income (loss) from continuing operations attributable to common stockholders		1,067		(8,519)		(45,068)		(26,027)
Income (loss) attributable to common stockholders from discontinued operations		—		(1,228)		180		(2,315)
Net income (loss) attributable to common stockholders		1,067		(9,747)		(44,888)		(28,342)
Less: dilutive gain on revaluation of warrant liability, net of addback for undistributed net income to participating securities		(12,822)		—		—		—
Net loss attributable to common stockholders for diluted earnings per share	$	(11,755)	$	(9,747)	$	(44,888)	$	(28,342)

Denominator:
Weighted average number of common shares - basic		32,520,134		17,017,610		27,132,216		16,464,262
Effect of dilutive common and prefunded warrants		3,000,804		—		—		—
Weighted average number of common shares - diluted		35,520,938		17,017,610		27,132,216		16,464,262

Net income (loss) attributable to common stockholders from continuing operations per share - basic	$	0.03	$	(0.50)	$	(1.66)	$	(1.58)
Net loss per share attributable to common stockholders from continuing operations per share - diluted	$	(0.33)	$	(0.50)	$	(1.66)	$	(1.58)
Net income (loss) attributable to common stockholders from discontinued operations per share - basic and diluted	$	—	$	(0.07)	$	0.01	$	(0.14)
Net income (loss) attributable to common stockholders per share - basic	$	0.03	$	(0.57)	$	(1.65)	$	(1.72)
Net loss attributable to common stockholders per share - diluted	$	(0.33)	$	(0.57)	$	(1.65)	$	(1.72)

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,		September 30,
	2024	2023	2024	2023
Options to purchase common stock	3,230,454	1,648,190	3,230,454	1,648,190
Restricted stock units	1,540,624	369,525	1,540,624	369,525
Class A common stock warrants	187,969	187,969	187,969	187,969
Common Warrants	—	11,033,804	—	11,033,804
2023 Prefunded Warrants	3,896,130	503,058	4,137,718	503,058
2024 Prefunded Warrants	—	—	725,000	—
Total	8,855,177	13,742,546	9,821,765	13,742,546

Long-Term Debt (Tables)

9 Months Ended

Sep. 30, 2024

Long-Term Debt

Summary of PPP loan recorded within long-term debt

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


	September 30,		December 31,
	2024		2023
Term Loan Facility, net of unamortized discount and deferred financing costs	$	22,641	$	23,677
Current Portion		—		(3,321)
Long-Term Debt	$	22,641	$	20,356

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT) - USD ($) $ in Thousands	Common Stock Class A Common stock Registered Direct Offering of Common Stock and Warrants	Common Stock Class A Common stock Private Placement	Common Stock Class A Common stock	Common Stock Class B Common stock	Additional Paid-in Capital Registered Direct Offering of Common Stock and Warrants	Additional Paid-in Capital Private Placement	Additional Paid-in Capital	Accumulated Deficit	Registered Direct Offering of Common Stock and Warrants	Private Placement	Total
Balance at the beginning at Dec. 31, 2022			$ 12	$ 4			$ 132,939	$ (137,988)			$ (5,033)
Balance at the beginning (in shares) at Dec. 31, 2022			11,823,445	4,313,406
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Issuance of common stock		$ 7				$ 1,708				$ 1,715
Issuance of common stock (in shares)		6,852,811
Issuance of common stock under Employee Stock Purchase Plan							219				219
Issuance of common stock under Employee Stock Purchase Plan (in shares)			104,905
Vesting of restricted stock units, net of shares withheld and taxes paid							(19)				(19)
Vesting of restricted stock units, net of shares withheld and taxes paid (in shares)			71,769
Stock-based compensation							1,987				1,987
Net loss								(28,342)			(28,342)
Balance at the ending at Sep. 30, 2023			$ 19	$ 4			136,834	(166,330)			(29,473)
Balance at the ending (in shares) at Sep. 30, 2023			18,852,930	4,313,406
Balance at the beginning at Jun. 30, 2023			$ 12	$ 4			134,439	(156,583)			(22,128)
Balance at the beginning (in shares) at Jun. 30, 2023			11,936,441	4,313,406
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Issuance of common stock		$ 7				$ 1,708				$ 1,715
Issuance of common stock (in shares)		6,852,811
Issuance of common stock under Employee Stock Purchase Plan							72				72
Issuance of common stock under Employee Stock Purchase Plan (in shares)			63,628
Vesting of restricted stock units, net of shares withheld and taxes paid (in shares)			50
Stock-based compensation							615				615
Net loss								(9,747)			(9,747)
Balance at the ending at Sep. 30, 2023			$ 19	$ 4			136,834	(166,330)			(29,473)
Balance at the ending (in shares) at Sep. 30, 2023			18,852,930	4,313,406
Balance at the beginning at Dec. 31, 2023			$ 19	$ 4			137,021	(175,644)			(38,600)
Balance at the beginning (in shares) at Dec. 31, 2023			18,884,196	4,313,406
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Issuance of common stock	$ 3				$ 9,669				$ 9,672
Issuance of common stock (in shares)	3,175,000
Exercise of stock options							7				$ 7
Exercise of stock options (in shares)			1,960								1,960
Exercises of Common Warrants and Prefunded Warrants			$ 7				27,736				$ 27,743
Exercises of Common Warrants and Prefunded Warrants (in shares)			7,399,144
Issuance of common stock under Employee Stock Purchase Plan							155				155
Issuance of common stock under Employee Stock Purchase Plan (in shares)			96,658
Vesting of restricted stock units, net of shares withheld and taxes paid			$ 1				(1,011)				(1,010)
Vesting of restricted stock units, net of shares withheld and taxes paid (in shares)			691,734
Stock-based compensation							6,683				6,683
Net loss								(44,888)			(44,888)
Balance at the ending at Sep. 30, 2024			$ 30	$ 4			180,260	(220,532)			(40,238)
Balance at the ending (in shares) at Sep. 30, 2024			30,248,692	4,313,406
Balance at the beginning at Jun. 30, 2024			$ 24	$ 4			157,452	(221,818)			(64,338)
Balance at the beginning (in shares) at Jun. 30, 2024			23,963,101	4,313,406
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Exercise of stock options							7				7
Exercise of stock options (in shares)			1,960
Exercises of Common Warrants and Prefunded Warrants			$ 5				21,630				21,635
Exercises of Common Warrants and Prefunded Warrants (in shares)			5,771,655
Issuance of common stock under Employee Stock Purchase Plan							85				85
Issuance of common stock under Employee Stock Purchase Plan (in shares)			31,199
Vesting of restricted stock units, net of shares withheld and taxes paid			$ 1				(689)				(688)
Vesting of restricted stock units, net of shares withheld and taxes paid (in shares)			480,777
Stock-based compensation							1,775				1,775
Net loss								1,286			1,286
Balance at the ending at Sep. 30, 2024			$ 30	$ 4			$ 180,260	$ (220,532)			$ (40,238)
Balance at the ending (in shares) at Sep. 30, 2024			30,248,692	4,313,406

Summary of Significant Accounting Policies

9 Months Ended

Sep. 30, 2024

Summary of Significant Accounting Policies

Summary of Significant Accounting Policies

Note 2. Summary of Significant Accounting Policies

Basis of Presentation and Liquidity

The condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. Intercompany accounts and transactions have been eliminated in consolidation.

Reclassifications

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

Use of Estimates

Net Income (Loss) per Share Attributable to Common Stockholders

Fair Value of Financial Instruments

Level 1 - Valuations based on quoted prices for identical assets and liabilities in active markets.

Cash and Cash Equivalents

Accounts Receivable and Allowances

Inventory

Property and Equipment

Property and equipment are stated at cost less accumulated depreciation. Depreciation is computed on the straight-line method over the following estimated useful lives of the assets:


Processing and research equipment		5 to 10 years
Office equipment and furniture		3 to 5 years
Computer hardware and software		3 years

Leasehold improvements are amortized on the straight-line method over the shorter of the lease term or the estimated useful life of the asset. Repairs and maintenance costs are expensed as incurred.

Leases

Long-Lived Assets

Purchased intangible assets with finite lives are carried at acquired fair value, less accumulated amortization. Amortization is computed over the estimated useful lives of the respective assets.

Warrant Liability

Revenue Recognition

matched against the revenues from which they originated. The Company records estimated returns as a reduction of revenue in the same period revenue is recognized.

Stock-Based Compensation Plans

Research and Development Costs

Research and development costs, which include mainly salaries, outside services and supplies, are expensed as incurred.

Concentration of Credit Risk

Comprehensive Income (Loss)

Income Taxes

Common Stock and Warrants

9 Months Ended

Sep. 30, 2024

Common Stock and Warrants

Common Stock and Warrants

Note 9: Common Stock and Warrants

Registered Direct Offering of Common Stock and Warrants

On June 16, 2024, the Company sold, in a registered direct offering (“Registered Offering”) an aggregate of (i) 3,175,000 shares of the Company’s Class A common stock and (ii) prefunded warrants (“2024 Prefunded Warrants”) to purchase up to an aggregate of 725,000 shares of Class A Common Stock. The public offering price for each share of Class A Common Stock was $3.40, and the public offering price for each 2024 Prefunded Warrant was $3.399, for aggregate gross proceeds of approximately $13.3 million, before deducting offering expenses. The 2024 Prefunded Warrants have an exercise price of $0.001 per share of Class A Common Stock, are exercisable immediately and will expire when exercised in full. The Company incurred transaction fees, including commissions and legal fees, of approximately $1.4 million in connection with the Registered Offering, of which $1.1 million were allocated to the issuance of the common stock.

Private Placement of Common Stock and Warrants

On September 21, 2023, the Company sold, in a private offering (“Private Offering”) an aggregate of (i) 6,852,811 units (“Common Units”) each comprised of (a) one share of the Company’s Class A common stock and (b) a warrant (“Common Warrant”) to purchase one and one half shares of Class A Common Stock, and (ii) 503,058 units (the “Prefunded Units”), each comprised of (a) a prefunded warrant (“2023 Prefunded Warrant”) to purchase one share of Class A Common Stock, and (b) a Common Warrant. The Common Units were sold at a purchase price of $1.4275 per unit, and the Prefunded Units were sold at a purchase price of $1.4265 per unit, for aggregate gross proceeds of approximately $10.5 million, before deducting offering expenses. Each Common Warrant 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 ($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 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 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. 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 September 30, 2024 and December 31, 2023. A summary of the warrant activity for the nine months ended September 30, 2024 is as follows:



	Common Warrants	2023 Prefunded Warrants	2024 Prefunded Warrants
Outstanding, December 31, 2023	11,033,804	503,058	—
Issued	-	—	725,000
Conversions of Common Warrants to 2023 Prefunded Warrants	(3,896,130)	3,896,130	—
Exercised	(7,137,674)	(261,470)	—
Outstanding, September 30, 2024	—	4,137,718	725,000

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 nine months ended September 30, 2024 (in thousands):



		Common Warrants		2023 Prefunded Warrants		2024 Prefunded Warrants		Total Offering Warrants
Warrant liability, December 31, 2023	$	11,670	$	1,090	$	-	$	12,760
Fair value upon issuance		-		-		2,464		2,464
Loss on revaluation of warrant liability		13,740		1,282		299		15,321
Conversions of Common Warrants to 2023 Prefunded Warrants		(8,898)		14,456		-		5,558
Exercised		(16,512)		(1,064)		-		(17,576)
Warrant liability, September 30, 2024	$	-	$	15,764	$	2,763	$	18,527

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:


	December 31,
	2023
Common stock price	$ 2.16
Expected term (years)	0.7
Risk-free interest rate	5.1	%
Volatility factor	107.3	%
Dividend yield	—	%

The Company has used the price of its Class A Common Stock to estimate the fair value of the 2024 Prefunded Warrants and 2023 Prefunded Warrants at each measurement date. The price of the Company’s Class A Common Stock approximates fair value of the 2024 Prefunded Warrants and 2023 Prefunded Warrants due to the exercise price per share of $0.001.

- Definition

The entire disclosure for equity.

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Topic 505
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 13
-Subparagraph (b)
-Publisher FASB
-URI https://asc.fasb.org/1943274/2147481112/505-10-50-13

Reference 2: http://www.xbrl.org/2003/role/disclosureRef
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Reference 3: http://www.xbrl.org/2003/role/disclosureRef
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Reference 4: http://www.xbrl.org/2003/role/disclosureRef
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Reference 5: http://www.xbrl.org/2003/role/disclosureRef
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Reference 6: http://www.xbrl.org/2003/role/disclosureRef
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Reference 7: http://www.xbrl.org/2003/role/disclosureRef
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Reference 8: http://www.xbrl.org/2003/role/disclosureRef
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Reference 9: http://www.xbrl.org/2003/role/disclosureRef
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Reference 10: http://fasb.org/us-gaap/role/ref/legacyRef
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Reference 11: http://www.xbrl.org/2003/role/disclosureRef
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Reference 13: http://www.xbrl.org/2003/role/disclosureRef
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+ Details

Recently Issued Accounting Standards

9 Months Ended

Sep. 30, 2024

Recently Issued Accounting Standards

Recently Issued Accounting Standards

Note 3. Recently Issued Accounting Standards

- Definition

The entire disclosure for change in accounting principle. Includes, but is not limited to, nature, reason, and method of adopting amendment to accounting standards or other change in accounting principle.

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
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+ Details