ELUTIA INC

Previous wording

At Elutia, our mission is to humanize medicine so that patients can thrive without compromise. As a commercial-stage company, we seek to leverage our unique understanding of biologics to improve the interaction between implanted medical devices and patients by reducing complications associated with these surgeries. These complications include device migration, erosion, non-union of implants as well as implant rejection. In addition, our products are designed to mitigate the formation of scar and fibrotic capsule formation that commonly occurs with device implants and is linked with additional risk factors including infection and capsular contracture.

Current wording

At Elutia, our mission is to humanize medicine so that patients can thrive without compromise. As a commercial-stage company, we seek to leverage our unique understanding of biologics combined with local drug delivery to improve the interaction between implanted medical devices and patients by reducing complications associated with these surgeries. These complications include infection, device migration, erosion, implant rejection, non-union of implants, fibrosis and scar formation.

Previous wording

We estimate that, over the past two years, more than 600,000 surgical procedures were performed per year in the United States in which the patient was implanted with medical devices such as pacemakers, defibrillators, neuro-stimulators or tissue expanders for breast reconstruction. This number has been driven by advances in medical device technologies, reimbursement models focused on patient outcomes, and an aging population with a growing incidence of comorbidities, including diabetes, obesity and cardiovascular and peripheral vascular diseases. These comorbidities can exacerbate various immune responses and contribute to other complications upon device implant.

Current wording

We estimate that, over the past two years, more than 700,000 surgical procedures were performed per year in the United States in which the patient was implanted with medical devices such as pacemakers, defibrillators, neuro-stimulators or tissue expanders for breast reconstruction. This number has been driven by advances in medical device technologies, reimbursement models focused on patient outcomes, and an aging population with a growing incidence of comorbidities, including diabetes, obesity and cardiovascular and peripheral vascular diseases. These comorbidities can exacerbate various immune responses and contribute to other complications upon device implant.

Previous wording

We process all of our CanGaroo and cardiovascular products at our manufacturing facility in Roswell, Georgia and stock inventory of raw materials, supplies and finished goods at this location. We rely on a single or limited number of suppliers for certain raw materials and supplies. We have a long-term supply agreement with Cook Biotech (now owned by RTI Surgical), the porcine tissue supplier of our raw materials for our CanGaroo and cardiovascular products.

Current wording

EluPro and CanGaroo are sold primarily through our internal sales force and independent sales agents. In the nine months ended September 30, 2024, these products generated revenue of $7.3 million. We produce all of our Device Protection and Cardiovascular (see below) products at our manufacturing facility in Roswell, Georgia and stock inventory of raw materials, supplies and finished goods at this location. We rely on a single or limited number of suppliers for certain raw materials and supplies. We have a long-term supply agreement with Cook Biotech (now owned by RTI Surgical), the porcine tissue supplier of our raw materials for our bioenvelope and cardiovascular products.

Previous wording

In Women’s Health, we have developed both patented and proprietary technologies, culminating in the creation of SimpliDerm—a novel biological matrix meticulously designed to leverage the inherent science of natural healing processes. SimpliDerm’s design uses human acellular dermal matrices with heightened structural integrity and superior handling capabilities, which may mitigate inflammation and tissue incorporation, leading to a better healing experience. We believe that these acellular dermal matrices represent an optimal choice for tissue repair and reconstruction, finding

Current wording

In Women’s Health, we have developed both patented and proprietary technologies, culminating in the creation of SimpliDerm—a novel biological matrix that leverages the inherent science of natural healing processes. SimpliDerm’s design uses human acellular dermal matrix (“hADM”) with heightened structural integrity and superior handling capabilities, which may mitigate inflammation and enhance tissue incorporation, leading to a better healing experience as compared to other hADM products. We believe that these acellular dermal matrices represent an ideal choice for tissue repair and reconstruction, finding applications in fields such as breast reconstruction, sports medicine, hernia repair and trauma reconstruction.

Previous wording

SimpliDerm has historically been processed by us at our Richmond, California facility; however, that facility was included with the sale of the Orthobiologics Business described below, and SimpliDerm is now being provided to us on a go-forward basis through a long-term supply agreement with the purchaser of the Orthobiologics Business, Berkeley Biologics, LLC.

Current wording

SimpliDerm has historically been processed by us at our Richmond, California facility; however, that facility was included with the sale of the Orthobiologics Business described below, and SimpliDerm is now being provided to us on a go-forward basis through a long-term supply agreement with the purchaser of the Orthobiologics Business, Berkeley Biologics, LLC. We also intend to develop our own in-house capability for the production of SimpliDerm.

Previous wording

We also sell legacy products into the Cardiovascular market. In Cardiovascular, we sell our specialized porcine small intestine submucosa, which is also the tissue used to make CanGaroo, for use as an intracardiac and vascular patch as well as for pericardial reconstruction. In addition, our TYKE product is designed for use in the neonatal patient population. These cardiovascular products are sold in the United States through an exclusive agreement with LeMaitre Vascular and internationally through distributors.

Current wording

We also sell legacy products into the Cardiovascular market. In Cardiovascular, we sell our specialized porcine small intestine submucosa, which is also the biomatrix used to make EluPro and CanGaroo, for use as an intracardiac and vascular patch as well as for pericardial reconstruction. In addition, our TYKE product is designed for use in the neonatal patient population. These cardiovascular products are sold in the United States through an exclusive distribution agreement with LeMaitre Vascular. This agreement also provided LeMaitre with an option to acquire the Cardiovascular product line through March 2026. During the nine months ended September 30, 2024, our Cardiovascular products generated revenue of $2.4 million.

Previous wording

With respect to pipeline products, we are pioneering DEB to help solve problems unaddressed by available options. As described above, EluPro is our first DEB product offering. We also intend to leverage our DEB platform technology by developing and commercializing products for markets with similar unmet needs, including neurostimulation, wound care and breast reconstruction.

Current wording

With respect to pipeline products, we are pioneering DEBs to help solve problems unaddressed by available options. As described above, EluPro is our first DEB product offering. We also intend to leverage our DEB platform technology by developing and commercializing products for markets with similar unmet needs, including breast reconstruction and neurostimulation.

Previous wording

On November 8, 2023, we completed the sale of substantially all of the assets relating to our former 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 our Orthobiologics products, and the business of contract manufacturing of particulate bone, precision milled bone, cellular bone matrix, acellular dermis, soft tissue and other products. The assets sold represent the entirety of our Orthobiologics segment. In the sale, we received approximately $14.6 million, and we may earn up to an additional $20 million, in the aggregate, in the form of earn-out payments. The earn-out payments are equal to 10% of the actual revenue earned by Berkeley in each of the five years after the closing of the sale from sales of specified Orthobiologics products under the purchase agreement (including improvements, modifications, derivatives and enhancements related to those products). There were no earn-out payments earned or paid in the three months ended June 30, 2024. Additionally, the purchase agreement provides for a customary indemnity holdback in the amount of $1.5 million to be retained by Berkeley for 24 months after close. We recognized a gain of approximately $6.0 million on the sale of the Orthobiologics Business in the fourth quarter of 2023 and an additional gain of $0.2 million in the second quarter of 2024 from an adjustment payment related to the final working capital received by Berkeley at the sale date. The indemnity holdback is available as a source of recovery for Berkeley for claims of indemnification under the purchase agreement, and some or all of the holdback may be retained by Berkeley if Berkeley is successful in asserting a claim or claims for indemnification against us. Should we receive incremental proceeds in the future through an earn-out payment or payment of the holdback amount, an additional gain will be recorded upon the receipt of such amounts.

Current wording

On November 8, 2023, we completed the sale of substantially all of the assets relating to our former 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 our Orthobiologics products, and the business of contract manufacturing of particulate bone, precision milled bone, cellular bone matrix, acellular dermis, soft tissue and other products. The assets sold represent the entirety of our Orthobiologics segment. In the sale, we received approximately $14.6 million, and we 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. We 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

Previous wording

product. The recall was issued after learning of postsurgical infections reported in several patients treated with the product, including some patients that tested positive for tuberculosis. Additionally, in July 2023, we announced a voluntary recall of a single lot of one of our viable bone matrix (“VBM”) products and the market withdrawal of all of our VBM products produced after a specified date. Notice of the voluntary recall was issued to centers after we learned of post-surgical tuberculosis infections in two patients treated with product from a single donor lot of our VBM product. Both of these products were part of our Orthobiologics Business, which we have fully divested as described above. For information about legal proceedings in which we are involved and the possible future financial implications, see Note 10 to condensed consolidated financial statements included elsewhere in this Quarterly Report.

Current wording

In June 2021, we issued a voluntary recall pertaining to a single donor lot of our FiberCel Fiber Viable Bone Matrix, a bone repair product formerly manufactured under a contract with Medtronic PLC, which also distributed the product. The recall was issued after learning of postsurgical infections reported in several patients treated with the product, including some patients that tested positive for tuberculosis. Additionally, in July 2023, we announced a voluntary recall of a single lot of one of our viable bone matrix (“VBM”) products and the market withdrawal of all of our VBM products produced after a specified date. Notice of the voluntary recall was issued to centers after we learned of post-surgical tuberculosis infections in two patients treated with product from a single donor lot of our VBM product. Both of these products were part of our Orthobiologics Business, which we have fully divested as described above. For information about legal proceedings in which we are involved and the possible future financial implications, see Note 10 to condensed consolidated financial statements included elsewhere in this Quarterly Report.

Previous wording

We recognize revenue on the sale of our products. Our device protection products are sold to hospitals and other healthcare facilities primarily through our direct sales force, commercial partners or independent sales agents. Our cardiovascular products are sold domestically through a distribution agreement with LeMaitre Vascular and internationally through commercial partners. Our women’s health products are sold directly to hospitals and other healthcare facilities through independent sales agents or through our distribution agreement with Tiger Aesthetics Medical after their acquisition of the assets of Sientra in April 2024.

Current wording

We recognize revenue on the sale of our products. Our device protection products are sold to hospitals and other healthcare facilities primarily through our direct sales force, commercial partners or independent sales agents. Our cardiovascular products are sold domestically through a distribution agreement with LeMaitre Vascular and were previously sold internationally through commercial partners. Our women’s health products are sold directly to hospitals and other healthcare facilities through independent sales agents or through our distribution agreement with Tiger Aesthetics Medical.

Previous wording

Sales and marketing expenses are primarily related to our direct sales force, consisting of salaries, commission compensation, fringe benefits, meals and other expenses. Auto and travel costs also contribute to sales and marketing expenses. Outside of our direct sales force, we incur significant expenses relating to commissions to our CanGaroo and SimpliDerm commercial partners and independent sales agents. Additionally, this expense category includes distribution

Current wording

Sales and marketing expenses are primarily related to our direct sales force, consisting of salaries, commission compensation, fringe benefits, meals and other expenses. Auto and travel costs also contribute to sales and marketing expenses. Outside of our direct sales force, we incur significant expenses relating to commissions to our CanGaroo and SimpliDerm commercial partners and independent sales agents. Additionally, this expense category includes distribution costs as well as market research, trade show attendance, advertising and public relations related to our products, and customer service expenses.

Previous wording

FiberCel litigation costs consist primarily of legal fees and the estimated costs to resolve the outstanding FiberCel litigation cases offset by the estimated and actual amounts recoverable under insurance, indemnity and contribution agreements for such costs.

Current wording

Litigation costs, net consist primarily of legal fees and the estimated costs to resolve the outstanding FiberCel and VBM litigation cases offset by the estimated and actual amounts recoverable or recovered under insurance, indemnity and contribution agreements for such costs.

Previous wording

Total cost of goods sold decreased $0.1 million to $3.5 million in the three months ended June 30, 2024 compared to $3.6 million in the three months ended June 30, 2023. Gross margin was 44.5% in the three months ended June 30, 2024 compared to 42.7% in the three months ended June 30, 2023. Gross margin, excluding intangible asset amortization, was 58.0% in the three months ended June 30, 2024 compared to 56.1% in the three months ended June 30, 2023. The improvement in gross margin was primarily due to the Women’s health business which experienced certain non-recurring production issues in the 2023 period which had a negative impact on gross margins. As noted above, with the sale of the Orthobiologics Business in November 2023, we no longer internally produce our women’s health product, SimpliDerm.

Current wording

Total cost of goods sold decreased $0.1 million to $3.2 million in the three months ended September 30, 2024 compared to $3.3 million in the three months ended September 30, 2023. Gross margin was 46.3% in the three months ended September 30, 2024 consistent with the 46.4% in the three months ended September 30, 2023. Gross margin, excluding intangible asset amortization, was 60.6% in the three months ended September 30, 2024 compared to 60.2% in the three months ended September 30, 2023.

Previous wording

Sales and marketing expenses increased $0.3 million, or 10.2%, to $3.3 million in the three months ended June 30, 2024 compared to $3.0 million in the three months ended June 30, 2023. As a percentage of sales, sales and marketing expenses increased to 52.9% in the three months ended June 30, 2024 from 47.6% in the three months ended June 30, 2023. The increase in expense was largely attributable to the non-cash equity compensation grants made in January 2024.

Current wording

Sales and marketing expenses increased $0.2 million, or 6.7%, to $3.0 million in the three months ended September 30, 2024 compared to $2.8 million in the three months ended September 30, 2023. As a percentage of sales, sales and marketing expenses increased to 50.5% in the three months ended September 30, 2024 from 45.7% in the three months ended September 30, 2023. The increase in expense was largely attributable to the non-cash equity compensation grants made in January 2024.

Previous wording

G&A expenses increased $0.8 million, or 21.4%, to $4.7 million in the three months ended June 30, 2024 compared to $3.9 million in the three months ended June 30, 2023. As a percentage of net sales, G&A expenses increased to 74.5% in the three months ended June 30, 2024 from 60.8% in the three months ended June 30, 2023. The increase in expense was primarily driven by the non-cash equity compensation grants made in January 2024.

Current wording

G&A expenses increased $1.7 million, or 64.0%, to $4.5 million in the three months ended September 30, 2024 compared to $2.8 million in the three months ended September 30, 2023. As a percentage of net sales, G&A expenses increased to 76.3% in the three months ended September 30, 2024 from 45.0% in the three months ended September 30, 2023. The increase in expense was primarily driven by the non-cash equity compensation grants made in January 2024.

Previous wording

R&D expenses were essentially flat between years slightly increasing to $1.0 million in the three months ended June 30, 2024 compared to $0.9 million in the three months ended June 30, 2023. Over the last several years, our R&D efforts have primarily related to activities associated with the development of EluPro (referred to as CanGarooRM during development). The June 2024 FDA approval of EluPro is discussed in further under the heading "Overview" above..

Current wording

R&D expenses increased $0.2 million, or 39.7% to $0.8 million in the three months ended September 30, 2024 compared to $0.6 million in the three months ended September 30, 2023. The increase in expense was largely attributable to the non-cash equity compensation grants made in January 2024. Over the last several years, our R&D efforts have primarily related to activities associated with the development of EluPro. With the FDA approval of EluPro in June 2024, our development efforts are focused on the areas described under the heading "Overview" above.

Previous wording

Interest expense was approximately $1.3 million in the three months ended June 30, 2024 compared to $1.4 million in the three months ended June 30, 2023. The decrease was primarily due to lower principal outstanding on the SWK debt in the current year period as a result of mandatory repayments in connection with our sale of the Orthobiologics Business in November 2023.

Current wording

Interest expense was approximately $1.1 million in the three months ended September 30, 2024 compared to $1.4 million in the three months ended September 30, 2023. The decrease was primarily due to lower principal outstanding on the SWK debt in the current year period as a result of mandatory repayments in connection with our sale of the Orthobiologics Business in November 2023.

Previous wording

Total net sales increased $0.3 million, or 1.9%, to $13.0 million in the six months ended June 30, 2024 compared to $12.7 million in the six months ended June 30, 2023. Revenues from Device Protection and Women’s Health increased compared to the prior year period due primarily to volume growth, and revenues from Cardiovascular decreased due to the commencement in April 2023 of our distribution agreement with LeMaitre Vascular which provides for sales at a contract price versus sales prior to such agreement being made at end-user pricing.

Current wording

Total net sales were $18.9 million in both the nine months ended September 30, 2024 and 2023. Revenues from Device Protection and Women’s Health increased compared to the prior year period due primarily to volume growth, but such increases were offset by declines in revenues from Cardiovascular due to the commencement in April 2023 of our

Previous wording

Total net sales decreased $0.1 million, or 0.9%, to $6.3 million in the three months ended June 30, 2024 compared to $6.4 million in the three months ended June 30, 2023. Revenues from Device Protection and Women’s Health increased compared to the prior year’s second quarter due primarily to volume growth, and revenues from Cardiovascular decreased due to the commencement in April 2023 of our distribution agreement with LeMaitre Vascular which provides for sales at a contract price versus sales prior to such agreement being made at end-user pricing.

Current wording

distribution agreement with LeMaitre Vascular which provides for sales at a contract price versus sales prior to such agreement being made at end-user pricing.

Previous wording

Total cost of goods sold increased $0.6 million to $7.3 million in the six months ended June 30, 2024 compared to $6.7 million in the six months ended June 30, 2023. Gross margin was 43.5% in the six months ended June 30, 2024 compared to 47.8% in the six months ended June 30, 2023. Gross margin, excluding intangible asset amortization, was 56.5% in the six months ended June 30, 2024 compared to 61.1% in the six months ended June 30, 2023. The decline in gross margin was primarily due to the Cardiovascular business which decreased due to the commencement of the LeMaitre Vascular distribution agreement described above.

Current wording

Total cost of goods sold increased $0.6 million to $10.5 million in the nine months ended September 30, 2024 compared to $9.9 million in the nine months ended September 30, 2023. Gross margin was 44.3% in the nine months ended September 30, 2024 compared to 47.3% in the nine months ended September 30, 2023. Gross margin, excluding intangible asset amortization, was 57.8% in the nine months ended September 30, 2024 compared to 60.8% in the nine months ended September 30, 2023. The decline in gross margin was primarily due to the Cardiovascular business which decreased due to the commencement of the LeMaitre Vascular distribution agreement described above.

Previous wording

Sales and marketing expenses decreased $1.1 million, or 13.9%, to $6.6 million in the six months ended June 30, 2024 compared to $7.7 million in the six months ended June 30, 2023. As a percentage of sales, sales and marketing expenses decreased to 51.1% in the six months ended June 30, 2024 from 60.5% in the six months ended June 30, 2023. The decrease in expense was largely attributable to the previously announced reduction in force which occurred at the end of the first quarter of 2023 and primarily impacted certain members of sales and marketing management.

Current wording

Sales and marketing expenses decreased $0.9 million, or 8.4%, to $9.6 million in the nine months ended September 30, 2024 compared to $10.5 million in the nine months ended September 30, 2023. As a percentage of sales, sales and marketing expenses decreased to 50.9% in the nine months ended September 30, 2024 from 55.7% in the nine months ended September 30, 2023. The decrease in expense was largely attributable to the previously announced reduction in force which occurred at the end of the first quarter of 2023 and primarily impacted certain members of sales and marketing management.

Previous wording

G&A expenses increased $2.3 million, or 32.0%, to $9.7 million in the six months ended June 30, 2024 compared to $7.4 million in the six months ended June 30, 2023. As a percentage of net sales, G&A expenses increased to 75.0% in the six months ended June 30, 2024 from 57.9% in the six months ended June 30, 2023. The increase in expense resulted largely from the non-cash equity compensation grants made in January 2024.

Current wording

G&A expenses increased $4.1 million, or 40.7%, to $14.3 million in the nine months ended September 30, 2024 compared to $10.1 million in the nine months ended September 30, 2023. As a percentage of net sales, G&A expenses increased to 75.5% in the nine months ended September 30, 2024 from 53.7% in the nine months ended September 30, 2023. The increase in expense resulted largely from the non-cash equity compensation grants made in January 2024.

Previous wording

R&D expenses decreased to $2.2 million in the six months ended June 30, 2024 compared to $2.5 million in the six months ended June 30, 2023. Over the last several years, our R&D efforts have primarily related to activities associated with the development of EluPro (referred to as CanGarooRM during development). See above for discussion of the June 2024 FDA approval of EluPro. Such related costs were less in the first half of 2024 versus the prior year’s comparable

Current wording

R&D expenses were $3.0 million in both the nine months ended September 30, 2024 and 2023. Over the last several years, our R&D efforts have primarily related to activities associated with the development of EluPro (referred to as CanGarooRM during development). With the FDA’s approval of EluPro in June 2024, such related costs were less in the first nine months of 2024 versus the prior year’s comparable period, but such decrease was offset by non-cash equity compensation recognized in the 2024 period. See “Overview” above for discussion of future development projects.

Previous wording

FiberCel litigation costs increased to $2.3 million in the three months ended June 30, 2024 compared to $1.3 million in the three months ended June 30, 2023. The increase in expense was primarily due to the continued evaluation of the contingent FiberCel liability. See further discussion in Note 10 to condensed consolidated financial statements included elsewhere in this Quarterly Report.

Current wording

Litigation costs, net increased to $8.8 million in the nine months ended September 30, 2024 compared to $7.3 million in the nine months ended September 30, 2023. The continued evaluation of our contingent liability for legal proceedings resulted in higher expenses in the 2024 period. Such increase was partially offset by our recovery in September 2024 of $1.6 million in connection with the settlement of certain disputed indemnity and contribution amounts related to the FiberCel Litigation. See further discussion in Note 10 to condensed consolidated financial statements.

Previous wording

Interest expense was approximately $2.6 million in the six months ended June 30, 2024 compared to $2.8 million in the six months ended June 30, 2023. The decrease was primarily due to lower principal outstanding on the SWK debt in the current year period as a result of mandatory repayments in connection with our sale of the Orthobiologics Business in November 2023.

Current wording

Interest expense was approximately $3.7 million in the nine months ended September 30, 2024 compared to $4.3 million in the nine months ended September 30, 2023. The decrease was primarily due to lower principal outstanding on the SWK debt in the current year period as a result of mandatory repayments in connection with our sale of the Orthobiologics Business in November 2023.

Previous wording

Income from discontinued operations for the three months ended June 30, 2024 was $0.2 millon and loss from discontinued operations for the three months ended June 30, 2023 was $2.9 million. See Notes 1 and 4 to condensed consolidated financial statements included elsewhere in this Quarterly Report for further discussion.

Current wording

Income from discontinued operations for the nine months ended September 30, 2024 was $0.2 millon and loss from discontinued operations for the nine months ended September 30, 2023 was $2.3 million. See Notes 1 and 4 to condensed consolidated financial statements included elsewhere in this Quarterly Report for further discussion.

Previous wording

This Quarterly Report presents our gross margin, excluding intangible asset amortization, for the three and six months ended June 30, 2024 and 2023. We calculate gross margin, excluding intangible asset amortization, as gross profit, excluding amortization expense relating to intangible assets we acquired in the CorMatrix Acquisition, divided by net sales. Gross margin, excluding intangible asset amortization, is a supplemental measure of our performance, is not defined by or presented in accordance with U.S. generally accepted accounting principles (“GAAP”), has limitations as an analytical tool and should not be considered in isolation or as an alternative to our GAAP gross margin, gross profit or any other financial performance measure presented in accordance with GAAP. We present gross margin, excluding intangible asset amortization, because we believe that it provides meaningful supplemental information regarding our operating performance by removing the impact of amortization expense, which is not indicative of our overall operating performance. We believe this provides our management and investors with useful information to facilitate period-to-period comparisons of our operating results. Our management uses this metric in assessing the health of our business and our operating performance, and we believe investors’ understanding of our operating performance is similarly enhanced by our presentation of this metric. In addition, other companies, including companies in our industry, may use other measures to evaluate their performance, which could reduce the usefulness of this non-GAAP financial measure as a tool for comparison.

Current wording

This Quarterly Report presents our gross margin, excluding intangible asset amortization, for the three and nine months ended September 30, 2024 and 2023. We calculate gross margin, excluding intangible asset amortization, as gross profit, excluding amortization expense relating to intangible assets we acquired in the CorMatrix Acquisition, divided by net sales. Gross margin, excluding intangible asset amortization, is a supplemental measure of our performance, is not defined by or presented in accordance with U.S. generally accepted accounting principles (“GAAP”), has limitations as an analytical tool and should not be considered in isolation or as an alternative to our GAAP gross margin, gross profit or any other financial performance measure presented in accordance with GAAP. We present gross margin, excluding intangible asset amortization, because we believe that it provides meaningful supplemental information regarding our operating performance by removing the impact of amortization expense, which is not indicative of our overall operating performance. We believe this provides our management and investors with useful information to facilitate period-to-period comparisons of our operating results. Our management uses this metric in assessing the health of our business and our operating performance, and we believe investors’ understanding of our operating performance is similarly enhanced by our presentation of this metric. In addition, other companies, including companies in our industry, may use other measures to evaluate their performance, which could reduce the usefulness of this non-GAAP financial measure as a tool for comparison.

Previous wording

The following table presents a reconciliation of our gross margin, excluding intangible asset amortization, for the three and six months ended June 30, 2024 and 2023 to the most directly comparable GAAP financial measure, which is our GAAP gross margin (in thousands).

Current wording

The following table presents a reconciliation of our gross margin, excluding intangible asset amortization, for the three and nine months ended September 30, 2024 and 2023 to the most directly comparable GAAP financial measure, which is our GAAP gross margin (in thousands).

Previous wording

As of June 30, 2024, we had cash of approximately $18.2 million. Since inception, we have financed our operations primarily through amounts borrowed under our credit facilities, proceeds from our initial public offering (“IPO”), sales of our products and more recently, the sale of our Orthobiologics Business and proceeds from a follow-on offering and private placements of our common stock and warrants. Our historical cash outflows have primarily been associated with acquisitions and integration, manufacturing and administrative costs, general and marketing, research and development, clinical activity, purchase of property and equipment used in our production activities, litigation costs and investing in our commercial infrastructure through our direct sales force and our commercial partners in order to expand our presence and to promote awareness and adoption of our products. As of June 30, 2024, our accumulated deficit was $221.8 million.

Current wording

As of September 30, 2024, we had cash of approximately $25.7 million. Since inception, we have financed our operations primarily through amounts borrowed under our credit facilities, proceeds from our initial public offering (“IPO”), sales of our products and more recently, the sale of our Orthobiologics Business and proceeds from a follow-on offering and private placements of our common stock and warrants. Our historical cash outflows have primarily been associated with acquisitions and integration, manufacturing and administrative costs, general and marketing, research and development, clinical activity, purchase of property and equipment used in our production activities, litigation costs and investing in our commercial infrastructure through our direct sales force and our commercial partners in order to expand our presence and to promote awareness and adoption of our products. As of September 30, 2024, our accumulated deficit was $220.5 million.

Previous wording

On September 21, 2023, we sold, in a private offering (“Private Offering”) an aggregate of (i) 6,852,811 units (“Common Units”), each comprised of (a) one share of our Class A common stock and (b) a warrant (“Common Warrant”) to purchase one and one half shares of Class A Common Stock, and (ii) 503,058 units (the “Prefunded Units”), each comprised of (a) a prefunded warrant (“2023 Prefunded Warrant”) to purchase one share of Class A Common Stock, and (b) a Common Warrant. The Common Units were sold at a purchase price of $1.4275 per unit, and the 2023 Prefunded Units were sold at a purchase price of $1.4265 per unit, for aggregate gross proceeds of approximately $10.5 million, before deducting offering expenses. Each Common Warrant is exercisable at any time until the earlier of (a) 30 trading days after the clearance by the FDA of our CanGarooRM antibiotic-eluting biologic envelope or (b) five years from the

Current wording

On September 21, 2023, we sold, in a private offering (“Private Offering”) an aggregate of (i) 6,852,811 units (“Common Units”), each comprised of (a) one share of our Class A common stock and (b) a warrant (“Common Warrant”) to purchase one and one half shares of Class A Common Stock, and (ii) 503,058 units (the “Prefunded Units”), each comprised of (a) a prefunded warrant (“2023 Prefunded Warrant”) to purchase one share of Class A Common Stock, and (b) a Common Warrant. The Common Units were sold at a purchase price of $1.4275 per unit, and the 2023 Prefunded Units were sold at a purchase price of $1.4265 per unit, for aggregate gross proceeds of approximately $10.5 million, before deducting offering expenses. Each Common Warrant was exercisable until July 31, 2024, the date which was 30 trading days after the clearance by the FDA of the Company’s EluPro product, at an exercise price per share of $1.4275.

Previous wording

date of the offering, at an exercise price per share of $1.4275. Each 2023 Prefunded Warrant is exercisable at any time at a nominal exercise price per share of $0.001 (with the remainder of the exercise price per share of Class A Common Stock having been prefunded to us). With the FDA’s approval of EluPro in June 2024 (referred to as CanGarooRM during development), the last exercise date for the Common Warrants was July 31, 2024. All Common Warrants outstanding as of June 30, 2024 were exercised by such date yielding exercise proceeds of $13.8 million in July 2024.

Current wording

All Common Warrants 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. Each 2023 Prefunded Warrant is exercisable at any time at a nominal exercise price per share of $0.001 (with the remainder of the exercise price per share of Class A Common Stock having been prefunded to us).

Previous wording

Cash Flows for the Six Months Ended June 30, 2024 and 2023

Current wording

Cash Flows for the Nine months ended September 30, 2024 and 2023

Previous wording

Net cash used in operating activities for the six months ended June 30, 2024 was $7.0 million compared to $7.6 million for the six months ended June 30, 2023. The year-over-year decrease was primarily due to a lower net loss (excluding non-cash items) as well as reductions in inventory held.

Current wording

Net cash used in operating activities for the nine months ended September 30, 2024 was $10.4 million compared to $12.7 million for the nine months ended September 30, 2023. The year-over-year decrease was primarily due to a lower net loss (excluding non-cash items) as well as reductions in inventory held.

Previous wording

Net cash provided by investing activities for the six months ended June 30, 2024 was $0.2 million compared to net cash used in investing activities of $0.3 million for the six months ended June 30, 2023. The current year period reflects the receipt 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 prior year period use of cash is related to the purchase of property and equipment for our production activities.

Current wording

Net cash provided by investing activities for the nine months ended September 30, 2024 was $0.4 million compared to net cash used in investing activities of $0.3 million for the nine months ended September 30, 2023. The current year period reflects the purchase of property and equipment for our production facilities and the receipt of $0.2 million from an adjustment payment related to the final working capital received by Berkeley at the sale date. The prior year period use of cash is related to the purchase of property and equipment for our production activities.

Previous wording

Net cash provided by financing activities for the six months ended June 30, 2024 was $5.7 million compared to $0.1 million for the six months ended June 30, 2023. The year-over-year increase was caused primarily by the Registered Offering and warrant exercises which yielded proceeds of $14.1 million offset by repayments of long-term debt and

Current wording

Net cash provided by financing activities for the nine months ended September 30, 2024 was $17.2 million compared to $10.5 million for the nine months ended September 30, 2023. The year-over-year increase was caused primarily by warrant exercises which yielded proceeds of $15.7 million offset by repayments of long-term debt and payments on the revenue interest obligation which collectively totalled $8.3 million. No such activity occurred in the 2023 period.

Previous wording

On August 10, 2022 (the “Closing Date”), we entered into a senior secured term loan facility with SWK Funding LLC (“SWK”), as agent, and other lenders party thereto (as amended and modified subsequent to the Closing Date, the “SWK Loan Facility”) for an aggregate principal amount of $25 million. An initial draw of $21 million was made on the Closing Date with the additional $4 million drawn on December 14, 2022 upon satisfaction of the amended terms enabling such receipt. The SWK Loan Facility also allows for the establishment of a separate, new asset-based revolving loan facility of up to $8 million, which has not been entered into to date. As of June 30, 2024, we had $23.0 million of indebtedness outstanding under our SWK Loan Facility, with such balance being net of $0.7 million of unamortized discount and deferred financing costs.

Current wording

On August 10, 2022 (the “Closing Date”), we entered into a senior secured term loan facility with SWK Funding LLC (“SWK”), as agent, and other lenders party thereto (as amended and modified subsequent to the Closing Date, the “SWK Loan Facility”) for an aggregate principal amount of $25 million. An initial draw of $21 million was made on the Closing Date with the additional $4 million drawn on December 14, 2022. The SWK Loan Facility also allows for the establishment of a separate, new asset-based revolving loan facility of up to $8 million, which has not been entered into to date. As of September 30, 2024, we had $22.6 million of indebtedness outstanding under our SWK Loan Facility, with such balance being net of $0.6 million of unamortized discount and deferred financing costs.

Previous wording

All of the SWK Loan Facility borrowings take the form of Secured Overnight Financing Rate (“SOFR”) loans and bear interest at a rate per annum equal to the sum of an applicable margin of (i) 7.75% and the “Term SOFR Rate” (based upon an interest period of 3 months), or (ii) if we have elected the PIK Interest option (as defined below), 3.75% and the “Term SOFR Rate.” We may elect a portion of the interest due, to be paid in-kind at a rate per annum of 4.5% (“PIK Interest”), and such election may be made (x) until November 15, 2024 if certain conditions, as defined, have not been met, or (y) if such conditions have been satisfied, until November 17, 2025. The “Term SOFR Rate” is subject to a floor of 2.75%.

Current wording

All of the SWK Loan Facility borrowings take the form of Secured Overnight Financing Rate (“SOFR”) loans and bear interest at a rate per annum equal to the sum of an applicable margin of (i) 7.75% and the “Term SOFR Rate” (based upon an interest period of 3 months), or (ii) if we have elected the PIK Interest option (as defined below), 3.75% and the “Term SOFR Rate.” We may elect a portion of the interest due, to be paid in-kind at a rate per annum of 4.5% (“PIK Interest”), and such election may be made until November 15, 2025. The “Term SOFR Rate” is subject to a floor of 2.75%.

Previous wording

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) to the Company’s total gross profit (as defined in the SWK Loan Facility) multiplied by the outstanding loans under the SWK Loan Facility, and (y) the difference between $1,000,000 and the aggregate sale proceeds of any assets previously sold during the fiscal year. The closing of the sale of the Orthobiologics Business in November 2023 triggered the mandatory prepayment of $4.0 million. Of such amount, $2.0 million was paid shortly after closing of the divestiture of the Orthobiologics Business and the remainder was paid on February 15, 2024 based on mutual agreement between the parties. No such mandatory prepayments were required in the six months ended June 30, 2023.

Current wording

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) to the Company’s total gross profit (as defined in the SWK Loan Facility) multiplied by the outstanding loans under the SWK Loan Facility, and (y) the difference between $1,000,000 and the aggregate sale proceeds of any assets previously sold during the fiscal year. The closing of the sale of the Orthobiologics Business in November 2023 triggered the mandatory prepayment of $4.0 million. Of such amount, $2.0 million was paid shortly after closing of the divestiture of the Orthobiologics Business in 2023 and the remainder was paid on February 15, 2024 based on mutual agreement between the parties. No such mandatory prepayments were required in the nine months ended September 30, 2023.

Previous wording

The agreement, as amended, governing the SWK Loan Facility also includes an exit fee equal to 6.5% of the aggregate principal amount funded priorto termination plus $62,500 and prepayment penalties equal to: (i) if such prepayment occurs prior to the first anniversary of the Closing Date, 2% of the aggregate principal amount funded prior to the termination plus remaining unpaid interest payments scheduled to be paid during the first year of the loan or (ii) if such prepayment occurs after the first anniversary of the Closing Date but prior to the second anniversary of the Closing Date, 2% of the aggregate principal amount funded prior to the termination.

Current wording

The agreement, as amended, governing the SWK Loan Facility also includes an exit fee equal to 6.5% of the aggregate principal amount funded priorto termination plus $112,500.

Previous wording

The SWK Loan Facility matures on August 10, 2027 and accrues interest, payable quarterly in arrears. Principal amortization of the SWK Loan Facility starts on November 15, 2024, which amortization may be extended to November 17, 2025 if the Extension Conditions (as defined in the SWK Loan Facility Agreement) have been satisfied. Principal payments during the amortization period will be limited based on revenue-based caps. As of June 30, 2024, quarterly

Current wording

The SWK Loan Facility matures on August 10, 2027 and accrues interest, payable quarterly in arrears. Principal amortization of the SWK Loan Facility starts on November 15, 2025. Principal payments during the amortization period will be limited based on revenue-based caps. As of September 30, 2024, quarterly principal payments will be in an amount equal to 5% of the aggregate principal amount funded with the balance paid at maturity.