PART I – FINANCIAL INFORMATION Financial Statements (Unaudited) Unaudited financials report Q3 net loss of $8.3 million and nine-month loss of $15.8 million, raising substantial doubt about going concern - The company has identified conditions that raise substantial doubt about its ability to continue as a going concern within one year, citing recurring net losses, an accumulated deficit of $96.0 million, and uncertainty regarding future cash flows to meet operating needs4446 Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | Sep 30, 2021 | Dec 31, 2020 | | :--- | :--- | :--- | | Assets | | | | Cash | $22,543 | $39,150 | | Total current assets | $39,254 | $59,707 | | Total assets | $59,903 | $82,810 | | Liabilities & Equity | | | | Total current liabilities | $22,510 | $26,779 | | Total liabilities | $52,044 | $61,979 | | Accumulated deficit | $(96,027) | $(80,259) | | Total stockholders' equity | $7,859 | $20,831 | Condensed Consolidated Statements of Operations Highlights (in thousands) | Metric | Three Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2021 | | :--- | :--- | :--- | | Net sales | $11,485 | $36,529 | | Gross profit | $3,689 | $15,632 | | Loss from operations | $(6,976) | $(15,270) | | Net loss | $(8,316) | $(15,768) | | Net loss per share | $(0.81) | $(1.54) | Condensed Consolidated Statements of Cash Flows Highlights (Nine Months Ended Sep 30, in thousands) | Activity | 2021 | 2020 | | :--- | :--- | :--- | | Net cash used in operating activities | $(9,059) | $(8,258) | | Net cash used in investing activities | $(344) | $(525) | | Net cash (used in) provided by financing activities | $(7,503) | $7,837 | | Net decrease in cash and restricted cash | $(16,906) | $(946) | Management's Discussion and Analysis of Financial Condition and Results Of Operations Management discusses the FiberCel recall's impact, leading to Medtronic agreement termination, revenue decline, and substantial doubt about going concern - In June 2021, the company issued a voluntary recall for a single donor lot of FiberCel after post-surgical infections, including tuberculosis, were reported, leading to Medtronic suspending all purchases and subsequently moving to terminate the distribution agreement in October 2021154161 - The termination of the FiberCel agreement with Medtronic may negatively affect future revenues and creates uncertainty about the company's ability to comply with its debt covenants, contributing to substantial doubt about its ability to continue as a going concern154155216 Q3 2021 vs Q3 2020 Performance (in thousands) | Metric | Q3 2021 | Q3 2020 | Change (%) | | :--- | :--- | :--- | :--- | | Net Sales | $11,485 | $11,774 | (2.5)% | | Gross Profit | $3,689 | $5,541 | (33.4)% | | Gross Margin | 32.1% | 47.1% | (15.0) pps | | Loss from Operations | $(6,976) | $(2,691) | 159.2% | | Net Loss | $(8,316) | $(6,731) | 23.5% | Nine Months 2021 vs 2020 Performance (in thousands) | Metric | YTD 2021 | YTD 2020 | Change (%) | | :--- | :--- | :--- | :--- | | Net Sales | $36,529 | $30,216 | 20.9% | | Gross Profit | $15,632 | $14,540 | 7.5% | | Gross Margin | 42.8% | 48.1% | (5.3) pps | | Loss from Operations | $(15,270) | $(9,636) | 58.5% | | Net Loss | $(15,768) | $(16,469) | (4.3)% | Quantitative and Qualitative Disclosures About Market Risk Primary market risk stems from variable interest rates, though a 10% change is not material, with credit risk concentrated in one institution and one customer - The company's main market risk is interest rate risk from its variable-rate debt, but management states a 10% rate change would not materially impact financial statements257 - Credit risk is present, with cash held at a single institution and one customer accounting for 10% or more of accounts receivable as of September 30, 2021258259 Controls and Procedures Management concluded that disclosure controls and procedures were effective as of September 30, 2021, with no material changes to internal control over financial reporting - Based on an evaluation as of the end of the reporting period, the company's management concluded that disclosure controls and procedures were effective266 - There were no changes in internal control over financial reporting during the nine months ended September 30, 2021, that have materially affected, or are reasonably likely to materially affect, internal controls267 PART II – OTHER INFORMATION Legal Proceedings The company faces 41 lawsuits related to the FiberCel recall, alleging tuberculosis infections, with potential material financial impact - As of November 5, 2021, forty-one lawsuits have been filed against the company in multiple states related to the FiberCel recall, alleging patients contracted tuberculosis after implantation128 - The company states that it is not possible to estimate a range of probable loss from the FiberCel litigation at this time, but acknowledges that the loss could have a material effect on its financial position and results of operations130 Risk Factors Significant risks include FiberCel recall consequences, reputational damage, substantial litigation, Medtronic agreement termination, and substantial doubt about going concern - The FiberCel recall and subsequent negative publicity could harm the company's brand image, decrease confidence in its products, and adversely affect its ability to retain customers and partners272 - The company faces significant litigation risk from the FiberCel recall, with 41 lawsuits filed, and an unfavorable outcome could result in substantial damages and materially harm the business304319 - The termination of the FiberCel distribution agreement by Medtronic, a significant commercial partner, could adversely affect business, financial condition, and results of operations276277 - The company has identified conditions and events, including operating losses and the impact of the FiberCel recall, that raise substantial doubt about its ability to continue as a going concern without raising additional capital281282284 Unregistered Sales of Equity Securities and Use of Proceeds No unregistered sales of equity securities were reported during the period - None reported357 Defaults Upon Senior Securities No defaults upon senior securities were reported during the period - None reported357 Mine Safety Disclosures This item is not applicable to the company - Not applicable357 Other Information No other information was reported for the period - None reported357 Exhibits This section lists exhibits filed with the Form 10-Q, including required certifications by the Principal Executive and Financial Officers
Elutia(ELUT) - 2021 Q3 - Quarterly Report