ELUTIA INC. Stock Compensation Disclosure

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 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 December 31, 2025, the Company had 1,597,158 shares of Class A common stock available for issuance under the 2020 Plan, and on January 1, 2026, the shares available for issuance were increased by 1,711,394 pursuant to the automatic increase provisions of the plan.  

In March 2026, the Company established the Elutia Inc. 2026 Inducement Award Plan (the “Inducement Plan”) to attract, retain and motivate persons who are expected to make important contributions to the Company. Shares of Class A common stock totaling 2,000,000 are reserved for issuance pursuant to the Inducement Plan.

Stock Options

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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 have contractual terms of ten years and generally vest over a four-year period from the date of grant.

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A summary of stock option activity under the Company’s 2015 Plan and 2020 Plan for the years ended December 31, 2025 is as follows:

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As of December 31, 2025, there was approximately $1.5 million of total unrecognized compensation expense related to unvested stock options. These costs are expected to be recognized over a weighted-average period of 1.1 years. The weighted average grant date fair value of options granted during the years ended December 31, 2025 and 2024 were $1.13 and $2.38, respectively. The total intrinsic value of options exercised during the year ended December 31, 2024 was not material.

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. 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 based on the Company’s historical stock data. 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 options during the years ended December 31, 2025 and 2024:

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In January 2024, the Company granted 390,625 options that vested on a defined date following the U.S. Food and Drug Administration’s (“FDA”) clearance of  EluPro. With the FDA’s clearance 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 year ended December 31, 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 December 31, 2025, there were a total of 345,011 stock options outstanding that are market condition stock option awards.

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Restricted Stock Units

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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 RSUs or the shares issued in settlement of the award.

A summary of the RSU activity under the Company’s 2020 Plan for the year ended December 31, 2025 is as follows:

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The total fair value of the RSUs granted during the years ended December 31, 2025 and 2024 was $0.4 million and $8.5 million, respectively. 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 December 31, 2025, $1.6 million of unrecognized compensation costs related to RSUs is expected to be recognized over a weighted average period of 1.1 years.    

During the year ended December 31, 2024, the Company granted 554,375 RSUs that vested on a defined date following the FDA’s clearance of EluPro. With the FDA’s clearance 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 December 31, 2025, there were 252,394 RSUs outstanding that were market condition RSU awards.

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Employee Stock Purchase Plan

The Company makes shares of its Class A common stock available for purchase under the Elutia Inc. 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 December 31, 2025, the total shares of Class A common stock authorized for

issuance under the ESPP was 1,126,448, of which 763,965 remained available for future issuance.  During the year ended December 31, 2025, 59,268 shares of Class A common stock were issued under the ESPP.

Stock-Based Compensation Expense

Stock-based compensation expense recognized during the years ended December 31, 2025 and 2024 was comprised of the following (in thousands):

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