Xtant Medical Holdings, Inc.

Previous wording

We develop, manufacture and market regenerative medicine products and medical devices for domestic and international markets. Our products serve the specialized needs of orthopedic and neurological surgeons, as well as trauma, foot and ankle, sports medicine, wound care surgeons including orthobiologics for the promotion of bone healing, amniotic tissue and collagen for both surgical repair and chronic wound care, implants and instrumentation for the treatment of spinal disease. We promote our products primarily in the United States through a direct sales force, independent distributors and stocking agents.

Current wording

We develop, manufacture and market regenerative medicine products and medical devices for domestic and international markets. Our products serve the specialized needs of orthopedic and neurological surgeons, as well as trauma, foot and ankle, sports medicine, and wound care surgeons including orthobiologics for the promotion of bone healing, amniotic tissue and collagen for both surgical repair and chronic wound care, and implants and instrumentation for the treatment of spinal disease. We promote our products primarily in the United States through a direct sales force, independent distributors and stocking agents.

Previous wording

We have an extensive sales channel of direct and independent commissioned agents and stocking distributors in the United States representing some or all of our products. We also maintain a national accounts program to enable our agents to gain access to integrated delivery network hospitals and through group purchasing organizations. We have biologics contracts with major GPOs, as well as extensive access to IDNs across the United States for both biologics and spine hardware systems. While our focus is the United States market, we promote and sell our products internationally through stocking distribution partners in Europe, Canada, Mexico, South America, and certain Pacific region countries. We have recently made and intend to continue to make measured investments in the expansion of our commercial team to support our new products and maximize the reach of our broad portfolio of orthobiologics solutions. We also recently hired approximately 20 sales personnel in connection with our exclusive distribution arrangement with Dilon Technologies, Inc. (“Dilon”).

Current wording

We have an extensive sales channel of direct and independent commissioned agents and stocking distributors in the United States representing some or all of our products. We also maintain a national accounts program to enable our agents to gain access to integrated delivery network hospitals and through group purchasing organizations. We have biologics contracts with major GPOs, as well as extensive access to IDNs across the United States for both biologics and spine hardware systems. While our focus is the United States market, we promote and sell our products internationally through stocking distribution partners in Europe, Canada, Mexico, South America, and certain Pacific region countries. We have recently made and intend to continue to make measured investments in the expansion of our commercial team to support our new products and maximize the reach of our broad portfolio of orthobiologics solutions. In April 2026, we hired approximately 20 sales personnel in connection with our exclusive distribution arrangement with Dilon Technologies, Inc. (“Dilon”).

Previous wording

As previously disclosed, on December 1, 2025, we completed the sale of certain non-core assets relating to our Coflex and CoFix products and our international hardware business to Companion Spine, LLC (“Companion Spine”) for an aggregate purchase price of $21.4 million. Of the $10.7 million purchase price received during the first quarter of 2026, $2.8 million was used to repay a portion of our term debt. To assist in the transition of this business to Companion Spine, we agreed to certain transition services to Companion Spine for a limited period of time. In 2025, we recognized $20.3 million in revenue from sales of our Coflex and CoFix products and international hardware products which we sold to Companion Spine. The loss of this revenue will adversely affect our 2026 revenue.

Current wording

As previously disclosed, on December 1, 2025, we completed the sale of certain non-core assets relating to our Coflex and CoFix products and our international hardware business to Companion Spine, LLC (“Companion Spine”) for an aggregate purchase price of $21.4 million (the “Coflex/CoFix and Paradigm Divestitures”). Of the $10.7 million of proceeds received (including $0.3 million of interest accrued on the note receivable balance) during the first quarter of 2026, $2.8 million was used to repay a portion of our term debt. To assist in the transition of this business to Companion Spine, we agreed to provide certain transition services to Companion Spine for a limited period of time. In 2025, we recognized $20.3 million in revenue from sales of our Coflex and CoFix products and international hardware products prior to the Coflex/CoFix and Paradigm Divestitures. As anticipated, the loss of this revenue has adversely affected and will continue to adversely affect our 2026 revenue.

Previous wording

In addition, as previously disclosed, we recognized $18.7 million in license revenue in 2025 that we indicated likely will not repeat in 2026 due primarily to changes in the reimbursement environment for our SimpliMax™ product effective January 1, 2026 and will adversely affect a portion of our product revenue in 2026. During first quarter of 2026, as anticipated, our revenue was adversely affected by such changes, including a decrease in license revenue of $3.6 million and a decrease in product revenue, primarily related to skin substitute products, of $2.0 million. The loss of this license and product revenue will continue to have an adverse impact on our revenues and other operating results, including in particular, our gross margins, during the remainder of 2026 as compared to 2025.

Current wording

In addition, as previously disclosed, we recognized $18.7 million in license revenue in 2025 that we indicated likely will not repeat in 2026 due primarily to changes in the reimbursement environment for our SimpliMax™ product effective January 1, 2026. As previously disclosed, this loss in license revenue has also adversely affected and will continue to adversely affect a portion of our product revenue in 2026. Specifically, we experienced $5.0 million and $8.6 million decreases in license revenue during the three and six months ended June 30, 2026, respectively, and $2.9 million and $4.9 million decreases in product revenue related primarily to skin substitute products during the three and six months ended June 30, 2026, respectively, in each case as compared to the respective prior year period. The loss of this license and product revenue will continue to adversely impact our revenues and other operating results, including our gross margins, during the remainder of 2026 as compared to 2025.

Previous wording

On April 13, 2026, we announced that we entered into a Distribution Agreement (the “Distribution Agreement”) with Dilon Technologies, Inc. pursuant to which we obtained the exclusive rights to import, market, distribute and sell the HEMOBLAST® Bellows product in the United States. The HEMOBLAST® Bellows product is an FDA-approved powder-based, topical, surgical hemostatic agent used to control bleeding during surgical procedures. In connection therewith, we hired approximately 20 Dilon sales personnel to assist in the sale of the HEMOBLAST® Bellows product in the United States. Under the terms of the Distribution Agreement, Dilon will continue to manufacture the HEMOBLAST® Bellows product from its current manufacturing location in France and will supply and sell it to us at a specified transfer price as provided in the Distribution Agreement, which price is subject to change under the terms of the Distribution Agreement. The Distribution Agreement does not contain any minimum purchase requirements. Under the terms of the Distribution Agreement, we paid Dilon a $5.0 million exclusivity fee, which fee is subject to repayment by Dilon under certain circumstances, including upon a termination of the Distribution Agreement, which agreement can be terminated by either party upon certain specified events.

Current wording

On April 13, 2026, we announced that we entered into a Distribution Agreement (the “Distribution Agreement”) with Dilon Technologies, Inc. pursuant to which we obtained the exclusive rights to import, market, distribute and sell the HEMOBLAST® Bellows product in the United States. The HEMOBLAST® Bellows product is an FDA-approved powder-based, topical, surgical hemostatic agent used to control bleeding during surgical procedures. In connection with the agreement, we hired approximately 20 Dilon sales personnel to assist in selling product in the United States. Under the Distribution Agreement, Dilon will continue to manufacture the HEMOBLAST® Bellows product at its facility in France and supply it to us at a specified transfer price, which price is subject to adjustment in certain circumstances. The Distribution Agreement does not contain any minimum purchase requirements. We rely on Dilon, as the sole manufacturer, to produce the product for us and in sufficient quantities and at an appropriate transfer price. There are no other suppliers of the HEMOBLAST® Bellows product. Accordingly, this arrangement involves risk since we do not control the manufacturing process and Dilon is responsible for all manufacturing decisions, as well as compliance with all applicable rules and regulations in connection therewith. We believe we will have a sufficient supply of the HEMOBLAST® Bellows product to support our anticipated sales through the end of third quarter 2026. We are uncertain that supply will be available to us thereafter. If Dilon is unable to manufacture and supply us the HEMOBLAST® Bellows product in sufficient quantities or at all, then we will be unable to sell the product and recognize revenue in connection therewith, as discussed later in this report under the heading “Part II. Other Information – Item 1A. Risk Factors.”

Previous wording

Comparison of Three Months Ended March 31, 2026 and March 31, 2025

Current wording

Comparison of Three and Six Months Ended June 30, 2026 and 2025

Previous wording

Cost of sales consists primarily of manufacturing cost, product purchase costs, and depreciation of surgical instruments. Cost of sales also includes reserves for estimated excess inventory and inventory on consignment that may be missing and not returned. Cost of sales decreased by 30%, or $3.8 million, to $8.9 million for the three months ended March 31, 2026 from $12.7 million for the prior year period. The decrease in cost of sales is primarily due to lower revenue in the current year period compared to the prior year period, as described above.

Current wording

Cost of sales consists primarily of manufacturing cost, product purchase costs, and depreciation of surgical instruments. Cost of sales also includes reserves for estimated excess inventory and inventory on consignment that may be missing and not returned. Cost of sales decreased by $1.4 million to $9.7 million for the three months ended June 30, 2026 from $11.1 million for the three months ended June 30, 2025. Cost of sales decreased by $5.2 million to $18.6 million for the six months ended June 30, 2026 from $23.8 million for the six months ended June 30, 2025. The decrease associated with the three-month comparison was due primarily to the non-recurrence of costs of sales in the current year period associated with the Coflex/CoFix and Paradigm Divestitures in the prior year period. The decrease associated with the six-month comparison was due primarily to the non-recurrence of costs of sales in the current year period associated with the Coflex/CoFix and Paradigm Divestitures and decreases in orthobiologics sales during the current year period.

Previous wording

General and administrative expenses consist primarily of personnel costs for corporate employees, cash-based and stock-based compensation related costs, amortization, and corporate expenses for legal, accounting and other professional fees, as well as occupancy costs. General and administrative expenses decreased 17%, or $1.3 million, to $6.3 million for the three months ended March 31, 2026, compared to $7.5 million for the prior year period. Of this decrease, $1.6 million is due to the sale of certain assets relating to our Coflex and CoFix products and international hardware business to Companion Spine, partially offset by $0.2 million in additional accounting and consulting fees incurred during the current year period.

Current wording

General and administrative expenses consist primarily of personnel costs for corporate employees, cash-based and stock-based compensation related costs, amortization, and corporate expenses for legal, accounting and other professional fees, as well as occupancy costs. General and administrative expenses decreased 14%, or $1.0 million, to $6.4 million for the three months ended June 30, 2026, compared to $7.5 million for the same period in 2025. General and administrative expenses decreased 15%, or $2.3 million, to $12.7 million for the six months ended June 30, 2026, compared to $15.0 million for the same period in 2025. Of these decreases, $1.4 million and $3.0 million for the three-month and six-month periods are due to the Coflex/CoFix and Paradigm Divestitures. The decrease for the three-month comparison was partially offset by $0.1 million in additional stock-based compensation expense incurred in the current year period. The decrease for the six-month comparison was partially offset by $0.2 million of additional computer and software costs and $0.2 million in additional accounting and consulting fees incurred in the current year period.

Previous wording

Sales and marketing expenses consist primarily of sales commissions; personnel costs for sales and marketing employees; costs for trade shows, sales conventions and meetings; travel expenses; advertising; and other sales and marketing related costs. Sales and marketing expenses decreased 27%, or $3.0 million, to $8.2 million for the three months ended March 31, 2026, compared to $11.2 million for the prior year period. Of this decrease, $2.5 million is due to the sale of certain assets relating to our Coflex and CoFix products and international hardware business to Companion Spine. The remaining decrease is primarily due to a $0.4 million decrease in independent agent commissions expense resulting from the decline in revenue and a $0.6 million decrease in professional fees during the current year period. The decrease was partially offset by a $0.2 million increase in compensation expense related to increased headcount. We expect our sales and marketing expenses to increase in future periods due to our exclusive distribution agreement with Dilon and our recent hiring of approximately 20 sales personnel in connection therewith to assist in the sale of the HEMOBLAST® Bellows product in the United States.

Current wording

Sales and marketing expenses consist primarily of sales commissions; personnel costs for sales and marketing employees; costs for trade shows, sales conventions and meetings; travel expenses; advertising; and other sales and marketing related costs. Sales and marketing expenses decreased 11%, or $1.2 million, to $10.4 million for the three months ended June 30, 2026, compared to $11.6 million for the same period in 2025. Sales and marketing expenses decreased 19%, or $4.2 million, to $18.6 million for the six months ended June 30, 2026, compared to $22.8 million for the same period in 2025. Of these decreases, $2.4 million and $4.9 million for the three-month and six-month periods are due to the Coflex/CoFix and Paradigm Divestitures. The remaining increase for the three-month comparison is primarily due to increased compensation expenses of $1.2 million related to increased headcount; an increase in independent agent commission expense of $0.3 million resulting from revenue mix; and a $0.3 million increase in travel-related expenses, partially offset by a $0.9 million reduction in consulting fees. The remaining increase for the six-month comparison is primarily due to increased compensation expenses of $1.4 million related to increased sales personnel headcount and $0.4 million increase in travel-related expenses, partially offset by a $1.5 million reduction in consulting fees.

Previous wording

Research and development expenses consist primarily of internal costs for the development of new technologies. Research and development expenses were $0.4 million for each of the three months ended March 31, 2026 and 2025.

Current wording

Research and development expenses consist primarily of internal costs for the development of new technologies. Research and development expenses increased 23%, or $0.1 million, to $0.7 million for the three months ended June 30, 2026, compared to $0.6 million for the same period in 2025. Research and development expenses increased 12%, or $0.1 million, to $1.1 million for the six months ended June 30, 2026, compared to $1.0 million for the same period in 2025.

Previous wording

We recognized $0.2 million of other income for the three months ended March 31, 2026 primarily related to certain transition services provided to Companion Spine. We expect such other income to continue for approximately three months through the remaining term of the transition services agreement with Companion Spine.

Current wording

We recognized $0.3 million and $0.6 million, respectively, of other income for the three and six months ended June 30, 2026 primarily related to certain transition services provided to Companion Spine. We expect such other income to continue for approximately one month through the remaining term of the transition services agreement with Companion Spine.

Previous wording

While our working capital decreased by $4.9 million as of March 31, 2026 as compared to December 31, 2025, we used cash received from the Companion Spine transaction to repay some of our long-term debt, resulting in our long-term debt, less the current portion and plus premium and less issuance costs, being $8.1 million as of March 31, 2026, compared to $11.0 million as of December 31, 2025.

Current wording

While our working capital decreased by $13.9 million as of June 30, 2026 as compared to December 31, 2025, we used cash received from the Coflex/CoFix and Paradigm Divestitures and the repayment by Companion Spine of the note receivable that existed as of December 31, 2025 in connection therewith to repay some of our long-term debt, resulting in our long-term debt, less the current portion and plus premium and less issuance costs, being $7.3 million as of June 30, 2026, compared to $11.0 million as of December 31, 2025.

Previous wording

Subsequent to the end of first quarter of 2026, we used $5.0 million of our cash and cash equivalents to pay the $5.0 million exclusivity fee to Dilon under the terms of the Distribution Agreement, which fee is subject to repayment by Dilon under certain circumstances, including upon a termination of the Distribution Agreement.

Current wording

During the second quarter of 2026, we used $5.0 million of cash to pay the exclusivity fee to Dilon under the Distribution Agreement. While this fee is subject to repayment by Dilon under certain circumstances, including upon termination of the Distribution Agreement for any reason, we recorded a $5.0 million charge to operating expenses during the second quarter of 2026. This charge is based on an assessment of facts and circumstances, including the uncertainty surrounding recovery of the payment and management’s expectation that repayment was not probable despite the contractual repayment provisions.

Previous wording

Net cash used in operating activities for the first three months of 2026 was $2.1 million compared to net cash provided by operating activities of $1.3 million for the first three months of 2025. This change relates primarily to the net loss in the first three months of 2026 compared to net income in the comparable prior year period.

Current wording

Net cash used in operating activities for the first six months of 2026 was $9.4 million compared to net cash provided by operating activities of $2.6 million for the first six months of 2025. This change relates primarily to the net loss in the first six months of 2026 compared to net income in the comparable prior year period, exclusive of the $5.0 million Dilon distribution expense associated with the Distribution Agreement.

Previous wording

Net cash provided by investing activities for the first three months of 2026 was $10.2 million compared to net cash used in investing activities of $1.1 million for the first three months of 2025. This change relates primarily to the proceeds received from the sale of certain assets relating to our Coflex and CoFix products and international hardware business to Companion Spine.

Current wording

Net cash provided by investing activities for the first six months of 2026 was $5.0 million compared to net cash used in investing activities of $1.5 million for the first six months of 2025. This change relates primarily to $10.4 million of cash received from Companion Spine in connection with the Coflex/Cofix and Paradigm Divestitures in the current year period, partially offset by $5.0 million paid to Dilon in connection with the Distribution Agreement in the current year period.

Previous wording

Net cash used in financing activities for the first three months of 2026 was $13.3 million compared to net cash used in financing activities of $0.9 million for the first three months of 2025. This change relates primarily to $9.6 million of reduced borrowings, net of repayments, under our revolving line of credit during the current year period compared to the prior year period and a $2.8 million payment on long-term debt from the proceeds from the sale of certain assets relating to our Coflex and CoFix products and international hardware business to Companion Spine in 2025.

Current wording

Net cash used in financing activities for the first six months of 2026 was $2.7 million compared to $0.3 million for the first six months of 2025. This increase relates primarily to $3.8 million of increased repayments on the term loan during the current year period compared to the prior year period, partially offset by $1.2 million of reduced borrowings under our revolving credit facility, net of repayments.

Previous wording

Xtant, as guarantor, and certain of our subsidiaries, as borrowers (collectively, the “Borrowers”), are parties to a term loan credit agreement (the “Term Credit Agreement”) and revolving loan credit agreement (the “Revolving Credit Agreement” and together with the Term Loan Credit Agreement, the “Loan Agreements”) with MidCap Financial Trust and MidCap Funding IV Trust, respectively and each in its respective capacity as agent, and lenders from time to time party thereto. As of March 31, 2026, $11.2 million was outstanding under the term loan facility under the Term Credit Agreement (the “Term Facility”), reduced from $17.0 million as of December 31, 2025. This reduction was due to the final purchase price payment of $2.8 million by Companion Spine to us during the current year period in connection with the sale of certain assets relating to our Coflex and CoFix products and international hardware business to Companion Spine.

Current wording

Xtant, as guarantor, and certain of our subsidiaries, as borrowers (collectively, the “Borrowers”), are parties to a term loan credit agreement (the “Term Credit Agreement”) and revolving loan credit agreement (the “Revolving Credit Agreement” and together with the Term Loan Credit Agreement, the “Loan Agreements”) with MidCap Financial Trust and MidCap Funding IV Trust, respectively and each in its respective capacity as agent, and lenders from time to time party thereto. As of June 30, 2026, $10.2 million was outstanding under the term loan facility under the Term Credit Agreement (the “Term Facility”), reduced from $14.0 million as of December 31, 2025. This reduction was due to the final purchase price payment of $2.8 million by Companion Spine to us during the current year period in connection with the sale of certain assets relating to our Coflex and CoFix products and international hardware business to Companion Spine and $0.9 million of principal repayments under the Term Loan Credit Agreement.

Previous wording

The Facilities have a maturity date of March 1, 2029. Each of the Borrowers, and Xtant, as guarantor, are jointly and severally liable for all of the obligations under the Facilities on the terms set forth in the Credit Agreements. The Borrowers’ obligations, and Xtant’s obligations as a guarantor, under the Credit Agreements are secured by first-priority liens on substantially all of their assets, including, without limitation, all inventory, equipment, accounts, intellectual property and other assets of Xtant and the Borrowers. As of March 31, 2026, we had $0.4 million outstanding and $11.8 million of availability under the Revolving Credit Facility.

Current wording

The Facilities have a maturity date of March 1, 2029. Each of the Borrowers, and Xtant, as guarantor, are jointly and severally liable for all of the obligations under the Facilities on the terms set forth in the Credit Agreements. The Borrowers’ obligations, and Xtant’s obligations as a guarantor, under the Credit Agreements are secured by first-priority liens on substantially all of their assets, including, without limitation, all inventory, equipment, accounts, intellectual property and other assets of Xtant and the Borrowers. As of June 30, 2026, we had $12.0 million outstanding and $0.7 million of availability under the Revolving Credit Facility.

Previous wording

The loans and other obligations pursuant to the Credit Agreements bear interest at a per annum rate equal to the sum of the SOFR Interest Rate, as such term is defined in the Credit Agreements, plus the applicable margin of 6.50% in the case of the Term Credit Agreement, and an applicable margin of 4.50% in the case of the Revolving Credit Agreement, subject in each case to a floor of 2.50%. As of March 31, 2026, the effective rate of the Term Credit Agreement, inclusive of authorization of debt issuance costs and accretion of the final payment, was 14.80%, and the effective rate of the Revolving Credit Agreement was 8.49%.

Current wording

The loans and other obligations pursuant to the Credit Agreements bear interest at a per annum rate equal to the sum of the SOFR Interest Rate, as such term is defined in the Credit Agreements, plus the applicable margin of 6.50% in the case of the Term Credit Agreement, and an applicable margin of 4.50% in the case of the Revolving Credit Agreement, subject in each case to a floor of 2.50%. As of June 30, 2026, the effective rate of the Term Credit Agreement, inclusive of amortization of debt issuance costs and accretion of the final payment, was 14.74%, and the effective rate of the Revolving Credit Agreement was 8.23%.

Previous wording

The Credit Agreements contain affirmative and negative covenants customarily applicable to senior secured credit facilities, including covenants that, among other things, limit or restrict the ability of the Borrowers, subject to negotiated exceptions, to incur additional indebtedness and additional liens on their assets, engage in mergers or acquisitions or dispose of assets, pay dividends or make other distributions, voluntarily prepay other indebtedness, enter into transactions with affiliated persons, make investments, undergo a change in control and change the nature of their businesses. In addition, the Credit Agreements require us to maintain net product revenue at or above certain minimum levels and to maintain a certain minimum liquidity level, in each case as specified in the Credit Agreements. On March 26, 2026, we entered into Amendment No. 4 to Amended and Restated Credit, Security and Guaranty Agreement (Term Loan) with MidCap Financial Trust and Amendment No. 4 to Amended and Restated Credit, Security and Guaranty Agreement (Revolving Loan) with MidCap Funding IV Trust pursuant to which we eliminated the requirement to comply with the minimum net revenue covenant for fourth quarter of 2025, adjusted the amortization of the term loan to have amortization calculated off the amount of principal outstanding when amortization payments start instead of the original principal amount of the term loan, and revised the minimum net revenue covenant to align solely with revenue generated from our orthobiologics products and correspondingly adjusted the minimum net revenue amounts. As of March 31, 2026, we were in compliance with all covenants under the Credit Agreements.

Current wording

The Credit Agreements contain affirmative and negative covenants customarily applicable to senior secured credit facilities, including covenants that, among other things, limit or restrict the ability of the Borrowers, subject to negotiated exceptions, to incur additional indebtedness and additional liens on their assets, engage in mergers or acquisitions or dispose of assets, pay dividends or make other distributions, voluntarily prepay other indebtedness, enter into transactions with affiliated persons, make investments, undergo a change in control and change the nature of their businesses. In addition, the Credit Agreements require us to maintain net product revenue at or above certain minimum levels and to maintain a certain minimum liquidity level, in each case as specified in the Credit Agreements.

Previous wording

We believe that our $12.2 million of cash and cash equivalents as of March 31, 2026, together with our anticipated operating cash flows and amounts available under the Facilities, will be sufficient to meet our anticipated cash requirements through at least May 2027. However, we may require or seek additional capital to fund our future operations and business strategy prior to May 2027. Accordingly, there is no assurance that we will not need or seek additional financing prior to such time.

Current wording

We believe that our $10.2 million of cash and cash equivalents as of June 30, 2026, together with our anticipated operating cash flows and amounts available under the Facilities, will be sufficient to meet our anticipated cash requirements through at least August 2027. However, we may require or seek additional capital to fund our future operations and business strategy prior to August 2027. Accordingly, there is no assurance that we will not need or seek additional financing prior to such time.

Previous wording

Management’s discussion and analysis of our financial condition and results of operations is based on our financial statements, which have been prepared in accordance with U.S. GAAP. There have been no changes in our critical accounting estimates for the three months ended March 31, 2026 as compared to the critical accounting estimates described in our Annual Report on Form 10-K for the fiscal year ended December 31, 2025.

Current wording

Management’s discussion and analysis of our financial condition and results of operations is based on our financial statements, which have been prepared in accordance with U.S. GAAP. There have been no changes in our critical accounting estimates for the six months ended June 30, 2026 as compared to the critical accounting estimates described in our Annual Report on Form 10-K for the fiscal year ended December 31, 2025.