Xtant Medical Holdings Inc

Previous wording

We have focused and intend to continue to focus primarily on four key growth initiatives: (1) introduce new products, including our Cortera®Posterior Fixation System, viable bone matrix, OsteoVive® Plus, and amniotic membrane allografts, SimpliGraft™ and SimpliMax™; (2) expand our distribution network; (3) penetrate adjacent markets; and (4) leverage our growth platform with technology and strategic acquisitions. In furtherance of our growth initiatives, and as described elsewhere in this report, we made the following three acquisitions last year:

Current wording

We have focused and intend to continue to focus primarily on four key growth initiatives: (1) introduce new products, including our recently launched premium, next-generation demineralized bone matrix, Trivium™ in addition to our introductions last year: Cortera®Posterior Fixation System, viable bone matrix, OsteoVive® Plus, and amniotic membrane allografts, SimpliGraft™ and SimpliMax™;(2) expand our distribution network; (3) penetrate adjacent markets; and (4) leverage our growth platform with technology and strategic acquisitions. While the intent of these four key growth initiatives is to increase our future revenues, no assurance can be provided that we will be successful in implementing these growth initiatives or increasing our future revenues.

Previous wording

Comparison of Three and Nine Months Ended September 30, 2024 and September 30, 2023

Current wording

Comparison of Three Months Ended March 31, 2025 and March 31, 2024

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, inventory on consignment that may be missing and not returned, and reserves for estimated missing and damaged consigned surgical instruments. Cost of sales increased by 20%, or $1.9 million, to $11.6 million for the three months ended September 30, 2024 from $9.7 million for the three months ended September 30, 2023. Cost of sales increased by 35%, or $8.7 million, to $33.6 million for the nine months ended September 30, 2024 from $24.9 million for the nine months ended September 30, 2023. These increases are primarily due to greater revenue in the 2024 periods compared to the comparable 2023 periods, as mentioned above.

Current wording

Cost of sales consists primarily of manufacturing costs, product purchase costs, and depreciation of surgical instruments. Cost of sales also includes reserves for estimated excess inventory, inventory on consignment that may be missing and not returned, and reserves for estimated missing and damaged consigned surgical instruments. Cost of sales increased by $2.1 million to $12.7 million for the three months ended March 31, 2025 from $10.6 million for the prior year period. The increase in cost of sales is primarily due to greater revenue in the current year period compared to the prior year period, as described above, and the write-off of approximately $0.6 million of inventory in the prior 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 professional fees, as well as occupancy costs. General and administrative expenses increased 5%, or $0.4 million, to $7.5 million for the three months ended September 30, 2024, compared to $7.1 million for the same period in 2023. General and administrative expenses increased 35%, or $6.0 million, to $23.0 million for the nine months ended September 30, 2024, compared to $17.0 million for the same period in 2023. The increase for the three-month comparison is primarily attributable to $0.5 million of severance expense and $0.4 million of additional stock-based compensation. These increases were partially offset by reduced expense of $0.2 million related to various compensation plans. The increase for the nine-month comparison is primarily attributable to $1.4 million of additional expense related to various compensation plans, $1.5 million of additional stock-based compensation expense, $0.9 million of additional professional service fees, $0.5 million of additional hardware and software expense and $0.5 million of severance expense.

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 professional fees, as well as occupancy costs. General and administrative expenses decreased 3%, or $0.3 million, to $7.5 million for the three months ended March 31, 2025, compared to $7.8 million for the prior year period. This decrease is primarily attributable to $0.4 million of reduced accounting and consultant fees during 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 increased 7%, or $0.8 million, to $11.9 million for the three months ended September 30, 2024, compared to $11.1 million for the same period in 2023. Sales and marketing expenses increased 40%, or $10.7 million, to $37.5 million for the nine months ended September 30, 2024, compared to $26.9 million for the same period in 2023. The increase for the three-month comparison is primarily due to additional commission expense of $0.6 million resulting from revenue growth. The increase for the nine-month comparison is primarily due to additional commission expense of $6.3 million resulting from revenue growth and $3.0 million of additional compensation expense related to additional headcount.

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 10%, or $1.3 million, to $11.2 million for the three months ended March 31, 2025, compared to $12.5 million for the prior year period. This decrease is primarily due to a decrease in independent agent commissions expense of $0.8 million resulting from sales mix and a $0.7 million decrease in compensation expense related to reduced headcount. These decreases were partially offset by $0.4 million of additional professional fees during the current year period.

Previous wording

Research and development expenses consist primarily of internal costs for the development of new technologies. Research and development expenses were $0.7 million for the three months ended September 30, 2024, compared to $0.5 million for the same period in 2023. Research and development expenses were $1.9 million for the nine months ended September 30, 2024, compared to $0.8 million for the same period in 2023. The increases for the three- and nine-month comparisons are primarily due to $0.1 million and $0.5 million, respectively, of compensation expense related to additional headcount.

Current 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 the three months ended March 31, 2025, compared to $0.5 million for the same period in 2024. This decrease is primarily due to decreased headcount.

Previous wording

Interest expense consists of interest incurred from our debt instruments and finance leases. Interest expense was $1.2 million and $3.0 million for the three and nine months ended September 30, 2024, respectively, compared to $0.8 million and $2.1 million for the three and nine months ended September 30, 2023. The increases in interest expense during the three- and nine-month comparisons resulted primarily from additional borrowings on our revolving line of credit and the additional borrowing of $5.0 million under our term credit agreement in May 2024.

Current wording

Interest expense is related to interest incurred from our debt instruments and finance leases. Interest expense was $1.0 million for the three months ended March 31, 2025, compared to $0.8 million for the three months ended March 31, 2024. This increase resulted primarily from additional borrowings on our revolving line of credit and the additional borrowing of $5.0 million under our term credit agreement in May 2024. We expect that our annualized interest expense will increase approximately $0.1 million for every 25 basis points of increase to the reference rate associated with our credit agreements.

Previous wording

Since our inception, we have financed our operations through primarily operating cash flows, private placements of equity securities and convertible debt, debt facilities, common stock rights offerings, and other debt transactions. The following table summarizes our working capital as of September 30, 2024 and December 31, 2023 (in thousands):

Current wording

Since our inception, we have financed our operations primarily through operating cash flows, private placements of equity securities and convertible debt, debt facilities, common stock rights offerings, and other debt transactions. The following table summarizes our working capital as of March 31, 2025 and December 31, 2024 (in thousands):

Previous wording

On March 7, 2024, the Company, as guarantor, and certain of our subsidiaries, as borrowers (collectively, the “Borrowers”), entered into an Amended and Restated Credit, Security and Guaranty Agreement (Term Loan) (as amended from time to time, the “Term Credit Agreement”) and an Amended and Restated Credit, Security and Guaranty Agreement (Revolving Loan) (as amended from time to time, the “Revolving Credit Agreement” and, together with the Term Credit Agreement, the “Credit Agreements”) with MidCap Financial Trust and MidCap Funding IV Trust, each in its respective capacity as agent, and lenders from time to time party thereto. These Credit Agreements amend and restate the Credit, Security and Guaranty Agreement, dated as of May 6, 2021 (Term Loan), as amended (the “Prior Term Credit Agreement”), and the Credit, Security and Guaranty Agreement, dated as of May 6, 2021 (Revolving Loan), as amended (the “Prior Revolving Credit Agreement” and, together with the Prior Term Credit Agreement, the “Prior Credit Agreements”), in each case, by and among the Borrowers, the Company and MidCap Financial Trust and MidCap Funding IV Trust, as respective agents, and the lenders from time to time party thereto.

Current wording

The Company, 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, each in its respective capacity as agent, and lenders from time to time party thereto. Under the Term Credit Agreement (the “Term Facility”), we have borrowed up to the maximum of $22.0 million as of March 31, 2025.

Previous wording

The Facilities have a maturity date of March 1, 2029. Each of the Borrowers, and the Company, 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 the Company’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 the Company and the Borrowers. As of September 30, 2024, the Company had $12.9 million outstanding and $3.8 million of availability under the Revolving Facility.

Current wording

The Facilities have a maturity date of March 1, 2029. Each of the Borrowers, and the Company, 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 the Company’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 the Company and the Borrowers. As of March 31, 2025, the Company had $11.3 million outstanding and $5.7 million of availability under the Revolving Credit Facility.

Previous wording

The loans and other obligations pursuant to the Credit Agreements will 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 December 31, 2023, the effective rate of the Prior Term Credit Agreement, inclusive of authorization of debt issuance costs and accretion of the final payment, was 14.42%, and the effective rate of the Prior Revolving Credit Agreement was 9.94%.

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 March 31, 2025, the effective rate of the Term Credit Agreement, inclusive of authorization of debt issuance costs and accretion of the final payment, was 13.20%, and the effective rate of the Revolving Credit Agreement was 8.94%.

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, and change the nature of their businesses. In addition, the Credit Agreements require the Borrowers and the Company to maintain net product revenue at or above minimum levels and to maintain a certain minimum liquidity level, in each case as specified in the Credit Agreements. As of September 30, 2024, 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 the Borrowers and the Company to maintain net product revenue at or above minimum levels and to maintain a certain minimum liquidity level, in each case as specified in the Credit Agreements. As of March 31, 2024, we were in compliance with all covenants under the Credit Agreements.

Previous wording

We believe that our $7.1 million of cash and cash equivalents as of September 30, 2024, together with our anticipated operating cash flows, including fees associated with licensing agreements, and amounts available under the Facilities, will be sufficient to meet our anticipated cash requirements through at least November 2025. However, we may require or seek additional capital to fund our future operations and business strategy prior to November 2025. Accordingly, there is no assurance that we will not need or seek additional financing prior to such time.

Current wording

We believe that our $5.4 million of cash and cash equivalents as of March 31, 2025, 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 2026. However, we may require or seek additional capital to fund our future operations and business strategy prior to May 2026. Accordingly, there is no assurance that we will not need or seek additional financing prior to such time.

Previous wording

We may elect to raise additional financing even before we need it if market conditions for raising additional capital are favorable. We may seek to raise additional financing through various sources, such as equity and debt financings, or additional debt restructurings or refinancings. We can give no assurances that we will be able to secure additional sources of funds to support our operations, or if such funds are available to us, that such additional financing will be sufficient to meet our needs or on terms acceptable to us. This is particularly true if economic and market conditions deteriorate or our business, financial performance or prospects deteriorate.

Current wording

We may elect to raise additional financing even before we need it if market conditions for raising additional capital are favorable. We may seek to raise additional financing through various sources, such as equity and debt financings, debt restructurings or refinancings, or through strategic transactions, dispositions, collaborations and/or license agreements. We can give no assurances that we will be able to secure additional sources of funds to support our operations, or if such funds are available to us, that such additional financing will be sufficient to meet our needs or on terms acceptable to us. This is particularly true if economic and market conditions deteriorate or our business, financial performance or prospects deteriorate.

Previous wording

To the extent that we raise additional capital through the sale of equity or convertible debt securities or the restructuring or refinancing of our debt, the interests of our current stockholders may be diluted, and the terms may include discounted equity purchase prices, warrant coverage, liquidation or other preferences or rights that would adversely affect the rights of our current stockholders. If we issue common stock, we may do so at purchase prices that represent a discount to our trading price and/or we may issue warrants to the purchasers, which could further dilute our current stockholders. If we issue preferred stock, it could adversely affect the rights of our stockholders or reduce the value of our common stock. In particular, specific rights or preferences granted to future holders of preferred stock may include voting rights, preferences as to dividends and liquidation, conversion and redemption rights, sinking fund provisions, and restrictions on our ability to merge with or sell our assets to a third party. Additional debt financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. Prior to raising additional equity or debt financing, we may be required to obtain the consent of MidCap Financial Trust and MidCap Funding IV Trust under our Credit Agreements and/or ROS and Royalty Opportunities under our Investor Rights Agreement with them, and no assurance can be provided that they would provide such consent, which could limit our ability to raise additional financing and the terms thereof.

Current wording

To the extent that we raise additional capital through the sale of equity or convertible debt securities or the restructuring or refinancing of our debt, the interests of our current stockholders may be diluted, and the terms may include discounted equity purchase prices, warrant coverage, liquidation or other preferences or rights that would adversely affect the rights of our current stockholders. If we issue common stock, we may do so at purchase prices that represent a discount to our trading price and/or we may issue warrants to the purchasers, which could further dilute our current stockholders. If we issue preferred stock, it could adversely affect the rights of our stockholders or reduce the value of our common stock. In particular, specific rights or preferences granted to future holders of preferred stock may include voting rights, preferences as to dividends and liquidation, conversion and redemption rights, sinking fund provisions, and restrictions on our ability to merge with or sell our assets to a third party. Additional debt financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. Prior to raising additional equity or debt financing, we may be required to obtain the consent of MidCap Financial Trust and MidCap Funding IV Trust under our Credit Agreements, which could limit our ability to raise additional financing and the terms thereof. Since we are no longer party to an Investor Rights Agreement with the OrbiMed funds, we no longer need their consent to raise additional financing or take certain other actions.

Previous wording

There have been no changes in our critical accounting estimates for the three months ended September 30, 2024 as compared to the critical accounting estimates described in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023.

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 three months ended March 31, 2025 as compared to the critical accounting estimates described in our Annual Report on Form 10-K for the fiscal year ended December 31, 2024.