UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

	☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

		For the quarterly period ended June 30, 2024

	☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

		For the transition period from ___________ to ___________

Commission File Number: 001-34951

XTANT MEDICAL HOLDINGS, INC.

(Exact name of registrant as specified in its charter)

Delaware		20-5313323
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

664 Cruiser Lane Belgrade, Montana		59714
(Address of principal executive offices)		(Zip Code)

(406) 388-0480

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Common stock, par value $0.000001 per share		XTNT		NYSE American LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

	Large accelerated filer ☐		Accelerated filer ☐
	Non-accelerated filer ☒		Smaller reporting company ☒
			Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Number of shares of common stock, par value $0.000001 per share, of registrant outstanding at August 2, 2024: 130,314,372.

XTANT MEDICAL HOLDINGS, INC.

FORM 10-Q

June 30, 2023

TABLE OF CONTENTS

		Page
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS		ii
PART I.	FINANCIAL INFORMATION	1
ITEM 1.	FINANCIAL STATEMENTS	1
ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	18
ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	23
ITEM 4.	CONTROLS AND PROCEDURES	23
PART II.	OTHER INFORMATION	24
ITEM 1.	LEGAL PROCEEDINGS	24
ITEM 1A.	RISK FACTORS	24
ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	24
ITEM 3.	DEFAULTS UPON SENIOR SECURITIES	24
ITEM 4.	MINE SAFETY DISCLOSURES	24
ITEM 5.	OTHER INFORMATION	25
ITEM 6.	EXHIBITS	26

This Quarterly Report on Form 10-Q contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and are subject to the safe harbor created by those sections. For more information, see “Cautionary Statement Regarding Forward-Looking Statements.”

As used in this report, unless the context indicates another meaning, the terms “we,” “us,” “our,” “Xtant,” “Xtant Medical,” and the “Company” mean Xtant Medical Holdings, Inc. and its wholly owned subsidiaries, all of which are consolidated on Xtant’s condensed consolidated financial statements. All intercompany balances and transactions have been eliminated in consolidation.

We own various unregistered trademarks and service marks, including our corporate logo. Solely for convenience, the trademarks and trade names in this report are referred to without the ® and ™ symbols, but such references should not be construed as any indicator that the owner of such trademarks and trade names will not assert, to the fullest extent under applicable law, their rights thereto. We do not intend the use or display of other companies’ trademarks and trade names to imply a relationship with, or endorsement or sponsorship of us by, any other companies.

We include our website address throughout this report for reference only. The information contained on or connected to our website is not incorporated by reference into this report.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

The statements contained in this Quarterly Report on Form 10-Q that are not purely historical are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Our forward-looking statements include, but are not limited to, statements regarding our expectations, hopes, beliefs, intentions, or strategies regarding the future. In addition, any statements that refer to projections, forecasts, or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements. The words “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “possible,” “potential,” “predict,” “project,” “should,” and “would,” as well as similar expressions, may identify forward-looking statements, but the absence of these words does not mean that a statement is not forward looking. Forward-looking statements in this Form 10-Q may include, for example, statements about the topics below and are subject to risks and uncertainties including without limitation those described below:

	●	our ability to increase revenue and our ability to improve our gross margins, our operating expenses as a percentage of revenue, and obtain and sustain profitability;

	●	our ability to become operationally self-sustaining by controlling our supply chain and becoming less reliant on production and manufacturing of our products outside of our control, which we believe will allow us to be a larger and more diverse producer of biologics;

	●	our ability to integrate the products acquired as part of the acquisition of Surgalign SPV, Inc., the acquisition of certain assets and liabilities of Surgalign Holdings, Inc., and the acquisition of certain assets of RTI Surgical, Inc. and achieve future sales of those products as anticipated, especially given their respective declines in sales before we acquired them, and other risks associated with those acquisitions and any future business combinations or acquisitions we may pursue;

	●	the effect of our private label and original equipment manufacturer (“OEM”) business on our business and operating results and risks associated therewith, including fluctuations in our operating results and decreased profit margins;

	●	our ability and success in implementing key growth and process improvement initiatives designed to increase our production capacity, revenue and scale and risks associated with such growth and process improvement initiatives;

	●	our ability to implement successfully our four key growth pillars, which are focused on introducing new products; expanding our distribution network and achieving greater contract access; leveraging and penetrating adjacent markets and completing targeted strategic acquisitions;

	●	risks associated with our international operations, including but not limited to the effect of foreign currency exchange rate fluctuations and compliance with foreign legal and regulatory requirements, current and future wars, related sanctions and geopolitical tensions, political risks associated with the potential instability of governments and legal systems in countries in which we or our customers or suppliers conduct business, and other potential conflicts;

	●	our ability to operate in international markets and effectively manage our international subsidiaries, which require management attention and financial resources;

	●	our ability to navigate manufacturing challenges related to the production of biologics products and recover from our prior stem cell shortage and our ability to win back stem cell customers and achieve future stem cell revenue as anticipated;

	●	our ability to retain and expand our agreements with group purchasing organizations (“GPOs”) and independent delivery networks (“IDNs”) and sell products to members of such GPOs and IDNs;

	●	the effect of inflation and supply chain disruptions, which could result in delayed product launches, lost revenue, higher costs, decreased profit margins, and other adverse effects on our business and operating results;

	●	the effect of labor and staffing shortages at hospitals and other medical facilities on the number of elective procedures in which our products are used and as a result our revenues, as well as global and local labor shortages and loss of personnel, which have adversely affected and may continue to adversely affect our ability to produce product to meet demand;

	●	our ability to remain competitive;

	●	our ability to rebrand and integrate acquired products with our existing product line and successfully transition our customers from some of our older legacy hardware products to these new products and the anticipated adverse effect of these transitions on our organic revenue growth rate;

	●	our ability to innovate, develop, introduce and market new products and technologies and the success of such new products and technologies, including our recently launched amniotic membrane allografts, SimpliGraft™ and SimpliMax™;

	●	our dependence on and ability to retain and recruit independent sales agents and distributors and motivate and incentivize them to sell our products, including in particular our dependence on key independent agents for a significant portion of our revenue;

	●	the ability of our sales personnel, including our independent sales agents and distributors, to achieve expected results;

	●	our reliance on third party suppliers and manufacturers;

	●	the effect of product liability claims and other litigation to which we may be subjected and product recalls and defects;

	●	the effect of infectious diseases on our business, operating results and financial condition;

	●	the effect of fluctuations in foreign currency exchange rates on our earnings and our foreign currency translation adjustments;

	●	risks associated with and the effect of a shift in procedures using our products from hospitals to ambulatory surgical centers, which would put pressure on the price of our products and margins;

	●	our ability to obtain and maintain regulatory approvals in the United States and abroad and the effect of government regulations and our compliance with government regulations;

	●	the ability of our clinical trials to demonstrate competent and reliable evidence of the safety and effectiveness of our products;

	●	our ability to remain accredited with the American Association of Tissue Banks and continue to obtain a sufficient number of donor cadavers for our products;

	●	our ability to obtain and maintain government and third-party coverage and reimbursement for our products;

	●	our ability to attract, retain and engage qualified technical, sales and processing personnel and members of our management team, especially in light of a tight labor market and increasing cost of living in and around the Belgrade, Montana area;

	●	our ability to maintain sufficient liquidity to fund our operations and obtain financing on reasonable terms when needed and the effect of such additional financing on our business, results of operations, financial condition and stockholders;

	●	our ability to service our debt and comply with the covenants in our credit agreements and the effect of our significant indebtedness on our business, results of operations, financial condition and prospects;

	●	our expectations regarding operating trends, future financial performance and expense management and our estimates of our future revenue, expenses, ongoing losses, gross margins, operating leverage, capital requirements and our need for, or ability to obtain, additional financing and the availability of our credit facilities;

	●	our ability to effectively remediate our outstanding material weaknesses and maintain effective internal control over financial reporting;

	●	our ability to obtain and protect our intellectual property and proprietary rights and operate without infringing the intellectual property rights of others;

	●	our ability to maintain our stock listing on the NYSE American Exchange;

	●	risks inherent in being a controlled company; and

	●	the effect of a global economic slowdown, rising interest rates and the prospects for recession, a possible U.S. government shutdown, as well as past and potential future disruptions in access to bank deposits or lending commitments due to bank failures, which could materially and adversely affect our revenue, liquidity, financial condition and results of operations.

The forward-looking statements contained in this Form 10-Q are based on our current expectations and beliefs concerning future developments and their potential effects on us. There can be no assurance that future developments affecting us will be those that we have anticipated. These forward-looking statements involve a number of risks, uncertainties, or assumptions, many of which are beyond our control, which may cause actual results or performance to be materially different from those expressed or implied by these forward-looking statements. These risks and uncertainties include, but are not limited to, those factors described in the “Risk Factors” section of our Annual Report on Form 10-K for the year ended December 31, 2023 and this Form 10-Q.

Should one or more of these risks or uncertainties materialize, or should any of our assumptions prove incorrect, actual results may vary in material respects from those projected in these forward-looking statements. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise, except as may be required under applicable securities laws.

iii

PART I.	FINANCIAL INFORMATION

ITEM 1.	FINANCIAL STATEMENTS

XTANT MEDICAL HOLDINGS, INC.

Condensed Consolidated Balance Sheets

(In thousands, except number of shares and par value)

	As of June 30, 2024			As of December 31, 2023
	(Unaudited)
ASSETS
Current Assets:
Cash and cash equivalents	$	5,379		$	5,715
Restricted cash		99			208
Trade accounts receivable, net of allowance for credit losses and doubtful accounts of $1,012 and $920, respectively		21,187			20,731
Inventories		40,507			36,885
Prepaid and other current assets		1,800			1,330
Total current assets		68,972			64,869
Property and equipment, net		8,837			8,692
Right-of-use asset		1,117			1,523
Goodwill		7,302			7,302
Intangible assets, net		9,220			10,085
Other assets		130			141
Total Assets	$	95,578		$	92,612

LIABILITIES & STOCKHOLDERS’ EQUITY
Current Liabilities:
Accounts payable	$	6,875		$	7,054
Accrued liabilities		8,676			10,419
Current portion of lease liability		794			830
Current portion of finance lease obligations		67			65
Line of credit		11,899			4,622
Total current liabilities		28,311			22,990
Long-term Liabilities:
Lease liability, less current portion		376			759
Finance lease obligation, less current portion		82			116
Long-term debt, plus premium and less issuance costs		21,770			17,167
Other liabilities		34			231
Total Liabilities		50,573			41,263
Commitments and Contingencies (note 14)		-			-
Stockholders’ Equity:
Preferred stock, $0.000001 par value; 10,000,000 shares authorized; no shares issued and outstanding		—			—
Common stock, $0.000001 par value; 300,000,000 shares authorized; 130,314,372 shares issued and outstanding as of June 30, 2024 and 130,180,031 shares issued and outstanding as of December 31, 2023		—			—
Additional paid-in capital		296,451			294,330
Accumulated other comprehensive (loss) income		(175	)		29
Accumulated deficit		(251,271	)		(243,010	)
Total Stockholders’ Equity		45,005			51,349
Total Liabilities & Stockholders’ Equity	$	95,578		$	92,612

See notes to unaudited condensed consolidated financial statements.

XTANT MEDICAL HOLDINGS, INC.

Condensed Consolidated Statements of Operations

(Unaudited, in thousands, except number of shares and per share amounts)

	2024			2023			2024			2023
	Three Months Ended June 30,						Six Months Ended June 30,
	2024			2023			2024			2023

Revenue	$	29,943		$	20,232		$	57,816		$	38,176
Cost of sales		11,361			7,773			21,932			15,180
Gross Profit		18,582			12,459			35,884			22,995

Operating Expenses
General and administrative		7,713			4,954			15,498			9,839
Sales and marketing		13,179			8,716			25,639			15,770
Research and development		636			180			1,163			354
Total Operating Expenses		21,528			13,850			42,300			25,963

Loss from Operations		(2,946	)		(1,391	)		(6,416	)		(2,967	)

Other Expense
Interest expense		(992	)		(786	)		(1,827	)		(1,360	)
Interest income		—			—			—			85
Foreign currency exchange gain		118			—			79			—
Other (expense) income		(5	)		—			7			—
Total Other Expense		(879	)		(786	)		(1,741	)		(1,275	)

Net Loss from Operations Before Provision for Income Taxes		(3,825	)		(2,177	)		(8,157	)		(4,242	)

Provision for Income Taxes Current and Deferred		(36	)		(13	)		(104	)		(26	)
Net Loss	$	(3,861	)	$	(2,190	)	$	(8,261	)	$	(4,268	)

Net Loss Per Share:
Basic	$	(0.03	)	$	(0.02	)	$	(0.06	)	$	(0.04	)
Dilutive	$	(0.03	)	$	(0.02	)	$	(0.06	)	$	(0.04	)

Shares used in the computation:
Basic		130,269,710			108,897,048			130,291,796			108,895,327
Dilutive		130,269,710			108,897,048			130,291,796			108,895,327

See notes to unaudited condensed consolidated financial statements.

XTANT MEDICAL HOLDINGS, INC.

Condensed Consolidated Statements of Comprehensive Loss

(Unaudited, in thousands)

	2024			2023			2024			2023
	Three Months Ended June 30,						Six Months Ended June 30,
	2024			2023			2024			2023
Net Loss	$	(3,861	)	$	(2,190	)	$	(8,261	)	$	(4,268	)
Other Comprehensive Loss
Foreign currency translation adjustments		(42	)		—			(204	)		—
Comprehensive Loss	$	(3,903	)	$	(2,190	)	$	(8,465	)	$	(4,268	)

See notes to unaudited condensed consolidated financial statements.

XTANT MEDICAL HOLDINGS, INC.

Condensed Consolidated Statements of Equity

(Unaudited, in thousands, except number of shares)

	Shares			Amount		Capital			Loss			Deficit			Equity
	Common Stock					Additional Paid-In-			Accumulated Other Comprehensive			Accumulated			Total Stockholders’
	Shares			Amount		Capital			Loss			Deficit			Equity
Balance at December 31, 2022		108,874,803		$	—	$	277,841		$	—		$	(243,670	)	$	34,171

Common stock issued on vesting of restricted stock units		22,245			—		—			—			—			—
Withholding on common stock upon vesting of restricted stock units
Withholding on common stock upon vesting of restricted stock units, shares
Stock-based compensation		—			—		617			—			—			617
Foreign currency translation adjustment
Net loss		—			—		—			—			(2,078	)		(2,078	)
Balance at March 31, 2023		108,897,048			—		278,458			—			(245,748	)		32,710

Stock-based compensation		—			—		439			—			—			439
Net loss		—			—		—			—			(2,190	)		(2,190	)
Balance at June 30, 2023		108,897,048			—		278,897			—			(247,938	)		30,959

Balance at December 31, 2023		130,180,031		$	—	$	294,330		$	29		$	(243,010	)	$	51,349

Common stock issued on vesting of restricted stock units		44,496			—		—			—			—			—
Withholding on common stock upon vesting of restricted stock units		(7,986	)		—		(17	)		—			—			(17	)
Stock-based compensation		—			—		910			—			—			910
Foreign currency translation adjustment		—			—		—			(162	)		—			(162	)
Net loss		—			—		—			—			(4,400	)		(4,400	)
Balance at March 31, 2024		130,216,541			—		295,223			(133	)		(247,410	)		47,680
Balance		130,216,541			—		295,223			(133	)		(247,410	)		47,680

Common stock issued on vesting of restricted stock units		97,831			—		—			—			—			—
Stock-based compensation		—			—		1,228

SEC Form 10-Q filed by Xtant Medical Holdings Inc.