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 March 31, 2025

	☐	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 May 9, 2025: 139,323,172.

XTANT MEDICAL HOLDINGS, INC.

FORM 10-Q

March 31, 2025

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	17
ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	21
ITEM 4.	CONTROLS AND PROCEDURES	21
PART II.	OTHER INFORMATION	22
ITEM 1.	LEGAL PROCEEDINGS	22
ITEM 1A.	RISK FACTORS	22
ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	22
ITEM 3.	DEFAULTS UPON SENIOR SECURITIES	22
ITEM 4.	MINE SAFETY DISCLOSURES	22
ITEM 5.	OTHER INFORMATION	22
ITEM 6.	EXHIBITS	23

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

	●	our ability to maintain sufficient liquidity to continue to meet the financial covenants under our credit agreements and to continue to fund our operations and our ability to 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 ability to execute our strategic priorities and become operationally self-sustaining by controlling our supply chain, especially with respect to stem cells, 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 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;

	●	the effect of a global economic slowdown, the prospects for recession, tariffs, inflation, rising interest rates, and supply chain disruptions on our business, operating results and financial position, which, among other effects, could result in delayed product launches, lost revenue, higher costs, decreased profit margins and other adverse effects on our business and operating results;

	●	our dependence on and ability to retain and recruit independent sales agents and distributors with appropriate expertise and motivate and incentivize them to engage with customers and 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 ability to leverage sales under our recent license agreements and meet manufacturing , develop, introduce, market and license new products and technologies and the success of such new products and technologies, including our recently launched next-generation demineralized bone matrix, Trivium™;

	●	our ability to innovate, develop, introduce, market and license new products and technologies and the success of such new products and technologies, including our recently launched next-generation demineralized bone matrix, Trivium™;

	●	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, and the possibility that we may become more in the OEM business;

	●	our ability to implement successfully our four key growth initiatives, which are focused on introducing new products; expanding our distribution network and ; penetrating adjacent markets and leveraging our growth platform with technology and 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 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 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 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;

iii

	●	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 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 generate revenue from our recent license agreements, license certain of our intellectual property on commercially reasonable terms and maintain our intellectual property licenses;

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

	●	the potential impacts of the ownership of a significant percentage of our common stock by Nantahala Capital Management, LLC;

	●	the potential impact of future sales of our common stock by investors party to the registration rights agreement we entered into on April 10, 2025, or the perception that such sales may occur, on the market price of our common stock; and

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

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, 2024 and our subsequent Securities and Exchange Commission (“SEC”) filings.

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.

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 March 31, 2025			As of December 31, 2024
	(Unaudited)
ASSETS
Current Assets:
Cash and cash equivalents	$	5,032		$	6,199
Restricted cash		403			22
Trade accounts receivable, net of allowance for credit losses and doubtful accounts of $1,705 and $1,437, respectively		23,476			20,660
Inventories		38,812			38,634
Prepaid and other current assets		1,421			1,601
Total current assets		69,144			67,116
Property and equipment, net		10,726			10,131
Right-of-use asset, net		736			829
Goodwill		7,302			7,302
Intangible assets, net		7,924			8,356
Other assets		1			103
Total Assets	$	95,833		$	93,837

LIABILITIES & STOCKHOLDERS’ EQUITY
Current Liabilities:
Accounts payable	$	7,121		$	7,918
Accrued liabilities		10,492			7,771
Current portion of lease liability		646			703
Current portion of finance lease obligations		61			69
Line of credit		11,261			12,120
Total current liabilities		29,581			28,581
Long-term Liabilities:
Lease liability, less current portion		121			166
Finance lease obligation, less current portion		39			47
Long-term debt, plus premium and less issuance costs		22,167			22,038
Other liabilities		48			42
Total Liabilities		51,956			50,874
Commitments and Contingencies (note 11)		-			-
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; 139,082,174 shares issued and outstanding as of March 31, 2025 and 139,045,664 shares issued and outstanding as of December 31, 2024		—			—
Additional paid-in capital		303,487			302,738
Accumulated other comprehensive loss		(209	)		(316	)
Accumulated deficit		(259,401	)		(259,459	)
Total Stockholders’ Equity		43,877			42,963
Total Liabilities & Stockholders’ Equity	$	95,833		$	93,837

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)

	2025			2024
	Three Months Ended March 31,
	2025			2024
Revenue
Product revenue	$	29,284		$	27,873
License revenue		3,620			—
Total Revenue		32,904			27,873

Cost of sales		12,661			10,571
Gross Profit		20,243			17,302

Operating Expenses
General and administrative		7,533			7,785
Sales and marketing		11,204			12,460
Research and development		443			527
Total Operating Expenses		19,180			20,772

Income (Loss) from Operations		1,063			(3,470	)

Other Expense
Interest expense		(1,045	)		(835	)
Unrealized foreign currency translation gain (loss)		24			(39	)
Other (expense) income		(9	)		12
Total Other Expense		(1,030	)		(862	)

Net Income (Loss) from Operations Before Provision for Income Taxes		33			(4,332	)

Benefit (Provision) for Income Taxes Current and Deferred		25			(68	)
Net Income (Loss)	$	58		$	(4,400	)

Net Loss Per Share:
Basic	$	0.00		$	(0.03	)
Dilutive	$	0.00		$	(0.03	)

Shares used in the computation:
Basic		139,068,831			130,201,251
Dilutive		143,335,114			130,201,251

See notes to unaudited condensed consolidated financial statements.

XTANT MEDICAL HOLDINGS, INC.

Condensed Consolidated Statements of Comprehensive Income (Loss)

(Unaudited, in thousands)

	2025		2024
	Three Months Ended March 31,
	2025		2024
Net Income (Loss)	$	58	$	(4,400	)
Other Comprehensive Income (Loss)
Foreign currency translation adjustments		107		(162	)
Comprehensive Income (Loss)	$	165	$	(4,562	)

See notes to unaudited condensed consolidated financial statements.

XTANT MEDICAL HOLDINGS, INC.

Condensed Consolidated Statements of Equity

(Unaudited, in thousands, except number of shares)


	Common Stock					Additional Paid-In-			Accumulated Other Comprehensive			Accumulated			Total Stockholders’
	Shares			Amount		Capital			Income (Loss)			Deficit			Equity
Balance at December 31, 2023		130,180,031		$	—	$	294,330		$	29		$	(243,010	)	$	51,349
Common stock issued on settlement of restricted stock units		44,496			—		—			—			—			—
Withholding of common stock upon settlement 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 at December 31, 2024		139,045,664		$	—	$	302,738		$	(316	)	$	(259,459	)	$	42,963
Balance		139,045,664		$	—	$	302,738		$	(316	)	$	(259,459	)	$	42,963
Common stock issued on settlement of restricted stock units		44,496			—		—			—			—			—
Withholding of common stock upon settlement of restricted stock units		(7,986	)		—		(9	)		—			—			(9	)
Stock-based compensation		—			—		758			—			—			758
Foreign currency translation adjustment		—			—		—			107			—			107
Net income		—			—		—			—			58			58
Net income (Loss)		—			—		—			—			58			58
Balance at March 31, 2025		139,082,174			—		303,487			(209	)		(259,401	)		43,877
Balance		139,082,174			—		303,487			(209	)		(259,401	)		43,877

See notes to unaudited condensed consolidated financial statements.

XTANT MEDICAL HOLDINGS, INC.

Condensed Consolidated Statements of Cash Flows

(Unaudited, in thousands)

	2025			2024
	Three Months Ended March 31,
	2025			2024
Operating activities:
Net income (loss)	$	58		$	(4,400	)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization		1,074			1,005
Gain on sale of fixed assets		(37	)		(82	)
Non-cash interest		163			95
Stock-based compensation		758			910
Provision for reserve on accounts receivable		243			88
Provision for excess and obsolete inventory		541			259
Other		(3	)		3

Changes in operating assets and liabilities:
Accounts receivable		(3,114	)		(879	)
Inventories		(535	)		(2,195	)
Prepaid and other assets		280			(376	)
Accounts payable		(890	)		492
Accrued liabilities		2,740			(675	)
Net cash provided by (used in) operating activities		1,278			(5,755	)

Investing activities:
Purchases of property and equipment		(1,191	)		(773	)
Proceeds from sale of fixed assets		48			99
Net cash used in investing activities		(1,143	)		(674	)

Financing activities:
Payments on financing leases		(17	)		(16	)
Borrowings on line of credit		25,158			30,445
Repayments on line of credit		(26,017	)		(24,797	)
Debt issuance costs		(34	)		(436	)
Payment of taxes from withholding of common stock on settlement of restricted stock units		(9	)		(17	)
Net cash (used in) provided by financing activities		(919	)		5,179

Effect of exchange rate changes on cash and cash equivalents and restricted cash		(2	)		(49	)

Net change in cash and cash equivalents and restricted cash		(786	)		(1,299	)
Cash and cash equivalents and restricted cash at beginning of period		6,221			5,923
Cash and cash equivalents and restricted cash at end of period	$	5,435		$	4,624
Reconciliation of cash and cash equivalents and restricted cash reported in the condensed consolidated balance sheets
Cash and cash equivalents	$	5,032		$	4,547
Restricted cash		403			77
Total cash and restricted cash reported in condensed consolidated balance sheets	$	5,435		$	4,624

See notes to unaudited condensed consolidated financial statements.

Notes to Unaudited Condensed Consolidated Financial Statements

(1) Business Description, Basis of Presentation and Summary of Significant Accounting Policies

Business Description and Basis of Presentation

The accompanying condensed consolidated financial statements include the accounts of Xtant Medical Holdings, Inc. (“Xtant”), a Delaware corporation, and its wholly owned subsidiaries, which are jointly referred to herein as “Xtant” or the “Company”. The terms “we,” “us” and “our” also refer to Xtant. All intercompany balances and transactions have been eliminated in consolidation.

Xtant is a global medical technology company focused on the design, development, and commercialization of a comprehensive portfolio of orthobiologics and spinal implant fixation systems to facilitate spinal fusion in complex spine, deformity, and degenerative procedures.

The accompanying condensed consolidated balance sheet as of December 31, 2024, which has been derived from audited financial statements, and the unaudited interim condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). They do not include all disclosures required by generally accepted accounting principles for annual consolidated financial statements, but in the opinion of management include all adjustments, consisting only of normal recurring items, necessary for a fair presentation.

Interim results are not necessarily indicative of results that may be achieved in the future for the full year ending December 31, 2025.

These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto, which are included in Xtant’s Annual Report on Form 10-K for the year ended December 31, 2024. The accounting policies set forth in those annual consolidated financial statements are the same as the accounting policies utilized in the preparation of these condensed consolidated financial statements, except as modified for appropriate interim consolidated financial statement presentation.

Use of Estimates

The preparation of the condensed consolidated financial statements requires management of the Company to make a number of estimates and assumptions relating to the reported amount of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenue and expenses during the period. Significant estimates include the carrying amount of property and equipment; goodwill, intangible assets and liabilities; valuation allowances for trade receivables, inventory, deferred income tax assets and liabilities; current and long-term lease obligations and corresponding right-of-use asset; and estimates for the fair value of long-term debt, stock options and other equity awards upon which the Company determines stock-based compensation expense. Actual results could differ from those estimates.

Cash, Cash Equivalents, and Restricted Cash

The Company considers all highly liquid investments purchased with an original maturity date of three months or less to be cash equivalents. Cash equivalents are recorded at cost, which approximates market value. The Company maintains its cash balances primarily with two financial institutions. These balances generally exceed federally insured limits. The Company has not experienced any losses in such accounts and believes it is not exposed to any significant credit risk in cash and cash equivalents.

Cash and cash equivalents classified as restricted cash on the Company’s condensed consolidated balance sheets are restricted as to withdrawal or use under the terms of certain contractual agreements. The March 31, 2025 and December 31, 2024 balances included lockbox deposits that are temporarily restricted due to timing at the period end. The lockbox deposits are applied against the Company’s line of credit the next business day.

Long-Lived Assets

The Company reviews its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recovered. No impairments of long-lived assets were recorded for the three months ended March 31, 2025 and 2024.

Goodwill

Goodwill represents the excess of costs over fair value of assets of businesses acquired. Goodwill and intangible assets acquired in a purchase business combination and determined to have indefinite useful lives are not amortized. Instead, they are tested for impairment at least annually, and whenever events or circumstances indicate, the carrying amount of the asset may not be recoverable. No impairments of goodwill were recorded for the three months ended March 31, 2025 and 2024.

Stock-Based Compensation

The Company accounts for stock-based compensation in accordance with Financial Accounting Standards Board, or FASB, Accounting Standards Codification (“ASC”) 718, Compensation-Stock Compensation. ASC 718 requires the recognition of compensation expense, using a fair-value based method, for costs related to all stock-based payments including stock options, restricted stock units, performance stock units, and shares issued under its employee stock purchase plan. ASC 718 requires companies to estimate the fair value of all share-based payment option awards on the date of grant using an option pricing model. The fair value of stock options is recognized over the period during which an optionee is required to provide services in exchange for the option award, known as the requisite service period (usually the vesting period), on a straight-line basis. The Company accounts for option forfeitures as they occur.

The Company accounts for stock-based compensation for restricted stock units and deferred stock units at their fair value, based on the closing market price of the Company’s common stock on the date of grant. These costs are recognized on a straight-line basis over the requisite service period, which is usually the vesting period.

The Company accounts for stock-based compensation for performance stock units with market-based conditions at their fair value on the date of the award using the Monte Carlo simulation model. These costs are recognized over the requisite service period, which is usually the vesting period, regardless of the likelihood of achievement of the market-based performance criteria.

Recently Issued Accounting Pronouncements

In December 2023, the Financial Accounting Standards Board issued Accounting Standards Update (“ASU”) No. 2023-09, Income Taxes (Topic 740): Improvement to Income Tax Disclosures to enhance the transparency of income tax disclosures. The guidance in ASU No. 2023-09 allows for a prospective method of transition, with the option to apply the standard retrospectively. The standard is effective for fiscal years beginning after December 15, 2024, with early adoption permitted. The Company is currently evaluating the effect of this new guidance on its consolidated financial statements.

In November 2024, the Financial Accounting Standards Board issued ASU 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40). This ASU requires that public business entities disclose additional information about specific expense categories in the notes to financial statements at interim and annual reporting periods. The prescribed categories include purchases of inventory, employee compensation, depreciation, intangible asset amortization, and depletion. This authoritative guidance is effective for annual periods beginning after December 15, 2026 and interim periods beginning after December 15, 2027, with early adoption permitted. The Company is currently evaluating the effect of this new guidance on its consolidated financial statements.

Foreign Currency

The Company generates revenues outside the United States in multiple foreign currencies including euros, Swiss francs, British pounds and in U.S. dollar-denominated transactions conducted with customers who generate revenue in currencies other than the U.S. dollar. The Company also incurs operating expenses in euros, Swiss francs and British pounds. All assets and liabilities of foreign subsidiaries which have a functional currency other than the U.S. dollar are translated at the rate of exchange at period-end, while elements of the income statement are translated at the average exchange rates in effect during the period. The net effect of these translation adjustments is shown as a component of accumulated other comprehensive income (loss). Foreign currency transaction gains and losses are reported in other income (loss), net.

Fair Value of Financial Instruments

The carrying values of financial instruments, including trade accounts receivable, accounts payable, accrued liabilities and long-term debt, approximate their fair values based on terms and related interest rates as of March 31, 2025 and December 31, 2024.

(2) Revenue

In the United States, the Company generates a substantial portion of its revenue from independent commissioned sales agents. The Company consigns its orthobiologics products to hospitals and consigns or loans its spinal implant sets to independent sales agents. The spinal implant sets typically contain the instruments, disposables, and spinal implants required to complete a surgery. Consigned sets are managed by the sales agent to service hospitals that are high volume users for multiple procedures.

The Company ships replacement inventory to independent sales agents to replace the consigned inventory used in surgeries. Loaned sets are returned to the Company’s distribution center, replenished, and made available to sales agents for the next surgical procedure.

For each surgical procedure, the sales agent reports use of the product by the hospital and, as soon as practicable thereafter, ensures that the hospital provides a purchase order to the Company. Revenue is recognized upon utilization of product.

Additionally, the Company sells product directly to domestic and international stocking resellers, original equipment manufacturer resellers, and private label resellers. Upon receipt and acceptance of a purchase order from a stocking reseller, the Company ships product and invoices the reseller. The Company recognizes revenue when the control is transferred upon shipment or upon delivery, based on the contract terms and legal requirements, and the transfer of title and risk of loss occurs. There is generally no customer acceptance or other condition that prevents the Company from recognizing revenue in accordance with the delivery terms for these sales transactions. In the normal course of business, the Company accepts returns of product that have not been implanted. Product returns are not material to the Company’s consolidated statements of operations. The Company accounts for shipping and handling activities as a fulfillment cost rather than a separate performance obligation. The Company’s policy is to record revenue net of any applicable sales, use, or excise taxes. Payment terms are generally net 30 days from invoice date and some customers are offered discounts for early payment. The consideration for goods or services reflects any fixed amount stated per the contract and estimates for any variable consideration, such as returns, discounts or rebates, to the extent that it is probable that a significant reversal of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is resolved. For certain sales transactions, we incur group purchasing organization fees that are based on a contractual percentage of applicable sales and are treated as consideration payable to a customer and recorded as a reduction of revenue.

The Company recognizes revenue in certain circumstances before product delivery occurs (commonly referred to as bill-and-hold transactions). When the Company enters into bill-and-hold arrangements, the Company determines if the customer obtains control of the product by determining (a) the reason for the bill-and-hold arrangement; (b) whether the product was identified separately as belonging to the customer; (c) whether the product was ready for physical transfer to the customer; and (d) whether the Company was unable to utilize the product or direct it to another customer. For bill-and-hold arrangements, the associated product inventory is identified separately by the Company as belonging to the customer and is ready for physical transfer. At March 31, 2025, $0.4 million was included in revenue for products that had not shipped. During the first quarter of 2025, the Company received a $1.5 million upfront payment and recognized as a contract liability within accrued liabilities on the condensed consolidated balance sheet. The Company recognizes revenue related to the upfront payment in proportion to when control of the goods are transferred to the customer. At March 31, 2025, $0.1 million was recognized as revenue and the contract liability closing balance was $1.4 million.

Licensing revenue

Licensing revenue is recognized when control of the intellectual property (“IP”) rights is transferred to a customer in an amount that reflects the consideration the Company expects to be entitled to in exchange for the licensing of the Company’s IP. Revenue for IP rights is accounted for based on the nature of the promise to grant the license. In determining whether the Company’s promise is to provide a right to access its IP or a right to use its IP, the Company considers the nature of its IP to which the customer will have rights. IP is either functional IP which has significant standalone functionality or symbolic IP which does not have significant standalone functionality. Revenue from functional IP is recognized at the point in time when control of the distinct license is transferred to the customer. Revenue from symbolic IP is recognized over the access period to the Company’s IP.

Revenues from sales-based royalties promised in exchange for a license of IP is recognized at the later of when the underlying sale occurs or the performance obligation to which some or all of the sales-based royalty has been allocated is satisfied.

The Company has a license agreement which grants an exclusive, nontransferable, non-sublicensable, royalty-bearing right to manufacture and commercialize one of our products in the United States. The Company concluded this represented one performance obligation of transferring the IP rights to manufacture and commercialize the product. This was determined to be functional IP. The transaction price includes an upfront non-refundable fee of $1.5 million, as well as quarterly royalty payments based on the volume of product sold, subject to guaranteed quarterly minimums, which aggregate to $3.75 million during 2025. Variable consideration is included in the transaction price only to the extent significant reversal of cumulative revenue recognized is not probable of occurring when the uncertainty associated with the variable consideration is subsequently resolved. Significant judgment is required in estimating variable consideration for the performance obligation identified in the contract. This judgment involves assessing factors outside of our influence, including the accessibility of the licensed products to certain reimbursement codes determined by regulatory authorities. Accordingly, the guaranteed quarterly minimums past the first quarter of 2025 were considered constrained and, therefore, not recognized when the performance obligation was satisfied as it was not probable as of March 31, 2025 that there would not be a significant reversal of cumulative revenue due to uncertainty with a Centers for Medicare & Medicaid Services (“CMS”) policy change and language in the license agreement. On April 12, 2025, CMS announced that the effective date of the local coverage determination, which determines the eligibility of the reimbursement code contained in the license agreement, had been deferred until January 2026. However, additional policy changes by CMS, or other government organizations, may further restrict reimbursement such that all quarterly minimums will not be recognized prior to commencement of the local coverage determination.

Disaggregation of revenue

The Company operates in one reportable segment with its net revenue derived primarily from the sale of orthobiologics and spinal implant products across North America, Europe, Asia Pacific, and Latin America. Sales are reported net of returns, discounts and rebates. The following table presents revenues from these product lines for the three months ended March 31, 2025 and 2024 (in thousands):

Schedule of Revenues from Product Lines

	Three Months Ended		Percentage of			Three Months Ended		Percentage of
	March 31, 2025		Total Revenue			March 31, 2024		Total Revenue
Orthobiologics	$	18,074		55	%	$	15,416		55	%
Spinal implant		11,210		34	%		12,457		45	%
License revenue		3,620		11	%		—		—	%
Total revenue	$	32,904		100	%	$	27,873		100	%

(3) Receivables

The Company’s provision for current expected credit loss is determined based on historical collection experience adjusted for current economic conditions affecting collectability. Actual customer collections could differ from estimates. Account balances are charged to the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. Provisions to the allowance for credit losses are charged to expense.

(4) Inventories

Inventories consist of the following (in thousands):

Schedule of Inventories

	March 31, 2025		December 31, 2024
Raw materials	$	5,391	$	6,622
Work in process		2,959		2,812
Finished goods		30,462		29,200
Total	$	38,812	$	38,634

(5) Property and Equipment, Net

Property and equipment, net are as follows (in thousands):

Schedule of Property and Equipment, Net

	March 31, 2025			December 31, 2024
Equipment	$	7,379		$	7,239
Computer equipment		1,309			1,254
Computer software		361			361
Leasehold improvements		4,389			4,356
Surgical instruments		17,023			15,798
Assets not yet in service		765			960
Total cost		31,226			29,968
Less: accumulated depreciation		(20,500	)		(19,837	)
Property and equipment, net	$	10,726		$	10,131

Depreciation expense related to property and equipment, including property under finance leases, for the first three months of 2025 and 2024 was $0.6 million and $0.6 million, respectively.

(6) Intangible Assets

The following table sets forth information regarding intangible assets (in thousands):

Schedule of Intangible of Assets

March 31, 2025:	Weighted Average Life	Cost		Accumulated Amortization			Net
Patents	11 years	$	2,777	$	(1,017	)	$	1,760
Customer List	6 years		8,000		(2,778	)		5,222
Tradenames	10 years		1,190		(248	)		942
		$	11,967	$	(4,043	)	$	7,924

December 31, 2024:	Weighted Average Life	Cost		Accumulated Amortization			Net
Patents	11 years	$	2,777	$	(948	)	$	1,829
Customer List	6 years		8,000		(2,445	)		5,555
Tradenames	10 years		1,190		(218	)		972
		$	11,967	$	(3,611	)	$	8,356

Amortization expense was $0.4 million and $0.4 million for the three months ended March 31, 2025 and 2024, respectively.

(7) Accrued Liabilities

Accrued liabilities consist of the following (in thousands):

Schedule of Accrued Liabilities

	March 31, 2025		December 31, 2024
Cash compensation/commissions payable	$	6,341	$	5,565
Other accrued liabilities		4,151		2,206
Accrued liabilities	$	10,492	$	7,771

(8) Debt

Long-term debt consists of the following (in thousands):

Schedule of Long-term Debt

	March 31, 2025			December 31, 2024
Amounts due under term loan	$	22,000		$	22,000
Accrued end-of-term payments		563			465
Less: unamortized debt issuance costs		(396	)		(427	)
Long-term debt, less issuance costs	$	22,167		$	22,038

The effective rate of the term loan, inclusive of amortization of debt issuance costs and accretion of the final payment, was 13.20% as of March 31, 2025. The effective rate of the revolving line of credit was 8.94% as of March 31, 2025. As of March 31, 2025, the Company had $5.7 million available under its revolving line of credit and was in compliance with all covenants under the term loan and revolving line of credit agreements.

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 certain subsidiaries of the Company, as borrowers (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. On April 9, 2025, the credit agreements were amended to increase the common stock ownership threshold that triggers a change in control from 40% to 49.9% to accommodate the sale of common stock from OrbiMed. See Note 17. 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, 2025, the Company was in compliance with all covenants under the credit agreements.

Each of the Borrowers, and the Company, as guarantor, are jointly and severally liable for all of the obligations under the term loan and revolving line of 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.

(9) Stock-Based Compensation

On July 26, 2023, our stockholders approved and adopted the Xtant Medical Holdings, Inc. 2023 Equity Incentive Plan (the “2023 Plan”), which replaced the Xtant Medical Holdings, Inc. 2018 Equity Incentive Plan (as amended and restated, the “2018 Plan”) with respect to future grants of equity awards, although the 2018 Plan continues to govern equity awards granted under the 2018 Plan. The 2023 Plan permits the Board of Directors, or a committee thereof, to grant to eligible employees, non-employee directors, and consultants of the Company non-statutory and incentive stock options, stock appreciation rights, restricted stock awards, restricted stock units, deferred stock units, performance awards, non-employee director awards, and other stock-based awards. The Board of Directors may select 2023 Plan participants and determine the nature and amount of awards to be granted. The maximum number of shares of our common stock available for issuance under the 2023 Plan, subject to adjustment pursuant to the terms of the 2023 Plan, is (i) 5,500,000 shares of common stock; (ii) 7,695,812 shares of common stock remaining available for issuance under the 2018 Plan but not subject to outstanding awards under the 2018 Plan as of July 26, 2023; and (iii) up to 6,686,090 shares of common stock subject to awards outstanding under the 2018 Plan as of July 26, 2023 but only to the extent such awards are subsequently forfeited, cancelled, expire, or otherwise terminate without the issuance of such shares of common stock after such date.

Total stock-based compensation expense recognized for employees and directors was $0.8 million and $0.9 million for the three months ended March 31, 2025 and 2024, respectively, and was recognized as general and administrative expense.

Stock Options

Stock option activity, including options granted under the 2023 Plan and 2018 Plan, was as follows for the three months ended March 31, 2025 and 2024:

Schedule of Stock Options Activity

	2025							2024
	Shares			Weighted Average Exercise Price		Weighted Average Remaining Contract Term (years)		Shares		Weighted Average Exercise Price		Weighted Average Remaining Contract Term (years)
Outstanding at January 1		3,925,403			1.29				4,875,828		1.31
Cancelled or expired		(164,432	)		1.09				—		—
Outstanding at March 31		3,760,971			1.30		6.68		4,875,828		1.31		7.72
Exercisable at March 31		2,894,964			1.37		6.25		2,221,703		1.48		6.75

As of March 31, 2025, there was approximately $0.8 million of total unrecognized compensation expense related to unvested stock options, which expense is expected to be recognized over a weighted-average period of 2.2 years.

Restricted Stock Units and Deferred Sock Units

Restricted stock unit and deferred stock unit activity for awards granted under the 2023 Plan and 2018 Plan was as follows for the three months ended March 31, 2025 and 2024:

Schedule of Restricted Stock Activity

	2025					2024
	Shares			Weighted Average Fair Value at Grant Date Per Share		Shares			Weighted Average Fair Value at Grant Date Per Share
Outstanding at January 1		5,455,472		$	0.90		3,524,675		$	1.07
Vested		(44,496	)		0.71		(44,496	)		0.71
Cancelled		(34,197	)		0.98		—			—
Outstanding at March 31		5,376,779		$	0.93		3,480,179		$	1.17

Total compensation expense related to unvested restricted stock units and deferred stock units not yet recognized was $2.7 million as of March 31, 2025, which expense is expected to be allocated to expenses over a weighted-average period of 2.5 years.

Performance Stock Units

During 2024, the Company began awarding performance stock units, or PSUs, under the 2023 Plan to certain executive officers and key employees. The Company has awarded an aggregate of 1,894,985 PSUs, assuming target performance, and each PSU award can be earned and vested at the end of a three-year performance period based on the total stockholder return, or TSR, of the Company’s common stock price relative to a group of peer companies and subject to continued service to the Company. The number of shares of the Company’s common stock to be issued upon vesting and settlement of the PSUs range from 0% to 200% of the target number of shares underlying the award, depending on the Company’s TSR performance against the group of peer companies. The fair value of the PSUs was estimated using the Monte Carlo simulation model and the following assumptions: the volatility of the peer companies was unique to each company used in simulation, Company volatility of 93.34%, risk-free interest rate of 4.53%, correlation with index of 0.06, and dividend yield of 0%.

There was no change in shares outstanding for PSU awards granted under the 2023 Plan during the three months ended March 31, 2025.

The total compensation cost related to unvested PSUs was $1.6 million as of March 31, 2025, which is expected to be allocated to expenses over a weighted-average period of 1.9 years.

(10) Warrants

As of March 31, 2025 and December 31, 2024, there were outstanding and exercisable warrants to an aggregate of 12,237,470 shares of our common stock at a weighted average exercise price of $1.53 per share with a weighted average remaining contractual term of 1.5 years and 1.8 years, respectively.

(11) Commitments and Contingencies

Litigation

We are subject to potential liabilities under government regulations and various claims and legal actions that are pending or may be asserted from time to time. These matters arise in the ordinary course and conduct of our business and may include, for example, commercial, product liability, intellectual property, and employment matters. We intend to continue to defend the Company vigorously in such matters and, when warranted, take legal action against others. Furthermore, we regularly assess contingencies to determine the degree of probability and range of possible loss for potential accrual in our financial statements. An estimated loss contingency is accrued in our financial statements if it is probable that a liability has been incurred and the amount of the loss can be reasonably estimated. Based on our assessment, we have adequately accrued an amount for contingent liabilities currently in existence. We do not accrue amounts for liabilities that we do not believe are probable or that we consider immaterial to our overall financial position. Litigation is inherently unpredictable, and unfavorable resolutions could occur. As a result, assessing contingencies is highly subjective and requires judgment about future events. While we do not believe that the ultimate resolution of any claims and lawsuits will have a material adverse effect upon our consolidated financial position, results of operations or cash flows, it is possible that the amount of ultimate loss may exceed our current accruals and that our cash flows or results of operations could be materially affected in any particular period by the unfavorable resolution of one or more of these contingencies.

Indemnification Arrangements

Our indemnification arrangements generally include limited warranties and certain provisions for indemnifying customers against liabilities if our products or services infringe a third-party’s intellectual property rights. To date, we have not incurred any material costs as a result of such warranties or indemnification provisions and have not accrued any liabilities related to such obligations in the accompanying condensed consolidated financial statements.

We have also agreed to indemnify our directors and executive officers for costs associated with any fees, expenses, judgments, fines, and settlement amounts incurred by any of these persons in any action or proceeding to which any of those persons is, or is threatened to be, made a party by reason of the person’s service as a director or officer, including any action by us, arising out of that person’s services as our director or officer or that person’s services provided to any other company or enterprise at our request.

(12) Income Taxes

Information on the Company’s income taxes for the periods reported is as follows:

	2025			2024
	Three Months Ended
	March 31,
	2025			2024
Income tax (benefit) expense from continuing operations	$	(25	)	$	68
Income (loss) from continuing operations before income taxes	$	33		$	(4,332	)
Effective income tax rate		-75.8	%		-1.6	%

Our effective tax rate for each of the three months ended March 31, 2025 and 2024 differs from the statutory rate due to a valuation allowance against deferred tax assets, offset by the impact of cash state and foreign taxes.

As of March 31, 2025, the Company is not currently under examination by tax authorities.

(13) Net Income (Loss) Per Share

Basic net income (loss) per share is computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding. Shares issued during the period and shares reacquired during the period are weighted for the portion of the period that they were outstanding. Diluted net income (loss) per share is computed in a manner consistent with that of basic earnings per share while giving effect to all potentially dilutive shares of common stock outstanding during the period, which include the assumed exercise of stock options and warrants using the treasury stock method. Diluted net income (loss) per share was the same as basic net income (loss) per share for the three months ended March 31, 2024, as shares issuable upon the exercise of stock options and warrants were anti-dilutive as a result of the net loss incurred for the period.

The table below sets forth the computation of basic and diluted earnings (loss) per share (in thousands, except per share data):

	2025		2024
	Three Months Ended
	March 31,
	2025		2024
Numerator:
Net income (loss)	$	58	$	(4,400	)
Denominator:
Basic – weighted average shares outstanding		139,068,831		130,201,251
Effect of dilutive securities:
Employee restricted stock units and deferred stock units		4,266,283		—
Diluted – weighted average shares outstanding		143,335,114		130,201,251
Basic (loss) earnings per share		0.00		(0.03	)
Diluted (loss) earnings per share		0.00		(0.03	)

For the three months ended March 31, 2025 and 2024, an aggregate of 16,068,993 and 20,543,477 shares underlying outstanding stock options, restricted stock units, deferred stock units and warrants were excluded for the diluted (loss) earnings per share calculation as they were anti-dilutive.

(14) Supplemental Disclosure of Cash Flow Information

Supplemental cash flow information is as follows (in thousands):

	2025		2024
	Three Months Ended
	March 31,
	2025		2024
Cash paid during the period for:
Interest	$	882	$	740

(15) Related Party Transactions

As described in more detail under Note 1, “Business Description and Summary of Significant Accounting Policies,” and Note 19, “Related Party Transactions,” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024, the Company was party to an Investor Rights Agreement, as amended, several Registration Rights Agreements and certain other agreements with OrbiMed Royalty Opportunities II, LP and ROS Acquisition Offshore LP, which are funds affiliated with OrbiMed Advisors LLC (“OrbiMed”). OrbiMed beneficially owned 52.6% of the Company’s common stock as of March 31, 2025, but in April 2025 sold all of its shares of the Company’s common stock to several investors in a private secondary resale transaction. As the lead purchaser in such transaction, funds affiliated with Nantahala Capital Management, LLC (“Nantahala”), an existing stockholder of the Company, purchased 57.0 million shares of the Company’s common stock, which together with shares of common stock previously held by Nantahala, result in Nantahala holding shares of common stock representing 49.1% of the issued and outstanding shares of the Company’s common stock. See Note 17, “Subsequent Event.”

All related party transactions are reviewed and approved by the Audit Committee or the disinterested members of the full Board of Directors.

(16) Segment and Geographic Information

The Company operates as one reportable and operating segment based upon the Company’s organization structure and the way in which the operations and investments are managed and evaluated by the chief operating decision maker (“CODM”), who is the Company’s Chief Executive Officer. The CODM uses consolidated net income (loss) as the primary measure of segment profit or loss to monitor performance and allocate resources.

The measure of segment assets is reported on the balance sheet as total assets. The CODM does not review segment assets at a level other than that presented in the Company’s consolidated balance sheets.

The table below provides the calculation of consolidated net income (loss), which is the performance measure that is most consistent with GAAP, and the significant operating expenses included in this performance measure (in thousands):

	2025			2024
	Three Months Ended March 31,
	2025			2024
Revenue	$	32,904		$	27,873
Less cost of sales		12,661			10,571
Gross Profit		20,243			17,302
Gross Margin		61.5	%		62.1	%
Less:
General and administrative		7,533			7,785
Sales and marketing		11,204			12,460
Research and development		443			527
Interest expense		1,045			835
Unrealized foreign currency translation (gain) loss		(24	)		39
Other expense (income)		9			(12	)
Provision (benefit) for income taxes		(25	)		68
Net Income (Loss)	$	58		$	(4,400	)

The Company attributes revenues to geographic areas based on the location of the customer. Approximately 92% and 90% of revenue was in the United States for the years ended March 31, 2025 and 2024, respectively. Total revenue by major geographic area is as follows (in thousands):

	2025		2024
	Three Months Ended March 31,
	2025		2024
United States	$	30,117	$	25,133
Rest of world		2,787		2,740
Total revenue	$	32,904	$	27,873

(17) Subsequent Event

On April 15, 2025, OrbiMed sold to Nantahala and certain other purchasers an aggregate of approximately 73.1 million shares of the Company’s common stock. The Company was not party to the securities purchase agreement, which was privately negotiated amongst OrbiMed, Nantahala and the other purchasers party thereto. To the Company’s knowledge, based solely on beneficial ownership filings made with SEC, the shares of common stock sold by OrbiMed constitute all of the issued and outstanding shares of common stock previously held by OrbiMed, resulting in OrbiMed no longer being a stockholder of the Company. As the lead purchaser in such transaction, funds affiliated with Nantahala purchased 57.0 million shares of the Company’s common stock, which together with shares of common stock previously held by Nantahala, result in Nantahala holding shares of common stock representing 49.1% of the issued and outstanding shares of the Company’s common stock. As part of the transaction, the Company amended its credit agreements to increase the common stock ownership threshold that triggers a “change in control” from 40% to 49.9% such that Nantahala’s ownership percentage following the closing of the transaction does not result in a change in control under the credit agreements solely by virtue of Nantahala’s ownership. Also to facilitate the sale transaction by OrbiMed, the Company entered into a registration rights agreement with Nantahala and the other purchasers in the transaction pursuant to which the Company agreed to prepare and file a shelf resale registration statement with the SEC within 30 days of the date of the closing, for purposes of registering the resale of the shares of common stock purchased by the purchasers in the transaction, and agreed to use commercially reasonable efforts to cause such resale registration statement to be declared effective by the SEC within 60 days of the date of the closing (90 days in the event the resale registration statement is reviewed by the SEC).

ITEM 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

This Management’s Discussion and Analysis provides material historical and prospective disclosures intended to enable investors and other users to assess our financial condition and results of operations. The following discussion should be read in conjunction with our condensed consolidated financial statements and accompanying notes included in this Quarterly Report on Form 10-Q and the audited consolidated financial statements and accompanying notes thereto and Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2024. In addition to historical financial information, the following discussion and analysis contains forward-looking statements that involve risks, uncertainties, and assumptions. Some of the numbers included herein have been rounded for the convenience of presentation. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of many factors, including those discussed above in “Cautionary Statement Regarding Forward-Looking Statements” and elsewhere in this Form 10-Q.

Business Overview

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, including orthobiologics for the promotion of bone healing, implants and instrumentation for the treatment of spinal disease. We promote our products in the United States through independent distributors and stocking agents, supported by direct employees.

We have an extensive sales channel of 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 (“IDNs”) and through group purchasing organizations (“GPOs”). 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 direct sales representatives and stocking distribution partners in Europe, Canada, Mexico, South America, Australia, and certain Pacific region countries.

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.

Since one of our key growth initiatives is to leverage our growth platform with technology and strategic acquisitions and explore other strategic transactions with respect to our products and our company, including licenses, business collaborations and other business combinations or transactions with other companies, we, as a matter of course, often engage in discussions with third parties regarding such matters.

During the first quarter of 2025, we entered into a manufacture and license agreement with a distributor pursuant to which we agreed to manufacture and supply to the distributor our SimpliGraft® product under the distributor’s name and brand in exchange for a one-time $1.5 million cash payment and minimum SimpliGraft® product purchase obligations of the distributor. During the fourth quarter of 2024, we entered into a license agreement with a distributor granting an exclusive right and license to manufacture and commercialize in the United States our SimpliMax™ product in exchange for a one-time $1.5 million cash payment and minimum quarterly royalty payments based on the volume of product sold by the distributor. The Centers for Medicare and Medicaid Services (“CMS”) issued a Local Coverage Determination implementing significant changes to reimbursement for cellular and tissue-based products, which would impact our SimpliMax™ and SimpliGraft® products and constitute a CMS Policy Change under these license agreements, which changes were initially intended to become effective in February 2025 but were delayed to April 2025 and then again recently delayed to January 1, 2026. These changes limit the amount of revenue to be recognized beyond 2025 and any further changes to CMS policy may reduce the amount of revenue to be recognized during 2025.

With respect to recently enacted or to be effective tariffs announced by the current U.S. Presidential administration, we do not anticipate the effect on our business will be material based on tariffs currently in place.

Results of Operations

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

Revenue

Total revenue for the three months ended March 31, 2025 was $32.9 million, which represents an increase of 18% compared to $27.9 million in the same quarter of the prior year. The increase is attributed primarily additional orthobiologics sales and $3.6 million of licensing revenue during the three months ended March 31, 2025

Cost of Sales

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.

Gross profit as a percentage of revenue decreased 60 basis points to 61.5% for the three months ended March 31, 2025 compared to 62.1% for the same period in 2024. Of this decrease, 400 basis points were due to charges for the write-off of inventory and additional excess and obsolete inventory and 260 basis points were due to sales mix. These decreases were partially offset by 570 basis points for reductions to product cost and greater scale.

General and Administrative

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.

Sales and Marketing

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.

Research and Development

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.

Interest Expense

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.

Provision for Income Taxes Current and Deferred

The decrease in income tax expense for the three months ended March 31, 2025 compared to the three months ended March 31, 2024 was primarily due to a decrease in cash taxes in foreign jurisdictions in 2025.

Liquidity and Capital Resources

Working Capital

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):

	March 31, 2025		December 31, 2024
Cash and cash equivalents	$	5,435	$	6,221
Accounts receivable, net		23,476		20,660
Inventories		38,812		38,634
Total current assets		69,144		67,116
Accounts payable		7,121		7,918
Accrued liabilities		10,492		7,771
Line of credit		11,261		12,120
Total current liabilities		29,581		28,581
Net working capital		39,563		38,535

Cash Flows

Net cash provided by operating activities for the first three months of 2025 was $1.3 million compared to net cash used in operating activities of $5.8 million for the first three months of 2024. This change relates primarily to net income for the first three months of 2025 compared to a net loss in the comparable prior year period.

Net cash used in investing activities for the first three months of 2025 was $1.1 million compared to $0.7 million for the first three months of 2024. This increase relates primarily to increased purchases of property and equipment in the current year period.

Net cash used in financing activities for the first three months of 2025 was $0.9 million compared to net cash provided by financing activities of $5.2 million for the first three months of 2024. This change relates primarily to $6.5 million of reduced revolver borrowings, net of repayments, during the current year period compared to the prior year period.

Term Loan and Revolving Credit Facilities

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.

The Revolving Credit Agreement provides for a secured revolving credit facility (the “Revolving Facility,” and, together with the secured term credit facility under the Term Credit Agreement, the “Facilities”) under which the Borrowers may borrow up to $17.0 million at any one time, the availability of which is determined based on a borrowing base equal to percentages of certain accounts receivable and inventory of the Borrowers in accordance with a formula set forth in the Revolving Credit Agreement. All borrowings under the Revolving Facility are subject to the satisfaction of customary conditions, including the absence of default, the accuracy of representations and warranties in all material respects, and the delivery of an updated borrowing base certificate.

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.

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%.

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.

Cash Requirements

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.

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.

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.

Critical Accounting Estimates

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.

ITEM 3.

Quantitative and Qualitative Disclosures About Market Risk

As a smaller reporting company, we are not required to provide the information required by this Item.

ITEM 4.

Controls and Procedures

Limitations on Effectiveness of Controls and Procedures

In designing and evaluating our disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply judgment in evaluating the benefits of possible controls and procedures relative to their costs.

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our principal executive officer and principal financial officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of March 31, 2025. Based upon that evaluation, and as a result of the material weakness in our internal control over financial reporting discussed below, our principal executive officer and principal financial officer concluded that as of March 31, 2025, our disclosure controls and procedures were not effective.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the three months ended March 31, 2025, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II.

OTHER INFORMATION

ITEM 1.

Legal Proceedings

Our legal proceedings are discussed in Note 11, “Commitments and Contingencies,” in the notes to our condensed consolidated financial statements in this Form 10-Q.

Item 1A.

Risk Factors

As a smaller reporting company, we are not required to provide the information required by this Item.

ITEM 2.

Unregistered Sales of Equity Securities and Use of Proceeds

Not applicable.

ITEM 3.

Defaults Upon Senior Securities

Not applicable.

ITEM 4.

Mine Safety Disclosures

Not applicable.

ITEM 5.

Other Information

Appointment of Mark Schallenberger as Chief Operating Officer

On May 12, 2025, Xtant publicly announced the appointment of Mark A. Schallenberger as Chief Operating Officer, effective immediately.

Mr. Schallenberger, age 39, was initially appointed our Chief Operations Officer effective as of January 16, 2023. Prior to this, Mr. Schallenberger served as Chief Operations Officer of Surgenex LLC, a medical technology manufacturer, from June 2019 to January 2023. Prior to Surgenex, Mr. Schallenberger served as Senior Director of Marketing & Product Development of DCI Donor Services Tissue Bank, a tissue bank, from February 2016 to June 2019. Prior to DCI Donor Services Tissue Bank, Mr. Schallenberger served as various roles with increasing responsibility from September 2010 to February 2016 culminating with Director of Scientific Affairs with Xtant Medical Holdings, Inc. formerly Bacterin International Holdings, Inc. Mr. Schallenberger holds a Master of Science in Chemical Biology from The Scripps Research Institute and a Bachelor of Science degree in Chemistry from the University of Montana.

In connection with Mr. Schallenberger’s change in title, the Compensation Committee of the Board of Directors of Xtant approved an increase in Mr. Schallenberger’s annual base salary from $416,000 to $461,760 and an increase in his target annual bonus opportunity from 50% of annual base salary to 75% of annual base salary, with 50% based on corporate goals and 25% based on individual goals for 2025.

Rule 10b5-1 Plan and Non-Rule 10b5-1 Trading Arrangement Adoptions, Terminations, and Modifications

During the three months ended March 31, 2025, none of our directors or “officers” (as defined in Rule 16a-1(f) under the Exchange Act) adopted or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408 of SEC Regulation S-K.

ITEM 6.

Exhibits

The following exhibits are being filed or furnished with this Quarterly Report on Form 10-Q:

Exhibit No.		Description

3.1		Restated Certificate of Incorporation of Xtant Medical Holdings, Inc. (filed as Exhibit 3.1 to the Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2023 (SEC File No. 001-34951) and incorporated by reference herein).

3.2		Third Amended and Restated Bylaws of Xtant Medical Holdings, Inc. (Effective as of June 1, 2023) (filed as Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on May 19, 2023 (SEC File No. 001-34951) and incorporated by reference herein).

31.1		Certification of Chief Executive Officer pursuant to Exchange Act Rules 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).

31.2		Certification of Chief Financial Officer pursuant to Exchange Act Rules 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).

32.1		Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith).

32.2		Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith).

101		The following materials from Xtant’s Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2025, formatted in Inline XBRL (Extensible Business Reporting Language): (i) the unaudited Condensed Consolidated Balance Sheets, (ii) the unaudited Condensed Consolidated Statements of Operations, (iii) the unaudited Condensed Consolidated Statements of Equity, (iv) the unaudited Condensed Consolidated Statements of Cash Flows, and (v) Notes to Condensed Consolidated Financial Statements (filed herewith).

104		Cover Page Interactive Data File (embedded within the Inline XBRL document).

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	XTANT MEDICAL HOLDINGS, INC.

Date: May 12, 2025	By:	/s/ Sean E. Browne
	Name:	Sean E. Browne
	Title:	President and Chief Executive Officer
		(Principal Executive Officer)

Date: May 12, 2025	By:	/s/ Scott C. Neils
	Name:	Scott C. Neils
	Title:	Chief Financial Officer
		(Principal Financial Officer and Principal Accounting Officer)

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