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What changed in Xtant Medical Holdings, Inc.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of Xtant Medical Holdings, Inc.'s 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+435 added−410 removedSource: 10-K (2025-03-06) vs 10-K (2024-04-01)

Top changes in Xtant Medical Holdings, Inc.'s 2024 10-K

435 paragraphs added · 410 removed · 314 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

66 edited+31 added−24 removed101 unchanged
Biggest changeAn HCT/P is regulated solely under section 361 of the Public Health Service Act (“PHSA”) and 21 CFR Part 1271 if it meets the following four criteria: 1) The HCT/P is minimally manipulated; 2) The HCT/P is intended for homologous use only; 3) The manufacture of the HCT/P does not involve the combination of the cells or tissues with another article (with limited exceptions); and 4) The HCT/P does not have a systemic effect and is not dependent upon the metabolic activity of living cells for its primary function; or the HCT/P has a systemic effect or is dependent upon the metabolic activity of living cells for its primary function and: is for autologous use; is for allogeneic use in a first-degree or second-degree blood relative; or is for reproductive use.
Biggest changeThe core CGTP requirements include requirements for: ● Facilities ● Environmental control ● Equipment ● Supplies and reagents ● Recovery ● Processing and process controls ● Labeling controls ● Storage ● Receipt, predistribution shipment, and distribution of an HCT/P ● Donor eligibility determinations, donor screening, and donor testing An HCT/P is regulated solely under section 361 of the Public Health Service Act (“PHSA”) and 21 CFR Part 1271 if it meets the following four criteria: 1) The HCT/P is minimally manipulated; 2) The HCT/P is intended for homologous use only; as reflected by the labeling, advertising, or other indications of the manufacturer’s objective intent; 3) The manufacture of the HCT/P does not involve the combination of the cells or tissues with another article (with limited exceptions); and 4) Either i) The HCT/P does not have a systemic effect and is not dependent upon the metabolic activity of living cells for its primary function; or ii) The HCT/P has a systemic effect or is dependent upon the metabolic activity of living cells for its primary function and: is for autologous use; is for allogeneic use in a first-degree or second-degree blood relative; or is for reproductive use.
Our 3Demin products are easily hydrated with any biocompatible liquid, making them an option for various bone grafting applications. They are most commonly used in spinal fusion procedures. 3 ● OsteoFactor is a processed allograft that contains retained growth factors found within the endosteum layer of allograft bone.
Our 3Demin products are easily hydrated with any biocompatible liquid, making them an option for various bone grafting applications. They are most commonly used in spinal fusion procedures. ● OsteoFactor is a processed allograft that contains retained growth factors found within the endosteum layer of allograft bone.
It is intended for spinal fusion procedures at one level (C3 − T1 inclusive) in skeletally mature patients for the treatment of degenerative disc disease. ● The Irix-A Lumbar Integrated Fusion System consists of an integrated titanium ring, surrounded by an outer PEEK ring and three screws.
It is intended for spinal fusion procedures at one level (C3 − T1 inclusive) in skeletally mature patients for the treatment of degenerative disc disease. 5 ● The Irix-A Lumbar Integrated Fusion System consists of an integrated titanium ring, surrounded by an outer PEEK ring and three screws.
Certain states also mandate implementation of commercial compliance programs, impose restrictions on device manufacturer marketing practices and require tracking and reporting of gifts, compensation and other remuneration to healthcare professionals and entities. Our operations are also subject to the U.S. Foreign Corrupt Practices Act (“FCPA”).
Certain states also mandate implementation of commercial compliance programs, impose restrictions on device manufacturer marketing practices and require tracking and reporting of gifts, compensation and other remuneration to healthcare professionals and entities. 12 Our operations are also subject to the U.S. Foreign Corrupt Practices Act (“FCPA”).
The manufacturer must be truthful and not misleading in the reimbursement advice it gives to customers. 12 Actions under the Federal False Claims Act may be brought by the Attorney General or as a qui tam action by a private individual in the name of the government.
The manufacturer must be truthful and not misleading in the reimbursement advice it gives to customers. Actions under the Federal False Claims Act may be brought by the Attorney General or as a qui tam action by a private individual in the name of the government.
Our products are used by orthopedic spine surgeons and neurosurgeons to treat a variety of spinal disorders in the cervical, thoracolumbar, and interbody spine. We promote and sell our products in the United States through independent distributors and stocking agents, supported by direct employees.
Our products are used by orthopedic spine surgeons and neurosurgeons to treat a variety of spinal disorders in the cervical, thoracolumbar, and interbody spine. We promote our products in the United States through independent distributors and stocking agents, supported by direct employees.
We expect to be able to continue to build our network for donor tissue as our processing capabilities and sales increase. Competition There are various public and private organizations that offer both fixation and orthobiologics to their customers.
We expect to be able to continue to build our network for donor tissue as our processing capabilities and sales increase. 6 Competition There are various public and private organizations that offer both fixation and orthobiologics to their customers.
Under the X-spine name, we own the following registered trademarks: SILEX®, X-SPINE®, IRIX®, CAPLESS®, CERTEX®, CALIX®, H-GRAFT®, SPIDER, X90®, HYDRAGRAFT®, BUTREX®, FORTEX®, AXLE®, FIXCET®, XTANT®, Capless® and X-spine’s square design logo.
Under the X-spine name, we own the following registered trademarks: SILEX®, IRIX®, CERTEX®, CALIX®, H-GRAFT®, SPIDER, X90®, BUTREX®, FORTEX®, AXLE®, FIXCET®, XTANT®, and X-spine’s square design logo.
In February 2024, the FDA issued a final rule replacing the QSR with the Quality Management System Regulation, or QMSR, which incorporates by reference the quality management system requirements of ISO 13485:2016, as discussed below. The FDA has stated that the standards contained in ISO 13485:2016 are substantially similar to those set forth in the existing QSR.
In February 2024, the FDA issued a final rule replacing the QSR with the Quality Management System Regulation, or QMSR, which incorporates by reference the quality management system requirements of ISO 13485:2016. The FDA has stated that the standards contained in ISO 13485:2016 are substantially similar to those set forth in the existing QSR.
On October 15, 2015, our common stock began trading on the NYSE MKT, now known as the NYSE American, under the ticker symbol “XTNT.” Controlled Company Status As a result of debt restructuring transactions completed in 2018 and 2020, OrbiMed Royalty Opportunities II, LP (“Royalty Opportunities”) and ROS Acquisition Offshore LP (“ROS”), which are funds affiliated with OrbiMed Advisors LLC (“OrbiMed”), collectively own approximately 56.2% of our outstanding common stock as of December 31, 2023.
On October 15, 2015, our common stock began trading on the NYSE MKT, now known as the NYSE American, under the ticker symbol “XTNT.” Controlled Company Status As a result of debt restructuring transactions completed in 2018 and 2020, OrbiMed Royalty Opportunities II, LP (“Royalty Opportunities”) and ROS Acquisition Offshore LP (“ROS”), which are funds affiliated with OrbiMed Advisors LLC (“OrbiMed”), collectively own approximately 53% of our outstanding common stock as of December 31, 2024.
As a condition of employment, we generally require employees to execute an agreement relating to the confidential nature of and company ownership of proprietary information and assigning intellectual property rights to us. We generally require confidentiality agreements with vendors, consultants, and others who may have access to proprietary information.
We protect our proprietary rights through a variety of methods. As a condition of employment, we generally require employees to execute an agreement relating to the confidential nature of and company ownership of proprietary information and assigning intellectual property rights to us. We generally require confidentiality agreements with vendors, consultants, and others who may have access to proprietary information.
We have an extensive distribution channel of commissioned independent agents and stocking agents 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 independent health delivery network hospitals and through group purchasing organizations (“GPOs”).
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 (“IDNs”) hospitals and through group purchasing organizations (“GPOs”).
These regulated activities include product design and development, testing, manufacturing, labeling, storage, safety, premarket clearance, advertising and promotion, product marketing, sales and distribution, post-market surveillance and post-market adverse event reporting. All products currently marketed by Xtant are regulated as HCT/Ps and/or have received 510(k) clearances.
These regulated activities include but are not limited to, product design and development, testing, manufacturing, labeling, storage, safety, premarket clearance, advertising and promotion, product marketing, sales and distribution, post-market surveillance and post-market adverse event reporting. All products currently marketed by Xtant are regulated as HCT/Ps and/or have received 510(k) clearances from the FDA.
Class III devices are generally the highest risk devices and are subject to the highest level of regulatory control to provide reasonable assurance of safety and effectiveness. Class III devices must typically be approved by the FDA before they are marketed.
Class I devices are deemed to be low risk and are subject to the fewest regulatory controls. Class III devices are generally the highest risk devices and are subject to the highest level of regulatory control to provide reasonable assurance of safety and effectiveness. Class III devices must typically be approved by the FDA before they are marketed.
Unlike many of the various growth factor-based products on the market today, OsteoFactor is not limited to a single growth factor but contains a wide array of naturally occurring proteins and peptides that support bone formation and remodeling. ● OsteoVive Plus is a growth factor enriched cellular bone matrix created through a proprietary processing method.
Unlike many of the various growth factor-based products on the market today, OsteoFactor is not limited to a single growth factor but contains a wide array of naturally occurring proteins and peptides that support bone formation and remodeling. ● OsteoVive Plus is an aseptically processed, viable bone allograft created through a proprietary processing method.
The advantage of the de novo classification is that it generally requires less data than a PMA. The disadvantage is that it may require more data than a 510(k) and most often will include human clinical data. A request for de novo classification also has a longer review time.
The disadvantage is that it may require more data than a 510(k) and most often will include human clinical data. A request for de novo classification also has a longer review time.
The device sponsor must then fulfill more rigorous PMA requirements or can request a risk-based classification determination for the device in accordance with the de novo process, which is a route to market for novel medical devices that are low to moderate risk and are not substantially equivalent to a predicate device.
The device sponsor must then fulfill more rigorous PMA requirements or can request a risk-based classification determination for the device in accordance with the de novo process, which is a route to market for novel medical devices that are low to moderate risk and are not substantially equivalent to a predicate device. 10 The advantage of the de novo classification is that it generally requires less data than a PMA.
The FDA has broad post-market and regulatory enforcement powers. Medical device manufacturers are subject to unannounced inspections by the FDA and other state, local and foreign regulatory authorities to assess compliance with the QSR and other applicable regulations, and these inspections may include the manufacturing facilities of any suppliers.
Medical device manufacturers are subject to unannounced inspections by the FDA and other state, local and foreign regulatory authorities to assess compliance with the QMSR and other applicable regulations, and these inspections may include the manufacturing facilities of any suppliers.
Of our U.S. workforce, 3% are veterans. 14 Turnover Xtant continually monitors employee turnover rates as its success depends upon retaining highly trained personnel. The average tenure of our employees is 3.9 years. The average tenure of the members of our management team is 6 years.
Of our U.S. workforce, 2% are veterans. Turnover Xtant continually monitors employee turnover rates as its success depends upon retaining highly trained personnel. The average tenure of our employees is approximately 4 years. The average tenure of the members of our management team is approximately 7 years.
We currently maintain a Board of Directors with a majority of independent directors and a compensation committee and nominating and corporate governance committee composed entirely of independent directors. 16 Available Information We make available, free of charge and through our Internet website, our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and any amendments to any such reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, as soon as reasonably practicable after we electronically file such material with, or furnish it to, the Securities and Exchange Commission (“SEC”).
Available Information We make available, free of charge and through our Internet website, our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and any amendments to any such reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, as soon as reasonably practicable after we electronically file such material with, or furnish it to, the Securities and Exchange Commission (“SEC”).
These offerings complement our portfolio of orthobiologics and spinal implant fixation systems. This transaction was conducted through a process supervised by the United States Bankruptcy Court in connection with Surgalign Holdings’ bankruptcy proceedings.
These offerings complement our portfolio of orthobiologics and spinal implant fixation systems. This transaction was conducted through a process supervised by the United States Bankruptcy Court in connection with Surgalign Holdings’ bankruptcy proceedings. We funded the purchase price of $5 million with cash on hand.
Of these 215 employees, 33 are located outside the United States, primarily in Germany. In addition, we utilize various outsourced services to manage normal business cycles. As of December 31, 2023, of our total workforce, 49% are female and 21% are racially or ethnically diverse. Of our management team, 36% are female and 15% are racially or ethnically diverse.
Of these 232 employees, 40 are located outside the United States, primarily in Germany. In addition, we utilize various outsourced services to manage normal business cycles. As of December 31, 2024, of our total workforce, 49% are female and 39% are racially or ethnically diverse. Of our management team, 39% are female and 14% are racially or ethnically diverse.
The 510(k) clearance pathway is much less burdensome and time-consuming than the PMA approval pathway. The de novo pathway has an enhanced burden compared to the 510(k) clearance pathway, but is much less burdensome than a PMA approval process.
The PMA approval pathway requires proof of the safety and effectiveness of the device to the FDA’s satisfaction. The 510(k)-clearance pathway is much less burdensome and time-consuming than the PMA approval pathway. The de novo pathway has an enhanced burden compared to the 510(k)-clearance pathway but is much less burdensome than a PMA approval process.
We funded the purchase price of $5 million with cash on hand. 2 RTI Surgical, Inc.’s nanOss Production Operations On October 23, 2023, we acquired the nanOss production operations owned by RTI Surgical, Inc. (“RTI”) pursuant to an Asset Purchase Agreement dated October 23, 2023 between us and RTI (the “RTI Asset Purchase Agreement”).
RTI Surgical, Inc.’s nanOss Production Operations On October 23, 2023, we acquired the nanOss production operations owned by RTI Surgical, Inc. (“RTI”) pursuant to an Asset Purchase Agreement dated October 23, 2023 between us and RTI (the “RTI Asset Purchase Agreement”).
Recognizing that our Code of Conduct may not address every situation our employees may encounter, other resources exist to assist our employees in their decision-making, including our management team, training and a hotline pursuant to which employees can ask questions or report issues on an anonymous basis.
Recognizing that our Code of Conduct may not address every situation our employees may encounter, other resources exist to assist our employees in their decision-making, including our management team, training and a hotline pursuant to which employees can ask questions or report issues on an anonymous basis. 14 Employee Safety, Health and Wellness We are committed to maintaining a safe workplace and promoting the health and wellness of our employees.
Conversely, motion preservation devices are designed predominantly to stabilize the spine and allow for motion of the segments. Spine implants can be surgically applied via traditional open surgery or via minimally invasive surgery. We provide devices in both the fixation and motion preservation categories of the spine implant market and via both surgical methodologies.
Conversely, motion preservation devices are designed predominantly to stabilize the spine and allow for motion of the segments. Spine implants can be surgically applied via traditional open surgery or via minimally invasive surgery.
The Coflex and CoFix products have been approved by the U.S. Food and Drug Administration (the “FDA”) for the treatment of moderate to severe lumbar spinal stenosis in conjunction with decompression and provide minimally invasive, motion preserving stabilization.
Food and Drug Administration (the “FDA”) for the treatment of moderate to severe lumbar spinal stenosis in conjunction with decompression and provide minimally invasive, motion preserving stabilization.
We also have implemented multiple safety programs and regularly perform safety hazard evaluations within our manufacturing facility. We publish a quarterly Safety Standard newsletter that reiterates our commitment to safety, highlights actions we have taken and intend to take to improve employee safety, and provides practical advice to employees to keep them and their families safe.
We publish a quarterly Safety Standard newsletter that reiterates our commitment to safety, highlights actions we have taken and intend to take to improve employee safety, and provides practical advice to employees to keep them and their families safe.
We meet all licensing requirements for the distribution of HCT/Ps in states with licensing requirements, including Florida, California, Delaware, Illinois, Louisiana, Maryland, Oregon, and New York. Our industry is highly regulated, and we cannot predict the impact of future regulations on either us or our customers.
In addition, we comply with all licensing requirement for distributing HCT/Ps in states with such regulations, including Florida, California, Delaware, Illinois, Louisiana, Maryland, Oregon, and New York. As our industry is highly regulated, we cannot predict the impact of future regulations on our operations or those of our customers.
A novel device is placed in Class III by default, but it may be eligible to be placed in Class I or Class II via “de novo” classification if it can be shown to pose only low to moderate risk with appropriate regulatory controls. 9 The PMA approval pathway requires proof of the safety and effectiveness of the device to the FDA’s satisfaction.
A novel device is placed in Class III by default, but it may be eligible to be placed in Class I or Class II via “de novo” classification if it can be shown to pose only low to moderate risk with appropriate regulatory controls.
(“Surgalign SPV”), a then indirect wholly owned subsidiary of Surgalign Holdings, Inc. (“Surgalign Holdings”), which held certain intellectual property, contractual rights and other assets related to the design, manufacture, sale and distribution of the Coflex and CoFix products in the United States, for an aggregate purchase price of $17.0 million in cash.
(“Surgalign Holdings”), which held certain intellectual property, contractual rights and other assets related to the design, manufacture, sale and distribution of the Coflex and CoFix products in the United States, for an aggregate purchase price of $17.0 million in cash. The Coflex and CoFix products have been approved by the U.S.
We currently own the following registered trademarks: OsteoSponge®, OsteoVive®, OsteoWrap®, OsteoLock®, BacFast®, OsteoSelect®, Elutia®, OsteoSTX®, hMatrix®, 3Demin®, BACTERINSE®, Circle of Life®, Coflex®, CoFix TM , ASPECT®, BACJAC®, BACFUSE®, BIGFOOT®, CLARITY®, CONTACT®, CROSS-FUSE®, LAT-FUSE®, LOCKED AND LOADED®, NANOSS®, NUNEC®, PAC PLATE®, QUANTUM®, RELEASE®, SLIMFUSE®, STREAMLINE®, X-LINK®, ELEMAX®, UNISON®, FORTILINK®, TETRAFUSE®, CERVALIGN®, NANOSS 3D®, DCI®, DSS®, HPS®, OPTISTRAIN®, PARADIGM SPINE®, the Paradigm Spine design logo, THE MOVEMENT IN SPINE CARE®, DUALITY®, TIPLUS®, FIBREX®, MAXFUSE®, BIOMAX®, and CORTERA®.
We currently own the following registered trademarks: OsteoSponge®, OsteoVive®, OsteoWrap®, BacFast®, OsteoSelect®, 3Demin®, Circle of Life®, Coflex®, CoFix®, ARANAX®, ASPECT®, ATRIX-C®, ATRIX-C UNION®, BACJAC®, BACFUSE®, BIGFOOT®, CLARITY®, CONTACT®, CROSS-FUSE®, INTERLAMINAR STABILIZATION®, INTICE®, LAT-FUSE®, NANOSS®, NUNEC®, PAC PLATE®, QUANTUM®, RELEASE®, SLIMFUSE®, STREAMLINE®, X-LINK®, XPRESS®, XSPAN®, ZYFIX®, ELEMAX®, UNISON®, FORTILINK®, TETRAFUSE®, CERVALIGN®, NANOSS 3D®, DCI®, DSS®, HPS®, PARADIGM SPINE®, the Paradigm Spine design logo, THE MOVEMENT IN SPINE CARE®, TIPLUS®, FIBREX®, MAXFUSE®, BIOMAX®, CORTERA®, ELEVATE YOUR BONE GRAFT®, and ELEVATED PROCEDURAL SOLUTIONS®.
Headcount and Employee Demographics As of December 31, 2023, Xtant had 215 employees, 207 of whom were full time employees, and of whom 70 were in operations, 50 were in sales and marketing, 13 in research and development and engineering, 26 in regulatory and quality affairs, and 23 were in administrative functions.
Headcount and Employee Demographics As of December 31, 2024, Xtant had 232 employees, 217 of whom were full time employees, and of whom 90 were in operations, 42 were in sales and marketing, 3 in research and development and engineering, 31 in regulatory and quality affairs, and 26 were in administrative functions.
We encourage employees to obtain skills, knowledge and abilities which may improve their opportunities for career advancement within our Company and the purpose of our professional development policy is to provide our employees with the requirements for approval, time off, and reimbursement for employee training and professional development activities.
We encourage employees to obtain skills, knowledge and abilities which may improve their opportunities for career advancement within our Company and the purpose of our professional development policy is to provide our employees with the requirements for approval, time off, and reimbursement for employee training and professional development activities. 15 Diversity and Inclusion We strive to create a diverse and inclusive workplace in which all employees feel respected, valued and empowered to reach their full potential.
It is intended to promote fusion of the subaxial cervical spine and cervico-thoracic junction (C3 − T3 inclusive). ● The Spider Cervical Plating System consists of simple, single step locking with 3 forms of locking feedback providing confidence in Spider System construct and performance. ● The Streamline OCT System allows a rigid construct to be created in the occipito-cervico-thoracic spine by offering a broad range of implants.
Some of our key spinal implant product lines include: Cervical Products ● The Spider Cervical Plating System consists of simple, single step locking with 3 forms of locking feedback providing confidence in Spider System construct and performance. ● The Streamline OCT System allows a rigid construct to be created in the occipito-cervico-thoracic spine by offering a broad range of implants.
We review third-party proprietary rights, including patents and patent applications, as available, to develop an effective intellectual property strategy, avoid infringement of third-party proprietary rights, identify licensing opportunities and monitor the intellectual property owned by others. 6 We protect our proprietary rights through a variety of methods.
Intellectual Property We rely upon patents, trademarks, trade secrets and other proprietary rights to maintain and improve our competitive position. We review third-party proprietary rights, including patents and patent applications, as available, to develop an effective intellectual property strategy, avoid infringement of third-party proprietary rights, identify licensing opportunities and monitor the intellectual property owned by others.
Although we believe our proprietary technology has value, because of rapid technological changes in the medical industry, we also believe that proprietary protection is of less significance than factors such as the intrinsic knowledge and experience of our management, advisory board, consultants and personnel and their ability to identify unmet market needs and to create, invent, develop and market innovative and differentiated products. 7 Government Regulation We are registered with the FDA as a manufacturer of human cellular and tissue products (“HCT/Ps”) as well as medical devices, and we are an accredited member in good standing of the American Association of Tissue Banks (“AATB”).
Although we believe our proprietary technology has value, because of rapid technological changes in the medical industry, we also believe that proprietary protection is of less significance than factors such as the intrinsic knowledge and experience of our management, advisory board, consultants and personnel and their ability to identify unmet market needs and to create, invent, develop and market innovative and differentiated products.
Human Capital Mission, Quality Policy and Core Values Our Mission is to “honor the gift of donation, by allowing our patients to live as full, and complete a life as possible.” Through an effective quality system, we prioritize our commitment to our patients and donor families.
Additionally, we believe that our ISO 13485:2016 certification may offer new markets and business opportunities for our products in the global marketplace. 13 Human Capital Mission, Quality Policy and Core Values Our Mission is to “honor the gift of donation, by allowing our patients to live as full, and complete a life as possible.” Through an effective quality system, we prioritize our commitment to our patients and donor families.
Pharmacy benefits as well as dental, vision, life, accidental death and disability, long and short-term disability, accident, critical illness, and hospital indemnity insurance plans are available to our employees. We also offer employees wellbeing benefits through LifeBalance, Noom, and our Employee Assistance Program. Xtant prides itself on offering employment arrangements that include competitive time off policies and flexibility.
Pharmacy benefits as well as dental, vision, life, accidental death and disability, long and short-term disability, accident, critical illness, and hospital indemnity insurance plans are available to our employees. We also offer all full-time and part-time employees wellbeing benefits through LifeBalance, Calm, Burnalong, and our Employee Assistance Program.
In the future, Xtant may decide to strategically commercialize products in the United States that would require a PMA, but there are no plans to do so at the present time. 10 After a medical device enters commercial distribution, numerous regulatory requirements continue to apply.
In the future, Xtant may decide to strategically commercialize products in the United States that would require a BLA, but there are no plans to do so at the present time.
We have biologics contracts with major GPOs, as well as extensive access to integrated delivery networks (“IDNs”) across the United States for both our biologics and spine hardware products. We promote and sell our products internationally through direct sales representatives and distribution partners in Canada, Mexico, Europe, South America, Australia, and certain Pacific region countries.
We have biologics contracts with major GPOs, including Vizient, Premier, and HealthTrust Purchasing Group, as well as extensive access to IDNs across the United States for both biologics and spine hardware systems. Our international footprint includes direct sales representatives and distribution partners in Canada, Mexico, South America, Australia, and certain Pacific region countries.
We expect that additional patent applications will be filed and prosecuted as inventions are discovered, technological improvements and processes are developed, and specific applications are identified. There can be no assurance that we will be able to obtain final approval of any patents.
We expect that additional patent applications will be filed and prosecuted as inventions are discovered, technological improvements and processes are developed, and specific applications are identified.
Trademarks We have registered, and continue to seek registration, of trademarks and continuously monitor and aggressively pursue users of names and marks that potentially infringe upon our registered trademarks.
There can be no assurance that we will be able to obtain final approval of any patents. 7 Trademarks We have registered, and continue to seek registration, of trademarks and continuously monitor and aggressively pursue users of names and marks that potentially infringe upon our registered trademarks.
In addition, it is possible that future legislation, regulation or coverage and reimbursement policies of third-party payors will adversely affect the demand for Xtant products or the ability to sell them on a profitable basis. 13 Internationally, reimbursement and healthcare payment systems vary substantially from country to country and include single-payor, government-managed systems as well as systems in which private payors and government managed systems exist side-by-side.
In addition, it is possible that future legislation, regulation or coverage and reimbursement policies of third-party payors will adversely affect the demand for Xtant products or the ability to sell them on a profitable basis.
Healthcare Fraud and Abuse Healthcare fraud and abuse laws apply to Xtant’s business when a customer submits a claim for an item or service that is reimbursed under Medicare, Medicaid or most other federally-funded healthcare programs.
Some countries accept MDSAP Certificates, CE Marking, and/or FDA clearances as part of their medical device marketing approval process, 11 Healthcare Fraud and Abuse Healthcare fraud and abuse laws apply to Xtant’s business when a customer submits a claim for an item or service that is reimbursed under Medicare, Medicaid or most other federally-funded healthcare programs.
It is a minimally invasive, modular interspinous fusion system with angled spikes that allows for adequate L5 − S1 engagement and other variations in patient anatomy.
Thoracolumbar Products ● The Axle-X Interspinous Fusion System is an internal fixation device for spinal surgery in the non-cervical spine (T1 − S1 inclusive). It is a minimally invasive, modular interspinous fusion system with angled spikes that allows for adequate L5 − S1 engagement and other variations in patient anatomy.
Our Spinal Implant Products We offer a comprehensive line of products that are used to treat a variety of spinal and sacroiliac conditions, including trauma, degeneration, deformity and tumor, including use of minimally invasive surgery techniques.
Its unique formulation combines our PurLoc® Fiber Technology and superior handling properties and is designed to deliver dependable performance for reliable outcomes. 4 Our Spinal Implant Products We offer a comprehensive line of products that are used to treat a variety of spinal and sacroiliac conditions, including trauma, degeneration, deformity and tumor, including use of minimally invasive surgery techniques.
Medical Devices The Center for Devices and Radiological Health regulates the clearance and approval of conventional medical devices, such as our spinal hardware, as well as some of the HCT/Ps that are also regulated as medical devices, such as our OsteoSelect DBM putty.
Medical Devices The Center for Devices and Radiological Health oversees the clearance and approval of medical devices, including our stabilization and fusion products, as well as certain HCT/Ps regulated as medical devices, such as our OsteoSelect DBM putty.
Our Orthobiologics Products Our biomaterial products include OsteoSponge, OsteoSponge SC, OsteoSelect DBM putty, OsteoSelect Plus DBM putty, OsteoWrap, and our line of 3Demin products, as described below, as well as other allografts: ● OsteoSponge is a form of demineralized bone matrix (“DBM”) made from 100% human bone.
We provide devices in both the fixation and motion preservation categories of the spine implant market and via both surgical methodologies. 3 Our Orthobiologics Products Our biomaterial products include OsteoSponge, OsteoSelect DBM putty, OsteoSelect Plus DBM putty, OsteoWrap, OsteoVive, OsteoFactor, our line of 3Demin products and our nanOss family of products, as described below, as well as other allografts: ● OsteoSponge is a form of demineralized bone matrix (“DBM”) made from 100% human bone.
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. Recent Acquisitions Coflex and CoFix Product Lines On February 28, 2023, we acquired all of the issued and outstanding capital stock of Surgalign SPV, Inc.
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.
The system offers a broad range of implants and instruments, providing the ability to tailor treatment to a specific patient. Sacroiliac Joint Products ● The Silex Sacroiliac Joint Fusion System is a sacroiliac fixation system which actively compresses across the SI joint. Sacroiliac dysfunction is increasingly recognized as a frequent contributor to chronic low back pain.
Sacroiliac Joint Products ● The Silex Sacroiliac Joint Fusion System is a sacroiliac fixation system which actively compresses across the SI joint. Sacroiliac dysfunction is increasingly recognized as a frequent contributor to chronic low back pain. Interbody Products ● Calix is a family of polyetheretherketone, or PEEK, interbody spacers and precision instruments for both cervical and thoracolumbar applications.
We also maintain a national accounts program to enable our agents to gain access to IDN hospitals and through GPOs. We have biologics contracts with major GPOs, including Vizient, Premier, and HealthTrust Purchasing Group, as well as extensive access to IDNs across the United States for both biologics and spine hardware systems.
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.
Our primary competitors include Medtronic plc, Johnson and Johnson, Zimmer Biomet Holdings, Inc., Stryker Corporation, Nuvasive, Inc., Bioventus Inc., Globus Medical, Inc., SeaSpine Holdings Corporation, OrthoFix Medical Inc., Alphatec Holdings, Inc., ZimVie Inc., SI-Bone Inc., as well as dozens of privately-owned companies.
Our primary competitors include Medtronic plc, Johnson and Johnson, Zimmer Biomet Holdings, Inc., Stryker Corporation, Bioventus Inc., Globus Medical, Inc., OrthoFix Medical Inc., Alphatec Holdings, Inc., Highridgek Inc., SI-Bone Inc., as well as dozens of privately-owned companies. We also compete with tissue banks that do not offer spinal fixation products, such as AlloSource International, Inc., LifeNet Health, and MTF Biologics.
Satisfaction of FDA PMA requirements typically takes years, and the actual time required may vary substantially based upon the type, complexity, and novelty of the device or disease.
Satisfaction of FDA PMA requirements typically take years, and the actual time required may vary substantially based upon the type, complexity, and novelty of the device or disease. We currently market Coflex Interlaminar Technology under the PMA approval pathway. After a medical device enters commercial distribution, General Controls for Medical Devices apply.
Our fixation products and instrumentation systems are regulated as medical devices and therefore are subject to extensive regulation by the FDA, as well as by other domestic and international regulatory bodies. These regulations govern multiple activities that Xtant and our suppliers, licensors and partners perform and will continue to perform.
Our stabilization and fusion products, along with our instrumentation systems, are classified as medical devices and are therefore subject to rigorous regulation by the FDA, as well as by other domestic and international regulatory authorities. These regulations apply to a wide range of activities carried out by Xtant and our suppliers, licensors and partners both now and in the future.
The combination of viable cells, growth factors and DBM fibers results in an allograft containing higher concentrations of growth factors than other cellular allografts. ● The nanOss family of products provides osteoconductive nano-structured hydroxyapatite and an engineered extracellular matrix bioscaffold collagen carrier to provide a natural bone growth solution.
Our proprietary processing methods protect the native elements of bone, including growth factors and viable cells, while our PurLoc fiber technology creates beneficial handling characteristics. ● The nanOss family of products provides osteoconductive nano-structured hydroxyapatite and an engineered extracellular matrix bioscaffold collagen carrier to provide a natural bone growth solution.
Our employees are eligible for paid holidays effective immediately upon hire. Paid time off is available to all corporate employees and accrue based on length of service, and sick time is available for all commercial-sales employees. 15 Employee Engagement We provide all employees with the opportunity to anonymously share their opinions and feedback directly with senior management and human resources.
Xtant prides itself on offering employment arrangements that include competitive time off policies and flexibility. Our employees are eligible for paid holidays effective immediately upon hire. Paid time off is available to all corporate employees and accrue based on length of service, and sick time is available for all commercial-sales employees.
As of December 31, 2023, our biologics patent portfolio included 50 issued patents, 26 of which are issued U.S. patents, and 3 pending U.S. patent applications. Our fixation portfolio is patent protected globally and includes 260 issued patents, 180 of which are issued U.S. patents, and 16 pending patent applications, 7 of which are U.S. patent applications.
As of December 31, 2024, our biologics patent portfolio included 50 issued patents that expire between 2028 and 2041, 26 of which are issued U.S. patents.
Our international footprint includes direct sales representatives and distribution partners in Canada, Mexico, South America, Australia, and certain Pacific region countries. Additionally, as a result of our recent acquisitions, we gained distribution partners in the European Union in 2023. Our European Union business is based in Wurmlingen, Germany.
Additionally, as a result of our August 2023 Surgalign Holdings asset acquisition, we gained distribution partners in the European Union. Our European Union business is based in Wurmlingen, Germany.
Employee Safety, Health and Wellness We are committed to maintaining a safe workplace and promoting the health and wellness of our employees. We have an employee Health & Safety Committee that is comprised of employees and recommends improvements in furtherance of employee health and safety.
We have an employee Health & Safety Committee that is comprised of employees and recommends improvements in furtherance of employee health and safety. We also have implemented multiple safety programs and regularly perform safety hazard evaluations within our manufacturing facility.
Failure to comply with applicable requirements may subject a device and/or its manufacturer to a variety of administrative sanctions, such as FDA refusal to approve pending PMAs, issuance of warning letters, mandatory product recalls, import detentions, civil monetary penalties, and/or judicial sanctions, such as product seizures, injunctions, and criminal prosecution.
Non-compliance with these requirements can result in administrative actions such as FDA refusal to approve pending PMAs, 510(k)s, issuance of warning letters, mandatory product recalls, import detentions, civil monetary penalties, and/or judicial sanctions, such as product seizures, injunctions, and criminal prosecution. 9 Under the FDCA, medical devices are classified into one of three classes based on the risk associated with the device and the level of control necessary to provide a reasonable assurance of safety and effectiveness.
We have focused and intend to continue to focus primarily on four key growth initiatives: (1) introduce new products; (2) expand our distribution network; (3) penetrate adjacent markets; and (4) leverage our growth platform with technology and strategic acquisitions.
Our strategic focus is currently on digesting and growing the products and businesses we have acquired, producing our own stem cells, growth factor, amnio and synthetics biologics products, and continuing to focus on the following four key growth initiatives: (1) introduce new biologics products, including our Cortera ® Spinal Fixation System, viable bone matrix, OsteoVive ® Plus, and amniotic membrane allografts, SimpliGraft ® and SimpliMax™; (2) leverage our distribution network; (3) penetrate adjacent markets; and (4) leverage our growth platform with technology and strategic acquisitions.
Submissions are analyzed to enhance the employee experience, promote retention, drive change, and leverage the overall success of our organization. Employee Development and Training We recognize that successful execution of our strategy is dependent on attracting, developing and retaining top talent in all areas of the business.
We create opportunities for connection to the Company mission through events, communications, and programs, highlighting the significance of the work being done, fostering stronger employee relationships, and showing appreciation through employee recognition. Employee Development and Training We recognize that successful execution of our strategy is dependent on attracting, developing and retaining top talent in all areas of the business.
It is intended for use on all levels of the lumbar spine for back pain and intervertebral disc-related pain due to degenerative processes of the lumbar spine with the occurrence of instability. 5 Future Products In the near term, we plan to introduce a synthetic putty for bone graft applications; the BMAC System, a cell concentration system; and Cortera, a rod pedical screw system that has both open and minimally invasive modules.
It is intended for use on all levels of the lumbar spine for back pain and intervertebral disc-related pain due to degenerative processes of the lumbar spine with the occurrence of instability. Sales and Marketing We distribute our products in the United States through an extensive distribution network of commissioned independent sales agents and stocking agents.
The laws and regulations govern, among other things, the design, manufacture, storage, recordkeeping, approval, labeling, promotion, post-approval monitoring and reporting, distribution and import and export of medical devices.
In the United States, medical devices are heavily regulated by the FDA under the Federal Food, Drug, and Cosmetic Act (“FDCA”) and its associated regulations, as well as other relevant federal and state laws. These regulations cover various aspects, including design, manufacture, storage, record control, approval, labeling, promotion, post-approval monitoring and reporting, distribution and import and export of medical devices.
This final rule does not go into effect until February 2026. 11 International Regulation Many foreign countries have regulatory bodies and restrictions similar to the FDA. International sales are subject to foreign government regulation, the requirements of which vary substantially from country to country.
This final rule does not go into effect until February 2026. International Regulation International distribution is governed by foreign government regulations, which can vary between countries. The time needed for approval in a foreign country may be longer or shorter than that required for FDA approval process, and the specific requirements may differ.
Removed
Some of our key spinal implant product lines include: Cervical Products ● The Certex Spinal Fixation System consists of screws, hooks, rods, and cross connectors.
Added
While our focus is primarily 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.
Removed
Thoracolumbar Products ● The Axle Interspinous Fusion System is a fully modular interspinous device matched to the patient’s individual anatomy and available in multiple implantable configurations. ● The Xpress Minimally Invasive Pedicle Screw System combines minimally invasive functionality to the most common lumbar fixation procedures — pedicle screw fixation. ● The Fortex Pedicle Screw System consists of titanium alloy bone screws, rods, cross-connectors and associated instruments.
Added
Recent Developments During the fourth quarter of 2024, we entered into a license agreement with a distributor granting an exclusive, nontransferable, non-sublicensable, royalty-bearing right and license to manufacture and commercialize in the United States our SimpliMax™ product and the trademarks associated therewith during the term of the agreement and subject to certain limitations as set forth therein.
Removed
The system is indicated for attachment to the pedicles of the thoracic, lumbar, and sacral spine. 4 ● The Axle-X Interspinous Fusion System is an internal fixation device for spinal surgery in the non-cervical spine (T1 − S1 inclusive).
Added
Under the terms of the agreement, we received a one-time, up front, non-refundable, non-creditable cash payment of $1.5 million. Beginning in 2025, we are entitled to quarterly royalty payments based on the volume of product sold by the distributor. These royalty payments include guaranteed minimums, which aggregate to $3.75 million during 2025.
Removed
Interbody Products ● Calix is a family of polyetheretherketone, or PEEK, interbody spacers and precision instruments for both cervical and thoracolumbar applications.
Added
The agreement has an initial term of one year and is automatically renewable in one-year terms unless either party thereto provides written notice of non-renewal six months prior to the then-current term or earlier termination as provided under the agreement.
Removed
We are also in the process of developing other new products, including OsteoSelect Fiber Putty, a fiber-based putty; the OsteoSelect MIS gun, a bone graft delivery system; 3Demin Fiber Plus, an enhanced loose fiber formulation; and various growth factor strips and shapes.
Added
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.
Removed
Sales and Marketing We distribute our products in the United States through an extensive distribution network of commissioned independent sales agents and stocking agents. As a result of our recent acquisitions, we have expanded our network in 2023. As of December 31, 2023, we had over 650 independent sales agents and stocking agents.
Added
We appointed the distributor as the exclusive seller of our SimpliGraft ® product to end-users located in the United States during the term of the agreement and in accordance with the terms and conditions thereof and granted the distributor the right to use our related trademark in connection therewith.
Removed
With our presence in the region, we can rely on the large local network of spine manufacturers and the wider “Medical Valley Community” of spine and medical device experts and talent. Our international warehousing and logistics have been outsourced to a qualified third-party logistics provider based in the Netherlands that has scalable biomaterials and hardware capabilities and operations.
Added
Under the terms of the agreement, we received a one-time, up-front, non-refundable, non-creditable cash payment of $1.5 million. Additionally, the distributor agreed to purchase our SimpliGraft ® product in accordance with certain specified minimum purchase obligations. The minimum purchase obligations aggregate to $3.9 million during 2025.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeRisks Related to Governmental Regulation ● Our business is subject to extensive governmental regulation, including product approvals and clearances and healthcare fraud and abuse laws, false claims laws, and physician payment transparency laws. ● Our clinical trials involve risk and expense. ● Governmental regulation could restrict the use of our tissue products or our procurement of tissue. ● Outside of the United States, our medical devices must comply with the laws and regulations of the foreign countries in which they are marketed, and compliance may be costly and time-consuming. ● Modifications to our products may require new regulatory clearances or approvals or may require us to recall or cease marketing our products until clearances or approvals are obtained. ● Our manufacturing operations are required to comply with the FDA’s and other governmental authorities’ laws and regulations regarding the manufacture and production of medical devices. ● Even if our products are cleared or approved by regulatory authorities, they could be subject to restrictions or withdrawal from the market. ● The use, misuse or off-label use of our products may harm our image in the marketplace or result in injuries that lead to product liability suits. ● If our products cause or contribute to a death or serious injury, or malfunction in certain ways, we will be subject to medical device reporting regulations and likely litigation. ● Any future product recall or voluntary market withdrawal of a product due to defects, enhancements and modifications or other reasons would significantly increase our costs. ● If we or our suppliers fail to comply with regulations pertaining to human cells, tissues, and cellular and tissue-based products or are deemed to be biological products requiring approval of a BLA prior to being marketed, these products could be subject to withdrawal from the market or other enforcement action. ● Loss of AATB accreditation would have a material adverse effect on us. ● Federal regulatory reforms may adversely affect our business and our ability to sell our products. ● Our revenues depend upon prompt and adequate coverage and reimbursement from public and private insurers and national health systems. ● Our business is subject to complex and evolving laws and regulation regarding privacy and data protection.
Biggest changeWe have experienced and could continue to experience manufacturing issues, which could negatively impact our business and results of operations. ● Prolonged inflation, tariffs and supply chain disruptions could result in delayed product launches, lost revenue, higher costs and decreased profit margins. ● We may not be able to compete successfully because we are smaller and have fewer financial resources and less ability to invest in the development of new products. ● Our efforts to integrate acquired products with our existing product line may not be favorably received, which could negatively impact our results of operations and financial condition. ● If we are unable to innovate, develop, introduce, market and license new products and technologies, our business and operating results would suffer. ● Our private label and OEM business involves risks and may be subject to significant fluctuation. ● Our growth initiatives designed to increase our revenue and scale may not be successful and involve risks. ● Our biologics business is highly dependent on the availability of human donors and negative publicity could reduce demand for our biologics products and impact the supply of available donor tissue. ● Substantially all of our revenue is conducted through independent sales agents and distributors who we do not control. ● We depend on a limited number of third-party suppliers for products, components and raw materials. ● We are highly dependent on the continued availability of our facilities. ● We may be party to product liability litigation that could be expensive. ● Our quarterly operating results are subject to substantial fluctuations. ● We may be required to incur impairment and other charges resulting from the impairment of goodwill or other intangible assets recorded in connection with acquisitions. 17 Risks Related to Governmental Regulation ● Our business is subject to extensive governmental regulation, including product approvals and clearances and healthcare fraud and abuse laws, false claims laws, and physician payment transparency laws. ● Our clinical trials involve risk and expense. ● Governmental regulation could restrict the use of our tissue products or our procurement of tissue. ● Outside of the United States, our medical devices must comply with the laws and regulations of the foreign countries in which they are marketed, and compliance may be costly and time-consuming. ● Modifications to our products may require new regulatory clearances or approvals or may require us to recall or cease marketing our products until clearances or approvals are obtained. ● Our manufacturing operations are required to comply with the FDA’s and other governmental authorities’ laws and regulations regarding the manufacture and production of medical devices. ● Even if our products are cleared or approved by regulatory authorities, they could be subject to restrictions or withdrawal from the market. ● The use, misuse or off-label use of our products may harm our image in the marketplace or result in injuries that lead to product liability suits. ● If our products cause or contribute to a death or serious injury, or malfunction in certain ways, we will be subject to medical device reporting regulations and likely litigation. ● Any future product recall or voluntary market withdrawal of a product due to defects, enhancements and modifications or other reasons would significantly increase our costs. ● If we or our suppliers fail to comply with regulations pertaining to human cells, tissues, and cellular and tissue-based products or are deemed to be biological products requiring approval of a BLA prior to being marketed, these products could be subject to withdrawal from the market or other enforcement action. ● Loss of AATB accreditation would have a material adverse effect on us. ● Federal regulatory reforms may adversely affect our business and our ability to sell our products. ● Our revenues depend upon prompt and adequate coverage and reimbursement from public and private insurers and national health systems. ● Our business is subject to complex and evolving laws and regulation regarding privacy and data protection.
We have experienced and could continue to experience manufacturing issues, which could negatively impact our business and results of operations. Biologics products are inherently difficult and time-consuming to manufacture. Our products are manufactured using technically complex processes requiring specialized equipment and facilities, highly specific raw materials.
We have experienced and could continue to experience manufacturing issues, which could negatively impact our business and results of operations. Biologics products are inherently difficult and time-consuming to manufacture. Our products are manufactured using technically complex processes requiring specialized equipment and facilities and highly specific raw materials.
Consolidation in our industry not involving our Company could result in existing competitors increasing their market share through business combinations and result in stronger competitors, which could have a material adverse effect on our business, financial condition, and operating results.
Consolidation in our industry not involving our Company could result in existing competitors increasing their market share through business combinations and result in stronger competitors, which could have a material adverse effect on our business, operating results and financial condition.
Our ability to deduct interest is limited. Our ability to deduct interest on indebtedness properly allocable to our trade or business (which excludes investment interest) is limited to an amount equal to the sum of (i) our business interest income during the taxable year and (ii) 30% of our adjusted taxable income for such taxable year.
Our ability to deduct interest on indebtedness properly allocable to our trade or business (which excludes investment interest) is limited to an amount equal to the sum of (i) our business interest income during the taxable year and (ii) 30% of our adjusted taxable income for such taxable year.
We are also required to collect information on payments or transfers of value to physician assistants, nurse practitioners, clinical nurse specialists, certified registered nurse anesthetists, and certified nurse-midwives for reporting to CMS; ● analogous state and foreign law equivalents of each of the above federal laws, such as state anti-kickback prohibitions and false claims prohibitions which may apply to items or services reimbursed by any third-party payor, including commercial insurers; state laws that require device companies to comply with the industry’s voluntary compliance guidelines and the applicable compliance guidance promulgated by the federal government or otherwise restrict payments that may be made to healthcare providers and other potential referral sources; state laws that require device manufacturers to report information related to payments and other transfers of value to physicians and other healthcare providers or marketing expenditures; and state laws governing the privacy and security of health information in certain circumstances, many of which differ from each other and federal law in significant ways and may not have the same effect, thus complicating compliance efforts; and 34 ● the Federal Health Insurance Portability and Accountability Act of 1996 (“HIPAA”), and its implementing regulations, which created federal criminal laws that prohibit executing a scheme to defraud any healthcare benefit program or making false statements relating to healthcare matters and which also imposes certain regulatory and contractual requirements regarding the privacy, security and transmission of individually identifiable health information.
We are also required to collect information on payments or transfers of value to physician assistants, nurse practitioners, clinical nurse specialists, certified registered nurse anesthetists, and certified nurse-midwives for reporting to CMS; ● analogous state and foreign law equivalents of each of the above federal laws, such as state anti-kickback prohibitions and false claims prohibitions which may apply to items or services reimbursed by any third-party payor, including commercial insurers; state laws that require device companies to comply with the industry’s voluntary compliance guidelines and the applicable compliance guidance promulgated by the federal government or otherwise restrict payments that may be made to healthcare providers and other potential referral sources; state laws that require device manufacturers to report information related to payments and other transfers of value to physicians and other healthcare providers or marketing expenditures; and state laws governing the privacy and security of health information in certain circumstances, many of which differ from each other and federal law in significant ways and may not have the same effect, thus complicating compliance efforts; and ● the Federal Health Insurance Portability and Accountability Act of 1996 (“HIPAA”), and its implementing regulations, which created federal criminal laws that prohibit executing a scheme to defraud any healthcare benefit program or making false statements relating to healthcare matters and which also imposes certain regulatory and contractual requirements regarding the privacy, security and transmission of individually identifiable health information.
The existence of unissued and unreserved common stock and preferred stock may enable the Board of Directors to issue shares to persons friendly to current management or to issue preferred stock with terms that could render more difficult or discourage a third-party attempt to obtain control of us by means of a merger, tender offer, proxy contest or otherwise, thereby protecting the continuity of our management. ● Shares of our common stock do not have cumulative voting rights in the election of directors, so our stockholders holding a majority of the shares of common stock outstanding will be able to elect all of our directors. ● Special meetings of the stockholders may be called only by the Board of Directors, the chair of the Board of Directors or the chief executive officer. ● The Board of Directors may adopt, alter, amend or repeal our Bylaws without stockholder approval. ● Unless otherwise provided by law, any newly created directorship or any vacancy occurring on the Board of Directors for any cause may be filled by the affirmative vote of a majority of the remaining members of the Board of Directors even if such majority is less than a quorum, and any director so elected shall hold office until the expiration of the term of office of the director whom he or she has replaced or until his or her successor is elected and qualified. 54 ● Prior to July 26, 2030, fixing the number of directors at more than seven directors requires the approval of at least 75% of our directors then holding office. ● The affirmative vote of the holders of at least two-thirds of the voting power of the then outstanding shares of our capital stock entitled to vote generally in the election of directors, voting together as a single class, is required to amend or repeal the provisions of our Charter related to the amendment of our Bylaws, the Board of Directors and our stockholders as well as the general provisions of our Charter. ● Stockholders must follow advance notice procedures to submit nominations of candidates for election to the Board of Directors at an annual or special meeting of our stockholders, including director election contests subject to the SEC’s universal proxy rules, and must follow advance notice procedures to submit other proposals for business to be brought before an annual meeting of our stockholders. ● Unless we consent in writing to an alternative forum, the Court of Chancery of the State of Delaware, (or, if the Court of Chancery of the State of Delaware does not have subject matter jurisdiction, a state court located within the State of Delaware or, if no state court located within the State of Delaware has subject matter jurisdiction, the federal district court for the District of Delaware), will be the exclusive forum for (i) any derivative action or proceeding brought on our behalf, (ii) any action asserting a claim of breach of a fiduciary duty owed by any director, officer or other employee to us or our stockholders, (iii) any action asserting a claim arising under any provision of the General Corporation Law of the State of Delaware (“DGCL”), our Charter or our Bylaws, or (iv) any action asserting a claim governed by the internal-affairs doctrine; provided, however, that unless we consent in writing to an alternative forum, the federal district courts of the United States of America shall be, to the fullest extent permitted by applicable law, the exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act of 1933, as amended. ● The Investor Rights Agreement includes director nomination rights, which provide that so long as the Ownership Threshold (as defined in the Investor Rights Agreement) is met, Royalty Opportunities and ROS are entitled to nominate such individuals to the Board of Directors constituting a majority of the directors.
The existence of unissued and unreserved common stock and preferred stock may enable the Board of Directors to issue shares to persons friendly to current management or to issue preferred stock with terms that could render more difficult or discourage a third-party attempt to obtain control of us by means of a merger, tender offer, proxy contest or otherwise, thereby protecting the continuity of our management. ● Shares of our common stock do not have cumulative voting rights in the election of directors, so our stockholders holding a majority of the shares of common stock outstanding will be able to elect all of our directors. ● Special meetings of the stockholders may be called only by the Board of Directors, the chair of the Board of Directors or the chief executive officer. ● The Board of Directors may adopt, alter, amend or repeal our Bylaws without stockholder approval. ● Unless otherwise provided by law, any newly created directorship or any vacancy occurring on the Board of Directors for any cause may be filled by the affirmative vote of a majority of the remaining members of the Board of Directors even if such majority is less than a quorum, and any director so elected shall hold office until the expiration of the term of office of the director whom he or she has replaced or until his or her successor is elected and qualified. ● Prior to July 26, 2030, fixing the number of directors at more than seven directors requires the approval of at least 75% of our directors then holding office. ● The affirmative vote of the holders of at least two-thirds of the voting power of the then outstanding shares of our capital stock entitled to vote generally in the election of directors, voting together as a single class, is required to amend or repeal the provisions of our Charter related to the amendment of our Bylaws, the Board of Directors and our stockholders as well as the general provisions of our Charter. ● Stockholders must follow advance notice procedures to submit nominations of candidates for election to the Board of Directors at an annual or special meeting of our stockholders, including director election contests subject to the SEC’s universal proxy rules, and must follow advance notice procedures to submit other proposals for business to be brought before an annual meeting of our stockholders. 53 ● Unless we consent in writing to an alternative forum, the Court of Chancery of the State of Delaware, (or, if the Court of Chancery of the State of Delaware does not have subject matter jurisdiction, a state court located within the State of Delaware or, if no state court located within the State of Delaware has subject matter jurisdiction, the federal district court for the District of Delaware), will be the exclusive forum for (i) any derivative action or proceeding brought on our behalf, (ii) any action asserting a claim of breach of a fiduciary duty owed by any director, officer or other employee to us or our stockholders, (iii) any action asserting a claim arising under any provision of the General Corporation Law of the State of Delaware (“DGCL”), our Charter or our Bylaws, or (iv) any action asserting a claim governed by the internal-affairs doctrine; provided, however, that unless we consent in writing to an alternative forum, the federal district courts of the United States of America shall be, to the fullest extent permitted by applicable law, the exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act of 1933, as amended. ● The Investor Rights Agreement includes director nomination rights, which provide that so long as the Ownership Threshold (as defined in the Investor Rights Agreement) is met, Royalty Opportunities and ROS are entitled to nominate such individuals to the Board of Directors constituting a majority of the directors.
Federal False Claims Act) which prohibit, among other things, individuals or entities from knowingly presenting, or causing to be presented, claims seeking payment from Medicare, Medicaid or other federal-funded third-party payors that are false or fraudulent; this may impact the reimbursement advice we give to our customers as it cannot be inaccurate and must relate to on-label uses of our products; ● federal criminal laws that prohibit executing a scheme to defraud any federal healthcare benefit program or making false statements relating to healthcare matters; ● the Federal Physician Payments Sunshine Act, which requires manufacturers of drugs, devices, biologics and medical supplies for which payment is available under Medicare, Medicaid or the Children’s Health Insurance Program (with certain exceptions) to report annually to CMS, information related to payments or other “transfers of value” made to physicians (defined to include doctors, dentists, optometrists, podiatrists and chiropractors) and teaching hospitals, and requires applicable manufacturers and group purchasing organizations to report annually to CMS ownership and investment interests held by the physicians described above and their immediate family members and payments or other “transfers of value” to such physician owners.
Federal False Claims Act) which prohibit, among other things, individuals or entities from knowingly presenting, or causing to be presented, claims seeking payment from Medicare, Medicaid or other federal-funded third-party payors that are false or fraudulent; this may impact the reimbursement advice we give to our customers as it cannot be inaccurate and must relate to on-label uses of our products; ● federal criminal laws that prohibit executing a scheme to defraud any federal healthcare benefit program or making false statements relating to healthcare matters; 35 ● the Federal Physician Payments Sunshine Act, which requires manufacturers of drugs, devices, biologics and medical supplies for which payment is available under Medicare, Medicaid or the Children’s Health Insurance Program (with certain exceptions) to report annually to CMS, information related to payments or other “transfers of value” made to physicians (defined to include doctors, dentists, optometrists, podiatrists and chiropractors) and teaching hospitals, and requires applicable manufacturers and group purchasing organizations to report annually to CMS ownership and investment interests held by the physicians described above and their immediate family members and payments or other “transfers of value” to such physician owners.
The commencement or completion of any clinical trial may be delayed or halted, or be inadequate to support approval of a PMA application, for numerous reasons, including, but not limited to, the following: ● The FDA or other regulatory authorities do not approve a clinical trial protocol or a clinical trial, or place a clinical trial on hold; 32 ● Patients do not enroll in clinical trials at the rate expected; ● Patients do not comply with trial protocols; ● Patient follow-up is not at the rate expected; ● Patients experience adverse events; ● Patients die during a clinical trial, even though their death may not be related to the products that are part of the trial; ● Device malfunctions occur with unexpected frequency or potential adverse consequences; ● Side effects or device malfunctions of similar products already in the market that change the FDA’s view toward approval of new or similar PMAs or result in the imposition of new requirements or testing; ● Institutional review boards and third-party clinical investigators may delay or reject the trial protocol; ● Third-party clinical investigators decline to participate in a trial or do not perform a trial on the anticipated schedule or consistent with the clinical trial protocol, investigator agreement, investigational plan, good clinical practices, the IDE regulations, or other FDA or institutional review board requirements; ● Third-party investigators are disqualified by the FDA; ● We or third-party organizations do not perform data collection, monitoring and analysis in a timely or accurate manner or consistent with the clinical trial protocol or investigational or statistical plans, or otherwise fail to comply with the investigational device exemption regulations governing responsibilities, records, and reports of sponsors of clinical investigations; ● Third-party clinical investigators have significant financial interests related to us or our study such that the FDA deems the study results unreliable, or the company or investigators fail to disclose such interests; ● Regulatory inspections of our clinical trials or manufacturing facilities, which may, among other things, require us to undertake corrective action or suspend or terminate our clinical trials; ● Changes in government regulations or administrative actions; ● The interim or final results of the clinical trial are inconclusive or unfavorable as to safety or effectiveness; or ● The FDA concludes that our trial design is unreliable or inadequate to demonstrate safety and effectiveness.
The commencement or completion of any clinical trial may be delayed or halted, or be inadequate to support approval of a PMA application, for numerous reasons, including, but not limited to, the following: ● The FDA or other regulatory authorities do not approve a clinical trial protocol or a clinical trial, or place a clinical trial on hold; ● Patients do not enroll in clinical trials at the rate expected; ● Patients do not comply with trial protocols; ● Patient follow-up is not at the rate expected; ● Patients experience adverse events; ● Patients die during a clinical trial, even though their death may not be related to the products that are part of the trial; ● Device malfunctions occur with unexpected frequency or potential adverse consequences; ● Side effects or device malfunctions of similar products already in the market that change the FDA’s view toward approval of new or similar PMAs or result in the imposition of new requirements or testing; ● Institutional review boards and third-party clinical investigators may delay or reject the trial protocol; ● Third-party clinical investigators decline to participate in a trial or do not perform a trial on the anticipated schedule or consistent with the clinical trial protocol, investigator agreement, investigational plan, good clinical practices, the IDE regulations, or other FDA or institutional review board requirements; ● Third-party investigators are disqualified by the FDA; 34 ● We or third-party organizations do not perform data collection, monitoring and analysis in a timely or accurate manner or consistent with the clinical trial protocol or investigational or statistical plans, or otherwise fail to comply with the investigational device exemption regulations governing responsibilities, records, and reports of sponsors of clinical investigations; ● Third-party clinical investigators have significant financial interests related to us or our study such that the FDA deems the study results unreliable, or the company or investigators fail to disclose such interests; ● Regulatory inspections of our clinical trials or manufacturing facilities, which may, among other things, require us to undertake corrective action or suspend or terminate our clinical trials; ● Changes in government regulations or administrative actions; ● The interim or final results of the clinical trial are inconclusive or unfavorable as to safety or effectiveness; or ● The FDA concludes that our trial design is unreliable or inadequate to demonstrate safety and effectiveness.
Our business, operating results and financial condition may be materially adversely affected by COVID-19 and other infectious diseases. At the onset of, and at various times during, the COVID-19 pandemic, hospitals and other medical facilities cancelled or deferred elective procedures, diverted resources to patients suffering from infections and limited access for non-patients, including our direct and indirect sales representatives.
Our business, operating results and financial condition may be materially adversely affected by the spread of infectious diseases. At the onset of, and at various times during, the COVID-19 pandemic, hospitals and other medical facilities cancelled or deferred elective procedures, diverted resources to patients suffering from infections and limited access for non-patients, including our direct and indirect sales representatives.
We are currently subject to certain product liability litigation, which could harm our business, financial condition or results of operations, especially if this litigation requires payments in amounts that exceed our product liability insurance coverage. Any future product recall or voluntary market withdrawal of a product due to defects, enhancements and modifications or other reasons would significantly increase our costs.
We are currently subject to certain product liability litigation, which could harm our business, financial condition or results of operations, especially if this litigation requires payments in amounts that exceed our product liability insurance coverage. 41 Any future product recall or voluntary market withdrawal of a product due to defects, enhancements and modifications or other reasons would significantly increase our costs.
If a governmental authority were to determine that we do not comply with these laws and regulations, the Company and our directors, officers and employees could be subject to criminal and civil penalties, including exclusion from participation in U.S. federal healthcare reimbursement programs. 33 Many of these healthcare laws inevitably influence company standards of conduct.
If a governmental authority were to determine that we do not comply with these laws and regulations, the Company and our directors, officers and employees could be subject to criminal and civil penalties, including exclusion from participation in U.S. federal healthcare reimbursement programs. Many of these healthcare laws inevitably influence company standards of conduct.
If any of these events were to occur, it could materially adversely affect us. 41 In addition, the FDA could disagree with our conclusion that one or more of our HCT/Ps meet the criteria for marketing solely under Section 361 of the PHSA, and therefore that one or more of the HCT/Ps require licensure, approval or clearance of a marketing application.
If any of these events were to occur, it could materially adversely affect us. In addition, the FDA could disagree with our conclusion that one or more of our HCT/Ps meet the criteria for marketing solely under Section 361 of the PHSA, and therefore that one or more of the HCT/Ps require licensure, approval or clearance of a marketing application.
New SEC rules related to cybersecurity risk management may further increase our regulatory burden and the cost of compliance in such events. 49 Our IT systems require an ongoing commitment of significant resources to maintain, protect and enhance existing systems and develop new systems to keep pace with continuing changes in information processing technology, evolving systems and regulatory standards.
SEC rules related to cybersecurity risk management may further increase our regulatory burden and the cost of compliance in such events. Our IT systems require an ongoing commitment of significant resources to maintain, protect and enhance existing systems and develop new systems to keep pace with continuing changes in information processing technology, evolving systems and regulatory standards.
In addition, under the Investor Rights Agreement, for so long as the ownership threshold is met, we must obtain the approval of a majority of our common stock held by ROS and Royalty Opportunities to proceed with the following actions: (i) issue new securities; (ii) incur over $250,000 of debt in a fiscal year; (iii) sell or transfer over $250,000 of our assets or businesses or our subsidiaries in a fiscal year; (iv) acquire over $250,000 of assets or properties in a fiscal year; (v) make capital expenditures over $125,000 individually, or $1,500,000 in the aggregate during a fiscal year; (vi) approve our annual budget; (vii) appoint or remove the chairperson of our Board of Directors; and (viii) make loans to, investments in, or purchase, or permit any subsidiary to purchase, any stock or other securities in another entity in excess of $250,000 in a fiscal year.
In addition, under the Investor Rights Agreement, for so long as the ownership threshold is met, we must obtain the approval of a majority of our common stock held by ROS and Royalty Opportunities to proceed with the following actions: (i) issue new securities; (ii) incur over $250,000 of debt in a fiscal year; (iii) sell or transfer over $250,000 of our assets or businesses or our subsidiaries in a fiscal year; (iv) acquire over $250,000 of assets or properties in a fiscal year; (v) make capital expenditures over $125,000 individually, or $1,500,000 in the aggregate during a fiscal year; (vi) approve our annual budget; (vii) appoint or remove the chair of our Board of Directors; and (viii) make loans to, investments in, or purchase, or permit any subsidiary to purchase, any stock or other securities in another entity in excess of $250,000 in a fiscal year.
It is impossible to predict whether legislative or other changes will be enacted or FDA regulations, guidance or interpretations changed, and what the impact of such changes, if any, may be. Our revenues depend upon prompt and adequate coverage and reimbursement from public and private insurers and national health systems.
It is impossible to predict whether legislative or other changes will be enacted or FDA regulations, guidance or interpretations changed, and what the impact of such changes, if any, may be. 43 Our revenues depend upon prompt and adequate coverage and reimbursement from public and private insurers and national health systems.
Any action against us for violation of these laws, even if we successfully defend against it, could cause us to incur significant legal expenses and divert our management’s attention from the operation of our business. 35 U.S. governmental regulation could restrict the use of our tissue products or our procurement of tissue.
Any action against us for violation of these laws, even if we successfully defend against it, could cause us to incur significant legal expenses and divert our management’s attention from the operation of our business. U.S. governmental regulation could restrict the use of our tissue products or our procurement of tissue.
Additionally, although we have availability under our Revolving Credit Agreement, the availability of such funds is determined based on a borrowing base equal to percentages of certain accounts receivable and inventory. These credit facilities have a maturity date of March 1, 2029, and all of our indebtedness thereunder matures on such date.
Although we have availability under our Revolving Credit Agreement, the availability of such funds is determined based on a borrowing base equal to percentages of certain accounts receivable and inventory. These credit facilities have a maturity date of March 1, 2029, and all of our indebtedness thereunder matures on such date.
Disallowed interest deductions may be carried forward indefinitely and treated as business interest paid or accrued in the succeeding taxable year. 30 A shift in performing more procedures in ambulatory surgical centers from hospitals would likely reduce the prices of our products and margins.
Disallowed interest deductions may be carried forward indefinitely and treated as business interest paid or accrued in the succeeding taxable year. A shift in performing more procedures in ambulatory surgical centers from hospitals would likely reduce the prices of our products and margins.
Item 1A. Risk Factors Our business and an investment in our common stock are subject to a variety of risks. The following risk factors describe some of the material factors that could have a material adverse effect upon our business, financial condition, results of operations, and the market price for our common stock.
Item 1A. Risk Factors Our business and an investment in our common stock are subject to a variety of risks. The following risk factors describe some of the material factors that could have a material adverse effect upon our business, financial condition, results of operations, prospectus, and the market price for our common stock.
Product liability lawsuits and claims, safety alerts and product recalls, regardless of their ultimate outcome, could result in decreased demand for our products, injury to our reputation, significant litigation and other costs, substantial monetary awards to or costly settlements with patients, product recalls, loss of revenue, increased regulatory scrutiny, and the inability to commercialize new products or product candidates, and otherwise have a material adverse effect on our business and reputation and on our ability to attract and retain customers. 28 Our quarterly operating results are subject to substantial fluctuations, and you should not rely on them as an indication of our annual or future results.
Product liability lawsuits and claims, safety alerts and product recalls, regardless of their ultimate outcome, could result in decreased demand for our products, injury to our reputation, significant litigation and other costs, substantial monetary awards to or costly settlements with patients, product recalls, loss of revenue, increased regulatory scrutiny, and the inability to commercialize new products or product candidates, and otherwise have a material adverse effect on our business and reputation and on our ability to attract and retain customers. 30 Our quarterly operating results are subject to substantial fluctuations, and you should not rely on them as an indication of our annual or future results.
As with our customers and vendors, these economic conditions make it more difficult for us to accurately forecast and plan our future business activities. 56 Climate change, or legal, regulatory or market measures to address climate change, may materially adversely affect our financial condition and business operations.
As with our customers and vendors, these economic conditions make it more difficult for us to accurately forecast and plan our future business activities. Climate change, or legal, regulatory or market measures to address climate change, may materially adversely affect our financial condition and business operations.
If adequate funds are not otherwise available, we could be required to curtail operations significantly, including reducing our sales and marketing expenses, which could negatively impact product sales, delaying new product initiatives, and we could even be required to cease operations, liquidate our assets and possibly seek bankruptcy protection. 44 To the extent we raise additional financing through the sale of equity or convertible debt securities or the restructuring or refinancing of our outstanding debt, the interests of our current stockholders may be diluted, and the terms may include discounted equity purchase prices, warrant coverage, or liquidation or other preferences that adversely affect the rights of our current stockholders.
If adequate funds are not otherwise available, we could be required to curtail operations significantly, including reducing our sales and marketing expenses, which could negatively impact product sales, delaying new product initiatives, and we could even be required to cease operations, liquidate our assets and possibly seek bankruptcy protection. 19 To the extent we raise additional financing through the sale of equity or convertible debt securities or the restructuring or refinancing of our outstanding debt, the interests of our current stockholders may be diluted, and the terms may include discounted equity purchase prices, warrant coverage, or liquidation or other preferences that adversely affect the rights of our current stockholders.
Our ability to make payments on, and to refinance, our indebtedness, and our ability to fund planned capital expenditures, contractual cash obligations, known and unknown liabilities, research and development efforts, working capital, any future acquisitions and business combinations, and other general corporate purposes depends on our ability to generate cash in the future.
Our ability to make payments on our indebtedness, and our ability to fund planned capital expenditures, contractual cash obligations, known and unknown liabilities, research and development efforts, working capital, any future acquisitions and business combinations, and other general corporate purposes depends on our ability to generate cash in the future.
Adverse publicity or climate-related litigation that impacts us could have a negative impact on our business. Changes in accounting standards, policies, or assumptions utilized in determining accounting estimates could adversely affect our financial statements, including our operating results and financial condition.
Adverse publicity or climate-related litigation that impacts us could have a negative impact on our business. 55 Changes in accounting standards, policies, or assumptions utilized in determining accounting estimates could adversely affect our financial statements, including our operating results and financial condition.
For example, it could: ● make us more vulnerable to adverse changes in general U.S. and worldwide economic, industry, and competitive conditions and adverse changes in government regulation; 45 ● limit our flexibility in planning for, or reacting to, changes in our business and our industry; ● restrict our ability to make strategic acquisitions, business combinations or dispositions or to exploit business opportunities; ● place us at a competitive disadvantage compared to our competitors who have less debt; and ● limit our ability to borrow additional amounts or raise financing for working capital, capital expenditures, contractual obligations, research and development efforts, acquisitions or business combinations, debt service requirements, execution of our business strategy, or other purposes.
For example, it could: ● make us more vulnerable to adverse changes in general U.S. and worldwide economic, industry, and competitive conditions and adverse changes in government regulation; 20 ● limit our flexibility in planning for, or reacting to, changes in our business and our industry; ● restrict our ability to make strategic acquisitions, business combinations or dispositions or to exploit business opportunities; ● place us at a competitive disadvantage compared to our competitors who have less debt; and ● limit our ability to borrow additional amounts or raise financing for working capital, capital expenditures, contractual obligations, research and development efforts, acquisitions or business combinations, debt service requirements, execution of our business strategy, or other purposes.
In connection with acquisitions, applicable accounting standards generally require the net tangible and intangible assets of the acquired business to be recorded on the balance sheet of the acquiring company at their fair values as of the date of acquisition.
In connection with our acquisitions, applicable accounting standards generally require the net tangible and intangible assets of the acquired business to be recorded on the balance sheet of the acquiring company at their fair values as of the date of acquisition.
The availability of acceptable donors is relatively limited, and we compete with many other companies for this limited availability. The availability of donors is also impacted by regulatory changes, AATB requirements, general public opinion of the donor process and our reputation for our handling of the donor process.
The availability of acceptable donors and placentas is relatively limited, and we compete with many other companies for this limited availability. The availability of donors and placentas is also impacted by regulatory changes, AATB requirements, general public opinion of the donor process and our reputation for our handling of the donor process.
Availability of additional funds under the Revolving Credit Agreement is determined based on a borrowing base equal to percentages of certain accounts receivable and inventory of the borrowers in advance with a formula set forth in the Revolving Credit Agreement.
Availability of funds under the Revolving Credit Agreement is determined based on a borrowing base equal to percentages of certain accounts receivable and inventory of the borrowers in advance with a formula set forth in the Revolving Credit Agreement.
If our competitors are more successful than us in these matters, we may be unable to compete successfully against our existing or future competitors. Our industry has been subject to increasing consolidation.
If our competitors are more successful than we are in these matters, we may be unable to compete successfully against our existing or future competitors. Our industry has been subject to increasing consolidation.
Regulations issued by Florida, New York, California and Maryland are particularly relevant to our business. Most states do not currently have tissue banking regulations. It is possible that others may make allegations against us or against donor recovery groups or tissue banks about non-compliance with applicable FDA regulations or other relevant statutes or regulations.
Regulations issued by Florida, New York, California, Colorado, Georgia and Maryland are particularly relevant to our business. Most states do not currently have tissue banking regulations. It is possible that others may make allegations against us or against donor recovery groups or tissue banks about non-compliance with applicable FDA regulations or other relevant statutes or regulations.
We may require or we may seek additional funds to fund our future operations and business strategy prior to March 2025. Accordingly, there is no assurance that we will not need or seek additional funding at any time. We may elect to raise additional funds even before we need them if market conditions for raising additional capital are favorable.
We may require or we may seek additional funds to fund our future operations and business strategy prior to March 2026. Accordingly, there is no assurance that we will not need or seek additional funding at any time. We may elect to raise additional funds even before we need them if market conditions for raising additional capital are favorable.
Our competitors may develop and patent processes or products earlier than us, obtain regulatory clearances or approvals for competing products more rapidly than us, develop more effective or less expensive products or technologies that render our technology or products obsolete or non-competitive or acquire technologies and technology licenses complementary to our products or advantageous to our business, which could adversely affect our business and operating results.
Our competitors may develop and patent processes or products earlier than us, obtain regulatory clearances or approvals for competing products more rapidly than we do, develop more effective or less expensive products or technologies that render our technology or products obsolete or non-competitive or acquire technologies and technology licenses complementary to our products or advantageous to our business, which could adversely affect our business and operating results.
In the future, the FDA may determine that our products will require the more costly, lengthy and uncertain de novo or PMA processes.
In the future, the FDA may determine that more of our products will require the more costly, lengthy and uncertain de novo or PMA processes.
We are party to the Investor Rights Agreement, under which ROS and Royalty Opportunities are permitted to nominate a majority of the directors and designate the chairperson of our Board of Directors at subsequent annual meetings, as long as they maintain an ownership threshold in our Company of at least 40% of our then outstanding common stock.
We are party to the Investor Rights Agreement, under which ROS and Royalty Opportunities are permitted to nominate a majority of the directors and designate the chair of our Board of Directors at subsequent annual meetings, as long as they maintain an ownership threshold in our Company of at least 40% of our then outstanding common stock.
Any acquisition or business combination could impair our business, reputation, operating results and financial condition. The benefits of an acquisition or business combination may take more time than expected to develop or integrate into our operations, and we cannot guarantee that previous or future acquisitions or business combinations will, in fact, produce any benefits.
Any acquisition or business combination could impair our business, reputation, operating results and financial condition. The benefits of an acquisition or business combination may take more time than expected to develop or integrate into our operations, and we cannot guarantee that prior or future acquisitions or business combinations will, in fact, produce any benefits.
In the ordinary course of litigation, attorney fees are not recoverable. 48 In addition to the risks involved with patent protection, we also face the risk that our competitors will infringe on our trademarks. Any infringement could lead to a likelihood of confusion and could result in lost sales.
In the ordinary course of litigation, attorney fees are not recoverable. 47 In addition to the risks involved with patent protection, we also face the risk that our competitors will infringe on our trademarks. Any infringement could lead to a likelihood of confusion and could result in lost sales.
We compete for qualified personnel with other companies, academic institutions, governmental entities, and other organizations. A shortage in the labor pool of workers, which we believe currently exists in Belgrade, Montana, and which has worsened in the past year, has made it more difficult for us to attract and retain qualified personnel.
We compete for qualified personnel with other companies, academic institutions, governmental entities, and other organizations. A shortage in the labor pool of workers, which we believe currently exists in Belgrade, Montana, and which has worsened in the past years, has made it more difficult for us to attract and retain qualified personnel.
If these or any future warrants, options or restricted stock units are exercised or otherwise converted into shares of our common stock, our stockholders will experience additional dilution. 53 The sale or availability for sale of substantial amounts of our common stock or other equity securities could adversely affect the market price of our common stock.
If these or any future warrants, options or restricted stock units are exercised or otherwise converted into shares of our common stock, our stockholders will experience additional dilution. 52 The sale or availability for sale of substantial amounts of our common stock or other equity securities could adversely affect the market price of our common stock.
We have been further impacted by the recent labor shortage. Additionally, the rising cost of living in Belgrade, Montana and surrounding areas has caused some members of the labor force to leave these areas in search of more affordable living arrangements, which has worsened our local labor shortage.
We have been further impacted by labor shortages. Additionally, the rising cost of living in Belgrade, Montana and surrounding areas has caused some members of the labor force to leave these areas in search of more affordable living arrangements, which has worsened our local labor shortage.
We have employment arrangements in place with our executive and other officers, but none of these executive and other officers are bound legally to remain employed with Xtant for any specific term. We do not have key person life insurance policies covering our executive and other officers or any of our other employees.
While we have employment arrangements in place with our executive and other officers, none of these executive and other officers are bound legally to remain employed with Xtant for any specific term. We do not have key person life insurance policies covering our executive and other officers or any of our other employees.
For example, in March 2024, the SEC adopted new climate disclosure rules, which require new disclosure in certain SEC filings about material climate-related risks, activities to mitigate or adapt to such risks, board oversight of climate-related risks and management’s role in managing material climate-related risks, and climate-related targets and goals.
For example, in March 2024, the SEC adopted climate disclosure rules, which would require disclosure in certain SEC filings about material climate-related risks, activities to mitigate or adapt to such risks, board oversight of climate-related risks and management’s role in managing material climate-related risks, and climate-related targets and goals.
The NYSE American requires that we comply with various corporate governance requirements. To maintain and improve the effectiveness of our disclosure controls and procedures and internal controls over financial reporting and comply with the Exchange Act and NYSE American requirements, significant resources and management oversight are required.
The NYSE American requires that we comply with various continued listing requirements and corporate governance requirements. To maintain and improve the effectiveness of our disclosure controls and procedures and internal controls over financial reporting and comply with the Exchange Act and NYSE American requirements, significant resources and management oversight are required.
In addition, under the Investor Rights Agreement, so long as the Ownership Threshold is met, certain matters require the approval of Royalty Opportunities and ROS to proceed with such a transaction, including without limitation, the sale, transfer or other disposition of our assets or businesses or our subsidiaries with a value in excess of $250,000 in the aggregate during any fiscal year (other than sales of inventory or supplies in the ordinary course of business, sales of obsolete assets (excluding real estate), sale-leaseback transactions and accounts receivable factoring transactions). ● The Letter Agreement between us and Mr.
In addition, under the Investor Rights Agreement, so long as the Ownership Threshold is met, certain matters require the approval of Royalty Opportunities and ROS to proceed with such a transaction, including without limitation, the sale, transfer or other disposition of our assets or businesses or our subsidiaries with a value in excess of $250,000 in the aggregate during any fiscal year (other than sales of inventory or supplies in the ordinary course of business, sales of obsolete assets (excluding real estate), sale-leaseback transactions and accounts receivable factoring transactions).
In 2023, we completed acquisitions of Surgalign SPV, certain assets and liabilities of Surgalign Holdings and certain assets of RTI. One of our key growth initiatives is to add depth to our product offerings through targeted strategic acquisitions in the future.
In 2023, we acquired Surgalign SPV, certain assets and liabilities of Surgalign Holdings, and certain assets of RTI. One of our key growth initiatives is to add depth to our product offerings through targeted strategic acquisitions in the future.
“Controls and Procedures.” These laws and regulations could also make it more difficult or costly for us to obtain certain types of insurance, including director and officer liability insurance, and we may be forced to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage.
These laws and regulations could also make it more difficult or costly for us to obtain certain types of insurance, including director and officer liability insurance, and we may be forced to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage.
Our ability to achieve profitability will be influenced by many factors, including, among others, the level and timing of future revenues and expenditures; development, commercialization, market acceptance and availability and supply of our products; competing technologies and market developments; our ability to develop and introduce new products; regulatory requirements and delays; the strength of our relationships with our independent sales agents and distributors; and our ability to attract and retain key personnel.
Our ability to achieve profitability will be influenced by many factors, including, among others, the level and timing of future revenues and expenditures; development, commercialization, market acceptance and availability and supply of our products; the impact of competing technologies and market developments; our ability to develop and introduce new products; the impact of regulatory requirements and delays; the strength of our relationships with and the success of our independent sales agents and distributors; our ability to increase our OEM sales; and our ability to attract and retain key personnel.
Although it is difficult for us to predict our future liquidity requirements, we believe that our cash and cash equivalents and restricted cash balance of approximately $5.6 million as of December 31, 2023, together with existing credit availability under our Amended and Restated Credit, Security and Guarantee Agreement (Term Loan), (the “Term Credit Agreement”), and Amended and Restated Credit, Security and Guaranty Agreement (Revolving Loan), (the “Revolving Credit Agreement” and, together with the Term Credit Agreement, the “Credit Agreements”), with MidCap Financial Trust and MidCap Funding IV Trust (together, “MidCap”), each in its respective capacity as agent, will be sufficient to meet our anticipated cash requirements through at least the end of March 2025.
Although it is difficult for us to predict our future liquidity requirements, we believe that our cash and cash equivalents and restricted cash balance of approximately $6.2 million as of December 31, 2024, together with existing credit availability under our Amended and Restated Credit, Security and Guarantee Agreement (Term Loan), (as amended, the “Term Credit Agreement”), and Amended and Restated Credit, Security and Guaranty Agreement (Revolving Loan), (as amended, the “Revolving Credit Agreement” and, together with the Term Credit Agreement, the “Credit Agreements”), with MidCap Financial Trust and MidCap Funding IV Trust (together, “MidCap”), each in its respective capacity as agent, will be sufficient to meet our anticipated cash requirements through at least the end of March 2026.
These factors include, among others: ● demand for our products; ● 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 as well as global and local labor shortages and loss of personnel; ● the effect of inflation, increased interest rates and other recessionary indicators and supply chain disruptions; ● the impact of infectious diseases, such as COVID-19, RSV or the flu, and hospital capacity on the number of elective procedures and our business and operating results; ● the level of competition; ● the number, timing, and significance of new products and product introductions and enhancements by us and our competitors; ● our ability to develop, introduce, and market new and enhanced versions of our products on a timely basis; ● the timing of or failure to obtain regulatory clearances or approvals for our products; ● changes in pricing policies by us and our competitors; ● changes in the treatment practices of our customers; ● changes in independent sales representative or distributor relationships and sales force size and composition; ● the timing of material expense- or income-generating events and the related recognition of their associated financial impact; ● the number and mix of products sold in the quarter and the geographies in which they are sold; ● the number of selling days; ● the availability and cost of components and materials; ● the timing of orders and shipments; 29 ● ability to obtain reimbursement for our products and the timing of patients’ use of their calendar year medical insurance deductibles; ● work stoppages or strikes in our industry; ● changes in FDA and foreign governmental regulatory policies, requirements, and enforcement practices; ● changes in accounting standards, policies, estimates, and treatments; ● restructuring, impairment, and other special charges; ● costs associated with pending and any future litigation; ● variations in cost of sales due to the amount and timing of excess and obsolete inventory charges and manufacturing variances; ● income tax fluctuations and changes in tax rules; ● general economic, social and other external factors; and ● increases of interest rates, which can increase the cost of borrowings under our credit agreements and generally affect the level of economic activity.
These factors include, among others: ● demand for our products; ● the effect of inflation, increased interest rates and other recessionary indicators and supply chain disruptions; ● the level of competition; ● the number, timing, and significance of new products and product introductions and enhancements by us and our competitors; ● our ability to develop, introduce, and market new and enhanced versions of our products on a timely basis; ● the timing of or failure to obtain regulatory clearances or approvals for our products; ● changes in pricing policies by us and our competitors; ● changes in the treatment practices of our customers; ● changes in independent sales representative or distributor relationships and sales force size and composition; ● the timing of material expense- or income-generating events and the related recognition of their associated financial impact; ● the number and mix of products sold in the quarter and the geographies in which they are sold; ● the number of selling days; ● the availability and cost of components and materials; ● the timing of orders and shipments; ● ability to obtain reimbursement for our products and the timing of patients’ use of their calendar year medical insurance deductibles; ● work stoppages or strikes in our industry; ● 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 as well as global and local labor shortages and loss of personnel; ● the impact of acquisitions, dispositions, business combinations and license agreements; ● changes in FDA and foreign governmental regulatory policies, requirements, and enforcement practices; ● changes in accounting standards, policies, estimates, and treatments; ● restructuring, impairment, and other special charges; ● costs associated with pending and any future litigation; ● variations in cost of sales due to the amount and timing of excess and obsolete inventory charges and manufacturing variances; ● income tax fluctuations and changes in tax rules; ● general economic, social and other external factors; and ● increases of interest rates, which can increase the cost of borrowings under our credit agreements and generally affect the level of economic activity.
If we are at any time unable to generate sufficient cash flows from operations to service our indebtedness when payment is due, we may be required to attempt to renegotiate the terms of the Credit Agreements, seek to refinance all or a portion of the indebtedness, or obtain additional financing.
If we at any time are unable to meet these covenants or generate sufficient cash flows from operations to service our indebtedness when payment is due, we may be required to attempt to obtain a waiver of or renegotiate the terms of the Credit Agreements, seek to refinance all or a portion of the indebtedness, or obtain additional financing.
Several provisions of our Restated Certificate of Incorporation (“Charter”) and Third Amended and Restated Bylaws (“Bylaws”) and our Investor Rights Agreement could make it difficult for our stockholders to change the composition of our Board of Directors, preventing them from changing the composition of management.
Several provisions of our Restated Certificate of Incorporation (“Charter”) and Bylaws and our Investor Rights Agreement could make it difficult for our stockholders to change the composition of our Board of Directors, preventing them from changing the composition of management.
Additionally, the credit and financial markets may be adversely affected by the war between Russia and Ukraine and measures taken in response thereto, as well as the war between Israel and Hamas. If the credit markets are not favorable, we may be unable to raise additional financing when needed or on favorable terms.
Additionally, the credit and financial markets may be adversely affected by the war between Russia and Ukraine and measures taken in response thereto, as well as the war between Israel and Hamas and other conflicts in the Middle East. If the credit markets are not favorable, we may be unable to raise additional financing when needed or on favorable terms.
This recall has led to the American Association of Tissue Banks imposing additional regulations and has also constrained the overall supply of stem cells, with other stem cell suppliers now favoring larger customers during this shortage. As a smaller customer, we have encountered difficulties in receiving any supply of stem cells.
This recall led to the American Association of Tissue Banks imposing additional regulations and constrained the overall supply of stem cells, with other stem cell suppliers favoring larger customers during this shortage. As a smaller customer, we encountered difficulties in receiving any supply of stem cells.
We cannot be certain that we will be able to maintain an adequate qualified labor force necessary to operate efficiently and to support our growth strategy and operations. During 2022 and to a lesser degree during 2023, these labor shortages contributed to production shortages and, from time to time, an inability for us to operate at full capacity.
We cannot be certain that we will be able to maintain an adequate qualified labor force necessary to operate efficiently and to support our growth strategy and operations. During 2023, these labor shortages contributed to production shortages and, from time to time, an inability for us to operate at full capacity.
Our mission is, “honoring the gift of donation, by allowing our patients to live as full, and complete a life as possible.” Accordingly, our biologics business is highly dependent on our ability to obtain donor cadavers as the raw material for many of our biologics products.
Our mission is “to honor the gift of donation, by allowing our patients to live as full, and complete a life as possible.” Accordingly, our biologics business is highly dependent on our ability to obtain donor cadavers and placentas as the raw material for many of our biologics products.
Our international sales operations and newly acquired international subsidiaries expose us and our representatives, agents, and distributors to the following risks inherent in operating in foreign jurisdictions: ● the imposition of additional U.S. and foreign governmental controls or regulations on orthopedic implants and biologic products; 21 ● withdrawal from or revision to international trade policies or agreements and the imposition or increases in import and export licensing and other compliance requirements, customs duties and tariffs, import and export quotas and other trade restrictions, license obligations, and other non-tariff barriers to trade; ● economic instability and currency risk between the U.S. dollar and foreign currencies in our markets; ● political instability, including instability related to the war between Russia and Ukraine and the war between Israel and Hamas; ● the imposition of U.S. or international sanctions against a country, company, person, or entity with whom we do business that would restrict or prohibit continued business with that country, company, person, or entity; ● the imposition of restrictions on the activities of foreign agents, representatives and distributors; ● scrutiny of foreign tax authorities, which could result in significant fines, penalties and additional taxes being imposed upon us; ● difficulties in managing and staffing international operations and increases in infrastructure costs including legal, tax, accounting and information technology; ● risks related to complying with accounting rules and regulations in foreign jurisdictions and consolidating the financial statements of our international subsidiaries in our financial statements; ● a shortage of high-quality international salespeople and distributors; ● loss of any key personnel who possess proprietary knowledge or are otherwise important to our success in international markets; ● changes in third-party reimbursement policy that may require some of the patients who receive our products to directly absorb medical costs or that may necessitate our reducing selling prices for our products; ● unexpected changes in foreign regulatory requirements; ● differing local product preferences and product requirements; ● changes in tariffs and other trade restrictions, particularly related to the exportation of our biologic products; ● difficulties in protecting, enforcing and defending intellectual property rights; ● foreign currency exchange controls that might prevent us from repatriating cash; ● longer payment cycles and difficulties in enforcing agreements and collecting receivables through certain foreign legal systems; ● transportation delays and interruptions, including due to recent supply chain and shipping disruptions; ● national and international conflicts, including foreign policy changes, acts of war or terrorist acts; ● complex data privacy requirements and labor relations laws; and ● exposure to different legal and political standards. 22 Operations conducted through our international subsidiaries require management attention and financial resources and exposes us to difficulties and risks presented by international economic, political, legal, accounting and business factors.
Our international sales operations and international subsidiaries expose us and our representatives, agents, and distributors to the following risks inherent in operating in foreign jurisdictions: ● the imposition of additional U.S. and foreign governmental controls or regulations on orthopedic implants and biologic products; ● withdrawal from or revision to international trade policies or agreements and the imposition or increases in import and export licensing and other compliance requirements, customs duties and tariffs, such as the tariffs implemented and proposed by the Trump administration, import and export quotas and other trade restrictions, license obligations, and other non-tariff barriers to trade; ● economic instability and currency risk between the U.S. dollar and foreign currencies in our markets; ● political instability and geopolitical conflicts, such as the war between Russia and Ukraine, the war between Israel and Hamas, and other conflicts in the Middle East; ● the imposition of U.S. or international sanctions against a country, company, person, or entity with whom we do business that would restrict or prohibit continued business with that country, company, person, or entity; ● the imposition of restrictions on the activities of foreign agents, representatives and distributors; ● scrutiny of foreign tax authorities, which could result in significant fines, penalties and additional taxes being imposed upon us; ● difficulties in managing and staffing international operations and increases in infrastructure costs including legal, tax, accounting and information technology; ● risks related to complying with accounting rules and regulations in foreign jurisdictions and consolidating the financial statements of our international subsidiaries in our financial statements; ● a shortage of high-quality international salespeople and distributors; ● loss of any key personnel who possess proprietary knowledge or are otherwise important to our success in international markets; ● changes in third-party reimbursement policy that may require some of the patients who receive our products to directly absorb medical costs or that may necessitate our reducing selling prices for our products; ● unexpected changes in foreign regulatory requirements; ● differing local product preferences and product requirements; ● difficulties in protecting, enforcing and defending intellectual property rights; ● foreign currency exchange controls that might prevent us from repatriating cash; 28 ● longer payment cycles and difficulties in enforcing agreements and collecting receivables through certain foreign legal systems; ● transportation delays and interruptions, including due to recent supply chain and shipping disruptions; ● national and international conflicts, including foreign policy changes, acts of war or terrorist acts; ● complex data privacy requirements and labor relations laws; and ● exposure to different legal and political standards.
For taxable years beginning after 2021, our adjusted taxable income for purposes of computing the 30% limitation will be reduced by depreciation, amortization and depletion deductions thereby causing a more restrictive limitation than that which existed for taxable years beginning prior to 2022.
For taxable years beginning after 2021, our adjusted taxable income for purposes of computing the 30% limitation has been reduced by depreciation, amortization and depletion deductions thereby causing a more restrictive limitation than that which existed for taxable years beginning prior to 2022.
Demand for our products also could change in ways we may not anticipate due to evolving customer needs, changes in customer health insurance coverage, changing demographics, slow industry growth rates, declines in our markets, the introduction of new products and technologies, evolving surgical philosophies, and evolving industry standards, among others.
Demand for our products also could change in ways we may not anticipate due to, among other factors, evolving customer needs, changes in customer health insurance coverage and reimbursement policies, changing demographics, slow industry growth rates, declines in our markets, the introduction of new products and technologies, evolving surgical philosophies, and evolving industry standards.
A failure to comply with the covenants and other provisions of our Credit Agreements may cause suspension or termination of the Credit Agreements and/or require the immediate repayment of our outstanding indebtedness.
A failure to comply with the minimum liquidity covenant or other covenants and provisions of our Credit Agreements may cause suspension or termination of the Credit Agreements and/or require the immediate repayment of our outstanding indebtedness.
The failure by us or one of our third-party manufacturers or suppliers to comply with applicable statutes and regulations administered by the FDA and other regulatory bodies, or the failure to timely and adequately respond to any adverse inspectional observations or product safety issues, could result in, among other things, any of the following enforcement actions: ● untitled letters, warning letters, fines, injunctions, consent decrees, disgorgement of profits, criminal and civil penalties; ● customer notifications or repair, replacement, refunds, recall, detention or seizure of our products; ● operating restrictions or partial suspension or total shutdown of production; ● refusing or delaying our requests for 510(k) clearance, de novo classification, or PMA approval of new products or modified products; ● withdrawing 510(k) clearances, de novo classifications, or PMAs that have already been granted; ● refusal to grant export certificates for our products; or ● criminal prosecution. 38 Any of these actions could impair our ability to produce our products in a cost-effective and timely manner in order to meet our customers’ demands.
The failure by us or one of our third-party manufacturers or suppliers to comply with applicable statutes and regulations administered by the FDA and other regulatory bodies, or the failure to timely and adequately respond to any adverse inspectional observations or product safety issues, could result in, among other things, any of the following enforcement actions: ● untitled letters, warning letters, fines, injunctions, consent decrees, disgorgement of profits, criminal and civil penalties; 39 ● customer notifications or repair, replacement, refunds, recall, detention or seizure of our products; ● operating restrictions or partial suspension or total shutdown of production; ● refusing or delaying our requests for 510(k) clearance, de novo classification, or PMA approval of new products or modified products; ● withdrawing 510(k) clearances, de novo classifications, or PMAs that have already been granted; ● refusal to grant export certificates for our products; or ● criminal prosecution.
Moreover, research and development efforts require a substantial investment of time and resources before we are adequately able to determine the commercial viability of a new product, technology, material, or innovation and our current and recent annual operating plans have not provided for any significant investment in new products.
Research and development efforts require a substantial investment of time and resources before we are adequately able to determine the commercial viability of a new product, technology, material, or innovation and our current and recent annual operating plans have not provided for any significant investment in new products. We also may experience delays in the research and development process.
Further, Medicare, Medicaid and private healthcare insurer cutbacks could create downward price pressure on our products. Healthcare reform legislation at the federal and state levels could result in changes in coverage of and reimbursement for our products. Finally, our revenues also depend upon timely reimbursement data input from our independent agents.
Further, Medicare, Medicaid and private healthcare insurer cutbacks could create downward price pressure on our products. Healthcare reform legislation at the federal and state levels could result in changes in coverage of and reimbursement for our products. Finally, our revenues also depend upon timely reimbursement data input from our independent agents. All of these factors could adversely affect our business.
The interpretation and application of consumer and data protection laws in the United States, the EU and elsewhere are often uncertain and subject to change. It is possible that these laws may be interpreted and applied in a manner that is inconsistent with our data practices.
The interpretation and application of these laws in the United States, as well as similar laws in the EU and elsewhere, are often uncertain and subject to change. It is possible that these laws may be interpreted and applied in a manner that is inconsistent with our data practices.
The FDA can delay, limit or deny clearance or approval of a device for many reasons, including: ● we may not be able to demonstrate to the FDA’s satisfaction that our products meet the standard of “substantial equivalence” for a 510(k) or meet the standard for the FDA to grant a petition for de novo classification; ● we may not be able to demonstrate to the FDA’s satisfaction that our products are safe and effective for their intended uses; ● the data from our pre-clinical studies (bench and/or animal) and clinical trials may be insufficient to support clearance or approval in general or for specific, commercially desirable indications, where required; ● the manufacturing process or facilities we use may not meet applicable requirements; and ● changes in FDA clearance or approval policies or the adoption of new regulations may require additional data.
The FDA can delay, limit or deny clearance or approval of a device for many reasons, including: ● we may not be able to demonstrate to the FDA’s satisfaction that our products meet the standard of “substantial equivalence” for a 510(k) or meet the standard for the FDA to grant a petition for de novo classification; ● we may not be able to demonstrate to the FDA’s satisfaction that our products are safe and effective for their intended uses; ● the data from our pre-clinical studies (bench and/or animal) and clinical trials may be insufficient to support clearance or approval in general or for specific, commercially desirable indications, where required; ● the manufacturing process or facilities we use may not meet applicable requirements; and ● changes in FDA clearance or approval policies or the adoption of new regulations may require additional data. 33 In addition, even if we do obtain clearance or approval, the FDA may not approve or clear these products for the indications that are necessary or desirable for successful commercialization.
(formerly Aziyo Biologics, Inc.), one of our key suppliers of stem cells, recently voluntarily recalled its viable bone matrix products and suspended shipments of all viable bone matrix products from all donor lots.
(formerly Aziyo Biologics, Inc.), one of our key suppliers of stem cells at that time, voluntarily recalled its viable bone matrix products and suspended shipments of all viable bone matrix products from all donor lots.
For example, efforts to purchase raw materials in advance for product manufacturing may result in increased storage costs or excess supply. If our costs rise due to continuing supply chain disruptions, we may not be able to fully offset such higher costs through price increases.
For example, efforts to purchase raw materials in advance for product manufacturing may result in increased storage costs or excess supply and inventory. If our costs rise due to continuing supply chain disruptions or due to the impact of tariffs, we may not be able to fully offset such higher costs through price increases.
In addition, even if such clinical trials are successfully completed, we cannot guarantee that the FDA or foreign regulatory authorities will interpret the results as we do, and more trials could be required before we submit our products for approval.
We cannot be certain that our planned clinical trials or any other future clinical trials will be successful. In addition, even if such clinical trials are successfully completed, we cannot guarantee that the FDA or foreign regulatory authorities will interpret the results as we do, and more trials could be required before we submit our products for approval.
If we do not generate sufficient cash flow from operations or if future borrowings are not available to us in an amount sufficient to pay our indebtedness or to fund our liquidity needs, we may be forced to refinance all or a portion of our indebtedness on or before the maturity dates thereof, sell assets, reduce or delay capital expenditures, seek to raise additional capital, or take other similar actions.
If we do not generate sufficient cash flow from operations or if future borrowings are not available to us in an amount sufficient to fund or pay our indebtedness, when due, including in the event of a covenant breach and event of default, or to otherwise fund our liquidity needs, we may be forced to sell assets, reduce or delay capital expenditures, seek to raise additional capital, refinance all or a portion of our indebtedness on or before the maturity dates thereof, or take other similar actions.
During 2023, we issued in a private placement approximately 20.0 million shares of common stock at a purchase price of $0.75 per share. Future dilution may occur due to additional future equity issuances and/or equity financing events by us, including any potential future restructuring of our outstanding indebtedness.
During 2024, we issued in a private placement approximately 7.8 million shares of common stock at a purchase price of $0.64 per share. Future dilution may occur due to additional future equity issuances and/or equity financing events by us, including any potential future restructuring of our outstanding indebtedness.
As a result, our access to credit under the Credit Agreements is subject to the discretion of MidCap and the lenders as well as fluctuations to our accounts receivable and inventory. Our inability to borrow additional amounts under the Credit Agreements if and when we need them may adversely affect our liquidity, results of operations, and financial condition.
As a result, our access to credit under the Revolving Credit Agreement is subject to fluctuations to our accounts receivable and inventory. Our inability to borrow additional amounts under the Credit Agreements if and when we need them may adversely affect our liquidity, results of operations, and financial condition.
For example, in connection with the audit of our consolidated financial statements for the fiscal year ended December 31, 2023, we identified certain control deficiencies in the design and implementation of our internal control over financial reporting that related to our recent acquisitions, which constituted two material weaknesses.
For example, in connection with the audit of our consolidated financial statements for the fiscal year ended December 31, 2023, we identified certain control deficiencies in the design and implementation of our internal control over financial reporting that related to our then recent acquisitions, which constituted two material weaknesses at that time, which have since been remediated.
Acquisitions and business combinations may involve a number of risks, the occurrence of which could adversely affect our business, reputation, operating results and financial condition, including: ● diversion of management’s attention; ● disruption to our existing operations and plans or the inability to effectively manage our expanded operations; ● failure, difficulties or delays in securing, integrating, developing and assimilating information, financial systems, internal controls, operations, manufacturing processes and products or the distribution channels for acquired product lines; ● potential loss of key employees, customers, distributors, or sales representatives of the acquired businesses or adverse effects on existing business relationships with suppliers, customers, distributors, and sales representatives; ● adverse impact on overall profitability if our expanded operations do not achieve the efficiencies, growth projections, net sales, earnings, cost or revenue synergies, or other financial results projected in our valuation models, delays in the realization thereof or costs or charges incurred to achieve any revenue or cost synergies; ● reallocation of amounts of capital from other operating initiatives and/or an increase in our leverage and debt service requirements to pay acquisition purchase prices or other business venture investment costs, which could in turn restrict our ability to access additional capital when needed or pursue other important elements of our business strategy; ● infringement by acquired businesses or other business ventures of intellectual property rights of others; ● violation of confidentiality, intellectual property and non-compete obligations or agreements by employees of an acquired business or lack of or inadequate formal intellectual property protection mechanisms in place at an acquired business; ● inaccurate assessment of additional post-acquisition investments, undisclosed, contingent, tax or other liabilities or problems, unanticipated costs associated with an acquisition, and an inability to recover or manage such liabilities and costs; ● incorrect estimates made in the accounting for acquisitions, including those related to the material weaknesses discussed elsewhere in this Annual Report on Form 10-K, and incurrence of non-recurring charges, including restructuring charges in connection with any future effort to reduce costs and streamline operations; and ● impacts as a result of accounting adjustments, incorrect estimates made in the accounting for the acquisitions, including those related to the material weaknesses discussed elsewhere in this Annual Report on Form 10-K, or the potential write-off of significant amounts of goodwill or other assets as a result of deterioration in the performance of an acquired business or product line, adverse market conditions, changes in the competitive landscape, changes in laws or regulations that restrict activities of an acquired business or product line, or as a result of a variety of other circumstances, or other potential financial accounting or reporting impacts, including those resulting from the international subsidiaries we acquired from Surgalign Holdings. 20 In addition, effective internal controls are necessary for us to provide reliable and accurate financial reports and to effectively prevent fraud.
Acquisitions and business combinations may involve a number of risks, the occurrence of which could adversely affect our business, reputation, operating results and financial condition, including: ● diversion of management’s attention; ● disruption to our existing operations and plans or the inability to effectively manage our expanded operations; ● failure, difficulties or delays in securing, integrating, developing and assimilating information, financial systems, internal controls, operations, manufacturing processes and products or the distribution channels for acquired product lines; ● potential loss of key employees, customers, distributors, or sales representatives of the acquired businesses or adverse effects on existing business relationships with suppliers, customers, distributors, and sales representatives; ● temporary adverse impact on overall profitability and growth if certain acquired products cannibalize existing product offerings; ● adverse impact on overall profitability if our expanded operations do not achieve the efficiencies, growth projections, net sales, earnings, cost or revenue synergies, or other financial results projected in our valuation models, delays in the realization thereof or costs or charges incurred to achieve any revenue or cost synergies; ● reallocation of amounts of capital from other operating initiatives and/or an increase in our leverage and debt service requirements to pay acquisition purchase prices or other business venture investment costs or fund acquired businesses, which could in turn restrict our ability to access additional capital when needed, pursue other important elements of our business strategy or remain in compliance with the covenants under our Credit Agreements; ● infringement by acquired businesses or other business ventures of intellectual property rights of others or violation of confidentiality, intellectual property and non-compete obligations or agreements by employees of an acquired business or lack of or inadequate formal intellectual property protection mechanisms in place at an acquired business; ● inaccurate assessment of additional post-acquisition investments, undisclosed, contingent, tax or other liabilities or problems, unanticipated costs associated with an acquisition, and an inability to recover or manage such liabilities and costs; ● incorrect estimates made in the accounting for acquisitions and incurrence of non-recurring charges, including restructuring charges in connection with efforts to reduce costs and streamline operations; and ● impacts as a result of accounting adjustments, incorrect estimates made in the accounting for the acquisitions or the potential write-off of significant amounts of goodwill or other assets as a result of deterioration in the performance of an acquired business or product line, adverse market conditions, changes in the competitive landscape, changes in laws or regulations that restrict activities of an acquired business or product line, or as a result of a variety of other circumstances, or other potential financial accounting or reporting impacts, including those resulting from the international subsidiaries we acquired from Surgalign Holdings.
Factors that may have a significant impact on the market price and marketability of our common stock include, among others: ● the terms of any potential future transaction(s) related to debt financing, debt restructuring or capital raising; ● our ability to make interest payments under our Credit Agreements; ● our observance of covenants under our Credit Agreements; ● announcements of technological innovations or new commercial products by us or our present or potential competitors; ● developments or disputes concerning patent or other proprietary rights; ● developments in our relationships with employees, suppliers, distributors, sales representatives and customers; ● acquisitions or divestitures; ● litigation and government proceedings; ● adverse legislation, including changes in governmental regulation; ● third-party reimbursement policies; ● additions or departures of key personnel; ● sales of our equity securities by our significant stockholders or management or sales of additional equity securities by our Company; ● changes in securities analysts’ recommendations; ● short selling; ● changes in health care policies and practices; ● the delisting of our common stock or halting or suspension of trading in our common stock by the NYSE American; ● economic, social and other external factors, such as epidemics or pandemics, supply chain disruptions, labor shortages and persistent inflation; and ● general market conditions. 52 In the past, following periods of volatility in the market price of a company’s securities, securities class action litigation has often been instituted.
Factors that may have a significant impact on the market price and marketability of our common stock include, among others: ● our observance of covenants under our Credit Agreements; ● our ability to make interest payments under our Credit Agreements; ● the terms of any potential future transaction(s) related to debt financing, debt restructuring or capital raising; ● announcements of technological innovations or new commercial products by us or our present or potential competitors; ● developments or disputes concerning patent or other proprietary rights; ● developments in our relationships with employees, suppliers, distributors, sales representatives and customers; ● acquisitions or divestitures; ● litigation and government proceedings; ● adverse legislation, including changes in governmental regulation; ● third-party reimbursement policies; ● additions or departures of key personnel; ● sales of our equity securities by our significant stockholders, including in the event ROS or Royalty Opportunities distributes shares of our common stock to its limited partners, or management or sales of additional equity securities by our Company; ● changes in securities analysts’ recommendations; ● short selling; ● changes in health care policies and practices or reimbursement affecting our products or technologies; ● the delisting of our common stock or halting or suspension of trading in our common stock by the NYSE American; ● economic, social and other external factors, such as epidemics or pandemics, supply chain disruptions, labor shortages and persistent inflation; and ● general market conditions.
The failure to achieve such guidance could disappoint investors and analysts and cause the market price of our common stock to decline. We may issue additional common stock resulting in stock ownership dilution. From time to time, we issue equity securities to raise additional financing and in connection with debt restructurings.
The failure to achieve such guidance or analyst expectations regarding future operating results could disappoint investors and analysts and cause the market price of our common stock to decline. We may issue additional common stock resulting in stock ownership dilution. From time to time, we issue equity securities to raise additional financing and in connection with debt restructurings.
Delisting would also impair our ability to raise capital. 51 The market price of our common stock is extremely volatile, which may affect our ability to raise capital in the future and may subject the value of the investment of our stockholders to sudden decreases.
The market price of our common stock is extremely volatile, which may affect our ability to raise capital in the future and may subject the value of the investment of our stockholders to sudden decreases.
Prior to raising additional equity or debt financing, we must obtain the consent of MidCap and ROS and Royalty Opportunities, and no assurance can be provided that MidCap, ROS or Royalty Opportunities would provide such consent, which could limit our ability to raise additional financing. We have indebtedness which matures on March 1, 2029.
Prior to raising additional equity or debt financing, we must obtain the consent of MidCap and ROS and Royalty Opportunities, and no assurance can be provided that MidCap, ROS or Royalty Opportunities would provide such consent, which could limit our ability to raise additional financing.
However, we may incur increased costs relating to the assessment and disclosure of climate-related risks and increased litigation risks related to disclosures made pursuant to the new rules, either of which could materially and adversely affect our future results of operations and financial condition.
We may incur increased costs relating to the assessment and disclosure of climate-related risks and increased litigation risks related to such disclosures, either of which could materially and adversely affect our future results of operations and financial condition.
For example, we generally do not have long-term supply agreements covering this business so our customers could periodically decide to use other OEMs based on cost, quality, delivery time, production capacities, competitive and regulatory considerations or other factors.
In addition, our private label and OEM business involves other additional risks. For example, we generally do not have long-term supply agreements covering this business so our customers could periodically decide to use other OEMs based on cost, quality, delivery time, production capacities, competitive and regulatory considerations or other factors.
The trading volume and prices of our common stock have been and may continue to be volatile and could fluctuate widely due to factors both within and beyond our control. During 2023, the sale price of our common stock ranged from $0.58 to $1.39 per share, and our daily trading volume ranged from 1 thousand to 790 thousand shares.
The trading volume and prices of our common stock have been and may continue to be volatile and could fluctuate widely due to factors both within and beyond our control. During 2024, the sale price of our common stock ranged from $0.33 to $1.31 per share, and our daily trading volume ranged from 1 thousand to 950 thousand shares.
Modifications to our products that were implemented without obtaining clearance or approval and for which FDA subsequently concludes that clearance or approval was required, may require us to recall or cease marketing the modified devices until clearance or approval is obtained.
Modifications to our products that were implemented without obtaining clearance or approval and for which FDA subsequently concludes that clearance or approval was required, may require us to recall or cease marketing the modified devices until clearance or approval is obtained, and we may be subject to significant regulatory fines or penalties.
The FDA periodically inspects tissue processors to determine compliance with these requirements. Allegations of violations of applicable regulations noted by the FDA during facility inspections could adversely affect the continued marketing of our products.
In addition, these regulations can increase the cost of tissue recovery activities. The FDA periodically inspects tissue processors to determine compliance with these requirements. Allegations of violations of applicable regulations noted by the FDA during facility inspections could adversely affect the continued marketing of our products.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeRole of Management Management has implemented risk management structures, policies and procedures and is responsible for our day-to-day cybersecurity risk management. Our Director of Information Technology, Chris Dennis, is responsible for our day-to-day assessment and management of cybersecurity risks. Mr. Dennis has served as our Director of Information Technology since June 2019. Mr.
Biggest changeOur Director of Information Technology, Chris Dennis, is responsible for our day-to-day assessment and management of cybersecurity risks. Mr. Dennis has served as our Director of Information Technology since June 2019. Mr. Dennis additionally is the founder of a data privacy consulting company and has over 20 years of experience in the data management space .
Management continually re-assesses the Company’s cybersecurity risk environment based on changing circumstances and new information identified by its monitoring, scanning and testing as well as third party resources. Risk Management and Strategy Our processes for assessing, identifying, and managing cybersecurity threats have been integrated into the our overall risk management processes.
Management continually re-assesses the Company’s cybersecurity risk environment based on changing circumstances and new information identified by its monitoring, scanning and testing as well as third party resources. Risk Management and Strategy Our processes for assessing, identifying, and managing cybersecurity threats have been integrated into our overall risk management processes.
Although none of the members of the Audit Committee has any work experience, degree, or certifications related to information security or cybersecurity, the Audit Committee works closely with members of our employee team with relevant expertise, and we have engaged third-party service providers to further enhance our cybersecurity efforts.
The management team and/or Audit Committee, in turn, regularly provide data protection and cybersecurity reports to the full Board of Directors . 58 Although none of the members of the Audit Committee has any work experience, degree, or certifications related to information security or cybersecurity, the Audit Committee works closely with members of our employee team with relevant expertise, and we have engaged third-party service providers to further enhance our cybersecurity efforts.
Members of our management team often attend these discussions, and the Audit Committee has requested that Mr. Dennis provide updates at two of its meetings annually. The management team and/or Audit Committee, in turn, regularly provide data protection and cybersecurity reports to the full Board of Directors.
Members of our management team often attend these discussions, and the Audit Committee has requested that Mr. Dennis provide updates at two of its meetings annually.
We engage cybersecurity consultants, auditors, and other third parties to assess and enhance our cybersecurity practices, such as a third party consulting firm to perform tabletop exercises and evaluate our cyber processes including an assessment of our incident response procedures. 59 Board Oversight The Board of Directors, both directly and through the delegation of responsibilities to the Audit committee oversees the proper functioning of our cybersecurity risk management program.
We engage cybersecurity consultants, auditors, and other third parties to assess and enhance our cybersecurity practices, such as a third-party consulting firm to perform tabletop exercises and evaluate our cyber processes including an assessment of our incident response procedures.
Dennis additionally is the founder of a data privacy consulting company and has over 20 years of experience in the data management space. We have implemented a number of processes which allow Mr. Dennis and his team to be informed about and monitor the prevention, detection, mitigation, and remediation of cybersecurity incidents.
We have implemented a number of processes which allow Mr. Dennis and his team to be informed about and monitor the prevention, detection, mitigation, and remediation of cybersecurity incidents.
Risk mitigation strategies are developed and implemented based on the specific nature of each cybersecurity risk. These strategies include, among others, the application of cybersecurity policies and procedures, implementation of administrative, technical, and physical controls, and employee training, education, and awareness initiatives.
These strategies include, among others, the application of cybersecurity policies and procedures, implementation of administrative, technical, and physical controls, and employee training, education, and awareness initiatives. 57 Role of Management Management has implemented risk management structures, policies and procedures and is responsible for our day-to-day cybersecurity risk management.
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Risk mitigation strategies are developed and implemented based on the specific nature of each cybersecurity risk.
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Board Oversight The Board of Directors, both directly and through the delegation of responsibilities to the Audit committee oversees the proper functioning of our cybersecurity risk management program.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeWe also lease approximately 17,700 square feet in a building located at 600 Cruiser Lane, Belgrade, Montana. This space includes six Class 100 (ISO 5) clean rooms, a fully equipped diagnostics laboratory, microbiology laboratory and testing laboratory. We lease the building under a ten-year operating lease which expires in October 2025 and has a ten-year renewal option.
Biggest changeThe 600 Cruiser Lane building has approximately 17,700 square feet, which includes fourteen Class 100 (ISO 5) cleanrooms, a fully equipped diagnostics laboratory, microbiology laboratory and testing laboratory. The space at 732 Cruiser Lane is approximately 21,000 square feet where one Class 1,000 (ISO 6) cleanroom is located.
Item 2. Properties Our headquarters and manufacturing facility are located at 664 Cruiser Lane, Belgrade, Montana 59714. We also have two other facilities on the Montana campus, located at 600 Cruiser Lane, Belgrade, Montana 59714, and at 732 Cruiser Lane, Belgrade, Montana 59714.
Item 2. Properties Our headquarters and manufacturing facility are located at 664 Cruiser Lane, Belgrade, Montana 59714. We also have two other facilities on the contiguous Belgrade campus, located at 600 Cruiser Lane, and at 732 Cruiser Lane. All our properties are leased and expire in October 2025.
In connection with our acquisition of the nanOss production operations from RTI, we acquired the lease for the approximately 15,000 square foot nanOss production facility located in Greenville, North Carolina. The lease expires in June 2024.
In connection with our acquisition of the nanOss production operations from RTI, we acquired the lease for the approximately 15,000 square foot nanOss production facility located in Greenville, North Carolina. The lease expires in June 2025 and we do not intend to renew it as we are moving this production to Belgrade, Montana.
The validated manufacturing areas and laboratory facilities located in this facility provide processing, final packaging and testing space to manufacture medical devices pursuant to FDA, GMP regulations, and ISO 13485:2003. The facility is registered with the FDA for device design, device manufacture, and contract manufacture, as well as for screening, testing, storing, and distributing biological tissues.
The validated manufacturing areas and laboratory facilities located across this campus provide storage, processing, final packaging and testing space for production of biologic tissues and manufacturing medical devices pursuant to FDA, GMP regulations, and ISO 13485:2016.
Removed
All our properties are leased. 60 We lease an approximately 14,000 square foot facility at 664 Cruiser Lane, Belgrade, Montana, which expires in October 2025. This building is an FDA registered facility with a Class 10,000 (ISO 7) environmentally controlled area.
Added
Additionally, all leases have the option to extend for either two five-year terms or a single ten-year term. The facility located at 664 Cruiser Lane is approximately 14,000 square feet of space. This building has an ISO 7 (Class 10,000) environmentally controlled area as well as diagnostic testing and research laboratories.
Removed
We also lease approximately 21,000 square feet in a building located at 732 Cruiser Lane, Belgrade, Montana, where one Class 1,000 (ISO 6) clean room is located, which expires in October 2025.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeHolders of Record As of March 25, 2024, we had 166 holders of record. Dividends We have not paid any cash dividends and do not expect to do so in the foreseeable future. In addition, our credit agreements with MidCap preclude us from paying dividends.
Biggest changeHolders of Record As of February 28, 2025, we had 148 holders of record. A greater number of owners of our common stock are beneficial holders, whose shares of record are held by banks, brokers, and other financial institutions. Dividends We have not paid any cash dividends and do not expect to do so in the foreseeable future.
Recent Sales of Unregistered Securities We did not sell any unregistered equity securities of our Company during the quarter ended December 31, 2023. Purchases of Equity Securities by the Issuer and Affiliated Purchasers We did not purchase any shares of our common stock or other equity securities of our Company during the quarter ended December 31, 2023.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers We did not purchase any shares of our common stock or other equity securities of our Company during the quarter ended December 31, 2024.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information Our common stock is listed on the NYSE American under the ticker symbol “XTNT.” The closing sale price to our common stock on March 25, 2024 was $1.04 per share.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information Our common stock is listed on the NYSE American under the ticker symbol “XTNT.” The closing sale price to our common stock on February 28, 2025 was $0.51 per share.
Added
In addition, our credit agreements with MidCap preclude us from paying dividends. Recent Sales of Unregistered Securities We did not sell any unregistered equity securities of our Company during the quarter ended December 31, 2024.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

35 edited+18 added−25 removed28 unchanged
Biggest changeResults of Operations Comparison of Years Ended December 31, 2023 and December 31, 2022 The following table sets forth our results of operations for 2023 and 2022 (dollars in thousands): Year Ended December 31, 2023 2022 % of % of Amount Revenue Amount Revenue Total Revenue 91,303 100.0 % 57,969 100.0 % Cost of Sales 35,836 39.2 % 25,832 44.6 % Gross Profit 55,467 60.8 % 32,137 55.4 % Operating Expenses General and administrative 25,850 28.3 % 15,462 26.7 % Sales and marketing 38,439 42.1 % 22,515 38.8 % Research and development 1,336 1.5 % 915 1.6 % Total Operating Expenses 65,625 71.9 % 38,892 67.1 % Loss from Operations (10,158 ) (11.1 )% (6,755 ) (11.7 )% Other Income (Expense) Interest expense (2,938 ) (3.2 )% (1,692 ) (2.9 )% Interest income 149 0.2 % 31 0.1 % Unrealized foreign currency translation gain 265 0.3 % — 0.0 % Bargain purchase gain 11,694 12.8 % — 0.0 % Other expense (49 ) (0.1 )% — 0.0 % Total Other Income (Expense) 9,121 10.0 % (1,661 ) (2.9 )% Net Loss from Operations Before Provision for Income Taxes (1,037 ) (1.1 )% (8,416 ) (14.5 )% Benefit (Provision) for Income Taxes Current and Deferred 1,697 1.9 % (69 ) (0.1 )% Net Income (Loss) $ 660 0.7 % $ (8,485 ) (14.6 )% 64 Revenue Total revenue for the year ended December 31, 2023 increased 58% to $91.3 million compared to $58.0 million for the prior year.
Biggest changeIf these changes are not further delayed or reversed, we may receive less revenue under the license agreements than anticipated. 62 Results of Operations Comparison of Years Ended December 31, 2024 and December 31, 2023 The following table sets forth our results of operations for 2024 and 2023 (dollars in thousands): Year Ended December 31, 2024 2023 % of % of Amount Revenue Amount Revenue Revenue Product revenue 115,765 98.7 % 91,303 100.0 % License revenue 1,502 1.3 % — — % Total Revenue 117,267 100.0 % 91,303 100.0 % Cost of Sales 49,051 41.8 % 35,836 39.2 % Gross Profit 68,216 58.2 % 55,467 60.8 % Operating Expenses General and administrative 28,691 24.5 % 25,850 28.3 % Sales and marketing 49,214 42.0 % 38,439 42.1 % Research and development 2,385 2.0 % 1,336 1.5 % Total Operating Expenses 80,290 68.5 % 65,625 71.9 % Loss from Operations (12,074 ) (10.3 )% (10,158 ) (11.1 )% Other (Expense) Income Interest expense (4,160 ) (3.5 )% (2,938 ) (3.2 )% Interest income — 0.2 % 149 0.2 % Unrealized foreign currency translation gain 5 0.0 % 265 0.3 % Bargain purchase gain — 0.0 % 11,694 12.8 % Other expense (33 ) (0.0 )% (49 ) (0.1 )% Total Other (Expense) Income (4,188 ) (3.6 )% 9,121 10.0 % Net Loss from Operations Before Provision for Income Taxes (16,262 ) (13.9 )% (1,037 ) (1.1 )% (Provision) Benefit for Income Taxes Current and Deferred (187 ) (0.2 )% 1,697 1.9 % Net (Loss) Income $ (16,449 ) (14.0 )% $ 660 0.7 % Revenue Total revenue for the year ended December 31, 2024 increased 28% to $117.3 million compared to $91.3 million for the prior year.
Current and Prior Credit Facilities On March 7, 2024, the Company, as guarantor, and certain of our subsidiaries, as borrowers (collectively, the “Borrowers”), entered into an Amended and Restated Credit, Security and Guaranty Agreement (Term Loan) (the “Term Credit Agreement”) and an Amended and Restated Credit, Security and Guaranty Agreement (Revolving Loan) (the “Revolving Credit Agreement” and, together with the Term Credit Agreement, the “Credit Agreements”) with MidCap Financial Trust and MidCap Funding IV Trust, each in its respective capacity as agent, and lenders from time to time party thereto.
Current and Prior Credit Facilities On March 7, 2024, the Company, as guarantor, and certain of our subsidiaries, as borrowers (collectively, the “Borrowers”), entered into an Amended and Restated Credit, Security and Guaranty Agreement (Term Loan) (as amended from time to time, the “Term Credit Agreement”) and an Amended and Restated Credit, Security and Guaranty Agreement (Revolving Loan) (as amended from time to time, the “Revolving Credit Agreement” and, together with the Term Credit Agreement, the “Credit Agreements”) with MidCap Financial Trust and MidCap Funding IV Trust, each in its respective capacity as agent, and lenders from time to time party thereto.
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. Recent Acquisitions Coflex and CoFix Product Lines On February 28, 2023, we acquired all of the issued and outstanding capital stock of Surgalign SPV, Inc.
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. Acquisitions Coflex and CoFix Product Lines On February 28, 2023, we acquired all of the issued and outstanding capital stock of Surgalign SPV, Inc.
However, we may require or seek additional capital to fund our future operations and business strategy prior to March 2025. 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.
However, we may require or seek additional capital to fund our future operations and business strategy prior to March 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.
Our estimates of anticipated future product demand may prove to be inaccurate in which case we may be required to incur charges for excess and obsolete inventory. Increases in our inventory reserves result in a corresponding expense, which is recorded to cost of sales. We believe the total reserve at December 31, 2023 is adequate.
Our estimates of anticipated future product demand may prove to be inaccurate in which case we may be required to incur charges for excess and obsolete inventory. Increases in our inventory reserves result in a corresponding expense, which is recorded to cost of sales. We believe the total reserve at December 31, 2024 is adequate.
This transaction resulted in a gain on bargain purchase due to the estimated fair value of the identifiable net assets acquired exceeding the purchase consideration transferred by $11.7 million and is shown as a gain on bargain purchase on our consolidated statement of operations for the year ended December 31, 2023.
This transaction resulted in a gain on bargain purchase due to the estimated fair value of the identifiable net assets acquired exceeding the purchase consideration transferred by $11.7 million and is shown as a gain on bargain purchase on our consolidated statement of operations for the year ended December 31, 2024.
The bargain purchase was primarily attributable to the transaction occurring as part of bankruptcy proceedings. 63 RTI Surgical, Inc.’s nanOss Production Operations On October 23, 2023, we acquired the nanOss production operations from RTI Surgical, Inc. (“RTI”) pursuant to an Asset Purchase Agreement dated October 23, 2023 between us and RTI (the “RTI Asset Purchase Agreement”).
The bargain purchase was primarily attributable to the transaction occurring as part of bankruptcy proceedings. 61 RTI Surgical, Inc.’s nanOss Production Operations On October 23, 2023, we acquired the nanOss production operations from RTI Surgical, Inc. (“RTI”) pursuant to an Asset Purchase Agreement dated October 23, 2023 between us and RTI (the “RTI Asset Purchase 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 (the “Maturity Date”).
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.
The Revolving Credit Agreement provides for a secured revolving credit facility (the “Revolving Facility,” and, together with the Term Facility, the “Facilities”) under which the Borrowers may borrow up to $17.0 million (such amount, the “Revolving Loan Commitment”) 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.
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.
Prior to raising additional equity or debt financing, we may be required to obtain the consent of MidCap under our Credit Agreements and/or ROS and Royalty Opportunities under our Investor Rights Agreement with them, and no assurance can be provided that they would provide such consent, which could limit our ability to raise additional financing and the terms thereof.
Prior to raising additional equity or debt financing, we may be required to obtain the consent of MidCap Financial Trust and MidCap Funding IV Trust under our Credit Agreements and/or ROS and Royalty Opportunities under our Investor Rights Agreement with them, and no assurance can be provided that they would provide such consent, which could limit our ability to raise additional financing and the terms thereof.
This change resulted primarily from the tax benefit associated with the release of the valuation allowance resulting from recognition of deferred tax liabilities in purchase accounting.
This change resulted primarily from the non-recurring tax benefit in 2023 associated with the release of the valuation allowance resulting from recognition of deferred tax liabilities in purchase accounting.
Benefit (Provision) for Income Taxes Current and Deferred Income tax benefit for the year ended December 31, 2023 was $1.7 million compared to income tax expense of $0.1 million for the year ended December 31, 2022.
(Provision) Benefit for Income Taxes Current and Deferred Income tax provision for the year ended December 31, 2024 was $0.2 million compared to income tax benefit of $1.7 million for the year ended December 31, 2023.
We may seek to raise additional financing through various sources, such as equity and debt financings, additional debt restructurings or refinancings, or through strategic collaborations and license agreements.
We may seek to raise additional financing through various sources, such as equity and debt financings, or additional debt restructurings or refinancings.
We believe that the following financial estimates are both important to the portrayal of our financial condition and results of operations and require subjective or complex judgments. Further, we believe that the items discussed below are properly recorded in our consolidated financial statements for all periods presented.
We believe that the following financial estimate is both important to the portrayal of our financial condition and results of operations and requires subjective or complex judgments. Further, we believe that the item discussed below is properly recorded in our consolidated financial statements for all periods presented.
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.
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 increase was due primarily to additional independent agent commissions expense of $9.8 million resulting from higher sales, $5.1 million of additional expense associated with various compensation plans and additional expense of $0.9 million associated with trade shows and travel. Research and Development Research and development expenses consist primarily of internal costs for the development of new product technologies.
This increase was due primarily to additional independent agent commissions expense of $7.0 million resulting from higher independent agent sales, $2.4 million of additional expense associated with various compensation plans and $0.9 million of additional professional service fees. Research and Development Research and development expenses consist primarily of internal costs for the development of new product technologies.
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.
This is particularly true if economic and market conditions deteriorate or our business, financial performance or prospects deteriorate. 66 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.
These Credit Agreements amend and restate the Credit, Security and Guaranty Agreement, dated as of May 6, 2021 (Term Loan), as amended (the “Prior Term Credit Agreement”), and the Credit, Security and Guaranty Agreement, dated as of May 6, 2021 (Revolving Loan), as amended (the “Prior Revolving Credit Agreement” and, together with the Prior Term Credit Agreement, the “Prior Credit Agreements”), in each case, by and among the Borrowers, the Company and MidCap Financial Trust and MidCap Funding IV Trust, as respective agents, and the lenders from time to time party thereto.
These Credit Agreements amend and restate the Credit, Security and Guaranty Agreement, dated as of May 6, 2021 (Term Loan), as amended (the “Prior Term Credit Agreement”), and the Credit, Security and Guaranty Agreement, dated as of May 6, 2021 (Revolving Loan), as amended (the “Prior Revolving Credit Agreement” and, together with the Prior Term Credit Agreement, the “Prior Credit Agreements”), in each case, by and among the Borrowers, the Company and MidCap Financial Trust and MidCap Funding IV Trust, as respective agents, and the lenders from time to time party thereto. 65 On May 14, 2024, we entered into Amendment No. 1 to Amended and Restated Credit, Security and Guarantee Agreement (Term Loan) (“Term Amendment No. 1”), which amends the Term Credit Agreement, and Amendment No. 1 to Amended and Restated Credit, Security and Guarantee Agreement (Revolving Loan) (“Revolving Amendment No. 1” and, together with Term Amendment No. 1, the “Amendments No. 1”), which amends the Revolving Credit Agreement.
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.
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 December 31, 2024, we were in compliance with all covenants under the Credit Agreements.
As of December 31, 2023, the effective rate of the Prior Term Credit Agreement, inclusive of authorization of debt issuance costs and accretion of the final payment, was 14.42%, and the effective rate of the Prior Revolving Credit Agreement was 9.94%.
As of December 31, 2024, the effective rate of the Term Credit Agreement, inclusive of authorization of debt issuance costs and accretion of the final payment, was 15.23%, and the effective rate of the Revolving Credit Agreement was 9.96%.
We have focused and intend to continue to focus primarily on four key growth initiatives: (1) introduce new products; (2) expand our distribution network; (3) penetrate adjacent markets; and (4) leverage our growth platform with technology and strategic acquisitions.
We have focused and intend to continue to focus primarily on four key growth initiatives: (1) introduce new products, including our Cortera ® Spinal Fixation System, viable bone matrix, OsteoVive ® Plus, and amniotic membrane allografts, SimpliGraft ® and SimpliMax TM ; (2) leverage our distribution network; (3) penetrate adjacent markets; and (4) leverage our growth platform with technology and strategic acquisitions.
This increase in net cash used in operating activities relates primarily to the increase in accounts receivable balance. Net cash used in investing activities for the years ended December 31, 2023 and 2022 was $24.8 million and $1.6 million, respectively.
This increase in net cash used in operating activities relates primarily to the increase in inventory balance. Net cash used in investing activities for the years ended December 31, 2024 was $3.7 million compared to $24.8 million for the year ended December 31, 2023.
As of December 31, 2023, we were in compliance with all covenants under the Prior Credit Agreements. 67 Cash Requirements We believe that our $5.9 million of cash and cash equivalents as of December 31, 2023, together with amounts available under the Facilities, will be sufficient to meet our anticipated cash requirements through at least March 2025.
Cash Requirements We believe that our $6.2 million of cash and cash equivalents as of December 31, 2024, 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 March 2026.
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 Canada, Mexico, South America, Australia, and certain Pacific region countries.
While our primary 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.
The following table summarizes our working capital as of December 31, 2023 and December 31, 2022 (in thousands): December 31, 2023 2022 Cash and cash equivalents $ 5,923 $ 20,507 Accounts receivable, net 20,731 10,853 Inventories 36,885 17,285 Total current assets 64,899 49,318 Accounts payable 7,054 3,490 Accrued liabilities 10,419 5,496 Line of credit 4,622 3,379 Current portion of long-term debt — 2,333 Total current liabilities 22,990 15,218 Net working capital 41,879 34,100 Cash Flows Net cash used in operating activities for the year ended December 31, 2023 was $9.5 million compared to $5.3 million provided by operating activities for the year ended December 31, 2022.
The following table summarizes our working capital as of December 31, 2024 and December 31, 2023 (in thousands): December 31, 2024 2023 Cash and cash equivalents $ 6,221 $ 5,923 Accounts receivable, net 20,660 20,731 Inventories 38,634 36,885 Total current assets 67,116 64,899 Accounts payable 7,918 7,054 Accrued liabilities 7,771 10,419 Line of credit 12,120 4,622 Total current liabilities 28,581 22,990 Net working capital 38,535 41,879 Cash Flows Net cash used in operating activities for the year ended December 31, 2024 was $11.9 million compared to $9.5 million for the year ended December 31, 2023.
General and administrative expenses increased 67%, or $10.4 million, to $25.9 million for the year ended December 31, 2023 compared to $15.5 million for the year ended December 31, 2022.
General and administrative expenses increased 11%, or $2.8 million, to $28.7 million for the year ended December 31, 2024 compared to $25.9 million for the year ended December 31, 2023.
Sales and marketing expenses increased 71%, or $15.9 million, to $38.4 million for the year ended December 31, 2023 compared to $22.5 million for the year ended December 31, 2022.
Sales and marketing expenses increased 28%, or $10.8 million, to $49.2 million for the year ended December 31, 2024 compared to $38.4 million for the year ended December 31, 2023.
As of December 31, 2023, we had $4.0 million outstanding and $3.3 million of availability under the Prior Revolving Credit Agreement.
As of December 31, 2024, we had $12.1 million outstanding and $4.2 million of availability under the Revolving Credit Facility.
This increase resulted primarily from increased headcount due to additional personnel hired in connection with our acquisitions. 65 Interest Expense Interest expense for the year ended December 31, 2023 increased $1.2 million to $2.9 million as compared to $1.7 million for the year ended December 31, 2022.
Research and development expenses increased 79%, or $1.0 million, to $2.4 million for year ended December 31, 2024 compared to $1.3 million for the year end December 31, 2023. This increase resulted primarily from increased headcount due to additional personnel hired in connection with our acquisitions and increased expenses associated with new product development.
The resulting material weaknesses are described in greater detail under the heading Part II. Item 9A. “Controls and Procedures.” Inventory Valuation Inventories are stated at the lower of cost or net realizable value. Cost is determined using the specific identification method and includes materials, labor and overhead.
Our most critical accounting estimate is inventory valuation, as described in more detail below. Inventory Valuation Inventories are stated at the lower of cost or net realizable value. Cost is determined using the specific identification method and includes materials, labor and overhead.
Net Income (Loss) We recognized net income of $660 thousand during the year ended December 31, 2023 as compared to a net loss of $8.5 million during the year ended December 31, 2022 primarily due to the $11.7 million gain on bargain purchase recognized as a result of our acquisition of Surgalign Holdings’ hardware and biologics business in connection with bankruptcy proceedings.
Net (Loss) Income We recognized a net loss of $16.4 million during the year ended December 31, 2024 as compared to net income of $660 thousand during the year ended December 31, 2023 primarily due to the $11.7 million gain on bargain purchase recognized in 2023 as a result of our acquisition of Surgalign Holdings’ hardware and biologics business in connection with a bankruptcy proceeding. 64 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.
Cost of sales increased by 39%, or $10.0 million, to $35.8 million for the year ended December 31, 2023 from $25.8 million for the year ended December 31, 2022. This increase is primarily due to higher sales levels.
Cost of sales increased by 37%, or $13.2 million, to $49.1 million for the year ended December 31, 2024 from $35.8 million for the year ended December 31, 2023.
This increase relates primarily to the use of $17.0 million of cash for the acquisition of Surgalign SPV, $5.6 million of cash for the acquisition of Surgalign Holdings’s hardware and biologics business and $2.0 million of cash for the acquisition of nanOss production operations from RTI Surgical, Inc. 66 Net cash provided by financing activities was $19.7 million for the year ended December 31, 2023, which was primarily attributable to $14.0 million of net proceeds resulting from our July 2023 private placement of common stock and $4.7 million of net proceeds from the issuance of long term debt, net of issuance costs.
This decrease relates primarily to the use of $23.5 million of cash for the acquisitions of Surgalign SPV, Inc., Surgalign Holdings’ hardware and biologics business and nanOss production operations from RTI Surgical, Inc. during the year ended December 31, 2023.
Net cash provided by financing activities was $9.0 million for the year ended December 31, 2022, which was primarily attributable to $9.3 million of proceeds from the private placement of common stock and common stock warrants, net of issuance costs.
Net cash provided by financing activities for the year ended December 31, 2024 was $16.1 million compared to $19.7 million for the year ended December 31, 2023.
This increase resulted primarily from increases to the base interest rate applied to our debt instruments and the additional borrowing of $5.0 million under our term loan agreement in February 2023 in connection with our acquisition of Surgalign SPV and the Coflex and CoFix product lines.
Interest Expense Interest expense for the year ended December 31, 2024 increased $1.2 million to $4.2 million as compared to $2.9 million for the year ended December 31, 2023. 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.
Removed
This increase is attributed primarily to the contribution of additional sales resulting from the acquisition of the Surgalign Holdings’ hardware and biologics business, greater independent agent sales, the additional Coflex and CoFix product sales and opportunistic private label sales, in each case during the year ended December 31, 2023.
Added
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.
Removed
Gross profit as a percentage of revenue increased to 60.8% for the year ended December 31, 2023 compared to 55.4% for the year ended December 31, 2022.
Added
Recent Developments During the fourth quarter of 2024, we entered into a license agreement with a distributor granting an exclusive, nontransferable, non-sublicensable, royalty-bearing right and license to manufacture and commercialize in the United States our SimpliMax™ product and the trademarks associated therewith during the term of the agreement and subject to certain limitations as set forth therein.
Removed
Of this increase, 620 basis points were due to greater scale and improved production efficiency, 290 basis points were due to sales mix, partially offset by 340 basis points due to higher production costs.
Added
Under the terms of the agreement, we received a one-time, up front, non-refundable, non-creditable cash payment of $1.5 million. Beginning in 2025, we are entitled to quarterly royalty payments based on the volume of product sold by the distributor. These royalty payments include guaranteed minimums, which aggregate to $3.75 million during 2025.
Removed
This increase is primarily attributable to additional expense of $4.3 million related to various compensation plans, $2.0 million of additional legal and other professional fees resulting primarily from acquisition related activities, $1.4 million of additional amortization of intangible assets associated with the Coflex and CoFix product lines and $1.1 million of consulting fees resulting primarily from acquisition related activities.
Added
The agreement has an initial term of one year and is automatically renewable in one-year terms unless either party thereto provides written notice of non-renewal six months prior to the then-current term or earlier termination as provided under the agreement.
Removed
Research and development expenses increased 46%, or $0.4 million, to $1.3 million for year ended December 31, 2023 compared to $0.9 million for the year end December 31, 2022.
Added
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.
Removed
We expect that our annualized interest expense will increase approximately $0.1 million for every 50 basis points of increase to the reference rate associated with our credit agreements.
Added
We appointed the distributor as the exclusive seller of our SimpliGraft ® product to end-users located in the United States during the term of the agreement and in accordance with the terms and conditions thereof and granted the distributor the right to use our related trademark in connection therewith.
Removed
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.
Added
Under the terms of the agreement, we received a one-time, up-front, non-refundable, non-creditable cash payment of $1.5 million. Additionally, the distributor agreed to purchase our SimpliGraft ® product in accordance with certain specified minimum purchase obligations. The minimum purchase obligations aggregate to $3.9 million during 2025.
Removed
The Term Credit Agreement provides for a secured term loan facility (the “Term Facility”) in an aggregate principal amount of $17.0 million (the “Term Loan Commitment”), which was previously funded under the Prior Term Credit Agreement, and an additional $10.0 million tranche available solely at the discretion of MidCap Financial Trust and the lenders, for the purposes agreed to between the Company, the Borrowers and the lenders in advance of the making of loans under such additional tranche.
Added
The agreement has an initial term of two years and is automatically renewable for six additional one-year terms unless the distributor provides written notice of non-renewal 90 days prior to the then-current term or earlier termination as provided under the agreement.
Removed
Those financial estimates include: 68 Business Combinations When applicable, we account for the acquisition of a business in accordance with the accounting standards codification guidance for business combinations, whereby the total consideration transferred is allocated to the assets acquired and liabilities assumed, including amounts attributable to non-controlling interests, when applicable, based on their respective estimated fair values as of the date of acquisition.
Added
The first license agreement may terminate, and the second license agreement may generate significantly less revenue than anticipated following a CMS Policy Change, as defined in the agreements.
Removed
Goodwill represents the excess of consideration transferred over the estimated fair value of the net assets acquired in a business combination.
Added
The Centers for Medicare and Medicaid Services recently 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 our license agreements. These changes were initially intended to become effective in February 2025 but have been delayed to April 2025.
Removed
Assigning estimated fair values to the net assets acquired requires the use of significant estimates, judgments, inputs, and assumptions regarding the fair value of domestic and international assets and liabilities, including intangible assets that are separately identifiable from goodwill, inventory, and property, plant, and equipment.
Added
This increase is attributed primarily to the contribution of additional sales resulting from the acquisition of the Surgalign Holdings’ hardware and biologics business, higher independent agent sales, and $1.5 million in upfront licensing revenue generated from a licensing agreement pursuant to which we granted a distributor an exclusive, nontransferable, non-sublicensable, royalty-bearing right and license to manufacture and commercialize in the United States our SimpliMax TM product and the trademarks associated therewith.
Removed
While the ultimate responsibility for determining estimated fair values of the acquired net assets resides with management, for material acquisitions, we may retain the services of certified valuation specialists to assist with assigning estimated fair values to certain acquired assets and assumed liabilities, including intangible assets that are separately identifiable from goodwill, inventory, and property, plant, and equipment.
Added
This increase is primarily due to greater revenue, as described above and the write-off of approximately $1.5 million of inventory acquired from Surgalign Holdings’ hardware and biologics business resulting from performance of verification procedures performed during the course of 2024. 63 Gross profit as a percentage of revenue decreased to 58.2% for the year ended December 31, 2024 compared to 60.8% for the year ended December 31, 2023.
Removed
Estimated fair values of acquired intangible assets that are separately identifiable from goodwill, inventory, and property, plant, and equipment are generally based on available historical information, future expectations, available market data, and assumptions determined to be reasonable but are inherently uncertain with respect to future events, including economic conditions, competition, technological obsolescence, the useful life of the acquired assets, and other factors.
Added
Of this decrease, 220 basis points were due to product mix, 200 basis points were due to reduced production throughput and 130 basis points were due to charges for the write-off of inventory associated with our acquisition of Surgalign Holdings’ hardware and biologics business. This decrease was partially offset by increased leverage on higher revenue.
Removed
These significant estimates, judgments, inputs, and assumptions include, when applicable, the selection of an appropriate valuation method depending on the nature of the respective asset, such as the income approach, the market or sales comparison approach, or the cost approach; estimating future cash flows based on projected revenues and/or margins that we expect to generate subsequent to the acquisition; applying an appropriate discount rate to estimate the present value of those projected cash flows we expect to generate; selecting an appropriate terminal growth rate and/or royalty rate or estimating a customer attrition or technological obsolescence factor where necessary and appropriate given the nature of the respective asset; assigning an appropriate contributory asset charge where needed; determining an appropriate useful life and the related depreciation or amortization method for the respective asset; and assessing the accuracy and completeness of other historical financial metrics of the acquiree used as standalone inputs or as the basis for determining estimated projected inputs such as margins, customer attrition, and costs to hold and sell product.
Added
This increase is primarily attributable to $1.4 million of additional stock-based compensation, $0.5 million of additional severance expense, $0.6 million of additional hardware and software expense, and $0.3 million of additional amortization expense, in each case in 2024 as compared to 2023. These increases were partially offset by reduced expense of $0.4 million related to various compensation plans.
Removed
In determining the estimated fair value of intangible assets that are separately identifiable from goodwill, we typically utilize the income approach, which discounts the projected future cash flows using a discount rate that appropriately reflects the risks associated with the projected cash flows.
Added
This decrease relates primarily to $9.6 million of greater proceeds from private placements during the year ended December 31, 2023, partially offset by greater borrowings during year ended December 31, 2024 under our revolving line of credit, net of repayments.
Removed
Generally, we estimate the fair value of acquired customer relationships using the relief from royalty method under the income approach, which is based on the hypothetical royalty stream that would be received if we were to license the acquired trade name.
Added
The Term Amendment No. 1 increases the amount of term loans that may be borrowed by $5.0 million to a maximum of $22.0 million, which are fully drawn as of December 31, 2024.
Removed
For most other acquired intangible assets, we estimate fair value using the excess earnings method under the income approach, which is typically applied when cash flows are not directly generated by the asset, but rather, by an operating group that includes the particular asset.
Added
In addition, the Amendments No. 1 re-set the date certain fees payable in connection with optional prepayments are determined to May 14, 2024 and consequently extend such fees’ original expiration. The exit fees were increased by 2.50% to 6.50% of the principal amount borrowed pursuant to the Term Credit Agreement.
Removed
In certain instances, particularly in relation to developed technology or patents, we may utilize the cost approach depending on the nature of the respective intangible asset and the recency of the development or procurement of such technology.
Added
The terms of borrowing under the Credit Agreements otherwise remain materially unchanged.
Removed
The useful lives and amortization methods for the acquired intangible assets that are separately identifiable from goodwill are generally determined based on the period of expected cash flows used to measure the fair value of the acquired intangible assets and the nature of the use of the respective acquired intangible asset, adjusted as appropriate for entity-specific factors including legal, regulatory, contractual, competitive, economic, and/or other factors such as customer attrition rates and product or order lifecycles that may limit the useful life of the respective acquired intangible asset.
Removed
In determining the estimated fair value of acquired inventory, we typically utilize the cost approach for raw materials and the sales comparison approach for work in process, finished goods, and service parts.
Removed
In determining the estimated fair value of acquired property, plant, and equipment, we typically utilize the sales comparison approach or the cost approach depending on the nature of the respective asset and the recency of the construction or procurement of such asset. 69 We may refine the estimated fair values of assets acquired and liabilities assumed, if necessary, over a period not to exceed one year from the date of acquisition by taking into consideration new information that, if known as of the date of acquisition, would have affected the estimated fair values ascribed to the assets acquired and liabilities assumed.
Removed
The judgments made in determining the estimated fair value assigned to assets acquired and liabilities assumed, as well as the estimated useful life and depreciation or amortization method of each asset, can materially impact the net earnings of the periods subsequent to an acquisition through depreciation and amortization, and in certain instances through impairment charges, if the asset becomes impaired in the future.
Removed
During the measurement period, any purchase price allocation changes that impact the carrying value of goodwill will affect any measurement of goodwill impairment taken during the measurement period, if applicable.
Removed
If necessary, purchase price allocation revisions that occur outside of the measurement period are recorded within cost of sales, selling expenses or general and administrative expenses within our consolidated statements of operations depending on the nature of the adjustment.
Removed
As of December 31, 2023, our controls designed surrounding the completeness and accuracy of information utilized in determining the open balance sheet fair value of inventory, which includes the establishment of inventory reserves, related to the acquisition of the hardware and biologics business of Surgalign Holdings, Inc. were insufficient and did not operate at an appropriate level of precision.

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