Xtant Medical (XTNT) - 2022 Q3 - Quarterly Report

Cautionary Statement Regarding Forward-Looking Statements This section outlines the nature of forward-looking statements within the report and the inherent risks and uncertainties that could cause actual results to differ materially - The report contains forward-looking statements regarding future expectations, beliefs, intentions, or strategies, identified by words like 'anticipate,' 'believe,' 'expect,' 'intend,' 'may,' 'plan,' 'project,' and similar expressions[11] - These statements are subject to various risks and uncertainties, many beyond the company's control, which could cause actual results to differ materially. Key risks include labor shortages, inflation, increased interest rates, supply chain disruptions, the ongoing impact of COVID-19, ability to increase revenue, competition, reliance on third-party suppliers, and regulatory approvals[12][13][14] Part I. Financial Information This part encompasses the company's unaudited condensed consolidated financial statements, along with management's discussion and analysis of financial condition and results of operations Item 1. Financial Statements This section presents the unaudited condensed consolidated financial statements for Xtant Medical Holdings, Inc. and its subsidiaries, including the balance sheets, statements of operations, statements of equity, and statements of cash flows, along with detailed notes explaining the company's business, accounting policies, and specific financial line items Condensed Consolidated Balance Sheets This statement presents the company's financial position, detailing assets, liabilities, and equity at specific points in time Condensed Consolidated Balance Sheet Highlights (in thousands) | Metric | September 30, 2022 (Unaudited) | December 31, 2021 | | :--------------------------------- | :------------------------------ | :------------------ | | Total Assets | $56,049 | $54,692 | | Total Liabilities | $23,276 | $23,809 | | Total Stockholders' Equity | $32,773 | $30,883 | Condensed Consolidated Statements of Operations This statement reports the company's revenues, expenses, and net loss over specific periods Condensed Consolidated Statements of Operations Highlights (in thousands, except per share amounts) | Metric | Three Months Ended Sep 30, 2022 | Three Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | | :------------------------ | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Total Revenue | $14,462 | $13,777 | $42,699 | $41,293 | | Gross Profit | $7,896 | $7,191 | $23,831 | $24,795 | | Loss from Operations | $(1,900) | $(1,445) | $(5,031) | $(1,943) | | Net Loss | $(2,353) | $(1,804) | $(6,276) | $(2,566) | | Basic Net Loss Per Share | $(0.03) | $(0.02) | $(0.07) | $(0.03) | Condensed Consolidated Statements of Equity This statement details changes in the company's equity accounts over specific periods Condensed Consolidated Statements of Equity Highlights (in thousands) | Metric | September 30, 2022 | December 31, 2021 | | :------------------------- | :----------------- | :---------------- | | Total Stockholders' Equity | $32,773 | $30,883 | | Additional Paid-In Capital | $274,234 | $266,068 | | Accumulated Deficit | $(241,461) | $(235,185) | - Total Stockholders' Equity increased by $1,890 thousand from December 31, 2021, to September 30, 2022, primarily due to a private placement of common stock and warrants ($5,225 thousand and $1,116 thousand, respectively) and stock-based compensation ($1,825 thousand), partially offset by a net loss of $(6,276) thousand[20][22] Condensed Consolidated Statements of Cash Flows This statement summarizes the cash inflows and outflows from operating, investing, and financing activities over specific periods Condensed Consolidated Statements of Cash Flows Highlights (Nine Months Ended September 30, in thousands) | Activity | 2022 | 2021 | | :------------------------ | :-------- | :-------- | | Operating activities | $(3,053) | $16 | | Investing activities | $(1,137) | $(1,295) | | Financing activities | $3,406 | $17,552 | | Net change in cash | $(784) | $16,273 | | Cash at beginning of period | $18,387 | $2,341 | | Cash at end of period | $17,603 | $18,614 | Notes to Unaudited Condensed Consolidated Financial Statements These notes provide detailed explanations of the company's business, significant accounting policies, and breakdowns of various financial statement line items, including revenue, receivables, inventories, debt, equity, and commitments, offering crucial context for the condensed consolidated financial statements (1) Business Description, Basis of Presentation and Summary of Significant Accounting Policies This note describes the company's business, the basis of financial statement presentation, and its key accounting policies - Xtant Medical Holdings, Inc. is a global medical technology company focused on designing, developing, and commercializing orthobiologics and spinal implant systems for spinal fusion procedures[24] - The COVID-19 pandemic has negatively impacted revenues due to deferred elective procedures, diverted hospital resources, and limited access for sales representatives, with potential for continued adverse effects on business and supply chain[25] - On August 25, 2022, the company closed the first tranche of a private placement, selling approximately 14.1 million shares of common stock and warrants for ~3.5 million shares, generating net cash proceeds of approximately $6.3 million. A second tranche closed on October 7, 2022, raising an additional $3.0 million[29][30] (2) Revenue This note details the company's revenue recognition policies and provides a breakdown of revenue by product line - The company generates most of its U.S. revenue from independent commissioned sales agents, consigning orthobiologics products to hospitals and spinal implant sets to agents. Revenue is recognized when control of goods is transferred to the customer, typically upon receipt of a hospital purchase order[39][41] Revenue by Product Line (in thousands) | Product Line | Three Months Ended Sep 30, 2022 | Percentage of Total Revenue | Three Months Ended Sep 30, 2021 | Percentage of Total Revenue | | :-------------- | :------------------------------ | :-------------------------- | :------------------------------ | :-------------------------- | | Orthobiologics | $12,046 | 83% | $10,795 | 78% | | Spinal implant | $2,416 | 17% | $2,948 | 22% | | Other revenue | $— | 0% | $34 | 0% | | Total revenue | $14,462 | 100% | $13,777 | 100% | | Product Line | Nine Months Ended Sep 30, 2022 | Percentage of Total Revenue | Nine Months Ended Sep 30, 2021 | Percentage of Total Revenue | | :-------------- | :----------------------------- | :-------------------------- | :----------------------------- | :-------------------------- | | Orthobiologics | $34,614 | 81% | $31,264 | 76% | | Spinal implant | $8,075 | 19% | $9,929 | 24% | | Other revenue | $10 | 0% | $100 | 0% | | Total revenue | $42,699 | 100% | $41,293 | 100% | (3) Receivables This note provides information on the company's accounts receivable and the allowance for credit losses Allowance for Credit Losses Activity (in thousands) | Metric | September 30, 2022 | September 30, 2021 | | :------------------------------------ | :----------------- | :----------------- | | Balance at January 1 | $552 | $653 | | Provision for current expected credit losses | $191 | $(63) | | Write-offs charged against allowance | $(173) | $(36) | | Balance at March 31 | $570 | $554 | | Provision for current expected credit losses | $(49) | $(81) | | Write-offs charged against allowance | $(11) | $(3) | | Balance at June 30 | $510 | $470 | | Provision for current expected credit losses | $54 | $118 | | Write-offs charged against allowance | $(15) | $(12) | | Balance at September 30 | $549 | $576 | (4) Inventories This note details the composition of the company's inventories, including raw materials, work in process, and finished goods Inventories (in thousands) | Category | September 30, 2022 | December 31, 2021 | | :-------------- | :----------------- | :---------------- | | Raw materials | $5,121 | $5,613 | | Work in process | $957 | $571 | | Finished goods | $10,915 | $11,761 | | Total | $16,993 | $17,945 | (5) Property and Equipment, Net This note presents the company's property and equipment, net of accumulated depreciation Property and Equipment, Net (in thousands) | Category | September 30, 2022 | December 31, 2021 | | :------------------------ | :----------------- | :---------------- | | Total cost | $23,636 | $22,381 | | Less: accumulated depreciation | $(17,967) | $(17,169) | | Property and equipment, net | $5,669 | $5,212 | - Depreciation expense for property and equipment was $0.4 million for the three months ended September 30, 2022, compared to $0.3 million for the same period in 2021. For the nine months, it was $1 million for both 2022 and 2021[45] (6) Intangible Assets This note details the company's intangible assets, net of accumulated amortization Intangible Assets (in thousands) | Category | September 30, 2022 | December 31, 2021 | | :------------------------ | :----------------- | :---------------- | | Patents | $807 | $847 | | Accumulated amortization | $(449) | $(447) | | Intangible assets, net | $358 | $400 | (7) Accrued Liabilities This note provides a breakdown of the company's accrued liabilities Accrued Liabilities (in thousands) | Category | September 30, 2022 | December 31, 2021 | | :-------------------------------- | :----------------- | :---------------- | | Cash compensation/commissions payable | $3,844 | $3,184 | | Other accrued liabilities | $1,177 | $1,165 | | Accrued liabilities | $5,021 | $4,349 | (8) Debt This note details the company's long-term debt, including terms, amendments, and effective interest rates Long-Term Debt (in thousands) | Category | September 30, 2022 | December 31, 2021 | | :---------------------------------------- | :----------------- | :---------------- | | Amounts due under the Term Facility | $12,000 | $12,000 | | Accrued end-of-term payments | $182 | $83 | | Less: unamortized debt issuance costs | $(221) | $(296) | | Less: current maturities | $(1,335) | $— | | Long-term debt | $10,626 | $11,787 | - The term loan agreement was amended on March 7, 2022, to waive the minimum adjusted EBITDA requirement if liquidity exceeds $14 million and to reset certain prepayment fees. The final payment fees were increased by 25 basis points[48] - Effective rates as of September 30, 2022, were 11.53% for the term loan and 7.07% for the revolving credit agreement. The reference rate for credit agreements transitioned from LIBOR to term SOFR on October 27, 2022, effective November 1, 2022[49][50] (9) Stock-Based Compensation This note describes the company's stock-based compensation plans and activity for stock options and restricted stock units Stock Option Activity (Nine Months Ended September 30) | Metric | 2022 Shares | 2022 Avg. Exercise Price | 2021 Shares | 2021 Avg. Exercise Price | | :------------------------- | :---------- | :----------------------- | :---------- | :----------------------- | | Outstanding at January 1 | 3,201,666 | $1.80 | 2,190,892 | $2.25 | | Granted | 109,164 | $0.65 | 1,012,083 | $1.27 | | Cancelled or expired | (443,125) | $2.39 | (269) | $314.19 | | Outstanding at September 30 | 2,867,705 | $1.66 | 3,202,706 | $1.92 | | Exercisable at September 30 | 828,978 | $2.37 | 210,028 | $9.02 | Restricted Stock Unit Activity (Nine Months Ended September 30) | Metric | 2022 Shares | 2022 Avg. Fair Value at Grant Date | 2021 Shares | 2021 Avg. Fair Value at Grant Date | | :------------------------- | :---------- | :--------------------------------- | :---------- | :--------------------------------- | | Outstanding at January 1 | 2,970,104 | $1.39 | 2,503,698 | $1.54 | | Granted | 1,898,808 | $0.53 | 1,249,002 | $1.27 | | Vested | (851,955) | $1.33 | (349,572) | $1.92 | | Cancelled | (318,805) | $1.38 | — | — | | Outstanding at September 30 | 3,698,152 | $0.96 | 3,403,128 | $1.40 | - Shareholders approved an amendment to the 2018 Equity Incentive Plan on October 26, 2022, increasing available common stock shares by 8,500,000[51] (10) Warrants This note provides details on the company's outstanding warrants, including their terms and valuation - Warrants issued in the August 25, 2022 private placement have an exercise price of $0.48 per share, are immediately exercisable, and expire on the five-year anniversary of the First Closing. They include customary anti-dilution provisions and a buy-out right in certain acquisition scenarios[31][52] - The fair value of the warrants was determined using a Black-Scholes model, with significant assumptions including a 5-year contractual term and 107% estimated stock volatility[53] Common Stock Warrant Activity (Nine Months Ended September 30, 2022) | Metric | Common Stock Warrants | Weighted Average Exercise Price | | :------------------------- | :-------------------- | :------------------------------ | | Outstanding at January 1, 2022 | 7,111,112 | $2.29 | | Issued | 3,515,079 | $0.48 | | Outstanding at September 30, 2022 | 10,626,191 | $1.69 | (11) Commitments and Contingencies This note outlines the company's lease commitments and potential legal contingencies - The company leases three office facilities in Belgrade, Montana, with lease terms extended through October 2025 for two facilities. The weighted-average remaining lease term as of September 30, 2022, was 3.1 years[55] Present Value of Long-term Leases (in thousands) | Category | September 30, 2022 | | :-------------------------------- | :----------------- | | Right-of-use assets, net | $1,490 | | Current portion of lease liability | $443 | | Lease liability, less current portion | $1,094 | | Total lease liability | $1,537 | - The company is subject to various claims and legal actions in the ordinary course of business but does not believe their ultimate resolution will have a material adverse effect on its financial position, results of operations, or cash flows[57] (12) Income Taxes This note discusses the company's income tax position, including deferred tax assets and valuation allowances - A valuation allowance has been established against the entire deferred income tax asset balance due to uncertainty regarding the company's ability to generate future taxable income[60] (13) Supplemental Disclosure of Cash Flow Information This note provides additional details on cash paid for interest and non-cash investing and financing activities Supplemental Cash Flow Information (Nine Months Ended September 30, in thousands) | Category | 2022 | 2021 | | :-------------------------------------------- | :----- | :----- | | Cash paid during the period for: Interest | $1,022 | $485 | | Non-cash activities: Fixed assets acquired under finance lease | $159 | $163 | | Non-cash activities: Revaluation of lease liability and right of use asset | $234 | $— | (14) Related Party Transactions This note discloses transactions and relationships with related parties, including significant stockholders - OrbiMed Advisors LLC affiliated funds (Royalty Opportunities and ROS) beneficially own 72% of the Company's common stock. All related party transactions are reviewed and approved by the Audit Committee or disinterested Board members[63][64] (15) Segment and Geographic Information This note provides information on the company's operating segments and revenue breakdown by geographic area - The company operates in a single reportable segment: the development, manufacture, and marketing of orthopedic medical products and devices[65] Total Revenue by Major Geographic Area (in thousands) | Geographic Area | Three Months Ended Sep 30, 2022 | Three Months Ended Sep 30, 2021 | | :-------------- | :------------------------------ | :------------------------------ | | United States | $14,370 | $13,629 | | Rest of world | $92 | $148 | | Total revenue | $14,462 | $13,777 | | Geographic Area | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | | :-------------- | :----------------------------- | :----------------------------- | | United States | $42,089 | $40,813 | | Rest of world | $610 | $480 | | Total revenue | $42,699 | $41,293 | - Approximately 99% of sales for both the three and nine months ended September 30, 2022 and 2021, were in the United States[66] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the company's financial performance, condition, and future outlook, including operational highlights, financial trends, the impact of the COVID-19 pandemic, and a detailed discussion of liquidity and capital resources Business Overview This section provides an overview of Xtant Medical's business, products, sales channels, and key growth initiatives - Xtant develops, manufactures, and markets regenerative medicine products and medical devices for orthopedic and neurological surgeons, focusing on orthobiologics for bone healing and spinal implant systems[68] - The company's sales channel in the U.S. relies on independent commissioned agents and stocking distributors, supported by a national accounts program for GPOs and IDNs. International sales are through stocking distribution partners in Canada, Mexico, South America, Australia, and certain Pacific region countries[69] - Key growth initiatives include introducing new products (e.g., OsteoVive® Plus, OsteoFactor™), expanding the distribution network, penetrating adjacent markets, and leveraging technology and strategic acquisitions. Penetration into adjacent markets has slowed due to limited production labor[70][77] Recent Private Placement This section details the company's recent private placement of common stock and warrants, including proceeds and intended use - On August 25, 2022, the company completed the first tranche of a private placement, issuing approximately 14.1 million common shares and warrants for 3.5 million shares at $0.48 per share, yielding $6.3 million in net cash proceeds[71] - A second tranche closed on October 7, 2022, selling an additional 6.2 million common shares and warrants for 1.6 million shares, raising $3.0 million. Proceeds are intended for working capital and general corporate purposes[71][85] Impact of the COVID-19 Pandemic This section discusses the negative impact of the COVID-19 pandemic on the company's revenues, supply chain, and operations - The COVID-19 pandemic has negatively impacted revenues due to cancellations/deferrals of elective procedures, diversion of hospital resources, and staffing shortages, particularly in Q1 2022[73][74] - The pandemic has also disrupted the global economy and supply chain, affecting the company's ability to obtain raw materials and impacting distributors, sales representatives, customers, and suppliers[75] - The full extent of future impact remains uncertain, depending on new variants, vaccine effectiveness, government restrictions, and hospital capacity. Continued revenue decline could lead to impairment charges and inventory write-offs[76] Results of Operations This section analyzes the company's financial performance, including revenue, cost of sales, gross profit, and operating expenses for the reported periods Revenue This section analyzes the company's revenue performance and key drivers for the reported periods Total Revenue (in millions) | Period | 2022 | 2021 | Change (%) | | :----------------------------------- | :---- | :---- | :--------- | | Three Months Ended September 30 | $14.5 | $13.8 | +5% | | Nine Months Ended September 30 | $42.7 | $41.3 | +3% | - Revenue increases are primarily attributed to the introduction of new products, specifically OsteoVive® Plus and OsteoFactor™[77] Cost of Sales and Gross Profit This section analyzes the company's cost of sales and gross profit margins, identifying factors influencing changes Cost of Sales and Gross Profit (in millions, except percentages) | Metric | Three Months Ended Sep 30, 2022 | Three Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | | :----------------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Cost of Sales | $6.6 | $6.6 | $18.9 | $16.5 | | Gross Profit as a percentage of revenue | 54.6% | 52.2% | 55.8% | 60.0% | - Cost of sales for the nine months ended September 30, 2022, increased by 14% ($2.4 million) primarily due to a $1.0 million increase in reserve expense for excess and obsolete inventory and $0.6 million in additional salaries and wages[78] - Gross profit percentage increased for the three-month comparison due to sales mix (higher margin independent agent sales) and better absorption of labor/overhead, but decreased for the nine-month comparison due to higher product costs and increased inventory reserve expense. Higher product costs are expected to continue impacting gross profit[79] General and Administrative This section analyzes changes in general and administrative expenses and their underlying causes General and Administrative Expenses (in millions) | Period | 2022 | 2021 | Change ($M) | Change (%) | | :----------------------------------- | :---- | :---- | :---------- | :--------- | | Three Months Ended September 30 | $3.7 | $3.1 | +$0.6 | +20% | | Nine Months Ended September 30 | $11.5 | $10.3 | +$1.2 | +12% | - The three-month increase was mainly due to $0.3 million in product registrations and $0.3 million in employee compensation. The nine-month increase included $0.3 million in bad debt, $0.3 million in product registrations, $0.3 million in stock-based compensation, and $0.5 million for ERP system upgrades, partially offset by $0.6 million in legal settlement expenses in the prior year[80] Sales and Marketing This section analyzes changes in sales and marketing expenses, primarily driven by commissions and incentives Sales and Marketing Expenses (in millions) | Period | 2022 | 2021 | Change ($M) | Change (%) | | :----------------------------------- | :---- | :---- | :---------- | :--------- | | Three Months Ended September 30 | $5.9 | $5.3 | +$0.6 | +11% | | Nine Months Ended September 30 | $16.7 | $15.7 | +$1.0 | +6% | - The increase for both periods was primarily driven by additional independent agent sales commissions and incentives due to higher revenues[81] Research and Development This section analyzes changes in research and development expenses Research and Development Expenses (in millions) | Period | 2022 | 2021 | Change ($M) | Change (%) | | :----------------------------------- | :---- | :---- | :---------- | :--------- | | Three Months Ended September 30 | $0.2 | $0.3 | -$0.1 | -13% | | Nine Months Ended September 30 | $0.7 | $0.7 | $0.0 | 0% | - The three-month decrease was primarily due to reduced equipment purchases[82] Interest Expense This section analyzes changes in interest expense, attributing them to base interest rate increases and debt refinancing Interest Expense (in millions) | Period | 2022 | 2021 | Change ($M) | | :----------------------------------- | :---- | :---- | :---------- | | Three Months Ended September 30 | $0.4 | $0.3 | +$0.1 | | Nine Months Ended September 30 | $1.2 | $0.5 | +$0.7 | - The increase in interest expense for the three-month period was due to increases in the base interest rate. The nine-month increase resulted from debt refinancing in May 2021, as no interest expense related to debt instruments was incurred in 2021 prior to that[84] - Interest expense is expected to increase in future periods due to rising interest rates, with an estimated $0.1 million annual increase for every 75 basis points rise in the reference rate[84] Liquidity and Capital Resources This section discusses the company's working capital, cash flows, credit facilities, and future capital requirements Working Capital This section analyzes the company's working capital position and changes in cash and cash equivalents Working Capital (in thousands) | Metric | September 30, 2022 | December 31, 2021 | | :------------------------ | :----------------- | :---------------- | | Cash and cash equivalents | $17,603 | $18,387 | | Total current assets | $45,108 | $44,330 | | Total current liabilities | $11,359 | $11,077 | | Net working capital | $33,749 | $33,253 | - The decrease in cash and cash equivalents was primarily due to net cash used in operations and reduced borrowing on the revolving line of credit, partially offset by net proceeds from the August 2022 private placement[85] Cash Flows This section analyzes the company's cash flows from operating, investing, and financing activities Net Cash Flow Activities (Nine Months Ended September 30, in millions) | Activity | 2022 | 2021 | | :------------------------ | :---- | :---- | | Net cash used in operating activities | $(3.1) | $0.0 | | Net cash used in investing activities | $(1.1) | $(1.3) | | Net cash provided by financing activities | $3.4 | $17.6 | - The increase in net cash used in operating activities in 2022 was primarily due to an increased net loss. Financing activities in 2022 were driven by $6.3 million from the August private placement, while 2021 saw $18.4 million from a February private placement[86][88] Current and Prior Credit Facilities This section details the company's term and revolving credit agreements, including terms, availability, and compliance with covenants - The company has a Term Credit Agreement for $12.0 million and a Revolving Credit Agreement for up to $8.0 million with MidCap Financial Trust, both maturing on May 1, 2026[89][90][91] - As of September 30, 2022, $0.7 million was outstanding and $7.3 million was available under the Revolving Facility. The reference rate transitioned from LIBOR to term SOFR effective November 1, 2022[92] - The credit agreements contain customary affirmative and negative covenants, including minimum net product revenue, adjusted EBITDA, and liquidity levels. The company was in compliance with all covenants as of September 30, 2022[94] Cash Requirements This section outlines the company's anticipated cash requirements and potential needs for additional financing - The company believes its $17.4 million cash and cash equivalents (as of Sep 30, 2022), along with proceeds from the second tranche of the private placement and available credit, will be sufficient to meet anticipated cash requirements through at least November 2023[96] - Additional capital may be required or sought through equity/debt financings or strategic collaborations. Such financing could dilute current stockholders, and obtaining consent from existing lenders/investors may be required[97][98] Critical Accounting Estimates This section highlights the significant accounting estimates and assumptions made in preparing the financial statements - The preparation of financial statements requires management to make estimates and assumptions, which are based on historical experience and other reasonable factors. Actual results may differ materially from these estimates[100] - There have been no changes in critical accounting estimates for the three and nine months ended September 30, 2022, compared to those described in the Annual Report on Form 10-K for the year ended December 31, 2021[101] Item 3. Quantitative and Qualitative Disclosures About Market Risk As a smaller reporting company, Xtant Medical Holdings, Inc. is not required to provide the information typically mandated for this item - The company is a smaller reporting company and is not required to provide quantitative and qualitative disclosures about market risk[102] Item 4. Controls and Procedures This section addresses the effectiveness of the company's disclosure controls and procedures, acknowledging their inherent limitations, and reports on any material changes in internal control over financial reporting, noting the implementation of a new ERP system Limitations on Effectiveness of Controls and Procedures This section acknowledges the inherent limitations of any control system in providing absolute assurance of achieving objectives - Management acknowledges that any controls and procedures, regardless of design, can only provide reasonable assurance of achieving desired control objectives due to inherent limitations and resource constraints[103] Evaluation of Disclosure Controls and Procedures This section reports on the effectiveness of the company's disclosure controls and procedures as assessed by management - As of September 30, 2022, the principal executive officer and principal financial officer concluded that the company's disclosure controls and procedures were effective[104] Changes in Internal Control over Financial Reporting This section reports on any material changes in the company's internal control over financial reporting during the period - During the three months ended September 30, 2022, the company implemented a new enterprise resource planning (ERP) system. No other material changes in internal control over financial reporting occurred during this period[105] Part II. Other Information This part covers various other disclosures, including legal proceedings, risk factors, equity sales, defaults, and exhibits Item 1. Legal Proceedings This section states that there are no legal proceedings applicable to the company for the reported period - Not applicable[106] Item 1A. Risk Factors As a smaller reporting company, Xtant Medical Holdings, Inc. is not required to provide the information typically mandated for this item - The company is a smaller reporting company and is not required to provide risk factors[107] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section confirms that no unregistered equity securities were sold during the quarter ended September 30, 2022, other than those issued in connection with the reported private placement - No unregistered equity securities were sold during the quarter ended September 30, 2022, other than the issuance of common stock and warrants in connection with the private placement, as reported in a Current Report on Form 8-K[108] Item 3. Defaults Upon Senior Securities This section states that there are no defaults upon senior securities applicable to the company for the reported period - Not applicable[109] Item 4. Mine Safety Disclosures This section states that there are no mine safety disclosures applicable to the company for the reported period - Not applicable[110] Item 5. Other Information This section reports an amendment to the company's term loan and revolving credit agreements, transitioning the reference rate from LIBOR to term SOFR, effective November 1, 2022 - On October 27, 2022, the company's term loan and revolving credit agreements were amended to transition the reference rate from LIBOR to term SOFR, effective for amounts outstanding and draws on or after November 1, 2022[111] Item 6. Exhibits This section lists all exhibits filed or furnished with the Quarterly Report on Form 10-Q, including corporate governance documents, private placement agreements, credit agreement amendments, and certifications - The report includes various exhibits such as Amended and Restated Certificate of Incorporation, Bylaws, Form of Warrant, Securities Purchase Agreement, Registration Rights Agreement, Letter Agreement, and Amendment No. 2 to both Term Loan and Revolving Loan Credit Agreements[113][114] - Certifications from the Chief Executive Officer and Chief Financial Officer, pursuant to the Exchange Act and Sarbanes-Oxley Act, are also filed/furnished[117]