Xtant Medical (XTNT) - 2021 Q4 - Annual Report

Cautionary Statement Regarding Forward-Looking Statements This section advises readers on the inherent risks and uncertainties associated with forward-looking statements within the report Forward-Looking Statements Disclosure This section highlights that the 10-K report contains forward-looking statements, which are not guarantees of future events and are subject to risks and uncertainties - The report contains forward-looking statements, identified by words like 'expectations,' 'hopes,' 'beliefs,' 'intentions,' or 'strategies,' and any projections or forecasts of future events[11] - Forward-looking statements are not predictions or guarantees and are based on currently available operating, financial, and competitive information, as well as current expectations and beliefs[12] - These statements involve risks, uncertainties, or assumptions, many beyond the company's control, which could cause actual results to differ materially. Specific risk factors are detailed in 'Part I. Item 1.A. Risk Factors'[12] PART I This part provides a comprehensive overview of the company's business, risk factors, properties, and legal proceedings Item 1. Business Xtant Medical Holdings, Inc. is a global medical technology company specializing in orthobiologics and spinal implant fixation systems for spinal fusion procedures - Xtant Medical Holdings, Inc. is a global medical technology company focused on designing, developing, and commercializing orthobiologics and spinal implant fixation systems for spinal fusion[15] - The company promotes and sells products in the U.S. through independent distributors and stocking agents, supported by direct employees, and internationally through distribution partners in Canada, Mexico, South America, Australia, and certain Pacific region countries[16][27][28] - Key growth initiatives include introducing new products (4 launched in 2021), expanding the distribution network (40+ new agents in 2021), penetrating adjacent markets (foot and ankle, cranio-maxilofacial, oncology, joint reconstruction, trauma), and leveraging growth platforms with technology and strategic acquisitions[17] Overview Xtant Medical is a global medical technology company providing orthobiologics and spinal implant fixation systems for various spinal disorders - Xtant Medical Holdings, Inc. is a global medical technology company focused on orthobiologics and spinal implant fixation systems for complex spine, deformity, and degenerative procedures[15] - Products are used by orthopedic spine surgeons and neurosurgeons for various spinal disorders in the cervical, thoracolumbar, and interbody spine[15] - Distribution channels include independent distributors and stocking agents in the U.S., national accounts programs, and international partners in Canada, Mexico, South America, Australia, and certain Pacific region countries[16] Industry and Market Overview The orthopedic biomaterials market involves implantable materials aiding bone healing, often substituting autografts, with fixation products providing stability - The orthopedic biomaterials market involves organic, inorganic, or synthetic materials implanted to aid healing, augment bone tissue, compensate for depletion, and restore structure[18] - These materials often serve as substitutes for autograft materials, which are harvested from the patient[18] - Fixation products (e.g., plates, screws, rods) are crucial for reestablishing stability, immobilizing regenerative sites, relieving stress, and holding biomaterials in place[19] Our Orthobiologics Products Xtant offers a range of biomaterial products like OsteoSponge and OsteoSelect DBM putty, along with processed sports and spinal allografts - Xtant's biomaterial products include OsteoSponge, OsteoSponge SC, OsteoSelect DBM putty, OsteoSelect Plus DBM putty, OsteoWrap, 3Demin products, OsteoFactor, and OsteoVive Plus[20][23] - OsteoSponge, made from 100% human bone, provides a natural scaffold for cellular in-growth and exposes bone-forming proteins, suitable for various orthopedic practices[20] - The company also processes and distributes sports allografts, milled spinal allografts, and traditional allografts for multi-disciplinary applications[21] Our Spinal Implant Products Xtant provides a comprehensive line of spinal implant products for cervical, thoracolumbar, and sacroiliac conditions, including trauma and degeneration - Xtant offers a comprehensive line of spinal implant products for cervical, thoracolumbar, and sacroiliac conditions, including trauma, degeneration, deformity, and tumor treatment[22][29] - Key cervical products include the Certex Spinal Fixation System and the Spider Cervical Plating System[24] - Thoracolumbar and interbody products include the Axle Interspinous Fusion System, Silex Sacroiliac Joint Fusion System, Xpress Minimally Invasive Pedicle Screw System, Fortex Pedicle Screw System, Calix PEEK interbody spacers, Axle-X Interspinous Fusion System, Irix-C Cervical Integrated Fusion System, and Irix-A Lumbar Integrated Fusion System[29] Sales and Marketing The company distributes products in the U.S. through over 300 independent sales agents and internationally via partners, leveraging national accounts programs - The company distributes products in the U.S. through an extensive network of over 300 commissioned independent sales agents and stocking agents as of December 31, 2021[27] - A national accounts program provides agents access to Integrated Delivery Network (IDN) hospitals and Group Purchasing Organizations (GPOs), with biologics contracts with major GPOs like Vizient, Premier, and HealthTrust Purchasing Group[27] - International distribution partners are located in Canada, Mexico, South America, Australia, and certain Pacific region countries, with no operations or sales in Europe[28] Donor Procurement Xtant's donor procurement mission focuses on honoring donation to help patients, expanding its network to meet increasing demand for biologics - Xtant's mission for donor procurement is 'Honoring the gift of donation, by helping our patients live as full, and complete a life as possible'[30] - The company has agreements with multiple recovery agencies and seeks to expand its network for donor tissue to meet anticipated increased demand for biologics products[30] Competition The fixation and orthobiologics market is highly competitive, dominated by large players holding approximately 80% market share - The market for fixation and orthobiologics is highly competitive, dominated by large players like Medtronic, Johnson & Johnson, Zimmer Biomet, Stryker, Nuvasive, and Globus Medical, which collectively hold approximately 80% market share[31] - Xtant competes with these large companies, other public and private companies (e.g., Surgalign, SeaSpine, OrthoFix, Alphatec), and tissue banks that do not offer spinal fixation products (e.g., AlloSource, LifeNet Health, MTF Biologics)[31] Intellectual Property Xtant relies on patents, trademarks, and trade secrets to maintain its competitive position, actively developing and reviewing its intellectual property strategy - Xtant relies on patents, trademarks, trade secrets, and other proprietary rights to maintain its competitive position and develops an intellectual property strategy by reviewing third-party rights[32] - As of December 31, 2021, the company's fixation patent portfolio includes 60 issued patents globally, and its biologics patent portfolio includes 19 issued patents globally and 7 pending patent applications[35] - The company owns several registered trademarks, including OsteoSponge®, OsteoVive®, SILEX®, X-SPINE®, and XTANT®[36] Government Regulation Xtant is subject to extensive government regulations, including FDA and AATB standards for HCT/Ps and medical devices, alongside healthcare fraud and abuse laws - Xtant is registered with the FDA as a manufacturer of human cellular and tissue products (HCT/Ps) and medical devices, and is an accredited member of the American Association of Tissue Banks (AATB)[38] - HCT/Ps are regulated under Section 361 of the Public Health Service Act and 21 CFR Part 1271, requiring annual registration, donor eligibility screening, Good Tissue Practices (cGTP), and adverse reaction reporting[40][42][43] - Medical devices, such as spinal hardware, are regulated by the FDA under the Federal Food, Drug, and Cosmetic Act, classified into three classes based on risk, with most requiring 510(k) clearance[45][46][47][49] - The company is subject to federal and state healthcare fraud and abuse laws, false claims laws, and physician payment transparency laws (e.g., Federal Anti-Kickback Statute, Federal False Claims Act, Physician Payments Sunshine Act)[60][62][63][65] - Sales volumes and fees depend on coverage and reimbursement from third-party payors (private insurers, Medicare, Medicaid), which increasingly review and challenge prices for procedures and medical products[67][69] Human Capital Xtant's mission is to honor donation by enabling patients to live full lives, supported by core values and a focus on employee well-being and development - Xtant's mission is to 'honor the gift of donation, by allowing our patients to live as full, and complete a life, as possible,' guided by core values including Quality, Integrity and Compliance, Accountability & Ownership, Teamwork & Continuous Improvement, and Respect the Gift of Donation[73][77] - As of December 31, 2021, the company had 118 employees (116 full-time), with significant portions in operations (54), sales and marketing (20), and administrative functions (29)[74] - The company provides competitive compensation and benefits, including annual bonuses, 401(k) with matching, tuition assistance, and health/wellness programs, and fosters employee engagement and development through a learning management system[78][80] Corporate Information Xtant Medical, incorporated in 2000 as Bacterin, Inc., became a 'controlled company' in 2015 after acquiring X-spine Systems, Inc., with OrbiMed-affiliated funds owning 83.7% of common stock - Xtant Medical Holdings, Inc. was incorporated in January 2000 as Bacterin, Inc., and changed its name in 2015 after acquiring X-spine Systems, Inc. for approximately $60 million cash, $13 million debt repayment, and 4.24 million shares[83] - As of December 31, 2021, OrbiMed-affiliated funds (Royalty Opportunities and ROS) collectively own approximately 83.7% of outstanding common stock, making Xtant a 'controlled company' under NYSE American rules[84] Item 1A. Risk Factors This section outlines various material risks that could adversely affect Xtant Medical's business, financial condition, operating results, and stock price - The COVID-19 pandemic has adversely affected business, operating results, and financial condition due to deferred elective procedures, staffing shortages, and supply chain disruptions, with revenues declining in H2 2021 and continuing into 2022[99][100][101] - The company faces intense competition from larger players with greater resources, and its ability to innovate and introduce new products is crucial for maintaining market share[107][108] - Extensive governmental regulation, including FDA clearances, healthcare fraud and abuse laws, and foreign regulations, poses significant compliance costs and risks of enforcement actions or market withdrawal[126][130][140] - Substantially all revenue is generated through independent sales agents and distributors, creating a dependency risk if relationships are lost or agents fail to comply with company standards[172] - Xtant has a history of net losses and may require additional financing, which might not be available on favorable terms and could dilute current stockholders or impose restrictive covenants[180][181][182] Item 1B. Unresolved Staff Comments There are no unresolved staff comments to report for the period - No unresolved staff comments were reported[236] Item 2. Properties Xtant Medical's primary operations are based in Belgrade, Montana, where it leases three facilities for headquarters, manufacturing, and laboratory activities - Xtant's headquarters and manufacturing facility are located at 664 Cruiser Lane, Belgrade, Montana, leased through October 2025, and is an FDA registered facility with Class 10,000 (ISO 7) environmentally controlled area[237][238] - Additional facilities in Belgrade, Montana, include 17,700 sq ft at 600 Cruiser Lane (with Class 100 clean rooms, diagnostics, and microbiology labs, leased through August 2023) and 21,000 sq ft at 732 Cruiser Lane (with a Class 1,000 clean room, leased through January 2024)[238] - The company also leases approximately 100 square feet of office space in Minnetonka, Minnesota[239] Item 3. Legal Proceedings Information regarding Xtant Medical's legal proceedings is detailed in Note 11 – Commitments and Contingencies within the consolidated financial statements - Legal proceedings are discussed in Note 11 – Commitments and Contingencies in the notes to the consolidated financial statements[240] Item 4. Mine Safety Disclosures This item is not applicable to Xtant Medical Holdings, Inc - This item is not applicable[241] PART II This part details the company's market for common equity, financial condition, results of operations, and financial statements Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Xtant Medical's common stock is listed on the NYSE American under 'XTNT', with 173 holders of record as of March 8, 2022, and no cash dividends paid - Xtant Medical's common stock is listed on the NYSE American under the ticker symbol 'XTNT'[243] - As of March 8, 2022, the company had 173 holders of record[243] - The company has not paid any cash dividends and does not expect to in the foreseeable future, as its credit agreements with MidCap preclude dividend payments[244] - No unregistered equity securities were sold, and no equity securities were purchased by the issuer or affiliated purchasers during the quarter ended December 31, 2021[245][246] Item 6. Reserved This item is reserved and contains no information - This item is reserved[247] Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides an overview of Xtant Medical's business, the impact of the COVID-19 pandemic, and a detailed analysis of its financial performance for 2021 and 2020 - Xtant develops, manufactures, and markets regenerative medicine products and medical devices for orthopedic and neurological surgeons, focusing on orthobiologics and spinal implants[249] - The COVID-19 pandemic negatively impacted elective procedures, staffing, and supply chains, causing revenues to decline in Q3 and Q4 2021 compared to prior periods, with continued impact into early 2022[252][254][255] - The company's liquidity position improved significantly, with cash and cash equivalents increasing to $18.4 million as of December 31, 2021, primarily due to a $18.4 million private placement in February 2021[268] Business Overview Xtant Medical develops, manufactures, and markets regenerative medicine products and medical devices for orthopedic and neurological surgeons, focusing on orthobiologics and spinal implants - Xtant Medical develops, manufactures, and markets regenerative medicine products and medical devices for domestic and international markets, serving orthopedic and neurological surgeons[249] - The company's products include orthobiologics for bone healing and implants/instrumentation for spinal disease treatment[249] - Key growth initiatives for 2021 and 2022 include introducing new products (4 launched in 2021), expanding the distribution network (40+ new agents in 2021), penetrating adjacent non-spine markets, and strategic acquisitions[251] Impact of the COVID-19 Pandemic The COVID-19 pandemic negatively impacted Xtant's revenues and sales due to deferred elective procedures, staffing shortages, and supply chain disruptions - The COVID-19 pandemic led to cancellations/deferrals of elective procedures, diversion of hospital resources, and staffing shortages, negatively impacting Xtant's revenues and sales efforts[252] - Revenues declined in Q3 and Q4 2021 compared to prior periods due to resurgences of COVID-19 variants, increased hospitalizations, and restrictions on elective procedures[254] - The pandemic also disrupted the global supply chain, affecting the ability to obtain raw materials and components, and adversely impacting distributors, sales representatives, and customers[255] Results of Operations Total revenue increased by 3.6% in 2021, but gross profit margin decreased due to higher costs and a shift towards lower-margin sales, while interest expense significantly declined Key Financial Results (2021 vs. 2020) | Metric | Year Ended Dec 31, 2021 (Amount in $ thousands) | % of Revenue (2021) | Year Ended Dec 31, 2020 (Amount in $ thousands) | % of Revenue (2020) | | :-------------------------------- | :------------------------------------- | :------------------ | :------------------------------------- | :------------------ | | Total Revenue | 55,263 | 100.0% | 53,337 | 100.0% | | Cost of Sales | 22,773 | 41.2% | 18,945 | 35.5% | | Gross Profit | 32,490 | 58.8% | 34,392 | 64.5% | | Total Operating Expenses | 36,344 | 65.8% | 35,143 | 65.9% | | Loss from Operations | (3,854) | (7.0)% | (751) | (1.4)% | | Interest expense | (995) | (1.8)% | (5,976) | (11.2)% | | Net Loss | (4,849) | (8.8)% | (7,023) | (13.2)% | | Basic Net Loss Per Share | (0.06) | - | (0.25) | - | - Total revenue increased by 3.6% to $55.3 million in 2021, primarily driven by a $2.4 million increase in private label and OEM orthobiologics sales, partially offset by a $1.0 million reduction in implant sales[259] - Gross profit margin decreased to 58.8% in 2021 from 64.5% in 2020, mainly due to increased under-absorption of labor and overhead (1.9%), sales mix shift towards lower-margin private label/OEM sales (1.3%), and higher production costs from prior periods (2.6%)[260][261] - Interest expense significantly decreased by $5.0 million to $1.0 million in 2021, a result of the October 1, 2020 debt restructuring that reduced outstanding principal and paid-in-kind interest by $61.7 million[266] Liquidity and Capital Resources Xtant's cash and cash equivalents significantly increased to $18.4 million in 2021 due to a private placement, and debt was refinanced with MidCap Financial Trust Working Capital Summary (in thousands) | Metric | December 31, 2021 | December 31, 2020 | | :-------------------------- | :------------------ | :------------------ | | Cash and cash equivalents | $18,387 | $2,341 | | Total current assets | $44,330 | $31,365 | | Total current liabilities | $11,077 | $25,649 | | Net working capital | $33,253 | $5,716 | - The increase in cash and cash equivalents to $18.4 million in 2021 was primarily due to $18.4 million net proceeds from a private placement of common stock and warrants in February 2021[268] - Net cash provided by operating activities was $0.4 million in 2021, an increase from $0.7 million used in 2020, mainly due to cash generation from inventory reduction initiatives[269] - On May 6, 2021, Xtant refinanced its debt with MidCap Financial Trust, securing a $12.0 million term loan and an $8.0 million revolving credit facility, both maturing on May 1, 2026[272][273][274] - The company believes its cash and credit facilities will meet anticipated cash requirements through at least March 2023, but may seek additional financing, which could dilute stockholders or impose new restrictions[281][282][283] Recent Accounting Pronouncements Information regarding recent accounting pronouncements is included in Note 1 to the consolidated financial statements - Information regarding recent accounting pronouncements is included in Note 1 to the consolidated financial statements[284] Critical Accounting Estimates Critical accounting estimates involve significant management judgment for goodwill, inventory valuation, and accounts receivable, with no goodwill impairment in 2021 or 2020 - Critical accounting estimates include goodwill and intangible assets, inventory valuation, and accounts receivable and allowances, all requiring significant management judgment and assumptions[285] - Goodwill is tested annually for impairment; no impairment was recorded in 2021 or 2020[287] - Inventory is valued at the lower of cost or net realizable value, with reserves for obsolescence and excess inventory based on usage, sales, and future demand. The total reserve was $10.3 million at December 31, 2021[290] - The allowance for doubtful accounts, including current expected credit loss (CECL), is estimated based on historical collection experience, creditworthiness, and economic conditions. The allowance was $0.6 million at December 31, 2021[292][293] - Management believes the company can continue as a going concern, with $18.4 million cash and credit facility availability sufficient through at least March 2023[295] Item 7A. Quantitative and Qualitative Disclosures About Market Risk This item is not applicable to Xtant Medical as it is a smaller reporting company - This item is inapplicable to Xtant as a smaller reporting company[296] Item 8. Financial Statements and Supplementary Data This section presents Xtant Medical's audited consolidated financial statements for 2021 and 2020, including statements of operations, balance sheets, and cash flows, along with detailed notes - The section includes the Report of Independent Registered Public Accounting Firm, Consolidated Statements of Operations, Consolidated Balance Sheets, Consolidated Statements of Changes in Stockholders' Equity (Deficit), and Consolidated Statements of Cash Flows[298] - The independent auditor, Plante & Moran, PLLC, issued an unqualified opinion on the financial statements for the two-year period ended December 31, 2021[301] - A critical audit matter identified was the valuation of inventory, due to the sensitivity of assumptions like product life cycle, sales forecasts, and competitor product introductions, especially with COVID-19 impacts[307][308][309] Consolidated Statements of Operations (in thousands) | Metric | Year Ended Dec 31, 2021 | Year Ended Dec 31, 2020 | | :------------------------------------------ | :---------------------- | :---------------------- | | Orthopedic product sales | $55,146 | $53,188 | | Other revenue | $117 | $149 | | Total Revenue | $55,263 | $53,337 | | Cost of Sales | $22,773 | $18,945 | | Gross Profit | $32,490 | $34,392 | | General and administrative | $14,449 | $13,503 | | Sales and marketing | $21,025 | $20,983 | | Research and development | $870 | $657 | | Total Operating Expenses | $36,344 | $35,143 | | Loss from Operations | $(3,854) | $(751) | | Interest expense | $(995) | $(5,976) | | Net Loss | $(4,849) | $(7,023) | | Basic Net Loss per share | $(0.06) | $(0.25) | | Dilutive Net Loss per share | $(0.06) | $(0.25) | Consolidated Balance Sheets (in thousands) | Asset/Liability | As of Dec 31, 2021 | As of Dec 31, 2020 | | :------------------------------------------ | :----------------- | :----------------- | | Cash and cash-equivalents | $18,243 | $2,341 | | Total current assets | $44,330 | $31,365 | | Property and equipment, net | $5,212 | $4,347 | | Goodwill | $3,205 | $3,205 | | Total Assets | $54,692 | $41,466 | | Accounts payable | $2,615 | $2,947 | | Accrued liabilities | $4,349 | $5,462 | | Line of credit | $3,620 | — | | Current portion of long-term debt | — | $16,797 | | Total current liabilities | $11,077 | $25,649 | | Long-term debt, plus premium and less issuance costs | $11,787 | — | | Total Liabilities | $23,809 | $26,952 | | Total Stockholders' Equity | $30,883 | $14,514 | Consolidated Statements of Cash Flows (in thousands) | Cash Flow Activity | Year Ended Dec 31, 2021 | Year Ended Dec 31, 2020 | | :------------------------------------------ | :---------------------- | :---------------------- | | Net cash provided by (used in) operating activities | $439 | $(731) | | Net cash used in investing activities | $(1,890) | $(1,304) | | Net cash provided by (used in) financing activities | $17,497 | $(861) | | Net change in cash and cash equivalents and restricted cash | $16,046 | $(2,896) | | Cash and cash equivalents and restricted cash at end of year | $18,387 | $2,341 | PART III This part covers corporate governance, executive and director compensation, security ownership, related party transactions, and accounting fees Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure There were no changes in or disagreements with accountants on accounting and financial disclosure - No changes in or disagreements with accountants on accounting and financial disclosure were reported[419] Item 9A. Controls and Procedures Management concluded Xtant Medical's disclosure controls and internal control over financial reporting were effective as of December 31, 2021 - As of December 31, 2021, Xtant Medical's disclosure controls and procedures were evaluated and deemed effective by management, including the CEO and Interim CFO[420] - Management concluded that the internal control over financial reporting was effective as of December 31, 2021, based on the COSO framework[422] - There were no material changes in the company's internal control over financial reporting during the fourth quarter ended December 31, 2021[423] Item 9B. Other Information On March 7, 2022, Xtant Medical amended its Credit Agreements with MidCap Financial Trust, waiving certain EBITDA requirements and adjusting fees - On March 7, 2022, Xtant Medical amended its Credit Agreements with MidCap Financial Trust[424] - The amendments include a waiver for the minimum adjusted EBITDA requirement if liquidity exceeds $14 million and no other event of default occurs[425] - The amendments also reset the date for certain optional prepayment fees and increased exit fees by 25 basis points[425] Item 10. Directors, Executive Officers and Corporate Governance This section details Xtant Medical's directors and executive officers, their biographies, and corporate governance structure, highlighting its 'controlled company' status Directors and Executive Officers (as of Feb 25, 2022) | Name | Age | Position | Director/Officer Since | | :------------- | :-- | :------------------------------------ | :--------------------- | | Jeffrey Peters | 53 | Chairman of the Board and Director | 2018 | | Sean E. Browne | 56 | President and Chief Executive Officer and Director | 2019 | | John Bakewell | 60 | Director | 2018 | | Michael Eggenberg | 52 | Director | 2018 | | Robert McNamara | 65 | Director | 2018 | | Matthew Rizzo | 49 | Director | 2018 | | Kevin D. Brandt | 56 | Chief Commercial Officer | 2018 | | Scott C. Neils | 37 | Interim Chief Financial Officer | 2022 | - Xtant is a 'controlled company' under NYSE American rules, with OrbiMed-affiliated funds owning over 50% of voting power, granting them the right to designate a majority of the Board and influence significant corporate decisions[438][439] - The Board has an Audit Committee (Chair: John Bakewell, Member: Robert McNamara) and a Compensation Committee (Chair: Robert McNamara, Members: Michael Eggenberg, Matthew Rizzo). John Bakewell and Robert McNamara are deemed independent directors[446][447][449] - The company has adopted a Code of Ethics for the CEO and Senior Financial Officers and a Code of Conduct for all directors, officers, and employees[451] Item 11. Executive Compensation This section details compensation for named executive officers for 2021 and 2020, including salaries, equity awards, and potential payments upon termination or change in control Summary Compensation Table (in thousands) | Name and Principal Position | Year | Salary ($) | Stock Awards ($) | Option Awards ($) | Non-Equity Incentive Plan Compensation ($) | All Other Compensation ($) | Total ($) | | :-------------------------- | :--- | :--------- | :--------------- | :---------------- | :----------------------------------------- | :------------------------- | :-------- | | Sean E. Browne, President and CEO | 2021 | 590,228 | — | — | 201,900 | 39,362 | 831,490 | | | 2020 | 603,692 | 1,850,762 | 1,508,484 | 510,000 | 76,116 | 4,549,054 | | Greg Jensen, Former VP, Finance and CFO | 2021 | 393,846 | 198,438 | 206,543 | 100,200 | 55,883 | 954,910 | | | 2020 | 402,462 | 107,557 | 108,469 | 170,000 | 72,616 | 861,104 | | Kevin D. Brandt, Chief Commercial Officer | 2021 | 408,615 | 205,878 | 214,288 | 85,243 | 9,992 | 924,016 | | | 2020 | 417,554 | 107,557 | 108,469 | 176,375 | 11,400 | 821,355 | - Executive employment agreements include annual base salaries, target annual bonus opportunities, and equity grants, with specific terms for confidentiality, non-competition, non-solicitation, and severance/change in control provisions[459][460] - Equity awards (stock options and restricted stock units) granted under the 2018 Plan typically vest over multi-year periods and have specific provisions for accelerated vesting upon death, disability, or certain change in control events[473][474][475] Director Compensation Xtant Medical's non-employee directors receive annual cash retainers and annual RSU equity grants. In 2021, each non-employee director received an RSU award valued at $165,000, vesting on August 15, 2022. Specific cash retainers are provided for non-employee directors, the Chairman of the Board, and committee chairs Annual Cash Retainers for Directors (2021) | Description | Annual Cash Retainer ($) | | :-------------------------- | :----------------------- | | Non-Employee Director | 50,000 | | Chairman of the Board Premium | 32,500 | | Audit Committee Chair Premium | 32,500 | | Compensation Committee Chair Premium | 32,500 | - In 2021, each non-employee director received an RSU award valued at $165,000 (85,337 shares), vesting on August 15, 2022[478] Director Compensation Table for Fiscal 2021 (in thousands) | Name | Fees Earned or Paid in Cash ($) | Stock Awards ($) | Option Awards ($) | All Other Compensation ($) | Total ($) | | :-------------- | :------------------------------ | :--------------- | :---------------- | :------------------------- | :-------- | | John Bakewell | 82,500 | 108,378 | — | — | 190,878 | | Michael Eggenberg | 50,000 | 108,378 | — | — | 158,378 | | Robert McNamara | 95,000 | 108,378 | — | — | 203,378 | | Jeffrey Peters | 82,500 | 108,378 | — | — | 190,878 | | Matthew Rizzo | 50,000 | 108,378 | — | — | 158,378 | Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters This section details beneficial ownership of Xtant Medical's common stock by significant shareholders and management, including securities authorized under equity plans Significant Beneficial Owners (as of Feb 25, 2022) | Name and Address of Beneficial Owner | Amount and Nature of Beneficial Ownership | Percent of Class | | :----------------------------------- | :---------------------------------------- | :--------------- | | OrbiMed Advisors LLC | 72,943,918 | 83.5% | | Altium Capital Management, LP | 12,744,209 | 7.2% | - OrbiMed Advisors LLC, through its affiliated funds ROS Acquisition Offshore LP and OrbiMed Royalty Opportunities II, LP, holds significant voting and investment power over 83.5% of Xtant's common stock[482] Security Ownership of Management (as of Feb 25, 2022) | Name of Beneficial Owner | Amount and Nature of Beneficial Ownership | Percent of Class | | :----------------------- | :---------------------------------------- | :--------------- | | John Bakewell | 147,794 | * | | Sean E. Browne | 837,447 | 1.0% | | Robert McNamara | 146,057 | * | | Jeffrey Peters | 147,794 | * | | All executive officers and directors as a group (8 persons) | 1,428,083 | 1.6% | *Less than 1% of outstanding shares of common stock. Securities Authorized for Issuance under Equity Compensation Plans (as of Dec 31, 2021) | Plan Category | Number of Securities to Be Issued upon Exercise of Outstanding Options, Warrants and Rights (a) | Weighted Average Exercise Price of Outstanding Options, Warrants and Rights (b) | Number of Securities Remaining Available for Future Issuance under Equity Compensation Plans (c) | | :------------------------------------------ | :-------------------------------------------------------------------------------- | :---------------------------------------------------------------- | :------------------------------------------------------------------------------------------------ | | Equity compensation plans approved by security holders | 6,171,771 | $1.80 | 1,246,080 | | Total | 6,171,771 | $1.80 | 1,246,080 | Item 13. Certain Relationships and Related Transactions, and Director Independence This section details Xtant Medical's policies for reviewing related party transactions, significant agreements with OrbiMed affiliates, and director independence - The Audit Committee reviews and approves all related party transactions, making recommendations to the Board, and for significant transactions like the 2020 debt restructuring, a Special Restructuring Committee obtained a fairness opinion[490][491] - The Investor Rights Agreement grants OrbiMed affiliates (Royalty Opportunities and ROS) the right to nominate a majority of directors and requires their approval for significant corporate actions as long as they maintain at least 40% ownership[492] - The 2020 debt restructuring involved exchanging approximately $61.9 million of principal and paid-in-kind interest for 57.8 million shares of common stock at $1.07 per share, resulting in OrbiMed affiliates owning approximately 93.9% of outstanding common stock[494][497][498] - The Second A&R Credit Agreement with Royalty Opportunities and ROS was terminated on May 6, 2021, and all outstanding amounts were repaid, replaced by new Credit Agreements with MidCap Financial Trust[505][509] - A sublease agreement with Cardialen, Inc., a related party due to a shared director, was terminated in 2021, with payments of $7,600 in fiscal 2021 and $11,215 in fiscal 2020[511] Item 14. Principal Accounting Fees and Services Plante & Moran, PLLC served as Xtant Medical's independent registered public accounting firm for 2021 and 2020, with all services pre-approved by the Audit Committee - Plante & Moran, PLLC was the independent registered public accounting firm for Xtant Medical for fiscal years ended December 31, 2021 and 2020[513] Aggregate Fees Billed by Plante Moran (in thousands) | Fee Type | 2021 ($) | 2020 ($) | | :--------------- | :------- | :------- | | Audit fees | 284,317 | 262,116 | | Audit-related fees | — | — | | Tax fees | — | — | | All other fees | 8,000 | 18,500 | | Total fees | 292,317 | 280,616 | - The Audit Committee has a policy to pre-approve all audit, audit-related, tax, and other services, with the Chair delegated authority to pre-approve services up to $20,000[515] PART IV This part lists exhibits and financial statement schedules included in the annual report Item 15. Exhibit and Financial Statement Schedules This section lists financial statements and exhibits, noting that schedules are omitted as Xtant Medical is a smaller reporting company - Financial statements are included in 'Part II, Item 8. Financial Statements and Supplementary Data'[518] - All financial statement schedules are omitted because Xtant Medical is a smaller reporting company[518] - A copy of any listed exhibits will be furnished at a reasonable cost to any stockholder upon written request[520] Item 16. Form 10-K Summary This is an optional disclosure item, and a Form 10-K Summary is not included in this Annual Report - Form 10-K Summary is an optional disclosure and is not included in this Annual Report[525] SIGNATURES This section contains the official signatures of the company's executive officers and directors, certifying the annual report Report Signatures The Annual Report on Form 10-K was duly signed on March 8, 2022, by the principal executive and financial officers, along with the directors - The report was signed on March 8, 2022, by Sean E. Browne, President and Chief Executive Officer, and Scott Neils, Interim Chief Financial Officer[529] - Directors John Bakewell, Michael Eggenberg, Robert McNamara, Jeffrey Peters, and Matthew Rizzo also signed the report[529]