Xtant Medical (XTNT) - 2020 Q1 - Quarterly Report

Cautionary Statement Regarding Forward-Looking Statements This section outlines the inherent risks and uncertainties associated with forward-looking statements, which may cause actual results to differ materially from projections - The report contains forward-looking statements regarding future expectations, hopes, beliefs, intentions, or strategies, identified by words like "anticipate," "believe," "expect," "intend," "may," "plan," "project," and similar expressions[9] - These statements involve risks and uncertainties, many beyond the company's control, which may cause actual results to differ materially from projections, including the impact of COVID-19 and ability to maintain liquidity[9][10] Part I. Financial Information This part presents the company's unaudited condensed consolidated financial statements and management's discussion and analysis for the reporting period Item 1. Financial Statements This section presents Xtant Medical Holdings, Inc.'s unaudited condensed consolidated financial statements and accompanying notes Condensed Consolidated Balance Sheets This section provides a snapshot of the company's financial position, detailing assets, liabilities, and equity as of specific dates Condensed Consolidated Balance Sheets (March 31, 2020 vs. December 31, 2019) | Metric | March 31, 2020 (in thousands) | December 31, 2019 (in thousands) | Change (QoQ) | | :-------------------------------- | :----------------------------- | :------------------------------ | :------------- | | Cash and cash equivalents | $3,239 | $5,237 | -$1,998 | | Trade accounts receivable, net | $9,743 | $10,124 | -$381 | | Inventories | $18,044 | $16,101 | +$1,943 | | Total current assets | $32,110 | $32,246 | -$136 | | Total Assets | $42,551 | $43,155 | -$604 | | Accounts payable | $3,609 | $2,188 | +$1,421 | | Accrued liabilities | $5,910 | $6,625 | -$715 | | Total current liabilities | $10,059 | $9,390 | +$669 | | Long-term debt, less issuance costs | $77,345 | $76,244 | +$1,101 | | Total Liabilities | $89,027 | $87,360 | +$1,667 | | Total Stockholders' Equity (Deficit) | $(46,476) | $(44,205) | -$2,271 | Condensed Consolidated Statements of Operations This section presents the company's financial performance over a period, detailing revenues, costs, and net loss Condensed Consolidated Statements of Operations (Three Months Ended March 31, 2020 vs. 2019) | Metric | March 31, 2020 (in thousands) | March 31, 2019 (in thousands) | Change (YoY) | | :-------------------------------- | :----------------------------- | :----------------------------- | :------------- | | Total Revenue | $14,778 | $16,726 | -$1,948 | | Cost of sales | $5,165 | $5,913 | -$748 | | Gross Profit | $9,613 | $10,813 | -$1,200 | | Total Operating Expenses | $10,977 | $11,481 | -$504 | | Loss from Operations | $(1,364) | $(668) | -$696 | | Interest expense | $(1,108) | $(2,018) | +$910 | | Net Loss | $(2,493) | $(2,799) | +$306 | | Net loss per share (Basic & Dilutive) | $(0.19) | $(0.21) | +$0.02 | Condensed Consolidated Statements of Equity This section details changes in the company's equity over a period, including additional paid-in capital and accumulated deficit Condensed Consolidated Statements of Equity (Three Months Ended March 31, 2020 vs. 2019) | Metric | March 31, 2020 (in thousands) | March 31, 2019 (in thousands) | | :-------------------------------- | :----------------------------- | :----------------------------- | | Additional Paid-In Capital | $179,330 | $178,668 | | Accumulated Deficit | $(225,806) | $(217,844) | | Total Stockholders' Equity (Deficit) | $(46,476) | $(39,176) | Condensed Consolidated Statements of Cash Flows This section reports the cash generated and used by the company across operating, investing, and financing activities Condensed Consolidated Statements of Cash Flows (Three Months Ended March 31, 2020 vs. 2019) | Metric | March 31, 2020 (in thousands) | March 31, 2019 (in thousands) | Change (YoY) | | :-------------------------------- | :----------------------------- | :----------------------------- | :------------- | | Net cash (used in) provided by operating activities | $(1,789) | $490 | -$2,279 | | Net cash used in investing activities | $(175) | $(86) | -$89 | | Net cash used in financing activities | $(34) | $(104) | +$70 | | Net change in cash and cash equivalents | $(1,998) | $300 | -$2,298 | | Cash and cash equivalents at end of period | $3,239 | $7,097 | -$3,858 | Notes to Unaudited Condensed Consolidated Financial Statements This section provides detailed explanations of the accounting policies, business operations, and specific financial statement line items - Xtant is a global medical technology company focused on the design, development, and commercialization of orthobiologics and spinal implant systems to facilitate spinal fusion procedures[22] - The company adopted ASU 2016-13 (Financial Instruments–Credit Losses) on January 1, 2020, recognizing a cumulative effect adjustment of $47,000 to retained earnings and accounts receivable, net[27] Revenue by Product Line (Three Months Ended March 31, 2020 vs. 2019) | Product Line | March 31, 2020 (in thousands) | Percentage of Total Revenue (2020) | March 31, 2019 (in thousands) | Percentage of Total Revenue (2019) | | :------------- | :----------------------------- | :--------------------------------- | :----------------------------- | :--------------------------------- | | Orthobiologics | $10,755 | 73% | $12,058 | 72% | | Spinal implant | $3,980 | 27% | $4,628 | 28% | | Other revenue | $43 | 0% | $40 | 0% | | Total revenue | $14,778 | 100% | $16,726 | 100% | Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's financial condition and operational results, including the impact of the COVID-19 pandemic and liquidity Executive Summary This section provides an overview of Xtant's business, products, and a snapshot of its current liquidity position - Xtant develops, manufactures, and markets regenerative medicine products and medical devices for orthopedic and neurological surgeons, including orthobiologics for bone healing and spinal implant systems[71] Liquidity Snapshot (March 31, 2020) | Metric | Amount (in millions) | | :------------------------ | :------------------- | | Cash and cash equivalents | $3.2 | | Credit facility availability | $12.2 | | Total available liquidity | $15.4 | Potential Impact of the COVID-19 Pandemic This section details the adverse effects of the COVID-19 pandemic on the company's revenue, operations, and financial stability - The COVID-19 pandemic has negatively impacted revenue due to canceled elective surgeries, reduced hospital access, and patient deferrals, and is expected to continue to have a material adverse effect[74] - The pandemic also causes adverse effects on the global economy, potentially leading to financial distress for distributors, customers, and suppliers, and increasing credit risk[75][104] - The company implemented cost-saving actions including terminating or furloughing 42% of its workforce, temporary 20% salary/wage reductions, and eliminating capital expenditures (except for biologics production efficiency)[77] Results of Operations This section analyzes the company's revenue performance and key operational metrics for the reporting period Revenue Performance (Three Months Ended March 31, 2020 vs. 2019) | Metric | March 31, 2020 (in millions) | March 31, 2019 (in millions) | Change (YoY) | Percentage Change (YoY) | | :----- | :-------------------------- | :-------------------------- | :----------- | :---------------------- | | Revenue | $14.8 | $16.7 | -$1.9 | -11.6% | Liquidity and Capital Resources This section discusses the company's ability to meet its short-term obligations and fund operations, including working capital analysis Working Capital (March 31, 2020 vs. December 31, 2019) | Metric | March 31, 2020 (in thousands) | December 31, 2019 (in thousands) | Change (QoQ) | | :-------------------- | :----------------------------- | :------------------------------ | :------------- | | Total current assets | $32,110 | $32,246 | -$136 | | Total current liabilities | $10,059 | $9,390 | +$669 | | Total working capital | $22,051 | $20,856 | +$1,195 | Critical Accounting Estimates This section addresses significant accounting judgments and estimates that impact the company's financial statements - There have been no changes in critical accounting estimates for the three months ended March 31, 2020, compared to the prior annual report, other than the adoption of ASU 2016-13[97] Item 3. Quantitative and Qualitative Disclosures About Market Risk As a smaller reporting company, Xtant Medical Holdings, Inc. is exempt from providing detailed market risk disclosures - The company is exempt from providing detailed market risk disclosures as a smaller reporting company[98] Item 4. Controls and Procedures Management evaluated and confirmed the effectiveness of disclosure controls and procedures, with no material changes in internal control over financial reporting - Disclosure controls and procedures were evaluated and deemed effective as of March 31, 2020[100] - No material changes in internal control over financial reporting occurred during the three months ended March 31, 2020[101] Part II. Other Information This part covers various other disclosures, including legal proceedings, risk factors, and recent corporate developments Item 1. Legal Proceedings The company is subject to various legal actions and potential liabilities arising in the ordinary course of business - The company faces potential liabilities from government regulations and various legal claims, including commercial, product liability, intellectual property, and employment matters[102] Item 1A. Risk Factors This section details the material adverse effects of the COVID-19 pandemic on the company's business, operations, and financial condition - The COVID-19 pandemic has materially and adversely affected the company's business, operating results, and financial condition[103] - Key impacts include canceled elective surgeries, reduced hospital access for sales representatives, and deferral of procedures, leading to revenue decline[103] - The pandemic also poses risks to general commercial activity, the global economy, supply chain stability, debt covenants, and access to capital markets[104][105] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This item is not applicable to the company for this reporting period - This item is not applicable[107] Item 3. Defaults Upon Senior Securities This item is not applicable to the company for this reporting period - This item is not applicable[108] Item 4. Mine Safety Disclosures This item is not applicable to the company for this reporting period - This item is not applicable[109] Item 5. Other Information The company amended its credit agreement on May 6, 2020, modifying loan terms and issuing 2.4 million warrants to lenders - On May 6, 2020, the company entered into a First Amendment to the Second Amended and Restated Credit Agreement[110] - Key amendments include: no interest accrual from March 31, 2020, to September 30, 2020; interest accrual at 10.00% plus LIBO Rate (or 2.3125%) from October 1, 2020; maturity date extended to December 31, 2021; revised Revenue Base financial covenant; and revised key person event default provision[113] - As a condition for the First Amendment, Xtant issued 2,400,000 warrants to the Lenders to purchase common stock at an exercise price of $0.01 per share, expiring May 6, 2030[111] Item 6. Exhibits This section lists all exhibits filed with the Quarterly Report on Form 10-Q, including corporate documents, warrants, and certifications - The report includes various exhibits such as corporate organizational documents, warrants, the First Amendment to the Second Amended and Restated Credit Agreement, CEO/CFO certifications, and XBRL financial data[115][116]