Xtant Medical (XTNT) - 2025 Q1 - Quarterly Report

Part I: Financial Information Financial Statements The company reported a net income of $58 thousand in Q1 2025, a significant turnaround from a $4.4 million net loss in Q1 2024, driven by an 18% revenue increase and a post-quarter change in majority ownership Condensed Consolidated Financial Statements Q1 2025 financial statements reflect a shift to profitability with a net income of $58 thousand, positive operating cash flow of $1.3 million, and a slight increase in total assets to $95.8 million Condensed Consolidated Balance Sheet Data (in thousands) | Account | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $5,032 | $6,199 | | Total current assets | $69,144 | $67,116 | | Total Assets | $95,833 | $93,837 | | Total current liabilities | $29,581 | $28,581 | | Total Liabilities | $51,956 | $50,874 | | Total Stockholders' Equity | $43,877 | $42,963 | Condensed Consolidated Statements of Operations (in thousands, except per share data) | Account | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Total Revenue | $32,904 | $27,873 | | Gross Profit | $20,243 | $17,302 | | Income (Loss) from Operations | $1,063 | $(3,470) | | Net Income (Loss) | $58 | $(4,400) | | Basic & Diluted EPS | $0.00 | $(0.03) | Condensed Consolidated Statements of Cash Flows (in thousands) | Activity | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $1,278 | $(5,755) | | Net cash used in investing activities | $(1,143) | $(674) | | Net cash (used in) provided by financing activities | $(919) | $5,179 | | Net change in cash | $(786) | $(1,299) | Notes to Financial Statements Notes reveal a significant revenue shift with $3.6 million in new licensing revenue, continued debt covenant compliance, and a major post-quarter ownership change where Nantahala Capital Management acquired a 49.1% stake Revenue by Product Line (in thousands) | Product Line | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Orthobiologics | $18,074 | $15,416 | | Spinal implant | $11,210 | $12,457 | | License revenue | $3,620 | $— | | Total revenue | $32,904 | $27,873 | - A new license agreement includes a $1.5 million upfront fee and guaranteed quarterly minimum royalties, though future minimums beyond Q1 2025 were constrained due to uncertainty regarding a CMS policy change[52] - As of March 31, 2025, the company had $5.7 million available under its revolving line of credit and was in compliance with all debt covenants[59] - Subsequent to the quarter end, in April 2025, OrbiMed sold its entire ~73.1 million share stake, with Nantahala Capital Management increasing its ownership to 49.1% of the company's outstanding common stock as the lead purchaser[79][83] Management's Discussion and Analysis (MD&A) Management attributes Q1 2025 revenue growth of 18% to orthobiologics and new licensing, leading to an operating income of $1.1 million and sufficient liquidity to fund operations through at least May 2026 Business Overview and Strategy The company focuses on developing and marketing regenerative medicine and medical devices, pursuing growth through new products, expanded distribution, adjacent market penetration, and strategic acquisitions - The company's four key growth initiatives are: - Introduce new products (e.g., Trivium™) - Expand distribution network - Penetrate adjacent markets - Leverage growth platform with technology and strategic acquisitions[88] - Recent license agreements for SimpliGraft® and SimpliMax™ products are subject to revenue recognition risks related to potential changes in CMS reimbursement policies, which have been delayed to January 1, 2026[91] Results of Operations Q1 2025 total revenue grew 18% to $32.9 million driven by orthobiologics and new licensing, while gross margin slightly decreased to 61.5% and operating expenses notably declined, shifting to operating income - Total revenue increased 18% year-over-year to $32.9 million, driven by orthobiologics sales and $3.6 million in new licensing revenue[93] - Gross margin decreased by 60 basis points to 61.5%, primarily due to inventory write-offs and sales mix changes[94] - Sales and marketing expenses decreased by 10% ($1.3 million), mainly from a $0.8 million reduction in agent commissions and a $0.7 million decrease in compensation expense due to reduced headcount[96] - General and administrative expenses decreased by 3% ($0.3 million) due to reduced accounting and consultant fees[95] Liquidity and Capital Resources The company's liquidity, including $5.4 million cash and $5.7 million available credit, is deemed sufficient to meet cash requirements through at least May 2026, supported by $1.3 million in Q1 2025 operating cash flow - The company believes its $5.4 million in cash as of March 31, 2025, along with operating cash flows and available credit, will be sufficient to meet cash requirements through at least May 2026[109] - Net cash from operating activities was $1.3 million in Q1 2025, a significant improvement from a $5.8 million use of cash in Q1 2024, primarily due to achieving net income versus a net loss[101] - As of March 31, 2025, the company had $11.3 million outstanding on its revolving line of credit, with $5.7 million of availability[106] Quantitative and Qualitative Disclosures About Market Risk As a smaller reporting company, Xtant Medical is not required to provide the information for this item - The company is not required to provide this information as it qualifies as a smaller reporting company[113] Controls and Procedures Management concluded that disclosure controls and procedures were not effective as of March 31, 2025, due to a previously identified material weakness in internal control over financial reporting - Based on their evaluation, the principal executive officer and principal financial officer concluded that as of March 31, 2025, the company's disclosure controls and procedures were not effective[115] - The ineffectiveness is attributed to a material weakness in the company's internal control over financial reporting[115] Part II: Other Information Legal Proceedings The company is subject to various legal claims arising in the ordinary course of business and believes it has adequately accrued for probable and estimable contingent liabilities - The company is subject to potential liabilities from various claims and legal actions arising in the ordinary course of business[71][117] - Management believes it has adequately accrued for contingent liabilities where loss is probable and reasonably estimable, and does not expect the ultimate resolution of claims to have a material adverse effect[71] Other Information Effective May 12, 2025, Mark A. Schallenberger was appointed COO with an annual base salary of $461,760 and a 75% target bonus, with no Rule 10b5-1 trading plan changes reported - Effective May 12, 2025, Mark A. Schallenberger was appointed as the company's Chief Operating Officer[122] - Mr. Schallenberger's compensation was increased to an annual base salary of $461,760 and a target annual bonus of 75% of base salary[124] Other Items (Risk Factors, Unregistered Sales, Defaults, Mine Safety) As a smaller reporting company, Item 1A (Risk Factors) information is not required, and other items including unregistered sales, defaults, and mine safety disclosures were not applicable - As a smaller reporting company, information regarding Risk Factors (Item 1A) is not required[118] - Items concerning Unregistered Sales of Equity Securities, Defaults Upon Senior Securities, and Mine Safety Disclosures were not applicable[119][120][121]