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Xtant Medical Announces First Quarter 2018 Financial Results

BELGRADE, MT / ACCESSWIRE / May 8, 2018 / Xtant Medical Holdings, Inc. (NYSE American: XTNT), a leader in the development of regenerative medicine products and medical devices, today reported financial and operating results for the first quarter of 2018.

First Quarter 2018 Financial Highlights and Recent Accomplishments:

  • Revenue for the first quarter 2018 was $17.9 million, down from $22.1 million for the first quarter of 2017
  • Gross Margin for the first quarter 2018 was 68.2%, compared to 67.5% for the first quarter of 2017
  • The Company reported a net loss from operations of $5.3 million, compared to $5.8 million during the first quarter of 2017
  • The Company reported non-GAAP Adjusted EBITDA of $1.1 million, compared to a loss of approximately $0.1 million during the first quarter of 2017
  • The Company engaged in a restructuring to improve its capital structure, including exchanging $71.9 million of convertible notes into common stock

"This quarter's results reflect Xtant's continued commitment to transforming the Company for operational excellence," said Carl O'Connell, Xtant Medical's chief executive officer. "We have reduced costs in numerous areas as part of our continued focus to improve net income and adjusted EBITDA performance, and are very pleased with the corporate restructuring transactions announced during first quarter 2018."

First Quarter 2018 Financial Results

Revenue for the first quarter of 2018 was $17.9 million, down from $22.1 million compared to the same period of the prior year. The year over year decline was due to a shift in our sales channels, our efforts to move away from some reseller and higher-than-acceptable commission rate distributor relationships, and competitive factors affecting the sell through of our fixation products.

Gross margin for the first quarter of 2018 was 68.2%, up from 67.5% for the same period in 2017. This improvement was due to cost containment initiatives and improvements in end user pricing by modifying and exiting certain reseller relationships.

Operating expenses for the first quarter were 77.4% of net revenue, down $3.6 million compared to the quarter ended March 31, 2017 which was 79.1% of net revenue. The improvement was mostly attributable to execution of our channel strategy enhancement initiative as we move away from higher-commission relationships and unprofitable revenue. In addition, the Company successfully continued the successful execution of its cost saving program throughout the quarter.

General and administrative expenses decreased 26.7% to $3.0 million for the first quarter of 2018, compared to the same period of 2017. The improvement is primarily due to a reduction in payroll expense from consolidating manufacturing and distribution to a single location, and from efficiencies realized by streamlining administrative functions within the business.

Net loss for the quarter was $5.3 million compared to a loss of $5.8 million for the same period in the prior year. Non-GAAP Adjusted EBITDA for the first quarter of 2018 was approximately $1.1 million compared to a loss of $0.1 million for the same period during 2017. The Company defines Adjusted EBITDA as net income/loss from operations before depreciation, amortization, non-recurring expenses and non-cash stock-based compensation. A calculation and reconciliation of net loss to non-GAAP Adjusted EBITDA can be found in the attached financial tables.

Cash and cash equivalents at the end of the first quarter of 2018 totaled $6.2 million, compared to $2.9 million as of December 31, 2017. The Company also had $2.2 million in availability under its credit facility as of March 31, 2018.

Corporate Restructuring

In the first quarter of 2018, Xtant entered into a restructuring and exchange agreement with holders of Xtant's outstanding 6% convertible senior unsecured notes due 2021. Pursuant to that agreement, all outstanding convertible notes, constituting $71.9 million in outstanding principal amount, plus accrued and unpaid interest, were converted into 10.6 million shares of Xtant common stock during the first quarter of 2018. Most of the conversions occurred on February 14, 2018, after the receipt of stockholder approval of aspects of the restructuring transaction and the effectiveness of a 1-for-12 reverse stock split, which occurred at the close of business on February 13, 2018. On February 14, 2018, the Company issued 945,819 shares of common stock in a private placement at a price per share of $7.20 for cash proceeds of $6.8 million.

The Company also announced the resignation of its then current board of directors and election of six new directors to serve on Xtant's board of directors.

As the final step of the restructuring, the Company recently announced April 27, 2018 as the record date for a proposed rights offering of its shares of common stock. At the commencement of the rights offering, each holder of common stock will receive 0.0869816 non-transferable subscription rights for each share of common stock held on the record date. Each whole subscription right will entitle the holder to purchase one share of the Company's common stock for $7.20 in cash. In addition, holders as of the record date will have over-subscription rights, pursuant to which they may be able to purchase additional shares at the subscription price, to the extent that not all subscription rights are exercised, subject to certain limitations. The Company expects that subscription materials will be mailed on or about May 18, 2018 to holders of the Company's common stock as of the record date, and that the rights offering will close on or about June 18, 2018. The Company may extend the rights offering for additional periods of time in its sole discretion.

Conference Call

The Company will host a conference call to discuss the first quarter 2018 financial results and business developments on Wednesday, May 9, 2018 at 9:00 AM EDT. Please refer to the information below for conference call dial-in information and webcast registration:

Conference date: May 9, 2018, 9:00 AM ET
Conference dial-in: 877-269-7756
International dial-in: 201-689-7817
Conference Call Name: Xtant Medical's First Quarter 2018 Results Call
Webcast Registration: Click Here

Following the live call, a replay will be available on the Company's website, www.xtantmedical.com, under "Investor Info."

About Xtant Medical

Xtant Medical develops, manufactures and markets regenerative medicine products and medical devices for domestic and international markets. Xtant Medical products serve the specialized needs of orthopedic and neurological surgeons, including orthobiologics for the promotion of bone healing, implants and instrumentation for the treatment of spinal disease, tissue grafts for the treatment of orthopedic disorders, and biologics to promote healing following cranial, and foot and ankle surgeries. With core competencies in both biologic and non-biologic surgical technologies, Xtant Medical can leverage its resources to successfully compete in global neurological and orthopedic surgery markets. For further information, please visit www.xtantmedical.com.

Non-GAAP Financial Measures

To supplement the Company's consolidated financial statements prepared in accordance with U.S. generally accepted accounting principles (GAAP), the Company uses certain non-GAAP financial measures in this release, including Adjusted EBITDA. Reconciliations of the non-GAAP financial measures used in this release to the most comparable GAAP measures for the respective periods can be found in tables later in this release. The Company's management believes that the presentation of these measures provides useful information to investors. These measures may assist investors in evaluating the company's operations, period over period. Management uses the non-GAAP measures in this release internally for evaluation of the performance of the business, including the allocation of resources. Investors should consider non-GAAP financial measures only as a supplement to, not as a substitute for or as superior to, measures of financial performance prepared in accordance with GAAP.

Important Cautions Regarding Forward-looking Statements

This press release contains certain disclosures that may be deemed forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that are subject to significant risks and uncertainties. Forward-looking statements include statements that are predictive in nature, that depend upon or refer to future events or conditions, or that include words such as ''continue,'' ''efforts,'' ''expects,'' ''anticipates,'' ''intends,'' ''plans,'' ''believes,'' ''estimates,'' ''projects,'' ''forecasts,'' ''strategy,'' ''will,'' ''goal,'' ''target,'' ''prospects,'' ''potential,'' ''optimistic,'' ''confident,'' ''likely,'' ''probable'' or similar expressions or the negative thereof. Statements of historical fact also may be deemed to be forward-looking statements. We caution that these statements by their nature involve risks and uncertainties, and actual results may differ materially depending on a variety of important factors, including, among others: the ability to increase revenue; the ability to achieve expected results; the ability to remain competitive; the ability to innovate and develop new products; the ability to engage and retain qualified technical personnel and members of the Company's management team; influence by Company management; the security of our technology systems; government and third-party coverage and reimbursement for Company products; the ability to obtain donors to support the biologic portfolio; the availability of Company facilities; the ability to remain accredited with the American Association of Tissue Banks; the ability to obtain regulatory approvals; government regulations; product liability claims and other litigation to which we may be subjected; product recalls and defects; timing and results of clinical studies; the ability to obtain and protect Company intellectual property and proprietary rights; infringement and ownership of intellectual property; the ability to use net operating loss carry-forwards to offset future taxable income; the ability to service Company debt; the ability to comply with covenants in the Company's senior credit facility; the ability to raise additional financing and other factors. Additional risk factors are listed in the Company's Annual Report on Form 10-K for the year ended December 31, 2017 filed with the Securities and Exchange Commission (SEC) on April 2, 2018 and subsequent SEC filings by the Company, including without limitation its Quarterly Report on Form 10-Q for the quarter ended March 31, 2018. Investors are encouraged to read the Company's filings with the SEC, available at www.sec.gov, for a discussion of these and other risks and uncertainties. Investors should not place considerable reliance on the forward-looking statements contained in this release. The Company undertakes no obligation to release publicly any revisions to any forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events, except as required by law. The Company's business is subject to substantial risks and uncertainties, including those referenced above. Investors, potential investors, and others should give careful consideration to these risks and uncertainties. All forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by this cautionary statement.



XTANT MEDICAL HOLDINGS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except number of shares and par value)



As of
March 31,
As of
2018
December 31,
(unaudited)
2017
ASSETS
Current Assets:
Cash and cash equivalents
$
6,172
$
2,856
Trade accounts receivable, net of allowance for doubtful accounts of $1,945 and $2,135, respectively
10,340
12,714
Current inventories, net
22,512
22,229
Prepaid and other current assets
1,107
1,706
Total current assets
40,131
39,505
Non-current inventories, net
138
194
Property and equipment, net
9,331
9,913
Goodwill
41,535
41,535
Intangible assets, net
12,977
13,826
Other assets
670
732
Total Assets
$
104,782
$
105,705
LIABILITIES & STOCKHOLDERS' EQUITY (DEFICIT)
Current Liabilities:
Accounts payable
$
7,528
$
9,316
Accounts payable – related party (note 13)
63
160
Accrued liabilities
3,852
15,845
Warrant derivative liability
169
131
Current portion of capital lease obligations
383
366
Total current liabilities
11,995
25,818
Long-term Liabilities:
Capital lease obligation, less current portion
526
623
Long-term convertible debt, less issuance costs
-
70,854
Long-term debt, less issuance costs
76,651
67,109
Total Liabilities
89,172
164,404
Commitments and Contingencies (note 10)
Stockholders' Equity (Deficit):
Preferred stock, $0.000001 par value; 10,000,000 shares authorized; no shares issued and outstanding
-
-
Common stock, $0.000001 par value; 50,000,000 shares authorized; 13,077,468 shares issued and outstanding as of March 31, 2018 and 1,514,899 shares issued and outstanding as of December 31, 2017
-
-
Additional paid-in capital
165,808
86,247
Accumulated deficit
(150,198)
(144,946)
Total Stockholders' Equity (Deficit)
15,610
(58,699)
Total Liabilities & Stockholders' Equity (Deficit)
$
104,782
$
105,705


XTANT MEDICAL HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited, in thousands, except number of shares and per share amounts)



Quarter Ended
March 31,
2018
2017
Revenue
Orthopedic product sales
$
17,830
$
21,996
Other revenue
104
87
Total Revenue
17,934
22,083
Cost of sales
5,702
7,176
Gross Profit
12,232
14,907
Operating Expenses
General and administrative
3,025
4,128
Sales and marketing
8,349
10,997
Research and development
414
699
Depreciation and amortization
1,004
1,281
Restructuring expenses
733
-
Separation related expenses
-
224
Non-cash compensation expense
364
145
Total Operating Expenses
13,889
17,474
Loss from Operations
(1,657)
(2,567)
Other (expense) income
Interest expense
(3,545)
(3,400)
Change in warrant derivative liability
(38)
170
Other (expense) income
(13)
12
Total Other (Expense)
(3,596)
(3,218)
Net Loss from Operations
$
(5,253)
$
(5,785)
Net loss per share:
Basic
$
(0.70)
$
(3.87)
Dilutive
$
(0.70)
$
(3.87)
Shares used in the computation:
Basic
7,481,550
1,494,443
Dilutive
7,481,550
1,494,443


XTANT MEDICAL HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, in thousands)



Quarter Ended
March 31,
2018
2017
Operating activities:
Net loss
$
(5,253)
$
(5,785)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization
1,586
2,071
Non-cash interest
3,446
3,151
(Gain)/Loss on disposal of fixed assets
(23)
617
Non-cash compensation expense/stock option expense
364
230
Provision for losses on accounts receivable and inventory
39
313
Change in derivative warrant liability
38
(170)
Changes in operating assets and liabilities:
Accounts receivable
2,290
2,536
Inventories
(182)
261
Prepaid and other assets
660
(647)
Accounts payable
(1,884)
(1,743)
Accrued liabilities
(845)
(397)
Net cash used by operating activities
236
437
Investing activities:
Purchases of property and equipment and intangible assets
(132)
(310)
Net cash used by investing activities
(132)
(310)
Financing activities:
Payments on capital leases
(79)
(63)
Payments on revolving line of credit
-
(155)
Expense associated with private placement and convertible debt conversion/exchange
(3,519)
-
Proceeds from issuance of stock
6,810
-
Net cash provided by (used by) financing activities
3,212
(218)
Net change in cash and cash equivalents
3,316
(91)
Cash and cash equivalents at beginning of period
2,856
2,578
Cash and cash equivalents at end of period
$
6,172
$
2,487


XTANT MEDICAL HOLDINGS, INC.
Calculation of Adjusted EBITDA for the Quarter Ended March 31, 2018 and March 31, 2017

(in thousands)



Unaudited
Quarter Ended
March 31,
2018
2017
Net loss
$ (5,253)
$ (5,785)
Other (income) expense
12 -
Depreciation & amortization
1,586 2,071
Interest expense
3,545 3,400
EBITDA
$ (110)
$ (314)
EBITDA/Total Revenue
- % (1%)
ADJUSTED EBITDA CALCULATION
Restructuring expenses
733 -
Separation related expenses
- 224
Non-cash compensation
364 145
Dayton transition costs
113 -
Change in warrant derivative liability
38 (170)
ADJUSTED EBITDA gain (loss)
$ 1,138 $ (114)
ADJUSTED EBITDA/Total revenue
7 % (1%)

Investor Contact
CG CAPITAL
877.889.1972
investorrelations@cg.capital

Company Contact
Xtant Medical
Molly Mason
mmason@xtantmedical.com
Xtant Medical Holdings, Inc.

SOURCE: Xtant Medical Holdings, Inc.