Press Release

Xtant Medical Reports Second Quarter 2017 Financial Results
Company Continues to Take Steps During Restructuring to Build for Future Growth

BELGRADE, Mont., Aug. 09, 2017 (GLOBE NEWSWIRE) -- Xtant™ Medical Holdings, Inc. (NYSE American:XTNT), a leader in the development of regenerative medicine products and medical devices, today reported its financial results for the quarter ended June 30th, 2017. The Company reported Second Quarter 2017 revenue of approximately $21.4 million and an EBITDA loss of approximately ($2.1) million for the period.

Revenue
Consolidated second quarter 2017 revenue was approximately $21.4 million, a slight decrease compared to revenue of approximately $21.5 million for the same period of 2016.  The slight decrease was due to a 20.5% increase in biologic revenue offset by an 18.4% decrease in fixation revenue compared to second quarter 2016 revenue.

Gross Profit
Consolidated gross profit for the second quarter of 2017 was $13.5 million or 63.2% of revenues, compared to gross profit of $14.7 million or 68.5% of revenues for the first quarter of 2016. The decrease in gross margin was primarily due to lower fixation revenue and lower fixation product margin compared to prior periods.  In addition, the Company recorded a charge of approximately $304,000 for excessive wear and tear on fixation instruments and $159,000 for discarded biologics inventory about to expire. 

Sales and Marketing Expenses
Consolidated second quarter 2017 sales and marketing expenses increased to $11.1 million, compared to sales and marketing expenses of $10.4 million during the same period in 2016. For the quarter, sales and marketing as a percentage of revenues increased to 52.0% compared to 48.6% in the second quarter of 2016. The increase was primarily driven by increased commissions from revenue derived from distributors who have higher contracted commissions rates.

General and Administrative Expenses
In the second quarter of 2017, consolidated general and administrative expenses increased to $4.5 million, compared to general and administrative expenses of $3.9 million for the same period during the prior year. As a percentage of revenues, general and administrative expenses were 21.1% during the period, compared to 18.2% for the same period of 2016.  The increase was primarily due to increased professional fees and a $214,000 charge for contributions to employee benefit plans. In addition, the Company incurred additional insurance expense of $142,000 compared to the second quarter of 2016.

Net Income / Loss
Second quarter 2017 consolidated net loss increased to ($9.7) million, compared to a net loss of ($4.5) million reported during the year-ago period. Second quarter 2017 consolidated loss per share was ($0.54), compared to a loss per share of ($0.37) in the second quarter of 2016.  The second quarter 2017 net loss includes approximately $1.5 million included in Other Expense for professional fees incurred in connection with the Company's potential restructuring and approximately $3.3 million of Interest Expense on the Company's debt instruments.

EBITDA
The Company defines earnings before interest, taxes, depreciation and amortization ("EBITDA") as net income/loss from operations before depreciation, amortization, impairment charges, non-recurring expenses and non-cash stock-based compensation. Consolidated EBITDA for the second quarter of 2017 was a loss of approximately ($2.1) million compared to a gain of $253,000 for the same period during 2016 due largely to the decrease in gross profit and increase in sales and marketing expenses noted above.

Financial Liquidity
Cash on hand as of June 30, 2017, was $1.7 million, as compared to $2.6 million as of December 31, 2016. Net working capital as of June 30, 2017, decreased to $17.9 million, as compared to $21.6 million as of December 31, 2016.

Conference Call to be Held August 10, 2017

An accompanying listen-only conference call will be hosted by Carl O'Connell, Chief Executive Officer, and John Gandolfo, Chief Financial Officer, to discuss the results. The call will be held at 10:00 AM ET, on August 10, 2017. Please refer to the information below for conference call dial-in information and webcast registration.

Conference date: August 10, 2017, 10:00 AM ET
Conference dial-in: 877-269-7756
International dial-in: 201-689-7817
Conference Call Name: Xtant Medical's Second Quarter 2017 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 Holdings, Inc.

Xtant Medical Holdings, Inc. (NYSE MKT:XTNT) develops, manufactures and markets class-leading regenerative medicine products and medical devices for domestic and international markets. Xtant 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 can leverage its resources to successfully compete in global neurological and orthopedic surgery markets. For further information, please visit www.xtantmedical.com.

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 comply with covenants in the Company’s senior credit facility and to make deferred interest payments; the ability to maintain sufficient liquidity to fund operations; the ability to remain listed on the NYSE MKT; the ability to obtain financing on reasonable terms; the ability to increase revenue; the ability to continue as a going concern; the ability to maintain sufficient liquidity to fund operations; the ability to achieve expected results; the ability to remain competitive; government regulations; the ability to innovate and develop new products; the ability to obtain donor cadavers for products; the ability to engage and retain qualified technical personnel and members of the Company’s management team; the availability of Company facilities; government and third-party coverage and reimbursement for Company products; the ability to obtain regulatory approvals; the ability to successfully integrate recent and future business combinations or acquisitions; the ability to use net operating loss carry-forwards to offset future taxable income; the ability to deduct all or a portion of the interest payments on the notes for U.S. federal income tax purposes; the ability to service Company debt; 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 remain accredited with the American Association of Tissue Banks; influence by Company management; the ability to pay dividends; and the ability to issue preferred stock; and other factors.

Additional risk factors are listed in the Company's Annual Report on Form 10-K and Quarterly Reports on Form 10-Q under the heading "Risk Factors." 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.


 

XTANT MEDICAL HOLDINGS, INC.  
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS  
(Unaudited)  
   
    Three Months Ended June 30,     Six Months Ended June 30,  
    2017     2016     2017     2016  
Revenue                                
Orthopedic product sales   $ 21,371,030     $ 21,311,322     $ 43,367,345     $ 42,119,357  
Other revenue     37,130       150,248       123,484       319,548  
Total Revenue     21,408,160       21,461,570       43,490,829       42,438,905  
                                 
Cost of sales     7,880,639       6,758,071       14,438,241       13,635,338  
                                 
Gross Profit     13,527,521       14,703,499       29,052,588       28,803,567  
                                 
Operating Expenses                                
General and administrative     4,526,543       3,899,280       8,654,811       7,383,992  
Sales and marketing     11,137,082       10,420,028       22,134,101       20,932,994  
Research and development     640,045       783,897       1,338,680       1,683,472  
Depreciation and amortization     1,469,603       1,216,696       2,750,568       2,425,030  
Acquisition and integration related expenses     -       450,755       -       752,528  
Separation related expenses     380,548       -       604,920       -  
Non-cash consulting expense     91,857       55,296       236,580       110,592  
Total Operating Expenses     18,245,678       16,825,952       35,719,660       33,288,608  
                                 
Loss from Operations     (4,718,157 )     (2,122,453 )     (6,667,072 )     (4,485,041 )
                                 
Other Income (Expense)                                
Interest expense     (3,328,262 )     (2,984,186 )     (6,728,651 )     (5,811,361 )
Change in warrant derivative liability     (13,798 )     477,639       156,233       496,329  
Other income (expense)     (1,632,612 )     166,425       (1,620,268 )     (258,574 )
                                 
Total Other Income (Expense)     (4,974,672 )     (2,340,122 )     (8,192,686 )     (5,573,606 )
                                 
Net Loss from Operations   $ (9,692,829 )   $ (4,462,575 )   $ (14,859,758 )   $ (10,058,647 )
                                 
Net loss per share:                                
Basic   $ (0.54 )   $ (0.37 )   $ (0.82 )   $ (0.84 )
Dilutive   $ (0.54 )   $ (0.37 )   $ (0.82 )   $ (0.84 )
                                 
Shares used in the computation:                                
Basic     18,092,603       12,101,356       18,012,959       11,999,478  
Dilutive     18,092,603       12,101,356       18,012,959       11,999,478  



XTANT MEDICAL HOLDINGS, INC.  
CONDENSED CONSOLIDATED BALANCE SHEETS  
   
    As of        
    June 30,     As of  
    2017     December 31,  
    (unaudited)     2016  
ASSETS                
Current Assets:                
Cash and cash equivalents   $ 1,664,543     $ 2,578,267  
Trade accounts receivable, net of allowance for doubtful accounts of $1,923,287 and $1,653,385, respectively     15,847,142       18,991,872  
Current inventories, net     24,932,155       26,266,457  
Prepaid and other current assets     831,239       1,149,615  
Total current assets     43,275,079       48,986,211  
                 
Non-current inventories, net     641,124       971,854  
Property and equipment, net     14,037,043       15,840,730  
Goodwill     41,534,626       41,534,626  
Intangible assets, net     33,672,915       35,940,810  
Other assets     1,133,331       827,374  
                 
Total Assets   $ 134,294,118     $ 144,101,605  
                 
LIABILITIES & STOCKHOLDERS’ DEFICIT                
Current Liabilities:                
Accounts payable   $ 8,446,454     $ 10,471,944  
Accounts payable - related party     291,785       640,442  
Revolving line of credit     -       10,448,283  
Accrued liabilities     11,627,528       8,982,187  
Warrant derivative liability     177,380       333,613  
Current portion of capital lease obligations     302,064       244,847  
Total current liabilities     20,845,211       31,121,316  
                 
Long-term Liabilities:                
Capital lease obligation, less current portion     747,000       832,152  
Long-term convertible debt, less issuance costs     70,708,939       68,937,247  
Long-term debt, less issuance costs     63,285,428       50,284,187  
Total Liabilities     155,586,578       151,174,902  
                 
Commitments and Contingencies                
Stockholders’ Deficit:                
Preferred stock, $0.000001 par value; 5,000,000 shares authorized; no shares issued and Outstanding     -       -  
Common stock, $0.000001 par value; 95,000,000 shares authorized; 18,092,603 shares issued and outstanding
as of June 30, 2017 and 17,249,315 shares issued and outstanding as of December 31, 2016
    18       17  
Additional paid-in capital     86,101,803       85,461,210  
Accumulated deficit     (107,394,281 )     (92,534,524 )
Total Stockholders’ Deficit     (21,292,460 )     (7,073,297 )
                 
Total Liabilities & Stockholders’ Deficit   $ 134,294,118     $ 144,101,605  

 


XTANT MEDICAL HOLDINGS, INC.  
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS  
(Unaudited)  
   
    Six Months Ended June 30,  
    2017     2016  
Operating activities:                
Net loss   $ (14,859,758 )   $ (10,058,647 )
Adjustments to reconcile net loss to net cash used in operating activities:                
Depreciation and amortization     4,029,851       3,649,361  
Non-cash interest     6,211,365       2,541,890  
Loss on disposal of fixed assets     878,251       -  
Non-cash consulting expense/stock option expense     397,174       271,374  
Provision for losses on accounts receivable and inventory     538,890       432,781  
Change in derivative warrant liability     (156,233 )     (496,329 )
Changes in operating assets and liabilities:                
Accounts receivable     2,544,399       207,934  
Inventories     1,726,473       (2,673,670 )
Prepaid and other assets     12,417       (708,693 )
Accounts payable     (2,374,147 )     3,652,113  
Accrued liabilities     63,235       (4,568,572 )
Net cash used in operating activities     (988,083 )     (7,750,458 )
                 
Investing activities:                
Purchases of property and equipment and intangible assets     (836,517 )     (4,369,562 )
Net cash used in investing activities     (836,517 )     (4,369,562 )
                 
Financing activities:                
Proceeds from long-term debt     11,387,094       -  
Payments on capital leases     (27,935 )     (49,428 )
Proceeds from the issuance of Convertible Debt     -       2,238,166  
Proceeds from Revolving Line of Credit     -       5,480,671  
Payments on Revolving Line of Credit     (10,448,283 )     -  
Net proceeds from issuance of stock     -       300,000  
Net cash provided by financing activities     910,876       7,969,409  
                 
Net change in cash and cash equivalents     (913,724 )     (4,150,611 )
                 
Cash and cash equivalents at beginning of period     2,578,267       6,368,016  
Cash and cash equivalents at end of period   $ 1,664,543     $ 2,217,405  


  

XTANT MEDICAL HOLDINGS, INC.
  Calculation of Consolidated EBITDA for the Periods Ended June 30, 2017 and 2016
    (Unaudited)      
           
  For  the  three months ended   For  the  six  months  ended
  2017 2016   2017 2016
Net Loss (9,692,829) (4,462,575)   (14,859,758) (10,058,647)
           
Tax (Benefit) Provision   -   -                      -   -
Other (Income) Expense 1,632,612 (166,426)   1,620,268 258,574
Change in warrant derivative liability 13,798 (477,639)   (156,233) (496,329)
Interest expense 3,328,262 2,984,186   6,728,651 5,811,361
Separation related expenses 380,548   -   604,920                    -
Acquisition and Integration related expenses   - 450,756               752,529
Non-Cash Compensation 91,857 55,296   236,580 110,592
Depreciation & Amortization 2,168,104 1,869,375   4,239,441 3,649,361
EBITDA Gain (Loss) (2,077,648) 252,973   (1,586,131) 27,441
           

 


Contact:
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877.889.1972
investorrelations@cg.capital
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