UNITED
STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE
14A INFORMATION
Proxy
Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment
No. )
Filed
by the Registrant ☒
Filed
by a party other than the Registrant ☐
Check
the appropriate box:
| ☐ |
Preliminary Proxy Statement |
| |
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| ☐ |
Confidential, for Use of the Commission Only (as permitted
by Rule 14a-6(e)(2)) |
| |
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| ☒ |
Definitive Proxy Statement |
| |
|
| ☐ |
Definitive Additional Materials |
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| ☐ |
Soliciting Material under §240.14a-12 |
Xtant
Medical Holdings, Inc.
(Name
of Registrant as Specified In Its Charter)
(Name
of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment
of Filing Fee (Check all boxes that apply):
| ☒ |
No fee required |
| |
|
| ☐ |
Fee paid previously with preliminary materials |
| |
|
| ☐ |
Fee computed on table in exhibit required by Item 25(b) per
Exchange Act Rules 14a-6(i)(1) and 0-11 |
NOTICE
OF ANNUAL MEETING OF STOCKHOLDERS TO BE HELD JULY 23, 2024
To
Our Stockholders:
You
are invited to attend the Annual Meeting of Stockholders of Xtant Medical Holdings, Inc. on July 23, 2024 at 8:00 a.m., Eastern Time,
at the offices of Fox Rothschild LLP, located at 101 Park Avenue, 17th Floor, New York, New York 10178, for the following purposes:
| 1. | To
elect the six nominees named in the accompanying proxy statement to serve as directors until
the next annual meeting of stockholders and until their respective successors have been duly
elected and qualified; |
| | | |
| 2. | To
ratify the appointment of Grant Thornton LLP as our independent registered public accounting
firm for the year ending December 31, 2024; |
| | | |
| 3. | To
approve, on an advisory basis, the compensation of our executive officers named in the accompanying
proxy statement; and |
| | | |
| 4. | To
transact such other business as may properly be brought before the Annual Meeting and any
adjournment or postponement thereof. |
Stockholders
of record at the close of business on May 28, 2024 shall be entitled to notice of and to vote at the Annual Meeting and any adjournments
or postponements thereof. A stockholder list will be available at our corporate offices beginning July 11, 2024 during normal business
hours for examination by any stockholder registered on our stock ledger as of the record date for any purpose germane to the Annual Meeting.
Your
vote is important. Please submit a proxy as soon as possible so your shares can be voted at the Annual Meeting.
By
Order of the Board of Directors
 |
 |
| Stavros
G. Vizirgianakis |
Sean
E. Browne |
| Chair
of the Board |
President
and Chief Executive Officer |
Belgrade,
Montana
June
10, 2024
[Page
intentionally left blank]
TABLE
OF CONTENTS
References
in this proxy statement to:
| ● | “Xtant,”
“we,” “us,” “our,” or the “Company” refer
to Xtant Medical Holdings, Inc.; |
| ● | “Board”
refers to the Board of Directors of Xtant; |
| ● | “Annual
Meeting” refers to our 2024 Annual Meeting of Stockholders; and |
| ● | “2023
Annual Report” or “2023 Annual Report to Stockholders” refer to our Annual
Report on Form 10-K for the year ended December 31, 2023, being made available together with
this proxy statement. |
Information
on our website and any other website referenced herein is not incorporated by reference into, and does not constitute a part of, this
proxy statement.
™
and ® denote trademarks and registered trademarks of Xtant Medical Holdings, Inc. or our affiliates, registered as indicated in the
United States. All other trademarks and trade names referred to in this release are the property of their respective owners.
XTANT
MEDICAL HOLDINGS, INC.
664 Cruiser Lane
Belgrade, Montana 59714
(406) 388-0480
PROXY
STATEMENT FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JULY 23, 2024
QUESTIONS
AND ANSWERS ABOUT THE PROXY MATERIALS
AND THE ANNUAL MEETING
| Q: | Why
am I receiving these materials? |
| A: | We
are providing these proxy materials to you in connection with the solicitation of proxies
by the Board of Directors (the “Board”) for our Annual Meeting, which will take
place on July 23, 2024. As a stockholder of record, you are invited to attend the Annual
Meeting and are entitled and requested to vote on the items of business described in this
proxy statement. This proxy statement and accompanying proxy card (or voting instruction
card), along with our 2023 Annual Report, are available on the Internet and being sent beginning
on or about June 10, 2024 to all stockholders entitled to vote at the Annual Meeting. We
will mail paper copies of these materials, together with a proxy card, within three business
days of a request properly made by a stockholder entitled to vote at the Annual Meeting. |
| Q: | When
and where will the Annual Meeting be held? |
| A: | The
Annual Meeting will be held on July 23, 2024 at 8:00 a.m., Eastern Time, at the offices of
Fox Rothschild LLP, located at 101 Park Avenue, 17th Floor, New York, New York 10178. |
| Q: |
How do I attend the Annual Meeting? |
| A: | Only
stockholders of record on the record date of May 28, 2024 (the “Record Date”)
are entitled to notice of, and to attend or vote at, the Annual Meeting. If you plan to attend
the meeting in person, please bring the following: |
| ● | Photo
identification; and |
| | | |
| ● | Acceptable
proof of ownership if your shares are held in “street name.” |
Street
name means your shares are held of record by brokers, banks, or other institutions. See below for additional information.
Acceptable
proof of ownership is either (a) a letter from your broker confirming that you beneficially owned shares of our common stock on the
Record Date or (b) an account statement showing that you beneficially owned shares of our common stock on the Record Date. If your shares
are held in street name, you may attend the meeting with proof of ownership, but you may not vote your shares in person at the Annual
Meeting unless you have obtained a “legal proxy” or other evidence from your broker giving you the right to vote your shares
at the Annual Meeting.
| Q: | What
information is contained in this proxy statement? |
| A: | This
proxy statement contains information regarding our corporate governance practices, the Board,
our named executive officers, the compensation of our directors and named executive officers,
the director nominees for election and other proposals to be voted on at the Annual Meeting,
and certain other required information. |
| Q: | How
may I obtain the Company’s Annual Report on Form 10-K for the year ended December 31,
2023? |
| A: | We
have enclosed with this proxy statement a copy of our Annual Report on Form 10-K for the
fiscal year ended December 31, 2023. Our Annual Report on Form 10-K can also be accessed
through our website at www.xtantmedical.com (click “Investors” and “SEC
Filings”). We filed our Annual Report on Form 10-K for the fiscal year ended December
31, 2023 with the SEC on April 1, 2024. We sometimes refer to our Annual Report on Form 10-K
for the fiscal year ended December 31, 2023 as our 2023 Annual Report. |
| Q: | What
items of business will be voted on at the Annual Meeting? |
| A: | The
items of business scheduled to be voted on at the Annual Meeting are: |
| 1. | To
elect the six nominees named in this proxy statement to serve as directors until the next
annual meeting of stockholders and until their respective successors have been duly elected
and qualified; |
| | | |
| 2. | To
ratify the appointment of Grant Thornton LLP as our independent registered public accounting
firm for the year ending December 31, 2024; |
| | | |
| 3. | To
approve, on an advisory basis, the compensation of our executive officers named in this proxy
statement; and |
| | | |
| 4. | To
transact such other business as may properly be brought before the Annual Meeting and any
adjournment or postponement thereof. |
| Q: | How
many votes must the nominees for director have to be elected? |
| A: | In
order for a director to be elected at a meeting at which a quorum is present, the director
must receive the affirmative vote of a plurality of the shares voted. There is no cumulative
voting for our directors or otherwise. |
| Q: | What
are the voting requirements to approve the other proposals? |
| A: | As
noted above, with respect to Proposal One, the six director nominees receiving the highest
number of affirmative votes will be elected. The affirmative vote of the holders of a majority
in voting power of the shares of common stock present in person or by proxy and entitled
to vote on the proposal is required to approve Proposal Two and Proposal Three. |
| Q: | How
does the Board recommend that I vote? |
| A: | The
Board recommends that you vote your shares “FOR” all six of the director nominees,
“FOR” the ratification of the appointment of Grant Thornton LLP (“Grant
Thornton”) as our independent registered public accounting firm, and “FOR”
the approval, on an advisory basis, of the compensation of the executive officers named in
this proxy statement. |
If
you return a properly completed proxy card, or vote your shares by telephone or Internet, your shares of common stock will be voted on
your behalf as you direct. If not otherwise specified, the shares of common stock represented by the proxies will be voted in accordance
with the Board’s recommendations.
| Q: | What
shares may I vote? |
| A: | Each
share of our common stock issued and outstanding as of the close of business on the Record
Date is entitled to one vote on each of the matters to be voted upon at the Annual Meeting. |
You
may vote all shares owned by you as of the Record Date, including (a) shares held directly in your name as the stockholder of record
and (b) shares held for you as the beneficial owner through a broker, trustee, or other nominee. We had 130,268,590 shares of common
stock issued and outstanding on the Record Date.
| Q: | What
is the difference between being a stockholder of record and being the beneficial owner of
shares held in street name? |
| A: | A
stockholder of record owns shares that are registered in his or her own name. A beneficial
owner owns shares that are held in street name through a third party, such as a broker. As
summarized below, there are some distinctions between a stockholder of record and beneficial
owner. |
Stockholder
of Record
You
are the stockholder of record of any of your shares registered directly in your name with our transfer agent, Broadridge Corporate Issuer
Solutions, Inc. With respect to such shares, these proxy materials are being sent to you by the Company. As the stockholder of record,
you have the right to grant your voting proxy directly to our designees, Sean E. Browne, the Company’s President and Chief Executive
Officer, Scott C. Neils, the Company’s Chief Financial Officer, and Stavros G. Vizirgianakis, the Company’s Chairman of the
Board, or to any other person you wish to designate, or to vote in person at the Annual Meeting. We have enclosed a proxy card for you
to grant your voting proxy to Mr. Browne, Mr. Neils and Mr. Vizirgianakis.
Shares
Beneficially Held in Street Name
You
are the beneficial owner of any of your shares held in street name. With respect to such shares registered through a broker, these proxy
materials, together with a voting instruction card, are being forwarded to you by your broker. As the beneficial owner, you have the
right to direct your broker how to vote. You may use the voting instruction card provided by your broker for this purpose. Even if you
have directed your broker how to vote, you may also attend the Annual Meeting. However, you may not vote your shares in person at the
Annual Meeting unless you obtain a “legal proxy” or other evidence from your broker giving you the right to vote the shares
at the Annual Meeting.
| Q: | Who
is entitled to attend the Annual Meeting and what are the admission procedures? |
| A: | You
are entitled to attend the Annual Meeting only if you were a stockholder as of the close
of business on the Record Date or if you hold a valid proxy for the Annual Meeting. A list
of stockholders eligible to vote at the Annual Meeting will be available for inspection at
the Annual Meeting. If you are a beneficial holder, you will need to provide proof of beneficial
ownership as of the Record Date, such as a brokerage account statement showing that you owned
shares of the Company’s common stock as of the Record Date or the voting instruction
card provided by your broker. The Annual Meeting will begin promptly at 8:00 a.m., Eastern
Time. You should be prepared to present photo identification for admittance. Check-in will
begin one-half hour prior to the meeting. Please allow ample time for the admission procedures. |
| Q: | May
I vote my shares in person at the Annual Meeting? |
| A: | If
you were a stockholder of record on the Record Date, you may vote your shares in person at
the Annual Meeting or through a proxy. If you decide to vote your shares in person, you do
not need to present your share certificate(s) at the Annual Meeting; your name will be on
the list of stockholders eligible to vote. If you hold your shares beneficially in street
name, you may vote your shares in person at the Annual Meeting only if you obtain a legal
proxy or other evidence from your broker giving you the right to vote the shares. Even
if you plan to attend the Annual Meeting, we recommend that you also submit your proxy or
voting instructions as described below so that your vote will be counted if you later decide
not to attend the Annual Meeting. |
| Q: | How
can I vote my shares without attending the Annual Meeting? |
| A: | Whether
you hold shares directly as the stockholder of record or beneficially in street name, you
may direct how your shares are voted without attending the Annual Meeting. If you are a stockholder
of record, you may vote by submitting a proxy. If you hold shares beneficially in street
name, you may vote by submitting voting instructions to your broker. For directions on how
to vote, please refer to the instructions on your proxy card or, for shares held beneficially
in street name, the voting instruction card provided by your broker. |
Stockholders
of record may submit proxies by completing, signing, dating, and mailing their proxy cards to the address provided on the proxy card.
Stockholders who hold shares beneficially in street name may vote by completing, signing, and dating the voting instruction cards provided
and mailing them to the address provided on the voting instruction card. The proxy card and voting instruction card also include directions
as to how you may submit your vote through the Internet. The voting instruction card may also include directions for alternative methods
of submitting your vote. We encourage you to vote early. If you choose to vote by mail, please allow sufficient time for your proxy or
voting instruction card to reach our vote tabulator prior to the Annual Meeting.
| Q: | Who
will count the votes? |
| A: | Votes
at the Annual Meeting will be counted by an inspector of election, who will be appointed
by the Board. |
| Q: | What
is the effect of not voting? |
| A: | If
you are a stockholder of record and you do not cast your vote, no votes will be cast on your
behalf on any of the items of business at the Annual Meeting. If you are a stockholder of
record and you properly sign and return your proxy card, your shares will be voted as you
direct. If no instructions are indicated on such proxy card and you are a stockholder of
record, shares represented by the proxy will be voted in the manner recommended by the Board
on all matters presented in this proxy statement, namely “FOR” all six of the
director nominees, “FOR” the ratification of the appointment of Grant Thornton
as our independent registered public accounting firm and “FOR” the approval,
on an advisory basis, of the compensation of our executive officers named in this proxy statement. |
Generally,
broker non-votes occur when shares held by a broker in “street name” for a beneficial owner are not voted with respect to
a particular proposal because the broker (1) has not received voting instructions from the beneficial owner and (2) lacks discretionary
voting power to vote those shares.
A
broker is entitled to vote shares held for a beneficial owner on routine matters. The ratification of the appointment of Grant Thornton
as our independent registered public accounting firm in Proposal Two is a routine matter; and, accordingly, a broker is entitled to vote
shares held for a beneficial owner on this proposal without instructions from such beneficial owner. On the other hand, absent instructions
from a beneficial owner, a broker is not entitled to vote shares held for such beneficial owner on non-routine matters. We believe, based
on the rules of the New York Stock Exchange (“NYSE”), that the election of directors in Proposal One and the advisory vote
on executive compensation in Proposal Three are non-routine matters; and, accordingly, brokers do not have authority to vote on such
matters absent instructions from beneficial owners. Whether a voting proposal is ultimately determined routine or non-routine is determined
by the NYSE. Accordingly, if beneficial owners desire not to have their shares voted by a broker in a certain manner, they should give
instructions to their brokers as to how to vote their shares.
Broker
non-votes count for purposes of determining whether a quorum is present.
| Q: | How
many votes are required for the approval of the proposals to be voted upon, and how will
abstentions and broker non-votes be treated? |
| Proposal |
|
Votes
Required |
|
Effect
of Votes Withheld / Abstentions |
|
Effect
of
Broker
Non-Votes |
| Proposal
One: Election of Directors |
|
Plurality
of the votes cast. This means that the six nominees receiving the highest number of affirmative
“FOR” votes will be elected as directors.
|
|
Votes
withheld will have no effect. |
|
Broker
non-votes will have no effect. |
| Proposal
Two: Ratification of Appointment of Independent Registered Public Accounting Firm |
|
Affirmative
vote of the holders of a majority in voting power of the shares of common stock present in
person or by proxy and entitled to vote thereon.
|
|
Abstentions
will have the effect of a vote against the proposal. |
|
We
do not expect any broker non-votes on this proposal. |
| Proposal
Three: Advisory Vote on Executive Compensation |
|
Affirmative
vote of the holders of a majority in voting power of the shares of common stock present in person or by proxy and entitled to vote thereon. |
|
Abstentions
will have the effect of a vote against the proposal.
|
|
Broker
non-votes will have no effect.
|
| Q: |
Can I revoke my proxy or change my vote after I have voted? |
| A: | You
may revoke your proxy and change your vote by voting again or by attending the Annual Meeting
and voting in person. Only your latest dated proxy card received at or prior to the Annual
Meeting will be counted. However, your attendance at the Annual Meeting will not have the
effect of revoking your proxy unless you forward written notice to the Corporate Secretary
at Xtant Medical Holdings, Inc., 664 Cruiser Lane, Belgrade, Montana 59714, or you vote by
ballot at the Annual Meeting. If you are a beneficial owner, you will need to request a legal
proxy from your broker and bring it with you to vote at the Annual Meeting. |
| Q: | How
many votes are required to hold the Annual Meeting? |
| A: | The
presence, in person or by proxy, of the holders of one-third of the shares of our common
stock outstanding and entitled to vote on the Record Date is necessary to hold the Annual
Meeting and conduct business. This is called a quorum. Abstentions and broker non-votes will
be considered as present at the Annual Meeting for purposes of establishing a quorum. |
| Q: | Who
will bear the cost of soliciting votes for the Annual Meeting? |
| A: | The
Company is making this solicitation and will pay the entire cost of preparing, printing,
assembling, mailing, and distributing these proxy materials. In addition to the use of the
mails, proxies may be solicited by personal interview, telephone, electronic mail, and facsimile
by directors, officers, and regular employees of the Company. None of the Company’s
directors, officers, or employees will receive any additional compensation for soliciting
proxies on behalf of the Board. The Company may also make arrangements with brokerage firms
and other custodians, nominees, and fiduciaries for the forwarding of soliciting material
to the beneficial owners of common stock held of record by those owners. The Company will
reimburse those brokers, custodians, nominees, and fiduciaries for their reasonable out-of-pocket
expenses incurred in connection with that service. |
| Q: | Where
can I find the voting results of the Annual Meeting? |
| A: | We
intend to announce preliminary voting results at the Annual Meeting and will disclose final
voting results in a Current Report on Form 8-K that will be filed with the SEC not more than
four business days following the Annual Meeting. |
PROPOSAL
one—ELECTION OF DIRECTORS
Board
Size and Structure
Our
Third Amended and Restated Bylaws (“Bylaws”) provide that the Board will consist of one or more members, the number thereof
to be determined from time to time by resolution of the Board; provided, however, that prior to July 26, 2030, fixing the number of directors
at more than seven directors requires the approval of at least 75% of the directors then holding office. The Board has fixed the number
of directors at six, and we currently have six directors serving on the Board. Each director holds office for a term of one year or until
his or her successor is duly elected and qualified, subject to his or her earlier death, resignation, disqualification, or removal.
Current
Directors and Nominees for Director
The
Board has nominated the following six individuals to serve as our directors until the next annual meeting of stockholders or until their
respective successors are elected and qualified. All of the nominees named below are current members of the Board. The names, ages, and
positions of our nominees for director as of May 28, 2024 are as follows:
| Name |
|
Age |
|
Position |
| Stavros
G. Vizirgianakis(3) |
|
53 |
|
Chairman
of the Board and Director |
| Sean
E. Browne |
|
58 |
|
Chief
Executive Officer and Director |
| John
K. Bakewell(1)(3) |
|
63 |
|
Director |
| Jonn
R. Beeson(2)(3) |
|
55 |
|
Director |
| Robert
E. McNamara(1)(2) |
|
67 |
|
Director |
| Lori
D. Mitchell-Keller(1)(2) |
|
58 |
|
Director |
| (1) |
Member of the Audit Committee |
| (2) |
Member of the Compensation Committee |
| (3) |
Member of the Nominating and Corporate Governance Committee |
Each
director elected at the Annual Meeting will serve a one-year term until the Company’s next annual meeting and until his or her
successor is duly elected and qualified or until his or her earlier death, resignation, disqualification, or removal. Unless otherwise
instructed, the proxyholders will vote the proxies received by them for the six nominees. If any nominee should become unavailable for
election prior to the Annual Meeting, an event that currently is not anticipated by the Board, the proxies will be voted in favor of
the election of a substitute nominee or nominees proposed by the Board. Each nominee has agreed to serve if elected, and the Board has
no reason to believe that any nominee will be unable to serve.
Board
Nomination Rights
Pursuant
to an Investor Rights Agreement, dated as of February 14, 2018 (as amended, the “Investor Rights Agreement”), by and among
the Company and OrbiMed Royalty Opportunities II, LP (“Royalty Opportunities”) and ROS Acquisition Offshore LP (“ROS”),
for so long as the Ownership Threshold (as defined in the Investor Rights Agreement and below) is met, Royalty Opportunities and ROS
are entitled to nominate such individuals to the Board constituting a majority of the directors. However, Royalty Opportunities and ROS
waived this right and did not nominate any individuals to serve on the Board for the ensuing year.
In
connection with our 2022 private placement, we entered into an agreement with Stavros G. Vizirgianakis, as the lead investor of the private
placement, pursuant to which we agreed to provide Mr. Vizirgianakis certain director nomination rights. Pursuant to the terms of the
agreement, we expanded the size of the Board by one position and elected Mr. Vizirgianakis as a director to fill the vacancy created
as a result of the increase, effective upon completion of the closing of the first tranche of securities in the private placement. In
addition, we, with the consent of Royalty Opportunities and ROS, elected Mr. Vizirgianakis as Chairman of the Board, effective upon completion
of the first closing. The director nomination rights set forth in the agreement will terminate on the earlier of (i) the date on which
Mr. Vizirgianakis ceases to hold at least 75% of the shares of our common stock purchased by him in the private placement; (ii) October
7, 2024; or (iii) upon written notice of Mr. Vizirgianakis to the Company.
Additional
Information About Director Nominees
The
Board believes that our six director nominees collectively have the experience, qualifications, attributes, and skills to effectively
oversee the management of the Company, including a high degree of personal and professional integrity, an ability to exercise sound business
judgment on a broad range of issues, sufficient experience and background to have an appreciation of the issues facing the Company, a
willingness to devote the necessary time to Board duties, a commitment to representing the best interests of the Company and our stockholders,
and a dedication to enhancing stockholder value. The business experience of each nominee for director is summarized below.
Stavros
G. Vizirgianakis has served as a member of our Board since August 2022. Mr. Vizirgianakis was elected to the Board in connection
with our private placement in August 2022. Mr. Vizirgianakis is the former Chief Executive Officer of Misonix, Inc., a medical device
company that Bioventus Inc. acquired in 2021. Mr. Vizirgianakis has a distinguished career in the medical devices field having worked
for United States Surgical Corporation as director of sales for sub-Saharan Africa and later Tyco Healthcare in the capacity of General
Manager South Africa. In 2006, Mr. Vizirgianakis co-founded Surgical Innovations, which has become one of the largest privately owned
medical device distributors in the African region, and now part of the Johannesburg Stock Exchange listed entity Ascendis Health. Mr.
Vizirgianakis was Managing Director of Ascendis Medical from January 2014 through July 2016. Mr. Vizirgianakis served as the President
and Chief Executive Officer of Misonix from September 2016 through October 2021. Mr. Vizirgianakis currently serves as a director and
Chairman of the board of directors of Apyx Medical Corporation (NASDAQ: APYX), an advanced energy technology company, and as a director
of Medinotec, Inc. (OTCQX: MDNC), a medical device company. He previously served on the board of directors of Bioventus Inc. and Tenaxis
Medical and is a strategic investor and advisor to numerous medical device startups and established companies in this field. Mr. Vizirgianakis
has a Degree in Commerce from the University of South Africa. Mr. Vizirgianakis’s extensive experience as a senior executive
of a publicly traded medical technology company, as well as his experience serving on the board of directors of other companies contributes
valuable experience to our Board.
Sean
E. Browne has served as our President and Chief Executive Officer since October 2019 and as a member of our Board since October
2019. Prior to this, Mr. Browne served as Chief Revenue Officer of CCS Medical, Inc., a provider of home delivery medical supplies, from
September 2014 to June 2019. Prior to CCS Medical, Mr. Browne served as Chief Operating Officer of The Kini Group, an integrated cloud-based
software analytics and advisory firm, from March 2013 to August 2014. From November 2007 to March 2016, Mr. Browne served as President
and Chief Executive Officer and a director of Neuro Resource Group, a venture start-up medical device company that was sold to a strategic
buyer. In other roles, Mr. Browne served as President, Miltex Surgical Instrument Division for Integra LifeSciences Holdings Corporation,
a publicly held medical device company that acquired Miltex Holdings, Inc. Mr. Browne served as Vice President, Sales and Marketing of
Esurg.com, an e commerce company serving physician and ambulatory surgery markets. Prior to Esurg.com, Mr. Browne served as Senior Vice
President, Health Systems Division of McKesson Corporation, a drug company, and prior to McKesson, served in various positions with increasing
responsibility at Baxter Healthcare. Mr. Browne holds a Master of Business Administration from the Kellogg School of Management at Northwestern
University and a Bachelor of Science degree, with a major in Finance and minor in Statistics, from Boston University. We believe that
Mr. Browne’s day-to-day operations experience as a result of his role as our President and Chief Executive Officer enable him to
make valuable contributions to the Board of Directors. In addition, in his role as President and Chief Executive Officer, Mr. Browne
provides unique insight into our business strategies, opportunities and challenges, and serves as the unifying element between the leadership
and strategic direction provided by the Board of Directors and the implementation of our business strategies by management.
John
K. Bakewell has served as a member of our Board since February 2018. He was initially elected to the Board in connection with
our restructuring in February 2018. Mr. Bakewell is a strategic executive with more than 30 years of experience in senior executive roles
and as a board member of several medical technology companies. He currently serves on the board of directors of Treace Medical Concepts,
Inc. (NASDAQ: TMCI), a medical device company. Mr. Bakewell most recently held the position of Chief Financial Officer of Exact Sciences
Corporation (NASDAQ: EXAS), a molecular diagnostics company, and previously Chief Financial Officer of Lantheus Holdings, Inc. (NASDAQ:
LNTH), a diagnostic medical imaging company. Mr. Bakewell also previously served in Chief Financial Officer positions at Interline Brands,
Inc., RegionalCare Hospital Partners, Wright Medical Group, Inc., which was acquired by Stryker Corporation (NYSE: SYK) in November 2020,
Cyberonics, Inc., now part of LivaNova PLC (NASDAQ: LIVN), Altra Energy Technologies, Inc. and ZEOS International, Ltd. He began his
career in the public accounting profession, serving seven years, collectively, with Ernst & Young and KPMG Peat Marwick. Mr. Bakewell
previously served on the board of directors of Neuronetics, Inc. (NASDAQ: STIM), a public medical device company, and Entellus Medical,
Inc., a public ENT-focused medical device company, until its acquisition by Stryker Corp.; ev3 Inc., a public endovascular medical device
company, until its acquisition by Covidien plc; and Corindus Vascular Robotics, Inc., a public cardiovascular robotics medical technology
company and now a Siemens Healthineers company. Mr. Bakewell holds a Bachelor of Arts in Accounting from the University of Northern Iowa
and is a certified public accountant (current status inactive). Mr. Bakewell’s financial expertise and extensive managerial experience
as a senior executive of several publicly traded medical technology companies, as well as his experience serving on the board of directors
of other companies contributes valuable experience to our Board.
Jonn
R. Beeson has served as a member of our Board since May 1, 2023. Mr. Beeson is a partner with Jones Day, a global law firm, and
has been practicing corporate law since 1996. His practice focuses on mergers and acquisitions, divestitures, takeovers, capital raising,
securities transactions, corporate governance and stockholder activism matters. Mr. Beeson represents a variety of corporate clients
and is most active in the life sciences, technology and software industries, with significant experience working with a wide range of
medical device companies. Mr. Beeson holds a Bachelor of Science degree from the University of California, Irvine, and a Juris Doctor
from the University of Pennsylvania. Mr. Beeson’s extensive experience in mergers and acquisitions, corporate governance matters
and working with medical device companies contributes valuable experience to our Board.
Robert
E. McNamara has served as a member of our Board since February 2018. He has over 25 years of experience in the medical device
industry. Mr. McNamara was initially elected to the Board in connection with our restructuring in February 2018. He also serves as Audit
Committee Chairman of Axonics, Inc. (AXNX) and as Audit Committee Chairman and member of the Nominating and Governance Committee of AVITA
Medical, Inc. (RCEL). From January 2013 to July 2016, Mr. McNamara served as Executive Vice President and from April 2012 to July 2016
as the Chief Financial Officer for LDR Holding Corporation, a publicly held medical device (spinal implants) company acquired by Zimmer
Biomet Holdings, Inc. In addition, Mr. McNamara has previously served as the Senior Vice President and Chief Financial Officer for publicly
traded medical device companies including Accuray Inc., a stereotactic radiation company focused on treating cancer using AI robotics,
Somnus Medical Technologies Inc., a RF energy company focused on treating upper airway breathing disorders, and Target Therapeutics,
Inc., a minimally invasive catheter and device company treating vascular diseases of the brain. Mr. McNamara has been a member of
the board of directors of Northstar Neurosciences Inc. and is the former Mayor of Menlo Park, California. Mr. McNamara began his career
in public accounting and is a certified public accountant (current status inactive). Mr. McNamara holds a Bachelor of Science in Accounting
from the University of San Francisco and a Master of Business Administration in Finance from The Wharton School at the University of
Pennsylvania. Mr. McNamara brings valuable finance and accounting experience in the medical device industry to the Board.
Lori
D. Mitchell-Keller has served as a member of our Board since May 16, 2023. Ms. Mitchell-Keller has over 30 years of experience
in the software, consumer goods, wholesale distribution and retail industries, including more than 15 years focused on market strategy
and market development. From May 2020 to November 2022, she served as Vice President and Global General Manager, Industry Solutions,
at Google Cloud, a company offering a suite of cloud computing services. From June 2018 to May 2020, Ms. Mitchell-Keller served as the
President and Global General Manager, SAP Industries, at SAP Labs, LLC, a software company, where she previously served in several other
roles since 2007, including EVP and Global General Manager, Consumer Industries; SVP and Global Head, Retail Industry Business Unit;
SVP, LoB Solution Management Idea-to-Delivery; SVP, Suite Solution Management, Supply Chain, Product Lifecycle Management and Manufacturing;
and SVP, Business Suite Applications. Prior to SAP, Ms. Mitchell-Keller held a variety of executive positions at Manugistics, a software
company, and Baxter/Allegiance Healthcare. Ms. Mitchell-Keller currently serves as a member of the board of directors of Mitratech, a
software company; Madison House Autism Foundation and The Neighborhood Of Maryland, Inc. She previously served on the boards of directors
of the Food Marketing Institute and the National Retail Federation. Ms. Mitchell-Keller holds a Master of Business Administration in
Management/Strategy and Marketing from the J.L. Kellogg Graduate School of Management at Northwestern University, a Master of Science
in Operations Research from Stanford University, and a Bachelor of Science in Industrial Engineering from Iowa State University. Ms.
Mitchell-Keller brings valuable market strategy, market development, operations and supply chain management experience to the Board.
Board
Recommendation
The
Board unanimously recommends that you vote “FOR” the election of Stavros G. Vizirgianakis, Sean E. Browne, John K.
Bakewell, Jonn R. Beeson, Robert E. McNamara and Lori D. Mitchell-Keller to serve as directors until the next annual meeting of stockholders
and until their respective successors are duly elected and qualified.
| The
Board Recommends a Vote FOR the Election of All Six Nominees for Director. |
 |
GENERAL
INFORMATION ABOUT THE BOARD OF DIRECTORS
AND CORPORATE GOVERNANCE
Investor
Rights Agreement
We
are party to an Investor Rights Agreement with OrbiMed Royalty Opportunities II, LP and ROS Acquisition Offshore LP, which are funds
affiliated with OrbiMed Advisors LLC. Under the Investor Rights Agreement, Royalty Opportunities and ROS are permitted to nominate a
majority of the directors and designate the chairperson of our Board of Directors at subsequent annual meetings, as long as they maintain
an ownership threshold in our Company of at least 40% of our then outstanding common stock. If Royalty Opportunities and ROS are unable
to maintain the Ownership Threshold, as defined in the Investor Rights Agreement, the Investor Rights Agreement contemplates a reduction
of nomination rights commensurate with our ownership interests. For so long as the Ownership Threshold is met, we must obtain the approval
of a majority of our common stock held by Royalty Opportunities and ROS to proceed with the following actions: (i) issue new securities;
(ii) incur over $250,000 of debt in a fiscal year; (iii) sell or transfer over $250,000 of our assets or businesses or our subsidiaries
in a fiscal year; (iv) acquire over $250,000 of assets or properties in a fiscal year; (v) make capital expenditures over $125,000 individually,
or $1,500,000 in the aggregate during a fiscal year; (vi) approve our annual budget; (vii) appoint or remove the chairperson of our Board
of Directors; and (viii) make, loans to, investments in, or purchase, or permit any subsidiary to purchase, any stock or other securities
in another entity in excess of $250,000 in a fiscal year.
The
Investor Rights Agreement grants Royalty Opportunities and ROS the right to purchase from us a pro rata amount of any new securities
that we may propose to issue and sell. The Investor Rights Agreement may be terminated (a) upon the mutual written agreement of all the
parties, (b) upon our written notice or the written notice of ROS or Royalty Opportunities if the ownership percentage of our then outstanding
common stock of ROS and Royalty Opportunities is less than 10%, or (c) upon written notice of ROS and Royalty Opportunities.
Royalty
Opportunities and ROS collectively beneficially own approximately 56.1% of our common stock.
Controlled
Company Status
Because
more than 50% of the combined voting power of all of our outstanding common stock is beneficially owned by OrbiMed Advisors LLC, we are
a “controlled company” as defined in section 801(a) of the NYSE American Company Guide. As such, we are exempt from certain
NYSE American rules requiring our Board of Directors to have a majority of independent directors, a compensation committee composed entirely
of independent directors and a nominating committee composed entirely of independent directors. We currently maintain a Board of Directors
with a majority of independent directors and a compensation committee and nominating and corporate governance committee composed entirely
of independent directors.
Director
Independence
The
Board has affirmatively determined that John K. Bakewell, Jonn R. Beeson, Robert E. McNamara, Lori D. Mitchell-Keller and Stavros G.
Vizirgianakis are “independent directors,” as defined under the independence standards of the NYSE American.
Board
Leadership Structure
Under
the terms of the Investor Rights Agreement, Royalty Opportunities and ROS have the right to designate the Chair of the Board. However,
Royalty Opportunities and ROS have waived this right during the past couple of years. Stavros G. Vizirgianakis serves as Chair of the
Board and has served in this position since August 2022 when he joined our Board in connection with our private placement. Sean E. Browne
serves as our President and Chief Executive Officer. We believe this leadership structure is in the best interests of the Company and
our stockholders and strikes the appropriate balance between the Chief Executive Officer’s responsibility for the strategic direction,
day-to-day leadership, and performance of the Company and the Chair of the Board’s responsibility to guide the overall strategic
direction of the Company, provide oversight of our corporate governance and guidance to our Chief Executive Officer, and to set the agenda
for and preside over Board meetings. We recognize that different leadership structures may be appropriate for companies in different
situations and believe that no one structure is suitable for all companies. We believe that we are currently well-served by this leadership
structure.
In
connection with our August 2022 private placement, we entered into an agreement with Stavros G. Vizirgianakis, as the lead investor of
the private placement, pursuant to which we agreed to provide Mr. Vizirgianakis certain director nomination rights. Pursuant to the terms
of the agreement, we agreed to and expanded the size of the Board by one position and elected Mr. Vizirgianakis as a director to fill
the vacancy created as a result of the increase, effective upon completion of the closing of the first tranche of securities in the private
placement. In addition, we agreed to and elected Mr. Vizirgianakis as Chair of the Board, effective upon completion of the first closing.
The director nomination rights set forth in the agreement will terminate on the earlier of (i) the date on which Mr. Vizirgianakis ceases
to hold at least 75% of the shares of our common stock purchased by him in the private placement; (ii) October 7, 2024; or (iii) upon
written notice of Mr. Vizirgianakis to the Company.
Board
Meetings
The
Board met 17 times during fiscal 2023. During fiscal 2023, each director nominee attended at least 88.9% of the meetings of the Board
and Board committees on which the director served during the last fiscal year.
We
do not have a formal policy on Board member attendance at annual meetings of stockholders. All Board members serving at the time of the
Company’s 2023 annual meeting of stockholders attended the annual meeting either in person or by telephone.
Board
Committees
We
currently maintain three Board committees, an Audit Committee, a Compensation Committee and a Nominating and Corporate Governance Committee.
Our Nominating and Corporate Governance Committee was formed on May 1, 2023.
The
table below summarizes the current membership of each of our three standing board committees as of May 28, 2024.
| Director | |
Audit Committee | |
Compensation Committee | |
Nominating and Corporate Governance Committee |
| Stavros G. Vizirgianakis | |
| |
| |
● |
| Sean E. Browne | |
| |
| |
|
| John K. Bakewell | |
Chair | |
| |
● |
| Jonn R. Beeson | |
| |
● | |
Chair |
| Robert E. McNamara | |
● | |
Chair | |
|
| Lori D. Mitchell-Keller | |
● | |
● | |
|
Audit
Committee
The
organization and primary responsibilities of the Audit Committee are set forth in its charter, posted on our website at www.xtantmedical.com
(click “Investors” and “Corporate Governance”), and include various matters with respect to the oversight
of our accounting and financial reporting process and audits of our financial statements. The primary purposes of the Audit Committee
include:
| ● | to
oversee the accounting and financial reporting processes of the Company and audits of the
financial statements of the Company; |
| | | |
| ● | to
provide assistance to the Board with respect to its oversight of the following: |
| ○ | integrity
of the Company’s financial statements and internal controls; |
| | | |
| ○ | the
Company’s compliance with legal and regulatory requirements; |
| | | |
| ○ | the
qualifications and independence of the Company’s independent registered public accounting
firm; and |
| | | |
| ○ | the
performance of the Company’s internal audit function, if any, and independent registered
public accounting firm; and |
| ● | to
prepare the report required to be prepared by the Audit Committee pursuant to the rules of
the Securities and Exchange Commission. |
The
Audit Committee currently consists of Mr. Bakewell (Chair), Mr. McNamara and Ms. Mitchell-Keller. From January 2023 and until May 2023,
the Audit Committee consisted of Mr. Bakewell (Chair) and Mr. McNamara. The Audit Committee met five times during fiscal 2023. Under
the NYSE American listing standards, all Audit Committee members must be independent directors and meet heightened independence requirements
under the federal securities laws. In addition, all Audit Committee members must be financially literate, and at least one member must
be financially sophisticated. Further, under SEC rules, the Board must determine whether at least one member of the Audit Committee is
an “audit committee financial expert,” as defined by the SEC’s rules. The Board has determined that Mr. Bakewell, Mr.
McNamara and Ms. Mitchell-Keller are independent and financially literate and that Mr. Bakewell and Mr. McNamara are financially sophisticated
and qualify as “audit committee financial experts” in accordance with the applicable rules and regulations of the SEC.
Compensation
Committee
The
organization and responsibilities of the Compensation Committee are set forth in its charter, which is posted on our website at www.xtantmedical.com
(click “Investors” and “Corporate Governance”). The primary purposes of the Compensation Committee include:
| ● | recommending
to the Board all compensation for the Company’s Chief Executive Officer and approving
all compensation for the Company’s other executive officers; |
| | | |
| ● | administering
the Company’s equity-based compensation plans; |
| | | |
| ● | reviewing,
assessing, and approving overall strategies for attracting, developing, retaining, and motivating
Company management and employees; |
| | | |
| ● | overseeing
the development and implementation of succession plans for the Chief Executive Officer and
other key executive officers and employees; |
| | | |
| ● | reviewing,
assessing, and approving overall compensation structure on an annual basis; and |
| | | |
| ● | recommending
and leading a process for the determination of non-employee director compensation. |
The
Compensation Committee currently consists of Mr. McNamara (Chair), Mr. Beeson and Ms. Mitchell-Keller. From January 2023 and until May
2023, the Compensation Committee consisted of Mr. McNamara (Chair) and Michael J. Eggenberg and Matthew S. Rizzo, both former directors.
The Compensation Committee met five times during fiscal 2023. The Board has determined that each of Mr. McNamara, Mr. Beeson and Ms.
Mitchell-Keller satisfies the heightened independence criteria for compensation committee members under the NYSE American listing standards.
In addition, each Compensation Committee member is a “non-employee director” within the meaning of Rule 16b-3 under the Securities
Exchange Act of 1934, as amended.
As
described above, the Compensation Committee is responsible for recommending to the Board all compensation for the Company’s Chief
Executive Officer and approving all compensation for the Company’s other executive officers. Although the Compensation Committee
may delegate any or all of its responsibilities to a subcommittee of the Compensation Committee, it has not done so. The Company’s
Chief Executive Officer provides his recommendations to the Compensation Committee regarding compensation to be paid to the executive
officers and bonus plan performance objectives and goals. The Compensation Committee may engage and obtain advice and assistance from
outside advisors as it deems necessary to carry out its duties. In 2023, the Compensation Committee engaged Mercer (US) Inc. to serve
as its independent compensation consultant and to assist with the assessment of our executive and non-employee director compensation
programs. Mercer (US) Inc. does not provide any services to the Company unrelated to executive or director compensation.
Nominating
and Corporate Governance Committee
The
organization and responsibilities of the Nominating and Corporate Governance Committee are set forth in its charter, which is posted
on our website at www.xtantmedical.com (click “Investors” and “Corporate Governance”). The primary purposes
of the Nominating and Corporate Governance Committee include:
| ● | identifying
individuals qualified to become Board members consistent with criteria approved by the Board
and recommending to the Board director nominees for election at each annual meeting of stockholders
and the persons to be elected by the Board to fill any vacancies on the Board; |
| | | |
| ● | making
recommendations to the Board regarding director diversity, retirement age, tenure and refreshment
policies; |
| | | |
| ● | reviewing
and making recommendations to the Board regarding Board committee structure and composition; |
| | | |
| ● | developing
and recommending to the Board a set of corporate governance guidelines and overseeing corporate
governance issues; and |
| | | |
| ● | developing
and overseeing an orientation process for new directors and reviewing the Company’s
policies and programs with respect to the continuing education of directors. |
The
Nominating and Corporate Governance Committee consists of Mr. Beeson (Chair), Mr. Bakewell and Mr. Vizirgianakis. The Nominating and
Corporate Governance Committee met three times during fiscal 2023. The Board has determined that Mr. Beeson, Mr. Bakewell and Mr. Vizirgianakis
are independent directors under the NYSE American listing standards.
In
connection with its primary responsibilities set forth above, the Nominating and Corporate Governance Committee is responsible for developing
and overseeing an orientation process for new directors and to review our policies and programs with respect to the continuing education
of directors. Accordingly, the Nominating and Corporate Governance Committee has adopted a new director orientation process, pursuant
to which new directors will be provided with access to information about the Company to assist the director in better understanding the
business as well as the responsibilities and culture of the Board and its committees. New directors will be provided with suggested reading
materials, an initial orientation session, follow-up one-on-one meetings, and sponsorship by an existing director. The Nominating and
Corporate Governance Committee has additionally adopted a director education reimbursement policy to encourage existing directors to
seek additional education opportunities regarding corporate governance and other subject matters relevant to their service.
Corporate
Governance Guidelines
The
Board, upon the recommendation of the Nominating and Corporate Governance Committee, has established Corporate Governance Guidelines
that describe our basic approach to corporate governance. A copy of these Corporate Governance Guidelines is posted on our website at
www.xtantmedical.com (click “Investors” and “Corporate Governance”). Among the topics addressed in our
Corporate Governance Guidelines are:
| |
● |
Role of the Board |
|
● |
Director Retirement Policy |
| |
● |
Size of the Board |
|
● |
Conflicts of Interests |
| |
● |
Composition of the Board |
|
● |
Confidentiality |
| |
● |
Chair of the Board |
|
● |
Board Access to Senior Management |
| |
● |
Lead Director |
|
● |
Board Access to Independent Advisors |
| |
● |
Executive Sessions |
|
● |
Director Orientation and Continuing Education |
| |
● |
Selection of New Directors |
|
● |
Board and Board Committee Self-Evaluation |
| |
● |
Director Qualifications |
|
● |
Board, Committee and Stockholder Meetings |
| |
● |
Limitation of Other Board Service |
|
● |
Board Committees |
| |
● |
Directors Who Change their Current Positions |
|
● |
Leadership Development |
| |
● |
Director Term Limits |
|
● |
Communications with the Board |
Director
Nomination Process
Until
the creation of a Nominating and Corporate Governance Committee in May 2023, the Board oversaw our director nomination process. In identifying
and evaluating candidates for membership on the Board, the Board took into account all factors it considered appropriate, including strength
of character, mature judgment, career specialization, relevant technical skills, diversity (including, but not limited to, gender, race,
ethnicity, age, experience, and skills), and the extent to which the candidate would fill a present need on the Board. Pursuant to its
charter, the Nominating and Corporate Governance Committee, in evaluating candidates for nomination to the Board, will take into account
the independence and other requirements, applicable pursuant to law, SEC rules, the requirements of any stock exchange on which securities
of the Company are listed, or otherwise. At a minimum, the Nominating and Corporate Governance Committee will consider (i) whether
each such nominee has demonstrated, by significant accomplishment in such nominee’s field, an ability to make a meaningful contribution
to the Board’s oversight of the business and affairs of the Company and (ii) the nominee’s reputation for honesty and ethical
conduct in such nominee’s personal and professional activities. Additional factors which the Nominating and Corporate Governance
Committee may consider include a candidate’s judgment, skill, objectivity, independence, leadership, integrity, diversity, business
or other experience, financial or other expertise, time availability in light of other commitments and conflicts of interest. The Nominating
and Corporate Governance Committee will consider candidates recommended by stockholders and others, as it deems appropriate. In considering
candidates submitted by stockholders, the Nominating and Corporate Governance Committee will take into consideration the needs of the
Board and the qualifications of the candidate. We do not have a formal diversity policy for directors.
The
Nominating and Corporate Governance Committee identifies, and prior to the creation of the Nominating and Corporate Governance Committee,
the Board identified, director candidates based on input provided by a number of sources, including Board members, stockholders, management,
and third parties. The Nominating and Corporate Governance Committee does not distinguish between nominees recommended by our stockholders
and those recommended by other parties. Any stockholder recommendation must be sent to our Corporate Secretary at Xtant Medical Holdings,
Inc., 664 Cruiser Lane, Belgrade, Montana 59714, and must include certain information concerning the nominee as specified in our Bylaws.
Board
Diversity
We
believe it is important to have a balanced and diverse Board, and we are committed to building and maintaining director diversity with
members who bring a range of expertise, perspectives, experiences and personal characteristics pertaining to, among other factors, gender,
race, ethnicity, age and tenure.
The
following describes the current diversity, age and tenure of our Board:
Board
Qualifications
Our
Board seeks to ensure that the Board is composed of members whose particular expertise, experience, qualifications, attributes and skills,
when taken together, will allow our Board to satisfy its oversight responsibilities effectively. The following are some of the key qualifications,
skills and experiences of our Board:
| Qualification, Skill or Experience | |
Vizirgianakis | |
Browne | |
Bakewell | |
Beeson | |
Mitchell-Keller | |
McNamara |
| Public Company CEO | |
● | |
● | |
| |
| |
| |
|
| Medical Device Industry | |
● | |
● | |
● | |
● | |
| |
● |
| Manufacturing/Operations | |
● | |
● | |
| |
| |
● | |
|
| Sales & Marketing/Commercial | |
● | |
● | |
| |
| |
● | |
|
| Financial/Accounting | |
| |
| |
● | |
| |
| |
● |
| International | |
● | |
● | |
| |
| |
● | |
|
| Mergers and Acquisitions | |
● | |
● | |
| |
● | |
| |
|
| Governance | |
● | |
| |
● | |
● | |
| |
● |
The
members of our Board have a diversity of experience and a wide variety of backgrounds, skills, qualifications and viewpoints that strengthen
their ability to carry out their oversight role on behalf of our stockholders. The matrix above does not encompass all of the knowledge,
skills and experience of our directors, and the fact that a particular knowledge, skill or experience is not listed does not mean that
a director does not possess it. In addition, the absence of a particular knowledge, skill or experience with respect to any of our directors
does not mean the director in question is unable to contribute to the decision-making process in that area. However, a mark indicates
a specific area of focus or expertise that the director brings to our Board. The determination of which particular knowledge, skill or
experience is an area of focus or expertise for a director is based on their prior business and industry experience, training and background.
More information on each director’s qualifications and background can be found in their director biographies. We regularly review
the attributes required of the members of our Board in order to facilitate our long-term goals and operational performance, enhance our
corporate culture and promote diversity and inclusiveness at our Company.
Risk
Oversight
The
Board has overall responsibility for risk oversight with a focus on the most significant risks facing the Company. The Board relies upon
management to supervise day-to-day risk management.
Risk
is inherent in every business. We face a number of risks, including regulatory, compliance, legal, competitive, financial (accounting,
credit, interest rate, liquidity, and tax), operational, political, strategic, and reputational risks. Our management is responsible
for the day-to-day management of risks faced by us, while the Board, as a whole and through the Audit Committee, has responsibility for
the oversight of risk management. In its risk oversight role, the Board ensures that the risk management processes designed and implemented
by management are adequate and functioning as designed. The Board oversees risks through the establishment of policies and procedures
that are designed to guide daily operations in a manner consistent with applicable laws, regulations, and risks acceptable to the Company.
The Audit Committee’s role includes a particular focus on the qualitative aspects of financial reporting to stockholders, our processes
for the management of business and financial risks, and compliance with significant applicable legal, ethical, and regulatory requirements.
The Audit Committee, along with management, is also responsible for developing and participating in a process for the review of important
financial and operating topics that present potential significant risks to the Company. Additionally, the Audit Committee is responsible
for overseeing the integrity of the Company’s information technology systems, processes and data, and for periodically reviewing
and assessing with management (i) the adequacy of controls and security for the Company’s information technology systems, processes
and data, and (ii) the Company’s contingency plans in the event of a breakdown or security breach affecting the Company’s
information technology systems, to the extent possible. Management regularly discusses with the Board the strategies and risks facing
the Company. This current leadership structure, which includes separate Chairman and Chief Executive Officer roles, is appropriate and
in the best interests of the Company and its stockholders at this time for a number of reasons, including (i) the extensive experience
of the members of the Board and management, (ii) our status as a controlled company, and (iii) the appropriate balance of risks relating
to the concentration of authority through the oversight of our Chairman.
Code
of Ethics and Code of Conduct
We
have adopted a Code of Ethics for the CEO and Senior Financial Officers as well as a Code of Conduct that applies to all directors, officers,
and employees. Our corporate governance materials, including our Code of Ethics for the CEO and Senior Financial Officers and Code of
Conduct, are available on our website at www.xtantmedical.com (click “Investors” and “Corporate Governance”).
We intend to disclose on our corporate website any amendment to, or waiver from, a provision of our Code of Ethics for the CEO and Senior
Financial Officers that applies to directors and executive officers and that is required to be disclosed pursuant to the rules of the
SEC and the NYSE American.
Stockholder
Communications
The
Board does not have a formal process for stockholders to send communications to the Board and does not feel that such a process is necessary
at this time. If the Company receives stockholder communications that cannot be properly addressed by officers of the Company, the officers
bring the matter to the attention of the Board.
DIRECTOR
COMPENSATION
Director
Compensation Program
Our
director cash compensation consists of an annual cash retainer paid to each non-employee director and an additional annual cash retainer
paid to the Chair of the Board, Chair of each of our Board Committees and Board Committee members, and initial and annual equity grants.
We
revised our non-employee director compensation program in April 2023 to provide for an annual cash retainer to be paid to the Chair of
our then newly formed Nominating and Corporate Governance Committee and then revised the program again effective as of July 1, 2023 to
provide for annual cash retainers to be paid to Board Committee members in addition to Board Committee Chairs.
The
table below sets forth the annual cash retainers for 2023, effective through June 30, 2023:
| Description | |
Annual Cash Retainer | |
| Non-Employee Director | |
$ | 50,000 | |
| Chair of the Board Premium | |
| 32,500 | |
| Audit Committee Chair Premium | |
| 32,500 | |
| Compensation Committee Chair Premium | |
| 32,500 | |
| Nominating and Corporate Governance Committee Chair Premium | |
| 20,000 | |
The
table below sets forth the annual cash retainers for 2023, effective as of July 1, 2023:
| Description | |
Annual Cash Retainer | |
| Non-Employee Director (other than Board Chair) | |
$ | 55,000 | |
| Board Chair | |
| 110,000 | |
| Audit Committee Chair | |
| 22,500 | |
| Audit Committee Member (other than Chair) | |
| 11,250 | |
| Compensation Committee Chair | |
| 16,250 | |
| Compensation Committee Member (other than Chair) | |
| 8,125 | |
| Nominating and Corporate Governance Committee Chair | |
| 10,000 | |
| Nominating and Corporate Governance Committee Member (other than Chair) | |
| 5,000 | |
In
addition to annual cash retainers, our non-employee director compensation program provides for initial and annual equity grants. Each
of our two new directors, Jonn Beeson and Lori Mitchell-Keller, received a pro rata portion of the 2022 annual non-employee director
RSU awards (initially valued at $112,016), covering 52,049 shares of our common stock in the case of Mr. Beeson and 45,782 shares of
our common stock in the case of Ms. Mitchell-Keller, in connection with joining the Board. The number of shares underlying these initial
RSU awards was based not only on the passage of time since the then most recent annual grant, but also the fair market value of our common
stock at the time these initial RSU awards were approved by the Board. Consistent with our equity grant policy, these initial RSU awards
were granted on the 15th day of the month after the election of the new director.
With
respect to our annual equity grants, we revised our non-employee director compensation program in 2023 to provide for annual equity grants
of stock options and RSUs (or, at the election of the non-employee director, restricted stock units, or DSUs), with a value equal to
$125,000 per non-employee director, except in the case of our Chair of the Board, where the value is equal to $187,500. Consistent with
our equity grant policy, these equity grants were granted on August 15, 2023. The number of stock options and RSUs granted to each non-employee
director was based on assumed grant date fair values using our closing price of $0.86 per share of our common stock on June 25, 2023,
which is a date immediately prior to the date of the Compensation Committee action related to these awards. Accordingly, on August 15,
2023, each of our non-employee directors at that time received a stock option under the Xtant Medical Holdings, Inc. 2023 Equity Incentive
Plan (the “2023 Plan”) to purchase 28,230 (42,345, in the case of the Chair of the Board) shares of our common stock at a
per share exercise price equal to the fair market value of our common stock on that date and an RSU award (or, at the election of the
non-employee director, a DSU award) covering 145,180 (217,770, in the case of the Chair of the Board) shares of our common stock. Because
the value of our common stock increased between the date of the Compensation Committee action related to these awards and the grant date
of these awards, the grant date fair value of these awards is different than the value we used in determining the number of stock options
and RSUs. We recently reviewed and revised our non-employee director compensation program to provide for the grant of solely RSUs to
non-employee directors as opposed to a fix of RSUs and stock options.
In
2023, we also adopted a director education reimbursement policy, pursuant to which we will reimburse directors for all reasonable costs
of attending director education programs to encourage continuing director education. Amounts reimbursed include costs associated with
attending each program, including tuition, travel, lodging and meals. In addition, we will reimburse directors for the reasonable cost
of subscriptions to periodicals or online information services relating to corporate governance and other subject matters relevant to
board service, as well as membership fees of organizations which promote corporate governance and board education. Directors serving
on multiple boards are encouraged to obtain pro rata reimbursement of their director education expenses from each corporation that they
serve, but we will nonetheless reimburse 100% of the costs if this is not practicable.
Pursuant
to the 2023 Plan, the sum of any cash compensation, or other compensation, and the value of awards granted to a non-employee director
as compensation for services as a non-employee director during any fiscal year may not exceed $400,000 (increased to $600,000 with respect
to any non-employee director serving as the Chair of the Board or lead independent director or in the fiscal year of a non-employee director’s
initial service as a non-employee director).
Director
Compensation Table for Fiscal 2023
The
table below describes the compensation earned by individuals who served as directors during fiscal 2023, other than Sean E. Browne, our
President and Chief Executive Officer. Mr. Browne is not compensated separately for his service as a director, and his compensation is
discussed under “Executive Compensation.”
| Name | |
Fees Earned or
Paid in Cash | | |
Stock
Awards(1)(2) | | |
Option
Awards(3)(4) | | |
All Other
Compensation | | |
Total | |
| John K. Bakewell | |
$ | 82,500 | | |
$ | 174,216 | | |
$ | 27,594 | | |
$ | — | | |
$ | 284,310 | |
| Jonn R. Beeson(5) | |
| 53,229 | | |
| 205,966 | | |
| 27,594 | | |
| — | | |
| 286,789 | |
| Michael J. Eggenberg(6) | |
| 16,801 | | |
| — | | |
| — | | |
| — | | |
| 16,801 | |
| Robert E. McNamara | |
| 82,500 | | |
| 174,216 | | |
| 27,594 | | |
| — | | |
| 284,310 | |
| Lori D. Mitchell-Keller(7) | |
| 43,505 | | |
| 205,806 | | |
| 27,594 | | |
| — | | |
| 276,905 | |
| Matthew S. Rizzo(6) | |
| 16,801 | | |
| — | | |
| — | | |
| — | | |
| 16,801 | |
| Stavros G. Vizirgianakis | |
| 98,750 | | |
| 261,324 | | |
| 41,390 | | |
| — | | |
| 401,464 | |
| (1) | Amounts
reported in the “Stock Awards” column represent the aggregate grant date fair
value for the RSU awards or DSU awards granted to each non-employee director in 2023 computed
in accordance with FASB ASC Topic 718. The grant date fair value is determined based on the
closing price of our common stock on the grant date. These grant date fair value amounts
may differ from the amounts provided in our non-employee director compensation program since
the number of RSU or DSU awards is determined based on our stock price as of a date prior
to the actual grant date. |
| (2) | On
August 15, 2023, each non-employee director serving at the time, other than Mr. Vizirgianakis,
received an RSU or DSU award covering 28,230 shares of our common stock, and Mr. Vizirgianakis,
as Chair of the Board, received a DSU award covering 42,345 shares of our common stock. In
addition, on May 15, 2023, Mr. Beeson received an RSU award covering 52,049 shares of our
common stock and on June 15, 2023, Ms. Mitchell-Keller received an RSU award covering 45,782
shares of our common stock. As of December 31, 2023, the non-employee directors held the
following unvested stock awards: Mr. Bakewell (145,180); Mr. Beeson (145,180); Mr. Eggenberg
(0); Mr. McNamara; (145,180); Ms. Mitchell-Keller (145,180); Mr. Rizzo (0); and Mr.
Vizirgianakis (217,770). |
| (3) | Amounts
reported in the “Option Awards” column represent the aggregate grant date fair
value for option awards granted to each non-employee director in 2023 computed in accordance
with FASB ASC Topic 718. The grant date fair value is determined based on our Black-Scholes
option pricing model. The table below sets forth the specific assumptions used in the valuation
of the option awards: |
| Grant Date | |
Grant Date
Fair Value Per Share | | |
Risk Free
Interest Rate | | |
Expected Life | |
Expected
Volatility | | |
Expected
Dividend Yield | |
| 08/15/2023 | |
$ | 0.98 | | |
| 4.3 | % | |
5.5 years | |
| 107.00 | % | |
| — | |
These
grant date fair value amounts may differ from the amounts provided in our non-employee director compensation program since the number
of option awards is determined based on our Black-Scholes option pricing model as of a date prior to the actual grant date.
| (4) | On
August 15, 2023, each non-employee director serving at the time, other than Mr. Vizirgianakis,
received an option to purchase 28,230 shares of our common stock, and Mr. Vizirgianakis,
as Chair of the Board, received an option to purchase 42,345 shares of our common stock.
These options were granted at an exercise price of $1.20 per share, were granted under the
Xtant Medical Holdings, Inc. 2023 Equity Incentive Plan, the material terms of which are
described in more detail under “Executive Compensation—Stock Incentive Plans,”
vest in full on August 15, 2024 and will expire on August 15, 2033 or earlier in the case
of a director whose service as a director is terminated prior to such date. As of December
31, 2023, the non-employee directors held the following unexercised stock options: Mr. Bakewell
(28,230); Mr. Beeson (28,230); Mr. Eggenberg (0); Mr. McNamara; (28,230); Ms. Mitchell-Keller
(28,230); Mr. Rizzo (0); and Mr. Vizirgianakis (42,345). |
| (5) | Mr.
Beeson joined our Board of Directors effective May 1, 2023. |
| (6) | Each
of Messrs. Eggenberg and Rizzo resigned as a director of the Company effective May 1, 2023. |
| (7) | Ms.
Mitchell-Keller joined our Board of Directors effective May 16, 2023. |
PROPOSAL
two—RATIFICATION OF APPOINTMENT OF INDEPENDENT
REGISTERED
PUBLIC ACCOUNTING FIRM
Appointment
of Independent Registered Public Accounting Firm
We
are seeking stockholder ratification of the appointment of Grant Thornton LLP (“Grant Thornton”) as our independent registered
public accounting firm for the fiscal year ending December 31, 2024 as a matter of good corporate governance.
The
Audit Committee appoints our independent registered public accounting firm, or independent auditor. In this regard, the Audit Committee
evaluates the qualifications, performance, and independence of our independent auditor and determines whether to re-engage the current
auditor. As part of its evaluation, the Audit Committee considers, among other factors:
| ● | the
quality and efficiency of the services provided by the independent auditor, including the
performance, technical expertise, and industry knowledge of the lead audit partner and the
audit team assigned to our account; |
| ● | the
overall strength and reputation of the audit firm; |
| ● | the
auditor’s national capabilities relative to our business; |
| ● | the
auditor’s knowledge of our operations; |
| ● | the
quality and candor of the auditor’s communications with the audit committee and management; |
| ● | the
independence of the auditor; |
| ● | external
data on audit quality and performance, including recent PCAOB reports on the auditor and
its peer firms; and |
Upon
consideration of these and other factors, the Audit Committee has appointed Grant Thornton to serve as our independent registered public
accounting firm for the fiscal year ending December 31, 2024. Grant Thornton has served as our independent auditor since 2023.
Stockholder
ratification of the appointment of Grant Thornton as our independent registered public accounting firm is not required. However, our
Board of Directors is submitting the appointment of Grant Thornton to the stockholders for ratification as a matter of corporate practice.
If our stockholders fail to ratify the appointment, the audit committee will reconsider whether or not to retain Grant Thornton. Even
if the selection is ratified by our stockholders, the Audit Committee, in its discretion, may direct the appointment of a different independent
registered public accounting firm at any time during the year if the Audit Committee determines that such a change would be in the best
interests of the Company and our stockholders.
If
our stockholders fail to ratify the appointment of Grant Thornton, the Audit Committee may reconsider its appointment. Even if the appointment
is ratified, the Audit Committee, in its discretion may direct the appointment of a different independent registered public accounting
firm at any time during the year if the Audit Committee feels that such a change would be in the best interests of the Company and our
stockholders.
We
do not expect representatives from Grant Thornton to attend the Annual Meeting.
Audit
and Non-Audit Fees
The
following table represents aggregate fees billed to the Company for the fiscal year ended December 31, 2023 and December 31, 2022 by
the Company’s independent registered accounting firms during such fiscal years.
| | |
2023 (Grant Thornton) | | |
2023 (Plante Moran) | | |
2022 (Plante Moran) | |
| Audit fees | |
$ | 854,645 | | |
$ | 147,495 | | |
$ | 320,158 | |
| Audit-related fees | |
| 46,800 | | |
| 22,000 | | |
| 7,000 | |
| Tax fees | |
| — | | |
| — | | |
| — | |
| All other fees | |
| — | | |
| — | | |
| — | |
| Total fees | |
$ | 901,445 | | |
$ | 169,495 | | |
$ | 327,158 | |
In
the above table, “audit fees” are fees billed for services provided related to the audit of our annual financial statements,
quarterly reviews of our interim financial statements, and services normally provided by the independent accountant in connection with
statutory and regulatory filings or engagements for those fiscal periods. “Audit-related fees” are fees not included in audit
fees that are billed by the independent accountant for assurance and related services that are reasonably related to the performance
of the audit or review of our financial statements. These audit-related fees also consist of the review of our registration statements
filed with the SEC and related services normally provided in connection with statutory and regulatory filings or engagements. “Tax
fees” are fees billed by the independent accountant for professional services rendered for tax compliance, tax advice, and tax
planning. “All other fees” are fees billed by the independent accountant for products and services not included in the foregoing
categories.
Pre-Approval
Policy
It
is the Audit Committee’s policy to approve in advance the types and amounts of audit, audit-related, tax, and any other services
to be provided by our independent registered public accounting firm. In situations where it is not practicable to obtain full Audit Committee
approval, the Audit Committee has delegated authority to the Chair of the Audit Committee to grant pre-approval of auditing, audit-related,
tax, and all other services up to $25,000. Any pre-approved decisions by the Chair are required to be reviewed with the Audit Committee
at its next scheduled meeting. The Audit Committee approved 100% of all services provided by Plante Moran during 2023 and 2022 and services
provided by Grant Thornton during 2023.
Audit
Committee Report
The
Audit Committee reviews the Company’s financial reporting process on behalf of the Board. Management has the primary responsibility
for establishing and maintaining adequate internal financial control, for preparing the financial statements, and for the public reporting
process. Grant Thornton, our independent registered public accounting firm, is responsible for expressing opinions on the conformity
of the Company’s audited financial statements with generally accepted accounting principles. In this context, the Audit Committee
has (i) reviewed and discussed the audited financial statements with management and our independent registered public accounting firm,
(ii) discussed with our independent auditor the matters that are required to be discussed by the applicable Public Company Accounting
Oversight Board and SEC standards, and (iii) received written disclosures and the letter from our independent registered public accounting
firm required by applicable requirements of the Public Company Accounting Oversight Board regarding the independent auditor’s communications
with the Audit Committee concerning independence and has discussed with the independent auditor the independent auditor’s independence.
Based on the review and discussions referred to above, the Audit Committee recommended to the Board that the audited financial statements
be included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023.
Respectfully
submitted,
John
Bakewell
Robert
McNamara
Lori
Mitchell-Keller
Recent
Change in Independent Registered Public Accounting Firm
As
previously disclosed, on August 15, 2023, the Audit Committee appointed Grant Thornton as the Company’s independent registered
public accounting firm, and in connection therewith dismissed Plante & Moran, PLLC (“Plante Moran”), as the Company’s
independent registered public accounting firm, subject to Grant Thornton’s standard client acceptance procedures, which were completed
on August 18, 2023. The decision to appoint Grant Thornton as the Company’s new independent registered public accounting firm was
the result of a request for proposal process after Plante Moran notified the Audit Committee that Plante Moran is evaluating whether
to continue its Securities and Exchange Commission audit practice in the Company’s primary industry.
During
the fiscal years ended December 31, 2022 and 2021, and through the subsequent interim period preceding the Company’s appointment
of Grant Thornton as the Company’s independent registered public accounting firm, neither the Company, nor anyone on its behalf,
consulted Grant Thornton regarding either (i) the application of accounting principles to a specified transaction, either completed or
proposed, or the type of audit opinion that might be rendered with respect to the consolidated financial statements of the Company, and
no written report or oral advice was provided to the Company by Grant Thornton that was an important factor considered by the Company
in reaching a decision as to any accounting, auditing or financial reporting issue; or (ii) any matter that was the subject of a “disagreement”
(as defined in Item 304(a)(1)(iv) of Regulation S-K and the related instructions) or a “reportable event” (as that term is
defined in Item 304(a)(1)(v) of Regulation S-K).
The
audit reports of Plante Moran on the Company’s consolidated financial statements as of and for the fiscal years ended December
31, 2022 and 2021 did not contain an adverse opinion or a disclaimer of opinion, and were not qualified or modified as to uncertainty,
audit scope or accounting principles.
During
the fiscal years ended December 31, 2022 and 2021, and through the subsequent interim period preceding Plante Moran’s dismissal,
(1) there were no disagreements (as defined in Item 304(a)(1)(iv) of Regulation S-K and the related instructions) between the Company
and Plante Moran on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure,
which disagreements, if not resolved to the satisfaction of Plante Moran, would have caused Plante Moran to make reference thereto in
its report on the Company’s consolidated financial statements for the years ended December 31, 2022 and 2021, and (2) there were
no “reportable events” as such term is defined in Item 304(a)(1)(v) of Regulation S-K.
The
Company previously disclosed this information in its Current Report on Form 8-K filed with the SEC on August 18, 2023, provided Plant
Moran with a copy of the disclosures, and requested that Plant Moran furnish it with a letter addressed to the SEC stating whether or
not it agrees with the Company’s statements therein. A copy of the letter dated August 18, 2023 was filed as an exhibit to such
Form 8-K.
Board
Recommendation
The
Board unanimously recommends that stockholders vote “FOR” the ratification of the appointment of Grant Thornton as
our independent registered public accounting firm for the fiscal year ending December 31, 2024.
| The
Board Recommends a Vote FOR the Ratification of the Appointment of Grant Thornton as our Independent Registered Public Accounting
Firm for the Fiscal Year Ending December 31, 2024 |
|
PROPOSAL
three—advisory vote on executive compensation
Background
The
Board is providing our stockholders with an advisory vote on our executive compensation pursuant to the Dodd-Frank Wall Street Consumer
Protection Act and Section 14A of the Exchange Act. This advisory vote, commonly known as a say-on-pay vote, is a non-binding vote on
the compensation paid to our named executive officers as set forth in this proxy statement.
At
our 2023 Annual Meeting of Stockholders, our stockholders had the opportunity to vote on an advisory say-on-pay proposal. Over 99% of
the votes cast were in favor of our say-on-pay proposal. At our 2019 Annual Meeting of Stockholders, the Company submitted to stockholders
a frequency of say-on-pay vote, recommending that a say-on-pay proposal be submitted annually. Our stockholders voted overwhelmingly
in favor of an annual say-on-pay vote. Accordingly, stockholders are being provided with a say-on-pay vote at this year’s Annual
Meeting.
Why
You Should Vote in Favor of Our Say-On-Pay Proposal
Our
executive compensation program is generally designed to attract, retain, motivate, and reward highly qualified and talented executive
officers that will enable us to drive long-term stockholder value.
Our
compensation practices include many best pay practices that support our executive compensation objectives and principles and benefit
our stockholders.
| What
We Do: |
|
What
We Don’t Do: |
| |
|
|
|
|
| ● |
Structure
our executive officer compensation so that a significant portion of pay is at risk |
|
● |
No
repricing of stock options unless approved by stockholders |
| |
|
|
|
|
| ● |
Emphasize
long-term performance in our equity-based incentive awards |
|
● |
No
excessive perquisites |
| |
|
|
|
|
| ● |
Use
a mix of performance measures and caps on payouts |
|
● |
No
guaranteed salary increases or bonuses |
| |
|
|
|
|
| ● |
Require
minimum vesting periods on equity awards |
|
● |
No
tax or excise tax gross-ups |
| |
|
|
|
|
| ● |
Require
double-trigger for equity acceleration upon a change of control |
|
● |
No
short sales or derivative transactions in Xtant stock, including hedges |
| |
|
|
|
|
| ● |
Maintain
competitive compensation packages |
|
● |
No
pledging of Xtant securities |
We
encourage our stockholders to read the “Executive Compensation” section beginning on page 25, which describes in detail
our executive compensation program and the executive compensation decisions made by the Compensation Committee for 2023, as well as the
accompanying executive compensation tables and narratives that provide detailed information on the compensation of our named executive
officers.
We
believe that our executive compensation program is competitive, focused on pay for performance, and strongly aligned with the long-term
interests of our stockholders. The Board believes that executive compensation for 2023 was reasonable, appropriate, and justified by
the performance of the Company and the result of a carefully considered approach.
Proposed
Resolution
The
Board recommends that our stockholders vote in favor of the say-on-pay vote as set forth in the following resolution:
RESOLVED,
that our stockholders approve, on an advisory basis, the compensation paid to our named executive officers, as disclosed pursuant to
the compensation disclosure rules of the SEC, including in the “Executive Compensation” section, the accompanying
compensation tables and the corresponding narrative discussion and footnotes, and any related material disclosed in this proxy statement.
Stockholders
are not voting to approve or disapprove the Board’s recommendation. As this is an advisory vote, the outcome of the vote is not
binding on us with respect to future executive compensation decisions, including those relating to our named executive officers, or otherwise.
The Compensation Committee and Board expect to take into account the outcome of the vote when considering future executive compensation
decisions.
Next
Say-On-Pay Vote
The
next say-on-pay vote will occur at our 2025 Annual Meeting of Stockholders.
Board
Recommendation
The
Board unanimously recommends that our stockholders vote “FOR” approval, on an advisory basis, of our executive compensation,
or say-on-pay vote.
The
Board Recommends a Vote FOR Approval, on an Advisory Basis,
of
our Executive Compensation, or Say-on-Pay Vote |
|
EXECUTIVE
COMPENSATION
Executive
Officers
The
names, ages, and positions of our executive officers as of May 28, 2024 are as follows:
| Name |
|
Age |
|
Position |
| Sean
E. Browne |
|
58 |
|
President
and Chief Executive Officer and Director |
| Kevin
D. Brandt |
|
59 |
|
Chief
Commercial Officer |
| Scott
C. Neils |
|
40 |
|
Chief
Financial Officer |
| Mark
A. Schallenberger |
|
38 |
|
Chief
Operations Officer |
Sean
E. Browne has served as our President and Chief Executive Officer since October 2019 and as a member of our Board since October
2019. Prior to this, Mr. Browne served as Chief Revenue Officer of CCS Medical, Inc., a provider of home delivery medical supplies, from
September 2014 to June 2019. Prior to CCS Medical, Mr. Browne served as Chief Operating Officer of The Kini Group, an integrated cloud-based
software analytics and advisory firm, from March 2013 to August 2014. From November 2007 to March 2016, Mr. Browne served as President
and Chief Executive Officer and a director of Neuro Resource Group, a venture start-up medical device company that was sold to a strategic
buyer. In other roles, Mr. Browne served as President, Miltex Surgical Instrument Division for Integra LifeSciences Holdings Corporation,
a publicly held medical device company that acquired Miltex Holdings, Inc. Mr. Browne served as Vice President, Sales and Marketing of
Esurg.com, an e commerce company serving physician and ambulatory surgery markets. Prior to Esurg.com, Mr. Browne served as Senior Vice
President, Health Systems Division of McKesson Corporation, a drug company, and prior to McKesson, served in various positions with increasing
responsibility at Baxter Healthcare. Mr. Browne holds a Master of Business Administration from the Kellogg School of Management at Northwestern
University and a Bachelor of Science degree, with a major in Finance and minor in Statistics, from Boston University. We believe that
Mr. Browne’s day-to-day operations experience as a result of his role as our President and Chief Executive Officer enable him to
make valuable contributions to the Board of Directors. In addition, in his role as President and Chief Executive Officer, Mr. Browne
provides unique insight into our business strategies, opportunities and challenges, and serves as the unifying element between the leadership
and strategic direction provided by the Board of Directors and the implementation of our business strategies by management.
Kevin
D. Brandt has served as our Chief Commercial Officer since July 2018. From January 2017 to June 2018, Mr. Brandt served as Executive
Vice President, Chief Commercial Officer – Domestic Direct of RTI Surgical, Inc., a surgical implant company. Mr. Brandt joined
RTI as Vice President and General Manager, Emerging Technologies Commercialization in June 2012 and assumed additional responsibilities
in January 2013 as head of RTI’s direct spine business. Following the acquisition of Pioneer Surgical, from July 2013 to December
2016, Mr. Brandt assumed additional responsibility when he began overseeing all North American and Canadian spine hardware and spine
biologics portfolios. Mr. Brandt has over 32 years of commercial leadership experience in the global orthopedic industry focusing on
building sustainable growth and value. Mr. Brandt’s expertise includes experience in sales, marketing, business development, mergers
and acquisitions and integration leadership. Prior to joining RTI, Mr. Brandt held various senior leadership roles over an 18-year period
in the orthopedic and spinal divisions at Stryker Corporation. In his most recent position at Stryker, he was President of Osteokinetics
Corp. from January 2002 to June 2012. From June 2000 to December 2001, Mr. Brandt was Senior Director, US Spinal Sales, in which he was
responsible for divesting and subsequently leading the Stryker Spine US Sales organization. Prior to joining Stryker, Mr. Brandt was
a sales leader at Zimmer in a flagship office piloting a direct sales model from January 1990 to April 1994. Mr. Brandt earned a master’s
degree in business administration in corporate finance and investments with distinction from Adelphi University, a bachelor of science
degree in business administration from New York Institute of Technology, and has taken executive education courses at the Wharton School
of Business, US Naval Academy and the Gallup organization.
Scott
C. Neils has served as our Chief Financial Officer since June 2022 and prior to that served as our Interim Chief Financial Officer
from January 2022 to June 2022 and as our Controller from August 2019 until January 2022. Mr. Neils’ has over 15 years of experience
focused on public accounting and corporate finance. In this role, Mr. Neils gained extensive experience managing our finance and accounting
functions. Prior to joining Xtant, Mr. Neils served as Audit Senior Manager at Baker Tilly US, LLP (formerly Baker Tilly Virchow Krause,
LLP), an advisory, tax and assurance firm, from November 2015 to August 2019. Prior to that position, Mr. Neils was at Grant Thornton
LLP, an accounting and advisory organization, from September 2007 to November 2015, most recently as Audit Manager. Mr. Neils is a Certified
Public Accountant. He holds a Bachelor of Science in Business in Accounting and a Master of Accountancy from the Carlson School of Management
at the University of Minnesota.
Mark
A. Schallenberger was appointed our Chief Operations Officer effective as of January 16, 2023. Prior to this, Mr. Schallenberger
served as Chief Operations Officer of Surgenex LLC, a medical technology manufacturer, from June 2019 to January 2023. Prior to Surgenex,
Mr. Schallenberger served as Senior Director of Marketing & Product Development of DCI Donor Services Tissue Bank, a tissue bank,
from February 2016 to June 2019. Prior to DCI Donor Services Tissue Bank, Mr. Schallenberger served as various roles with increasing
responsibility from September 2010 to February 2016 culminating with Director of Scientific Affairs with Xtant Medical Holdings, Inc.
formerly Bacterin International Holdings, Inc. Mr. Schallenberger holds a Master of Science in Chemical Biology from The Scripps Research
Institute and a Bachelor of Science degree in Chemistry from the University of Montana.
Overview
This
section describes the compensation of the executive officers named in the Summary Compensation Table below, which individuals consist
of our President and Chief Executive Officer and the two most highly compensated executive officers for the year ended December 31, 2023:
| ● | Sean
E. Browne, our President and Chief Executive Officer and principal executive officer (CEO
or PEO); |
| ● | Kevin
D. Brandt, our Chief Commercial Officer; and |
| ● | Mark
Schallenberger, our Chief Operations Officer. |
These
executive officers are collectively referred to as our named executive officers.
When
reading this Executive Compensation Overview, please note we are a small reporting company and are not required to provide a “Compensation
Discussion and Analysis” of the type required by Item 402 of SEC Regulation S-K. This Overview is intended to supplement the SEC-required
disclosure, which is included in this section, and it is not a Compensation Discussion and Analysis.
Compensation
Philosophy
We
generally target executive compensation at the 50th percentile of our peer group as discussed below.
Use
of Market Data
We
strive to compensate our executive officers competitively relative to other companies that are similar to us primarily from an industry,
revenue and revenue growth perspective. To ensure reasonableness and competitiveness of our executive compensation packages relative
to our peer companies, the Compensation Committee evaluates our peer group with the aid of our independent compensation consultant and
with input from management. Our current peer group is as follows.
| Anika
Therapeutics, Inc. |
AxoGen,
Inc. |
IRadimed
Corporation |
| NeuroPace,
Inc. |
OrthoPediatrics
Corp. |
Pulmonx
Corporation |
| Rockwell
Medical, Inc. |
Sanara
MedTech Inc. |
SI-BONE,
Inc. |
| Sientra,
Inc. |
Sight
Sciences, Inc. |
Silk
Road Medical, Inc. |
| Surmodics,
Inc. |
TELA
Bio, Inc. |
Treace
Medical Concepts, Inc. |
| |
Zynex,
Inc. |
|
Data
from this peer group, therefore, is considered in the compensation benchmarking process as one input in helping us determine appropriate
pay levels.
Use
of Consultants
The
Compensation Committee has the authority to engage the services of outside experts and advisors as it deems necessary or appropriate
to carry out its duties and responsibilities, and prior to doing so, assesses the independence of such experts and advisors from management.
The Compensation Committee retained Mercer (US) Inc. in August 2023 and updated its executive officer and non-employee director compensation
analyses shortly thereafter. Mercer (US) Inc. did not provide any services to our company other than those for which it was retained
by the Compensation Committee.
Elements
of Our Executive Compensation Program
During
2023, our executive compensation program consisted of several key elements, which are described in the table below, along with the key
characteristics of, and the purpose for, each element and key 2023 changes.
| Element |
|
Key
Characteristics |
|
Purpose |
|
Key
2023 Changes |
Base
Salary
(Fixed,
Cash) |
|
A
fixed amount, paid in cash periodically throughout the year and reviewed annually and, if appropriate, adjusted. |
|
Provides a source of fixed income that is market competitive and reflects scope and responsibility of the position held.
|
|
No
changes, except establishing an initial base salary of $400,000 for Mr. Schallenberger. |
Short-Term
Incentive (STI)
(Variable,
Cash) |
|
A
variable, short-term, discretionary element of compensation that is payable in cash based on achievement of key pre-established annual
corporate objectives. |
|
Motivates
and rewards our executives for achievement of annual corporate objectives. |
|
No
changes to target bonus percentages, except establishing a target bonus percentage at 50%
for Mr. Schallenberger.
The
pre-established corporate objectives for the 2023 STI plan were Xtant revenue (64% weighting), Coflex revenue (11% weighting), total
revenue (15% weighting), gross margin (5% weighting) and adjusted EBITDA (5% weighting).
Achievement
was determined to be at 110.76% of target.
|
Long-Term
Incentives (LTI)
(Variable,
Equity-Based Awards) |
|
A
variable, long-term element of compensation that is provided in the form of time-vested stock option awards and restricted stock
unit awards. |
|
Aligns the interests of our executives with our stockholders; encourages our executives to focus on our long-term performance; promotes retention; and encourages significant stock ownership.
|
|
Our
named executive officers received stock option awards, with 25% vesting on the one-year anniversary of the grant date and the remaining
75% vesting in 12 quarterly installments thereafter, and restricted stock unit awards vesting annually over four years. |
| Retirement
Benefits |
|
A
defined contribution retirement plan with a discretionary company match. |
|
Provides
an opportunity for employees to save and prepare financially for retirement. |
|
No
changes. |
Summary
Compensation Table
The
table below provides summary information concerning all compensation awarded to, earned by, or paid to our named executive officers for
the year ended December 31, 2023.
| Name and Principal Position | |
Year | |
Salary | | |
Bonus(1) | | |
Stock Awards(2) | | |
Option Awards(3) | | |
Non-Equity Incentive Plan Compensation(4) | | |
All Other Compensation(5) | | |
Total | |
| Sean E. Browne | |
2023 | |
$ | 600,000 | | |
$ | — | | |
$ | 209,059 | | |
$ | 209,266 | | |
$ | 664,560 | | |
$ | 29,273 | | |
$ | 1,712,158 | |
| President and Chief Executive Officer | |
2022 | |
| 600,000 | | |
| — | | |
| — | | |
| — | | |
| 416,400 | | |
| 44,162 | | |
| 1,060,562 | |
| Kevin D. Brandt | |
2023 | |
| 415,000 | | |
| — | | |
| 144,599 | | |
| 144,743 | | |
| 229,827 | | |
| 13,200 | | |
| 947,369 | |
| Chief Commercial Officer | |
2022 | |
| 415,000 | | |
| — | | |
| 213,241 | | |
| — | | |
| 144,005 | | |
| 6,250 | | |
| 778,496 | |
| Mark A. Schallenberger | |
2023 | |
| 400,000 | | |
| — | | |
| 205,144 | | |
| 208,263 | | |
| 221,520 | | |
| 139,696 | | |
| 1,174,623 | |
| Chief Operations Officer(6) | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| (1) | We
generally do not pay any discretionary bonuses or bonuses that are subjectively determined
and did not pay any such bonuses to any named executive officers in 2023. Annual cash incentive
bonus payouts based on performance against pre-established corporate performance goals are
reported in the “Non-equity incentive plan compensation” column. |
| (2) | Amounts
reported represent the aggregate grant date fair value for restricted stock unit (“RSU”)
awards granted to each named executive officer computed in accordance with FASB ASC Topic
718. The grant date fair value is determined based on the per share closing sale price of
our common stock on the grant date for 2023 and 2022. |
| (3) | Amounts
reported represent the aggregate grant date fair value for option awards granted to each
named executive officer computed in accordance with FASB ASC Topic 718. The grant date fair
value is determined based on our Black-Scholes option pricing model. The table below sets
forth the specific assumptions used in the valuation of each such option award: |
| Grant Date | |
Grant Date Fair Value Per Share | | |
Risk Free Interest Rate | | |
Expected Life | |
Expected Volatility | | |
Expected Dividend Yield | |
| 08/15/2023 | |
$ | 1.20 | | |
| 4.35 | % | |
6.25 years | |
| 111.12 | % | |
| — | |
| 02/15/2023 | |
$ | 0.77 | | |
| 3.98 | % | |
6.25 years | |
| 111.60 | % | |
| — | |
| (4) | Amounts
reported represent payouts under our annual bonus plan and for each year reflect the amounts
earned for that year but paid during the following year. |
| (5) | The
table below provides information concerning amounts reported in the “All Other Compensation”
column of the Summary Compensation Table for 2023 with respect to each named executive officer. |
| Name | |
401(k) Match | | |
Commuting Expenses | | |
Relocation Expenses | | |
Total | |
| Sean E. Browne | |
$ | 13,200 | | |
$ | 16,073 | | |
$ | — | | |
$ | 29,273 | |
| Kevin D. Brandt | |
| 13,200 | | |
| — | | |
| — | | |
| 13,200 | |
| Mark A. Schallenberger | |
| 8,000 | | |
| — | | |
| 131,696 | | |
| 139,696 | |
| (6) | Mr.
Schallenberger was appointed as our Chief Operations Officer effective January 16, 2023. |
Executive
Employment and Other Agreements
Employment
Agreements
Effective
October 7, 2019, we entered into an employment agreement with Sean E. Browne, our President and Chief Executive Officer, which provides
for an annual base salary $600,000 and a target annual bonus opportunity equal to 100% of his annual base salary. We agreed to reimburse
his reasonable travel and business expenses. In addition, we agreed to grant him an option to purchase 329,044 shares of our common stock
and an RSU unit award covering 329,044 shares of our common stock under the Xtant Medical Holdings, Inc. 2018 Equity Incentive Plan,
as amended (the “2018 Plan”), effective as of October 15, 2019, consistent with our equity grant policy. The total number
of shares subject to these equity awards represented 5% of our then outstanding common stock. We also agreed to grant Mr. Browne additional
stock options and RSU awards, in the same proportionate split, in the event OrbiMed (including its affiliates) converts any of our outstanding
indebtedness into equity of the Company within five years. Accordingly, in response to the completion of our October 2020 debt restructuring,
on November 15, 2020, we granted Mr. Browne an additional option to purchase 1,468,859 shares of our common stock and an RSU award covering
1,468,859 shares of our common stock. The terms of these awards are described under “—Outstanding Equity Awards at Fiscal
Year-End.” Our agreement with Mr. Browne also contains standard confidentiality, non-competition, non-solicitation and assignment
of intellectual property provisions, as well as standard severance and change in control provisions, which are described under “—Potential
Payments upon Termination or Change in Control.”
Effective
July 9, 2018, we entered into an employment agreement with Kevin D. Brandt, our Chief Commercial Officer, which provided for an initial
annual base salary of $400,000 (which was subsequently increased to $415,000 in April 2019) with a target annual bonus of 50% of his
annual base salary, and a $90,000 signing bonus, which was required to be paid back if Mr. Brandt terminated his employment with Xtant
prior to the one-year anniversary of his hire date. In addition, the agreement provided for the grant of an RSU award covering 40,000
shares of our common stock, which vested in full on July 9, 2021, the three-year anniversary date of Mr. Brandt’s hire date, assuming
continued employment. The agreement also provides that Mr. Brandt is eligible to receive an annual equity award, subject to the approval
of the Board, provided that the grant value of such equity award shall not be less than 50% of his annual base salary. This agreement
contains standard confidentiality, non-competition, non-solicitation, and assignment of intellectual property provisions, as well as
standard severance and change in control provisions, which are described under “—Potential Payments upon Termination or
Change in Control.”
Effective
January 16, 2023, we entered into an employment agreement with Mark A. Schallenberger, our Chief Operations Officer, which provides for
an annual base salary $400,000 and a target annual bonus opportunity equal to 50% of his annual base salary. In addition, the agreement
provided for the grant of an option to purchase 105,000 shares of our common stock and an RSU award covering 89,000 shares of our common
stock under the 2018 Plan, effective as of February 15, 2023, consistent with our equity grant policy. The options have a 10-year term
and a per share exercise price equal to the “fair market value” (as defined in the 2018 Plan) of our common stock on the
grant date. The options vest with respect to 25% of the shares on the one-year anniversary of the grant date and quarterly thereafter,
and the RSUs vest in four equal annual installments, in each case assuming continued employment. Our agreement with Mr. Schallenberger
also contains standard confidentiality, non-competition, non-solicitation and assignment of intellectual property provisions, as well
as standard severance and change in control provisions, which are described under “—Potential Payments upon Termination
or Change in Control.”
Indemnification
Agreements
We
have entered into indemnification agreements with our executive officers that require us to indemnify them against certain liabilities
that may arise by reason of their status or service as directors or executive officers to the fullest extent permitted by applicable
law.
401(k)
Retirement Plan
We
have a 401(k) plan for our employees. The 401(k) plan is a defined contribution plan covering substantially all of our employees. Employees
are eligible to participate in the plan on the first day of any month after starting employment. Employees are allowed to contribute
a percentage of their wages to the 401(k) plan, subject to statutorily prescribed limits and are subject to a discretionary employer
match of 100% of their wage deferrals not in excess of 4% of their wages.
Outstanding
Equity Awards at Fiscal Year-End
The
table below provides information regarding unexercised option awards and unvested stock awards held by each of our named executive officers
that remained outstanding at our fiscal year-end, December 31, 2023. All of the outstanding equity awards described below were either
granted under the 2023 Plan or the 2018 Plan.
| | |
Option Awards | |
Stock Awards | |
| Name | |
Number of Securities Underlying Unexercised Options (#) Exercisable | | |
Number of Securities Underlying Unexercised Options (#) Unexercisable | | |
Option Exercise Price | | |
Option Expiration Date(1) | |
Number of Shares or Units of Stock that Have Not Vested | | |
Market Value of Shares or Units of Stock that Have Not Vested(2) | |
| Sean E. Browne | |
| 263,235 | | |
| 65,809 | (3) | |
$ | 2.70 | | |
10/15/2029 | |
| 65,809 | (4) | |
$ | 74,364 | |
| | |
| 1,101,644 | | |
| 367,215 | (5) | |
| 1.26 | | |
11/15/2030 | |
| 367,215 | (6) | |
| 414,953 | |
| | |
| — | | |
| 203,252 | (7) | |
| 1.20 | | |
08/15/2033 | |
| 174,216 | (8) | |
| 196,864 | |
| Kevin D. Brandt | |
| 30,770 | | |
| — | | |
| 6.20 | | |
08/15/2028 | |
| 23,796 | (9) | |
| 26,889 | |
| | |
| 40,527 | | |
| — | | |
| 2.76 | | |
08/15/2029 | |
| 81,055 | (10) | |
| 91,592 | |
| | |
| 89,956 | | |
| 29,986 | (11) | |
| 1.13 | | |
08/15/2030 | |
| 307,560 | (12) | |
| 347,543 | |
| | |
| 112,229 | | |
| 87,290 | (13) | |
| 1.27 | | |
08/15/2031 | |
| 120,499 | (8) | |
| 136,164 | |
| | |
| — | | |
| 140,583 | (7) | |
| 1.20 | | |
08/15/2033 | |
| | | |
| | |
| Mark A. Schallenberger | |
| — | | |
| 105,000 | (14) | |
| 0.77 | | |
02/15/2033 | |
| 89,000 | (15) | |
| 100,570 | |
| | |
| — | | |
| 135,501 | (7) | |
| 1.20 | | |
08/15/2033 | |
| 116,144 | (8) | |
| 131,243 | |
| (1) | All
options awards have a 10-year term, but may terminate earlier if the recipient’s employment
or service relationship with the Company terminates. |
| (2) | Based
on the closing price of our common stock on December 29, 2023 ($1.13), as reported by the
NYSE American. |
| (3) | This
stock option vests in nearly equal installments annually over a five-year period beginning
on October 15, 2020. In addition, this option will vest in full immediately in the event
that it is discontinued upon a change in control or up to one year following a change in
control and a pro rata percentage will vest immediately if Mr. Browne dies. |
| (4) | This
RSU award vests in nearly equal installments annually over a five-year period beginning on
October 15, 2020. In addition, this RSU award will vest in full immediately in the event
that it is discontinued upon a change in control or up to one year following a change in
control and a pro rata percentage will vest immediately if Mr. Browne dies. |
| (5) | This
stock option vests in nearly equal installments annually over a four-year period beginning
on October 15, 2021. In addition, this option will vest in full immediately in the event
that it is discontinued upon a change in control or up to one year following a change in
control and a pro rata percentage will vest immediately if Mr. Browne dies. |
| (6) | This
RSU award vests in nearly equal installments annually over a four-year period beginning on
October 15, 2021. In addition, this RSU award will vest in full immediately in the event
that it is discontinued upon a change in control or up to one year following a change in
control and a pro rata percentage will vest immediately if Mr. Browne dies. |
| (7) | This
stock option vests with respect to 25% of the shares on August 15, 2024 and with respect
to the remaining 75% of such shares over the three-year period thereafter in 12 as nearly
equal as possible quarterly installments. In addition, this option will vest in full immediately
in the event that it is discontinued upon a change in control or up to one year following
a change in control and a pro rata percentage will vest immediately if the executive dies. |
| (8) | This
RSU award vests in nearly equal installments annually over a four-year period beginning on
August 15, 2024. In addition, this RSU award will vest in full immediately in the event that
it is discontinued upon a change in control or up to 12 months following a change in control
and a pro rata percentage will vest immediately if the executive dies. |
| (9) | This
RSU award vests in nearly equal installments annually over a four-year period beginning on
August 15, 2021. In addition, this RSU award will vest in full immediately in the event that
it is discontinued upon a change in control or up to 12 months following a change in control
and a pro rata percentage will vest immediately if the executive dies. |
| (10) | This
RSU award vests in nearly equal installments annually over a four-year period beginning on
August 15, 2022. In addition, this RSU award will vest in full immediately in the event that
it is discontinued upon a change in control or up to 12 months following a change in control
and a pro rata percentage will vest immediately if the executive dies. |
| (11) | This
stock option vests with respect to 25% of the shares on August 15, 2021 and with respect
to the remaining 75% of such shares over the three-year period thereafter in 12 as nearly
equal as possible quarterly installments. In addition, this option will vest in full immediately
in the event that it is discontinued upon a change in control or up to one year following
a change in control and a pro rata percentage will vest immediately if the executive dies. |
| (12) | This
RSU award vests in nearly equal installments annually over a four-year period beginning on
August 15, 2023. In addition, this RSU award will vest in full immediately in the event that
it is discontinued upon a change in control or up to 12 months following a change in control
and a pro rata percentage will vest immediately if the executive dies. |
| (13) | This
stock option vests with respect to 25% of the shares on August 15, 2022 and with respect
to the remaining 75% of such shares over the three-year period thereafter in 12 as nearly
equal as possible quarterly installments. In addition, this option will vest in full immediately
in the event that it is discontinued upon a change in control or up to one year following
a change in control and a pro rata percentage will vest immediately if the executive dies. |
| (14) | This
stock option vests with respect to 25% of the shares on February 15, 2024 and with respect
to the remaining 75% of such shares over the three-year period thereafter in 12 as nearly
equal as possible quarterly installments. In addition, this option will vest in full immediately
in the event that it is discontinued upon a change in control or up to one year following
a change in control and a pro rata percentage will vest immediately if the executive dies. |
| (15) | This
RSU award vests in nearly equal installments annually over a four-year period beginning on
February 15, 2024. In addition, this RSU award will vest in full immediately in the event
that it is discontinued upon a change in control or up to 12 months following a change in
control and a pro rata percentage will vest immediately if the executive dies. |
Xtant
Medical Holdings, Inc. 2023 Equity Incentive Plan
In
2023, the Board and the Company’s stockholders approved and adopted the 2023 Plan. The purpose of the 2023 Plan is to advance the
interests of the Company and our stockholders by enabling us to attract and retain qualified individuals to perform services, provide
incentive compensation for such individuals in a form that is linked to the growth and profitability of our company and increases in
stockholder value, and provide opportunities for equity participation that align the interests of participants with those of our stockholders.
The
2023 Plan replaced the 2018 Plan. However, the terms of the 2018 Plan continue to govern awards outstanding under the 2018 Plan until
exercised, expired, paid, or otherwise terminated or canceled.
The
2023 Plan permits the Board, or a committee or subcommittee thereof, to grant to eligible employees, non-employee directors, and consultants
of the Company non-statutory and incentive stock options, stock appreciation rights, restricted stock awards, RSUs, DSUs, performance
awards, non-employee director awards, and other stock-based awards. Subject to adjustment, the maximum number of shares of our common
stock authorized for issuance under the 2023 Plan is 19,881,902 shares. To date, the Company has granted stock options, RSUs and DSUs
under the 2023 Plan. As of May 28, 2024, 3,782,123 shares of Xtant common stock remained available for issuance under the 2023 Plan.
Potential
Payments upon Termination or Change in Control
Executive
Employment Agreements
Under
the terms of the employment agreements we have entered into with our named executive officers, if the executive’s employment is
terminated by the Company without “cause” (as defined in the agreement), the executive will be entitled to receive a severance
payment equal to 12 months of his annual base salary, payable as salary continuation, reimbursement of COBRA payments for up to 12 months,
and the prorated amount of any unpaid bonus for the calendar year in which his termination of employment occurs, if earned pursuant to
the terms thereof. If the executive’s employment is terminated by the Company without “cause” or by the executive for
“good reason” in connection with or within 12 months after a “change in control” (as such terms are defined in
the agreement), the executive’s severance payment, as previously described, will be paid in one lump sum, and in the case of Mr.
Brandt, will equal two times his base salary. To be eligible to receive these payments, the executive will be required to execute and
not revoke a release of claims against the Company.
Equity
Award Agreements
All
equity awards held by our named executive officers have been granted under 2018 Plan or the 2023 Plan. Under the terms of the 2018 Plan
and the 2023 Plan and the award agreements governing these awards, if an executive’s employment or other service with the Company
is terminated for cause, then all outstanding awards held by such executive will be terminated and forfeited. In the event an executive’s
employment or other service with the Company is terminated by reason of death, then:
| ● | All
outstanding stock options will vest and become exercisable immediately as to a pro rata percentage
of the unvested portion of the option scheduled to vest on the next applicable vesting date,
and the vested portion of the options will remain exercisable for a period of one year after
the date of such termination (but in no event after the expiration date). |
| ● | The
outstanding unvested RSU awards will vest and become immediately issuable as to a pro rata
percentage of the unvested portion of the RSU awards scheduled to vest on the next applicable
vesting date and the unvested portion of the RSU awards will terminate. |
In
the event an executive’s employment or other service with the Company is terminated by reason of disability, then:
| ● | All
outstanding stock options will remain exercisable to the extent exercisable on the termination
date for a period of one year after the date of such termination (but in no event after the
expiration date). |
| ● | All
outstanding unvested RSU awards will terminate. |
In
the event an executive’s employment or other service with the Company is terminated for any other reason, then:
| ● | All
outstanding stock options will remain exercisable to the extent exercisable on the termination
date for a period of 90 days after the date of such termination (but in no event after the
expiration date). |
| ● | All
outstanding unvested RSU awards will terminate. |
In
addition, the equity award agreements governing the equity awards held by our named executive officers contain “change in control”
provisions. Under the award agreements, without limiting the authority of the Compensation Committee to adjust awards, if a “change
in control” of the Company (as defined in the 2018 Plan and the 2023 Plan) occurs, then, unless otherwise provided in the award
or other agreement, if an award is continued, assumed, or substituted by the successor entity, the award will not vest or lapse solely
as a result of the change in control but will instead remain outstanding under the terms pursuant to which it has been continued, assumed,
or substituted and will continue to vest or lapse pursuant to such terms. If the award is continued, assumed, or substituted by the successor
entity and within one year following the change in control, the executive is either terminated by the successor entity without “cause”
or, if the executive resigns for “good reason,” each as defined in the award agreement, then the outstanding option will
vest and become immediately exercisable as of the termination or resignation and will remain exercisable until the earlier of the expiration
of its full specified term or the first anniversary of the date of such termination or resignation, and the outstanding RSU award will
be fully vested and will be converted into shares of our common stock immediately thereafter. If an award is not continued, assumed,
or substituted by the successor entity, then the outstanding option will be fully vested and exercisable, and the Compensation Committee
will either give the executive a reasonable opportunity to exercise the option prior to the change in control transaction or will pay
the difference between the exercise price of the option and the per share consideration paid to similarly situated stockholders. Under
these conditions, the outstanding RSU award will be fully vested and will be converted into shares of our common stock immediately thereafter.
Pay
Versus Performance Disclosure
Pay
Versus Performance Table
As
required by Section 953(a) of the Dodd-Frank Act and Item 402(v) of SEC Regulation S-K, we are providing the following information about
the relationship between “compensation actually paid” to our NEOs, within the meaning of such rules, and certain financial
performance measures of our Company. The table below provides information regarding compensation actually paid to our CEO, our principal
executive officer (PEO), and average compensation actually paid to our other non-PEO named executive officers during each of the past
three fiscal years, as well as total stockholder return and net income (loss) for each of the past three fiscal years.
| Year | |
Summary Compensation Table Total for PEO(1) ($) | | |
Compensation Actually Paid to PEO(2)(3) ($) | | |
Average Summary Compensation Table Total for Non-PEO Named Executive Officers(4) ($) | | |
Average Compensation Actually Paid to Non-PEO Named Executive Officers(5)(6) ($) | | |
Value of Initial Fixed $100 Investment Based On Total Shareholder Return(7) ($) | | |
Net Income (Loss)(8) ($) | |
| 2023 | |
| 1,712,158 | | |
| 2,367,852 | | |
| 1,060,996 | | |
| 1,244,649 | | |
| 91.87 | | |
| 660 | |
| 2022 | |
| 1,060,562 | | |
| 1,234,277 | | |
| 772,515 | | |
| 829,884 | | |
| 117.86 | | |
| (8,485 | ) |
| 2021 | |
| 831,490 | | |
| (849,352 | ) | |
| 939,463 | | |
| 592,961 | | |
| 47.67 | | |
| (4,849 | ) |
| (1) | Amounts
reported represent the Summary Compensation Table total for our CEO for each of the years
presented. See “Executive Compensation—Summary Compensation Table.” |
| (2) | Amounts
reported represent compensation actually paid to our CEO for each of the years presented.
The dollar amounts in this column do not reflect the actual amount of compensation earned
by or paid to our CEO during the applicable year. |
| (3) | Compensation
actually paid to our PEO consists of the following amounts deducted from or added to the
Summary Compensation Table total for our CEO for each of the years presented: |
| | |
Sean E. Browne | |
| Summary Compensation Table Total for 2023 | |
$ | 1,712,158 | |
| Deduct: Stock awards(a) | |
| 209,059 | |
| Deduct: Option awards(b) | |
| 209,266 | |
| Add: Year-end value of equity awards granted during the year that are outstanding and unvested(c) | |
| 381,459 | |
| Add: Change in fair value of equity awards granted in prior years that are outstanding and unvested(d) | |
| 346,348 | |
| Add: Change in fair value of equity awards granted in prior years that vested during the year(e) | |
| 346,212 | |
| Add: Value of dividend equivalents accrued
on equity awards during the year | |
| 0 | |
| Compensation Actually Paid for 2023 | |
| 2,367,852 | |
| | |
| | |
| Summary Compensation Table Total for 2022 | |
$ | 1,060,562 | |
| Deduct: Stock awards(a) | |
| 0 | |
| Deduct: Option awards(b) | |
| 0 | |
| Add: Year-end value of equity awards granted during the year that are outstanding and unvested(c) | |
| 0 | |
| Add:
Change in fair value of equity awards granted in prior years that are outstanding and unvested(d) | |
| 118,202 | |
| | |
Sean E. Browne | |
| Add: Change in fair value of equity awards granted in prior years that vested during the year(e) | |
| 55,513 | |
| Add: Value of dividend equivalents accrued
on equity awards during the year | |
| 0 | |
| Compensation Actually Paid for 2022 | |
| 1,234,277 | |
| | |
| | |
| Summary Compensation Table Total for 2021 | |
$ | 831,490 | |
| Deduct: Stock awards(a) | |
| 0 | |
| Deduct: Option awards(b) | |
| 0 | |
| Add: Year-end value of equity awards granted during the year that are outstanding and unvested(c) | |
| 0 | |
| Add: Change in fair value of equity awards granted in prior years that are outstanding and unvested(d) | |
| (1,564,559 | ) |
| Add: Change in fair value of equity awards granted in prior years that vested during the year(e) | |
| (116,283 | ) |
| Add: Value of dividend equivalents accrued
on equity awards during the year | |
| 0 | |
| Compensation Actually Paid for 2021 | |
| (849,352 | ) |
| (a) | Represents
the total of the amounts reported in the “Stock Awards” column in the Summary
Compensation Table for the applicable year. |
| (b) | Represents
the total of the amounts reported in the “Option Awards” column in the Summary
Compensation Table for the applicable year. |
| (c) | Represents
the year-end value of equity awards granted during the applicable year that are outstanding
and unvested as of the end of such applicable year. |
| (d) | Represents
the amount of change as of the end of the applicable year (from the end of the prior fiscal
year) in fair value of any equity awards granted in prior years that are outstanding and
unvested as of the end of such applicable year. |
| (e) | Represents
the amount of change as of the vesting date (from the end of the prior fiscal year) in fair
value of any equity awards granted in prior years that vested during the applicable year. |
Since
we do not have a pension plan, all of the foregoing adjustments are equity award adjustments for each applicable year and include the
addition (or subtraction, as applicable) of the following: (i) the year-end fair value of any equity awards granted in the applicable
year that are outstanding and unvested as of the end of such applicable year; (ii) the amount of change as of the end of the applicable
year (from the end of the prior fiscal year) in fair value of any equity awards granted in prior years that are outstanding and unvested
as of the end of such applicable year; (iii) for equity awards that are granted and vest in the same applicable year, the fair value
as of the vesting date; (iv) for equity awards granted in prior years that vest in the applicable year, the amount equal to the change
as of the vesting date (from the end of the prior fiscal year) in fair value; (v) for equity awards granted in prior years that are determined
to fail to meet the applicable vesting conditions during the applicable year, a deduction for the amount equal to the fair value at the
end of the prior fiscal year; and (vi) the dollar value of any dividends or other earnings paid on equity awards in the applicable year
prior to the vesting date that are not otherwise reflected in the fair value of such award or included in any other component of total
compensation for such applicable year. Adjustments as provided in clauses (iii) and (vi) are inapplicable for all of the years presented
in the table.
The
valuation assumptions used to calculate fair values did not materially differ from those disclosed at the time of grant. The value of
RSU awards is based on the fair value as of the end of the covered year or change in fair value during the covered year, in each case
based on the closing sale price of our common stock, as reported by the NYSE American. The value of option awards is based on the fair
value as of the end of the covered year or change in fair value during the covered year, in each case based on our Black-Scholes option
pricing model, the assumptions of which are described in Note 12 to our consolidated financial statements included in our Annual Report
on Form 10-K for the year ended December 31, 2023.
| (4) | Average
Summary Compensation Table total for non-PEO named executive officers reflects the average
Summary Compensation Table total for Kevin D. Brandt and Mark A. Schallenberger for 2023,
Kevin D. Brandt and Scott C. Neils for 2022, and for Kevin D. Brandt and Greg Jensen for
2021. |
| (5) | The
amounts in this column represent the average compensation actually paid to the non-PEOs for
each of the years presented. The dollar amounts in this column do not reflect the actual
average amount of compensation earned by or paid to the non-PEOs during the applicable year. |
| (6) | Average
compensation actually paid to non-PEO named executive officers reflects the average compensation
actually paid to Kevin D. Brandt and Mark A. Schallenberger for 2023, Kevin D. Brandt and
Scott C. Neils for 2022, and for Kevin D. Brandt and Greg Jensen for 2021, and consists of
the following average amounts deducted from and added to the average Summary Compensation
Table total for the non-PEO named executive officers for each of the years presented: |
| | |
Average Non-PEO Named Executive Officers | |
| Average Summary Compensation Table Total for 2023 | |
$ | 1,060,996 | |
| Deduct: Average stock awards(a) | |
| 174,872 | |
| Deduct: Average option awards(b) | |
| 176,503 | |
| Add: Average year-end value of equity awards granted during the year that are outstanding and unvested(c) | |
| 382,803 | |
| Add: Average change in fair value of equity awards granted in prior years that are outstanding and unvested(d) | |
| 94,066 | |
| Add: Average change in fair value of equity awards granted in prior years that vested during the year(e) | |
| 58,159 | |
| Add: Average value of dividend equivalents
accrued on equity awards during the year | |
| 0 | |
| Average Compensation Actually Paid for 2023 | |
| 1,244,649 | |
| | |
| | |
| Average Summary Compensation Table Total for 2022 | |
$ | 772,515 | |
| Deduct: Average stock awards(a) | |
| 200,944 | |
| Deduct: Average option awards(b) | |
| 30,014 | |
| Add: Average year-end value of equity awards granted during the year that are outstanding and unvested(c) | |
| 276,759 | |
| Add: Average change in fair value of equity awards granted in prior years that are outstanding and unvested(d) | |
| 17,538 | |
| Add: Average change in fair value of equity awards granted in prior years that vested during the year(e) | |
| (5,970 | ) |
| Add: Average value of dividend equivalents
accrued on equity awards during the year | |
| 0 | |
| Average Compensation Actually Paid for 2022 | |
| 829,884 | |
| | |
| | |
| Average Summary Compensation Table Total for 2021 | |
$ | 939,463 | |
| Deduct: Average stock awards(a) | |
| 202,158 | |
| Deduct: Average option awards(b) | |
| 210,416 | |
| Add: Average year-end value of equity awards granted during the year that are outstanding and unvested(c) | |
| 172,448 | |
| Add: Average change in fair value of equity awards granted in prior years that are outstanding and unvested(d) | |
| (121,540 | ) |
| Add: Average change in fair value of equity awards granted in prior years that vested during the year(e) | |
| 15,163 | |
| Add: Average value of dividend equivalents
accrued on equity awards during the year | |
| 0 | |
| Average Compensation Actually Paid for 2021 | |
| 592,961 | |
| (a) | Represents
the average of the total of the amounts reported in the “Stock Awards” column
in the Summary Compensation Table for the applicable year. |
| (b) | Represents
the average of the total of the amounts reported in the “Option Awards” column
in the Summary Compensation Table for the applicable year. |
| (c) | Represents
the average of the year-end value of equity awards granted during the applicable year that
are outstanding and unvested as of the end of such applicable year. |
| (d) | Represents
the average of the amount of change as of the end of the applicable year (from the end of
the prior fiscal year) in fair value of any equity awards granted in prior years that are
outstanding and unvested as of the end of such applicable year. |
| (e) | Represents
the average of the amount of change as of the vesting date (from the end of the prior fiscal
year) in fair value of any equity awards granted in prior years that vested during the applicable
year. |
Since
we do not have a pension plan, all of the foregoing adjustments are equity award adjustments for each applicable year and include the
addition (or subtraction, as applicable) of the following: (i) the average year-end fair value of any equity awards granted in the applicable
year that are outstanding and unvested as of the end of such applicable year; (ii) the average amount of change as of the end of the
applicable year (from the end of the prior fiscal year) in fair value of any equity awards granted in prior years that are outstanding
and unvested as of the end of such applicable year; (iii) for equity awards that are granted and vest in the same applicable year, the
average fair value as of the vesting date; (iv) for equity awards granted in prior years that vest in the applicable year, the average
amount equal to the change as of the vesting date (from the end of the prior fiscal year) in fair value; (v) for equity awards granted
in prior years that are determined to fail to meet the applicable vesting conditions during the applicable year, a deduction for the
amount equal to the average fair value at the end of the prior fiscal year; and (vi) the average dollar value of any dividends or other
earnings paid on equity awards in the applicable year prior to the vesting date that are not otherwise reflected in the fair value of
such award or included in any other component of total compensation for such applicable year. Adjustments as provided in clauses (iii)
and (vi) are inapplicable for all of the years presented in the table.
The
valuation assumptions used to calculate fair values did not materially differ from those disclosed at the time of grant. The value of
RSU awards is based on the fair value as of the end of the covered year or change in fair value during the covered year, in each case
based on the closing sale price of our common stock, as reported by the NYSE American. The value of option awards is based on the fair
value as of the end of the covered year or change in fair value during the covered year, in each case based on our Black-Scholes option
pricing model, the assumptions of which are described in Note 12 to our consolidated financial statements included in our Annual Report
on Form 10-K for the year ended December 31, 2023.
| (7) | The
total shareholder return is calculated by the difference between our common stock price at
the end of the three-year measurement period by our stock price at the beginning of the measurement
period. Because we do not pay any dividends, our total stockholder return does not assume
the reinvestment of dividends. |
| (8) | Amounts
reported represent the amount of net loss reflected in our audited consolidated financial
statements for the applicable year and is presented in thousands. |
Pay
Versus Performance Relationship
In
accordance with Item 402(v) of SEC Regulation S-K, we are providing the following descriptions of the relationships between information
presented in the Pay versus Performance table above. The graphs below illustrate moderate correlation between compensation actually paid
to our NEOs and our cumulative total stockholder return (TSR) and moderate correlation between compensation actually paid to our NEOs
and our net income (loss) from the beginning to the end of the three year period presented.
Compensation
Actually Paid and Company TSR. As demonstrated by the following graph, the amount of compensation actually paid to our NEOs trended
upward with our cumulative TSR from the beginning to the end of the three year period presented in the chart below. The alignment of
compensation actually paid with our cumulative TSR is because a significant portion of the compensation actually paid to our NEOs is
comprised of equity awards, the value of which is driven by our stock price.
Compensation
Actually Paid and Net Loss. As demonstrated by the following graph, the amount of compensation actually paid to our NEOs increased
over the three year period presented in the chart below, and our net income increased as well. The overall increase in compensation actually
paid to our NEOs is a result of the overall increase in our stock price over the period presented, which increased the compensation actually
paid to our NEOs irrespective of our net income (loss) during each year.
TRANSACTIONS
WITH RELATED PERSONS, PROMOTERS, AND CERTAIN CONTROL PERSONS
Policies
and Procedures for Review and Approval of Related Party Transactions
Pursuant
to its charter, the Audit Committee reviews and approves all related party transactions and makes recommendations to the full Board regarding
approval of such transactions, unless the Board specifically delegates this responsibility to the Compensation Committee. The Audit Committee
reviewed the transactions described below and determined that they were fair, just, and reasonable to the Company and in the best interests
of the Company and its stockholders.
Related
Party Transactions
Below
is a description of transactions that have occurred during the past two fiscal years, or any currently proposed transactions, to which
we were or are a participant and in which:
| ● | the
amounts involved exceeded or will exceed the lesser of: $120,000 or one percent (1%) of the
average of our total assets at year end for the last two completed fiscal years; and |
| ● | a
related person (including any director, director nominee, executive officer, holder of more
than 5% of our common shares or any member of their immediate family) had or will have a
direct or indirect material interest. |
Investor
Rights Agreement
We
are party to an Investor Rights Agreement with OrbiMed Royalty Opportunities II, LP and ROS Acquisition Offshore LP pursuant to which
Royalty Opportunities and ROS are permitted to nominate a majority of the directors and designate the chairperson of our Board of Directors
at subsequent annual meetings, as long as they maintain an ownership threshold in our Company of at least 40% of our then outstanding
common stock. If Royalty Opportunities and ROS are unable to maintain the Ownership Threshold, as defined in the Investor Rights Agreement,
the Investor Rights Agreement contemplates a reduction of nomination rights commensurate with our ownership interests. For so long as
the Ownership Threshold is met, we must obtain the approval of a majority of our common stock held by Royalty Opportunities and ROS to
proceed with the following actions: (i) issue new securities; (ii) incur over $250,000 of debt in a fiscal year; (iii) sell or transfer
over $250,000 of our assets or businesses or our subsidiaries in a fiscal year; (iv) acquire over $250,000 of assets or properties in
a fiscal year; (v) make capital expenditures over $125,000 individually, or $1,500,000 in the aggregate during a fiscal year; (vi) approve
our annual budget; (vii) appoint or remove the chairperson of our Board of Directors; and (viii) make loans to, investments in, or purchase,
or permit any subsidiary to purchase, any stock or other securities in another entity in excess of $250,000 in a fiscal year.
The
Investor Rights Agreement grants Royalty Opportunities and ROS the right to purchase from us a pro rata amount of any new securities
that we may propose to issue and sell. The Investor Rights Agreement may be terminated (a) upon the mutual written agreement of all the
parties, (b) upon our written notice or the written notice of ROS or Royalty Opportunities if the ownership percentage of our then outstanding
common stock of ROS and Royalty Opportunities is less than 10%, or (c) upon written notice of ROS and Royalty Opportunities.
2022
Private Placement and Securities Purchase Agreement
On
August 23, 2022, we entered into a securities purchase agreement (the “Securities Purchase Agreement”) with several accredited
investors, including Stavros G. Vizirgianakis and his brother, and Jonn R. Beeson, who invested through The Platinum Legacy Trust, dated
February 24, 2017, of which Jonn R. Beeson serves as Trustee, pursuant to which we agreed to issue an aggregate of 20,305,429 shares
of our common stock and warrants to purchase up to an aggregate of 5,076,358 shares of our common stock in a private placement (the “Private
Placement”), at a per unit (each unit consisting of one share and a warrant to purchase 0.25 of a share) purchase price of $0.48,
which represented a 2.5% discount to the 10-day volume-weighted average price of our common stock ending August 19, 2022. The closing
of the Private Placement was structured to occur in two tranches in order to comply with the continued listing requirements of the NYSE
American, which requires stockholder approval of the sale, issuance, or potential issuance by listed companies of common stock (or securities
convertible into common stock) at a price less than the greater of book or market value which equals 20% or more of outstanding common
stock prior to the transaction. Neither Mr. Vizirgianakis nor Mr. Beeson was a director of the Company when we entered into the Securities
Purchase Agreement.
On
August 25, 2022, we closed the first tranche of the Private Placement (the “First Closing”) and sold an aggregate of 14,060,315
shares and warrants to purchase an aggregate of 3,515,079 shares, for an aggregate purchase price of approximately $6.75 million. Immediately
after the execution of the Securities Purchase Agreement by the parties thereto, we obtained the written consent of Royalty Opportunities
and ROS, the holders of greater than a majority of the outstanding shares of our common stock, for the approval of the issuance of Shares
and Warrants at the second closing of the Private Placement (the “Second Closing”) pursuant to the continued listing requirements
of the NYSE American and in accordance with applicable provisions of the Delaware General Corporation Law and our Second Amended and
Restated Bylaws. At the Second Closing, we sold an aggregate of 6,245,114 shares and warrants to purchase an aggregate of 1,561,279 shares,
for an aggregate purchase price of approximately $3.0 million. Of the shares and warrants sold in the Private Placement, we sold the
following number of shares and warrants to purchase the following number of shares to each of Mr. Vizirgianakis, the brother of Mr. Vizirgianakis
and The Platinum Legacy Trust as follows:
| | |
First Closing | | |
Second Closing | |
| Investor | |
Shares | | |
Warrants | | |
Purchase Price | |
Shares | | |
Warrants | | |
Purchase Price |
| S. Vizirgianakis | |
| 3,515,079 | | |
| 878,770 | | |
$1.7 million | |
| 2,264,861 | | |
| 566,214 | | |
$1.1 million |
| Brother of S. Vizirgianakis | |
| 3,515,077 | | |
| 878,769 | | |
$1.7 million | |
| 857,696 | | |
| 214,425 | | |
$0.4 million |
| The Platinum Legacy Trust | |
| 703,016 | | |
| 175,754 | | |
$337.4 thousand | |
| 312,256 | | |
| 78,064 | | |
$150.0 thousand |
2022
Lock-Up Agreements
Under
the terms of the Securities Purchase Agreement, each of the accredited investors party thereto executed a lock-up agreement with the
Company, pursuant to which each such investor agreed to a lock-up on any sale or other disposition of our common stock, subject to certain
exceptions. The lock-up period had a three-month duration, except in the case of Mr. Vizirgianakis who agreed to a 12-month lock-up period.
Lead
Investor Agreement
Under
the terms of the Securities Purchase Agreement, we entered into an agreement with Stavros G. Vizirgianakis, as the lead investor of the
Private Placement, pursuant to we agreed to provide certain director nomination rights to Mr. Vizirgianakis. Pursuant to the terms of
the agreement, we expanded the size of our Board by one position and elected Mr. Vizirgianakis as a director to fill the vacancy created
as a result of the increase, effective upon completion of the First Closing. In addition, we elected Mr. Vizirgianakis as Chair of the
Board, effective upon completion of the First Closing. The director nomination rights set forth in the agreement will terminate on the
earlier of (i) the date on which Mr. Vizirgianakis ceases to hold at least 75% of the shares of our common stock to be purchased by him
in the Private Placement; (ii) October 7, 2024; or (iii) upon written notice of Mr. Vizirgianakis to the Company.
2022
Registration Rights Agreement
Under
the terms of the Securities Purchase Agreement, we entered into a Registration Rights Agreement with Mr. Vizirgianakis, his brother,
The Platinum Legacy Trust, dated February 24, 2017, and the other accredited investors party to the Securities Purchase Agreement, which
required us, among other things, to file a shelf resale registration statement with the SEC within 60 days of the date of the First Closing
for purposes of registering the resale of the shares of our common stock sold in the Private Placement and the shares of our common stock
issuable upon exercise of the warrants and use our commercially reasonable best efforts to cause the shelf resale registration statement
to become effective under the Securities Act of 1933, as amended, within 75 days of the date of the First Closing, subject to certain
exceptions. We filed this registration statement on October 11, 2022 and it became effective on October 20, 2022.
Family
Relationships
There
are no family relationships between or among our directors, executive officers, or persons nominated or chosen by the Company to become
directors or executive officers.
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Significant
Beneficial Owners
The
table below sets forth, as of May 28, 2024, information as to beneficial owners that have reported to the SEC or have otherwise advised
us that they are a beneficial owner, as defined by the SEC’s rules and regulations, of more than 5% of our outstanding common stock.
| Title of Class | |
Name and Address of Beneficial Owner | |
Amount and Nature of Beneficial Ownership | | |
Percent of Class(1) | |
| Common Stock | |
OrbiMed Advisors LLC(2) 601 Lexington Avenue, 54th Floor New York, NY 10022 | |
| 73,114,592 | | |
| 56.1 | % |
| Common Stock | |
Altium Capital Management, LP(3) 152 West 57th Street, Floor 20 New York, NY 10019 | |
| 14,525,511 | (4) | |
| 10.6 | %(4) |
| Common Stock | |
Stavros G. Vizirgianakis(5) 664 Cruiser Lane Belgrade, MT 59714 | |
| 7,440,339 | | |
| 5.6 | % |
| (1) | Percent
of class is based on 130,268,590 shares of our common stock outstanding as of May 28, 2024. |
| (2) | Based
in-part on information contained in a Schedule 13D/A filed with the SEC on August 3, 2023.
Includes 56,004,974 shares of common stock held of record by ROS Acquisition Offshore LP
(“ROS Acquisition”). OrbiMed Advisors LLC (“Advisors”), a registered
investment adviser under the Investment Advisors Act of 1940, as amended, is the investment
manager of ROS Acquisition. By virtue of such relationships, Advisors may be deemed to have
voting and investment power with respect to the securities held by ROS Acquisition as noted
above and as a result may be deemed to have beneficial ownership over such securities. Advisors
exercises its voting and investment power through a management committee comprised of Carl
L. Gordon, Sven H. Borho, and W. Carter Neild, each of whom disclaims beneficial ownership
of the securities held by ROS Acquisition. |
Also
includes 17,109,618 shares of common stock held of record by OrbiMed Royalty Opportunities II, LP (“ORO II”). OrbiMed ROF
II LLC (“ROF II”) is the general partner of ORO II, and Advisors is the managing member of ROF II. By virtue of such relationships,
Advisors and ROF II may be deemed to have voting and investment power with respect to the securities held by ORO II as noted above and
as a result may be deemed to have beneficial ownership over such securities. Advisors exercises its voting and investment power through
a management committee comprised of Carl L. Gordon, Sven H. Borho, and W. Carter Neild, each of whom disclaims beneficial ownership of
the securities held by ORO II.
| (3) | Based
on information contained in a Schedule 13G filed with the SEC on February 13, 2024 and other
information known to the Company. Altium Growth Fund, LP (the “Fund”), Altium
Capital Management, LP, and Altium Growth GP, LLC each have shared dispositive power and
voting power over the shares. The Fund is the record and direct beneficial owner of the shares.
Altium Capital Management, LP is the investment adviser of, and may be deemed to beneficially
own the shares owned by the Fund. Altium Growth GP, LLC is the general partner of, and may
be deemed to beneficially own the shares owned by the Fund. The number of shares consists
of 8,027,593 shares of our common stock and 6,497,918 shares of our common stock issuable
upon exercise of a warrant. |
| (4) | While
the total number of shares of our common stock issuable upon exercise of the Investor Warrant
is reflected in this table, the Fund is not permitted to exercise such Investor Warrant to
the extent that such exercise would result in the Fund and its affiliates beneficially owning
more than 9.99% of the number of shares of our common stock outstanding immediately after
giving effect to the issuance of shares of common stock issuable upon exercise of such warrants.
The Fund has the right to increase this beneficial ownership limitation in its discretion
on 61 days’ prior written notice to us. |
| (5) | Based
in part on information contained in a Schedule 13D filed with the SEC on September 6, 2022
and other information available to the Company. The number of shares consists of 5,995,355
shares of our common stock and 1,444,984 shares of our common stock issuable upon exercise
of warrants. |
Security
Ownership of Management
The
table below sets forth information relating to the beneficial ownership of our common stock as of May 28, 2024, by:
| ● | each
of our named executive officers; and |
| ● | all
directors and executive officers as a group. |
The
number of shares beneficially owned by each person is determined in accordance with the SEC’s rules and regulations, and the information
is not necessarily indicative of beneficial ownership for any other purpose. Under the SEC’s rules and regulations, beneficial
ownership includes any shares over which the individual has sole or shared voting power or investment power as well as any shares that
the individual has the right to acquire within 60 days of May 28, 2024, through the exercise of any stock option, warrants, or other
rights or the vesting of any RSU and DSU awards. Except as otherwise indicated, and subject to applicable community property laws, the
persons named in the table have sole voting and investment power with respect to all shares of common stock held by that person.
The
percentage of shares beneficially owned is computed on the basis of 130,268,590 shares of our common stock outstanding as of May 28,
2024. Shares of our common stock that a person has the right to acquire within 60 days of May 28, 2024, are deemed outstanding for purposes
of computing the percentage ownership of the person holding such rights, but are not deemed outstanding for purposes of computing the
percentage ownership of any other person.
| Title of Class | |
Name of Beneficial Owner | |
Amount and Nature of Beneficial Ownership(1) | | |
Percent of Class | |
| Common Stock | |
John K. Bakewell | |
| 448,546 | | |
| * | |
| Common Stock | |
Jonn R. Beeson | |
| 1,321,139 | | |
| 1.0 | % |
| Common Stock | |
Sean E. Browne | |
| 2,332,997 | | |
| 1.8 | % |
| Common Stock | |
Robert E. McNamara | |
| 446,809 | | |
| * | |
| Common Stock | |
Lori D. Mitchell-Keller | |
| 45,782 | | |
| * | |
| Common Stock | |
Stavros G. Vizirgianakis(2) | |
| 7,440,339 | | |
| 5.6 | % |
| Common Stock | |
Kevin D. Brandt | |
| 581,372 | | |
| * | |
| Common Stock | |
Mark A. Schallenberger | |
| 55,062 | | |
| * | |
| Common Stock | |
All current executive officers and directors as a group (9 persons) | |
| 12,991,875 | | |
| 9.7 | % |
| * |
Less than 1% of outstanding shares of common stock. |
| (1) | Includes
for the persons listed below the following shares subject to options, RSUs and DSUs held
by that person that are currently exercisable or become exercisable within 60 days of May
28, 2024: |
| Name | |
Warrants | | |
Options | | |
RSUs/DSUs | |
| Jonn R. Beeson | |
| 253,818 | | |
| — | | |
| — | |
| Sean E. Browne | |
| — | | |
| 1,364,879 | | |
| — | |
| Lori D. Mitchell-Keller | |
| — | | |
| — | | |
| 45,782 | |
| Stavros G. Vizirgianakis | |
| 1,444,984 | | |
| — | | |
| — | |
| Kevin D. Brandt | |
| — | | |
| 298,422 | | |
| — | |
| Mark A. Schallenberger | |
| — | | |
| 32,812 | | |
| — | |
| All current directors and executive officers as a group (9 persons) | |
| 1,698,802 | | |
| 1,850,953 | | |
| 45,782 | |
| (2) | Based
in part on information contained in a Schedule 13D filed with the SEC on September 6, 2022
and other information available to the Company. The number of shares consists of 5,995,355
shares of our common stock and 1,444,984 shares of our common stock issuable upon exercise
of warrants. |
Clawback
Policy
Effective
as of October 1, 2023, we adopted a clawback policy to provide for a mandatory clawback of incentive compensation paid to current and
former executives under certain circumstances in the event a financial metric used to determine the vesting or payment of incentive compensation
to an executive was calculated incorrectly and resulted in a financial restatement. This policy complies with SEC and NYSE American rules
adopted pursuant to the Dodd-Frank Wall Street and Consumer Protection Act.
Anti-Hedging
and Pledging Policy
Our
insider trading policy prohibits all directors, and officers and employees of the Company, their family members and members of their
households, and entities (such as trusts, partnerships, corporations and investment clubs) over which such directors, officers and employees
of the Company have or share voting or investment control from engaging in any of the following transactions at any time (even if the
individual involved is not in the possession of material, non-public information): (a) short sales of the Company’s securities,
including without limitation “sales against the box” (sales with delayed delivery); and (b) buying or selling puts, calls
or other derivative securities relating to the Company’s securities. In addition, the policy prohibits all directors and officers
who are subject to the reporting and liability provisions of Section 16 of the Exchange Act from pledging the Company’s securities
as collateral for a loan.
ADDITIONAL
INFORMATION
Stockholder
Proposals and Director Nominations
Proposals
by stockholders that are submitted for inclusion in our proxy statement for our 2025 Annual Meeting of Stockholders (the “2025
Annual Meeting”) must follow the procedures set forth in Rule 14a-8 under the Exchange Act and our Bylaws. To be timely under Rule
14a-8, stockholder proposals must be received by our Corporate Secretary at Xtant Medical Holdings, Inc., 664 Cruiser Lane, Belgrade,
Montana 59714 by 5:00 p.m., Mountain Time, on February 10, 2025. However, if the date of the 2025 Annual Meeting is changed by more than
30 days from the first anniversary of the date of the 2024 Annual Meeting, the deadline will instead be a reasonable time before we begin
to print and mail the proxy statement for the 2025 Annual Meeting.
Our
Bylaws also establish an advance notice procedure with regard to nominations of persons for election to the Board and stockholder proposals
to be brought before an annual meeting. Stockholder proposals and nominations may not be brought before an annual meeting unless, among
other things, the stockholder’s submission contained certain information concerning the proposal or the nominee, as the case may
be, and other information specified in our Bylaws. Proposals or nominations not meeting these requirements will not be entertained at
an annual meeting.
Stockholder
proposals and nominations may not be brought before the 2025 Annual Meeting unless, among other things, the stockholder’s submission
contains certain information concerning the proposal or the nominee, as the case may be, and other information specified in our Bylaws,
and the stockholder’s submission is received by us no earlier than 5:00 p.m., Mountain Time, on March 25, 2025 and no later than
5:00 p.m., Mountain Time, on April 24, 2025. However, if the date of the 2025 Annual Meeting is changed by more than 30 days before or
more than 70 days after the first anniversary of the date of the 2024 Annual Meeting, notice by the stockholder must be delivered not
earlier than 5:00 p.m., Mountain Time, on the 120th day prior to the 2025 Annual Meeting and not later than 5:00 p.m., Mountain Time,
on the later of the 90th day prior to the 2025 Annual Meeting or the 10th day following the day on which public announcement of the date
of the 2025 Annual Meeting is first made by the Company. Proposals or nominations not meeting these requirements will not be entertained
at the 2025 Annual Meeting. In addition, if applicable, stockholders who intend to solicit proxies in support of director nominees other
than the Company’s nominees at the 2025 Annual Meeting must give timely notice of nominations for directors for inclusion on a
universal proxy card in connection with the 2025 Annual Meeting. This notice must be submitted by the same deadline as disclosed above
under the advance notice provisions of our Bylaws and must include the information in the notice required by our Bylaws and by Rule 14a-19(b)(2)
and Rule 14a-19(b)(3) under the Exchange Act, including providing a statement that such stockholder intends to solicit the holders of
shares representing at least 67% of the voting power of the Company’s shares entitled to vote on the election of directors in support
of director nominees other than the Company’s nominees, as required by Rule 14a-19(b).
Stockholders
recommending candidates for consideration by the Board must provide the candidate’s name, biographical data, qualifications, and
certain other information. Any such recommendation should be accompanied by a written statement from the individual of his or her consent
to be named as a candidate and, if nominated and elected, to serve as a director. These requirements are separate from, and in addition
to, the SEC’s requirements that a stockholder must meet in order to have a stockholder proposal included in the proxy statement.
We
encourage stockholders who wish to submit a proposal or nomination to seek independent counsel. The Company will not consider any proposal
or nomination that is not timely or otherwise does not meet our Bylaws and SEC requirements. We reserve the right to reject, rule out
of order, or take other appropriate action with respect to any proposal that does not comply with these and other applicable requirements.
Householding
Information
The
SEC has adopted rules that permit companies and intermediaries (such as banks and brokers) to satisfy the delivery requirements for proxy
statements and annual reports with respect to two or more stockholders sharing the same address by delivering a single proxy statement
addressed to those stockholders. This delivery method is referred to as “householding” and can result in cost savings for
us. To take advantage of this opportunity, we may deliver a single proxy statement to multiple stockholders who share an address unless
we have received contrary instructions. We will deliver upon oral or written request a separate copy of our proxy statement to any stockholder
of a shared address to which a single copy of our proxy statement was delivered. If you prefer to receive separate copies of our proxy
statement, either now or in the future, or if you currently are a stockholder sharing an address with another stockholder and wish to
receive only one copy of future proxy statements for your household, please call us at (406) 388-0480 or send your request in writing
to us at the following address: 664 Cruiser Lane, Belgrade, Montana 59714, Attention: Corporate Secretary.
Copies
of 2023 Annual Report
Our
Annual Report on Form 10-K for the fiscal year ended December 31, 2023 is being sent along with this proxy statement. The 2023 Annual
Report is also available on our website at www.xtantmedical.com.
Important
Notice Regarding the Availability of Proxy Materials for the Annual Meeting to be Held on July 23, 2024: The proxy statement, along
with our Annual Report on Form 10-K for the fiscal year ended December 31, 2023 are available at www.xtantmedical.com (click “Investors”
and “SEC Filings”).
Your
vote is important. Please promptly vote your shares of our common stock by completing, signing, dating, and returning your proxy
card or by Internet or telephone voting as described on your proxy card.
| |
By
Order of the Board of Directors |
| |
|
| |
 |
| |
Stavros
G. Vizirgianakis |
| |
Chair
of the Board |
| |
|
| Belgrade,
Montana |
|
| June
10, 2024 |
|
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