NYSE: XTNT

We
have focused and intend to continue to focus primarily on four key growth initiatives: (1) introduce new products, including our
recently launched nanOss Strata™, an advanced synthetic bone graft designed to closely resemble natural bone;
CollagenX™, a bovine collagen particulate product for surgical wound closure; OsteoFactor ProTM, an allogenic
growth factor solution; and Trivium™, a next-generation demineralized bone matrix, in addition to our introductions in 2024:
Cortera® Posterior Fixation System, viable bone matrix; OsteoVive®
Plus, and amniotic membrane allografts, SimpliGraft™ and SimpliMax™;
(2) expand our distribution network; (3) penetrate adjacent markets; and (4) leverage our growth platform with technology and
strategic acquisitions. While the intent of these four key growth initiatives is to increase our future revenues, no assurance can
be provided that we will be successful in implementing these growth initiatives or increasing our future revenues.

Since
one of our key growth initiatives is to leverage our growth platform with technology and strategic acquisitions and explore other strategic
transactions with respect to our products and our company, including licenses, business collaborations and other business combinations
or transactions with other companies, we, as a matter of course, often engage in discussions with third parties regarding such matters.

As discussed in more detail elsewhere in this report, we recognized $18.7 million in license revenue in 2025 that
likely will not repeat in 2026 due primarily to changes in the reimbursement environment for our SimpliMax™ product effective January
1, 2026 and which changes also will adversely affect a portion of our product revenue in 2026. The loss of this license and product revenue
will have an adverse impact on our 2026 revenues and other operating results, including in particular, our gross margins.

Sale
of Coflex/CoFix Assets and International Hardware Business

On
December 1, 2025, we completed the sale of certain assets relating to our Coflex and CoFix products (the “Coflex/CoFix
Divestiture”) to Companion Spine, LLC and one of its affiliates, Companion Spine SAS (collectively, “Companion
Spine”), pursuant to an Asset Purchase Agreement dated July 7, 2025 (the “Coflex/CoFix Agreement”). The total
purchase price of the Coflex/CoFix Divestiture was $17.5 million (subject to a closing inventory valuation adjustment set forth in
the Coflex/CoFix Agreement). Of the total purchase price, an aggregate of $7.5 million was paid to us in cash as non-refundable
deposits during third and fourth quarters of 2025, $1.8 million was paid to us in cash at the closing, and $8.2 million was paid to
us as an unsecured promissory note issued by Companion Spine to us at the closing (the “Companion Spine Note”). Pursuant
to subsequent amendments to the Coflex/CoFix Agreement, the maturity date of the Companion Spine Note was extended to January 31,
2026. The outstanding principal balance of the Companion Spine Note, together with the related accrued interest, totaling $8.5
million, was paid to us on February 27, 2026.

Also,
on December 1, 2025, we completed the sale of all of our shares of equity securities of Paradigm Spine GmbH, one of our then wholly owned
subsidiaries engaged in the operation of our hardware business outside of the United States (“Paradigm”), which constituted
100% of the issued and outstanding shares of equity securities of Paradigm (the “Paradigm Divestiture” and together with
the Coflex/CoFix Divestiture, the “Divestitures”), to Companion Spine SAS pursuant to an Equity Purchase Agreement dated
July 7, 2025 between us, Paradigm and Companion Spine (the “Paradigm Agreement” and together with the Coflex/CoFix Agreement,
the “Divestiture Agreements”). The total purchase price of the Paradigm Divestiture was $3.9 million (the “Paradigm
Purchase Price”), $1.7 million of which was paid to us in cash at the closing of the Paradigm Divestiture and $2.2 million of which
was paid to us on February 27, 2026 in settlement of the net working capital and other purchase price adjustments.

The
aggregate purchase price associated with the two Divestitures was $21.4 million.

3

Industry
and Market Overview

The
orthopedic biomaterials market includes organic, inorganic, and synthetic materials designed for implantation or application in or near
bone to support healing and structural restoration. These materials are used to facilitate bone growth, augment areas with insufficient
bone tissue, and provide structural support during the repair process. Orthopedic biomaterials are commonly used as alternatives to autograft
tissue, reducing the need for harvesting bone from a secondary site in the patient.

Fixation
is often instrumental in allowing the body to heal and regenerate tissue. Fixation provides the constructive support necessary for reestablishing
stability, by immobilizing the regenerative site, and relieving stress. Fixation also can help hold the biomaterial in place in order
to achieve a better outcome. Examples of fixation products can include, but are not limited to, plates, screws, pins, rods, spacers,
and staples. Fixation products may be made from various metals and polymer materials.

Our
Orthobiologics Products

Our
primary biomaterial products are described below, and along with other allografts, are used across a range of orthopedic and clinical
applications.

● OsteoSponge
is a 100% human demineralized bone matrix (“DBM”) derived from trabecular bone. It provides
a natural scaffold for cellular in-growth and exposes bone-forming proteins to support the
healing process. Its malleable structure allows it to conform to and fill defects. OsteoSponge’s
mechanical and osteoconductive properties make it suitable for a range of orthopedic applications,
including spine, neurological, cranio/maxillofacial, trauma, plastic/reconstructive, and
other procedures requiring new bone formation.

● OsteoSelect
DBM Putty is a moldable demineralized bone matrix used to fill bony voids. The product is
manufactured using a low dose, low temperature gamma sterilization method intended to provide
device level sterility while maintaining its validated osteoinductive potential. OsteoSelect
DBM Putty is cleared for use as a bone void filler and bone graft substitute in defects not
intrinsic to structural stability, including surgically created and traumatic osseous defects,
and may be used in the extremities, pelvis, and posterolateral spine.

● OsteoSelect
PLUS DBM Putty combines the cohesive characteristics of OsteoSelect DBM Putty with demineralized
cortical chunks. OsteoSelect PLUS is designed to deliver differentiated handling properties
and ensure patient safety through validated, terminal sterilization.

● 3Demin
is a line of allograft bone products composed of 100% demineralized cortical bone. These
allografts are processed to enhance osteoconductivity and retain the osteoinductive potential
of human bone. The products exhibit malleable handling characteristics, are provided sterile,
and can be hydrated with biocompatible liquids for use in a range of bone grafting applications.
3Demin allografts are most commonly utilized in spinal fusion procedures.

● OsteoFactor
Pro is an allograft that retains a broad spectrum of naturally occurring growth factors present
in human bone. Unlike products formulated with a single recombinant or isolated growth factor,
OsteoFactor Pro contains multiple proteins and peptides associated with bone formation and
remodeling. The product may be used as a stand alone graft or combined with our other allograft
scaffolds to enhance the osteoinductive potential of those grafts.

● OsteoVive
Plus is a viable bone allograft produced using a proprietary method designed to preserve
native bone components, including growth factors and viable cells. The graft provides osteoconductive,
osteoinductive, and osteogenic potential as an alternative to autograft. The inclusion of
our PurLoc fiber technology is intended to support excellent handling characteristics.

● Our
nanOss portfolio consists of synthetic bone graft substitutes that incorporate nanocrystalline
hydroxyapatite designed to provide an osteoconductive scaffold for new bone formation. These
products are available in various configurations that combine the ceramic phase with a porous
carrier to support cellular attachment and graft handling. We recently introduced nanOss
Strata, an enhanced formulation manufactured from hydroxycarbon apatite intended to improve
incorporation with host bone. The nanOss products may be used in a range of orthopedic procedures
requiring a synthetic osteoconductive scaffold.

4

● FibreX
is a demineralized cortical fiber allograft intended to provide an osteoconductive scaffold
with osteoinductive potential to support new bone formation. Its elongated fiber structure
is designed to promote graft cohesion and conformability when placed into bony defects. The
incorporation of our PureLoc technology is intended to enhance handling characteristics and
maintain graft integrity during placement. FibreX may be used by clinicians in orthopedic
procedures where a moldable, fiber-based allograft scaffold is appropriate.

● Trivium
is a next-generation demineralized cortical fiber allograft that incorporates three key components—elongated
demineralized cortical fibers, trabecular cancellous chips, and demineralized bone matrix.
This composition creates intertwined structures with interconnected porosity intended to
support cellular attachment and tissue ingrowth. Trivium utilizes PureLoc fiber technology
to produce consistent, elongated fibers designed to maintain structural integrity and enhance
handling during surgical placement. Trivium may be used by clinicians in orthopedic procedures
requiring a moldable allograft scaffold.

● SimpliGraft
and SimpliMax are dehydrated, terminally irradiated amniotic membrane allografts available
in single and dual-layer configurations. These allograft membranes are intended to function
as protective barriers and provide coverage for acute and chronic wounds in surgical and
wound care settings. Their structural properties are designed to support a controlled environment
for wound management and integration into established clinical workflows.

● CollagenX
is a sterile, single use surgical collagen powder derived from 100% purified bovine Type
I collagen and designed for use in the management of surgical and non-surgical wounds. CollagenX
forms a soft, conforming barrier that helps maintain a moist wound environment.

We
also process and distribute sports allografts prepared for soft-tissue reconstruction applications, milled spinal allografts composed
of cortical bone shaped to defined specifications, and traditional allografts used across multiple clinical specialties, including orthopedics,
neurology, podiatry, oral and maxillofacial care, genitourinary care, chronic wound care, surgical repair, plastic and reconstructive
medicine.

Our
Spinal Implant Products

We
offer a comprehensive line of products that are used to treat a variety of spinal and sacroiliac conditions, including trauma, degeneration,
deformity and tumor, including use of minimally invasive surgery techniques. Some of our key spinal implant product lines include:

Cervical
Products

● The
Spider Cervical Plating System consists of simple, single step locking with 3 forms of locking
feedback providing confidence in Spider System construct and performance.

● The
Streamline OCT System allows a rigid construct to be created in the occipito-cervico-thoracic
spine by offering a broad range of implants. These implants provide the ability to tailor
treatment to a specific patient.

● The
CervAlign System is a comprehensive anterior cervical plate system designed to meet the varying
clinical needs of surgeons performing anterior cervical discectomy and fusion procedures.
The system is designed to accommodate semi-constrained, constrained and hybrid constructs.

Thoracolumbar
Products

● The
Axle-X Interspinous Fusion System is an internal fixation device for spinal surgery in the
non-cervical spine (T1 − S1 inclusive). It is a minimally invasive, modular interspinous
fusion system with angled spikes that allows for adequate L5 − S1 engagement and other
variations in patient anatomy. The Axle-X Interspinous Fusion System is designed to provide
spinal stability for lumbar fusion procedures, including the treatment of degenerative disc
disease, spinal tumors and trauma.

● The
Streamline MIS Spinal Fixation System allows a rigid construct to be created in the thoracolumbar
spine via a percutaneous or mini-open approach using cannulated pedicle screws, set screws
and rods. The system offers a broad range of implants and instruments, providing the ability
to tailor treatment to a specific patient.

5

● The
Streamline TL Spinal Fixation System allows a rigid construct to be created in the thoracolumbar
spine using pedicle screws, set screws, rods and Streamline TL Crosslinks. The system offers
a broad range of implants and instruments, providing the ability to tailor treatment to a
specific patient.

● The
Cortera Spinal Fixation System is a comprehensive posterior thoracolumbar fixation solution.
Featuring innovative implants and multi-functional instrumentation, Cortera provides surgeons
with a safe and effective solution that is designed to improve surgical workflow and deliver
value when navigating complex procedures.

Sacroiliac
Joint Products

● The
Silex Sacroiliac Joint Fusion System is a sacroiliac fixation system which actively compresses
across the SI joint. Sacroiliac dysfunction is increasingly recognized as a frequent contributor
to chronic low back pain.

Interbody
Products

● Calix
is a family of polyetheretherketone, or PEEK, interbody spacers and precision instruments
for both cervical and thoracolumbar applications. Calix PC is a frictional titanium plasma-coated
PEEK implant that provides additional biomechanical performance and end-plate visualization.

● The
Irix-C Cervical Integrated Fusion System consists of an integrated titanium ring, surrounded
by an outer PEEK ring and two screws. It is intended for spinal fusion procedures at one
level (C3 − T1 inclusive) in skeletally mature patients for the treatment of degenerative
disc disease.

● The
Irix-A Lumbar Integrated Fusion System consists of an integrated titanium ring, surrounded
by an outer PEEK ring and three screws. It is intended for spinal fusion procedures at one
or two contiguous levels of the lumbosacral spine (L2 − S1 inclusive) in skeletally
mature patients for the treatment of degenerative disc disease.

● Fortilink
is a family of implants used in a variety of fixation procedures. Fortilink implants with
TiPlus Technology are manufactured with selective laser melting and are built from implant
grade titanium alloy. Open mesh structure and graft windows are designed to allow bone ingrowth
and facilitate fusion.

● Fortilink
implants with TETRAfuse 3D Technology maintain bone-like mechanical properties. The unique
features of the 3D printed nano-rough surface have been shown to allow bone cells to attach
to the implant, increasing the potential for fusion.

● The
Contact ALP (Anterior Lumbar Plate) System provides anterior fixation of the lumbosacral
spine (L1-S1) with a focus on efficiency and flexibility. The system uses an integrated expansion
screw head locking mechanism that allows the plate to be lagged to the vertebral body while
maintaining controlled screw angulation and back out protection.

Sales
and Marketing

We
distribute our products in the United States through an extensive distribution network of commissioned independent sales agents and stocking
agents. As of December 31, 2025, we had over 670 independent sales agents and stocking agents. We also maintain a national accounts program
to enable our agents to gain access to IDN hospitals and through GPOs. We have biologics contracts with major GPOs, including Vizient,
Premier, and HealthTrust Purchasing Group, as well as extensive access to IDNs across the United States for both biologics and spine
hardware systems.

Our
international footprint includes distribution partners in Europe, Canada, Mexico, South America, and certain
Pacific region countries.

Donor
Procurement

Our
mission with respect to donor procurement is: “Honoring the gift of donation, by helping our patients live as full, and complete
a life as possible.”

In
furtherance of our mission, we have agreements with multiple recovery agencies, and we continue to explore options to expand our network
for access to donor tissue in anticipation of increased demand for our biologics products.

6

Competition

There
are various public and private organizations that offer both orthobiologics and fixation products to their customers, including our primary
competitors Medtronic plc, Johnson and Johnson, Bioventus Inc., Globus Medical, Inc., OrthoFix Medical Inc., Alphatec Holdings, Inc.,
Highridge Inc., SI-Bone Inc., as well as dozens of privately-owned companies. We also compete with tissue banks that do not offer spinal
fixation products, such as AlloSource International, Inc., LifeNet Health, and MTF Biologics.

Intellectual
Property

We
rely upon patents, trademarks, trade secrets and other proprietary rights to maintain and improve our competitive position. We review
third-party proprietary rights, including patents and patent applications, as available, to develop an effective intellectual property
strategy, avoid infringement of third-party proprietary rights, identify licensing opportunities and monitor the intellectual property
owned by others.

We
protect our proprietary rights through a variety of methods. As a condition of employment, we generally require employees to execute
an agreement relating to the confidential nature of and company ownership of proprietary information and assigning intellectual property
rights to us. We generally require confidentiality agreements with vendors, consultants, and others who may have access to proprietary
information. We generally limit access to our facilities and review the release of company information in advance of public disclosure.
There can be no assurances, however, that confidentiality agreements with employees, vendors, and consultants will not be breached, adequate
remedies for any breach would be available, or competitors will not discover or independently develop our trade secrets. Litigation also
may be necessary to protect trade secrets or techniques we own.

Patents

Although
we believe that, in the aggregate, our patents are valuable, and patent protection is beneficial to our business and competitive positioning,
our patent protection will not necessarily deter or prevent competitors from attempting to develop similar products. There can be no
assurances that our patents will provide competitive advantages for our products or that competitors will not challenge or circumvent
these rights. In addition, there can be no assurances that the United States Patent and Trademark Office (“USPTO”) or foreign
patent offices will issue any of our pending patent applications. The USPTO and foreign patent offices may deny or require a significant
narrowing of the claims in our pending patent applications and the patents issuing from such applications. Any patents issuing from the
pending patent applications may not provide us with significant commercial protection. We could incur substantial costs in proceedings
before the USPTO or foreign patent offices, including opposition and other post-grant proceedings. These proceedings could result in
adverse decisions as to the patentability, priority of our inventions, and the narrowing or invalidation of claims in issued patents.
Additionally, the laws of some of the countries in which our products are or may be sold may not protect our intellectual property to
the same extent as the laws in the United States or at all.

Our
policy is to file patent applications in the United States and other countries when we believe it is commercially advantageous to do
so. We do not consider our business to be materially dependent upon any individual patent. As of December 31, 2025, our biologics patent
portfolio included 46 issued patents that expire between 2028 and 2041, 26 of which are issued U.S. patents. Our fixation portfolio is
patent protected globally and includes 201 issued patents that expire between 2026 and 2043, 150 of which are issued U.S. patents, and
5 pending patent applications, 2 of which are U.S. patent applications. We expect that additional patent applications will be filed and
prosecuted as inventions are discovered, technological improvements and processes are developed, and specific applications are identified.
There can be no assurance that we will be able to obtain final approval of any patents.

Trademarks

We
have registered, and continue to seek registration, of trademarks and continuously monitor and aggressively pursue users of names and
marks that potentially infringe upon our registered trademarks. We currently own the following registered trademarks: OsteoSponge®,
OsteoVive®, OsteoWrap®, OsteoFactor®, OsteoFactor Pro®, BacFast®, OsteoSelect®, OsteoMax®, 3Demin®, Circle
of Life®, ARANAX®, ASPECT®, ATRIX-C®, ATRIX-C UNION®, BACJAC®, BACFUSE®, BIGFOOT®, CLARITY®, CONTACT®,
CROSS-FUSE®, INTICE®, LAT-FUSE®, MATRIFORM®, NANOSS®, NUNEC®, ORBITALWRAP®, PAC PLATE®, QUANTUM®,
SLIMFUSE®, SimpliGraft®, SimpliMax®, SimpliMix®, STREAMLINE®, X-LINK®, XPRESS®, XSPAN®, ZYFIX®, ELEMAX®,
UNISON®, FORTILINK®, TETRAFUSE®, CERVALIGN®, NANOSS 3D®, TIPLUS®, FIBREX®, MAXFUSE®, BIOMAX®, CORTERA®,
ELEVATE YOUR BONE GRAFT®, and ELEVATED PROCEDURAL SOLUTIONS®. Under the X-spine name, we own the following registered trademarks:
SILEX®, IRIX®, CALIX®, H-GRAFT®, SPIDER®, X90®, BUTREX®, FORTEX®, AXLE®, FIXCET®, and XTANT®.

7

Trade
Secrets and Other Proprietary Rights

To
safeguard our proprietary knowledge and technology, we rely upon trade secret protection and non-disclosure/confidentiality agreements
with employees, consultants and third-party collaboration partners with access to our confidential information. Although we believe our
proprietary technology has value, because of rapid technological changes in the medical industry, we also believe that proprietary protection
is of less significance than factors such as the intrinsic knowledge and experience of our management, advisory board, consultants and
personnel and their ability to identify unmet market needs and to create, invent, develop and market innovative and differentiated products.

License
Agreements

During
the first quarter of 2025, we entered into a manufacture and license agreement with a distributor pursuant to which we agreed to
manufacture and supply to the distributor our SimpliGraft® product under the distributor’s name in exchange for a one-time
$1.5 million cash payment and minimum SimpliGraft® product purchase obligations of the distributor. During the fourth quarter of
2024, we entered into a license agreement with a distributor granting an exclusive right and license to manufacture and
commercialize in the United States our SimpliMax™ product in exchange for a one-time $1.5 million cash payment and minimum
quarterly royalty payments based on the volume of product sold by the distributor. Effective January 1, 2026, the Centers for
Medicare & Medicaid Services (“CMS”) implemented a Local Coverage Determination with significant changes to
reimbursement for cellular and tissue-based products, which impacted our SimpliMax™ and SimpliGraft® products. In
addition, on July 14 and 15, 2025, CMS released the CY 2026 Physician Fee Schedule (“PFS”) proposal and the CY 2026
Hospital Outpatient Prospective Payment System (“OPPS”) proposal. Under these rules, which were implemented on January
1, 2026, CMS instituted a consistent payment approach for skin substitutes across the private office and hospital outpatient
departments settings with a fixed price of $127.14 per square centimeter. Together with the Local Coverage Determination and a
recently announced Wasteful and Inappropriate Service Reduction model, there are several significant potential changes to
reimbursement of skin substitutes that have impacted and will likely continue to impact the industry and the sale of our
SimpliMax™ and SimpliGraft® products. Because of these regulatory changes, the SimpliGraft® manufacture and license
agreement was terminated effective December 31, 2025 and it is possible that the SimpliMax™ license agreement may be
terminated, adversely affecting our 2026 and future license revenue.

Government
Regulation

We
are International Organization for Standardization (“ISO”) 13485 and MDSAP Certified and registered with the U.S. Food and Drug Administration (“FDA”) as a manufacturer of human cells, tissues, and cellular and tissue-based
products (“HCT/Ps”), as well as medical devices. ISO 13485 is the internationally recognized quality management systems (“QMS”)
standard specifically designed for organizations involved in the life cycle of medical devices, including design, production, installation,
servicing and distribution. Medical Device Single Audit Program (“MDSAP”) is a program that allows a third-party auditor
to evaluate a medical device manufacturer’s quality management system to satisfy the requirements of multiple regulatory jurisdictions
simultaneously. The program is based on ISO 13485. We are an accredited member in good standing with the Association for Advancing Tissue
and Biologics (“AATB”), formerly known as the American Association of Tissue Banks. In addition, we comply with all licensing
requirements for distributing HCT/Ps in states with such regulations, including Florida, California, Delaware, Illinois, Louisiana, Maryland,
Oregon, and New York. As our industry is highly regulated, we cannot predict the impact of future regulations on our operations or those
of our customers.

Our
stabilization and fusion products, along with our instrumentation systems, are classified as medical devices and are therefore subject
to rigorous regulation by the FDA, as well as by other domestic and international regulatory authorities. These regulations apply to
a wide range of activities carried out by Xtant and our suppliers, licensors and partners both now and in the future. These regulated
activities include but are not limited to, product design and development, testing, manufacturing, labeling, storage, safety, premarket
clearance, advertising and promotion, product marketing, sales and distribution, post-market surveillance and post-market adverse event
reporting. All products currently marketed by Xtant are regulated as HCT/Ps and/or have received 510(k) clearances from the FDA, unless
they are exempt.

Human
Tissue

The
FDA defines HCT/Ps as articles containing or consisting of human cells or tissues that are intended for implantation, transplantation,
infusion, or transfer into a human recipient. Current Good Tissue Practices (“CGTP”) requirements govern the methods used
in, and the facilities and controls used for, the manufacture of HCT/Ps in a way that prevents the introduction, transmission, or spread
of communicable diseases by HCT/Ps. CGTPs include but are not limited to, any or all steps in the recovery, processing, storage, labeling,
packaging or distribution of any human cell or tissue, and the screening or testing of the cell or tissue donor.

8

Core
CGTP requirements are those requirements that directly relate to preventing the introduction, transmission, or spread of communicable
disease by HCT/Ps. The core CGTP requirements include requirements for:

● Facilities

● Environmental
control

● Equipment

● Supplies
and reagents

● Recovery

● Processing
and process controls

● Labeling
controls

● Storage

● Receipt,
predistribution shipment, and distribution of an HCT/P.

In
addition, there are regulatory requirements pertaining to donor eligibility determinations, donor screening, and donor testing.

An
HCT/P is regulated solely under section 361 of the Public Health Service Act (“PHSA”) and 21 CFR Part 1271 if it meets the
following four criteria:

1) The
HCT/P is minimally manipulated;

2) The
HCT/P is intended for homologous use only; as reflected by the labeling, advertising, or
other indications of the manufacturer’s objective intent;

3) The
manufacture of the HCT/P does not involve the combination of the cells or tissues with another
article (with limited exceptions); and

4) Either

i) The
HCT/P does not have a systemic effect and is not dependent upon the metabolic activity of
living cells for its primary function; or

ii) The
HCT/P has a systemic effect or is dependent upon the metabolic activity of living cells for
its primary function and: is for autologous use; is for allogeneic use in a first-degree
or second-degree blood relative; or is for reproductive use.

Failure
to comply with applicable regulatory requirements can result in enforcement action by the FDA, which may include sanctions such as warning
or untitled letters, injunctions, or other action.

There
are many HCT/P products that must undergo regulatory review and licensure by the FDA. The approval process for a Biologics License Application
(“BLA”) includes a rigorous review of the safety and efficacy of the biological product. Successful applications typically
require testing and validation through a series of clinical and non-clinical studies taking place over multiple years of product development.
We refer to all of our HCT/P products as biologics. In the future, Xtant may decide to strategically commercialize products in the United
States that would require a BLA, but there are no plans to do so at the present time.

Medical
Devices

The
Center for Devices and Radiological Health oversees the clearance, authorization and approval of medical devices, including our stabilization
and fusion products, as well as certain HCT/Ps regulated as medical devices. In the United States, medical devices are heavily regulated
by the FDA under the Federal Food, Drug, and Cosmetic Act (“FDCA”) and its associated regulations, as well as other relevant
federal and state laws. These regulations cover various aspects, including design, manufacture, storage, record control, approval, labeling,
promotion, post-approval monitoring and reporting, distribution and import and export of medical devices. Non-compliance with these requirements
can result in administrative actions such as FDA refusal to approve pending Premarket Approvals (“PMAs”), 510(k)s, issuance of warning letters, mandatory product
recalls, import detentions, civil monetary penalties, and/or judicial sanctions, such as product seizures, injunctions, and criminal
prosecution.

9

Under
the FDCA, medical devices are classified into one of three classes based on the risk associated with the device and the level of control
necessary to provide a reasonable assurance of safety and effectiveness. Class I devices are deemed to be low risk and are subject to
the fewest regulatory controls. Class III devices are generally the highest risk devices and are subject to the highest level of regulatory
control to provide reasonable assurance of safety and effectiveness. Class III devices must typically be approved by the FDA before they
are marketed.

Most
Class I devices and a minority of Class II devices are completely exempt from premarket review by the FDA. Most Class II devices and
a minority of Class I devices require 510(k) clearance. Devices that pose the highest risk, including life sustaining, life-supporting
or implantable devices, or devices deemed not substantially equivalent to a previously 510(k)-cleared device or a “pre-amendment”
Class III device in commercial distribution before May 28, 1976 for which PMA applications are not required, are placed in Class III
requiring PMA approval. A novel device is placed in Class III by default, but it may be eligible to be placed in Class I or Class II
via “de novo” classification if it can be shown to pose only low to moderate risk with appropriate regulatory controls.

The
PMA approval pathway requires proof that there is a reasonable assurance of safety and effectiveness. The 510(k)-clearance pathway is
much less burdensome and time-consuming than the PMA approval pathway. The de novo pathway has an enhanced burden compared to the 510(k)-clearance
pathway but is much less burdensome than a PMA approval process.

Under
the 510(k)-clearance pathway, the applicant must submit to the FDA a premarket notification demonstrating that the medical device is
substantially equivalent to a legally marketed predicate device. A predicate device may be a previously 510(k) cleared device, a de novo-authorized
device, or a pre-amendment device (unless the FDA has issued a regulation calling for PMA applications for this device type). To be substantially
equivalent, the proposed device must have the same intended use as the predicate device, and either have the same technological characteristics
as the predicate device or have different technological characteristics and be shown to be equally safe and effective and not raise different
questions of safety and effectiveness than the predicate device.

By
statute, the FDA is required to complete its review within 90 FDA days of receiving the 510(k) notification. As a practical matter, clearance
often takes longer, typically ranging from three to nine months or more, and clearance is never assured. The FDA’s 510(k) review
compares a proposed device to a predicate device with respect to intended use and technology. The information necessary to show substantial
equivalence will depend on the differences between the proposed device and the predicate device, which may include bench, animal, and/or
clinical studies. The discussion of what data is needed is sometimes conducted in a voluntary process called the pre-submission process
whereby companies meet with the FDA to discuss the data needed for clearance.

If
the FDA finds the applicant’s device is substantially equivalent to the predicate device, it will send a letter to the applicant
stating that fact. This allows the applicant’s device to be commercially distributed in the United States. If the device cannot
proceed through the 510(k) pathway, the applicant must fulfill the much more rigorous premarketing requirements of the PMA approval process
or seek reclassification of the device through the de novo process.

After
a device receives 510(k) clearance, any modification that could significantly affect its safety or effectiveness, or that would constitute
a major change in its intended use, requires a new 510(k) clearance or could require reclassification through the de novo process or
a PMA approval. The FDA requires each manufacturer to make this determination in the first instance, but the FDA can review any such
decision. If the FDA disagrees with a manufacturer’s decision not to seek a new 510(k) clearance, the agency may require the manufacturer
to seek 510(k) clearance, de novo authorization, or PMA approval. The FDA can also require a manufacturer to cease marketing and/or recall
the modified device until 510(k) clearance, de novo authorization, or PMA approval is obtained.

Another
procedure for obtaining marketing authorization for a medical device is the “de novo classification” procedure. Devices of
a new type that the FDA has not previously classified based on risk are automatically classified into Class III, regardless of the level
of risk they pose. Additionally, in response to a 510(k) premarket notification, if the FDA determines that the device is “not
substantially equivalent” to a previously cleared device, the device is automatically designated as a Class III device. The device
sponsor must then fulfill more rigorous PMA requirements or can request a risk-based classification determination for the device in accordance
with the de novo process, which is a route to market for novel medical devices that are low to moderate risk and are not substantially
equivalent to a predicate device.

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The
advantage of the de novo classification process is that it generally requires less data than a PMA. The disadvantage is that it may require
more data than a 510(k) and most often will include human clinical data. A request for de novo classification also has a longer review
time as compared to a 510(k). If the de novo submission is denied, the device remains in Class III and PMA approval may be required before
the device may be legally marketed in the United States. The FDA is increasingly moving devices with slightly different proposed indication
statements or different technological features off the 510(k) path and onto the de novo path, resulting in more time and expense for
the company.

A
device not eligible for 510(k) clearance or de novo classification must follow the PMA approval pathway, which requires proof of the
reasonable assurance of the device’s safety and effectiveness. The cost of preparing and submitting a PMA is substantial and a
PMA application must provide extensive preclinical and clinical trial data and also detailed information about the device and its components
regarding, among other things, device design, manufacturing and labeling. Under federal law, the submission of most PMAs is additionally
subject to a substantial annually adjusted application user fee. Satisfaction of FDA PMA requirements typically take years, and the actual
time required may vary substantially based upon the type, complexity, and novelty of the device or disease.

After
a medical device enters commercial distribution, General Controls for Medical Devices apply. General Controls are the basic provisions
(authorities) that provide the FDA with the means of regulating devices to ensure their safety and effectiveness. The General Controls
apply to all medical devices. They include provisions that relate to adulteration; misbranding; device registration and listing; premarket
notification; banned devices; notification, including repair or replacement, or refund; records and reports; restricted devices; and
good manufacturing practices.

The
FDA has broad post-market and regulatory enforcement privileges. Medical device manufacturers are subject to unannounced inspections
by the FDA and other state, local and foreign regulatory authorities to assess compliance with the Quality Management System Regulation
(“QMSR”) and other applicable regulations, and these inspections may include the manufacturing facilities of any suppliers.
Failure to comply with applicable regulatory requirements can result in enforcement action by the FDA, which may include sanctions such
as: warning letters, fines, injunctions, consent decrees and civil penalties; unanticipated expenditures, repair, replacement, refunds,
recall or seizure of our devices; operating restrictions, partial suspension or total shutdown of manufacturing; the FDA’s refusal
of our requests for 510(k) clearances, de novo classification, or premarket approvals of new devices, new intended uses or modifications
to existing devices; the FDA’s refusal to issue certificates to foreign governments needed to export devices for sale in other
countries; and withdrawing 510(k) clearances, de novo marketing authorization, or premarket approvals that have already been granted;
and criminal prosecution.

International
Regulation

International
distribution is governed by foreign government regulations, which can vary between countries. The time needed for approval in a foreign
country may be longer or shorter than that required for FDA approval process, and the specific requirements may differ. Some countries
accept MDSAP Certificates, CE Marking, and/or FDA clearances as part of their medical device marketing approval process,

Healthcare
Fraud and Abuse

Healthcare
fraud and abuse laws apply to Xtant’s business when a customer submits a claim for an item or service that is reimbursed under
Medicare, Medicaid or most other federally-funded healthcare programs. The Federal Anti-Kickback Statute prohibits, among other things,
persons from knowingly and willfully soliciting, receiving, offering or paying remuneration, directly or indirectly, in cash or in kind,
to induce or reward either the referral of an individual for, or the purchase, order or recommendation of, items or services for which
payment may be made, in whole or in part, under federal health care programs, such as by Medicare or Medicaid. The concerns that the
Anti-Kickback Statute addresses are multiple, but primary among them are, first, that the federal government pays/reimburses health care
providers for the true acquisition cost of goods and services provided to patients served by government programs. The government does
not want, for example, health care providers obtaining manufacturer discounts which are not disclosed to the government on cost report
forms submitted for reimbursement to the government. The government wants to be the beneficiary of such discounts. Second, for that reason,
the government wants transparency in the billing process which discloses such discounts to the government. Third, the government does
not want purchasing, prescription or referral decisions for medical devices biased by economics unrelated to the best choices for a patient.

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The
Federal Anti-Kickback Statute is subject to evolving interpretations and has been applied by government enforcement officials to a number
of common business arrangements in the medical device industry. Remunerative relationships with physicians in which manufacturers give
health care providers gifts or pay for entertainment, sporting events, trips or other perquisites, may be viewed as an attempt to buy
loyalty to the manufacturer’s products. A number of states also have anti-kickback laws that establish similar prohibitions that
may apply to items or services reimbursed by government programs as well as any third-party payors, including commercial insurers. Further,
federal legislation, the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act (collectively
“PPACA”), among other things, clarified the intent requirements of the Federal Anti-Kickback Statute and the federal criminal
statutes governing healthcare fraud. Specifically, a person or entity can be found to have violated the statutes without actual knowledge
of these statutes or specific intent to violate them. In addition, the PPACA amended the Social Security Act to provide that the government
may assert that a claim including items or services resulting from a violation of the Federal Anti-Kickback Statute constitutes a false
or fraudulent claim for purposes of the Federal False Claims Act or federal civil money penalties statute. Amendments to the Federal
False Claims Act provide that a violation of the Federal Anti-Kickback Statute is also a violation of the Federal False Claims Act, subjecting
healthcare entities to treble damages and mandatory penalties for each false claim or statement.

Additionally,
the civil Federal False Claims Act prohibits, among other things, knowingly presenting or causing the presentation of a false, fictitious
or fraudulent claim for payment of federal funds, or knowingly making, or causing to be made, a false record or statement material to
a false or fraudulent claim to avoid, decrease or conceal an obligation to pay money to the federal government. The purpose of the Federal
False Claims Act is to prevent manufacturers from causing or inducing inappropriate prescriptions leading to an inappropriate government
reimbursement. It often comes into play where a manufacturer suggests or assists a health care provider to bill for an off-label, uncovered
use. It also can occur when the reimbursement advice given by a manufacturer results in inappropriate reimbursement claims from “upcoding,”
miscoding, “stretched” coding, the use of inappropriate modifiers or inappropriate care settings. These behaviors can result
in the government paying for products or procedures that should not be reimbursed by the federal government. The manufacturer must be
truthful and not misleading in the reimbursement advice it gives to customers.

Actions
under the Federal False Claims Act may be brought by the Attorney General or as a qui tam action by a private individual in the name
of the government. Violations of the Federal False Claims Act can result in very significant monetary penalties and treble damages. The
federal government is using the Federal False Claims Act, and the accompanying threat of significant liability, in its investigations
of healthcare companies throughout the country for a wide variety of Medicare billing practices, as well as federal Anti-Kickback Statute
violations and certain marketing practices, including off-label promotion, and has obtained multi-million and multi-billion dollar settlements
under the Federal False Claims Act in addition to individual criminal convictions under applicable criminal statutes. Given the significant
size of actual and potential settlements, it is expected that the government will continue to devote substantial resources to investigating
healthcare providers’ and suppliers’ compliance with the healthcare reimbursement rules and fraud and abuse laws.

The
Federal Physician Payments Sunshine Act imposes annual reporting requirements on device manufacturers for payments and other transfers
of value provided by them, directly or indirectly, to physicians (including physician family members) and teaching hospitals, as well
as ownership and investment interests held by physicians. Device manufactures are also required to collect information on payments or
transfers of value to physician assistants, nurse practitioners, clinical nurse specialists, certified registered nurse anesthetists,
and certified nurse midwives for reporting to the Centers for Medicare & Medicaid Services. A manufacturer’s
failure to submit timely, accurately and completely the required information for all payments, transfers of value or ownership or investment
interests may result in civil monetary penalties. Certain states also mandate implementation of commercial compliance programs, impose
restrictions on device manufacturer marketing practices and require tracking and reporting of gifts, compensation and other remuneration
to healthcare professionals and entities.

Our
operations are also subject to the U.S. Foreign Corrupt Practices Act (“FCPA”). We are required to comply with the FCPA,
which generally prohibits covered entities and their intermediaries from engaging in bribery or making other prohibited payments to foreign
officials for the purpose of obtaining or retaining business or other benefits. In addition, the FCPA imposes accounting standards and
requirements on publicly traded United States corporations and their foreign affiliates, which are intended to prevent the diversion
of corporate funds to the payment of bribes and other improper payments, and to prevent the establishment of “off books”
slush funds from which such improper payments can be made. We also are subject to similar anticorruption legislation implemented in certain
foreign jurisdictions.

Coverage
and Reimbursement

Xtant’s
currently approved products are commonly treated as general supplies utilized in spinal and orthopedic surgery and if covered by third-party
payors, are paid for as part of the surgical procedure. Accordingly, healthcare providers in the United States generally rely on third-party
payors, principally private insurers and governmental payors such as Medicare and Medicaid, to cover and reimburse all or part of the
cost of a spine surgery in which Xtant products are used. Sales volumes and fees for Xtant products will continue to depend in large
part on the availability of coverage and reimbursement from such third-party payors. Third-party payors perform analyses on new technologies
to determine if they are medically necessary before providing coverage for them. These third-party payors may still deny reimbursement
on covered technologies if they determine that a device used in a procedure was not used in accordance with the payor’s coverage
policy. Particularly in the United States, third-party payors continue to carefully review, and increasingly challenge, the prices charged
for procedures and medical products.

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In
the United States, a large percentage of insured individuals receive their medical care through managed care programs, which monitor
and often require pre-approval of the services that a member will receive. Some managed care programs pay their providers on a per capita
basis, which puts the providers at financial risk for the services provided to their patients by paying these providers a predetermined
payment per member per month and, consequently, may limit the willingness of these providers to use Xtant products.

The
overall escalating cost of medical products and services has led to, and will likely continue to lead to, increased pressures on the
healthcare industry to reduce the costs of products and services. Government or private third-party payors cannot be guaranteed to cover
and reimburse the procedures using Xtant products in whole or in part in the future or that payment rates will be adequate. In addition,
it is possible that future legislation, regulation or coverage and reimbursement policies of third-party payors will adversely affect
the demand for Xtant products or the ability to sell them on a profitable basis.

Internationally,
reimbursement and healthcare payment systems vary substantially from country to country and include single-payor, government-managed
systems as well as systems in which private payors and government managed systems exist side-by-side. Xtant’s ability to achieve
market acceptance or significant sales volume in international markets will be dependent in large part on the availability of reimbursement
for procedures performed using company products under the healthcare payment systems in such markets. A number of countries may require
Xtant to gather additional clinical data before recognizing coverage and reimbursement for its products.

ISO
Certification

Xtant
is ISO and MDSAP Certified.
ISO 13485 is the internationally recognized quality management system standard specifically designed for organizations
involved in the life cycle of medical devices, including design, production, installation, servicing and distribution. MDSAP is a program
that allows third-party auditors to evaluate a medical device manufacturer’s quality management system to satisfy the requirements
of multiple regulatory jurisdictions simultaneously. The program is based on ISO 13485.

Achieving
ISO 13485 and MDSAP certification requires building and maintaining a robust, fully implemented QMS that demonstrates consistent control
over the design, manufacture, and distribution of medical devices.

Human
Capital

Mission,
Quality Policy and Core Values

Our
mission is to “honor the gift of donation, by allowing our patients to live as full, and complete a life as possible.” Through
an effective quality system, we prioritize our commitment to our patients, our donors and donor families. We aim to improve the quality
of life for our patients by designing, manufacturing and distributing human tissues for transplant and medical devices that are safe,
effective and meet the needs of our customers. We honor the gift of donation by enhancing our core competencies and maximizing utilization
of the gift.

Our
mission and quality policy reflect our core values of:

● Respect
for the individual,

● Responsiveness
to our customers, and

● Responsibility
to our stakeholders.

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Employees

As
of December 31, 2025, we had 151 employees, all of whom were full time employees, and of whom 64 were in operations, 28 were in sales
and marketing, 12 in research and development and engineering, 24 in regulatory and quality affairs, and 23 were in administrative functions.
In addition, we utilize various outsourced services to manage normal business cycles.

Turnover

We
continually monitor employee turnover rates as our success depends upon retaining highly trained personnel. The average tenure of our
employees is approximately 5 years. The average tenure of the members of our management team is approximately 7 years.

Employee
Unions, Collective Bargaining Agreements and Work Councils

There
are no unions, collective bargaining agreements or work councils representing our employees, and we believe that our relations with our
employees are good.

Code
of Conduct

Each
employee agrees to follow our Code of Conduct, which is on our corporate website, and covers a wide range of business practices and procedures.
Recognizing that our Code of Conduct may not address every situation our employees may encounter, other resources exist to assist our
employees in their decision-making, including our management team, training and a hotline pursuant to which employees can ask questions
or report issues on an anonymous basis.

Employee
Safety, Health and Wellness

We
are committed to maintaining a safe workplace and promoting the health and wellness of our employees. We have an employee Health &
Safety Committee that is comprised of employees and recommends improvements in furtherance of employee health and safety. We also have
implemented multiple safety programs and regularly perform safety hazard evaluations within our manufacturing facility. We publish a
monthly newsletter which features a “Health & Safety Corner” that reiterates our commitment to safety, highlights actions
we have taken and intend to take to improve employee safety, and provides practical advice to employees to keep them and their families
safe. We monitor conditions that could lead to safety incidents and keep track of injuries through reporting systems in accordance with
the laws in the jurisdictions in which we operate.

With
respect to health and wellness, we provide our employees a variety of flexible and convenient health and wellness programs designed to
support their physical and mental health. These include, among others, medical, dental and vision coverage, health savings and flexible
spending accounts, flexible work schedules, family leave and care resources, and an employee assistance program.

Compensation
and Benefits

We
provide competitive compensation and benefits to attract and retain superior talent and to give our employees the tools to succeed both
on and off the job. In addition to salaries, our compensation and benefits, typically include annual bonuses; commission programs; a
401(k) plan with employer matching opportunities; tuition assistance; and company-sponsored short-term and long-term disability, life
and accidental death and dismemberment insurance, among others.

Our
benefit plans are available to full-time employees who work 30 or more hours per week. Eligible employees may select between four medical
plan options: two preferred provider organization plans and two health savings account compatible high-deductible plans. We provide contributions
to those participating in health savings account compatible plans. Additionally, we offer employees traditional and limited purpose flex
savings account options. Pharmacy benefits, as well as dental, vision, life, accidental death and disability, long and short-term disability,
accident, critical illness, and hospital indemnity insurance plans are available to our employees. We also offer all full-time and part-time
employees wellbeing benefits through LifeBalance and our Employee Assistance Program.

We
pride ourself on offering employment arrangements that include competitive time off policies and flexibility. Our employees are eligible
for paid holidays effective immediately upon hire. Paid time off is available to all corporate employees and accrue based on length of
service, and sick time is available for all commercial-sales employees.

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Employee
Engagement

We
provide all employees with the opportunity to anonymously share their opinions and feedback directly with senior management and human
resources. Submissions are analyzed to enhance the employee experience, promote retention, drive change, and leverage the overall success
of our organization.

We
create opportunities for connection to the Company mission through events, communications, and programs, highlighting the significance
of the work being done, fostering stronger employee relationships, and showing appreciation through employee recognition.

Employee
Development and Training

We
recognize that successful execution of our strategy is dependent on attracting, developing and retaining top talent in all areas of the
business. We have a robust learning management system platform that includes several modules for employee development and training. In
addition, we have a professional development policy intended to promote professional development opportunities and provide support to
employees who want to increase the effectiveness of their performance in their current position. We encourage employees to obtain skills,
knowledge and abilities which may improve their opportunities for career development within our Company and the purpose of our professional
development policy is to provide our employees with the requirements for approval, time off, and reimbursement for employee training
and professional development activities.

Equity
and Inclusion

We
strive to create an equal opportunity and inclusive workplace in which all employees feel respected, valued and empowered to reach their
full potential.

Community
Engagement

Throughout
the year, we encourage our employees to engage in community outreach programs and we sponsor various community organizations in the Belgrade,
Montana area. As a company, we work closely with the Donate Life Community to support our industry and promote the gift of donation.

Corporate
Information

We
began operations in 1998 as a spin out of the Center for Biofilm Engineering at Montana State University, or the CBE, and incorporated
as “Bacterin, Inc.” in the state of Montana in January 2000. Through a series of transactions and corporate events, we eventually
became Bacterin International Holdings, Inc., a Delaware corporation (“Bacterin”). Bacterin’s common stock traded on
the NYSE Amex, now known as the NYSE American, under the ticker symbol “BONE.” On July 31, 2015, we acquired all of the outstanding
capital stock of X-spine Systems, Inc. (“X-spine”) for approximately $60 million in cash, repayment of approximately $13
million of X-spine debt, and approximately 4.24 million shares (0.4 million shares post reverse split) of Xtant common stock. As a result
of this transaction, X-spine became a wholly owned subsidiary of Bacterin International Holdings, Inc. and we immediately then changed
our corporate name to “Xtant Medical Holdings, Inc.” Soon thereafter, we formed a new wholly owned subsidiary, Xtant Medical,
Inc., to facilitate the integration of Bacterin and X-spine. On October 15, 2015, our common stock began trading on the NYSE MKT, now
known as the NYSE American, under the ticker symbol “XTNT.”

Available
Information

We
make available, free of charge and through our Internet website, our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current
Reports on Form 8-K, and any amendments to any such reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange
Act of 1934, as amended, as soon as reasonably practicable after we electronically file such material with, or furnish it to, the Securities
and Exchange Commission (“SEC”). Reports filed with the SEC also may be viewed at www.sec.gov. We include our website
throughout this report for reference only. The information contained on or connected to our website is not incorporated by reference
into this report.

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