Edgar Filing: Xtant Medical Holdings, Inc.

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934

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Xtant Medical HOLDINGS, INC.

(Name of Registrant as Specified In Its Charter)

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664 Cruiser Lane
Belgrade, Montana 59714
(406) 388-0480

Notice of Special Meeting of Stockholders To Be Held February 13, 2018

To Our Stockholders:

You are invited to attend a Special Meeting of Stockholders (the “Special Meeting”) of Xtant Medical Holdings, Inc. (the “Company”) on February 13, 2018, at 10:00 a.m. Eastern Standard Time, at 112 South Tryon Street, 2nd Floor, Charlotte, North Carolina 28284.

On January 11, 2018, we announced that we had entered into a Restructuring and Exchange Agreement (the “Restructuring Agreement”) with ROS Acquisition Offshore LP (“ROS”), OrbiMed Royalty Opportunities II, LP (“OrbiMed”, and together with ROS, the “Investors”), Bruce Fund, Inc. (“Bruce Fund”), Park West Partners International, Limited (“PWPI”), Park West Investors Master Fund, Limited (“PWIMF”), and Telemetry Securities, L.L.C. (“Telemetry”, and together with Bruce Fund, PWPI and PWIMF, the “Consenting Noteholders”), which constitute all of the holders (collectively, the “Noteholders”) of the Company’s outstanding 6.00% convertible senior unsecured notes due 2021 (the “Notes”).

Under the Restructuring Agreement, the Investors converted the Notes issued to the Investors in January 2017 in the aggregate principal amount of $1.627 million, plus accrued and unpaid interest, at the $0.7589 per share conversion rate originally provided thereunder, into approximately 2.3 million shares of common stock of the Company, par value $0.000001 per share (“Common Stock”), on January 17, 2018 (the “Tier 1 Transaction”). After completion of the Tier 1 Transaction and after giving effect to the 1:12 reverse stock split described below, upon approval by our stockholders, the remaining $70.238 million aggregate principal amount of the Notes held by the Noteholders (the “Remaining Notes”), plus accrued and unpaid interest, will be exchanged for newly-issued shares of Common Stock at an exchange rate of 138.8889 shares per $1,000 principal amount of notes, for an exchange price of $7.20 per share (which, on a pre-reverse stock split basis, equates to an exchange price of $0.60 per share) (the “Tier 2 Transaction”). Assuming that the proposals described below are approved by our stockholders and the Tier 2 Transaction is consummated on February 15, 2018, the Remaining Notes would be exchanged for approximately 10.4 million newly-issued shares of Common Stock (which, on a pre-reverse stock split basis, equates to approximately 124.6 million shares of Common Stock) in the Tier 2 Transaction. Furthermore, if the proposals described below are approved by our stockholders, the Investors have also agreed to purchase from the Company in a private placement, simultaneously with the consummation of the Tier 2 Transaction, an aggregate of $6,809,887 of Common Stock at a price per share of $7.20 (which, on a pre-reverse stock split basis, equates to a price per share of $0.60) (the “Private Placement” and, together with the Tier 1 Transaction and the Tier 2 Transaction, the “Transactions”). Assuming that the Tier 2 Transaction and the Private Placement are consummated on February 15, 2018, following the consummation of the Transactions, the Investors would own, in the aggregate, approximately 70.4%, and the Noteholders would own, in the aggregate, approximately 88.5%, of the outstanding Common Stock. Consequently, existing non-Noteholder stockholders of the Company, who currently own approximately 95.7% of the outstanding Common Stock, would own approximately 11.3% of the outstanding Common Stock following the consummation of the Transactions. Following the consummation of the Tier 2 Transaction and the Private Placement, we intend to launch a rights offering to allow stockholders of the Company to purchase Common Stock at the same price per share as the Tier 2 Transaction and the Private Placement.

The primary purposes of our entry into the Restructuring Agreement are to reform our capital structure, meet our liquidity needs, to reposition the Company for long-term growth, and to regain compliance with NYSE American LLC (formerly the NYSE MKT) (“NYSE American”) listing standards. Stockholder approval is required under Sections 713(a) and 713(b) of the NYSE American Company Guide to complete the Transactions, which (i) will require the issuance in the Tier 2 Transaction and Private Placement of Common Stock in excess of 20% of the total number of shares of our Common Stock outstanding immediately before the Tier 2 Transaction and (ii) will result in a change of control of the Company. In addition, stockholder approval is required in order to effectuate a reverse stock split and amend our certificate of incorporation to allow a sufficient number of authorized shares to complete the Tier 2 Transaction and the Private Placement. These approvals are required for us to realize the full potential of our transaction with the Noteholders. If we fail to obtain these approvals, the Transactions will not be completed and we will not receive the benefits described above and in the enclosed Proxy Statement. Accordingly, we urge you to vote your shares for the approval of all proposals described in this document.

Specifically, we are asking you to vote on the following proposals (the “Proposals”) at the Special Meeting:

To approve the issuance of shares of Common Stock for purposes of Sections 713(a) and 713(b) of the NYSE American Company Guide;

To approve an amendment to our certificate of incorporation to effect a reverse stock split of the Common Stock at a ratio of 1:12, to change the number of authorized shares of Common Stock and preferred stock available for issuance and to make such other changes as are described in the enclosed Proxy Statement, as requested by the Investors pursuant to the Restructuring Agreement;

To elect six (6) directors named in the accompanying Proxy Statement effective on the closing of the Transactions to serve on the Company’s Board of Directors until their respective successors have been duly elected and qualified;

To approve an adjournment of the meeting, if necessary or appropriate, to solicit additional proxies in favor of the foregoing Proposals; and

To transact such other business as may properly be brought before the Special Meeting and any adjournment or postponement thereof.

For additional information concerning the Transactions with the Noteholders, please see the sections of the Proxy Statement titled Background of the Transactions beginning on page 7 and Description of the Transactions beginning on page 12.

Stockholders of record at the close of business on January 18, 2018, shall be entitled to notice of and to vote at the Special Meeting and any adjournments or postponements thereof.

Your vote is important. Please submit a proxy as soon as possible so that your shares can be voted at the Special Meeting. You may submit your proxy by mail or via the Internet, and you may revoke your proxy and vote in person if you decide to attend the Special Meeting.

Important Notice Regarding the Availability of Proxy Materials for the Special Meeting to Be Held on February 13, 2018: The Proxy Statement is available at www.xtantmedical.com (click “Investors” and “SEC Filings”).

Thank you for your continued support of Xtant Medical Holdings.

	By order of the Board of Directors

	/s/ Carl D. O’Connell
	Carl D. O’Connell
	Chief Executive Officer

Belgrade, Montana

January 22, 2018

Information about Attending the Special Meeting

Only stockholders of record on the record date of January 18, 2018, are entitled to notice of, and to attend or vote at, the Special Meeting. If you plan to attend the meeting in person, please bring the following:

Photo identification.

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.

Acceptable Proof of Ownership is either (a) a letter from your broker confirming that you beneficially owned shares of the Company’s Common Stock on the record date or (b) an account statement showing that you beneficially owned shares of the Company’s 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 Special Meeting unless you have obtained a “legal proxy” or other evidence from your Broker giving you the right to vote your shares at the Special Meeting.

XTANT MEDICAL HOLDINGS, INC.
664 Cruiser Lane
Belgrade, Montana 59714
(406) 388-0480

PROXY STATEMENT FOR THE SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON FEBRUARY 13, 2018

QUESTIONS AND ANSWERS ABOUT THE PROXY MATERIALS

AND THE SPECIAL 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 of the Company (the “Board”) for a special meeting of stockholders (the “Special Meeting”), which will take place on February 13, 2018. As a stockholder of record, you are invited to attend the Special 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) are being mailed on or about January 26, 2018 to all stockholders entitled to vote at the Special Meeting.

Q:	When and where will the Special Meeting be held?

A:	The Special Meeting will be held on February 13, 2018 at 10:00 a.m. Eastern Standard Time at 112 South Tryon Street, 2nd Floor, Charlotte, North Carolina 28284.

Q:	What information is contained in this Proxy Statement?

A:	The information in this Proxy Statement relates to the Proposals to be voted on at the Special Meeting, the voting process, and other information that the Securities and Exchange Commission (the “SEC”) requires us to provide to our stockholders in connection with the Special Meeting of our stockholders.

Q:	What items of business will be voted on at the Special Meeting?

A:	We are asking our stockholders of record to vote on the following Proposals, all of which are described in detail in this Proxy Statement:

	· A Proposal to approve the issuance of shares of Common Stock for purposes of Sections 713(a) and 713(b) of the NYSE American Company Guide · A Proposal to approve an amendment to our certificate of incorporation to effect a reverse stock split of the Common Stock at a ratio of 1:12, to change the number of authorized shares of Common Stock and preferred stock available for issuance and to make such other changes as are described below, as requested by the Investors pursuant to the Restructuring Agreement. · A Proposal to elect six (6) directors effective on the closing of the Transactions to serve on the Board until their respective successors have been duly elected and qualified. You can find more information about the Transactions with the Noteholders in the sections of this Proxy Statement titled Background of the Transactions beginning on page 7 and Description of the Transactions beginning on page 12. In total, we are asking you to vote on three Proposals, all of which have been unanimously approved by our Board and our Special Strategic Committee to the Board (the “Strategic Committee”). We may also request that you approve a fourth Proposal to adjourn the meeting, if necessary or appropriate, to solicit additional proxies in favor of the other Proposals.

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, a nominee 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:	The affirmative vote of a majority of the shares cast in person or represented by proxy at the Special Meeting and entitled to vote on the matter is required to approve the issuance of shares of Common Stock and to approve an amendment to our certificate of incorporation (which includes the reverse stock split).

Q:	How does the Board recommend that I vote?

A:	Our Board recommends that you vote your shares “FOR” the approval of the issuance of shares of Common Stock for purposes of Sections 713(a) and 713(b) of the NYSE American Company Guide, “FOR” the amendment to our certificate of incorporation (which includes the reverse stock split), and “FOR” the election of the members to the Board. For further details, please see the section of this Proxy Statement titled Recommendation of the Board of Directors of the Company beginning on page 18.

Q:	What shares may I vote?

A:	Each share of our Common Stock issued and outstanding as of the close of business on January 18, 2018 (the “Record Date”) is entitled to one vote on each of the matters to be voted upon at the Special 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 (collectively, a “Broker”). We had 20,454,536 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 which are registered in his or her own name. A beneficial owner owns shares which are held in street name through a third party, such as a Broker. As summarized below, there are some distinctions between stockholders of record and beneficial owners. Stockholder of Record You are the stockholder of record of any of your shares registered directly in your name with our transfer agent, Corporate Stock Transfer. 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 designee, Carl D. O’Connell, Chief Executive Officer, or to any other person you wish to designate, or to vote in person at the Special Meeting. We have enclosed a proxy card for you to grant your voting proxy to Mr. O’Connell.

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 Special Meeting. However, you may not vote your shares in person at the Special Meeting unless you obtain a “legal proxy” or other evidence from your Broker giving you the right to vote the shares at the Special Meeting.

Q:	Who is entitled to attend the Special Meeting and what are the admission procedures?

A:	You are entitled to attend the Special 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 Special Meeting. A list of stockholders eligible to vote at the Special Meeting will be available for inspection at the Special 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 Common Stock as of the Record Date or the voting instruction card provided by your Broker. The Special Meeting will begin promptly at 10:00 a.m., Eastern Standard 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 Special Meeting?

A:	If you were a stockholder of record on the Record Date, you may vote your shares in person at the Special 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 Special 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 Special 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 Special 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 Special Meeting.

Q:	How can I vote my shares without attending the Special 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 Special 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 Special Meeting.

Q:	Who will count the votes?

A:	Votes at the Special 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 Special 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” the approval of the issuance of shares of Common Stock for purposes of Sections 713(a) and 713(b) of the NYSE American Company Guide, “FOR” the amendment to our certificate of incorporation (which includes the reverse stock split) and “FOR” the approval of the nominees to the Board. If you are a beneficial owner of shares in street name and do not provide the Broker that holds your shares with specific voting instructions, then your shares will be considered “broker non-votes” and will have no effect on that proposal. Therefore, if you own shares through a Broker, you must instruct your broker how to vote in order for your vote to be counted.

Q:	How are broker non-votes and abstentions treated?

A:	Broker non-votes and abstentions with respect to a proposal are counted as present or represented by proxy for purposes of establishing a quorum.

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 Special Meeting and voting in person. Only your latest dated proxy card received at or prior to the Special Meeting will be counted. However, your attendance at the Special 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 Special 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 Special Meeting.

Q:	How many votes do you need to hold the Special Meeting?

A:	The presence, in person or by proxy, of the holders of one-third of the shares of Common Stock outstanding and entitled to vote on the Record Date is necessary to hold the Special Meeting and conduct business. This is called a quorum. Abstentions and broker non-votes will be considered as present at the Special Meeting for purposes of establishing a quorum.

Q:	Who will bear the cost of soliciting votes for the Special 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 Special Meeting?

A:	We intend to announce preliminary voting results at the Special Meeting and will disclose results in a Current Report on Form 8-K that will be filed not more than four business days following the Special Meeting.

CAUTIONARY STATEMENTS REGARDING FORWARD-LOOKING STATEMENTS

Certain statements contained in or incorporated by reference into this Proxy Statement, or filings with the SEC and our public releases that are not purely historical are forward-looking statements within the meaning of applicable securities laws. Our forward-looking statements include, but are not limited to, statements regarding our “expectations,” “hopes,” “beliefs,” “intentions,” or “strategies” regarding the future. In addition, any statements that refer to projections, forecasts, or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements. The words “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “might,” “plan,” “possible,” “potential,” “predict,” “project,” “should” and “would,” as well as similar expressions, may identify forward-looking statements, but the absence of these words does not mean that a statement is not forward looking. Forward-looking statements contained in or incorporated by reference into this Proxy Statement may include, for example, statements about:

our ability to obtain stockholder approval of the Proposals;

our ability to consummate the Transactions;

the consequences of obtaining and not obtaining stockholder approval of the Proposals and the consummation and non-consummation of the Transactions;

if the Transactions are consummated, the effects of increased ownership by the Investors;

the effects of the proposed amendment to our certificate of incorporation on, among other things, our NYSE American listing and the price of our Common Stock;

the composition and corporate governance policies of our Board and its committees following the consummation of the Transactions;

our ability to achieve the Company Forecasts;

our ability to comply with the covenants in our senior credit facility and to make all upcoming and deferred interest payments;

our ability to maintain sufficient liquidity to fund our operations;

our ability to remain listed on the NYSE American;

our ability to obtain financing on reasonable terms;

our ability to increase revenue;

our ability to continue as a going concern;

our ability to maintain sufficient liquidity to fund our operations;

the ability of our sales force to achieve expected results;

our ability to remain competitive;

government regulations;

our ability to innovate and develop new products;

our ability to obtain donor cadavers for our products;

our ability to engage and retain qualified technical personnel and members of our management team;

the availability of our facilities;

government and third-party coverage and reimbursement for our products;

our ability to obtain regulatory approvals;

our ability to successfully integrate recent and future business combinations or acquisitions;

our ability to use our net operating loss carry-forwards (including any impairment thereof as a result of the Transactions) to offset future taxable income;

our ability to deduct all or a portion of the interest payments on the notes for U.S. federal income tax purposes;

our ability to service our debt;

product liability claims and other litigation to which we may be subjected;

product recalls and defects;

timing and results of clinical studies;

our ability to obtain and protect our intellectual property and proprietary rights;

infringement and ownership of intellectual property;

our ability to remain accredited with the American Association of Tissue Banks.

influence by our management;

our ability to pay dividends; and

our ability to issue preferred stock.

Any of these factors and other factors in this Proxy Statement or any documents incorporated by reference could cause our actual results to differ materially from the results implied by these or any other forward-looking statements made by us. Although we believe our plans, intentions and expectations reflected in the forward-looking statements we make are reasonable, we can give no assurance that we will achieve these plans, intentions or expectations. Our assumptions about future events may prove to be inaccurate. We caution you that the forward-looking statements contained in this Proxy Statement are not guarantees of future performance, and we cannot assure you that those statements will be realized or the forward-looking events and circumstances will occur. All forward-looking statements speak only as of the date of this Proxy Statement.

We do not intend to publicly update or revise any forward-looking statements as a result of new information, future events or otherwise, except as required by law. These cautionary statements qualify all forward-looking statements attributable to us or persons acting on our behalf.

BACKGROUND OF THE TRANSACTIONS

On January 11, 2018, we announced that we entered into a Restructuring and Exchange Agreement (the “Restructuring Agreement”) with ROS Acquisition Offshore LP (“ROS”), OrbiMed Royalty Opportunities II, LP (“OrbiMed”, and together with ROS, the “Investors”), Bruce Fund, Inc. (“Bruce Fund”), Park West Partners International, Limited (“PWPI”), Park West Investors Master Fund, Limited (“PWIMF”), and Telemetry Securities, L.L.C. (“Telemetry”, and together with Bruce Fund, PWPI and PWIMF, the “Consenting Noteholders”), which constitute all of the holders (collectively, the “Noteholders”) of the Company’s outstanding convertible notes (the “Notes”).

The material terms of the Transactions are described in this section of this Proxy Statement under the subsection titled Description of the Transactions beginning on page 12.

To complete the Transactions, we have agreed to seek stockholder approval of the following matters:

Approval of the issuance of shares of our Common Stock in excess of 20% of the total number of shares of our Common Stock outstanding immediately before the closing of the Tier 2 Transaction and the Private Placement, and which will result in a change of control of the Company, as required by Sections 713(a) and 713(b) of the NYSE American Company Manual, respectively;

Approval of an amendment to our certificate of incorporation to effect a reverse stock split of the Common Stock at a ratio of 1:12, to change the number of authorized shares of Common Stock and preferred stock available for issuance and to make such other changes as are described below, as requested by the Investors pursuant to the Restructuring Agreement; and

Election of six (6) directors to serve on the Company’s Board of Directors until their respective successors have been duly elected and qualified;

Detailed information about these Proposals can be found in this section of this Proxy Statement beginning on page 38.

The Board of Directors of the Company (the “Board”) and the Special Strategic Committee to the Board (the “Strategic Committee”) unanimously approved the Transactions after taking into account various factors, including the history of our strategic efforts to realize value for our business operations, our ability to generate cash flow, our current debt obligations, current market conditions, our status as a company listed on the NYSE American, our substantial doubt about our ability to continue as a going concern and other alternatives available to us, as described below.

We have incurred losses and have had cash flow issues since our inception. For the past few years, we have sought to pursue strategic alternatives regarding our lack of sufficient cash flow. In 2015, we began searching for possible options for generating additional cash flow. In the course of doing this, we have reviewed various proposals and engaged in discussions to determine whether any such transaction could be achieved on terms that we believed would be beneficial to our stockholders.

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 of Common Stock.

Concurrent with the acquisition of X-spine, on July 31, 2015, we also completed an offering of $65.0 million aggregate principal amount of the Notes, pursuant to an Indenture, dated as of July 31, 2015, between the Company and Wilmington Trust, National Association (the “Indenture”). OrbiMed and ROS purchased $52.0 million aggregate principal amount of the Notes in the offering. On August 10, 2015, OrbiMed and ROS exercised their option with respect to an additional $3 million aggregate principal amount of the Notes.

Also on July 31, 2015, the Company refinanced approximately $24 million in existing term loans and borrowed an additional $18 million pursuant to an Amended and Restated Credit Agreement with ROS and OrbiMed (the “Credit Facility”).

Despite the acquisition of X-spine, we still continued to incur losses and have cash flow issues, which caused the Company to seek additional options for capital generation and alternative methods of payment to pay interest owed under the Notes and the Credit Facility. On April 14, 2016, due to our inability to pay cash interest due on the Notes under the Indenture and the Credit Facility, we issued $2,238,166 aggregate principal amount of convertible senior unsecured notes (the “2016 Notes”) in a private placement to OrbiMed and ROS. The proceeds were utilized to pay interest due under both the Notes under the Indenture and the Credit Facility on April 15, 2016.

Until April 2016, when we began our discussions with representatives of OrbiMed and ROS, we were unable to negotiate financing alternatives on terms satisfactory to us and in the best interests of our stockholders. We believed that seeking bankruptcy was not in the best interests of our stockholders as long as other alternatives could be pursued. In April 2016, representatives of OrbiMed and ROS approached us initially to discuss options for restructuring of OrbiMed’s and ROS’ Notes under the Indenture. Our management members met with those representatives to discuss a possible transaction and conducted several telephonic and in-person meetings to discuss potential options, which resulted in OrbiMed and ROS agreeing to allow the Company to enter into a senior secured revolving credit facility with another lender.

On May 25, 2016, we entered into a Loan and Security Agreement (the “LSA”) with Silicon Valley Bank, a California corporation (the “SVB”), pursuant to which SVB agreed to provide us with a revolving line of credit in the aggregate principal amount of $6,000,000. On August 12, 2016, we entered into a First Loan Modification Agreement (the “Modification Agreement”) with SVB, which increased the aggregate principal amount of the revolving line of credit to $11,000,000.

In July 2016, the Company began discussing with Maxim Group LLC (“Maxim”) the possibility of raising capital through a rights offering (the “Maxim Rights Offering”).

On August 15, 2016, we received a letter from the NYSE American notifying us that we were not in compliance with the NYSE American’s continued listing standards. Specifically, we were not in compliance with Section 1003(a)(i) of the Company Guide with stockholders’ equity of less than $2,000,000 and net losses in two of our three most recent fiscal years, Section 1003(a)(ii) with stockholders’ equity of less than $4,000,000 and net losses in three of our four most recent fiscal years and Section 1003(a)(iii) of the Company Guide with stockholders’ equity of less than $6,000,000 and net losses in five of our most recent fiscal years. According to Section 1003(a) of the Company Guide, the NYSE American will normally consider providing an exemption for entities not in compliance with Sections 1003(a)(i) through (a)(iii) of the Company Guide if the entity is in compliance with the following standards: (1) total value of market capitalization of at least $50,000,000; or total assets and revenue of $50,000,000 each in its last fiscal year, or in two of its last three fiscal years; and (2) the issuer has at least 1,100,000 shares publicly held, a market value of publicly held shares of at least $15,000,000 and 400 round lot shareholders. Previously, we were exempt from the minimum stockholders equity requirement because (i) at least 1,100,000 shares are publicly held, (ii) a market value of publicly held shares was at least $15,000,000, (iii) there were 400 round lot shareholders, and (iv) the market capitalization of its public float was more than the required $50,000,000 or total assets and revenue of $50,000,000 each in our last fiscal year, or in two of our last three fiscal years. However, this exemption was no longer available due to the decline of our Common Stock price.

On October 31, 2016, the Company entered into a dealer-manager agreement (the “Dealer-Manager Agreement”) with Maxim, to engage Maxim as dealer-manager for the Maxim Rights Offering. On October 31, 2016, the Company distributed to holders of its Common Stock and to holders of its convertible notes, at no charge, non-transferable subscription rights to purchase units. Each unit consisted of one share of Common Stock and one tradeable warrant representing the right to purchase one share of Common Stock (“Tradeable Warrants”).

In the Maxim Rights Offering, holders received two subscription rights for each share of Common Stock, or each share of Common Stock underlying our convertible notes owned on the record date, October 21, 2016. Subscribers whose subscriptions otherwise would have resulted in their beneficial ownership of more than 4.99% of Common Stock could elect to receive, in lieu of shares of Common Stock in excess of that threshold, pre-funded warrants to purchase the same number of shares of Common Stock for $0.01 (“Pre-Funded Warrants”), and the subscription price per unit consisting of a Pre-Funded Warrant in lieu of a share of Common Stock was reduced by the $0.01 exercise price, however no Pre-Funded Warrants were sold in the Maxim Rights Offering.

On November 1, 2016, we were notified by the NYSE American that NYSE Regulation had accepted our plan to regain compliance with the NYSE American’s continued listing standards of the NYSE American Company Guide by February 15, 2018, subject to periodic review by the NYSE American for compliance with the initiatives set forth in the plan. We were notified by the NYSE American that if we were not in compliance with the continued listing standards by February 15, 2018, or if we do not make progress consistent with the plan during the plan period, the NYSE Regulation staff would initiate delisting proceedings.

The Maxim Rights Offering closed on November 14, 2016. The units were priced at $0.75 per unit with gross proceeds from the Maxim Rights Offering of approximately $3.8 million and the net proceeds from the Maxim Rights Offering of approximately $2.5 million after deducting fees and expenses payable to Maxim, and after deducting other expenses payable by us and excluding any proceeds received upon exercise of any Tradeable Warrants issued in the offering. The Tradeable Warrants associated with the equity raised were subject to an analysis that resulted in the Tradeable Warrants being recorded as equity with the Common Stock in stockholder’s equity.

After failing to raise the amount of capital we hoped to raise in the Maxim Rights Offering, in order to explore potential strategic alternatives, on December 13, 2016, we formed the Strategic Committee. The purpose of the Strategic Committee has been to evaluate the Company’s performance of its obligations to its institutional lenders, holders of its convertible debt securities and other creditors, to review potential reorganization and/or restructuring or similar transactions with such parties, to review, evaluate, and negotiate mergers, acquisitions, investments or dispositions of material assets or a material portion of any business and to report its conclusions and recommendations to the Board, as appropriate. The Strategic Committee consists of Messrs. Deedrick, Mazzocchi, Timko and Buckman, each of whom is an independent director. Mr. Deedrick serves as the Chairman of the Strategic Committee.

Effective January 13, 2017, due to our inability to pay cash interest due on the Notes under the Indenture and the 2016 Notes, we issued an additional $1,627,145 aggregate principal amount of convertible senior unsecured notes in a private placement to OrbiMed and ROS (the “2017 Notes” and, together with the 2016 Notes, the “Additional Notes”). The proceeds were utilized to pay interest due on both the Notes under the Indenture and the 2016 Notes on January 15, 2017.

On February 13, 2017, the Company engaged Alvarez & Marsal Securities, LLC (“A&M”) to act as its financial advisor with respect to evaluating and pursuing a potential restructuring, financing or sale of the Company.

In March 2017, in connection with their audit for the year ended December 31, 2016, EKS&H LLLP, the Company’s independent registered public accounting firm, concluded that, due to the Company’s recurring losses from operations and the fact that the Company has operational and financial uncertainties that raise substantial doubt about its ability to continue as a going concern, it was necessary for EKS&H to include an emphasis of matter paragraph regarding going concern in their audit opinion.

In May 2017, we and representatives of OrbiMed and ROS began discussing various strategic transactions, including the structure of a potential conversion or exchange of the Notes.

On May 8, 2017, the Company entered into an agreement (the “CRO Agreement”) with Aurora Management Partners Inc. (“Aurora”). Pursuant to the CRO Agreement, David Baker serves as Chief Restructuring Officer of the Company (the “CRO”). The CRO and Aurora personnel, referred to as Deputy Restructuring Officers, assisting on this engagement report to the Strategic Committee and provide periodic updates on progress made in fulfilling the scope of services.

On May 12, 2017, the Company entered into an amendment to the Credit Facility with OrbiMed and ROS pursuant to which it borrowed an additional $15 million from OrbiMed and ROS and used such funds to pay off all obligations under the LSA with SVB and for working capital purposes. Throughout 2017, due to its inability to pay cash interest due thereunder, the Company has entered into various amendments and waivers to the Indenture, the Credit Facility and the Notes to defer interest owed under such obligations and to waive defaults under covenants in such documents.

On May 26, 2017, our Board engaged the law firm of Stoel Rives LLP (“Stoel Rives”) as independent counsel for its services in representing the Board and the Strategic Committee. On May 30, 2017, OrbiMed and ROS filed a Schedule 13D disclosing that they were engaged in discussions with the Company regarding possible conversion or exchange of some or all of the Notes into Common Stock.

Throughout the months of June and July 2017, we and representatives of OrbiMed and ROS continued discussing the potential structure and terms of possible transactions, including the potential exchange rate for the Notes as it related to the then-current trading price of the Common Stock. The parties considered converting the 2017 Notes at the $0.7589 per share conversion rate provided thereunder in the Tier 1 Transaction and exchanging the remaining Notes for Common Stock in the Tier 2 Transaction at a rate of $0.60 per share (which, at the time, did not take into account a potential reverse stock split). This exchange price was approximately 13% higher than $0.52 per share, which was the closing price on May 30, 2017, the date on which OrbiMed and ROS first disclosed their discussions with the Company regarding such potential transactions. Key factors leading to our decision to pursue the Transactions were the ability of the Note conversions and exchanges and the subsequent Private Placement discussed in this Proxy Statement to reform our capital structure, free up cash flow and provide financial support for future operations.

On July 28, 2017, Duff & Phelps, LLC (“Duff & Phelps”) was retained as an independent financial advisor to the Board and the Strategic Committee to opine as to whether the conversion price for the Notes, in connection with the Tier 2 Transaction, was fair to the public stockholders of the Company, from a financial point of view.

In the following months, the parties and their legal counsel prepared and negotiated the terms of the definitive documentation for the Transactions. During this period, the Strategic Committee considered other potential strategic alternatives, but did not believe any alternative transactions were viable. The Strategic Committee, in cooperation with the Company’s professional advisors, undertook a market check to ensure that the Transactions described in this Proxy Statement were in the best interests of the Company and its stockholders. The Company and its advisors engaged a number of strategically selected companies to assess their interest in consummating a transaction with the Company that would have a value in excess of the restructuring transaction contemplated in the Restructuring Agreement. The parties were selected based on a combination of factors including experience in the industry and ability to consummate a transaction based on timeline and financial capacity. Of the parties contacted, none expressed interest in pursuing further discussions.

During this period, we also sought guidance from the NYSE American regarding several aspects of the Transactions to gauge whether the completion of such transactions would bring the Company back in compliance with NYSE American guidelines. The NYSE American informed us that completion of such transactions would bring us back in compliance with NYSE American continued listing standards but, unless we were in compliance with such standards by February 15, 2018, we would be delisted from NYSE American. In light thereof, we continued negotiations with OrbiMed and ROS on the Transactions, including discussions regarding a potential reverse stock split in order to increase the trading price of our Common Stock on the NYSE American, with the goal of consummating the Tier 2 Transaction by February 15, 2018 in order to be in compliance with NYSE American continued listing standards and remaining listed on NYSE American.

On December 4, 2017, the Company provided A&M with written notice that it had elected to terminate its engagement with A&M, effective immediately.

On December 26, 2017, the Board held a meeting to discuss the preliminary terms and conditions of the Restructuring Agreement. Representatives of Ballard Spahr LLP, counsel to the Company (“Ballard Spahr”) made a presentation to the Board, which included all of the members of the Strategic Committee, regarding the preliminary terms and conditions of the Restructuring Agreement and Stoel Rives participated in the call in its capacity as counsel to the Board. Representatives from Duff & Phelps reviewed with the Board its fairness analysis and responded to questions from the Board.

On January 10, 2018, the Board and the Strategic Committee held a meeting to discuss the final terms and conditions of the Restructuring Agreement. Representatives of Ballard Spahr discussed with the Board and the Strategic Committee the proposed final terms and conditions of the Restructuring Agreement and Stoel Rives participated in the call in its capacity as counsel to the Board. Representatives from Duff & Phelps delivered its written opinion to the Strategic Committee and the Board that, as of that date, and based upon and subject to the assumptions, limitations and qualifications contained in its opinion, the conversion of the Notes into Common Stock at the Conversion Price (as defined below) in connection with the Tier 2 Transaction is fair, from a financial point of view, to the public stockholders of the Company. See the section of this Proxy Statement titled Opinion of the Company’s Financial Advisor beginning on page 20. Thereafter, our Board and the Strategic Committee unanimously approved the Restructuring Agreement and the Transactions, and on January 11, 2018, the parties signed the Restructuring Agreement. The terms of the key transaction documents are described in detail in the section of this Proxy Statement titled Description of the Transactions beginning on page 12.

DESCRIPTION OF THE TRANSACTIONS

Restructuring Agreement

Under the Restructuring Agreement, the Noteholders agreed to the restructuring of the Company and the exchange and conversion of their Notes in a series of transactions. Below is a summary of the material terms of the Restructuring Agreement. The discussion of the Transactions and the Restructuring Agreement is qualified in its entirety by reference to the Restructuring Agreement, which is attached to this proxy statement as Annex A. This summary does not purport to be complete and may not contain all of the information about the Restructuring Agreement that is important to you.

Actions Required to Be Completed Prior to or Simultaneously with the Execution of the Restructuring Agreement.

In addition to other standard obligations and approvals that the Company needed to complete under the terms of the Restructuring Agreement, the following actions were required to be completed before or at the same time as the parties executed the Restructuring Agreement:

Fairness Opinion

Prior to the execution of the Restructuring Agreement, the Board received the fairness opinion of Duff & Phelps, which stated that as of January 10, 2018, and subject to the assumptions, limitations and qualifications contained therein, the exchange rate of 138.8889 shares per $1,000 principal amount of notes, for an exchange price of $7.20 is fair to the public stockholders of the Company, from a financial point of view, as an exchange rate for the Notes. For more details, please see the section in this Proxy Statement titled Opinion of the Company’s Financial Advisor on page 20.

Support Agreement

On January 11, 2018, the Noteholders, the Company’s executive officers and directors and certain of the Company’s stockholders (collectively the “Support Equityholders”), who, as of such date, held approximately 24.8% of the outstanding Common Stock, entered into a support agreement (the “Support Agreement”) simultaneously with the execution of the Restructuring Agreement, which is attached to this Proxy Statement as Annex B. Under the Support Agreement, the Support Equityholders agreed to vote their shares of Common Stock in favor of the approval of: (i) the amendment to the Company’s certificate of incorporation and issuance of Common Stock pursuant to the exchange of the Notes under the Tier 2 Transaction, (ii) any proposal to adjourn or postpone the meeting to a later date, if there are not sufficient votes for the approval of the such proposals on the date on which such meeting is held, and (iii) any other proposal included in this Proxy Statement that relates to the consummation of the transactions contemplated by the Restructuring Agreement that the Board recommended the stockholders approve. The Support Equityholders also appointed OrbiMed and ROS as attorney-in-fact and proxy to vote all applicable shares of the Support Equityholders consistent with the provisions of the Support Agreement. The Support Equityholders made standard representations and warranties related to their ownership of Common Stock.

Actions Required to Be Completed Prior to the Closing of the Restructuring Agreement.

In addition to other standard obligations, approvals and securities filings that the Company needs to complete under the terms of the Restructuring Agreement, the following actions are required to be completed between the signing and the closing of the Transactions:

2017 Notes Amendment

As a condition to the closing of the Transactions, on or prior to the Record Date, the Company, ROS and OrbiMed are required to enter into an amendment to the 2017 Notes (the “2017 Notes Amendment”), which will amend the 2017 Notes by removing the limitations on stock ownership that prevent any holder or any of its affiliates from effecting a conversion of the 2017 Notes if such conversion would result in the holder or any of its affiliates beneficially owning in excess of 9.99% of the then outstanding shares of Common Stock and providing that the Conversion Consideration (as defined therein) shall be payable upon all outstanding principal amount plus accrued and unpaid interest of the 2017 Notes. The 2017 Notes Amendment is required to enable OrbiMed and ROS to convert the 2017 Notes pursuant to the Tier 1 Transaction.

Success Bonuses

The Restructuring Agreement contemplates that certain success bonuses be agreed to following the entry into the Restructuring Agreement, which are as follows: (i) up to four senior members of management will each be paid a Transaction success bonus of $35,000 in cash and (ii) Carl O’Connell, the Chief Executive Officer of the Company, will be paid a Transaction success bonus of $70,000 in cash, in each case, with half paid within 45 days following the closing of the Transactions and half paid within 90 days following the closing of the Transactions, provided they are employed by the Company through the time of the payment of the bonus. Additional retention bonuses for these members of management may be negotiated within 90 days following the closing of the Transactions.

Actions Required to Be Completed On the Closing of the Restructuring Agreement.

In addition to other standard obligations, approvals and securities filings that the Company will need to complete under the terms of the Restructuring Agreement, the following actions are required to be completed or delivered by or at the final closing of the Transactions:

Stockholder Approval

We are required to hold the Special Meeting to which this Proxy Statement relates in order to obtain stockholder approval for all applicable Proposals related to the Transactions, including Proposals 1, 2 and 3.

2016 Notes Amendment

As a condition to the closing of the Transactions, the Company, ROS and OrbiMed are required to enter into an amendment to the 2016 Notes (the “2016 Notes Amendment”), which will amend the 2016 Notes by clarifying that the restriction that prevents any holder or any of its affiliates from effecting a conversion thereof if such conversion would result in the holder or any of its affiliates beneficially owning in excess of 9.99% of the then outstanding shares of Common Stock shall not be applicable to the Tier 2 Transaction. The 2016 Notes Amendment is required to enable OrbiMed and ROS to exchange the 2016 Notes pursuant to the Tier 2 Transaction.

Indenture Amendment

As a condition to the closing of the Transactions, the Company and Wilmington Trust, National Association (the “Trustee”), are required to enter into an amendment to the Indenture (the “Indenture Amendment”), which will amend the Indenture by clarifying that the restriction that prevents any holder or any of its affiliates from effecting a conversion thereof if such conversion would result in the holder or any of its affiliates beneficially owning in excess of 9.99% of the then outstanding shares of Common Stock shall not be applicable to the Tier 2 Transaction. The Indenture Amendment is required to enable the Noteholders to exchange their Notes pursuant to the Tier 2 Transaction.

Charter Amendment

Pursuant to the terms of the amendment to the Company’s Certificate of Incorporation and following stockholder approval, the Company will effect a reverse stock split at a ratio of 1-for-12, change the number of authorized shares of Common Stock and preferred stock available for issuance and make such other changes as are described below. See Proposal 2 of this Proxy Statement for further description of such amendment to the Certificate of Incorporation.

Registration Rights Agreement

As a condition to the closing of the Transactions, we are required to enter into a Registration Rights Agreement (the “Registration Rights Agreement”) with the Noteholders. Upon demand by the Noteholders, the proposed Registration Rights Agreement requires us to, among other things, file with the SEC a shelf registration statement (which, initially, will be on Form S-1 and, as soon as we are eligible, will be on Form S-3) covering the resale, from time to time, of the Common Stock issuable upon conversion or exchange of the Notes or issued in the Private Placement within 90 days of such demand and use our best efforts to cause the shelf registration statement to become effective under the Securities Act no later than the 180th day after such demand.

Investor Rights Agreement

As a condition to the closing of the Transactions, we are required to enter into an Investor Rights Agreement (the “Investor Rights Agreement”) with OrbiMed, ROS, PWPI and PWIMF. Under the proposed Investor Rights Agreement, ROS and OrbiMed are permitted to nominate a majority of the directors and designate the chairperson of the Board at subsequent annual meetings, as long as they maintain an ownership threshold in the Company of at least 40% of the then outstanding Common Stock (the “Ownership Threshold”). If ROS and OrbiMed are unable to maintain the Ownership Threshold, the Investor Rights Agreement contemplates a reduction of nomination rights commensurate with the Company ownership interests.

For so long as the Ownership Threshold is met, the Company must obtain the approval of ROS and OrbiMed 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 assets or businesses of the Company or its 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 the Company’s annual budget; (vii) hire or terminate the Company’s chief executive officer; (viii) appoint or remove the chairperson of the Board; and (ix) 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. As long as the Ownership Threshold is met, the Company may not increase the size of the Board beyond seven directors without the approval of a majority of the directors nominated by ROS and OrbiMed.

The Investor Rights Agreement grants OrbiMed, ROS, PWPI and PWIMF the right to purchase from the Company a pro rata amount of any new securities that the Company 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 written notice of the Company, ROS or OrbiMed if ROS and OrbiMed’s ownership percentage of the then outstanding Common Stock is less than 10%, or (c) upon written notice of ROS and OrbiMed. PWPI and PWIMF’s right to purchase from the Company a pro rata amount of any new securities will also terminate at such time as their aggregate ownership percentage of the then outstanding Common Stock is less than 8.5%.

Credit Agreement Amendment

As a condition to the closing of the Transactions, we, ROS and OrbiMed are required to enter into an amendment to the Credit Facility which will amend the Credit Facility as follows:

(a)

Through December 31, 2018, the Company will have the option at its sole discretion (i) to pay “payment-in-kind” (“PIK”) interest at LIBOR plus 12% or (ii) pay cash interest at LIBOR plus 10%.

(b)

Beginning January 1, 2019 through June 30, 2019, the Company will have the option at its sole discretion to either (i) pay PIK interest at LIBOR plus 15% or (ii) pay cash interest at LIBOR plus 10%.

(c)

Beginning July 1, 2019 through the maturity date of the Credit Facility, the Company will pay cash interest at LIBOR plus 10%.

(d)

All prepayment or repayment fees under the Credit Facility will be reduced from 9% to 1%.

(e)

The following financial covenants will be revised as follows:

(i)

The Company will be required to maintain a minimum Adjusted EBITDA as follows:

Testing Period		Minimum Adjusted EBITDA
Three quarter period ended September 30, 2018		$2.2 million
Four quarter period ended December 31, 2018		$4.0 million
Four quarter period ended March 31, 2019		$5.5 million
Four quarter period ended June 30, 2019		$7.0 million
Four quarter period ended September 30, 2019		$8.5 million
Four quarter period ended December 31, 2019		$10 million
Four quarter period ended March 31, 2020		The greater of (a) $10 million or (b) 75% of projected Adjusted EBITDA for such period pursuant to projections, based on good faith estimates and assumptions believed to be reasonable at the time made, delivered to ROS no later than December 31, 2019
Four quarter period ended June 30, 2020		The greater of (a) $10 million or (b) 75% of projected Adjusted EBITDA for such period pursuant to projections, based on good faith estimates and assumptions believed to be reasonable at the time made, delivered to ROS no later than December 31, 2019

(ii)

The minimum liquidity of the Company shall be $500,000 at all times.

(iii)

The minimum revenue base covenant will not be applicable for quarters ended after December 31, 2017.

(iv)

The Company will maintain a consolidated senior leverage ratio no greater than as follows:

Four Fiscal Quarters Ended		Consolidated Senior Leverage Ratio
June 30, 2019		10.00:1.00
September 30, 2019		10.00:1.00
December 31, 2019		8.00:1.00
March 31, 2020		7.00:1.00
June 30, 2020		7.00:1.00

Private Placement

The Investors have also agreed to purchase from the Company in a private placement, upon terms and conditions reasonably satisfactory to the Investors and the Company, simultaneously with the consummation of the Tier 2 Transaction, an aggregate of $6,809,887 of Common Stock at a price per share of $7.20 (which, on a pre-reverse stock split basis, equates to a price per share of $0.60).

Rights Offering

Following the consummation of the Tier 2 Transaction and the Private Placement, the Restructuring Agreement requires us to launch a rights offering to allow stockholders of the Company to purchase Common Stock at the same price per share as the Tier 2 Transaction and the Private Placement.

Transfer Restrictions on Securities

The Restructuring Agreement restricts the transfer, sale or assignment of any Notes of a Noteholder between the signing and final closing of the Restructuring Agreement. The Restructuring Agreement does not restrict a Noteholder from transferring shares of Common Stock issued upon conversion or exchange of the Notes.

Covenants of the Company

The Company agreed to several standard covenants under the Restructuring Agreement. Until the final closing, the Company agrees to operate its businesses in the ordinary course of business based on past historic practices and operations, but also taking into account the Transactions. Without the prior written consent of the Investors, we may not engage in several specified actions, including, but not limited to the following: issue, sell or pledge additional securities; split, reclassify or otherwise acquire any of our outstanding securities; declare dividends; purchase, sell or encumber material properties or assets; acquire any business; amend our organizational documents; make certain employment compensation or benefit changes; prepay, incur or assume any indebtedness; redeem any capital stock or related interests; make certain changes in accounting methods; make any changes to tax elections or take certain other actions related to taxes; enter into any real property leases or fail to renew any lease of real property; enter into any contract that is material or could conflict with the Transactions; amend or terminate any material contract; pay, discharge, settle or satisfy any claims, liabilities or obligations; take any action that would conflict with or delay the Transactions; enter into any collective bargaining agreement or terminate the employment of any person that has an employment, severance or similar agreement with the Company; discharge or satisfy any lien or pay any obligation or liability; fail to maintain sufficient insurance coverage; commence any bankruptcy, dissolution, insolvency or similar proceeding; create additional subsidiaries of the Company; engage in any business other than the business the Company currently conducts; or commit to do any of the foregoing, in each case, subject to certain exceptions.

We also agreed to obtain, by the closing of the Transactions, prepaid directors’ and officers’ liability insurance policies in respect of acts or omissions occurring at or prior to the closing for six years from the closing, covering each existing member of the Board on terms with respect to such coverage and amounts no less favorable than those of such policies in effect on the date of the Restructuring Agreement. Without the prior written consent of the Investors, we may not expend in excess of 300% of the amount paid by us for coverage for the most recently completed 12-month period prior to the date of the Restructuring Agreement.

Prior to the receipt of the stockholder approval solicited under this Proxy Statement, the Company may initiate, solicit or make certain proposals and engage in or participate in any discussions or negotiations with any persons with respect to potential acquisition proposals of the Company. Upon receipt of such an acquisition proposal, the Company agrees to disclose all applicable information to the Noteholders.

Representations and Warranties

In the Restructuring Agreement, we made customary representations and warranties to the Noteholders relating to us, our business, and the shares of our Common Stock to be issued to the Noteholders. These representations and warranties were made only for purposes of that agreement and as of specific dates, are solely for the benefit of the parties to the Restructuring Agreement, may be subject to limitations agreed upon by the parties (including being qualified by confidential disclosures made for the purposes of allocating contractual risk between the parties to the Restructuring Agreement instead of establishing these matters as facts), and may be subject to standards of materiality applicable to the parties that differ from those applicable to investors.

Investors should not rely on the representations, warranties or covenants or any description thereof as characterizations of the actual state of facts or condition of the Company or any of their respective subsidiaries or affiliates. The representations, warranties and covenants made in the Restructuring Agreement by the Company and the Noteholders were made solely by the parties to, and for the purposes of, the Restructuring Agreement and as of specific dates and were qualified and subject to important limitations agreed to by the Company and the Noteholders in connection with negotiating the terms of the Restructuring Agreement. In particular, in your review of the representations and warranties contained in the Restructuring Agreement and described in this summary, it is important to bear in mind that the representations and warranties were negotiated with the principal purpose of establishing the circumstances in which a party to the Restructuring Agreement may have the right not to consummate the Transactions if the representations and warranties of another party prove to be untrue due to a change in circumstance or otherwise, and allocating risk among the parties to the Restructuring Agreement, rather than establishing matters as facts. The representations and warranties may also be subject to a contractual standard of materiality different from those generally applicable to stockholders and reports and documents filed with the SEC and in some cases were qualified by the matters contained in the confidential disclosure schedule that the Company provided to the Noteholders in connection with the Restructuring Agreement, which disclosures were not reflected in the Restructuring Agreement.

Moreover, information concerning the subject matter of the representations and warranties may change after the date of the Restructuring Agreement, which subsequent information may or may not be fully reflected in public disclosures by the Company or their subsidiaries or affiliates. The provisions of the Restructuring Agreement, including the representations and warranties, should not be read alone, but instead should only be read together with the information provided elsewhere in this Proxy Statement, as well as the periodic and current reports and statements that the Company files with the SEC. For information on how to view or obtain copies of these documents, please see the section of this Proxy Statement titled Additional Information on page 60.

Termination

The Restructuring Agreement may be terminated as follows:

by written consent of the Company and the Investors;

by any party if the closing is not consummated by May 15, 2018; provided that the terminating party has not been a principal cause of the failure to close due to its failure to perform obligations under the Restructuring Agreement;

by any party, if certain legal restraints preventing the Transactions have occurred and have become final and nonappealable;

by the Investors, if the stockholder approval under this Proxy Statement is not obtained;

by the Investors, if any of the Company or the Consenting Noteholders materially breach any provision of the Restructuring Agreement that would give rise to the failure of an Investor closing condition and is not cured within 10 days after receipt of written notice;

by the Company, if the Investors or the Consenting Noteholders materially breach any provision of the Restructuring Agreement that would give rise to the failure of a Company closing condition and is not cured within 10 days after receipt of written notice;

solely with respect to its obligations under the Restructuring Agreement, by any Consenting Noteholder, if any of the Company or the Investors materially breach any provisions of the Restructuring Agreement that would give rise to the failure of a Consenting Noteholder closing condition and is not cured within 10 days after receipt of written notice; or

by the Company, upon entering into a definitive agreement with respect to a superior acquisition proposal.

Indemnification

The Company agrees to indemnify certain officers and representatives of the Company and certain affiliates and representatives of the Noteholders for all damages arising from any losses based upon any act related to the Company, the Transactions, the Restructuring Agreement or any related documents.

Fees and Expenses

The Company agreed under the Restructuring Agreement to pay (i) all reasonable costs and expenses that it incurs with respect to the Transactions and (ii) at the closing of the Tier 2 Transaction and the Private Placement, all documented costs and expenses presented for payment by the counsel and professionals retained by each Noteholder (provided that such fees shall not exceed $10,000 in the aggregate for any Consenting Noteholder).

RECOMMENDATION OF THE BOARD OF DIRECTORS OF THE COMPANY

At a meeting of the Board held on January 10, 2018, the Board and the Strategic Committee approved the Restructuring Agreement and the Transactions by a unanimous vote of all directors present, and the Board and the Strategic Committee recommend that you vote your shares “FOR” the approval of the issuance of shares of Common Stock for purposes of Section 713(a) and 713(b) of the NYSE American Company Guide, “FOR” the amendment to our certificate of incorporation (which includes the reverse stock split) and “FOR” the approval of the election of the members to the Board.

Our Board and the Strategic Committee have, by the unanimous vote of all directors voting:

determined that the Restructuring Agreement and the Transactions are advisable and in the best interests of the Company and its stockholders;

determined that the Transactions are fair to the stockholders of the Company;

adopted resolutions approving the Restructuring Agreement and the Transactions; and

resolved to recommend that the stockholders approve the issuance of shares of Common Stock for purposes of Section 713(a) and 713(b) of the NYSE American Company Guide, the amendment to our certificate of incorporation (which includes the reverse stock split) and the election of the members to the Board.

In reaching its decision, the Board and the Strategic Committee evaluated the Restructuring Agreement and the Transactions in consultation with our management and our legal and financial advisors, including Stoel Rives, the independent legal advisor to the Strategic Committee. In addition, the Board and the Strategic Committee considered the fairness analysis provided by Duff & Phelps to the Board and the Strategic Committee.

The reasons considered by the Board and the Strategic Committee in favor of approving the Restructuring Agreement and the Transactions included the following (not necessarily in order of relative importance):

our historical inability, despite our extended efforts over the past two years, to raise financing or to otherwise realize value for our business operations due to our current capital structure;

our inability to satisfy our current debt obligations under the Notes, the Credit Facility and the Indenture, and the likelihood that failure to obtain stockholder approval of the Transactions could lead to an acceleration of our indebtedness owed under the Indenture, the Additional Notes and the Credit Facility, which would likely force us to file for bankruptcy;

the substantial doubt about our ability to continue as a going concern and the likelihood that, if the Transactions are not consummated, the Company will be unable to raise additional financing and that the resulting lack of liquidity may require the Company to declare bankruptcy;

the likely effect of bankruptcy on holders of Common Stock and on the Company;

the likelihood that, if the Transactions are not consummated, the Company will be delisted from the NYSE American, it will be difficult for the Company to be relisted on the NYSE American and the resultant effects on the liquidity of the Common Stock;

our efforts to review, evaluate and negotiate mergers, acquisitions, investments or dispositions of material assets, or other strategic alternatives, which did not result in the signing or consummation of a transaction on terms that we believed would be beneficial to our stockholders;

the fact that, under the Restructuring Agreement, the Company may initiate, solicit or make certain proposals and engage in or participate in any discussions or negotiations with any persons with respect to potential acquisition proposals of the Company, and if such discussions result in a proposal that the Board determines in good faith is a superior proposal, the Board may adopt such superior proposal without incurring a break-up fee;

the current and historical market prices of the Common Stock;

the opinion of Duff & Phelps, dated January 10, 2018, to the Board as to the fairness, from a financial point of view, of the conversion of the Notes into Common Stock at the Conversion Price (as defined below) in connection with the Tier 2 Transaction, to the public stockholders of the Company, based upon and subject to the assumptions, limitations and qualifications contained in its opinion;

the likelihood that the Restructuring Agreement and the Transactions would be consummated; and

the commitment by OrbiMed and ROS to provide $6.8 million of additional capital in the Private Placement.

The Board and the Strategic Committee also considered the following negative factors associated with the Restructuring Agreement and the Transactions:

if the Transactions are consummated, after the Investors fully convert and exchange the Notes and participate in the Private Placement pursuant to the terms and conditions of the Restructuring Agreement, the Investors will own, in the aggregate, approximately 70.4%, and the Noteholders would own, in the aggregate, approximately 88.5%, of our outstanding Common Stock, and our other non-Noteholder stockholders of the Company, who currently own approximately 95.7% of the outstanding Common Stock, will be substantially diluted from an ownership standpoint and will own approximately 11.3% of our outstanding Common Stock;

if the Transactions are consummated, the Investors will control a majority of our Common Stock, and as a result, the Investors will have the voting power to elect all of the members of our Board and determine the outcome of all matters requiring stockholder approval, thereby controlling our management and affairs;

the possibility that the Investors’ interests may not always coincide with the interests of our other stockholders and that they may act in a manner that advances their individual interests and not necessarily those of other stockholders;

the possibility that the Restructuring Agreement may be terminated and that the Transactions may not be consummated and thus that the benefits thereof may not be realized;

the possibility that the consummation of the Transactions may be delayed, resulting in the delisting of the Company from the NYSE American, and the resultant effects on the liquidity of the Common Stock;

the fact that the Restructuring Agreement contains significant restrictions on our ability to conduct our business prior to the consummation of the Transactions; and

the potential of litigation in connection with the Restructuring Agreement and the Transactions.

In the judgment of the Board and the Strategic Committee, however, these potential risks were favorably offset by the potential benefits of the Restructuring Agreement and the Transactions, including those described above and below.

Opinion of the Company’s Financial Advisor

Pursuant to an engagement letter dated July 28, 2017 and the Addendum thereto dated December 15, 2017 (collectively, the “Engagement Letter”), the Company retained Duff & Phelps, to serve as an independent financial advisor to its Board and to render an opinion to the Board and the Strategic Committee as to whether the conversion price for the Notes, in connection with the Tier 2 Transaction, was fair, from a financial point of view, to the public holders of the Common Stock. The Company retained Duff & Phelps based on Duff & Phelps’ qualifications, reputation and experience in providing fairness opinions, and its experience in valuing companies generally, and in the healthcare and medical device industries specifically. Duff & Phelps is a premier global valuation and corporate finance advisor that is regularly engaged to provide financial advisory services, including fairness opinions, in connection with mergers and acquisitions, leveraged buyouts, going-private transactions and recapitalization transactions.

Duff & Phelps was engaged to determine whether the $0.60, or $7.20 after giving effect to the Company’s 1:12 reverse stock split, per share conversion price (the “Conversion Price”) for the $70.238 million of aggregate principal plus any accrued and unpaid interest of the Notes, in connection with the Tier 2 Transaction, is fair, from a financial point of view, to the public holders of the Common Stock.

On December 26, 2017, representatives from Duff & Phelps reviewed with the Board, which included all of the members of the Strategic Committee, its fairness analysis of the Tier 2 Transaction and responded to questions from the Board. On January 10, 2018, at the request of the Board and the Strategic Committee, Duff & Phelps delivered its written opinion to the Strategic Committee and the Board that, as of January 10, 2018, and based upon and subject to the assumptions, limitations and qualifications contained in its opinion, the conversion of the Notes into Common Stock at the Conversion Price in connection with the Tier 2 Transaction is fair, from a financial point of view, to the public holders of the Common Stock. Duff & Phelps has consented to the reproduction of its opinion in this Proxy Statement.

Duff & Phelps’ opinion did not address the fairness of any transactions related to the Transactions other than the Tier 2 Transaction or any other transaction in connection with the Restructuring Agreement, including but not limited to the Private Placement, the Tier 1 Transaction or the reverse stock split.

The full text of Duff & Phelps’ written opinion, dated January 10, 2018, which sets forth, among other things, certain assumptions made, certain matters considered and the limitations with respect to the review undertaken by Duff & Phelps in connection with the Tier 2 Transaction, is attached as Annex C to this Proxy Statement and is incorporated herein by reference. We urge you to read Duff & Phelps’ opinion carefully and in its entirety.

Duff & Phelps’ opinion was provided for the information and assistance of the Strategic Committee and the Board in connection with its consideration of the Transactions and the Restructuring Agreement and (i) does not address the merits of the underlying business decision to enter into the Transactions and the Restructuring Agreement versus any alternative strategy or transaction, (ii) does not address any transaction related to the Transactions and the Restructuring Agreement, (iii) is not a recommendation as to how the Strategic Committee, the Board or any stockholder of the Company should vote or act with respect to any matters relating to the Transactions and the Restructuring Agreement, or whether to proceed with the Transactions and the Restructuring Agreement or any related transaction, and (iv) does not indicate that the Conversion Price for the Notes is the best exchange rate possibly attainable under any circumstances. The decision as to whether to proceed with the Transactions and the Restructuring Agreement or any related transaction may depend on an assessment of factors unrelated to the financial analysis on which Duff & Phelps’ opinion was based.

Duff & Phelps’ opinion was only one of the factors taken into consideration by the Strategic Committee and the Board in making its determination with respect to the Transactions and the Restructuring Agreement. Duff & Phelps’ opinion should not be construed as creating any fiduciary duty on the part of Duff & Phelps to the Strategic Committee, the Board or any other party. Duff & Phelps has not undertaken, and is under no obligation, to update, revise, reaffirm or withdraw its opinion, or otherwise comment on or consider events occurring or coming to its attention after the date of its opinion.

The information set forth below summarizes the material financial and comparative analyses performed by Duff & Phelps, but does not purport to be a complete description of the financial analyses performed by Duff & Phelps or the data considered by it in connection with its opinion. The preparation of a fairness opinion involves various subjective determinations as to the most appropriate and relevant methods of financial analysis and the application of these methods to particular circumstances. In arriving at its opinion, Duff & Phelps considered a number of analytical methodologies. Each analytical technique has inherent strengths and weaknesses, and the nature of the available information may further affect the strengths, weaknesses and applicability of any particular technique. While the conclusions reached in connection with each analysis were considered carefully by Duff & Phelps in arriving at its opinion, Duff & Phelps did not consider it practicable to, nor did it attempt to, assign relative weights to the individual analyses and specific factors considered in reaching its opinion. The conclusion reached by Duff & Phelps was based on all analyses and factors, taken as a whole, and also on the application of Duff & Phelps’ own experience and judgment. This conclusion may involve significant elements of subjective judgment and qualitative analysis. No one method of analysis should be regarded as critical to the overall conclusion. Accordingly, Duff & Phelps believes that its analyses must be considered as a whole, and that selecting portions of its analyses and of the factors considered by it, without considering all analyses and factors, could create a misleading or incomplete view of the evaluation process underlying its opinion.

In connection with its opinion, Duff & Phelps made such reviews, analyses and inquiries as it deemed necessary and appropriate under the circumstances. Duff & Phelps also took into account its assessment of general economic, market and financial conditions, as well as its experience in securities and business valuation in general, and with respect to similar transactions in particular. Duff & Phelps’ procedures, investigations and financial analysis with respect to the preparation of its opinion included, but were not limited to, the items summarized below:

Duff & Phelps reviewed the following documents provided by the Company:

the Company’s annual reports and audited financial statements in the Company’s Form 10-K filed with the SEC for the calendar years ended December 31, 2015 and December 31, 2016, and the Company’s unaudited interim financial statements in the Company’s Form 10-Q filed with the SEC for the quarterly period ended September 30, 2017;

the Company’s pro forma financial information contained in the Company’s Form 8-K filed with the SEC for the calendar year ended December 31, 2014;

the Company’s anticipated corrections to the financial information for the quarters ending March 31, 2017 and June 30, 2017 contained in the Company’s Form 8-K filed with the SEC on November 20, 2017, as reflected in the Company’s Form 10-Q filed with the SEC for the quarterly period ended September 30, 2017;

the Company’s unaudited pro forma financial information prepared by management of the Company for the calendar year ended December 31, 2015;

the detailed financial projections prepared by management of the Company and provided to Duff & Phelps for the calendar years ending December 31, 2017 through December 31, 2020 (the “Management Projections”);

a letter dated December 18, 2017 from the Chief Executive Officer and the Deputy Restructuring Officer of the Company to Duff & Phelps, which made certain representations to Duff & Phelps with respect to the Management Projections and the underlying assumptions related thereto (the “Management Representation Letter”);

the Company’s Management Presentation dated March 28, 2017;

the Company’s Board of Directors Meeting Discussion Materials prepared by A&M dated July 18, 2017;

the Company’s Board of Directors Meeting Presentation dated December 12, 2017;

other internal documents relating to the history, current operations and probable future outlook of the Company;

documents related to the Company’s indebtedness, including: (i) Bacterin International Holdings, Inc.’s (n/k/a the Company) $65,000,000 indenture for the Notes dated as of July 31, 2015 and the subsequent amendments thereto; (ii) the $995,700 and $42,856.59 promissory notes issued by the Company to ROS, and the $564,300 and $24,288.41 promissory notes issued by the Company to OrbiMed for the 2017 Notes dated January 17, 2017; and (iii) the amended and restated term loan credit agreement dated July 27, 2015 by and among Bacterin International, Inc., ROS and OrbiMed and the subsequent amendments thereto;

the December 20, 2017 draft of the Amended and Restated Certificate of Incorporation of Xtant Medical Holdings, Inc.; and

documents related to the Transactions, including the January 8, 2018 draft Restructuring and Exchange Agreement by and among the Company, OrbiMed, ROS and the consenting noteholder parties.

Duff & Phelps discussed the documents referred to above and the background and other elements of the Transactions with management of the Company.

Duff & Phelps reviewed the historical trading price and trading volume of the Common Stock and the publicly traded securities of certain other companies that Duff & Phelps deemed relevant.

Duff & Phelps performed certain valuation and comparative analyses using generally accepted valuation and analytical techniques, including a discounted cash flow analysis, an analysis of selected public companies and selected transactions that Duff & Phelps deemed relevant, and an analysis of selected publicly traded debt that Duff & Phelps deemed relevant.

Duff & Phelps conducted such other analyses and considered such other factors as Duff & Phelps deemed appropriate.

No limits were placed on Duff & Phelps by the Company, the Strategic Committee or the Board of Directors in terms of the information to which it had access or on the matters it could consider in rendering its opinion.

In performing its analyses and rendering its opinion with respect to the Tier 2 Transaction, Duff & Phelps, with the Company’s consent:

relied upon the accuracy, completeness, and fair presentation of all information, data, advice, opinions and representations obtained from public sources or provided to it from private sources, including management of the Company, and did not independently verify such information;

relied upon the fact that the Strategic Committee, the Board and the Company have been advised by counsel as to all legal matters with respect to the contemplated Transactions and the Restructuring Agreement, including, without limitation, whether all procedures required by law to be taken in connection with the Tier 2 Transaction have been duly, validly and timely taken, and all conditions to the Tier 2 Transaction have been satisfied;

assumed that any estimates, evaluations, forecasts and projections furnished to Duff & Phelps by the Company were reasonably prepared by the Company and based upon the best currently available information and good faith judgment of the person at the Company furnishing the same, and Duff & Phelps expresses no opinion with respect to such estimates, evaluations, forecasts and projections or the underlying assumptions;

assumed that information supplied and representations made to Duff & Phelps by management of the Company are substantially accurate regarding the Company and the Transactions;

assumed that the final versions of all documents provided to Duff & Phelps by the Company and reviewed by Duff & Phelps in draft form and referenced in Section 1.k above conform in all material respects to the drafts provided to Duff & Phelps by the Company and reviewed by Duff & Phelps;

assumed that there has been no material change in the assets, liabilities, financial condition, results of operations, business, or prospects of the Company since the date of the most recent financial statements and other information made available to Duff & Phelps by the Company and referenced herein, and that there is no information or facts that would make the information provided by the Company and reviewed by Duff & Phelps and referenced herein incomplete or misleading;

assumed that all of the conditions required to implement the Tier 2 Transaction will be satisfied, including, without limitation, the reverse stock split, and that the Tier 2 Transaction will be completed in accordance with the draft documents referenced in Section 1.m above without any amendments thereto or any waivers of any terms or conditions thereof;

did not address the fairness of any related transactions, including, without limitation, the loan amendments, the Private Placement, or the reverse stock split; and

assumed that all governmental, regulatory or other consents and approvals necessary for the consummation of the Transactions and the Restructuring Agreement (including, without limitation, the consent of the Strategic Committee and the Board), will be obtained without any adverse effect on the Company.

In Duff & Phelps’ analysis and in connection with the preparation of its opinion, Duff & Phelps has made numerous assumptions with respect to industry performance, general business, market and economic conditions and other matters, many of which are beyond the control of any party involved in the Transactions. To the extent that any of the foregoing assumptions, qualifications and limiting conditions, or any of the facts on which Duff & Phelps’ opinion is based prove to be untrue in any material respect, the opinion cannot and should not be relied upon.

Duff & Phelps prepared its analysis as of December 26, 2017 and, at the request of the Board and the Strategic Committee, delivered its written opinion with respect thereto on January 10, 2018. Duff & Phelps’ opinion was necessarily based upon market, economic, financial and other conditions as they existed and could be evaluated only as of January 10, 2018, and Duff & Phelps disclaims any undertaking or obligation to advise any person of any change in any fact or matter affecting its opinion which may come or be brought to the attention of Duff & Phelps after January 10, 2018.

Duff & Phelps’ did not evaluate the Company’s solvency or conduct an independent appraisal or physical inspection of any specific assets or liabilities (contingent or otherwise). Duff & Phelps has not been requested to, and did not, (i) initiate any discussions with, or solicit any indications of interest from, third parties with respect to the Notes, the assets, businesses or operations of the Company, or any alternatives to the Transactions and the Restructuring Agreement, (ii) structure or negotiate the terms or the effect of the exchange rate of the Notes or any part of the Transactions or the Restructuring Agreement and, therefore, Duff & Phelps has assumed that the terms of the Notes Conversion, including, without limitation, the exchange rate of the Notes, are the most beneficial terms, from the Company’s perspective, that could, under the circumstances, be negotiated among the parties to the Transactions and the Restructuring Agreement, or (iii) advise the Strategic Committee, the Board or any other party with respect to alternatives to the Transactions or the relative merits of the Transactions.

Duff & Phelps’ opinion does not express any opinion as to the market price or value of the Common Stock (or anything else) after the announcement or the consummation of the Transactions.

Duff & Phelps’ opinion should not be construed as a valuation opinion, a credit rating, a solvency opinion, an analysis of the Company’s credit worthiness, tax advice, accounting advice, or legal advice. Duff & Phelps has not made, and assumes no responsibility to make, any representation, or render any opinion, as to any legal matter.

Duff & Phelps’ opinion does not express any opinion with respect to the amount or nature of any compensation to any of the Company’s officers, directors, or employees, or any class of such persons, relative to the consideration to be received by the public stockholders of the Company in any the Transactions or other transactions in connection with the Restructuring Agreement, or with respect to the fairness of any such compensation.

Although these paragraphs include some information in tabular format, those tables are not intended to stand alone and must be read together with the full text of each summary and the limitations and qualifications in the Duff & Phelps’ opinion.

Valuation Analysis

As part of its analysis, Duff & Phelps’ performed an enterprise valuation analysis of the Company using generally accepted valuation methodologies.

Discounted Cash Flow Analysis. Duff & Phelps performed a discounted cash flow (“DCF”) analysis using the Management Projections for fiscal years 2017 through 2020 to derive indications of total enterprise value. A DCF analysis is designed to provide insight into the intrinsic value of a business based on its projected earnings and capital requirements, as well as the net present value of projected free cash flows as provided by the Company’s management in the Management Projections.

In the analysis shown in the table below, Duff & Phelps calculated the projected debt-free, free cash flows of the Company, for the fiscal years 2017 through 2020. After deducting depreciation from EBITDA, Duff & Phelps accounted for the tax effects of the debt-free pre-tax earnings utilizing a 25.0% tax rate, reflecting a reduction in the US statutory tax rate, to calculate net operating profit after taxes (“NOPAT”). Duff & Phelps then calculated the projected debt-free, free cash flows of the Company, by subtracting capital expenditures and changes in average working capital, to account for projected seasonality, from NOPAT. All of the assumptions and estimates used to determine the debt-free, free cash flows of the Company were provided by the Company’s management.

Duff & Phelps estimated the value of the Company in 2020, the end of the projection period, by capitalizing the projected EBITDA in fiscal 2020 by multiples ranging from 10.0x EBITDA to 11.0x EBITDA. These multiples were selected based on an analysis of selected public companies and selected merger and acquisition transactions, as described below. The resulting estimated future value of the Company in 2020 is referred to as the terminal value.

Duff & Phelps then discounted the projected debt-free, free cash flows of the Company for the fiscal years 2017 through 2020, as well as the terminal value for the Company, by the Company’s estimated weighted average cost of capital ranging from 13.0% to 14.0%. Fiscal 2017 debt-free, free cash flows of the Company were adjusted to include only the interim period from October 1, 2017 through December 31, 2017. The interim period for 2017 accounts for the fact the most current financial statements made available to Duff & Phelps were as of September 30, 2017.

The Company’s estimated weighted average cost of capital was based on the Capital Asset Pricing Model using information derived from the companies in the selected public company analysis. The weighted average cost of capital reflected the relative risk associated with the Company’s projected debt-free, free cash flows, the Company’s current and pro-forma capital structures, as well as the rates of return that the Company’s security holders could expect to realize on alternative investment opportunities.

The DCF analysis shown below, resulted in an estimated total enterprise value of the Company ranging from $132.0 million to $147.0 million.

Discounted Cash Flow Analysis
*($ in thousands)*
			*Management Projections*
			2017P			2018P			2019P			2020P
Total Revenue			$	83,035		$	87,412		$	97,987		$103,927
Growth				(7.7	)%		5.3	%		12.1	%	6.1%

EBITDA			$	1,521		$	7,431		$	14,036		$16,543
EBITDA Margin				1.8	%		8.5	%		14.3	%	15.9%
Growth				NM			NM			88.9	%	17.9%

			10/17 - 12/17
Earnings Before Interest and Taxes			$	104		$	3,286		$	9,617		$13,146
Pro Forma Taxes @ 25.0% (1)				0			(822	)		(2,404	)	(3,287)
Net Operating Profit After Tax			$	104		$	2,465		$	7,213		$9,860

Depreciation				984			4,145			4,418		3,397
Capital Expenditures				(520	)		(1,321	)		(1,200	)	(1,200)
(Increase) / Decrease in Working Capital (2)				971			(570	)		(2,295	)	(1,061)
Free Cash Flow			$	1,540		$	4,719		$	8,136		$10,995

Terminal EBITDA Exit Multiple				10.0	x		10.5	x		11.0	x
Weighted Average Cost of Capital				14.0	%		13.5	%		13.0	%

Concluded Enterprise Value Range			$	132,000		$	139,500		$	147,000

Implied Enterprise Value Multiples

EV / 2017 EBITDA	$	1,521		NM			NM			NM
EV / 2018 EBITDA		7,431		17.8	x		18.8	x		19.8	x
EV / 2019 EBITDA		14,036		9.4	x		9.9	x		10.5	x

EV / 2017 Revenue		83,035		1.59	x		1.68	x		1.77	x
EV / 2018 Revenue		87,412		1.51	x		1.60	x		1.68	x

(1) Reflects blended tax rate; adjusted to reflect changes to the US statutory corporate tax rate

(2) Reflects change in average working capital balance

Source: Management Projections

Market Approach. Duff & Phelps analyzed valuation multiples of enterprise value to EBITDA of the selected public companies and selected M&A transactions to apply to the Company’s projected 2020 EBITDA to estimate the terminal value in the DCF analysis. Duff & Phelps did not utilize a multiple of the Company’s 2017 or 2018 performance because the Company is restructuring its sales and operating model, resulting in operating performance that is not necessarily representative of the Company’s earnings and cash flow generation capability going forward.

The selected public companies utilized for comparative purposes were not identical to the Company, and the transactions utilized for comparative purposes in the following analysis were not identical to the Tier 2 Transaction. Duff & Phelps does not have access to non-public information of any of the companies or transactions used for comparative purposes. Accordingly, a complete valuation analysis of the Company, the Tier 2 Transaction and the Private Placement cannot rely solely upon a quantitative review of the selected public companies and selected transactions, but involve complex considerations and judgments concerning differences in financial and operating characteristics of such companies and targets and other factors that could affect their value relative to that of the Company and the Tier 2 Transaction and the Private Placement. Therefore, the selected public companies and selected M&A transactions analysis is subject to these limitations.

Selected Public Companies Analysis. A selected public companies analysis compares a subject company to a group of public companies that investors may consider to have similar investment characteristics relative to the Company, and applies valuation multiples to the Company’s financial performance metrics based on the qualitative and quantitative comparison. Comparative factors include, but are not limited to, size, historical and projected growth and profitability and factors that affect the riskiness of future cash flows.

Duff & Phelps compared certain financial information of the Company to corresponding data and ratios from publicly traded companies that Duff & Phelps deemed relevant to its analysis. For purposes of its analysis, Duff & Phelps used certain publicly available historical financial data and consensus equity analyst estimates for the selected publicly traded companies. Duff & Phelps included the eleven companies below in the selected public companies analysis based on their relative similarity, primarily in terms of industry and markets served, to those of the Company.

*Market Cap <$1B*	*Market Cap >$1B, <$5B*	*Market Cap >$5B*
SeaSpine Holdings Corporation	Globus Medical, Inc.	Medtronic plc
Orthofix International N.V.	Integra LifeSciences Holdings Corporation	Stryker Corporation
RTI Surgical, Inc.	NuVasive, Inc.	Zimmer Biomet Holdings, Inc.
K2M Group Holdings, Inc.	Wright Medical Group N.V.

Duff & Phelps noted that the Company has not yet achieved profitability and, although the Company achieved a modest positive EBITDA in 2016 and is expecting a modest positive EBITDA in 2017, the Company’s profits are generally lower than the profit margins achieved by the selected public companies. Furthermore, the estimated revenue growth rate for the Company is a negative 7.7% for fiscal 2017, before growing at a projected revenue growth rate of 5.3% in 2018 and then at 12.1% in 2019. The Company’s estimated 2017 revenue growth is weaker than all of the selected public companies, and its 2018 and 2019 revenue growth is similar to the selected public companies, taken as a group.

Summary of Market Approach Analysis: In selecting multiples, Duff & Phelps reviewed the selected public companies, taken as a group. Duff & Phelps noted that the Company is significantly smaller in size relative to the selected public companies, with generally weaker profitability and weaker near-term growth prospects.

Based on the Company’s smaller size, lower profitability and recent negative growth, Duff & Phelps selected terminal EBITDA multiples of 10.0x to 11.0x to apply to the Company’s projected 2020 EBITDA. These EBITDA multiples are below the mean and median multiples of the selected public companies.

Selected Public Companies Analysis
COMPANY INFORMATION	REVENUE GROWTH												EBITDA GROWTH												EBITDA MARGIN
Company Name	2-YR CAGR			2017			2018			2019			2-YR CAGR			2017			2018			2019			3-YR AVG			2017			2018			2019

Market Capitalization < $1B
K2M Group Holdings, Inc.		8.2	%		8.2	%		10.7	%		10.3	%		NA			NM			NM			NM			-5.3	%		-1.9	%		1.6	%		7.4	%
Orthofix International N.V.		0.6			4.7			4.7			4.6			2.4	%		4.1	%		10.7	%		10.0	%		14.6			15.4			16.3			17.1
RTI Surgical, Inc. ⁽¹⁾		1.3			NA			NA			4.1			-5.9			NA			NA			NA			12.4			NA			13.3			NA
SeaSpine Holdings Corporation		-2.4			1.6			4.1			NA			NM			NM			NM			NM			-12.4			-25.0			-12.2			NA

Mean		1.9	%		4.8	%		6.5	%		6.3	%		-1.8	%		4.1	%		10.7	%		10.0	%		2.3	%		-3.8	%		4.7	%		12.3	%
Median		0.9	%		4.7	%		4.7	%		4.6	%		-1.8	%		4.1	%		10.7	%		10.0	%		3.6	%		-1.9	%		7.4	%		12.3	%

Market Capitalization > $1B, > $5B
Globus Medical, Inc.		6.5	%		10.8	%		9.0	%		6.8	%		6.5	%		12.1	%		8.9	%		8.8	%		35.2	%		35.7	%		35.7	%		36.4	%
Integra LifeSciences Holdings Corporation ⁽¹⁾		2.5			NA			25.8			5.3			10.4			NA			32.6			10.7			21.0			NA			23.7			24.9
NuVasive, Inc.		8.1			7.1			5.4			6.4			16.0			9.8			13.5			10.2			20.2			23.0			24.7			25.6
Wright Medical Group N.V.		32.3			7.6			8.7			11.7			NM			117.5			39.5			40.0			-4.9			11.5			14.7			18.4

Mean		12.3	%		8.5	%		12.2	%		7.6	%		11.0	%		46.5	%		23.6	%		17.4	%		17.9	%		23.4	%		24.7	%		26.3	%
Median		7.3	%		7.6	%		8.9	%		6.6	%		10.4	%		12.1	%		23.0	%		10.5	%		20.6	%		23.0	%		24.2	%		25.3	%

Market Capitalization > $5B
Metronic plc ⁽¹⁾		2.8	%		0.1	%		2.4	%		4.6	%		13.7	%		1.2	%		6.2	%		9.7	%		NA			31.3	%		32.5	%		34.1	%
Stryker Corporation		5.4			9.2			7.2			6.0			6.1			9.6			9.3			8.1			27.1	%		27.5			28.1			28.6
Zimmer Biomet Holdings, Inc. ⁽¹⁾		-1.2			1.2			2.1			2.7			NA			3.3			0.3			6.0			NA			37.2			36.5			37.7

Mean		2.3	%		3.5	%		3.9	%		4.4	%		9.9	%		4.7	%		5.3	%		7.9	%		27.1	%		32.0	%		32.4	%		33.5	%
Median		2.8	%		1.2	%		2.4	%		4.6	%		9.9	%		3.3	%		6.2	%		8.1	%		27.1	%		31.3	%		32.5	%		34.1	%

Aggregate Mean		5.8	%		5.6	%		8.0	%		6.3	%		7.0	%		22.5	%		15.1	%		12.9	%		12.0	%		17.2	%		19.5	%		25.6	%
Aggregate Median		2.8	%		7.1	%		6.3	%		5.7	%		6.5	%		9.6	%		10.0	%		9.9	%		14.6	%		23.0	%		23.7	%		25.6	%

Xtant Medical Holdings, Inc. ^{(1) (2)}		5.0	%		-6.4	%		4.9	%		5.7	%		NA			145.2	%		217.1	%		-12.0	%		-3.2	%		3.2	%		9.7	%		8.1	%

Management Projections		7.7	%		-7.7	%		5.3	%		12.1	%		-27.1	%		NM			NM			88.9	%		1.1	%		1.8	%		8.5	%		14.3	%

(1) Pro forma metrics for historical periods not available

(2) Historical metrics as reported; Projected metrics based on analysis consensus estimates

2-YR CAGR = Compounded annual growth rate for the latest fiscal year (2016) over the fiscal year two periods prior (2014)

EBITDA = Earnings Before Interest, Texas, Depreciation and Amortization

Source: S&P Capital IQ, SEC Filings and Management Projections

Selected Public Companies Analysis										As of December 20, 2017
(US$ in millions, except per share data)

COMPANY INFORMATION	MARKET DATA									ENTERPRISE VALUE AS MULTIPLE OF
Company Name	Common Stock Price on 12/20/2017		% of 52- Week High			Market Organization		Enterprise Value		2017 EBITDA			2018 EBITDA			2019 EBITDA			2017 Revenue			2018 Revenue			2019 Revenue
Market Capitalization < $1B
K2M Group Holdings, Inc.	$	18.30		70.4	%	$	793	$	833		NM			NM			NM			3.25	x		2.94	x		2.67	x
Orthofix International N.V.		55.05		99.8			1,003		970		14.7	x		13.3	x		12.0	x		2.26			2.16			2.07
RTI Surgical, Inc. ⁽¹⁾		4.15		69.2			252		348		NA			9.3			NA			NA			1.24			1.19
SeaSpine Holdings Corporation		9.99		74.2			134		116		NM			NM			NM			0.88			0.85			0.80

Mean				78.4	%	$	546	$	567		14.7	x		11.3	x		12.0	x		2.13	x		1.80	x		1.68	x
Median				72.3	%	$	523	$	590		14.7	x		11.3	x		12.0	x		2.26	x		1.70	x		1.63	x

Market Capitalization > $1B, < $5B
Globus Medical, Inc.	$	40.10		96.2	%	$	3,865	$	3,527		15.8	x		14.5	x		13.3	x		5.64	x		5.18	x		4.85	x
Integra LifeSciences Holdings Corporation		49.91		88.5			3,917		5,140		NA			14.7			13.3			4.39			3.49			3.31
NuVasive, Inc.		59.24		72.5			3,019		3,590		15.2			13.4			12.1			3.48			3.30			3.11
Wright Medical Group N.V.		23.01		73.0			2,404		3,059		35.9			25.8			18.4			4.12			3.79			3.39

Mean				82.5	%	$	3,301	$	3,829		22.3	x		17.1	x		14.3	x		4.41	x		3.94	x		3.66	x
Median				80.7	%	$	3,442	$	3,558		15.8	x		14.6	x		13.3	x		4.25	x		3.64	x		3.35	x

Market Capitalization > $5B
Medtronic plc	$	81.38		90.7	%	$	110,148	$	121,866		13.2	x		12.5	x		11.4	x		4.15	x		4.05	x		3.87	x
Stryker Corporation		154.78		96.4			57,925		63,637		18.7			17.1			15.8			5.14			4.80			4.53
Zimmer Biomet Holdings, Inc.		121.18		90.8			24,536		34,925		12.1			12.0			11.4			4.49			4.40			4.28

Mean				92.6	%	$	64,203	$	73,476		14.7	x		13.9	x		12.8	x		4.59	x		4.42	x		4.23	x
Median				90.8	%	$	57,925	$	63,637		13.2	x		12.5	x		11.4	x		4.49	x		4.40	x		4.28	x

Aggregate Mean				83.8	%	$	18,909	$	21,637		17.9	x		14.7	x		13.5	x		3.78	x		3.29	x		3.10	x
Aggregate Median				88.5	%	$	3,019	$	3,527		15.2	x		13.4	x		12.7	x		4.13	x		3.49	x		3.31	x

Enterprise Value = (Market Capitalization + Management Equity + Debt + Preferred Stock + Non-Controlling Interest) - (Cash & Equivalents + Net Non-Operating Assets)

EBITDA = Earnings Before Interest, Taxes, Depreciation and Amortization

Source: S&P Capital IQ, SEC Filings, Annual and Interim Reports

Selected Transactions Analysis. Duff & Phelps also identified certain precedent M&A transactions involving target companies that had businesses somewhat similar to that of the Company with transaction values under $1.0 billion. Duff & Phelps compared the Company to the target companies involved in the selected M&A transactions listed in the table below. The selection of these M&A transactions was based, among other things, on the target company’s industry, the relative size of the applicable M&A transactions compared to the Company and the availability of public information related to the applicable M&A transactions. These EBITDA multiples were also considered when selecting multiples to apply to the Company’s 2020 EBITDA.

Selected M&A Transaction Analysis
($ in millions)
Announced	Target Name	Target Business Description	Acquirer Name	Enterprise Value		2-Year Revenue CAGR			LTM Revenue		LTM EBITDA		EBITDA Margin			EV / Revenue			EV / EBITDA

Spinal Related Companies
Oct-17	Vexim SA	Provides invasive solutions for treatment of traumatic spine pathologies	Stryker Corporation	$	184.7		21.8	%	$	23.2		NM		NM			7.97	x		NM
Jul-16	DFINE Inc.	Develops minimally invasive therapeutic devices that are used to treat pathologies of vertebrae, metastatic spinal tumors, and vertebral compressions fractures	Merit Medical Systems, Inc.	$	97.5		NA		$	33.4		NM		NA			2.92	x		NA
Mar-16	Alcoa Remmele Medical Operations (nka: LISI MEDICAL Remmele)	Manufacturers orthopedic, traumatological, spinal, and dental implants and instruments	Hi-Shear Corporation, Lisi Medical SAS	$	102.0		NA		$	70.0		NM		NA			1.46	x		NA
Jul-15	X-spine Systems, Inc. ⁽¹⁾	Develops spinal implants and instrumentation for the treatment of spinal disease worldwide	Bacterin International Holdings, Inc. (nka: Xtant Medical Holdings, Inc.)	$	87.9		NA		$	42.2	$	7.3		17.3	%		2.08	x		12.0	x
Feb-15	Branch Medical Group, Inc.	Manufacturers medical implants and graphic cases for spinal products, orthopedic products, and sterilization trays	Globus Medical, Inc.	$	63.2		NA		$	23.3	$	9.1		39.1	%		2.71	x		6.9	x
Oct-13	Lanx, Inc.	Develops and commercializes spinal surgery products for surgeons in the United States	EBI Holdings, LLC	$	147.0		NA		$	90.0		NA		NA			1.63	x		NA
Mar-13	Baxano, Inc.	Develops and manufactures minimally invasive tools for restoring spine function and preserving healthy tissue	TranS1, Inc. (nka Baxano Surgical, Inc.)	$	23.6		NA		$	9.4		NA		NA			2.51	x		NA

			Mean	$	100.9		21.8	%	$	41.6	$	8.2		28.2	%		3.04	x		9.5	x
			Median	$	97.5		21.8	%	$	33.4	$	8.2		28.2	%		2.51	x		9.5	x

(1) Reflects Company’s reported transaction value and X-spine’s 2014 year-end financial metrics.

Source: Capital IQ and company filings

Selected M&A Transaction Analysis
($ in millions)
Announced	Target Name	Target Business Description	Acquirer Name	Enterprise Value		2-Year Revenue CAGR			LTM Revenue		LTM EBITDA		EBITDA Margin			EV / Revenue			EV / EBITDA

Medical Device and Instrumentation Companies
Oct-17	Exactech, Inc. ⁽¹⁾	Develops, manufactures, markets, distributes, and sales orthopedic implant devices, related surgical instrumentation, and biologic services	TPG Capital, L.P.	$	625.7		2.9	%	$	264.4	$	43.2		16.3	%		2.37	x		14.5	x
Oct-17	JOTEC GmbH	Develops surgical vascular prostheses and stint graft systems for the treatment of aortic diseases	Cry olife, Inc.	$	253.6		NA		$	51.0		NA		NA			4.97	x		NA
Sep-16	Lifeline Scientific, Inc.	Develops products and services for cell, tissue, and organ transplantation in the United States and internationally	Shanghai Genext Medical Technology Co. Ltd.	$	73.9		7.0	%	$	42.6	$	8.9		20.9	%		1.74	x		8.3	x
Aug-16	Laborie Medical Technologies, Inc.	Engages in the development, manufacture, and marketing of medical devices and disposables in urology, gynecology, and colorectal fields	Patricia Industries AB	$	659.8		NA		$	117.0		NA		NA			5.64	x		NA
Apr-16	Symmetry Surgical Inc.	Manufactures and distributes instruments for neurosurgery and spine surgery applications	RoundTable Healthcare Management, LLC	$	129.5		(0.9	)%	$	84.1	$	9.1		10.8	%		1.54	x		14.2	x
Jul-15	TriVascular Technologies, Inc.	Develops and commercializes technologies to advance minimally invasive treatment of abdominal aortic aneurysms (AAA)	Endologix, Inc.	$	123.1		86.0	%	$	34.7		NM		NM			3.55	x		NM
May-15	Synergetics USA, Inc.	Provides precision surgical devices, surgical equipment, and consumables primarily for the ophthalmology and neurosurgery markets	Valeant Pharmaceuticals International	$	184.8		5.2	%	$	71.7	$	10.1		14.1	%		2.58	x		18.3	x
Dec-13	Solta Medical, Inc.	Designs, develops, manufactures, and markets energy-based medical device systems for aesthetic applications for plastic surgeons, general and family practitioners, gynecologists, ophthalmologists, and others	Valeant Pharmaceuticals International, Inc.	$	271.5		10.2	%	$	151.1	$	2.5		1.6	%		1.80	x		NM
Jun-13	Power Surgical Technology, Inc.	Designs, manufactures, and markets spinal and orthopedic implants and instruments for customers internationally	RTI Biologics, Inc. (nka: RTI Surgical, Inc.)	$	130.0		NA		$	88.2		NA		NA			1.47	x		NA
May-13	Theragenetics Corporation	Manufactures and distributes wound closures, vascular access products, and specialty needle products	Juniper Investment Company, LLC	$	53.7		(0.6	)%	$	80.7	$	10.1		12.6	%		0.67	x		5.3	x

			Mean	$	250.6		15.7	%	$	98.5	$	14.0		12.7	%		2.63	x		12.1	x
			Median	$	157.4		5.2	%	$	82.4	$	9.6		13.3	%		2.08	x		14.2	x

			Aggregate Mean	$	188.9		16.4	%	$	75.1	$	12.5		16.6	%		2.80	x		11.4	x
			Aggregate Median	$	129.5		6.1	%	$	70.0	$	9.1		15.2	%		2.37	x		12.0	x

(1) Transaction announced

Source Capital IQ and company filings

Analysis of Implied Valuation Multiples. Duff & Phelps compared the valuation multiples from the selected public company analysis and the selected M&A transactions analysis to the range of implied enterprise value multiples for the Company based on the DCF analysis. Due to the Company’s depressed EBITDA estimates for 2017 and projected 2018, the implied multiples for these years are not meaningful. Therefore, Duff & Phelps focused on the implied EBITDA multiple for 2019 when the Company is projected to achieve more normalized profitability. Duff & Phelps also analyzed implied multiples of enterprise value to revenue. The implied 2019 EBITDA multiples and the 2017, 2018 and 2019 revenue multiples for the Company fall below the mean and medians of the selected public companies. Based on the Company’s risk, growth, and profitability relative to the selected publicly traded companies and precedent transactions, the implied multiples were determined to be reasonable.

Selected Public Companies Analysis / M&A Transactions Analysis
*($ in thousands)*
Enterprise Valuation Multiples
Metric	Public Company Range						Public Company Median			Transaction Median ⁽¹⁾				Company Performance		Enterprise Value Range

							Concluded Enterprise Value Range								$	132,000		-	$	147,000
Implied Enterprise Value Multiples
EV/2017 EBITDA		12.1	x	-	35.9	x		15.2	x		12.0	x	$	1,521		NM		-		NM
EV/2018 EBITDA		9.3	x	-	25.8	x		13.4	x		NA			7,431		17.8	x	-		19.8	x
EV/2019 EBITDA		11.4	x	-	18.4	x		12.7	x		NA			14,036		9.4	x	-		10.5	x
EV/2017 Revenue		0.88	x	-	5.64	x		4.13	x		2.37	x		83,035		1.59	x	-		1.77	x
EV/2018 Revenue		0.85	x	-	5.18	x		3.49	x		NA			87,412		1.51	x	-		1.68	x
EV/2019 Revenue		0.80	x	-	4.85	x		3.31	x		NA			97,987		1.35	x	-		1.50	x

(1) 2017 transaction multiples reflect implied latest twelve month multiples from the M&A transactions shown on the prior page

Determination of Adjusted Enterprise Value

Duff & Phelps’ DCF valuation analysis resulted in indications of the Company’s total enterprise value ranging from $132.0 million to $147.0 million. Duff & Phelps then made certain adjustment to determine adjusted enterprise value.

Duff & Phelps performed an analysis of working capital and held discussions with Company management. This analysis resulted in a working capital deficit of approximately $1.9 million. This working capital deficit was subtracted from the enterprise value range.

In addition, Duff & Phelps performed an analysis and held discussions with Company management regarding the utilization of net operating loss carryforwards. On a pre-transaction basis, the Company’s management does not expect to be able to utilize the net operating loss carryforwards due to the Company’s high level of leverage and expected continued losses. On a post-transaction basis, the Company’s management anticipates that the net operating loss carryforwards will be limited under a IRS §382 limitation due to the change of control expected. The value of the Company’s net operating loss carryforwards on a post-transaction basis were estimated at $2.1 million to $2.2 million.

The adjustments for the working capital deficit, along with the post-Transaction adjustment for the net operating loss carryforwards results in a pre-Transaction adjusted enterprise value range of $130.1 million to $145.1 million and a post-Transaction adjusted enterprise value range of $132.2 million to $147.3 million.

Pre-Tier 2 Transaction Per Share Value Range

On a pre-transaction basis, Duff & Phelps estimated the adjusted enterprise value to be $130.1 million to $145.1 million. The Company’s net debt, including the 9.0% debt repayment fee and other obligations, have a face value of approximately $152.0 million, which exceeds the calculated enterprise value of the Company. Therefore, Duff & Phelps estimated the pre-transaction per share value of the Company utilizing a Black-Scholes option pricing model to estimate the Company’s pre-transaction equity value per share range of $0.02 to $2.37 (after adjusting for the reverse stock split). The table below summarizes the assumptions utilized:

Pre-Proposed Transaction Equity Value

($ in thousands, except per share values)

	Low			High
Enterprise Value Range	$	130,105	to	$	145,105

Book Value of Net Debt Outstanding		(151,954)
Cash		2,069
Transaction Expenses		(2,915)
Restructuring Expenses		(2,527)
Total Obligations		(155,327)

Assumed Time to Default		1 month to 3 months
Volatility Range		25%
Shares Outstanding (in 000s)		1,514

Equity Value Range	$	25	to	$	3,593

Indicated Per Share Value Range	$	0.02	-	$	2.37

Note: Balances as of September 30, 2017

Note: Shares outstanding and per share values are after giving effect to the Reverse Stock Split

Post-Tier 2 Transaction Per Share Value Range

On a post-transaction basis, Duff & Phelps estimated that the Company’s adjusted enterprise value to be $132.2 million to $147.3 million. To determine the total equity, there were adjustments made for (i) the conversion of the 2017 Notes to Common Stock, (ii) the exchange of the Remaining Notes into Common Stock, (iii) the inflow of $6.8 million in proceeds from the Private Placement, (iv) the deduction of capital leases and the term loan (reflecting a 1.0% debt repayment fee), (v) the addition of cash and equivalents, and (vi) the deduction of transaction costs and other non-recurring costs. These adjustments result in an estimated post-transaction equity value range of approximately $61.4 million to $76.5 million. Duff & Phelps then calculated the per share value by dividing the equity value range by shares outstanding after the conversion of the 2017 Notes and the Remaining Notes resulting in a per share value range of $4.79 to $5.97 per share (after adjusting for the reverse stock split).

Valuation Conclusion

($ in thousands, except per share values)

	Pre-Proposed Transaction									Post-Proposed Transaction
	D&P Estimate							Current		D&P Estimate
	Low				High			Trading Value		Low				High
Enterprise Value Conclusion	$	132,000		-	$	147,000				$	132,000		-	$	147,000
Present Value of Net Operating Loss Tax Benefit (2)		-		-		-					2,100		-		2,200
Net Working Capital Deficit		(1,895	)	-		(1,895	)				(1,895	)	-		(1,895	)
Adjusted Enterprise Value Conclusion	$	130,105		-	$	145,105				$	132,205		-	$	147,305
Cash and Equivalents (3)											2,069		-		2,069
Proceeds from Private Placement (4)											6,800		-		6,800
Transaction Costs (4)											(4,525	)	-		(4,525	)
Non-Recurring Costs (4)											(2,527	)	-		(2,527	)
Capital Leases (3)											(977	)	-		(977	)
Tern Loan (3) (5)											(71,607	)	-		(71,607	)
January 2016 and 2021 Notes (6)											-		-		-
Equity Value (7)	$	25		-	$	3,593		$	9,755	$	61,438		-	$	76,538
Shares Outstanding as of September 30, 2017		1,514				1,514			1,514		1,514				1,514			Exchange
New Shares from Proposed Transaction											11,299				11,299			Rate of
Fully Diluted Shares Outstanding		1,514				1,514			1,514		12,813				12,813			Notes

Indicated Per Share Value (7)	$	0.02		-	$	2.37		$	6.44	$	4.79		-	$	5.97		$	7.20

Implied Enterprise Value Multiples
EV/2017 EBITDA	$	1,521	NM		NM		NM		NM
EV/2018 EBITDA		7,431	17.5	x	19.5	x	17.8	x	19.8	x
EV/2019 EBITDA		14,036	9.3	x	10.3	x	9.4	x	10.5	x
EV/2017 Revenue		83,035	1.57	x	1.75	x	1.59	x	1.77	x
EV/2018 Revenue		87,412	1.49	x	1.66	x	1.51	x	1.69	x
EV/2019 Revenue		97,987	1.33	x	1.48	x	1.35	x	1.50	x

(1) Closing price as of December 20, 2017 adjusted for the Reverse Stock Split

(2) Per Company management, Pre-Proposed Transaction future benefits from net operating loss carryforwards would not be realized; Post-Proposed Transaction utilization would be limited by Section 382 limitation.

(3) Balance as of September 30, 2017

(4) Per Company management

(5) Includes $10.1 million of accrued interest and 9.0% Repayment Fee Pre-Transaction and 1.0% Repayment Fee Post-Transaction

(6) Pre-Transaction balance as of September 30, 2017

(7) Pre-Transaction values based on analysis shown on the prior page

Note: All shares outstanding and per share values are after giving effect to the Reverse Stock Split

Historical Stock Trading. Because the Common Stock is publicly traded, Duff & Phelps considered the per share value ascribed to it by the public markets. Duff & Phelps analyzed the Company’s historical stock prices, trading volumes, levels of institutional ownership and historical valuation multiples. On December 20, 2017, the closing price of the Common Stock was $0.54 per share, and as adjusted for the reverse stock split the closing price would be $6.44 per share. In performing its fundamental valuation, Duff & Phelps considered the reported price per share of the Common Stock as an indication of value.

Summary Conclusion

Based on Duff & Phelps’ analysis, as summarized in the table above, the Conversion Price of $7.20 exceeds the Company’s estimated pre-transaction per share value range of $0.02 to $2.37 per share. The Conversion Price also represents a premium to the Company’s closing stock price on December 20, 2017 of $6.44 per share, as adjusted for the reverse stock split. In addition, the Tier 2 Transaction is accretive to the holders of the Common Stock, as the Company’s per share value, taking into consideration all of the elements of the Proposed Transaction, is estimated at $4.79 to $5.97 per share. As a result, Duff & Phelps observed that its analysis supported its determination of the fairness, from a financial point of view, to the public holders of the Common Stock of the conversion of the Notes in connection with the Tier at the Conversion Price of $7.20 per share.

Other

Fairness Opinion Review Committee. The issuance of Duff & Phelps' opinion was approved by its fairness review committee.

Disclosure of Prior Relationships. Duff & Phelps acted as financial advisor to the Board and received a fee for its services. No portion of Duff & Phelps’ fee was contingent upon either the conclusion expressed in its opinion or whether or not the Tier 2 Transaction is successfully consummated. Pursuant to the terms of the Engagement Letter, a portion of Duff & Phelps’ fee is payable upon the later of (i) Duff & Phelps’ informing the Strategic Committee of the Board that it is prepared to deliver its Opinion, and (ii) January 10, 2018. Duff & Phelps has also performed certain portfolio valuation engagements for OrbiMed Advisors LLC (“OrbiMed Advisors”) and for these engagements Duff & Phelps received customary fees, expense reimbursement and indemnification. These engagements did not include OrbiMed Advisors’ investments in the Company.

Fees and Expenses. Pursuant to its Engagement Letter with the Company, Duff & Phelps received a professional fee for providing a fairness opinion in the amount of $325,000. The Company has also agreed to reimburse Duff & Phelps for its reasonable out-of-pocket expenses incurred in connection with its engagement and to indemnify Duff & Phelps, its affiliates and each of their respective directors, officers, attorneys and other agents, stockholders, employees and controlling persons against certain liabilities, including liabilities under the federal securities laws, relating to or arising out of Duff & Phelps’ engagement.

Certain Company Forecasts

We do not, as a matter of course, publicly disclose financial forecasts of future financial performance or other results as set forth below and are especially cautious of making financial forecasts due to the unpredictability of the underlying assumptions and estimates.

However, in connection with the evaluation of the Restructuring Agreement and the Transactions, and in connection with the rendering of Duff & Phelps’ opinion described above, Duff & Phelps and our Board were provided with certain non-public, unaudited, financial forecasts for the Company (pro forma for the consummation of the Transactions), which are described below and which we refer to as the “Company Forecasts.” The Company Forecasts were prepared by management for years ranging from 2017 to 2020 and were provided to Duff & Phelps and presented to our Board in December 2017. Our Board reviewed the Company Forecasts in its evaluation of the Transactions, and Duff & Phelps relied on the Company Forecasts in rendering its fairness opinion.

We prepared the Company Forecasts solely for internal use and not with a view toward public disclosure and, accordingly, the Company Forecasts do not necessarily comply with the published guidelines of the SEC regarding projections and the use of measures other than generally accepted accounting principles as applied in the United States (“GAAP”), the guidelines established by the American Institute of Certified Public Accountants for preparation and presentation of financial projections or forecasts. Neither our independent registered public accounting firm, nor any other independent accountants, have compiled, examined or performed any procedures regarding the Company Forecasts, nor have they expressed any opinion or any other form of assurance on the information or its achievability, and they assume no responsibility for, and disclaim any association with, the Company Forecasts.

The Company Forecasts, while presented with numerical specificity, necessarily were based on numerous variables and assumptions, including, but not limited to, those relating to industry performance, general business, economic, regulatory, market and financial conditions and other future events, as well as matters specific to our business, all of which are difficult to predict and many of which are beyond our control. The Company Forecasts are subjective in many respects and thus are susceptible to multiple interpretations and periodic revisions based on actual experience and business developments. We cannot assure you that the forecasted results under any of the scenarios presented will be realized or that actual results will not be significantly higher or lower than forecasted in any of the scenarios. The Company Forecasts cover multiple years and the information by its nature becomes less predictive with each successive year. The assumptions on which the Company Forecasts were based involve judgments regarding future economic, competitive and regulatory conditions and financial market conditions, all of which are difficult or impossible to predict accurately and many of which are beyond our control. The Company Forecasts also reflect assumptions for certain business decisions that are subject to change. The Company Forecasts cannot, therefore, be considered a guarantee of future operating results, and this information should not be relied on as such. We do not assume any responsibility for the validity, reasonableness, accuracy or completeness of the Company Forecasts.

The Company Forecasts are forward-looking statements. For information on factors that may cause our future financial results to materially vary, see Cautionary Statements Regarding Forward-Looking Statements on page 5.

The information from the Company Forecasts should be evaluated, if at all, in conjunction with the historical consolidated financial statements contained in our public filings with the SEC. In light of the foregoing factors and the uncertainties inherent in the Company Forecasts, readers of this Proxy Statement are cautioned not to place undue, if any, reliance on the Company Forecasts. The Company Forecasts have been prepared on a pro forma basis for the effect of the Restructuring Agreement and the Transactions.

The Company Forecasts included below are not being included in this Proxy Statement to influence your vote on the Proposals or because we believe they are material or because we believe they are a reliable prediction of actual future results. Instead, the Company Forecasts are being included herein since they were reviewed by the Board in connection with the evaluation of the Transactions and were used by Duff & Phelps in connection with the rendering of its fairness opinion.

In light of the foregoing factors and the uncertainties inherent in the Company Forecasts, stockholders are cautioned not to place undue, if any, reliance on such projections.

($000s)	FY2017		FY2018		FY2019		FY2020
Gross Sales	83,035		87,412		97,987		103,927
Sales Growth Rate	-7.7	%	5.3	%	12.1	%	6.1	%

Gross Profit	52,903		58,438		65,959		70,448
Gross Margin %	63.7	%	66.9	%	67.3	%	67.8	%
Total Operating Expenses	66,417		60,985		61,140		62,101

Income (Loss) from Operations	(13,515	)	(2,546	)	4,818		8,347
Other Expense	(18,107	)	(12,146	)	(11,356	)	(9,664	)
Net Loss	(31,622	)	(14,692	)	(6,538	)	(1,317	)

Balance Sheet
ASSETS
Total current assets	40,055		47,473		55,764		60,997

PP&E	10,836		8,013		4,794		2,597
Goodwill	41,535		41,535		41,535		41,535
Intangible assets, net	31,423		26,924		22,425		17,926
Other assets	2,118		555		555		555
Total Assets	125,967		124,499		125,072		123,609

LIABILITIES & EQUITY
Total current liabilities	89,944		22,997		23,775		23,728
Capital lease obligations (including current portion)	952		852		752		652
Long-term convertible debt	72,930		-		-		-
Long-term debt, less issuance costs	-		76,160		82,594		82,594
Total Liabilities	163,826		100,009		107,120		106,974

Total Stockholders’ (Deficit) Equity	(37,859	)	24,490		17,952		16,635
Total Liabilities and Stockholders’ Equity	125,967		124,499		125,072		123,609

We make no representation to any stockholder or any other person regarding our ultimate performance compared to the information included in the above unaudited, projected financial information under any of the Company Forecasts. The inclusion of unaudited, projected financial information in this Proxy Statement should not be regarded as an indication that the prospective financial information under any of the scenarios will be an accurate prediction of future events, and they should not be relied on as such. Except to the extent required by federal securities laws, we do not intend to, and disclaim any obligation to, update, revise or correct the above prospective financial information to reflect circumstances existing after the date when made or to reflect the occurrence of future events.

CONSEQUENCES OF STOCKHOLDER VOTE ON PROPOSALS 1, 2 AND 3

We expect the following consequences to occur depending on the outcome of the stockholder vote on Proposals 1, 2 or 3 at the Special Meeting.

Consequences if Proposals 1, 2 or 3 Are Not Approved

Termination of Restructuring Agreement

If any of Proposals 1, 2 or 3 are not approved at the Special Meeting, the Restructuring Agreement allows the Investors to terminate the Restructuring Agreement.

No Exchange of Notes

If Proposal 2 (Amendment to Certificate of Incorporation) is not approved, we will not have enough authorized shares of Common Stock under our certificate of incorporation to complete the Tier 2 Transaction and the Private Placement. If Proposal 1 (Issuance of Common Stock Under Notes) is not approved, we will not be able to exchange the Notes for Common Stock in the Tier 2 Transaction or consummate the Private Placement due to the stockholder approval requirements of Sections 713(a) and 713(b) of the NYSE American Company Guide. In either case, if the Notes would not be converted or exchanged into equity and we would continue to face severe liquidity constraints and the prospect of bankruptcy. The full conversion and exchange of the Notes and the Private Placement are integral parts of the Transactions.

Acceleration of Notes, Indenture and Credit Facility and Termination of Strategic Relationship

If any of Proposals 1, 2 or 3 are not approved at the Special Meeting, the Investors may exercise any rights they may have to accelerate full repayment of the Notes or other indebtedness set forth under the Credit Facility or the Indenture. If the Notes, Indenture and/or Credit Facility are accelerated, we will be forced to quickly raise additional funds to avoid defaulting on our payment obligations, and we cannot guarantee that we would be able to raise sufficient funds. If we default on our payment conditions under the Notes, Indenture and/or Credit Facility, we will face the prospect of bankruptcy.

Delisting of Shares from NYSE American

On November 1, 2016, we were notified by the NYSE American that NYSE Regulation has accepted our plan to regain compliance with the NYSE American’s continued listing standards of the NYSE American Company Guide by February 15, 2018, subject to periodic review by the NYSE American for compliance with the initiatives set forth in the plan. If we are not in compliance with the continued listing standards by February 15, 2018, or if we do not make progress consistent with the plan during the plan period, the NYSE Regulation staff will initiate delisting proceedings as appropriate.

If any of Proposals 1, 2 or 3 are not approved at the Special Meeting and the Tier 2 Transaction does not close by February 15, 2018, we will be delisted from the NYSE American, which could further decrease the value of our Common Stock.

Consequences if Proposals 1, 2 and 3 Are Approved

Full Conversion and Exchange of Notes

If Proposals 1 and 2 are approved, the Noteholders may exchange the Notes for shares of Common Stock in the Tier 2 Transaction.

Increased Ownership by the Investors

Based on the number of shares of our Common Stock outstanding on the closing, if the Investors fully convert and exchange their Notes at the conversion and exchange rates set forth in the Restructuring Agreement and complete the Private Placement, the Investors (ROS and OrbiMed) will own approximately 70.4% of our outstanding Common Stock. The non-Noteholder stockholders of the Company, who currently own approximately 95.7% of the outstanding Common Stock, will be substantially diluted from an ownership standpoint and will own approximately 11.3% of the outstanding Common Stock following the consummation of the Tier 2 Transaction and the Private Placement.

The following table sets forth the capitalization of the Company, taken on a consolidated basis with its subsidiaries, as of September 31, 2017, on an actual basis and on a pro forma basis to give effect to the reverse stock split and the Transactions, assuming that the Tier 2 Transaction and the Private Placement are consummated on February 15, 2018:

	As of September 30, 2017 (Unaudited)
	Actual			Pro Forma
Cash, cash equivalents and trade accounts receivable	$	15,978,178		$	22,788,065

Long-term debt:
Indenture Notes		67,026,807			0
2016 Notes		2,169,692			0
2017 Notes		1,584,713			0
Credit Facility		65,609,693			65,609,693
Capital lease obligations (less current portion)		658,011			658,011
Total long-term debt		137,048,916			66,267,704

Stockholders’ equity
Preferred stock, $0.000001 par value per share; 5,000,000 shares authorized, no shares issued and outstanding, actual; and 10,000,000 shares authorized, no shares issued and outstanding, pro forma		0			0
Common Stock, $0.000001 par value per share; 95,000,000 shares authorized and 18,173,007 issued and outstanding, actual; 50,000,000 shares authorized and 13,080,282 issued and outstanding pro forma		18			13
Additional paid-in capital		86,297,517			164,972,715
Accumulated deficit		(116,526,195	)		(117,610,294	)⁽¹⁾
Total stockholders’ (deficit) equity		(30,228,660	)		47,362,434
Total capitalization	$	106,820,256		$	113,630,138

(1)

Increase in accumulated deficit a result of the remaining write-off of debt issuance costs associated with 6% convertible senior unsecured notes due 2021.

For so long as the Investors are a significant stockholder, the Investors and their affiliates may exercise significant influence over our management and affairs, including influence beyond what is expressly described under the Transaction documents. The Investors and their affiliates also will be able to strongly influence or determine all matters requiring stockholder approval, regardless of whether or not other stockholders believe that a potential transaction is in their own best interests. In any of these matters, the interests of the Investors and their affiliates may differ or conflict with your interests.

The high concentration of stock ownership in one stockholder may also directly or indirectly deter hostile takeovers, delay or prevent changes in control or changes in management, or limit the ability of our other stockholders to approve transactions that they may deem to be in our best interests. Additionally, the trading price of our Common Stock may be adversely effected to the extent investors perceive a disadvantage in owning stock of a company with a significant stockholder.

Moreover, we will be a “controlled company” within the meaning of the corporate governance standards of the NYSE American. Under the rules of the NYSE American, a company of which more than 50% of the outstanding voting power is held by an individual, group or another company is a “controlled company” and may elect not to comply with certain stock exchange corporate governance requirements, including the requirement that a majority of the board of directors consists of independent directors and the requirement that a listed company have a nominating and governance committee and a compensation committee that is composed entirely of independent directors. Following the consummation of the Transactions, we may utilize these exemptions, and stockholders may not have the same protections afforded to stockholders that are subject to all of the stock exchange corporate governance requirements.

Impairment of our net operating losses (“NOLs”)

As of December 31, 2016, we had net operating loss (which we refer to as “NOL”) carryforwards of approximately $72.0 million for U.S. federal and state income tax purposes. Under the Internal Revenue Code, an “ownership change” with respect to a corporation can significantly limit the amount of pre-ownership change NOLs and certain other tax assets that the corporation may utilize after the ownership change to offset future taxable income, possibly reducing the amount of cash available to the corporation to satisfy its obligations. An ownership change generally should occur if the aggregate stock ownership of holders of at least 5% of our stock increases by more than 50 percentage points over the preceding three-year period. The issuance of our Common Stock to holders of Notes pursuant to the Transactions may have cause an ownership change with respect to our Common Stock. Further, the purchase of Common Stock pursuant to the Private Placement may trigger an ownership change with respect to our Common Stock.

PROPOSAL 1: Issuance of Shares of Common Stock for purposes of Sections 713(a) and 713(B) of the NYSE American Company Guide

On January 10, 2018, our Board adopted, upon recommendation of the Strategic Committee, a resolution recommending that our stockholders approve the issuance of shares of our Common Stock in the Transactions, which requires stockholder approval both as (i) an amount exceeding 20% of our outstanding common stock, as determined before such issuance, under Section 713(a) of the NYSE American Company Guide and (ii) an issuance that will result in a change of control of the Company under Section 713(b) of the NYSE American Company Guide.

Under the Tier 2 Transaction, the Investors and the Consenting Noteholders will exchange certain of their Notes for shares of our Common Stock at an exchange rate of 138.8889 shares per $1,000 principal amount of notes, for an exchange price of $7.20 per share (which, on a pre-reverse stock split basis, equates to an exchange rate of $0.60 per share). The Notes included in the Tier 2 Transaction are as follows:

$68,000,000 principal amount (which, including accrued and unpaid interest, will amount to approximately $72,515,200 as of February 15, 2018) of 6.00% convertible senior unsecured notes of the Company due 2021, issued in a private offering completed on July 31, 2015 pursuant to the Indenture to all of the Noteholders (and the option exercised by OrbiMed and ROS on August 10, 2015); and

$2,238,166 principal amount (which, including accrued and unpaid interest, amounted to approximately $2,386,781 as of February 15, 2018) of 6.00% convertible senior unsecured notes of the Company due 2021, issued in a private offering completed on April 14, 2016 governed by the convertible promissory notes with ROS and OrbiMed.

Furthermore, simultaneously with the consummation of the Tier 2 Transaction, the Investors have also agreed to purchase from the Company in the Private Placement an aggregate of 945,818 shares of Common Stock at a price per share of $7.20 (which, on a pre-reverse stock split basis, equates to a price per share of $0.60).

Reasons for Approval

Because our Common Stock is listed on the NYSE American, we are subject to the NYSE American’s rules and regulations. Section 713(a) of the NYSE American Company Guide requires stockholder approval prior to the issuance of common stock, or securities convertible into or exercisable for common stock, in any transaction or series of related transactions, if (i) the common stock to be issued has (or will have upon issuance) voting power equal to or greater than 20% of the company’s outstanding voting power, or (ii) the number of shares of common stock to be issued is (or will be upon issuance be) equal to or greater than 20% of the Company’s outstanding common stock, in each case determined before such issuance (the “Cap”).

The issuance of all of the Common Stock that the Investors are entitled to receive under the Tier 2 Transaction and the Private Placement would exceed the Cap, and, accordingly, must be approved by stockholders under Section 713(a) of the NYSE American Company Guide. Without stockholder approval of this Proposal 1, the Notes cannot be converted into or exchanged for, and the Private Placement cannot result in the issuance of, an aggregate number of shares exceeding the Cap. The full conversion and exchange of the Notes and the Private Placement are integral parts of the Transactions.

Section 713(b) of the NYSE American Company Guide requires us to obtain stockholder approval prior to certain issuances with respect to common stock or securities convertible into common stock that will result in a change of control of the Company. This rule does not specifically define when a change in control of a Company may be deemed to occur. However, guidance suggests that a change of control would occur, subject to certain limited exceptions, if after a transaction a person or an entity will hold 20% or more of the Company’s then outstanding capital stock. For the purpose of calculating the holdings of such person or entity, NYSE American would take into account, in addition to the securities received by such person or entity in the transaction, all of the shares owned by such person or entity unrelated to the transaction and would assume the conversion of any convertible securities held by such person or entity. Following the Transactions, the Investors will own approximately 70.4% of our outstanding Common Stock. We are seeking stockholder approval for any change in control in accordance with NYSE American Company Guide Section 713(b) as a result of the Transactions.

As discussed in Consequences of Stockholder Vote on Proposals 1, 2 and 3 on page 35, if this proposal is not approved, the Investors may terminate the Restructuring Agreement, which could lead to acceleration events under the Indenture, the Credit Facility and the Notes and delisting from the NYSE American.

Vote Required and Board of Directors’ Recommendation

The affirmative vote of a majority of holders of Common Stock present at the meeting and entitled to vote on each matter is required for approval of this proposal.

The Board recommends a vote FOR the approval of the issuance of shares of Common Stock for purposes of Sections 713(a) and 713(b) of the NYSE American Company Guide.

PROPOSAL 2: AMENDMENT TO CERTIFICATE OF INCORPORATION

The Board recommends that our stockholders approve the amendment to the Company’s Certificate of Incorporation attached hereto as Annex D (the “Certificate of Amendment”) to amend and restate the Company’s Certificate of Incorporation to, among other things:

effect a reverse stock split at a ratio of 1-for-12;

after giving effect to the reverse stock split, decrease the number of authorized shares of Common Stock available for issuance from 95,000,000 to 50,000,000 and increase the number of authorized shares of preferred stock available for issuance from 5,000,000 to 10,000,000;

authorize our Board to increase or decrease the number of shares of any series of our capital stock, provided that such increase or decrease does not exceed the number of authorized shares or be less than the number of shares then outstanding;

authorize our Board to issue new series of preferred stock without approval of the holders of Common Stock or other series of preferred stock, with such powers, preferences and rights as may be determined by our Board;

authorize a majority of our Board to fix the number of directors of the Company;

indemnify the members of our Board to the fullest extent permitted by law;

remove the classification of our Board to require all directors to be elected annually;

provide that special meetings of the stockholders of the Company may only be called by the Board, the chairman of the Board or the chief executive officer of the Company;

provide that no stockholder will be permitted to cumulative voting at any election of directors;

elect not to be governed by Section 203 of the General Corporation law of the State of Delaware;

elect the Court of Chancery of the State of Delaware to be the exclusive forum for any derivative action or proceeding brought on behalf of the Company, any action asserting a breach of a fiduciary duty owed by any director, officer or other employee of the Company, any action under the Delaware General Corporation Law, the Certificate of Incorporation or the bylaws of the Company or any actions governed by the internal affairs doctrine; and

require the vote of at least two-thirds of the voting power of the then outstanding shares of capital stock of the Company to amend or repeal certain provisions of the Certificate of Incorporation of the Company.

If the stockholders approve the reverse stock split, and the Board decides to implement it, the reverse stock split will become effective upon the filing of the Certificate of Amendment with the Delaware Secretary of State. The reverse stock split will be realized simultaneously for all outstanding Common Stock and the ratio determined by the Board will be the same for all outstanding Common Stock. The reverse stock split will affect all holders of Common Stock uniformly and each stockholder will hold the same percentage of Common Stock outstanding immediately following the reverse stock split as that stockholder held immediately prior to the reverse stock split, except for adjustments that may result from the treatment of fractional shares as described below.

The Certificate of Amendment will not change the par value per share of Common Stock (which will remain at $0.000001 per share).

Reasons for Approval

Enable Tier 2 Transaction and Private Placement

The reverse stock split will effectively increase the number of authorized shares of our Common Stock available for issue. Our certificate of incorporation does not currently authorize a sufficient number of shares to complete the Tier 2 Transaction and the Private Placement. Without stockholder approval of the amendment to our certificate of incorporation, we will not be able to complete the Transactions.

Maintain or Reestablish our NYSE American Listing

While there can be no guarantee, we expect that the reverse stock split will proportionately increase the trading price of our Common Stock on the NYSE American, which, if maintained, would allow us to maintain our listing, assuming we can continue to meet the other listing requirements. In addition, if the Tier 2 Transaction does not close by February 15, 2018, we will be delisted from the NYSE American. In order to relist our shares on the NYSE American, we will need to meet the minimum share price listing requirements. Without stockholder approval of the reverse stock split, we may not be able to reestablish our NYSE American listing.

Increase Our Common Stock Price to a Level More Appealing for Investors.

We believe that the reverse stock split could enhance the appeal of our Common Stock to the financial community, including institutional investors, and the general investing public. We believe that a number of institutional investors and investment funds are reluctant to invest in lower-priced securities and that brokerage firms may be reluctant to recommend lower priced stock to their clients, which may be due in part to a perception that lower-priced securities are less promising as investments, are less liquid in the event that an investor wishes to sell its shares, or are less likely to be followed by institutional securities research firms and therefore to have less third-party analysis of the company available to investors. We believe that the reduction in the number of issued and outstanding shares of the Common Stock caused by the reverse stock split, together with the anticipated increased stock price immediately following and resulting from the reverse stock split, may encourage interest and trading in our Common Stock and thus possibly promote greater liquidity for our stockholders, thereby resulting in a broader market for the Common Stock than that which currently exists.

We cannot assure you that all or any of the anticipated beneficial effects on the trading market for our Common Stock will occur. Our Board cannot predict with certainty what effect the reverse stock split will have on the market price of the Common Stock, particularly over the longer term. Some investors may view a reverse stock split negatively, which could result in a decrease in our market capitalization. Additionally, any improvement in liquidity due to increased institutional or brokerage interest or lower trading commissions may be offset by the lower number of outstanding shares.

Determination of Ratio

The ratio of the reverse stock split, if approved and implemented, will be 1-for-12. In determining the reverse stock split ratio, the Board consider numerous factors including:

the historical and projected performance of the Common Stock;

general economic and other related conditions prevailing in our industry and in the marketplace;

the projected impact of the selected reverse stock split ratio on trading liquidity in the Common Stock and our ability to continue the Common Stock’s listing on the NYSE American;

our capitalization (including the number of shares of Common Stock issued and outstanding) and number of shares of Common Stock to be authorized for issuance following the reverse stock split;

the prevailing trading price for Common Stock and the volume level thereof; and

potential devaluation of our market capitalization as a result of a reverse stock split.

Principal Effects of the Reverse Stock Split

A reverse stock split refers to a reduction in the number of outstanding shares of a class of a corporation’s capital stock, which may be accomplished, as in this case, by reclassifying and combining all of our outstanding shares of Common Stock into a proportionately smaller number of shares. For example, if the Company decides to implement the 1-for-12 reverse stock split of Common Stock, then a stockholder holding 12,000 shares of Common Stock before the reverse stock split would instead hold 1,000 shares of Common Stock immediately after the reverse stock split. Each stockholder’s proportionate ownership of outstanding shares of Common Stock would remain the same, except that stockholders that would otherwise receive fractional shares as a result of the reverse stock split will receive cash payments in lieu of fractional shares.

The following table illustrates the effects of the reverse stock split, without giving effect to any adjustments for fractional shares of Common Stock, on our outstanding shares of Common Stock and authorized but unreserved shares of Common Stock as of December 31, 2017:

	Before Reverse Stock Split		After Reverse Stock Split of 1-for-12
Common Stock Authorized		95,000,000		50,000,000
Common Stock Outstanding as of December 31, 2017		18,178,792		1,514,899
Common Stock Underlying Options, RSUs and Warrants		7,339,370		611,614
Common Stock Available for Grants under the Company’s Equity Incentive Plan		810,000		67,500
Total Common Stock Authorized but Unreserved		49,460,886		37,230,424

Because no fractional shares will be issued, holders of Common Stock could be eliminated in the event that the proposed reverse stock split is implemented. However, the Board does not intend to use the reverse stock split as a part of or a first step in a “going private” transaction within the meaning of Rule 13e-3 of the Securities and Exchange Act of 1934, as amended (the “Exchange Act”). There is no plan or contemplated plan by the Company or the Investors to take itself private at the date of this Proxy Statement.

Certain Risks Associated with the Reverse Stock Split

Before voting on this Proposal 2, you should consider the following risks associated with the implementation of the reverse stock split:

Although we expect that the reverse stock split will result in an increase in the market price of the Common Stock, we cannot assure you that the reverse stock split, if implemented, will increase the market price of the Common Stock in proportion to the reduction in the number of shares of the Common Stock outstanding, if at all, or result in a permanent increase in the market price. The effect the reverse stock split may have upon the market price of the Common Stock cannot be predicted with any certainty, and the history of similar reverse stock splits for companies in similar circumstances to ours is varied. The market price of the Common Stock is dependent on many factors, including our business and financial performance, general market conditions, prospects for future success and other factors detailed from time to time in the reports we file with the SEC. Accordingly, the total market capitalization of the Common Stock after the proposed reverse stock split may be lower than the total market capitalization before the proposed reverse stock split and, in the future, the market price of the Common Stock following the reverse stock split may not exceed or remain higher than the market price prior to the proposed reverse stock split.

The reverse stock split may result in some stockholders owning “odd lots” of less than 100 shares of Common Stock on a post-split basis. These odd lots may be more difficult to sell, or require greater transaction costs per share to sell, than shares in “round lots” of even multiples of 100 shares.

While the Board believes that a higher stock price may help generate investor interest, there can be no assurance that the reverse stock split will result in a per share price that will attract institutional investors or investment funds or that such share price will satisfy the investing guidelines of institutional investors or investment funds. As a result, the trading liquidity of the Common Stock may not necessarily improve.

Although the Board believes that the decrease in the number of shares of Common Stock outstanding as a consequence of the reverse stock split and the anticipated increase in the market price of Common Stock could encourage interest in the Common Stock and possibly promote greater liquidity for our stockholders, such liquidity could also be adversely affected by the reduced number of shares outstanding after the reverse stock split.

We cannot guarantee that the reverse stock split will be sufficient to increase the price of our Common Stock for purposes of maintaining or reestablishing our NYSE American listing, either in the near term or long term. In addition, even if the reverse stock split has the desired effect on the trading price of our Common Stock, we cannot guarantee that we will be able to, or choose to, maintain or reestablish our NYSE American listing.

Certain Risks Associated with Other Amendments

Certain other proposed amendments to our certificate of incorporation contain provisions that could make it harder for a third party to acquire us, even if doing so might be beneficial to our stockholders. These provisions include:

the ability of our Board to designate one or more series of preference shares and issue preference shares without stockholder approval;

the sole power of a majority of our Board to fix the number of directors;

the power of our Board to fill any vacancy on our Board in most circumstances, including when such vacancy occurs as a result of an increase in the number of directors or otherwise;

requiring the vote of at least two-thirds of the voting power of the then outstanding shares of capital stock of the Company to amend or repeal certain provisions of the Certificate of Incorporation of the Company; and

providing that special meetings of the stockholders of the Company may only be called by the Board, the chairman of the Board or the chief executive officer of the Company.

These anti-takeover provisions could discourage, delay or prevent transactions involving a change in control of the Company, including transactions that our stockholders may deem advantageous or that would provide our stockholders an opportunity to receive a premium for their Common Stock as part of a sale of the Company. This could, in turn, negatively affect the trading price of our Common Stock. These provisions could also discourage proxy contests and make it more difficult for you and other stockholders to elect directors of your choosing and to cause us to take other corporate actions you desire.

Effect on Authorized but Unissued Shares

The reverse stock split and the change in the number of our authorized shares of Common Stock will have the effect of significantly increasing the number of authorized but unissued shares of Common Stock. Because the number of outstanding shares will be reduced as a result of the reverse stock split, the number of shares available for issuance will effectively be increased. See the table under the caption “Principal Effects of the Reverse Stock Split” that shows the number of unreserved shares of Common Stock that would be available for issuance at various reverse stock split ratios.

Anti-Takeover and Dilutive Effects

Shares of Common Stock that are authorized but unissued provide the Board with flexibility to effect, among other transactions, public or private financings, mergers, acquisitions, stock dividends, stock splits and the granting of equity incentive awards. However, these authorized but unissued shares may also be used by the Board, consistent with and subject to its fiduciary duties, to deter future attempts to gain control of us or make such actions more expensive and less desirable. The Certificate of Amendment would give the Board authority to issue additional shares from time to time without delay or further action by the stockholders except as may be required by applicable law or the NYSE American rules. The Certificate of Amendment is not being recommended in response to any specific effort of which the Company is aware to obtain control of the Company. The Board does not have any present intent to use the authorized but unissued Common Stock to impede a takeover attempt. There are no plans or proposals to adopt other provisions or enter into any arrangements that have material anti-takeover effects.

In addition, the issuance of additional shares of Common Stock for any of the corporate purposes listed above could have a dilutive effect on earnings per share and the book or market value of the outstanding Common Stock, depending on the circumstances, and would likely dilute a stockholder’s percentage voting power in the Company. Holders of Common Stock are not entitled to preemptive rights or other protections against dilution. The Board intends to take these factors into account before authorizing any new issuance of shares.

Effect on Fractional Stockholders

No fractional shares of Common Stock will be issued in connection with the reverse stock split. If, as a result of the reverse stock split, a stockholder of record would otherwise hold a fractional share, the stockholder will receive a cash payment in lieu of the issuance of any such fractional share in an amount per share equal to the closing price per share on the NYSE American on the trading day immediately preceding the effective time of the reverse stock split (as adjusted to give effect to the reverse stock split), without interest. The ownership of a fractional interest will not give the holder thereof any voting, dividend or other right except to receive the cash payment therefor.

If a stockholder is entitled to a cash payment in lieu of any fractional share interest, a check will be mailed to the stockholder’s registered address as soon as practicable after the reverse stock split. By signing and cashing the check, stockholders will warrant that they owned the shares of Common Stock for which they received a cash payment.

Procedure for Effecting the Reverse Stock Split

If our stockholders approve this proposal, and the Board elects to effect the reverse stock split, we will effect the reverse stock split by filing the Certificate of Amendment with the Secretary of State of the State of Delaware. The reverse stock split will become effective, and the combination of, and reduction in, the number of our outstanding shares as a result of the reverse stock split will occur automatically, at the time of the filing of the Certificate of Amendment (referred to as the “effective time”), without any action on the part of our stockholders and without regard to the date that stock certificates representing any certificated shares prior to the reverse stock split are physically surrendered for new stock certificates. Beginning at the effective time, each certificate representing pre-reverse stock split shares will be deemed for all corporate purposes to evidence ownership of post-reverse stock split shares. The text of the Certificate of Amendment is subject to modification to include such changes as may be required by the office of the Secretary of State of the State of Delaware and as the Board deems necessary and advisable to effect the reverse stock split.

Stockholders should not destroy any stock certificate(s) and should not submit any certificate(s) until they receive a letter of transmittal from our transfer agent.

Material U.S. Federal Income Tax Consequences of the Reverse Stock Split

The following is a summary of important tax considerations of the reverse stock split. For purposes of this discussion, a stockholder is a “U.S. holder” if the holder is a beneficial owner of Common Stock and is, for U.S. federal income tax purposes:

a citizen or individual resident of the United States;

a corporation or other entity or arrangement treated as a corporation for U.S. federal income tax purposes, created in or organized under the laws of the United States, any state thereof or the District of Columbia;

an estate the income of which is subject to U.S. federal income tax without regard to its source; or

a trust if (a) a court within the United States is able to exercise primary supervision over the administration of the trust and one or more U.S. persons have the authority to control all substantial decisions of the trust, or (b) it has a valid election in effect under applicable U.S. Treasury regulations to be treated as a U.S. person.

The following addresses only U.S. holders who hold Common Stock as capital assets. Holders of Common Stock who are not U.S. holders may have different tax consequences than those described below and are urged to consult their own tax advisors about their tax treatment under U.S. and non-U.S. laws. It does not purport to be complete and does not address stockholders subject to special rules, such as financial institutions, tax-exempt organizations, insurance companies, dealers in securities, stockholders who hold their pre-reverse stock split shares as part of a straddle, hedge or conversion transaction, and stockholders who acquired their pre-reverse stock split shares pursuant to the exercise of employee stock options or otherwise as compensation. This summary is based upon current law, which may change, possibly even retroactively. It does not address tax considerations under state, local, foreign and other laws. The tax treatment of a stockholder may vary depending upon the particular facts and circumstances of such stockholder. Each stockholder is urged to consult with such stockholder’s own tax advisor with respect to the tax consequences of the reverse stock split.

A U.S. holder generally will not recognize gain or loss on the reverse stock split, except to the extent of cash, if any, received in lieu of a fractional share interest. The aggregate tax basis of the post-reverse stock split shares received will be equal to the aggregate tax basis of the pre-reverse stock split shares exchanged therefor (excluding any portion of the U.S. holder’s basis allocated to fractional shares), and the holding period of the post-reverse stock split shares received will include the holding period of the pre-reverse stock split shares exchanged.

A U.S. holder of the pre-reverse stock split shares who receives cash will generally be treated as having exchanged a fractional share interest for cash in a redemption by us. Accordingly, the U.S. holder will recognize gain or loss, equal to the difference between the portion of the U.S. holder’s adjusted tax basis of the pre-reverse stock split shares allocated to the fractional share interest and the cash received in lieu of the fractional share interest. The gain or loss generally will be capital gain or loss and will be long-term capital gain or loss if, as of the effective time of the reverse stock split, the U.S. holder’s holding period of the fractional share (which includes the holding period of the pre-reverse stock split shares) exceeds one year.

The foregoing views are not binding on the Internal Revenue Service or the courts. Accordingly, each stockholder should consult with his or her own tax advisor with respect to all of the potential tax consequences to him or her of the reverse stock split.

Accounting Matters

The par value of the Common Stock will remain unchanged at $0.000001 per share after the reverse stock split. As a result, our stated capital, which consists of the par value per share of the Common Stock multiplied by the aggregate number of shares of the Common Stock issued and outstanding, will be reduced proportionately at the effective time of the reverse stock split. Correspondingly, our additional paid-in capital, which consists of the difference between our stated capital and the aggregate amount paid to us upon the issuance of all currently outstanding shares of Common Stock, will be increased by a number equal to the decrease in stated capital. Further, net loss per share, book value per share and other per share amounts will be increased as a result of the reverse stock split because there will be fewer shares of Common Stock outstanding.

Vote Required and Board of Directors’ Recommendation

The affirmative vote of the holders of a majority of the shares of the Common Stock outstanding on the Record Date will be required to approve the Amendment to the Company’s Certificate of Incorporation, which contemplates a reverse stock split of the Common Stock at a ratio of 1:12, an increase of authorized shares of Common Stock and preferred stock available for issuance and such other changes as are described in this Proxy Statement. Accordingly, abstentions and broker non-votes will have the same effect as a vote against the proposal. Shares represented by valid proxies and not revoked will be voted at the Special Meeting in accordance with the instructions given. If no voting instructions are given, such shares will be voted “FOR” this proposal.

The Board recommends a vote FOR the adoption of the proposed amendment to the Company’s Certificate of Incorporation.

PROPOSAL 3: ELECTION OF DIRECTORS

Nominees for Director

Prior to the Special Meeting, the Company’s Board of Directors consisted of three classes of directors with staggered terms of three years each. Following the approval of Proposal 2, the board will be declassified and will only have one class of directors, whom will hold office until his or her successor has been elected and qualified or until the director’s earlier resignation or removal. The term of each director will expire at the Company’s subsequent annual meeting of the stockholder, at which time such directors will stand for re-election.

The names, ages and positions of our nominees for director are as follows:

Name	Age	Position
John Bakewell	56	Director
Michael Eggenberg	48	Director
Michael Mainelli	56	Director
Robert McNamara	61	Director
Jeffrey Peters	49	Director
Matthew Rizzo	45	Director

The business experience of our nominees for director for the past five years (and, in some instances, for prior years) is summarized below.

John K. Bakewell is a consultant to the medical technology industry. Mr. Bakewell served as the Chief Financial Officer of Exact Sciences Corporation, a molecular diagnostics company, from January 2016 to November 2016. Mr. Bakewell previously served as the Chief Financial Officer of Lantheus Holdings, Inc., a diagnostic medical imaging company, from June 2014 to December 2015 and as Chief Financial Officer of Interline Brands, Inc., a distributor and direct marketer of broad-line maintenance, repair and operations products, from June 2013 to May 2014. Mr. Bakewell previously was the Executive Vice President and Chief Financial Officer of RegionalCare Hospital Partners, an owner and operator of non-urban hospitals, from January 2010 to December 2011. In addition, Mr. Bakewell held the position of Chief Financial Officer with Wright Medical Group, Inc., an orthopaedic medical device company, from 2000 to 2009, with Altra Energy Technologies, Inc. from 1998 to 2000, with Cyberonics, Inc. from 1993 to 1998 and with Zeos International, Ltd. from 1990 to 1993. Mr. Bakewell has also served as a member of the board of directors of Entellus Medical, Inc., a public medical technology company that designs and manufactures products for the treatment of chronic and recurrent sinusitis in adults and children, since July 2015, and as a member of the board of directors of Corindus Vascular Robotics, Inc., a public medical technology company and the global leader in robotic-assisted vascular interventions, since July 2017. Since July 2008, Mr. Bakewell has served on the board of directors of Keystone Dental, Inc., a private medical device company,. Mr. Bakewell holds a Bachelor of Arts in Accounting from the University of Northern Iowa and is a certified public accountant (inactive). Mr. Bakewell’s financial experience as a chief financial officer of several publicly traded medical technology companies and his background and sophistication in finance and accounting contributes valuable experience to our Board of Directors.

Michael Eggenberg is a Managing Director with OrbiMed Advisors LLC since December 2016, focused on healthcare royalty and structured finance investments. Previously, Mr. Eggenberg was a Managing Director at Fortress Investment Group, focused on Special Opportunities Funds from May 2005 to December 2016. Prior to Fortress, Mr. Eggenberg held positions at CIT, Wells Fargo and Nations Bank. Mr. Eggenberg received his B.S. in Finance and General Business from Drexel University. Mr. Eggenberg brings valuable experience in the life science industry and finance experience to the Board of Directors.

Michael Mainelli has worked in the medical device industry for over twenty-five years, serving the diagnostic imaging, surgical, and orthopedic markets. He has extensive international experience having led operations in the UK and Israel. Most recently, he served as President and CEO of Stanmore Implants Worldwide, LTD from 2013 to 2016, a UK based specialty orthopaedics company, and led the sale of the company to Stryker Corporation. Prior to Stanmore, he was the CEO of Active Implants Corporation, an early stage company developing an innovative meniscal implant, from 2008 to 2011. Prior to Active Implants, he was the Group President of the Medical Device Segment of Intermagnetics General Corporation from 2005 to 2006 before the company was acquired by Royal Philips. Prior to employment by Intermagnetics, Mr. Mainelli was with Stryker Corporation serving in the positions of VP-Corporate Development, Assistant to the Chairman, President-Stryker Japan and President-Stryker Spine. Prior to Stryker, he was employed by General Electric in various management roles. He has served on the board of directors of Orthofix International, a publicly traded medical device company, and Active Implants Corporation and Stanmore Implants, which were VC-backed privately-owned companies. He currently serves on the board of directors of Autocam Medical, a privately-owned medical device contract manufacturing company. He earned a MBA from the University of Chicago, a MSE from the University of Pennsylvania and a BSME from Northeastern University. Mr. Mainelli brings strong experience in the implant and medical device industries to the Board of Directors.

Robert McNamara served as Executive Vice President of LDR Holdings since January 2013 and as the Chief Financial Officer for LDR Holdings since April 2012 up until its acquisition by Zimmer Biomet in 2016. From September 2010 to April 2012, Mr. McNamara served as a financial consultant, working primarily in the medical device and biotechnology industries. From May 2009 to September 2010, he served as Chief Financial Officer of Purfresh, Inc., a privately held clean technology company. In addition, Mr. McNamara has previously served as the Senior Vice President and Chief Financial Officer for publicly traded medical device companies Accuray, Inc., Somnus Medical Technologies and Target Therapeutics, was a member of the Board of Directors of Northstar Neurosciences and is the former Mayor of Menlo Park, California. Mr. McNamara holds a B.S. in Accounting from the University of San Francisco and an M.B.A. in Finance from The Wharton School of the University of Pennsylvania. Mr. McNamara brings valuable finance and accounting experience in the medical device industry to the Board of Directors.

Jeffrey Peters has over 25 years of medical device experience and currently serves as the president and chief executive officer of Cardialen, a private medical device company developing low-energy therapy for cardiac arrhythmias. Previously, Mr. Peters was the chief executive officer of Anulex Technologies (2011-2014), a company developing minimally invasive spine therapies. He also served as the chief technology officer of ev3 (now Medtronic) from 2001-2007. Mr. Peters’ financial roles include portfolio manager at Black River Asset Management, entrepreneur-in-residence at Foundation Medical, and stock analyst at Dain Rauscher Wessels. Mr. Peters received his B.S. and M.B.A. from the University of Minnesota. Mr. Peters brings experience in the medical device and life science industries to the Board of Directors.

Matthew S. Rizzo is a Partner with OrbiMed Advisors LLC, having joined the firm in April 2010, and is focused on healthcare royalty and structured finance investments. Previously, Mr. Rizzo was at Ikaria Holdings as a Senior Director in business development for pharmaceutical licensing and acquisitions. Prior to Ikaria, Mr. Rizzo was a Vice President at Fortress Investment Group, focused on healthcare investments in the Drawbridge Special Opportunities Funds. Prior to Fortress, he was at GlaxoSmithKline where he worked in business and commercial analysis. Mr. Rizzo received his M.B.A. from Duke University and his B.S. from the State University of New York at Buffalo. Mr. Rizzo brings valuable experience in the life science industry and finance experience to the Board of Directors.

Vote Required and Board of Directors’ Recommendation

The affirmative vote of a majority of holders of Common Stock present at the meeting and entitled to vote on each matter is required for the election of each nominee.

The Board of Directors recommends that you vote “FOR” the election of Messrs. Bakewell, Eggenberg, Mainelli, McNamara, Peters and Rizzo.

GENERAL INFORMATION ABOUT THE BOARD OF DIRECTORS
AND CORPORATE GOVERNANCE

Director Independence

The NYSE American listing standards require that the boards of listed companies have a majority of independent directors and, with limited exceptions, that audit and compensation committee members must all be independent as affirmatively determined by the Board. After reviewing the NYSE American standards of independence, our current Board affirmatively determined, by written consent in lieu of a special meeting of the Board, effective December 7, 2017, that the following current directors were independent: Kent Swanson, Michael Lopach, John Deedrick, Eric Timko, Paul Buckman and Rudy Mazzocchi. The basis for these determinations was that each of these current directors had no relationships with the Company other than being a director and/or stockholder of the Company. All of the members of the Company’s current Audit, Compensation, Nominations and Corporate Governance, Business Development and Strategic committees are independent.

If the Proposals described in this Proxy Statement are approved by stockholders, including the election of the nominees described in Proposal 3 of this Proxy Statement to the Board, the members of the Company’s Audit Committee following the consummation of the Transactions, Messers. Mainelli, Bakewell and McNamara, will be independent under the NYSE American standards of independence. Upon the consummation of the Transactions, OrbiMed and ROS will control a majority of the combined voting power of all classes of our outstanding voting stock. As a result, we expect to be a “controlled company” within the meaning of the NYSE American corporate governance standards. Under the NYSE American rules, a company of which more than 50% of the voting power is held by another person or group of persons acting together is a controlled company and may elect not to comply with certain NYSE American corporate governance requirements, including the requirements that:

a majority of the board of directors consist of independent directors;

the board has a nomination and governance committee composed entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities; and

the board has a compensation committee composed entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities.

If the Proposals described in this Proxy Statement are approved by stockholders, so long as we are a controlled company, we plan to rely on NYSE American’s controlled company exemptions and do not plan to have a majority independent Board, an independent nomination and governance committee or an independent compensation committee. Consequently, upon the consummation of the Transactions, we plan to disband the Compensation and Nominations and Corporate Governance committees of the Board. Furthermore, upon the consummation of the Transactions, we also plan to disband the Business Development and Special Strategic committees of the Board.

Board Meetings; Attendance at Annual Stockholders Meeting

The Board met 36 times during fiscal 2017, 33 of which were conducted by teleconference. All directors attended at least 75% of the meetings of the Board and Board Committees on which the director served during the last fiscal year. The Company does not have a formal policy on Board member attendance at annual meetings of stockholders, but encourages Directors to attend. The following Board members serving at the time of the Company’s 2017 annual meeting of stockholders attended the annual meeting: Messrs. O’Connell, Buckman and Swanson.

Board Leadership Structure and Risk Oversight

The current Board is led by Kent Swanson in his role as Chairman. Mr. Swanson is an independent director. The Company believes this structure is appropriate because it enables the Board to provide independent oversight and guidance. Following the election of the new Board under this Proxy Statement, the Chairman will be nominated by the Investors pursuant to the Investor Rights Agreement.

The Board has overall responsibility for risk oversight with a focus on the most significant risks facing the Company. The Board relies upon the Chief Executive Officer to supervise day-to-day risk management, and the Chief Executive Officer reports directly to the Board and certain committees on such matters as appropriate.

Stockholder Communications

The Board currently 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.

Corporate Governance

The Company has 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 Conduct and our Code of Ethics for the CEO and Senior Financial Officers, are available on our website at www.xtantmedical.com (click “Investors” and “Corporate Governance”).

Committees

Our current Board has the following committees and committee members (all of whom are independent directors):

Audit	Compensation	Nominations and Corporate Governance	Business Development	Strategic
Mr. Lopach, Chair	Mr. Buckman, Chair	Mr. Deedrick, Chair	Mr. Deedrick, Chair	Mr. Deedrick, Chair
Mr. Buckman	Mr. Lopach	Mr. Mazzocchi	Mr. Mazzocchi	Mr. Mazzocchi
Mr. Mazzocchi	Mr. Timko	Mr. Timko	Mr. Timko	Mr. Timko
			Mr. Buckman	Mr. Buckman

If the Proposals described in this Proxy Statement are approved by stockholders, following the consummation of the Transactions, the Board will have the following committee and committee members (all of whom are independent directors):

	Audit
	Mr. Bakewell, Chair
	Mr. Mainelli
	Mr. McNamara

Our Audit Committee, Compensation Committee, and Nominations and Corporate Governance Committee charters are posted on our website at www.xtantmedical.com (click “Investors” and “Corporate Governance”). A description of each committee's function and number of meetings during fiscal 2017 follows.

Audit Committee

The purpose of the Audit Committee is to assist the oversight of our Board of the integrity of the Company’s financial statements, the Company’s compliance with legal and regulatory matters, the independent auditor’s qualifications and independence, and the performance of the Company’s independent auditor and internal audit function. The primary responsibilities of the Audit Committee are set forth in its charter, and include various matters with respect to the oversight of the Company’s accounting and financial reporting process and audits of the financial statements of the Company. The Audit Committee also selects the independent auditor to conduct the annual audit of the financial statements of the Company; reviews the proposed scope of such audit; reviews accounting and financial controls of the Company with the independent auditor and our financial accounting staff; and reviews and approves transactions between the Company and directors, officers, and affiliates.

The Audit Committee currently consists of Messrs. Lopach, Buckman and Mazzocchi, each an “independent director” in accordance with NYSE American listing standards. Mr. Lopach serves as the Chairman of the Audit Committee. If the Proposals described in this Proxy Statement are approved by stockholders, following the consummation of the Transactions, the Audit Committee will consist of Messers. Mainelli, Bakewell and McNamara, each an “independent director” in accordance with NYSE American listing standards, and Mr. Blakewell will serve as the Chairman of the Audit Committee.

Under the NYSE American listing standards, all audit committee members must be “financially literate,” as that term is determined by the Board in its business judgment. 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 all current members of the Audit Committee are “financially literate” and that Messrs. Lopach and Buckman each qualify as an “audit committee financial expert” in accordance with applicable rules and regulations of the SEC. If the Proposals described in this Proxy Statement are approved by stockholders, following the consummation of the Transactions, we expect each member of the Audit Committee to be “financially literate” and qualify as an “audit committee financial expert” in accordance with applicable rules and regulations of the SEC. The Audit Committee met 7 times during 2017.

Report of the Audit Committee

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. EKS&H, our independent auditor, 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 auditor, (ii) discussed with our independent auditor the matters that are required to be discussed by the applicable Public Company Accounting Oversight Board standards, and (iii) received written disclosures and the letter from the independent auditor 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 2016 Annual Report on Form 10-K.

Respectfully submitted,

Michael Lopach
Paul R. Buckman
Rudy A. Mazzocchi

The foregoing Audit Committee Report does not constitute soliciting material and shall not be deemed filed or incorporated by reference into any other filing of our company under the Securities Act of 1933, as amended, or the Exchange Act of 1934, except to the extent we specifically incorporate this Audit Committee Report by reference therein.

Compensation Committee

The primary purposes of the Compensation Committee are to determine or recommend the compensation of our CEO and other executive officers and to oversee the administration of the Amended and Restated Xtant Medical Equity Incentive Plan. Our Compensation Committee currently consists of Messrs. Buckman, Lopach and Timko, each of whom is an “independent director” in accordance with NYSE American listing standards. If the Proposals described in this Proxy Statement are approved by stockholders, following the consummation of the Transactions, we expect to rely on NYSE American controlled company exemptions and disband the Compensation Committee. The Compensation Committee met 3 times during 2017.

Our Chief Executive Officer makes recommendations to the Compensation Committee regarding the Company’s business goals and the performance of executives in achieving those goals, and recommends other executives’ compensation levels to the Compensation Committee based on such performance. The Compensation Committee considers these recommendations and then makes an independent decision regarding officer compensation levels and awards. Neither the Compensation Committee nor management engaged the services of a compensation consultant during the year ended December 31, 2017.

Nominations and Corporate Governance Committee

The purposes of the Nominations and Corporate Governance Committee include the selection or recommendation to our Board of nominees to stand for election as directors at each election of directors, the oversight of the selection and composition of committees of our Board, the oversight of the evaluations of our Board and management, and the development and recommendation to our Board of a set of corporate governance principles applicable to our company.

In identifying and evaluating candidates for membership on the Board, the Nominations and Corporate Governance Committee may take into account all factors it considers appropriate, which may include 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. The entirety of each candidate's credentials is considered, and there are no specific minimum qualifications that must be met by a director nominee. The Company does not have a formal diversity policy for directors. The Nominations and Corporate Governance Committee identifies director candidates based on input provided by a number of sources, including members of the Committee, other directors, our stockholders, members of management and third parties. The Nominations 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 the Company’s Amended and Restated Bylaws.

The Nominations and Corporate Governance Committee currently consists of Messrs. Deedrick, Mazzocchi and Timko each of whom is an “independent director” in accordance with NYSE American listing standards. Mr. Deedrick serves as the current Chairman of the Nominations and Corporate Governance Committee. If the Proposals described in this Proxy Statement are approved by stockholders, following the consummation of the Transactions, we expect to rely on NYSE American controlled company exemptions and disband the Nominations and Corporate Governance Committee. The Nominations and Corporate Governance Committee met 4 times during 2017.

Business Development Committee

The purpose of the Business Development Committee is to assist the Board in carrying out oversight responsibilities related to potential strategic transactions. The current Business Development Committee consists of Messrs. Deedrick, Mazzocchi, Timko and Buckman, each of whom is an independent director. Mr. Deedrick serves as the current Chairman of the Business Development Committee. If the Proposals described in this Proxy Statement are approved by stockholders, following the consummation of the Transactions, we expect to disband the Business Development Committee. The Business Development Committee met 4 times during 2017.

Special Strategic Committee

The purpose of the Strategic Committee is to evaluate the Company’s performance of its obligations to its institutional lenders, holders of its convertible debt securities and other creditors and to review potential reorganization and/or restructuring or similar transactions with such parties and to review, evaluate, and negotiate mergers, acquisitions, investments or dispositions of material assets or a material portion of any business and to report its conclusions and recommendations to the Board, as appropriate. The current Strategic Committee consists of Messrs. Deedrick, Mazzocchi, Timko and Buckman, each of whom is an independent director. Mr. Deedrick serves as the current Chairman of the Strategic Committee. If the Proposals described in this Proxy Statement are approved by stockholders, following the consummation of the Transactions, we expect to disband the Strategic Committee. The Strategic Committee met 12 times during 2017.

Director Compensation

Independent directors received an annual retainer of $40,000 per year, the independent Chairman of our Board received an additional $20,000 per year, the Audit Committee Chair received $12,500 per year, other Committee Chairs received $10,000 per year, Audit Committee members received $5,000 per year, other Committee members received $4,000 per year and all independent directors received an annual equity grant valued at $40,000. In addition, the Chair of our Business Development Committee received $12,500 per year and all other members of the Business Development Committee received $5,000 per year.

The following table describes the compensation earned by our independent Board members during fiscal 2017.

Director Compensation

Name	Fees Earned or Paid in Cash		Stock Awards₍₁₎		Option Awards ₍₁₎		Non-Equity Incentive Plan Compensation		Change in Pension Value and Nonqualified Deferred Compensation Earnings		All Other Compensation		Total
Kent Swanson	$	60,000	$	40,000	$	-	$	-	$	-	$	-	$	100,000
Michael Lopach	$	56,500	$	40,000	$	-	$	-	$	-	$	-	$	96,500
Paul Buckman	$	73,500	$	40,000	$	-	$	-	$	-	$	-	$	113,500
Eric Timko	$	53,000	$	40,000	$	-	$	-	$	-	$	-	$	93,000
John Deedrick	$	71,500	$	40,000	$	-	$	-	$	-	$	-	$	111,500
Rudy Mazzocchi	$	55,500	$	40,000	$	-	$	-	$	-	$	-	$	95,500

(1)

Key assumptions used to estimate the grant date fair value of stock and option awards are contained in Note 10 to the latest audited financial statements in our 2016 Annual Report on Form 10-K.

TRANSACTIONS WITH RELATED PERSONS, PROMOTERS AND CERTAIN CONTROL PERSONS

As discussed in this Proxy Statement, the Company entered into the Restructuring Agreement with the Noteholders. Other than as described above with respect to (i) ROS and OrbiMed and (ii) PWPI and PWIMF, the Noteholders do not constitute a “group” as such term is defined in Section 13(d) of the Exchange Act.

Furthermore, as discussed in this Proxy Statement, the Company entered into the Support Agreement with the Noteholders, the Company’s executive officers and directors and certain of the Company’s stockholders.

For more information about the Restructuring Agreement and the Support Agreement, please see the section of this Proxy Statement titled Description of the Transactions beginning on page 12.

Certain former X-spine shareholders, who each now own less than 10% of our Common Stock, own a controlling interest in Norwood Tool Company d/b/a Norwood Medical, one of X-spine’s larger suppliers. In 2017, Xtant purchased less than 10% of its operating products from Norwood Medical.

Dr. Kirschman’s sister, Deborah Kirschman Klopsch, served as Xtant’s Corporate Counsel and Director of Corporate Compliance until July 2, 2017, and then provided consultation services to the Company from July 2, 2017 through July 25, 2017. Compensation paid to Ms. Klopsch was $82,314 and $140,614 in 2017 and 2016, respectively. Ms. Klopsch also received 1,005 restricted stock units at $3.19 a share for an anticipated cost of approximately $3,000 to be expensed ratably over the vesting period as General and Administrative expense; however, only 40% of such amount was incurred, as only 384 of her restricted stock units vested before her departure. See Note 10 to the financial statements in our 2016 Annual Report on Form 10-K.

Unless delegated to the Compensation Committee by the Board, the Audit Committee or the disinterested members of the full Board reviews and approves all related party transactions.

Family Relationships

There are no family relationships between or among our current directors, executive officers, or persons nominated or chosen by the Company to become directors or executive officers not disclosed above.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth information regarding the beneficial ownership of our Common Stock as of January 18, 2018 by (a) each of our directors and named executive officers, (b) all of our current directors and executive officers as a group, and (c) each person who is known by us to beneficially own more than 5% of our Common Stock.

Name and Address of Beneficial Owner	Number of Shares Beneficially Owned⁽²⁾			Percentage of Shares Beneficially Owned⁽³⁾

*Directors and Named Executive Officers⁽¹⁾:*

Carl O’Connell		75,000	⁽⁴⁾			*
Kent Swanson		456,794	⁽⁵⁾		2.2	%
Michael Lopach		73,741	⁽⁶⁾			*
Paul Buckman		20,101	⁽⁷⁾			*
John Deedrick		56,550	⁽⁸⁾			*
Eric Timko		29,700	⁽⁹⁾			*
Rudy Mazzocchi		29,700	⁽¹⁰⁾			*
David Kirschman, M.D.		1,697,063	⁽¹¹⁾		8.3	%

All executive officers and directors as a group (8 persons)		2,438,649			11.9	%

*Five Percent Stockholders:*
OrbiMed Advisors LLC
601 Lexington Ave., 54^th Floor
New York, NY 10022		2,838,903	⁽¹²⁾		13.9	%

Kenneth J. Hemmelgarn, Jr. Revocable Living Trust dated February 9, 1998
9485 Gulfshore Drive, B-201
Naples, FL 34108		1,272,796	⁽¹³⁾		6.2	%

Brian J. Hemmelgarn Revocable Living Trust dated February 9, 1998
P.O. Box 421
15643 Captive Drive
Captiva, FL 33924		1,272,796	⁽¹⁴⁾		6.2	%

* Less than 1% of outstanding shares of Common Stock.

(1)

The address for directors and named executive officers is c/o Xtant Medical Holdings, Inc., 664 Cruiser Lane, Belgrade, Montana 59714.

(2)

Unless otherwise indicated, includes shares owned by a spouse, minor children and relatives sharing the same home, as well as entities owned or controlled by the named person. Also includes shares that the named person has the right to acquire within 60 days after January 18, 2018, by the exercise or conversion of any warrant, stock option or convertible preferred stock. Unless otherwise noted, shares are owned of record and beneficially by the named person and the persons named in the table have sole voting and investment power with respect to the shares beneficially owned by them as set forth opposite their respective names.

(3)

The calculation in this column is based on 20,454,536 shares of Common Stock outstanding on January 18, 2018. The shares of Common Stock underlying warrants and stock options are deemed outstanding for purposes of computing the percentage of the person holding them, but are not deemed outstanding for the purpose of computing the percentage of any other person.

(4)

Consists of options to purchase 75,000 shares of our Common Stock.

(5)

Consists of (a) 120,794 shares of our Common Stock held directly, (b) 20,000 shares held by a family limited partnership, (c) warrants to purchase 5,000 shares of our Common Stock, (d) options to purchase 11,000 shares of our Common Stock, (e) 150,000 stock right shares purchased November 17, 2017, (f) 150,000 stock right warrants purchased November 17, 2017, and (g) 0 of the 51,948 restricted stock units (“RSUs”) of the annual board award on July 25, 2017 vesting on July 27, 2018.

(6)

Consists of (a) 41,451 shares of our Common Stock held directly, (b) 14,258 shares held by a 401(k) plan, (c) warrants to purchase 2,032 shares of our Common Stock, (d) options to purchase 16,000 shares of our Common Stock, and (e) 0 of the 51,948 RSUs of the annual board award on July 25, 2017 vesting on July 25, 2018.

(7)

Consists of (a) 20,101 shares of our Common Stock held directly, and (b) 0 vested of the 51,948 RSUs of annual board award on July 25, 2017 vesting on July 25, 2018.

(8)

Consists of (a) 46,550 shares of our Common Stock, (b) options to purchase 10,000 shares of our Common Stock, and (c) 0 of the 51,948 RSUs of the annual board award on July 25, 2017 vesting on July 25, 2018.

(9)

Consists of (a) options to purchase 29,700 shares of our common shares, and (b) 0 of the 51,948 RSUs annual board award on July 25, 2017 vesting on July 25, 2018.

(10)

Consists of (a) options to purchase 29,700 shares of our common shares, and (b) 0 of the 51,948 RSUs annual board award on July 25, 2017 vesting on July 25, 2018.

(11)

Consists of 1,697,063 shares of our Common Stock acquired in connection with our acquisition of X-spine, which are no longer subject to a lock-up agreement and escrow agreement.

(12)

Based on Schedule 13D filed with the SEC on January 17, 2018, as well as our knowledge regarding recent purchases of the Notes by affiliates of OrbiMed Advisors LLC (“OrbiMed Advisors”). Includes 2,275,745 shares issued on January 17, 2018, upon conversion of $1.627 million original principal amount, plus accrued and unpaid interest, of the Company's convertible promissory notes issued in January 17, 2017, to ROS and OrbiMed, entities managed by OrbiMed Advisors, 475,439 shares of our Common Stock and warrants to purchase 87,719 shares of our Common Stock held by ROS. Affiliates of OrbiMed Advisors also purchased $52.0 million aggregate principal amount of the Notes, which are convertible into shares of our Common Stock. However, the indenture prevents note holders from converting the remainder of their Notes to the extent that such conversion would result in beneficial ownership by the note holder or any of its affiliates in excess of 9.99% of the then-outstanding shares of our Common Stock. OrbiMed Advisors, an investment advisor, and Samuel D. Isaly, its managing member and a control person, each have shared voting and dispositive power with respect to shares of our Common Stock and notes held by ROS and OrbiMed.

(13)

Based on Schedule 13D filed with the SEC on August 10, 2015. Consists of 1,272,796 shares of our Common Stock acquired in connection with our acquisition of X-spine, which are subject to a lock-up agreement. Kenneth J. Hemmelgarn, Jr. is a beneficiary of and the sole trustee of the Kenneth J. Hemmelgarn, Jr. Revocable Living Trust dated February 9, 1998, which may be revoked by Kenneth J. Hemmelgarn, Jr. Kenneth J. Hemmelgarn, Jr. and Brian J. Hemmelgarn are brothers and may be deemed to be members of a “group” for purposes of Section 13(d)(3) of the Exchange Act, though they have disclaimed any express agreement to act as a group, other than as described in their jointly filed Schedule 13D.

(14)

Based on Schedule 13D filed with the SEC on August 10, 2015. Consists of 1,272,796 shares of our Common Stock acquired in connection with our acquisition of X-spine, which are subject to a lock-up agreement. Brian J. Hemmelgarn is a beneficiary of and the sole trustee of the Brian J. Hemmelgarn Revocable Living Trust dated February 9, 1998, which may be revoked by Brian J. Hemmelgarn. Kenneth J. Hemmelgarn, Jr. and Brian J. Hemmelgarn are brothers and may be deemed to be members of a “group” for purposes of Section 13(d)(3) of the Exchange Act, though they have disclaimed any express agreement to act as a group, other than as described in their jointly filed Schedule 13D.

Economic Ownership; Stock Ownership Guidelines

Because the table above is limited to shares that are owned or which the person has the right to acquire within 60 days, it does not present a complete view of the economic exposure our directors and executive officers have to our Common Stock. Excluded from the table above are unvested stock options, unvested restricted stock units and unvested warrants which will become vested more than 60 days from January 18, 2018. In addition, the table above does not reflect the effect of the Transactions, which will substantially transform the beneficial ownership of our Common Stock. If the Proposals described in this Proxy Statement are approved by stockholders, following the consummation of the Transactions, the Investors will own approximately 70.4% of our Common Stock.

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) requires directors, executive officers and holders of more than 10% of an equity security registered pursuant to Section 12 of the Exchange Act of 1934 to file various reports with the SEC.

To the Company’s knowledge, based solely on our review of the Section 16 reports furnished to us with respect to 2017, we believe all reports required pursuant to Section 16(a) were filed on a timely basis.

Interest of Certain Persons in Matters to Be Acted On

Consistent with the Company’s independent director compensation policy, which includes the grant of an annual equity award valued at $40,000 to each of the Company’s independent directors, on July 25, 2017, the Company granted 51,948 restricted stock awards to each of the six independent Directors of the Company (Messrs. Swanson, Lopach, Timko, Deedrick, Buckman and Mazzocchi). Pursuant to their terms, these restricted stock awards will fully vest upon the consummation of a change of control, and if the stockholders approve the Proposals and the Transactions are consummated, these restricted stock awards shall vest in full.

The Restructuring Agreement also requires us to obtain, by the closing of the Transactions, prepaid directors’ and officers’ liability insurance policies in respect of acts or omissions occurring at or prior to the closing for six years from the closing, covering each existing member of the Board on terms with respect to such coverage and amounts no less favorable than those of such policies in effect on the date of the Restructuring Agreement. Without the prior written consent of the Investors, we may not expend in excess of 300% of the amount paid by us for coverage for the most recently completed 12-month period prior to the date of the Restructuring Agreement.

Upon consummation of the Transactions, the Investors would own, in the aggregate, approximately 70.4% of the outstanding Common Stock. OrbiMed Advisors LLC (“OrbiMed Advisors”), a registered investment adviser, is the investment manager of the Investors. Matthew Rizzo and Michael Eggenberg, each of whom are nominees for the Board pursuant to Proposal 3, are each employees of OrbiMed Advisors. Jeffrey Peters, a nominee for the Board pursuant to Proposal 3, will be nominated to the Board by the Investors pursuant to their rights under the Investor Rights Agreement and is a Venture Partner with OrbiMed Advisors.

EXECUTIVE OFFICERS

The following table sets forth certain information concerning each of our executive officers:

Name		Age		Position
Carl D. O’Connell		54		Chief Executive Officer and Director

The business experience of our executive officers for the past five years (and, in some instances, for prior years) is summarized below.

Carl O’Connell, Director, Chief Executive Officer, was appointed Chief Executive Officer and a director of the Company effective February 17, 2017 after serving as Interim Chief Executive Officer since January 21, 2017, and the President of the Company since October 6, 2016. Prior to Mr. O’Connell’s employment with the Company, he was most recently the Vice President Global Marketing - Extremities for Wright Medical, a recognized leader in the global foot and ankle market. Mr. O'Connell lead marketing teams and initiatives that were instrumental in achieving U.S. growth initiatives that exceeded 28% and 23% globally. He also lead the completion of marketing integration of three acquired businesses within a year, recruited top talent to his team, and supported the launch of multiple product line extensions and new products, including the successful launch of the market leading Infinity Total Ankle. During his tenure as Global Vice President Marketing for Stryker Spine, Mr. O'Connell drove marketing leadership and brand differentiation programs to support a 20% growth imperative, which was achieved through strategic cross divisional collaboration and the successful launches of line extensions and product upgrades. Mr. O'Connell served as the President and CEO of MedSurg - ITOCHU International, a division of ITOCHU Corporation, the 3rd largest Japanese trading corporation with over $70B in sales transactions, where he was responsible for the reorganization of three recently impaired acquisitions by supporting success attributes, acquiring new vendor contracts, stabilizing and growing top line sales at double digit growth rates, and driving the division to profitability. Additionally, Mr. O’Connell previously served as President of Carl Zeiss Surgical, a German based company, who is a leading manufacturer and innovator of capital, durable and visualization technologies for the medical and industrial arena with sales of $3 billion. Carl Zeiss’s product portfolio includes Surgical Microscopes and Visualization and Industrial technologies. Mr. O’Connell was tasked with leading, developing and implementing strategic and tactical, sales, marketing and product development programs to accelerate the growth of the Surgical Products division in the United States within 48 months, while relocating and integrating operations from the east coast to the west coast with the company’s sister division, Carl Zeiss Meditec. Mr. O’Connell lead the U.S. division to sustainable market leading growth with performance management systems in markets, including Neurosurgery, Spine, Ophthalmic, ENT and Dental, achieving 31% top line growth, exceeding financial and operational objectives, achieving the best year in company’s history in an otherwise flat market in 2006 and achieving world class customer retention and service ratings of over 90% for 4 years consecutively from 2003 to 2006.

EXECUTIVE COMPENSATION

The table below summarizes the compensation earned for services rendered to the Company for the fiscal years indicated, by our Chief Executive Officer, the two most highly-compensated officers other than the Chief Executive Office