13D Filing: OrbiMed Advisors and Xtant Medical Holdings Inc. (XTNT)

Based upon information contained in the Issuer’s preliminary proxy statement dated January 11, 2018 (the “Special Meeting Proxy Statement”) relating to its special meeting of stockholders to be held on February 13, 2018 (the “Special Meeting”), which preliminary proxy statement was filed with the SEC on January 11, 2018, such Shares deemed to be indirectly beneficially owned by the Reporting Persons constitutes approximately 9.9% of the issued and outstanding Shares.  Advisors, pursuant to its authority as the investment manager of ROS, ROS Acquisition and ORO II, may be deemed to indirectly beneficially own the Shares held by ROS, through its ownership of ROS Acquisition, and ORO II.  Isaly, pursuant to his authority as the managing member of Advisors and owner of a controlling interest in Advisors, pursuant to its limited liability company agreement, may be deemed to also indirectly beneficially own the Shares attributable to Advisors.  As a result, Isaly and Advisors share the power to direct the vote and to direct the disposition of the Shares held by ROS Acquisition and ORO II, as described in Item 1 above.

(c)          The Reporting Persons have not effected any transactions in the Shares during the past sixty (60) days.

(d)          Not applicable.

(e)          Not applicable.

Item 6.

Contracts, Arrangements, Understandings or Relationship with Respect to Securities of the Issuer

In addition to the relationships between the Reporting Persons described in Items 2, 3 and 5 above, Advisors is the investment manager of ROS, ROS Acquisition and ORO II.  Pursuant to these relationships, Advisors has discretionary investment management authority with respect to the assets of ROS Acquisition and ORO II.  Such authority includes the power of Advisors to vote and otherwise dispose of securities held by ROS Acquisition and ORO II.  The aggregate number of fully diluted Shares held by ROS, through its ownership of ROS Acquisition, and ORO II is 2,838,903 (of which, includes Shares subject to Warrants and Shares issuable upon exercise of the Notes).  Advisors may be considered to hold indirectly 2,838,903 Shares.  Isaly, pursuant to his authority as the managing member of, and owner of a controlling interest in, Advisors, has shared discretionary power to direct the vote and the disposition of the securities of the Issuer held by Advisors, and consequently may be considered to have an indirect beneficial ownership of the Shares attributable to Advisors.

Restructuring Agreement

On January 11, 2018, the OrbiMed Purchasers entered into the Restructuring Agreement with the Issuer and certain other investors in the Issuer.  Pursuant to the Restructuring Agreement, the OrbiMed Purchasers agreed to convert an aggregate of $1.627 million original principal amount, plus accrued interest, of the Issuer’s outstanding 2017 Notes (as such term is defined below under “Background of the Transactions — Securities Purchase Agreements — Indenture Notes SPA”) issued to ROS Acquisition and ORO II in January 2017 at the $0.7589 per Share conversion rate originally provided thereunder in January 2018 (the “Tier 1 Transaction”).  On January 17, 2018, the Issuer, ROS Acquisition and ORO II entered into an amendment to the 2017 Notes (the “2017 Notes Amendment”), which amended the 2017 Notes by removing the limitations on stock ownership that would 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 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 was required to enable ROS Acquisition and ORO II to convert the 2017 Notes pursuant to the Tier 1 Transaction.  On January 17, 2018, following entering into of the 2017 Notes Amendment, ROS Acquisition ORO II converted the 2017 Notes and received 2,275,745 newly issued Shares, thereby consummating the Tier 1 Transaction.

After completion of the Tier 1 Transaction and after giving effect to a reverse stock split at a 1:12 ratio, upon approval of the stockholders of the Issuer, the remaining $70.238 million aggregate principal amount of the Issuer’ outstanding Notes (the “Remaining Notes”) held by the OrbiMed Purchasers and the other holders of outstanding Notes (collectively, the “Noteholders”), plus accrued and unpaid interest, will be exchanged for newly-issued Shares 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”).