– First quarter revenue was $4.4 million –
– Net loss per share was $0.19 for the quarter
–
– Avance™ MIS Pedicle Screw System receives FDA
clearance –
– $10 million financing completed –
Baxano Surgical, Inc. (Nasdaq:BAXS), a medical device company
focused on designing, developing and marketing minimally invasive
products to treat degenerative conditions of the spine affecting
the lumbar region, today announced its financial results for the
first quarter ended March 31, 2014. On May 31, 2013, we consummated
our acquisition of Baxano, Inc. Our consolidated statements of
operations reflect the Baxano, Inc. results, including the iO-Flex®
and iO-Tome® products, from May 31, 2013.
Revenue was $4.4 million in the first quarter of 2014,
representing a 42.4% increase from revenue of $3.1 million in the
first quarter of 2013. Domestic revenue was $4.3 million in the
first quarter of 2014, compared to $2.6 million in the first
quarter of 2013 and international revenue was $0.1 million in the
first quarter of 2014, compared to $0.5 million in the first
quarter of 2013. Revenue contributed in the first quarter of 2014
by the Baxano, Inc. products, which were acquired on May 31, 2013,
was $2.5 million.
"We have evaluated our sales force effectiveness over the past
two quarters and, based on our analysis, are implementing a revised
sales force strategy. While our revenue this quarter came in
slightly below our expectations, we are confident that this revised
strategy will drive us towards sequential revenue growth and reduce
operating expenses," commented Ken Reali, President and CEO of
Baxano Surgical. "We believe the recently cleared Avance MIS
Pedicle Screw System is another strong addition to our
differentiated portfolio of products focused on MIS degenerative
lumbar spine."
Gross margin was 71.4% in the first quarter of 2014 as compared
to 66.7% in the first quarter of 2013. The increase in gross margin
reflects lower overall product costs in the first quarter of 2014
due to increased volumes and product mix. Net loss was $9.1 million
in the first quarter of 2014, compared to a net loss of $7.1
million in the first quarter of 2013. Net loss per common share was
$0.19 in the first quarter of 2014 compared to a net loss per share
of $0.26 in the first quarter of 2013.
Excluding special items, net loss in the first quarter of 2014
was $9.1 million, or $0.19 per common share, compared to net loss,
excluding special items, of $5.7 million, or $0.21 per common share
in the first quarter of 2013. Special items of $1.4 million in the
first quarter of 2013 consisted of merger and integration expenses
of $1.3 million and expenses for the settlement with the U.S.
government related to the 2011 Office of Inspector General
subpoena. For additional information, see the "Reconciliation of
GAAP Financial Information to Non-GAAP Financial Information"
below.
Subsequent Events
On April 10, 2014, Baxano Surgical, Inc. announced that it has
received U.S. Food and Drug Administration 510(k) clearance
(k133743) of its Avance™ MIS Pedicle Screw System, which may be
used as an adjunct to fusion in numerous degenerative and complex
spinal pathologies. The innovative design of Avance provides a
quick and easy-to-use, percutaneous pedicle screw system that
addresses single, complex and multi-level spinal pathologies with
minimal tissue disruption and trauma. The Avance system will be in
limited market release in the second and third quarter of 2014 and
is planned for full launch in the fourth quarter of 2014.
On April 22, 2014 Baxano Surgical announced the closing of a
private placement of approximately $10 million aggregate principal
amount of subordinated convertible debentures and warrants to
purchase 9,428,000 shares of common stock to entities affiliated
with two institutional investors.
Baxano Surgical Outlook
For the second quarter ending June 30, 2014, the Company expects
total revenue in the range of $4.4 - $4.8 million.
Conference Call
Baxano Surgical will host a conference call today at 4:30 pm
Eastern time to discuss its first quarter financial results. To
listen to the conference call on your telephone, please dial (877)
312-8823 for domestic callers and (253) 237-1182 for international
callers approximately ten minutes prior to the start time. The call
will be concurrently webcast. To access the live audio broadcast or
the archived recording, use the following link at
http://ir.Baxanosurgical.com/events.cfm.
Reconciliation of GAAP Financial Information to Non-GAAP
Financial Information
To supplement the Company's consolidated financial statements
presented in accordance with accounting principles generally
accepted in the United States of America ("GAAP"), the Company uses
non-GAAP measures of certain components of financial performance,
including net loss, net loss per common share and a pro forma
consolidated statement of operations, which are adjusted from
results based on GAAP. Although "as adjusted" financial measures
are non-GAAP financial measures, the Company believes that the
presentation of "as adjusted" financial measures calculated to
reflect the Baxano, Inc. acquisition as if it had occurred at the
beginning of 2013 and to exclude "special items" are useful
adjuncts to the GAAP "as reported" financial measures. Pro forma
adjustments include amortization of intangibles, interest costs
associated with Baxano, Inc. preferred stock and convertible debt,
and elimination of intercompany general and administrative
expenses. "Special items" consist of merger and integration
expenses related to the merger with Baxano, Inc. and charges
related to the settlement with the U.S. Department of Justice,
including related legal fees. These non-GAAP measures are provided
to enhance investors' overall understanding of the Company's
current financial performance and the Company's prospects for the
future. We believe that providing non-GAAP measures that adjust for
the combined historical results of the Company and Baxano, Inc. and
for significant non-recurring expenses allows comparison of our
core operations from period to period. These non-GAAP measures may
be considered in addition to results prepared in accordance with
generally accepted accounting principles, but should not be
considered a substitute for, or superior to, GAAP results. The
non-GAAP measures included in this press release have been
reconciled to the most directly comparable GAAP measures.
About Baxano Surgical, Inc.
Baxano Surgical, Inc. is a medical device company focused on
designing, developing, and marketing minimally invasive products to
treat degenerative conditions of the spine affecting the lumbar
region. Baxano Surgical currently markets the AxiaLIF® family of
products for single and two level lower lumbar fusion, the VEO®
lateral access and interbody fusion system, iO-Flex®, a proprietary
set of flexible instruments used by surgeons during spinal
decompression procedures, iO-Tome® instrument, which rapidly and
precisely removes bone, specifically the facet joints, which is
commonly performed in spinal fusion procedures and Avance™, a MIS
pedicle screw system used in lumbar spinal fusion procedures.
Baxano Surgical was founded in May 2000 and is headquartered in
Raleigh, North Carolina. For more information, visit
www.baxanosurgical.com.
AxiaLIF, VEO, iO-Flex and iO-Tome are registered trademarks of
Baxano Surgical.
Forward Looking Statements
This press release includes statements that are based on our
current beliefs and assumptions. These statements constitute
"forward looking statements" within the meaning of Section 27A of
the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934, and are intended to qualify for the safe
harbor from liability established by the Private Securities
Litigation Reform Act of 1995. Such statements are subject to risks
and uncertainties that are often difficult to predict, are beyond
our control, and which may cause results to differ materially from
expectations. Factors that could cause our results to differ
materially from those described include, but are not limited to,
the pace of adoption of our product technology by spine surgeons,
the outcome of coverage and reimbursement decisions by the
government and third party payors, the success of our continuing
product development efforts, the effect on our business of existing
and new regulatory requirements, our ability to raise additional
capital, our ability to comply with our settlement agreement and
Corporate Integrity Agreement with certain entities of the U.S.
government, the risks inherent in operating in foreign
jurisdictions, stockholder class action lawsuits, the Company's
ability to achieve revenue targets set forth it its credit facility
and other economic and competitive factors. For a discussion of the
most significant risks and uncertainties associated with Baxano
Surgical's business, please review the Company's filings with the
Securities and Exchange Commission, including its Annual Report on
Form 10-K for the year ended December 31, 2013 and subsequent
reports. You are cautioned not to place undue reliance on these
forward looking statements, which are based on Baxano Surgical's
expectations as of the date of this press release and speak only as
of the date of this press release. We undertake no obligation to
publicly update or revise any forward looking statement, whether as
a result of new information, future events or otherwise.
Baxano Surgical,
Inc. |
Consolidated Statements
of Operations and Comprehensive Loss |
(in thousands, except
per share amounts) |
(Unaudited) |
|
|
|
|
Three Months
Ended March 31, |
|
2014 |
2013 |
|
|
|
Revenue |
$ 4,412 |
$ 3,099 |
Cost of revenue |
1,263 |
1,031 |
Gross profit |
3,149 |
2,068 |
Operating expenses: |
|
|
Research and development |
1,987 |
1,285 |
Sales and marketing |
7,274 |
4,927 |
General and administrative |
2,548 |
1,550 |
Merger and integration
expenses |
19 |
1,313 |
Charges related to U.S.
Government settlement |
-- |
91 |
Total operating expenses |
11,828 |
9,166 |
Operating loss |
(8,679) |
(7,098) |
|
|
|
Non-operating items: |
|
|
Interest expense |
(376) |
-- |
Loss on fair value of common
stock warrants |
(52) |
-- |
Other expense, net |
(2) |
(2) |
Net loss |
$ (9,109) |
$ (7,100) |
|
|
|
Other comprehensive loss: |
|
|
Foreign currency translation adjustments |
(1) |
(1) |
Comprehensive loss |
$ (9,110) |
$ (7,101) |
|
|
|
Net loss per common share - basic and
diluted |
$ (0.19) |
$ (0.26) |
|
|
|
Weighted average common shares outstanding -
basic and diluted |
47,058 |
27,317 |
|
|
|
|
|
|
Baxano Surgical,
Inc. |
Consolidated Balance
Sheets |
(in
thousands) |
(Unaudited) |
|
|
|
|
March 31, |
December 31, |
|
2014 |
2013 |
Assets |
|
|
Current assets: |
|
|
Cash and cash equivalents |
$ 1,456 |
$ 8,540 |
Restricted cash |
569 |
610 |
Accounts receivable, net |
3,787 |
4,699 |
Inventory |
7,457 |
7,037 |
Prepaid expenses and other
assets |
503 |
475 |
Total current
assets |
13,772 |
21,361 |
Property and equipment, net |
2,713 |
3,047 |
Goodwill |
8,463 |
8,463 |
Intangible assets, net |
15,215 |
15,530 |
Other long-term assets |
748 |
577 |
Total assets |
$ 40,911 |
$ 48,978 |
|
|
|
Liabilities and Stockholders'
Equity |
|
|
Current liabilities: |
|
|
Current portion of long-term
debt, net |
$ 1,242 |
$ 563 |
Accounts payable |
3,493 |
3,693 |
Accrued expenses related to
U.S. Government settlement |
2,750 |
2,736 |
Accrued expenses |
3,233 |
3,593 |
Total current
liabilities |
10,718 |
10,585 |
Long-term debt, net |
5,665 |
6,268 |
Common stock warrant liability |
580 |
528 |
Other noncurrent liabilities |
1,453 |
2,150 |
|
|
|
Stockholders' equity |
|
|
Common stock |
5 |
5 |
Additional paid-in capital |
202,418 |
200,260 |
Accumulated other comprehensive
income |
14 |
15 |
Accumulated deficit |
(179,942) |
(170,833) |
Total
stockholders' equity |
22,495 |
29,447 |
Total liabilities
and stockholders' equity |
$ 40,911 |
$ 48,978 |
|
|
|
|
|
|
Baxano Surgical,
Inc. |
Consolidated Statements
of Cash Flows |
(in
thousands) |
(Unaudited) |
|
|
|
|
Three Months
Ended March 31, |
|
2014 |
2013 |
|
|
|
Cash flows from operating
activities: |
|
|
Net loss |
$ (9,109) |
$ (7,100) |
Adjustments to reconcile net loss to net cash
used in operating activities |
|
|
Depreciation and
amortization |
818 |
359 |
Stock-based compensation |
385 |
317 |
Provision (reversal of
provision) for bad debts |
(5) |
11 |
Loss on fair value of common
stock warrants |
52 |
-- |
Amortization of debt discount
and deferred financing fees |
115 |
-- |
Loss on sale of fixed
assets |
4 |
-- |
Changes in operating assets and
liabilities: |
|
|
Decrease in
accounts receivable |
917 |
259 |
Increase in
inventory |
(420) |
(36) |
Increase in
prepaid expenses |
(28) |
(263) |
Increase
(decrease) in accounts payable and accrued expenses |
(811) |
481 |
Decrease in
accrued expenses related to U.S. Government settlement |
(683) |
(433) |
Net cash used in operating activities |
(8,765) |
(6,405) |
|
|
|
Cash flows from investing
activities: |
|
|
Purchases of property and
equipment |
(173) |
(396) |
Restricted cash
classification |
41 |
(62) |
Net cash used in investing activities |
(132) |
(458) |
|
|
|
Cash flows from financing
activities: |
|
|
Net proceeds from issuance of
common stock |
1,814 |
-- |
Proceeds from employee stock
plans |
-- |
9 |
Net cash provided by financing
activities |
1,814 |
9 |
|
|
|
Effect of exchange rate changes on cash and
cash equivalents |
(1) |
(1) |
Net decrease in cash and cash
equivalents |
(7,084) |
(6,855) |
Cash and cash equivalents, beginning of
period |
8,540 |
21,541 |
|
|
|
Cash and cash equivalents, end of
period |
$ 1,456 |
$ 14,686 |
|
|
|
|
|
|
Baxano Surgical,
Inc. |
Pro Forma Condensed
Consolidated Statement of Operations |
(in thousands, except
per share amounts) |
(Unaudited) |
|
|
|
|
|
|
|
Baxano, Inc. |
|
|
|
Three Months |
Results for the |
|
Three Months |
|
Ended March |
Three Months |
Pro Forma |
Ended March |
|
31, 2013 As |
Ended March |
Adjustments |
31, 2013 Pro |
|
Reported |
31, 2013 (1) |
(2) |
Forma |
|
|
|
|
|
|
|
|
|
|
Revenue |
$ 3,099 |
$ 2,953 |
$ -- |
$ 6,052 |
Cost of revenue |
1,031 |
1,028 |
15 |
2,074 |
Gross profit |
2,068 |
1,925 |
(15) |
3,978 |
|
|
|
|
|
Operating expenses: |
|
|
|
|
Research and development |
1,285 |
907 |
3 |
2,195 |
Sales and marketing |
4,927 |
3,660 |
3 |
8,590 |
General and administrative |
1,550 |
625 |
252 |
2,427 |
Merger and integration
expenses |
1,313 |
893 |
(893) |
1,313 |
Charges related to U.S.
Government settlement |
91 |
-- |
-- |
91 |
Total operating expenses |
9,166 |
6,085 |
(635) |
14,616 |
|
|
|
|
|
Operating loss |
(7,098) |
(4,160) |
620 |
(10,638) |
Non-operating items, net |
(2) |
(412) |
412 |
(2) |
Net loss |
$ (7,100) |
$ (4,572) |
$ 1,032 |
$ (10,640) |
|
|
|
|
|
Net loss per common share - basic and
diluted |
$ (0.26) |
|
|
$ (0.24) |
|
|
|
|
|
Weighted average common shares outstanding -
basic and diluted (3) |
27,317 |
|
|
45,168 |
|
|
|
|
|
(1) includes the results of
operations for Baxano, Inc. for January through March 2013. The
Merger was effective on May 31, 2013. |
(2) pro forma adjustments reflect
the amortization of intangible assets and depreciation on the fair
value of the fixed assets acquired in the merger less the
elimination of interest on Baxano, Inc. debt assumed by Baxano
Surgical, Inc., as if the merger occurred at the beginning of the
period presented |
(3) weighted average common
shares outstanding have been adjusted for merger related shares as
if issued at the beginning of the period presented. |
|
|
|
|
|
|
|
|
|
|
Reconciliation of GAAP
Financial Information to Non-GAAP Financial
Information |
(in thousands, except
per share amounts) |
(Unaudited) |
|
|
|
|
Three Months Ended |
|
March
31, |
|
2014 |
2013 |
GAAP net loss |
$ (9,109) |
$ (7,100) |
Special items: |
|
|
Merger and integration
expenses |
19 |
1,313 |
Charges related to U.S.
Government settlement |
-- |
91 |
Net loss excluding special items |
$ (9,090) |
$ (5,696) |
|
|
|
GAAP net loss per share |
$ (0.19) |
$ (0.26) |
Special items: |
|
|
Merger and integration
expenses |
-- |
0.05 |
Charges related to U.S.
Government settlement |
-- |
-- |
Net loss excluding special items |
$ (0.19) |
$ (0.21) |
|
|
|
Shares used in computing GAAP and non-GAAP
loss per share |
47,058 |
27,317 |
|
|
|
|
|
|
Reconciliation of Pro
Forma Financial Information to Non-GAAP Financial
Information |
(in thousands, except
per share amounts) |
(Unaudited) |
|
|
|
|
Three Months Ended |
|
March
31, |
|
2014 |
2013 |
Pro forma net loss |
$ (9,109) |
$ (10,640) |
Special items: |
|
|
Merger and integration
expenses |
19 |
1,313 |
Charges related to U.S.
Government settlement |
-- |
91 |
Pro forma net loss excluding special
items |
$ (9,090) |
$ (9,236) |
|
|
|
Pro forma net loss per share |
$ (0.19) |
$ (0.24) |
Special items: |
|
|
Merger and integration
expenses |
-- |
0.03 |
Charges related to U.S.
Government settlement |
-- |
-- |
Pro forma net loss excluding special
items |
$ (0.19) |
$ (0.21) |
|
|
|
Shares used in computing pro forma and pro
forma non-GAAP loss per share |
47,058 |
45,168 |
|
|
|
CONTACT: Baxano Surgical Inc.
Tim Shannon, Chief Financial Officer
919-926-8762
or
Westwicke Partners
Mark Klausner
443-213-0501
baxanosurgical@westwicke.com