Baxano Surgical, Inc. Reports Operating Results for the First Quarter of 2014, Issues Second Quarter 2014 Guidance
Baxano Surgical, Inc. Reports Operating Results for the First Quarter of 2014, Issues Second Quarter 2014 Guidance
— First quarter revenue was $4.4 million —
— Net loss per share was $0.19 for the quarter —
— Avance(TM) MIS Pedicle Screw System receives FDA clearance —
— $10 million financing completed —
RALEIGH, N.C., May 8, 2014 (GLOBE NEWSWIRE) — 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(R) and iO-Tome(R) 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(TM) 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(R) family of products for single and two level lower lumbar fusion, the VEO(R) lateral access and interbody fusion system, iO-Flex(R) , a proprietary set of flexible instruments used by surgeons during spinal decompression procedures, iO-Tome(R) instrument, which rapidly and precisely removes bone, specifically the facet joints, which is commonly performed in spinal fusion procedures and Avance(TM) , 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
