EX-99.1 2 v352667_ex99-1.htm EXHIBIT 99.1

 

Exhibit 99.1

 

Baxano Surgical, Inc. Reports Operating Results for the Second Quarter of 2013,

Issues Third Quarter 2013 Guidance

 

- Second quarter revenues were $3.9 million -

- Pro Forma second quarter revenues were $5.7 million* -

- Net loss per share was $0.26 for the quarter –

- Excluding special items, net loss per share was $0.21 for the quarter* -

- Acquisition of Baxano, Inc. and concurrent financing transaction completed in May -

 

RALEIGH, NC -- (GLOBE NEWSWIRE)— August 8, 2013—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 second quarter ended June 30, 2013.

 

Comparison of Selected Financial Results (in millions, except per share data)
   Three Months Ended June 30, 
   2013   2012 
As reported:        
   Total revenue  $3.9   $3.5 
   Net loss   (8.5)   (6.3)
   Net loss per common share   (0.26)   (0.23)
Excluding special items*:          
   Net loss   (6.9)   (5.6)
   Net loss per common share   (0.21)   (0.20)

 

* See “Reconciliation of GAAP Financial Information to Non-GAAP Financial Information” below.

 

Revenues were $3.9 million in the second quarter of 2013, representing a 12.1% increase from revenues of $3.5 million in the second quarter of 2012. Domestic revenues were $3.7 million in the second quarter of 2013, compared to $3.2 million in the second quarter of 2012 and international revenues were $0.2 million in the second quarter of 2013, compared to $0.2 million in the second quarter of 2012. Revenue contributed by the Baxano, Inc. products, which were acquired on May 31, 2013, was $0.8 million. Gross margin was 66.6% in the second quarter of 2013 as compared to 73.6% in the second quarter of 2012. The decrease in gross margin was due primarily to increased depreciation expense on reusable kits, increased royalty expenses and the medical device tax that became effective on January 1, 2013.

 

Net loss was $8.5 million in the second quarter of 2013, compared to a net loss of $6.3 million in the second quarter of 2012. Net loss per common share was $0.26 in the second quarter of 2013 compared to a net loss per share of $0.23 in the second quarter of 2012.

Excluding special items, net loss in the second quarter of 2013 was $6.9 million, or $0.21 per common share, compared to net loss excluding special items of $5.6 million, or $0.20 per common share in the second quarter of 2012. Special items in the second quarter of 2013 consisted of merger and integration expenses of $1.6 million related to our merger with Baxano, Inc. and legal fees of $0.1 million related to the U.S. Department of Justice investigation related to the subpoena issued in October 2011. Special items in the second quarter of 2012 consisted of expenses of $0.7 million for legal fees related to the U.S. Department of Justice investigation.

 

 
 

 

Cash and cash-equivalents were $19.6 million as of June 30, 2013.

 

"This quarter, we created the new Baxano Surgical and now have a suite of spinal devices targeting the minimally invasive spine market, the most significant growth opportunity in spine," commented Ken Reali, President and CEO of Baxano Surgical. "Through the recent transition and integration we have been able to stabilize the business and are enthusiastic about now returning our full focus to driving future revenue growth."

 

Baxano Surgical Outlook

 

For the third quarter ending September 30, 2013, the Company expects total revenues in the range of $5.6 - $6.2 million. For the full fiscal year 2013, on a pro forma basis for the combined companies, the Company now expects total revenues in the range of $23.5 - $25.5 million versus prior guidance of $25 - $29 million.

 

Conference Call

 

Baxano Surgical will host a conference call today at 4:30 pm Eastern time to discuss its second quarter financial results. To listen to the conference call on your telephone, please dial (877) 881-2183 for domestic callers and (970) 315-0453 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, as well as the Company’s presentation used during the conference call, 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 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 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 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 Baxano Surgical and Baxano 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 VEOTM lateral access and interbody fusion system, the iO-Flex® system, a proprietary set of flexible instruments used by surgeons during spinal decompression procedures and the iO-Tome™ instrument, which rapidly and precisely removes bone, specifically the facet joints, which is commonly performed in 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® and iO-Flex® 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, stockholder class action lawsuits, 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, 2012 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.

 

 
 

 

Contact:

 

Baxano Surgical Inc.

Joe Slattery, Executive Vice President and Chief Financial Officer

919-825-0868

 

or

 

Westwicke Partners

Mark Klausner

443-213-0501

baxanosurgical@westwicke.com

Source: Baxano Surgical, Inc.

 

 
 

 

Baxano Surgical, Inc.
Consolidated Statements of Operations and Comprehensive Loss
(in thousands, except per share amounts)
(Unaudited)
                 
   Three Months Ended June 30,   Six Months Ended June 30, 
   2013   2012   2013   2012 
                 
                 
Revenue  $3,877   $3,460   $6,977   $7,243 
Cost of revenue   1,295    912    2,327    1,909 
Gross profit   2,582    2,548    4,650    5,334 
Operating expenses:                    
Research and development   1,509    1,244    2,794    2,577 
Sales and marketing   6,032    5,371    10,959    10,670 
General and administrative   1,860    1,504    3,411    2,922 
Merger and integration expenses   1,583    -    2,895    - 
Charges related to U.S. Government settlement   69    720    160    1,184 
Total operating expenses   11,053    8,839    20,219    17,353 
Operating loss   (8,471)   (6,291)   (15,569)   (12,019)
Other expense, net   (60)   (2)   (62)   (32)
Net loss  $(8,531)  $(6,293)  $(15,631)  $(12,051)
Other comprehensive loss:                    
Foreign currency translation adjustments   1    -    -    - 
Comprehensive loss  $(8,530)  $(6,293)  $(15,631)  $(12,051)
                     
Net loss per common share - basic and diluted  $(0.26)  $(0.23)  $(0.51)  $(0.44)
                     
Weighted average common shares outstanding - basic and diluted   33,408    27,255    30,379    27,250 

 

 
 

 

Baxano Surgical, Inc.
Pro Forma Condensed Consolidated Statement of Operations
(in thousands, except per share amounts)
(Unaudited)
                 
    Three Months Ended June 30, 2013 As Reported    Baxano Inc. Results Prior to the Merger (1)    Pro Forma Adjustments (2)    Three Months Ended June 30, 2013 Pro Forma 
                     
                     
Revenue  $3,877   $1,773   $-   $5,650 
Cost of revenue   1,295    634    10    1,939 
Gross profit   2,582    1,139    (10)   3,711 
Operating expenses:                    
Research and development   1,509    412    2    1,923 
Sales and marketing   6,032    1,776    1    7,809 
General and administrative   1,860    315    91    2,266 
Merger and integration expenses   1,583    2,160    -    3,743 
Charges related to U.S. Government settlement   69    -    -    69 
Total operating expenses   11,053    4,663    94    15,810 
Operating loss   (8,471)   (3,524)   (104)   (12,099)
Other expense, net   (60)   (290)   219    (131)
Net loss  $(8,531)  $(3,814)  $115   $(12,230)
                     
Net loss per common share - basic and diluted  $(0.26)            $(0.27)
                     
Weighted average common shares outstanding - basic and diluted (3)   33,408              45,170 
                     
Supplemental disclosure:                    
Domestic revenue  $3,687   $1,773   $-   $5,460 
iO-Flex revenue  $798   $1,773   $-   $2,571 

 

(1) includes the results of operations for Baxano Inc. for April and May 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 not assumed by Baxano Surgical, Inc.

(3) weighted average common shares outstanding have been adjusted for merger related shares as if issued at the beginning of the period presented.

 

 
 

 

Baxano Surgical, Inc.
Pro Forma Condensed Consolidated Statement of Operations
(in thousands, except per share amounts)
(Unaudited)
                 
    Six Months Ended June 30, 2013 As Reported    Baxano Inc. Results Prior to the Merger (1)    Pro Forma Adjustments (2)    Six Months Ended June 30, 2013 Pro Forma 
                     
                     
Revenue  $6,977   $4,725   $-   $11,702 
Cost of revenue   2,327    1,662    25    4,014 
Gross profit   4,650    3,063    (25)   7,688 
Operating expenses:                    
Research and development   2,794    1,318    4    4,116 
Sales and marketing   10,959    5,437    4    16,400 
General and administrative   3,411    939    227    4,577 
Merger and integration expenses   2,895    3,054    -    5,949 
Charges related to U.S. Government settlement   160    -    -    160 
Total operating expenses   20,219    10,748    235    31,202 
Operating loss   (15,569)   (7,685)   (260)   (23,514)
Other expense, net   (62)   (702)   548    (216)
Net loss  $(15,631)  $(8,387)  $288   $(23,730)
                     
Net loss per common share - basic and diluted  $(0.51)            $(0.53)
                     
Weighted average common shares outstanding - basic and diluted (3)   30,379              45,173 

 

(1) includes the results of operations for Baxano Inc. for April and May 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 not assumed by Baxano Surgical, Inc.

(3) weighted average common shares outstanding have been adjusted for merger related shares as if issued at the beginning of the period presented.

 

 
 

  

Baxano Surgical, Inc.
Pro Forma Condensed Consolidated Statement of Operations
(in thousands, except per share amounts)
(Unaudited)
                 
    Three Months Ended June 30, 2012 As Reported    Baxano Inc. Results for the Three Months Ended June 30, 2012    Pro Forma Adjustments (1)    Three Months Ended June 30, 2012 Pro Forma 
                     
                     
Revenue  $3,460   $2,228   $-   $5,688 
Cost of revenue   912    815    15    1,742 
Gross profit   2,548    1,413    (15)   3,946 
Operating expenses:                    
Research and development   1,244    1,539    3    2,786 
Sales and marketing   5,371    4,516    3    9,890 
General and administrative   1,504    589    136    2,229 
Merger and integration expenses   -    -    -    - 
Charges related to U.S. Government settlement   720    -    -    720 
Total operating expenses   8,839    6,644    142    15,625 
Operating loss   (6,291)   (5,231)   (157)   (11,679)
Other expense, net   (2)   (163)   115    (50)
Net loss  $(6,293)  $(5,394)  $(42)  $(11,729)
                     
Net loss per common share - basic and diluted  $(0.23)            $(0.26)
                     
Weighted average common shares outstanding - basic and diluted (2)   27,255              45,106 
                     
Supplemental disclosure:                    
Domestic revenue  $3,216   $2,228   $-   $5,444 
iO-Flex revenue  $-   $2,228   $-   $2,228 

 

(1) 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 not assumed by Baxano Surgical, Inc.

(2) weighted average common shares outstanding have been adjusted for merger related shares as if issued at the beginning of the period presented.

  

 
 

 

Baxano Surgical, Inc.
Pro Forma Condensed Consolidated Statement of Operations
(in thousands, except per share amounts)
(Unaudited)
                 
    Six Months Ended June 30, 2012 As Reported    Baxano Inc. Results for the Six Months Ended June 30, 2012    Pro Forma Adjustments (2)    Six Months Ended June 30, 2012 Pro Forma 
                     
                     
Revenue  $7,243   $3,954   $-   $11,197 
Cost of revenue   1,909    1,487    30    3,426 
Gross profit   5,334    2,467    (30)   7,771 
Operating expenses:                    
Research and development   2,577    2,796    5    5,378 
Sales and marketing   10,670    8,798    5    19,473 
General and administrative   2,922    1,059    272    4,253 
Merger and integration expenses   -    -    -    - 
Charges related to U.S. Government settlement   1,184    -    -    1,184 
Total operating expenses   17,353    12,653    282    30,288 
Operating loss   (12,019)   (10,186)   (312)   (22,517)
Other expense, net   (32)   (283)   154    (161)
Net loss  $(12,051)  $(10,469)  $(158)  $(22,678)
                     
Net loss per common share - basic and diluted  $(0.44)            $(0.50)
                     
Weighted average common shares outstanding - basic and diluted (2)   27,250              45,101 

 

(1) 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 not assumed by Baxano Surgical, Inc.

(2) 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 June 30,  Six Months Ended June 30,

 
   2013   2012   2013   2012 
GAAP net loss  $(8,531)  $(6,293)  $(15,631)  $(12,051)
Special items:                    
Merger and integration expenses   1,583    -    2,895    - 
Charges related to U.S. Government settlement   69    720    160    1,184 
Net loss excluding special items  $(6,879)  $(5,573)  $(12,576)  $(10,867)
                     
GAAP net loss per share  $(0.26)  $(0.23)  $(0.51)  $(0.44)
Special items:                    
Merger and integration expenses   0.05    -    0.10    - 
Charges related to U.S. Government settlement   -    0.03    0.01    0.04 
Net loss excluding special items  $(0.21)  $(0.20)  $(0.40)  $(0.40)
                     
Shares used in computing GAAP and non-GAAP loss per share   33,408    27,255    30,379    27,250 

 

 

Reconciliation of Pro Forma Financial Information to Non-GAAP Financial Information
(in thousands, except per share amounts)
(Unaudited)
                 
  Three Months Ended June 30,  Six Months Ended June 30,

 

   2013   2012   2013   2012 
Pro forma net loss  $(12,230)  $(11,729)  $(23,730)  $(22,678)
Special items:                    
Merger and integration expenses   3,743    -    5,949    - 
Charges related to U.S. Government settlement   69    720    160    1,184 
Pro forma net loss excluding special items  $(8,418)  $(11,009)  $(17,621)  $(21,494)
                     
Pro forma net loss per share  $(0.27)  $(0.26)  $(0.53)  $(0.50)
Special items:                    
Merger and integration expenses   0.08    -    0.13    - 
Charges related to U.S. Government settlement   -    0.02    -    0.02 
Pro forma net loss excluding special items  $(0.19)  $(0.24)  $(0.40)  $(0.48)
                     
Shares used in computing pro forma and pro forma non-GAAP loss per share   45,170    45,106    45,173    45,101 

 

 
 

 

Baxano Surgical, Inc.
Consolidated Balance Sheets
(in thousands)
(Unaudited)
   June 30,   December 31, 
   2013   2012 
Assets
Current assets:          
Cash and cash equivalents  $19,602   $21,541 
Restricted cash   138    - 
Accounts receivable, net   4,290    3,206 
Inventory   6,872    5,017 
Prepaid expenses and other assets   834    330 
Total current assets   31,736    30,094 
Property and equipment, net   2,879    2,166 
Goodwill   16,036    - 
Intangible assets   8,219    - 
Other long-term assets   158    - 
Total assets  $59,028   $32,260 
           
Liabilities and Stockholders' Equity          
Current liabilities:          
Current portion of long-term debt  $526   $- 
Accounts payable   2,475    2,603 
Accrued expenses related to U.S. Government settlement   2,702    6,792 
Accrued expenses   3,048    1,648 
Total current liabilities   8,751    11,043 
Long-term debt   2,234    - 
Noncurrent liabilities   3,553    78 
           
Stockholders' equity          
Common stock   4    3 
Additional paid-in capital   198,910    159,929 
Accumulated other comprehensive income   14    14 
Accumulated deficit   (154,438)   (138,807)
Total stockholders' equity   44,490    21,139 
Total liabilities and stockholders' equity  $59,028   $32,260 

 

 
 

 

Baxano Surgical, Inc.
Consolidated Statements of Cash Flows
(in thousands)
(Unaudited)
                
  Three Months Ended June 30,

Six Months Ended June 30,

     2013   2012   2013  2012
Cash flows from operating activities:                 

  

Net loss  $(8,531)  $(6,293)  $(15,631)  $(12,051)
Adjustments to reconcile net loss to net cash used in operating activities                   
Depreciation and amortization   458    267    817   474
Stock-based compensation   304    429    620   760
Allowance for excess and obsolete inventory   9    47    29   59
Provision (reversal of provision) for bad debts   21    3    32   (37)
Loss on disposal of fixed assets   -    -    -   30
Changes in operating assets and liabilities:                   
Decrease in accounts receivable   192    333    451   506
(Increase) decrease in inventory   118    (515)   62   (677)
(Increase) decrease in prepaid expenses   (7)   (46)   (270)  149
Increase (decrease) in accounts payable   (2,015)   757    (1,616)  (187)
Increase (decrease) in accrued expenses related to U.S. Government settlement   (194)   186    (627)  437
Increase in accrued expenses   388    369    470   482
Net cash used in operating activities   (9,257)   (4,463)   (15,663)  (10,055)
Cash flows from investing activities:                   
Purchases of property and equipment   (216)   (660)   (612)  (1,357)
Acquisition, net of cash received   (2,685)   -    (2,685)  -
Sales and maturities of investments   -    -    -   6,027
Restricted cash classification change   -    -    (62)  -
Net cash provided by (used in) investing activities   (2,901)   (660)   (3,359)  4,670
Cash flows from financing activities:                   
Net proceeds from issuance of common stock   17,074    61    17,074   61
Proceeds from exercise of stock options   -    2    10   7
Net cash provided by financing activities   17,074    63    17,084   68
Effect of exchange rate changes on cash and cash equivalents   -    -    (1)  -
Net increase (decrease) in cash and cash equivalents   4,916    (5,060)   (1,939)  (5,317)
Cash and cash equivalents, beginning of period   14,686    38,467    21,541   38,724
Cash and cash equivalents, end of period  $19,602   $33,407   $19,602   $33,407