Amedica Corporation Reports Third Quarter 2015 Financial Results

Year-to-Date Operational Cash Burn Levels Decreased by $4.4 million, or 38%, Year-over-Year

Company Expands Product Offerings and Enters New Market Segments

SALT LAKE CITY, Nov. 12, 2015 (GLOBE NEWSWIRE) -- Amedica Corporation (Nasdaq:AMDA), an innovative biomaterial company which develops and manufactures silicon nitride ceramics as a platform for biomedical applications, today announced financial results for the third quarter ended September 30, 2015.

Recent Company Highlights

• Cash and cash equivalents totaled $11.3 million, and net cash used in operating activities during the quarter decreased by $1.3 million, or 43%, from the prior year period
  
• Reduced debt principal balance by $3.5 million, or 14%, and eliminated conversion feature of the convertible note
  
• Two-year performance data from the CASCADE clinical trial submitted to the U.S. Food and Drug Administration (FDA), with an anticipated final response in the first quarter of 2016 
  
• Received Brazilian clearance and shipped initial order of first generation silicon nitride interbody devices and instrumentation
  
• Appointed world-renowned materials scientist Giuseppe Pezzotti, PhD to the Scientific Advisory Board 
  
• Launched Valeo II™ lateral lumber interbody fusion device system and innovative articulating inserter for minimally invasive TLIF procedures
  
• Finalized definitive agreements to raise up to $15 million in equity financing, which will strengthen the Company’s balance sheet, reduce debt and be used for working capital  
  

"I’m extremely pleased with the milestones Amedica reached during the third quarter and expects to reach during the balance of this year.  These achievements have truly transformed our company for the better,” said Dr. Sonny Bal, Chairman and CEO of Amedica Corporation. “We made excellent progress this quarter as we launched new product offerings and expanded our silicon nitride global footprint into Brazil, which is both a sizeable targeted commercial market and provides a solid cornerstone for future growth in the South American market.

“From a financial perspective, the additional equity financing will strengthen the balance sheet and allow Amedica to rejuvenate previously shelved R&D and new product initiatives for the New Year. I’m also proud to announce that we’ve continued the trend of improving our operational cash burn levels and reducing our debt principal. As we layer in additional private label and OEM partners, in spine, dental, hip, or other applications, we will be positioned to further improve our financial standing, and communicate the efficacy of clinical outcomes through our unique and differentiated biomaterial technology platform,” concluded Dr. Bal.

Third Quarter 2015 Financial Results
For the three months ended September 30, 2015, Amedica recorded product revenue of $4.8 million, a decrease of $1.2 million, or 19%, as compared to the same period in 2014. The reduction was primarily due to decreased sales of non-silicon nitride products, which declined by $0.9 million, or 27%, for the third quarter as compared to the same period in 2014. Silicon nitride sales decreased by $0.3 million, or 10%, during the quarter as compared to the same period in 2014. This decline was primarily attributable to the loss of a few surgeons during 2015 and consequences from our restructuring. This was partially offset by the addition of new surgeons, as well as international and private label sales.

Cost of revenue for the quarter decreased $0.3 million, or 15%, as compared to the same period in 2014. The decrease in cost of revenue was primarily a result of reduced sales for the current year period, as compared to the same period in 2014. Excluding the impact of excess or obsolete inventory for both years, third quarter 2015 gross margins ended at 73% of total sales, as compared to 82% during the prior year period. Although product costs have been reduced through production efficiencies and lower overhead costs, the decline in gross margins was due to private label and increased international sales during the third quarter of 2015, which have lower gross margins due to lower selling prices, but have higher operating contribution margins since no commissions are paid on those sales and it requires less operating expenses to support these sales.

Operating expenses for the third quarter of 2015 declined by 38%, or $3.7 million, from the prior year period, to $6.0 million. This year-over-year decline in operating expenses is primarily due to the actions taken by the Company to simplify the organization and align financial objectives earlier in the year, as well as lower commission costs and a $1.7 million reduction in stock-based compensation expense during the third quarter of 2015.

Amedica reported a net loss for the third quarter of $(10.1) million, compared to a net loss of $(4.9) million in the prior-year period.  The increase in net loss was primarily the result of an $8.0 million increase in the fair value of derivative liabilities, which was partially offset by reduced operating expenses of $3.7 million for the period. By December 31, 2015, the Company anticipates the majority of its derivative liabilities will be extinguished as a result of the completion of the most recent equity financing.

Adjusted EBITDA, which is defined as earnings before deductions for interest, taxes, depreciation, amortization, non-cash stock compensation expense, change in fair value of derivative liabilities, offering costs, gain or loss on extinguishment of debt, and gain or loss on extinguishment of derivative liabilities for the third quarter 2015 was $(2.1) million, compared to $(3.3) million for the prior year period.

Cash and cash equivalents totaled $11.3 million as of September 30, 2015. The decline in total cash burn year-over-year was driven by a decrease in operational cash burn of $4.4 million in the nine months ended September 30, 2015, as compared to the prior year period. Total principal debt obligations were $21.0 million as of September 30, 2015, a decrease of $3.5 million from December 31, 2014.

2015 Business Outlook
The Company revises its previously stated estimates of total annual revenue to the range of $19.0-$19.5 million, which implies a flat to modest decline in 2015 silicon nitride annual sales, as compared to the prior year period. The Company expects the impact from the previously announced financial and operational alignment actions to deliver $5-$6 million of annualized operating benefit. These changes are anticipated to continue to reduce total cash burn, increase financial sustainability, and strengthen the balance sheet, positioning the Company to maintain compliance with all debt covenants into the third quarter of 2016 and achieve operating cash flow breakeven during the fourth quarter of 2016. The Company also anticipates debt principal balance to total approximately $17.5 million by the end of 2015, a decrease in total debt by approximately 28% from the prior year period. Additionally, the Company maintains its previously stated guidance of four OEM or private label partners to be announced during 2015.

Conference Call
Date:                    Thursday, November 12, 2015
Time:                    5:00 P.M. Eastern Time (ET)
Conference ID:     69692623            
Dial-in:                 Toll-free (855) 455-6055
                             International (484) 756-4308
Webcast:              Investors section of the Company's website

To join the live conference call, please dial into the above referenced telephone numbers five to ten minutes prior to the scheduled conference call time.

For those who are not available to listen to the live webcast, a telephone replay will be available for one week following the call by dialing (855) 859-2056 for domestic participants and (404) 537-3406 for international participants. When prompted, please enter the Conference ID number 69692623.The call will also be archived on the investor relations section of the Amedica website under Events & Presentations.

About Amedica Corporation
Amedica is focused on the development and application of medical-grade silicon nitride ceramics. Amedica markets spinal fusion products and is developing a new generation of wear- and corrosion-resistant implant components for dental, as well as hip and knee arthroplasty applications. The Company manufactures its products in its ISO 13485 certified manufacturing facility and through its partnership with Kyocera, one of the world's largest ceramic manufacturers. Amedica's spine products are FDA-cleared, CE-marked, and are currently marketed in the U.S. and select markets in Europe and South America through its distributor network and its growing OEM and private label partnerships.

For more information on Amedica or its silicon nitride material platform, please visit www.amedica.com.

Non-GAAP Financial Measures
This press release includes the following "non-GAAP financial measures" as defined by the Securities and Exchange Commission (SEC): Adjusted EBITDA and gross margin before deducting the provision for excess and obsolete inventory. These measures may be different from non-GAAP financial measures used by other companies. The presentation of this financial information, which is not prepared under any comprehensive set of accounting rules or principles, is not intended to be considered in isolation of, or as a substitute for, the financial information prepared and presented in accordance with generally accepted accounting principles (GAAP). For a reconciliation of these non-GAAP financial measures to the nearest comparable GAAP measure, see "Reconciliation of Non-GAAP Financial Measures" included in this press release.

Forward-Looking Statements
This press release contains statements that constitute forward-looking statements within the meaning of the Securities Act of 1933 and the Securities Exchange Act of 1934, as amended by the Private Securities Litigation Reform Act of 1995. Forward-looking statements include specifically, but are not limited to; the Company's anticipation of increased adoption of its material, the Company’s stated estimates of total annual revenue in the range of $19.0-$19.5 million, which implies a flat to modest decline in 2015 silicon nitride annual sales, the Company's expectation that the impact from the previously announced financial and operational alignment actions will deliver $5-$6 million of annualized operating profit benefit and that these changes are anticipated to reduce total cash burn, increase financial sustainability, and strengthen the balance sheet, positioning the Company to maintain compliance with all debt covenants into the third quarter of 2016 and achieve operating cash flow breakeven during the fourth quarter of 2016, the Company’s anticipation that debt principal balance will total approximately $17.5 million by the end of 2015 and, the Company's previously stated guidance of four OEM or private label partners to be announced during 2015. These statements reflect the best judgment of our management, but involve a number of risks and uncertainties which could cause actual results to differ materially from those set forth in our estimates. Consequently, there can be no assurances that actual results for the year ending December 31, 2015 will be within the range of the preliminary estimates set forth above or that the Company will secure additional OEM or Private Label partners. Any variation between our actual results and the estimates set forth above may be material.  Such statements are subject to risks and uncertainties such as the timing and success of new product introductions, physician acceptance, endorsement, and use of Amedica's products, regulatory matters, competitor activities, changes in and adoption of reimbursement rates, potential product recalls, effects of global economic conditions and changes in foreign currency exchange rates. Additional factors that could cause actual results to differ materially from those contemplated within this press release can also be found in Amedica's Risk Factors disclosure in its Annual Report on Form 10-K, filed with the Securities and Exchange Commission (SEC) on March 24, 2015, and in Amedica's other filings with the SEC.   Forward-looking statements contained in this press release speak only as of the date of this press release. We undertake no obligation to update any forward-looking statements as a result of new information, events or circumstances or other factors arising or coming to our attention after the date hereof.

Reconciliation of Non-GAAP Financial Measures:
To supplement our consolidated statements of operations and comprehensive net loss which are presented in accordance with GAAP, we use certain non-GAAP measures of components of financial performance. Although not measures of financial performance under GAAP, “Adjusted EBITDA” and “Gross Margin Before deducting the Provision for Excess and Obsolete Inventory” are provided for the use of investors in understanding our operating results and are not prepared in accordance with, nor do they serve as alternatives to GAAP measures, and may be materially different from similar measures used by other companies. We define "Adjusted EBITDA" as our earnings before deductions for interest, taxes, depreciation, amortization, stock-based compensation, change in fair value of derivative liabilities, offering costs, gain or loss on extinguishment of debt, and gain or loss on extinguishment of derivative liabilities.  We define “Gross Margin before Deducting the Provision for Excess and Obsolete Inventory” as our gross margin before deducting the provision for excess and obsolete inventory. While not a substitute for information prepared in accordance with GAAP, management believes that this information is helpful for investors to more easily understand our operating financial performance. Management also believes these measures may better enable an investor to form views of our potential financial performance in the future. These measures have limitations as analytical tools, and investors should not consider these measures in isolation or as a substitute for analysis of our results prepared in accordance with GAAP.

Below is a reconciliation of Adjusted EBITDA to Net Loss for each of the periods presented (in thousands - unaudited):

Below is a reconciliation of Gross Profit and Margin to Gross Profit and Margin Before deducting the Provision for Excess and Obsolete Inventory for each of the periods presented (in thousands - unaudited):

Contacts:
Mike Houston
VP, Commercialization
801-839-3534
IR@amedica.com

Robert Haag
IRTH Communications
866-976-4784
amda@irthcommunications.com

Released November 12, 2015