Good day, ladies and gentlemen and welcome to the Fourth Quarter and Full Year 2014 Amedica Corporation Financial Results Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. [Operator Instructions]. As a reminder, today’s conference is being recorded. I would now like to introduce your host for today's conference, Mr. Mike Houston, Director of Investor Relations. Mike, you may begin.

Thank you, Candy. Good morning, and welcome to Amedica Corporation’s fourth quarter and full year 2014 earnings conference call. On the call with me today are Dr. Sonny Bal, Chairman and Chief Executive Officer; and Ty Lombardi, Principal Accounting Officer. By now, everyone should have access to the earnings release for the period ended December 31, 2014 that went out this morning at approximately 9:00 A.M. Eastern Time. If you have not received the release, it’s available on the Amedica’s Web site at www.amedica.com. This call is being webcast, and a replay will be available on our Web site as well. I’d like to remind you that certain items that maybe discussed in today’s call are not based entirely on historical facts. These items should be considered forward-looking statements, and are subject to many risks, uncertainties and other factors that are difficult to predict and may affect our businesses and operations. As a result, our actual results may differ materially and adversely from those expressed or implied by our forward-looking statements. A discussion of some of these risks, uncertainties and other factors are set forth in our SEC filings. We undertake no obligation and do not intend to update any forward-looking statements, as a result of new information or future events or circumstances, arising after the date on which it was made. With that, I would now like to turn the call over to Dr. Sonny Bal. Dr. Bal?

Thank you Mike, and good morning to everyone. Thank you for being with us this morning. Welcome to our earnings report and the conference call. I will begin by providing an overview of the Amedica’s full year business highlights and then Ty Lombardi our Accounting Officer will give you details on the financial results for the fourth quarter and the full year 2014. Then we will open the call for question. I am very pleased to announce that full year revenue for Amedica’s proprietary silicon nitride products increased by 41% over the prior year period to $10.8 million. The Amedica’s total revenue for 2014 ended the year at 22.8 million. Silicon nitride ceramic sales growth this year reflected the continued strength of our Valeo branded spinal interbody devices with positive market acceptance for both our first and second generation technology. These gains in our silicon nitride sales were partially offset by continued and anticipated declines in our biologics and other business while our metals revenue for the year-ended flat as compared to 2013. Excluding the annual biologics revenue for both 2014 and 2013, our total revenue increased by 12% year-over-year. 2014 has been a remarkable year for Amedica and we are continuing to make that progress into 2015. Before I jump into some of the updates since our last call I would like to remind our listeners why we are so excited about Amedica’s future. We are a very unique company one of a kind in the world. We are the only company that develops and commercializes silicon nitride as a biomaterial platform. For use as spine arthroplasty potentially other medication applications. We are unique for three reasons; first we sell branded products directly to hospitals through our sales force and distribution structure. Secondly on private label fees innovative silicon…

Thank you, Dr. Bal. I am pleased to discuss the financial results of the company during the fourth quarter and full year 2014. Our total revenue for Q4 of 2014 was 5.2 million driven by 22% growth in our silicon nitride products. As for product mix our silicon nitride ceramic products were responsible for 55% of our overall products revenue during the quarter compared to 41% of our overall product revenue in Q4 of 2013. Turning to annual revenue for 2014, we finished the year with 22.8 million in total revenue. Silicon nitride revenue ended the year at 10.8 million an increase of 3.2 million or 41% from last year. As for the product mix in 2014 our silicon nitride ceramic products comprised 48% of our overall products revenue during the year compared to just 34% of our overall full year product revenue in 2013. This significant jump in revenue contribution is due enlarge part to the growth of our silicon nitride products, but also anticipated declines in our biologics and other sales we announced earlier in 2014. To focus on growing our silicon nitride technology platform. Excluding the impact for provisions for excess or obsolete inventory we experienced a 3 percentage point increase in gross margin percentage to 77% for the year as compared to a 74% margin for the full year 2013. From an accounting perspective our provision for excess and obsolete inventory increased more this quarter and year than in prior years due to a second generation launches of our interbody devices. Furthermore given the important role our metals product play and pulling through additional silicon nitride sales we have decided to invest in our metals portfolio in order to improve surgeon ease of use and bring it on par with other products used in the market…

Thanks, Ty. Candice can you please instruct the callers on how to join the queue for questions.

[Operator Instructions]. And our first question comes from the line of John Gillings of JMP Securities. Your line is now open.

So first just a couple on the composite devices. I had in my notes previously that we were looking for kind of a mid-year launch and it sounds like that might be more of a potentially mid-year to maybe the second half now based on comments during the call. Was there anything specific like a request for information or are you just being kind of cautious in your outlook?

Just being appropriate -- it's Sonny, appropriately cautious in our outlook because as I said we're dealing with the FDA and you can't predict anything. There is nothing I assure you from the FDA that they have said that's negative or requires more testing and more time. And keep in mind the device is already available in Europe and our partner Spinal Kinetics has sales and has expressed a lot of interest as that goes on. But in the U.S., no there is no adverse information we just can't predict when the FDA will say yes.

And I am certain that a lot of people are interested in the product given the early data that's come out. Can you give us just a little color about maybe in terms of the discussions you've had with surgeons or essentially hospital administrators who are I am sure interested in the potential cost savings from new device?

There is a high level of discussion, and I am glad you asked that question. This is a complex device and if we position it in the market as a improved spacer I think we're doing it ourselves, our investors, our engineers and ourselves that use this service because it's not a spacer. A spacer is an inherent device that the surgeon puts in there to maintain intervertebral body space while saying their prayers and stepping it with bone graft to make it fuse. This is a device that not only maintains the space but allows rapid bone in-growth around it, through it, all over it. So really this is a fusion device how to market it, position it, appropriately push it towards hospitals as value propositions its billing codes, those require bit of leg work and thinking. So while we're fully engaged in those discussions including the rest of the today -- I can't provide those details just to you as to when that will be. As for surgeon enthusiasm, I grant you yes they are all over the place, I mean they like it. We need to commercialize it appropriately to as a brand new device to the market that fulfills a segment that's just not addressed so far.

My next question, I understand if you don't want to answer it in too much detail but I got to throw it out there anyway. It sounds like pricing for this could potentially be maybe somewhat less than the price of a spacer plus biologics but probably more than just a spacer. Do you have any high level thoughts on where that might come in, anything you'd be willing to say at this point?

No, not really because again it goes back to the complexity of the question. If you look at the biologics and traditional spinal fusion or even fusion of knee or hip joint which is rarely done but still done. The use of biologics is unpredictable, very expensive, highly variable, with almost zero evidence based medicine. So in short the world we're going into the use of biologics and fusion particularly spine fusion has very little to support it. I mean we're using inert spacers that never grow into bone. So when we come to the market with a whole new paradigm, it's pricing, its cost, it's profitability these are high level issues that have our attention -- I just don't have answer quite yet.

And then maybe just a quick one on the financial side. If you could just give us a little additional color on the excess on obsolete inventory charge, is that -- how likely it is that we'll see more of those coming along that would be helpful and that will be it for us.

Yes as I indicated with the launch of additional products in 2014 in our interbody spacers resulted in and needing to reserve for additional excess and obsolete inventory related to those furthermore with the determination to invest in our metals product to determine that we needed also additional obsolescence added to our metals product. So while we anticipate it still has provision for obsolescence during 2015, we do anticipate a little decline moderately during 2015 as compared 2014.

Thank you. And our next question comes from the line of Mike Matson of Needham & Company. Your line is now open.

I guess just want to start with the revenue guidance. You're guiding to 20% to 30% growth in silicon nitride prior just about half your sales. So I mean that implies a pretty healthy decline in the other products metal products and so forth. So is that really what you guys expect, or just trying to just feel little conservative there?

We are being conservative there with that as we determined we are going to invest in upgrading metals and system. We have noted that there that we need to do that in order to increase the use of our metals as well as that will allow the pull through effect of our silicon nitride revenue as well. So all that being conservative in our approach that is being conservative.

And this is Sonny; there is an important component to that question which is our metals business and we might address that. We have an obsolete metals portfolio which we're seeking to upgrade aggressively and quickly so that the pull through effect on ceramics is appropriately leveraged. So part of the question is the metals business very much, so it’s important. It’s important to us in terms of driving the sales of silicon nitride intervertebral fusion devices. And we realized our metals business is flat, we're seeking to improve it, upgrade it -- update it and that will happen this year.

I mean you can get those products launched by the end of the year you think or?

It’s hard to say, I don’t want to commit there is a number of options, one we can upgrade our own preference crew which is nice sort of like them they just need to be upgraded to make them compatible with minimally invasive surgery and so on an so forth. And that requires engineering changes and maybe on an accelerated time line a year. But there is other opportunity, there are other companies that have similar devices that we are examining one-by-one that we could private label or at least metals is not our expertise but to the extent that it drives a silicon nitride sales it's important to us. So we may be able to get something out yes, within a year.

And then can you just give us an update on where things stand with your direct sales force. I think I guess at one point you had five of the AVPs I don’t know if that’s where you were last quarter. But just given the headcount reductions and so forth, can you just update us there?

The sales organization as you can imagine it’s very important to us. And we have 5 AVPs, we've just hired another one in Colorado someone young and motivated. The sales organizations will receive a whole lot of attention and focus in the next 30 days from the management. It’s important really to understand. And let me tell you why it’s important, this is a complex material with a lot of science behind it that’s not often easy to understand, much less easy to market and bring us advantages in understandable terms to the customer. And that’s -- we haven't always done that well. In point of fact we may not have done that. So to take it from a high-level science company that has a biomaterial that is clearly advantageous and take it to the customer needs. The ground analysis and my view of the entire sales organization. So to expand on your question this goes beyond the AVPs with the number of AVPs we are going to be looking at the sales organization to optimize it and customize it to sell silicon nitride.

And then just on the CASCADE study, I mean the obviously the results were outstanding but just wondering it was conducted in Europe. So I mean you are confident that the FDA is going to be okay on all European study for this product?

From the European spines feels the same way as American spines I hope. We may have heavier patients in the United States and that's the fact, U.S. spacers are heavier. It’s a blinded study; it’s radio-graphically adjudicated using some of the most severe imaging adjudicators that we have. There wasn’t any bias in the study. We have used the best available data, the best available statisticians and analysts. The question is good though is a U.S. study more credible and the answer is from a pure scientific standpoint no, it’s not more credible but from a practical standpoint we should push forward with the U.S. based studies that expand on the hypothesis that was a foundation of the CASCADE study. So we plan to do that in any events and that goes to the JAX study and us to upgrading it and moving forward with the different hypothesis based on the already good data that we have. But the data is what the data is. These devices we used with no bone additives and what they did was fuse rapidly like autograft outstanding results, but keep in mind in light of our scientific knowhow not entirely surprising results. Silicon nitride behaves unlike any other material in the body, it changes a surface composition in ways we are just beginning to characterize and the ways in which we change in the surface composition, helps explain why bone cells are attracted to it and why the fusion occurred like it did. So I am confident those results are incredible and we'll reproduce them.

What’s your estimate of or what are your plans for getting some composites spacers out that work on the lumbar spine. Would you need to run a separate study for that I guess as well or?

Well we're running that SNAP trial in Europe but once we get that data -- it's out in the future, let's see what the FDA says with cervical and what the regulatory path to getting approval lumbar is, but you're absolutely right the lumbar is a huge opportunity specially in United States for a lot of people on surgery including multiple lumbar segments. We'll pursue that pathway once we get some positive feedback from the FDA in terms of the cervical spacers.

And then Ty I was wondering if you could just give us the -- you kind of gave line by line operating expense guidance for qualitative anyway, can you give us kind of a ballpark operating expenses for the year or operating margins for the year something like that range or where you expect to sort of end up?

In the guidance that we provided we anticipate that there will be 6 million to 8 million operating profit benefit in 2015 as compared to 2014. And that will be spread out amongst the various departments such as sales and marketing, general and administrative and research and development. And so why we're not providing the details amongst those groups there will be an overall anticipated $6 million to $8 million operating profit benefit as compared to 2014.

And when you say compared to 2014, I mean I assume you’re stripping out the stock based comp, right?

Correct, that is correct.

So if you look at '14 and take out the stock based comp then you would -- you tucked off 6 million to 8 million and that’s kind of where you expect to end up?

Yes that is where we expect to be in that range.

And then just on the cash position -- do you have any kind of expectations for your cash consumption for '15?

Yes as we indicated on an annualized basis we expect our quarterly cash burns excluding the principal payments to begin in August to be 21.5 million and 2 million per quarter. In quarter one we will have elevated cash burn or similar to 2014 as a result of severance and benefit payments that were made as a result of restructuring early in January. But as we move forward on a go forward basis we would expect that to decline and on an annualized basis we expect it to be between 1.5 million and 2 million per quarter.

[Operator Instructions]. And our next question comes from the line of [indiscernible] of Venture Capital. Your line is open.

Obviously you seem to be making a great deal of progress which we're going to hopefully see in some announcements coming forward this year. One of the things I am concerned about is that you are sort of in a race against time here for this month we have this toxic Black-Scholes provision in the warrants that were done with the recent offering through Dawson James. Have you calculated what potentially is the stock space at these levels, what kind of shares are going to be issued could be issued on a cashless basis?

Yes so that's a 12/31 indicate that the amount of the dilutive impact of the shares would be about 13 million shares on a fully diluted basis related to warrant in addition to that there is some stock options outstanding out there and some RSUs for which shares need to be granted as well.

So in order to avoid that your stock has to reach a level of what by March 26?

In order to avoid that it varies depending on the price of the stock. So kind of ranges from $0.80 or $0.50 to $0.80 or maybe a $1.50 would vary on how much stock will need to be issued if all the cashless exercise provisions were granted. So it's hard to predict exactly how much it would be but if it got to $1.85 then that would minimize it.

As far as your present financing Hercules which is like a strangle at the $9 million covenant. When do you think you will be in a position to -- some of these announcements hopefully get this back up and look to renegotiate and get rid of that debt?

As we have indicated a lot of the reasons in focus for reasons for making the restructuring changes are in January, while as to allow us the runway as a company and as a management group to not have the distractions of needing to raise capital every three months. And so perfectly that's pushed the horizon out for us to bump up against the cash covenant that we have with the Hercules well on to quarter four which is as a management driven company we're focused over the next three months to four months, five months to execute on the strategy that we have outlined. At the same time we have discussions and that we will be more active in those discussions beginning in Q3.

Do you have any volume in the extremely high somewhat like somebody shorting into this cashless exercise? Do you have any idea where all these shares are coming from?

We're unsure at this time of what is causing all of that, it’s little unclear as to what is occurring with the increased volumes that has happened over the last couple of weeks. So let’s say I am not sure what the answer is in with regards to that.

I am showing no further questions at this time. I would like to turn the conference back over to Dr. Bal for any further remarks.

Thanks everyone who participated on the call. And I would like to reiterate my excitement for this year 2015, the large we got an inflection point and as looking for innovation, as industry leader focus more on consolidating, mergers, taking market share and innovate. This is a great opportunity for Amedica to prove the benefits silicon nitride and get wider adoption of the materials and I am confident that that’s what we will do. I am very optimistic that we continue to take advantage of this opportunity and look forward to providing you another update in May. Thank you.

Ladies and gentlemen, thank you for participating in today’s conference. This does conclude today’s program. And you may all disconnect. Have a great day everyone.