Xtant Medical Holdings, Inc. - FORM 8-K - EX-99.7 - EXHIBIT 99.7 - July 28, 2015

Attached files

file filename
8-K - 8-K - Xtant Medical Holdings, Inc.v416054_8k.htm
EX-23.1 - EXHIBIT 23.1 - Xtant Medical Holdings, Inc.v416054_ex23-1.htm
EX-99.6 - EXHIBIT 99.6 - Xtant Medical Holdings, Inc.v416054_ex99-6.htm
EX-10.1 - EXHIBIT 10.1 - Xtant Medical Holdings, Inc.v416054_ex10-1.htm
EX-10.2 - EXHIBIT 10.2 - Xtant Medical Holdings, Inc.v416054_ex10-2.htm
EX-99.5 - EXHIBIT 99.5 - Xtant Medical Holdings, Inc.v416054_ex99-5.htm
EX-10.3 - EXHIBIT 10.3 - Xtant Medical Holdings, Inc.v416054_ex10-3.htm
EX-99.4 - EXHIBIT 99.4 - Xtant Medical Holdings, Inc.v416054_ex99-4.htm
EX-99.1 - EXHIBIT 99.1 - Xtant Medical Holdings, Inc.v416054_ex99-1.htm
EX-23.2 - EXHIBIT 23.2 - Xtant Medical Holdings, Inc.v416054_ex23-2.htm
EX-99.2 - EXHIBIT 99.2 - Xtant Medical Holdings, Inc.v416054_ex99-2.htm
EX-10.4 - EXHIBIT 10.4 - Xtant Medical Holdings, Inc.v416054_ex10-4.htm
EX-10.5 - EXHIBIT 10.5 - Xtant Medical Holdings, Inc.v416054_ex10-5.htm
EX-99.3 - EXHIBIT 99.3 - Xtant Medical Holdings, Inc.v416054_ex99-3.htm

Exhibit 99.7

UNAUDITED PRO FORMA FINANCIAL STATEMENTS

The following unaudited pro forma financial statements have been prepared in accordance with guidelines specified by Article 11 of Regulation S-X. Specifically, the Unaudited Condensed Combined Statements of Operations for the twelve months ended December 31, 2014 and the three months ended March 31, 2015, have been prepared as if the offering of our 6.00% Convertible Senior Notes due 2021, the contemplated use of the estimated net proceeds therefrom, the entry by Bacterin International Holdings, Inc. (“Bacterin”) into an amended and restated credit agreement (the “New Facility”), which replaces its existing credit agreement (the “Existing Facility”), the extinguishment of X-spine Systems, Inc.’s (“X-spine”) existing revolving line of credit (the “X-spine Revolver”) and the combination of Bacterin and X-spine occurred on January 1, 2014, and include all adjustments that (i) are deemed to be directly attributable to the contemplated transactions and (ii) are factually supportable. The Unaudited Condensed Combined Balance Sheet as of March 31, 2015 has been prepared as if these transactions occurred as of March 31, 2015 and include all adjustments that (a) are deemed to be directly attributable to the contemplated transactions, (b) have a continuing impact on our financial statements, and (c) are factually supportable.

The transactions are more fully described in Note 1 hereto. The pro forma adjustments are based upon various estimates and assumptions that our management believes are reasonable and appropriate given the currently available information. Use of different estimates and judgments could yield different results.

The unaudited pro forma financial statements do not reflect any future operating efficiencies, associated cost savings or possible integration costs that may occur related to the combination of Bacterin and X-spine.

The unaudited pro forma financial statements are included for informational purposes only and do not purport to reflect our results of operations or financial position that would have occurred had we operated as a public company or as a group of companies during the periods presented. The unaudited pro forma financial statements should not be relied upon as being indicative of our financial condition or results of operations had the transactions occurred on the date assumed nor as a projection of our results of operations or financial position for any future period or date.

The unaudited pro forma financial statements should be read in conjunction with the historical financial statements and related notes of Bacterin, appearing in Bacterin’s public filings available on www.sec.gov, and X-spine, appearing elsewhere in this Current Report on Form 8-K.

1

 
 

BACTERIN INTERNATIONAL HOLDINGS, INC.
 
Unaudited Pro Forma Combined Statements of Operations

         
  For the Twelve Months Ended December 31, 2014
     Bacterin   X-Spine
Systems Inc.		   Pro Forma
Adjustments		     Pro Forma
Revenue
                                             
Tissue and medical device sales   $ 34,569,160     $ 42,144,675     $              $ 76,713,835  
Royalties and other     762,652       68,343                      830,995  
Total revenue     35,331,812       42,213,018       0                77,544,830  
Cost of sales     13,034,314       14,488,855                      27,523,169  
Gross profit     22,297,498       27,724,163       0             50,021,661  
Operating expenses
                                             
General and administrative     8,886,972       4,731,252                         13,222,774  
                         (395,450 )      (a)           
Sales and marketing     16,912,865       15,865,370                         32,778,235  
Research and development     1,443,018       2,140,450                         3,583,468  
Depreciation and amortization     271,748                395,450       (a)       4,630,917  
                         3,963,719       (b)           
Impairment of assets     912,549                                  912,549  
Non-cash consulting expense     135,075                —             135,075  
Total operating expenses     28,562,227       22,737,072       3,963,719                55,263,018  
Income (loss) from operations     (6,264,729 )      4,987,091       (3,963,719 )            (5,241,357 ) 
Other income (expense)
                                             
Interest expense     (5,660,357 )      (593,593 )      (11,607,172 )      (c)       (11,607,172 ) 
                         6,253,950       (d)           
Change in warrant derivative liability     1,736,053                —                1,736,053  
Other income (expense)     (318,836 )                              (318,836 ) 
Total other income (expense)     (4,243,140 )      (593,593 )      (5,353,222 )            (10,189,955 ) 
Net gain (loss) from operations before (provision) benefit for income taxes   $ (10,507,869 )    $ 4,393,498     $ (9,316,941 )          $ (15,431,312 ) 
Current              (112,337 )                        (112,337 ) 
Deferred                                          
Net income (loss)   $ (10,507,869 )    $ 4,281,161     $ (9,316,941 )          $ (15,543,649 ) 
Net loss per share:
                                             
Basic   $ (1.76 )                               $ (1.52 ) 
Dilutive   $ (1.76 )                               $ (1.52 ) 
Shares used in the computation:
                                             
Basic     5,954,195                4,250,000       (e)       10,204,195  
Dilutive     5,954,195                4,250,000       (e)       10,204,195  

2

 
 

BACTERIN INTERNATIONAL HOLDINGS, INC.
 
Unaudited Pro Forma Combined Statements of Operations

         
  For the Three Months Ended March 31, 2015
     Bacterin   X-Spine
Systems Inc.		   Pro Forma
Adjustments		     Pro Forma
Revenue
                                             
Tissue and medical device sales   $ 9,277,047     $ 12,170,571     $              $ 21,447,618  
Royalties and other     226,067       54,676                      280,743  
Total revenue     9,503,114       12,225,247                         21,728,361  
Cost of sales     3,472,477       4,290,544                      7,763,021  
Gross profit     6,030,637       7,934,703                      13,965,340  
Operating expenses
                                             
General and administrative     2,425,167       1,623,661                         3,914,271  
                         (134,557 )      (a)           
Sales and marketing     4,713,672       4,859,570                         9,573,242  
Research and development     433,561       608,343                         1,041,904  
Depreciation and amortization     124,111       —       134,557       (a)       1,374,481  
                         1,115,813       (b)           
Non-cash consulting expense     66,796       —       —             66,796  
Total operating expenses     7,763,307       7,091,574       1,115,813             15,970,694  
Gain (loss) from operations     (1,732,670 )      843,129       (1,115,813 )            (2,005,354 ) 
Other income (expense)
                                             
Interest expense     (1,435,578 )      (79,674 )      (2,992,081 )      (c)       (2,992,081 ) 
                         1,515,252       (d)           
Change in warrant derivative liability     (462,208 )      —       —                (462,208 ) 
Non-cash consideration associated stock agreement     (558,185 )      —       —                (558,185 ) 
Other income (expense)     11,837       —                      11,837  
Total other income (expense)     (2,444,134 )      (79,674 )      (1,476,829 )            (4,000,637 ) 
Net gain (loss) from operations before (provision) benefit for income taxes   $ (4,176,804 )    $ 763,455     $ (2,592,642 )             $ (6,005,991 ) 
Benefit (provision) for income taxes
                                             
Current              (24,932 )      —                (24,932 ) 
Deferred                       —             —  
Net income (loss)   $ (4,176,804 )    $ 738,523     $ (2,592,642 )          $ (6,030,923 ) 
Net loss per share:
                                             
Basic   $ (0.62 )                               $ (0.55 ) 
Dilutive   $ (0.62 )                               $ (0.55 ) 
Shares used in the computation:
                                             
Basic     6,689,530                4,250,000       (e)       10,939,530  
Dilutive     6,689,530                4,250,000       (e)       10,939,530  

3

 
 

BACTERIN INTERNATIONAL HOLDINGS, INC.
 
Unaudited Pro Forma Combined Balance Sheet

           
  As of March 31, 2015
     Bacterin   X-Spine
Systems Inc.		   Combined
before Adj's		   Pro Forma
Adjustments		     Pro Forma
Current Assets:
                                                      
Cash and cash equivalents   $ 2,899,557     $ 3,000     $ 2,902,557                       $ 8,132,557  
                                  5,230,000       (a)           
Trade accounts receivable     5,495,667       6,389,952       11,885,619                         11,885,619  
Inventories, net     9,710,580       12,644,228       22,354,808                         22,354,808  
Prepaid and other current assets     885,359       107,668       993,027       (223,410 )      (b)       1,273,617  
                                  72,000       (c)           
                                  432,000       (d)           
Total Current Assets     18,991,163       19,144,848       38,136,011       5,510,590                43,646,601  
Non-current inventories     1,787,061       0       1,787,061                         1,787,061  
Property and equipment, net     4,503,132       7,956,901       12,460,033                         12,460,033  
Intangible assets, net     621,126       667,753       1,288,879       (667,753 )      (e)       43,814,626  
                                  43,193,500       (f)           
Goodwill     0       0       0       21,777,112       (f)       21,777,112  
Other assets     1,502,333       0       1,502,333       (744,698 )      (b)       2,773,635  
                                  288,000       (c)           
                                  1,728,000       (d)           
Total Assets   $ 27,404,815     $ 27,769,502     $ 55,174,317     $ 71,084,751           $ 126,259,068  
Liabilities and Equity
                                                      
Accounts payable     4,412,385       4,212,423       8,624,808                         8,624,808  
Accounts payable – related party     327,641       0       327,641                         327,641  
Accrued liabilities     2,645,346       2,184,938       4,830,284                         4,830,284  
Warrant derivative liability     1,782,579       0       1,782,579                         1,782,579  
Current portion of capital lease obligations     30,914       0       30,914                         30,914  
Current portion of royalty liability     1,109,750       0       1,109,750       (1,109,750 )      (b)       0  
Current portion of long-term debt     51,574       0       51,574                      51,574  
Current Liabilities     10,360,189       6,397,361       16,757,550       (1,109,750 )               15,647,800  
Capital lease obligation, less current portion     6,529       0       6,529                         6,529  
Long-term royalty liability, less current portion     6,228,293       0       6,228,293       (6,228,293 )      (b)       (0 ) 
Long-term debt, less current portion     21,281,052       0       21,281,052       42,000,000       (h)       43,261,478  
                                  (24,000,000 )      (h)           
                                  (700,000 )      (b)           
                                  4,680,426       (b)           
Revolving line of credit     0       11,950,057       11,950,057       (11,950,057 )      (g)       0  
Convertible long-term debt     0       0       0       65,000,000       (i)       65,000,000  
Long-Term Liabilities     27,515,874       11,950,057       39,465,931       68,802,076             108,268,007  
Total Liabilities   $ 37,876,063     $ 18,347,418     $ 56,223,481     $ 67,692,326           $ 123,915,807  
Preferred stock, par value     —       100,000       100,000       (100,000 )      (j)       0  
Common stock, par value     7       1,000,000       1,000,007       4       (k)       11  
                                  (1,000,000 )      (j)           
Additional paid-in capital     64,572,987       350,000       64,922,987       13,174,996       (k)       77,747,983  
                                  (350,000 )      (j)           
Accumulated deficit     (75,044,242 )      7,972,084       (67,072,158 )      (7,972,084 )      (j)       (75,404,733 ) 
                                  2,389,509       (l)           
                                  (2,750,000 )      (m)           
Total stockholders' equity     (10,471,248 )      9,422,084       (1,049,164 )      3,392,425             2,343,261  
Total Liabilities and Equity   $ 27,404,815     $ 27,769,502     $ 55,174,317     $ 71,084,751           $ 126,259,068  

4

 
 

Bacterin International Holdings, Inc.
Notes to Unaudited Pro Forma Financial Statements

(1)  Basis of Pro Forma Presentation

For purposes of pro forma presentation, the acquisition date of X-spine is assumed to be the following for each of the respective financial statements:

• For the purposes of the Unaudited Condensed Combined Statement of Operations for the twelve months ended December 31, 2014 and the three months ended March 31, 2015, the acquisition date has been assumed to be January 1, 2014; and
• For the purposes of the Unaudited Condensed Combined Balance Sheet as of March 31, 2015, the acquisition date has been assumed to be March 31, 2015.

In conjunction with the acquisition of X-spine, the following equity and debt instruments are anticipated to be issued or established:

• 4,250,000 shares of common stock of Bacterin;
• $42 million in long-term debt incurred pursuant to the New Facility, with a maturity July 2020, an annual interest rate of 14% plus LIBOR (minimum 1%); and
• $65 million in convertible debt with a maturity July 2021 (for purposes of pro forma presentation the annual interest rate is assumed to be 7%).

The incurrence of the $42 million in long-term debt will replace the Existing Facility of $24 million for an incremental increase of $18 million.

For purposes of these unaudited pro forma condensed combined financial statements, it has been assumed that the proceeds associated with long-term debt and convertible long-term debt instruments have been received as of the acquisition date(s). These instruments are subject to investor acceptance.

The unaudited pro forma condensed combined financial statements have been prepared assuming that the acquisition is accounted for using the acquisition method of accounting. Accordingly, the assets acquired and liabilities of X-spine have been adjusted to their fair values as of March 31, 2015.

Fair Value as of March 31, 2015

   
X-spine tangible assets            $ 27,101,749  
X-spine tangible liabilities              (6,397,361 ) 
X-spine revolving line of credit           (11,950,057 ) 
Net tangible assets              8,754,331  
Goodwill              21,777,112  
Identifiable intangible assets
                  
Tradename   $ 4,543,300           
Technology     28,698,700           
Non-compete     40,500           
Customer relationship     9,911,000       43,193,500  
Cash     60,549,943           
Stock (4,250,000 shares of common stock)     13,175,000           
Consideration – stock and cash         $ 73,724,943  

5

 
 

Bacterin International Holdings, Inc.
Notes to Unaudited Pro Forma Financial Statements

(1)  Basis of Pro Forma Presentation  – (continued)

A fair market value of $8.8 million has been assigned to net tangible assets acquired. The difference between the fair market value of the net tangible assets and the consideration given have been allocated between (i) identifiable intangible assets (technology, trademarks, customer relationships and non-compete agreements) which will be amortized over three (3) to fourteen (14) years and (ii) goodwill, which in accordance with the ASC No. 805 Business Combinations, will not be amortized but instead will be tested for impairment at least annually and whenever events or circumstances have occurred that may indicate a possible impairment.

Acquisition-related costs are estimated to be $2.8 million for the period ended March 31, 2015.

(2)  Pro Forma Presentation Adjustments and Assumptions

The adjustments included in the column under the heading “Pro Forma Adjustments” in the unaudited pro forma condensed combined financial statements are as follows:

Pro Forma Adjustments to the Condensed Combined Balance Sheet

a) To record cash and cash equivalents, which is the excess of consideration given less net term debt, convertible debt and equity issued.
b) To eliminate the long-term debt discount, royalty liability and debt penalty fee associated with the extinguishment of the Existing Facility.
c) To record that portion of the third party fees incurred in conjunction with the acquisition of X-spine associated with the issuance with the New Facility.
d) To record that portion of the third party fees incurred in conjunction with the acquisition of X-spine associated with the fair market value of the convertible notes classified as part of long-term debt.
e) To eliminate the historical intangible assets of X-spine.
f) To record the identifiable intangible assets and goodwill associated with the acquisition of X-spine.
g) To record the extinguishment of the X-spine Revolver which will be paid off with the incurrence of new debt associated with the acquisition of X-spine.
h) To record the entry into the New Facility associated with the acquisition of X-spine and the extinguishment of the Existing Facility.
i) To record the issuance of the fair market value of the convertible notes classified as part of long-term debt.
j) To eliminate the sellers’ portion of Stockholders’ equity.
k) To record the values associated with common stock and additional paid-in capital associated with the approximately 4,250,000 shares of common stock issued to sellers as part of the consideration for X-spine.
l) To record the gain associated with the extinguishment of the Existing Facility.
m) To record that portion of the third party fees incurred in conjunction with the acquisition of X-spine.

6

 
 

Bacterin International Holdings, Inc.
Notes to Unaudited Pro Forma Financial Statements

(2)  Pro Forma Presentation Adjustments and Assumptions  – (continued)

Pro Forma Adjustments to the Condensed Combined Statements of Operations

a) To reclassify amortization and depreciation from General and administrative expense to Depreciation and amortization expense which is the financial reporting presentation used by Bacterin for the three months ended March 31, 2015 and for the twelve months ended December 31, 2014.
b) To record amortization of Identifiable intangible assets expense for the three months ended March 31, 2015 and for the twelve months ended December 31, 2014.
c) To record the interest expense associated with the entry into the New Facility and the issuance of convertible debt securities associated with the acquisition of X-spine for the three months ended March 31, 2015 and for the twelve months ended December 31, 2014.
d) To reverse out the interest expense associated with the Existing Facility and the X-spine Revolver which has been extinguished with the issuance of the New Facility and of the new convertible debt associated with the acquisition of X-spine for the three months ending March 31, 2015 and for the twelve months ending December 31, 2014.
e) To reflect the shares of common stock issued as consideration for the acquisition.

7

Xtant Medical Holdings, Inc. Reports