Mike Houston - Director of Investor Relations Sonny Bal - Chairman and Chief Executive Officer Ty Lombardi - Principal Accounting Officer.

John Gillings - JMP Securities Mike Matson - Needham & Company.

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 nitride products to other companies that are looking to broaden their product portfolio and differentiate themselves.

And lastly we are able to develop OEM partnerships or we take a company’s existing device for a new designs made of an interior legacy material such as metal-on-plastic that’s been around 30 years or 40 years and we can ceramatize it make it very unique into silicon nitride.

In our prior call I outlined three focal points, we are executing on in order to accelerate our vision of becoming the biomaterial of choice. First is executing our private label and OEM strategy. Second is to strengthen and nurture our relationships with surgeons and distributors our customers.

And third is to focus on clinical and research data in order to validate the established foundation of basic science that we have completed and published. We are very pleased with the traction and attention we have received thus far with potential private label and OEM partners. As we continue to selectively invest in that space.

These discussions take time to finalize and we anticipate being able to provide additional details on a few of these advanced conversions in the near future.

The recent CASCADE study interim results have helped stimulate additional points of contact and discussing while also expanding the current discussions and we view the upcoming AAOS that’s the American Academy of Orthopedic Surgeons, advanced at the end of March this month.

As an opportunity to help solidify some of these partnerships and provide additional opportunities and indeed we have a full counter at the AAOS meeting. I am very pleased for the progress that we've made today with the private label and OEM strategy and look forward to sharing the results and proves of that progress with you in the coming months.

I have communicated this with several of you in one-on-one meetings or conference calls. Since being named CEO last fall and I cannot emphasize this enough. We are first and foremost a biomaterial company focused on the spine market with a uniquely differentiated material platform found in silicon nitride period.

Spinal interbody devices represent a large opportunity with an addressable market of almost $2 billion between the U.S. and Europe. And we need to ensure success in that lucrative space before focusing on other orthopedic endeavors, but are also attracted to me and very much serve the scientists, clinician, orthopedic surgeon and a corporate leader.

And I am convinced that Amedica will be successful in expanding its market presence this year. Because we offer new treatment alternatives that are distinctively advantageous and differentiated to surgeons and hospitals and well those advantages being in terms of clinical use, application cost, outcomes and superior applications.

The private label in OEM strategy allows us to achieve incremental sales gains that have more favorable operating margin contributions and will also lead to faster and more widespread market penetration of silicon nitride.

The bottom-line we no longer want our company in Amedica nor material silicon nitride to be a well kept secret here in Salt Lake City.

The efforts to expand the use of silicon nitride through our existing sales and distribution channels have been met with great success as evidenced by our strong year-to-year growth, improving and expanding our distributor and surgeon relationships is a very high priority.

And during this past quarter I have met personally with several of our base distributors and surgeons and continued to do so. And the feedback that I get and this is consistent from the surgeons that use it, that silicon nitride is a superb material with excellent clinical results. So that's the foundation and that's what our customers tell us.

More and more surgeons are realizing that our interbody devices or spinal fusion devices not just a commodity spacer -- they are a distinct device and a brand new material platform.

And I can fully relate to our surgeon customers being an orthopedic surgeon myself and I am convinced there are many, many opportunities to help strengthen the existing distributor and surgeon base and build further on it.

Moving to our clinical research, we announced very favorable and some clinical data from the CASCADE study recently and to remind you CASCADE is our randomized blinded clinical trial that compared our core silicon nitride composition material to autograft bone which is the patient's own bone adjudicated by clinical and radiographic end points.

And so far the patient's own what we call autograft is the best available material to promote bone healing infusion and is considered the gold standard.

Amedica's Valeo interbody spinal devices used in the study consisted of an inner-core of porous silicon nitride the first such composition for any ceramic worldwide, and was surrounded by a solid silicon nitride material.

The two compositions of our material making it a single composite [indiscernible] device or a fusion device that can support bone on-growth on the outside and bone in-growth through and through that porous ceramic interior.

And our special note the Amedica interbody devices were placed in the patient by themselves without the addition of any bone graft or synthetic bone fillers. Dosing from CASCADE data proved that silicon nitride by itself has composed as I described achieved similar fusion rates and clinical scores.

As patients implanted with traditional spacers using bone autograft. The significance of this data cannot be overstated. It's the first -- the CASCADE study is the first to show that a synthetic material can heal and fuse as well as with the patient's own bone, that's not true with any other material.

We have shown that this is no longer necessary to use hallow interbody spacers filled with bone, bone fillers and various putties that extends to achieve optimal fusion results, our material does it by itself.

We are in the process of submitting two scientific papers related to the final outcomes and fusion data for the CASCADE study to peer-reviewed publications and also we have submissions to the NASS meeting later on this fall.

In the near future we'll have webcast announcing the full results of the patient outcomes and fusion rates of the CASCADE study. Dr. Mark Arts who was the lead investigator surgeon and neurosurgeon at the Medical Center at the Hague in Netherlands will present his findings.

And I will discuss the impact as we anticipate this disruptive technology will have on the markets and our business. We anticipate finalizing the date and time soon and we'll provide those to you accordingly.

The composite silicon nitride interbody devices that we used in the CASCADE study reflect a major [fair value] shift in the design, utilization and cost of using implants as we head into the future of healthcare. This is something that's every difficult to replicate, it's not impossible replicate by any competitor.

It reflects 20 years of legacy, cause science, investigation research, engineering and manufacturer expertise. In addition to the two peer-reviewed general submissions the CASCADE data has supported our 510 submission to the FDA earlier this year.

That clearance will allow us to introduce our composite interbody fusion device here in the United States. And although we made it through the administrative review process and the 90 day clock has begun to tick for the FDA, we still anticipate a final response in the second or third quarter of this year.

And as you can understand any review by the FDA, these type of predictions are difficult to make and not entirely in our control. So far the feedback from the FDA has been quite conserve.

The CASCADE addressed the performance of our devices and the cervical spine over the neck, in contrast we are also engaged in the SNAP silicon nitride and PEEK clinical trial which compares the first generation of lumbar silicon nitride devices to PEEK devices.

We have completed enrollment and we anticipate having one year follow-up data available in Q1 of 2016. The first study, the JAX, Jacksonville, JAX we discussed in the past has been put on hold and the reason is in light of the very successful CASCADE results more successful than I anticipated.

We have decided to temporarily shelf that randomized trial in favor of other trails with a different hypothesis that arise from the CASCADE data. We hope to announce additional details on those clinical studies in the near future.

Clinical outcomes data are vital to our success and credibility going forward with this new buyer material, our customers need clinical data to add scientific credibility and to validate the use of silicon nitride over other materials that are used in spine surgery today.

All these studies will give us a solid clinical foundation that our sales and marketing team can build on and leverage before our surgeon and hospital customers. And these are data are needed to adapt our technology more broadly.

Our scientific team continues to build very impressively on the portfolio of publications related to the basic material properties of silicon nitride which is our strength, we have just submitted three additional papers for acceptance in peer-reviewed journal and another that was published in the Journal of Physical Chemistry last month.

Now without getting into too many engineering details the study that was published in the Journal of Physical Chemistry looked at the phase chemistry of silicon nitride and how we can modify it based on this composition.

From a high-level there are variety of silicon nitride compositions available we took ours, we compared it to others and beyond providing inside as to why the material exhibits it’s strength and toughness our paper showed that our composition providers is the highest strength and toughness of all compositions tested.

And then we wanted to research the different ways to make a silicon nitride composition even stronger until we understand so why it exhibits the properties going into the future. The second paper, basic science has been submitted for publication and I think may already be accepted, it helps to answer the question why.

These findings are helpful to us as material scientists as we our composition better to be able to explain to clinicians why the material behaves as it does.

The third paper also submitted for publication in a peer-reviewed journal this last month, builds on the science the other two papers described and helped us and others understand the specific material properties of silicon nitride at the surface.

We wanted to understand why silicon nitride exhibits better [working] characteristics, adhesion to fluids than oxide ceramics, polymers and metals.

Again without going too much of the science we found that the hydrophilicity of the affinity of the material to water and body fluids has a lot to do with the surface topography and chemistry of the material.

And as you can probably guess the more the material likes to adhere synovial fluids or lubricants the better as properties in the body and the better the fusion characteristics because of protein adhesion.

The last paper I would like to discuss is another that we submitted for acceptance in a peer-reviewed publication and it builds on all the one I just talked about.

That explains the surface modulation of silicon nitride, our ability to change the surface and take the basic science work we have done to-date and look at how silicon nitride could be modified to interact in different ways with basic biologic fluids.

For example, one of the things we've studied is how a slight in the manufacturing process can change the material hydrophilicity or flexibility as we call it in engineering. From moderately hydrophilic to extremely hydrophilic something that really attract fluids.

So as we're seeing in this spine market currently companies that are attempting to modify existing materials, legacy materials that have been used for decades given their known challenges and limitations. But as much as they try the zebra can’t change its stripes. Old materials are old materials. They have been tried and we know their limitations.

Silicon nitride is the only material we know today that can alter its chemistry and we can do so in controlled circumstances, to improve the surface characteristics. Those characteristics are extremely important in spinal fusion procedures to improve the fusion process.

Bottom-line we can engineer this material to make it behave the way we want it to behave in future applications.

And now that we know silicon nitride can have even better wet characteristics through these modulations, we're looking at how this change is going to affect interaction with bacteria, with them more stem cells and other elements that are relevant and prevalent in surgical performance.

So to underscore this is a very exciting time for Amedica as we look to publish these findings in peer-reviewed journals with some of the top scientists in the world over the next several months. These scientific papers give us the knowledge the foundation the basis to further improve upon our technology platforms going into the future.

On the regulatory front we are excited to announce the FDA clearance for expanded indications of our silicon nitride interbody devices to include multi-level cervical treatment in allograft.

And given the high incidence clinically of two level cervical fusion procedures and operations we are proud of a silicon nitride interbody devices being available to address that segment.

This clearance allows a company to support and conduct clinical studies without the need for an IDE which is an Investigation of Device Extension in two level cervical pathology, which can then be used to confirm the effectiveness of a silicon nitride technology platform yet further.

The clearance also allowed us to promote this unique point of differentiation in the marketplace.

This is an important development for surgeons because they can now safely and effectively and legally use our silicon nitride cervical fusion devices in on-label treatments of multi-level cervical pathology and it also provides them with a broader array or procedure options for high-risk patients.

Such as patients with poor bone quality or small core diabetes in whom fusion is less predictable. In addition we were proud to announce that ANVISA that’s the FDA equivalent in Brazil recently cleared a first generation Valeo silicon nitride devices for use in spinal procedures in that country. We are very excited about this development.

We planned to provide additional details in the coming months as we work to get our instrument sets and second generation silicon nitride device is cleared. Moving to manufacturing, our team as usual of the shining star throughout the year as they continue to benefit from Six Sigma quality methods introduced by our R&D team.

These methods have allowed our team to improve production, yield while reducing tooling and labor cost. Additional opportunities to increase yield and reduce production throughput time this year have been identified, they will be implemented throughout this year. And for the year manufacturing volumes increased by 170% as compared to 2013.

Production yields have also increased by approximately 17% in 2014 compared to the 2013 full year results. This enhanced capacity which is partially due to improved yields and reduced throughput times enabled us to launch additional second generation Valeo products this year ahead of our original plan.

Our manufacturing partnership of Kyocera that I touched on before continues to grow as our team internally has worked very closely with the Kyocera team throughout the year and we continued to do so to help them achieve approved supplier status.

This has been time and labor intensive processes this past year and we're very pleased with the progress we've made.

To date some of the milestones that we've been able to accomplish include getting the Kyocera manufacturing site registered with the FDA as well as completing a successful audit performed by the FDA, this is a huge partnership for us going forward.

In closing I wanted to address our recent deficiency bid notice from NASDAQ, which we received because of the minimum bid price per share for our common stock was below a $1 for the period of 30 consecutive business days. The notification matter does not result in our immediate delisting and we continue to trade uninterrupted under the symbol AMDA.

This letter is more of a reminder that in order for Amedica to regain compliance with NASDAQ's minimum requirements over the next 180 days our common stock needs to have a closing bid price per share of a $1 or more for 10 consecutive business days, we fully intend to resolve the situation.

Two, most important continuing execution of our strategic plan and vision while building and maintaining credibility with our investors to allow for continued listing on the NASDAQ capital market.

Since assuming this role as Chairman and CEO last October part of my focus has been building up credibility, reaching out to the investment community, and most important executing on the work in front of us on the key milestones we have set in place since before going public.

I feel very strongly that the significant milestones we've already achieved in these last several months and others that we will do and announce soon will position us for future sustained growth in the coming years.

Starting with our private label and OEM partnership announcement with Spinal Kinetics during the first part of the fourth quarter, this has been a wonderful collaboration as we continue to grow and expand our partnership with Spinal Kinetics.

These two agreements not only increase the adoption of our silicon nitride platform but they also allow Spinal Kinetics to take the bio material directly to its customers and develop that according to their specifications.

Spinal Kinetics has been an absolutely wonderful ally in the process as we seek to structure additional private label and OEM agreements with at least four additional partners during the balance of this year.

The announcements with Spinal Kinetics and the discussions we're having with others confirm that Amedica is the only biomaterial company with expertise in fabricating, designing and delivering medical grade silicon nitride devices across many device platforms.

The spine market is today at an inflection point as we're seeing surgeons and hospitals who want a product that is superior to plastic spacers.

Silicon nitride is the ideal biomaterial because of its anti-infection behavior, its osteopromotive properties as well as their superior radiographic energy and its biocompatibility that is proven and these are just few.

Our CASCADE clinical study was also announced in the first part of this year further underscores the unique properties of silicon nitride either validate what we've been saying in an actual clinical model and the greatly expanded addressable market the porous composite device potentially offers to Amedica.

Because silicon nitride is a very fast out material, we can shape it as we like, it can be shaped and formulated in a variety of different forms where we're uniquely strong.

These are the results for the first of which to show that the porous formulation of a material, one of a kind in the world, enables bone in-growth and fusion by itself without relying on additives which is again a first for orthopedic surgery or neurosurgery. And this could decrease the cost and complexity of surgical procedures for sure.

Our goal is that this unique point of differentiation and innovation and cost effectiveness may I add will become well known among our investors and spine market participants and indeed we're gaining attention.

And then the final catalyst I would discuss in achieving an improved valuation and as a result of better outcomes and increased share price, with a recent change in trajectory to align financial and strategic objective.

These actions will allow us to capture additional market share while achieving profitability on accelerated time line given the superior benefits of our biomaterial technology.

Ty Lombardi will discuss the details of these actions later in the call but I would like to highlight that these changes will reduce our cash burn, increase financial sustainability and strengthen the balance sheet allowing us to maintain compliance with all debt covenants well into the fourth quarter of this year and becoming operating cash flow breakeven in the second quarter of next year 2016.

This realignment provides us with the necessary time to execute on our strategic plan and show progress without having to focus through, so much on financing activities. And thank you with that, I will turn the call over to Ty Lombardi who will discuss our financial results. Ty over to you..

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 today.

As a result a greater portion of the year-over-year increase in excess and our proved inventory was related to metals. We anticipate a moderate decline in this provision during 2015.

Our manufacturing team continued to drive efficiencies and cost savings throughout the year on our cost-of-goods sold by keeping labor costs low and improving our quality in tooling system.

We anticipate additional savings to be captured by our manufacturing team 2015 as Kyocera fully comes online and additional cost saving initiatives are implemented. Research and development expense for 2014 increased by 3.3 million to 6.7 million, when compared to full year results in 2013.

Primarily related to additional clinical studies expense and product development efforts to support the utility of our silicon nitride product. The year-over-year increase also included a 1.3 million increase in non-cash stock based compensation expense during the year.

We believe that research and development expenses will decline moderately in 2015 as compared to 2014, as cost savings are realized. These savings will be partially offset by additional clinical studies to support our silicon nitride products.

General and administrative expenses were 13.6 million in 2014 compared to 5.8 million in 2013, a 7.8% million increase from last year. This is primarily due to a 6.2 million increase in non-cash stock compensation expense as well as increases in personnel related and insurance expenses during the year.

Excluding the impact of non-cash stock compensation expense we expect general and administrative expense levels to decline moderately to 2015. As cost saving measures have been implemented to improve financial performance increased operational efficiencies and strengthen the company’s value proposition.

We anticipate 2015 non-cash stock compensation expense to decline dramatically as compared to full year expense in 2014. Due to the completion of the vesting period for all RSUs. As a reminder a large portion of the non-cash stock compensation expense for 2014 was related to RSUs granted to employees and directors at the time of our IPO.

The magnitude of the non-cash stock compensation expense totaled 10.2 million in 2014 a majority of which was related to the RSUs. Sales and marketing expenses totaled 18.7 million in 2014 compared to 16.4 million in 2013 an increase of 2.3 million.

This increase was primarily due to a non-cash stock compensation expense of approximately 2.3 million during the year. We expect the sales and marketing cost in 2015 will remain flat or slightly declined as compared to 2014, due to the recently implemented cost saving measures.

Our GAAP net loss for 2014 was 32.6 million compared to a loss of 8.3 million last year, an increase in loss of 24.3 million.

This was primarily due to non-cash stock compensation expense of approximately 10.2 million higher operating expenses as well as increased interest expenses, a loss on extinguishment of debt and operating cost incurred during the year.

Turning to adjusted EBITDA which we define as our earnings before deductions for interest, taxes, depreciation, amortization, non-cash stock compensation expense, change in fair value of our derivative liabilities offering common debt was a loss of 11.9 million for 2014 compared to a loss of 7.7 million last year, an increase in loss of approximately 4.2 million.

As of December 31, 2014 our cash balance was approximately 18.2 million or total debt principal obligations were approximately 24.5 million. And then lastly I would like to provide an update on the 2015 guidance we shared earlier this year.

We maintain our estimates of increasing silicon nitride sales this year by 30% to 40%, thus equating to a total annual revenue range of 23 million to 24 million.

We estimate that the impact from the restructuring announced in January we delivered 6 million to 8 million of annualized operating profit benefit, beginning in the first quarter of this year.

These changes will reduce total cash burn, increase financial sustainability and strengthen the balance sheet, allowing the company to maintain compliance with all debt covenants well into Q4 of this year and become operating cash flow breakeven in the second half of 2016.

We expect Q1 total cash burn level to remain elevated primarily due to severance and other benefit charges related to our financial and operational realignment. However on an annualized basis we anticipate quarterly total cash burn rate of excluding principal payments which began in August of this year to be between 1.5 million and 2 million in 2015.

We remain committed to improving focus and profitability of Amedica, as these strategic measures will allow us to execute on the development of our core silicon nitride technology by aligning sales, marketing and product development teams to drive broad product portfolio growth and adoption of silicon nitride. Back to your Dr. Bal..

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..