Dear SpineWire Reader,

Every year has moments suitable for framing. For our latest issue of SpineWire™, US Spine^® will frame several great accomplishments for 2009, all of which were years in the making. We have been proud to introduce four new products to the marketplace, as well as cross a milestone of successfully completing over 5,300 surgical procedures and being awarded two significant patents for our Facet Fixation System™ technology from the United States Patent and Trademark Office (USPTO). US Spine, like all companies, has its challenges; we have been hard at work to address those and are prepared to hit the ground running in 2010.

Join us as we share our successes and challenges in 2009 and prepare for the New Year.

US Spine^® Year in Review

Product Expansion
US Spine^® has been very busy in 2009, launching four new product lines. These additions strengthen the company's product portfolio and leave them poised to have an outstanding 2010. The Preference™ 2 Complex Spine System and Phantom™ Plus lines strengthen the Core Product portfolio while the Facet Gun™ Max and Javelin™ systems cement US Spine's place as the Leader in Facet Technologies.

1. Preference™ 2 Complex Spine System (P2CSS). P2CSS, launched in August, is a hook, rod and pedicle screw system with several implant options allowing multiple correction techniques and comprehensive instrumentation designed specifically to treat complex spinal pathologies. The launch marks US Spine's entry into the over $700 million complex spine market and has been well received, increasing year-over-year pedicle screw revenue over 70% during the summer scoliosis season.

2. Phantom™ Plus Interbody System. Phantom Plus provides spine surgeons with next generation instrumentation and implants that offer a complement to US Spine's posterior fixation systems. With PLIF, TLIF and Cervical launched in 2009, the company looks forward to adding an ALIF and exclusive Facet-sparing, posterior cage in 2010. The introduction of Phantom Plus allows the company to end its private label distribution of the original Phantom Interbody System, substantially increasing gross margin on interbody sales.

3. Facet Gun™ Max. The year 2009 also marked the evolution of the Facet Fixation System, with the unveiling of the much-anticipated Facet Gun Max. Facet Gun Max offers improved performance and consistency while maintaining core features such as strength, speed and ease of use. Facet Gun Max comprises a new reusable hand piece with quick-release, disposable implant cartridges. The system is designed to lock a spinal motion segment at risk of instability following laminectomy. Facet Gun Max is the must-have complement for the hundreds of thousands of laminectomies performed in the U.S. annually.

4. Javelin™MIS Locking Facet System. The launch of the Javelin MIS Locking Facet System gives US Spine a place in the rapidly expanding percutaneous posterior fixation market. Javelin is the only transfacet-pedicular screw on the market with a locking feature designed to prevent rotational screw loosening. Additionally, comparative biomechanical studies show that the Javelin screw provides nearly twice the pullout strength over competitive systems.

With the product development success of 2009, US Spine has strong momentum going in to 2010. The new and improved product portfolio not only gives our customers and sales force something to be excited about, but also opens resources to focus on the next leading edge in Facet Technologies.

Press Highlights

Press-wise, 2009 was an overall success for US Spine, with a series of positive announcements and news about the company being distributed to media consistently throughout the year. Our press releases have been consistently well received — each landing on 30 or more major news portals online, business and investor publications, and health industry and medical device trade publications.

2009 Press highlights included:

All four press releases for the aforementioned product launches along with these other highlights:

• Surgeons Team with US Spine and the International Hospital for Children to Provide Young Woman with "New Back"
  
  In January, our news about Dr. Tuten and Dr. Sharps utilizing US Spine's Preference 2 Complex Spine System to help a young woman in St. Vincent who suffered for more than 20 years with sever scoliosis was picked up by Reuters, Yahoo!, the Wall Street Journal.com and many medical and spine blogs, as well as mainstream news portals.

• US Spine Names Paul J. Sendro Executive Vice President
  
  In July, our press release announcing the arrival of Paul Sendro was published everywhere from Businessweek.com, Forbes.com and CNBC.com to Yahoo and CBS MoneyWatch. It also received blanket coverage from the health industry news press.

• US Spine Reports Revenues Up 40% Over Last Year
  
  In August, we distributed a release to media that announced a number of significant company benchmarks, including record revenues for its 2009 fiscal year with top line growth exceeding 40% over fiscal 2008 and first quarter revenues increasing approximately 40% over the same quarter the prior fiscal year. The release also reported that surgeons at that time had completed more than 5,300 surgical procedures utilizing US Spine technology, including over 1,600 Facet Bolts implanted in patients. The release was featured on MSN Money, CNBC, Yahoo! Finance, Wall Street Journal.com, Forbes, Reuters, Orthoworld, Spine Market Group and DeviceSpace, among many others.

• Patent Awarded to US Spine for Facet Gun
  
  Also in August, we announced the breaking news that US Spine had been awarded the first patent in a series for its Facet Fixation System. The story was featured online via Forbes.com, CNBC, Yahoo! Finance, Wall Street Journal.com, CBS Business News, Boston Globe, San Francisco Chronicle, Minneapolis-St. Paul Star Tribune and DeviceSpace, among many others.

• US Spine Announces Second Facet Patent Awarded, North American Spine Society Exhibit
  
  In November we sent out the news that US Spine was awarded yet another patent for facet fixation. In the same release, we also announced that US Spine would be displaying the new Facet Gun Max as well as the new Javelin MIS Locking Facet Fixation System at this year's North American Spine Society Annual Meeting in San Francisco. The story was picked up by a record 71 news portals!
  
  Visit our website at www.us-spine.com for complete copies of these press releases.

Sales Wrap-Up

The year in sales was a year of transition from a development company to a commercialization company. We opened the year with good products, though not without their problems. There were also gaps in our product line, such as a minimally invasive offering. Customer responsiveness was also an opportunity for us to make substantial gains. We closed the year with new products, better products, and improved customer service. The main tools for dramatic growth are now on-hand.

On the distribution side, we began the year with close to 40 independent sales agents and stocking distributors — some more dedicated than others. This created an opportunity to streamline the sales force and focus our support to more productive agents. We closed the year with just over 20 agents and stocking distributors who fully support the company and actively promote our products.

In 2009, our sales management team consisted of three area sales directors covering the entire United States. By the end of the first quarter of 2010 this number will have doubled to four area sales directors managed by eastern and western vice presidents of sales and a SVP of Sales and Marketing. This restructuring will provide an increased level of focus that will allow us to more adequately meet our customer needs by finding and managing the best independent agent network available today.

With these changes underway, we are on the path to a strong finish for the fiscal year while setting the table for continued double-digit sales growth.

Thank you for you interest in US Spine. We look forward to a strong and prosperous 2010!