SINTX Technologies, Inc. — 2019 Form 10-K
Reporting period: Fiscal year ended December 31, 2019. This is an annual report, not a standalone fourth-quarter report. Financial amounts below are in U.S. dollars; “$m” means millions. The company’s share and per-share figures reflect its July 2019 1-for-30 reverse split.
Business context
SINTX develops and manufactures silicon nitride ceramics for medical and non-medical applications. After selling its retail spine business to CTL Medical in October 2018, SINTX became an OEM manufacturer, with a 10-year exclusive supply arrangement for CTL’s silicon-nitride spine products. The agreement does not require CTL to purchase minimum volumes. SINTX is pursuing opportunities in dental, hip and knee, coating, and industrial applications; these programs are at varying development stages, and many candidate products require regulatory clearance.
Financial performance and liquidity
| Metric | 2019 | 2018 |
|---|---|---|
| Product revenue | $0.689m | $0.095m |
| Cost of revenue | $0.551m | $0.056m |
| Gross profit / margin | $0.138m / 20% | $0.039m / 41% |
| Research and development | $3.394m | $2.991m |
| General and administrative | $2.908m | $3.866m |
| Sales and marketing | $0.430m | $0.135m |
| Operating loss | $(6.594)m | $(13.116)m |
| Net loss | $(4.797)m | $(8.652)m |
| Net loss attributable to common stockholders | $(7.500)m | $(22.552)m |
| Cash used in continuing operations | $(6.435)m | $(9.328)m |
Revenue rose 625%, principally reflecting the post-sale business model and increased CTL sales and marketing efforts; 2018 revenue reflects only the remaining silicon-nitride business after the retail spine operations were classified as discontinued. Gross profit increased, but gross margin fell as SINTX shifted from retail sales to lower-margin OEM manufacturing. The operating loss narrowed substantially, partly because 2018 included a $6.163m goodwill impairment. Other income was $1.797m in 2019, including a $1.303m gain from the change in fair value of derivative liabilities. A $2.703m deemed dividend and preferred-stock discount accretion increased the loss attributable to common stockholders; these items are not part of net loss.
At year-end, cash and equivalents were $1.787m, total current assets $4.063m, and current liabilities $2.066m. Total assets were $9.147m and total liabilities $3.945m. Balance-sheet debt was approximately $18,000; operating lease liabilities were $2.227m, including $0.360m current. SINTX held a $6m noninterest-bearing note from CTL related to the 2018 sale, with a $3.668m net carrying value at year-end, split between current and long-term portions. Accumulated deficit was $234.078m. The filing reports no dividends.
Financing cash flow was $1.394m in 2019, mainly from $1.451m net common-stock proceeds through the at-the-market offering, partly offset by offering costs. The company reported $1.381m net investing cash flow, largely from note-receivable collections. Cash declined by $3.660m during the year. After year-end, SINTX raised approximately $9.4m gross in a February 2020 rights offering. Management said that year-end resources, remaining ATM capacity, offering proceeds, and expected CTL note payments would fund operations for at least 12 months, through March 2021.
Changes, outlook, risks and unusual items
- Strategy and concentration: SINTX’s 2018 spine-business sale shifted it to an OEM-focused model. CTL accounted for 100% of 2019 continuing-operations revenue and year-end receivables; its purchases are discretionary, creating substantial customer-concentration risk.
- Profitability and funding: The company has incurred recurring losses and expects further operating losses and cash use. Management’s runway assessment depends on financing availability, sales growth, and CTL note payments; SINTX states that future profitability and financing remain uncertain.
- Development and execution: New products require development, partners, and potentially clinical work and regulatory clearances. The filing notes FDA clinical-trial requirements may apply to certain hip products. Manufacturing depends on SINTX’s own facility and a limited number of raw-material suppliers.
- COVID-19: The filing says the effects of the emerging pandemic were uncertain and could disrupt financing, suppliers, partners, OEM relationships, development, and costs.
- Listing risk: On March 24, 2020, Nasdaq notified SINTX that its share price had been below the $1.00 minimum for 30 consecutive trading days. The company had until September 21, 2020 to regain compliance, subject to possible additional conditions.
- Other unusual items: 2018 results included the goodwill impairment, discontinued-operation loss and disposal gain, and substantial preferred-stock deemed dividends. SINTX recognized no goodwill impairment in 2019. The company reported no material ongoing legal proceedings. Management said prior-year material weaknesses in financial reporting controls were remediated in 2019 and assessed controls as effective at year-end.
- Outlook: No numerical revenue, earnings, or margin guidance is provided. Management’s stated priorities include growing CTL-related manufacturing, expanding OEM partnerships, and developing applications beyond spine.
Most important facts for investors to verify
- Whether CTL’s sales and orders support meaningful revenue growth, given the absence of minimum purchase commitments and SINTX’s full customer concentration.
- Whether cash burn, CTL note collections, and financing proceeds support the stated runway; review subsequent liquidity and any updated going-concern disclosures.
- Progress, funding needs, partner commitments, clinical requirements, and regulatory timelines for non-spine product candidates.
- Nasdaq bid-price compliance and the potential dilution or terms associated with preferred stock, warrants, and future equity financing.
- Whether the 2019 gross-margin decline reflects the ongoing economics of the OEM model and whether manufacturing volumes can improve margins.