Sintx Technologies, Inc. — 2015 Q2 Form 10-Q Summary
Issuer identification: The supplied filing is for Amedica Corporation, the company identified in the request as Sintx Technologies. It covers the quarter and six months ended June 30, 2015; financial statements are unaudited.
Business context and reporting period
Amedica was a commercial-stage biomaterials company developing, manufacturing, and selling medical devices using silicon nitride technology, alongside other spinal products. Revenue was primarily from spinal fusion devices. Management highlighted potential expansion through OEM and private-label partnerships and development of hip and knee products.
Financial performance and position
| Metric | Q2 2015 | Q2 2014 | Six months 2015 | Six months 2014 |
|---|---|---|---|---|
| Product revenue | $4.78 million | $5.84 million | $9.52 million | $11.62 million |
| Gross profit | $3.42 million | $4.23 million | $6.64 million | $8.36 million |
| Gross margin | 71% | 73% | 70% | 72% |
| Operating loss | $2.60 million | $10.63 million | $6.60 million | $14.68 million |
| Net loss | $5.93 million | $13.24 million | $11.31 million | $17.95 million |
| Basic and diluted loss per share | $0.11 | $1.07 | $0.28 | $1.95 |
At June 30, 2015, cash and cash equivalents were $12.39 million, versus $18.25 million at December 31, 2014. Six-month operating cash use was $5.32 million, investing cash use was $0.41 million, and financing cash use was $0.12 million. Current assets were $26.83 million and current liabilities were $23.79 million.
Debt principal totaled $24.30 million, with a net carrying amount of $22.55 million. The balance sheet classified $19.77 million as current debt and $2.78 million as long-term debt. A $4.59 million derivative liability remained at quarter-end. The Hercules loan requires at least $9 million of cash liquidity; the company reported compliance at June 30.
Material changes versus prior comparable period
- Revenue declined 18% in both Q2 and the first half. First-half silicon nitride revenue fell 3% to $5.01 million; non-silicon nitride revenue fell 30% to $4.51 million.
- Gross margin decreased by two percentage points in Q2 and the first half, which management attributed to lower-margin private-label sales.
- Operating expenses fell 60% in Q2 and 43% in the first half. Reductions reflected restructuring, lower costs, and sharply lower stock-based compensation; the comparison period included substantial stock compensation.
- Net loss improved, but other expense increased, including interest expense and losses related to derivative liabilities.
- Cash declined by $5.85 million during the first half. Share count increased from 26.35 million at December 31, 2014 to 65.76 million at June 30, largely following cashless warrant exercises that issued approximately 38.15 million shares.
Outlook, risks, contingencies, and unusual items
- Going concern and financing: Management said ongoing losses and cash use, combined with uncertainty about obtaining financing, create substantial doubt about the company’s ability to continue as a going concern. It anticipated needing additional funding in Q4 2015 to maintain covenant compliance; financing availability and terms were uncertain.
- Hercules loan notice: Hercules notified the company on June 30 that an event of default had occurred, citing at least the Magna notice. Hercules reserved its rights but had not accelerated the loan or demanded payment. The loan is secured by substantially all company assets, including intellectual property. Without additional funding, management expected a liquidity covenant shortfall in Q4.
- Magna dispute: Magna issued a default notice and demanded approximately $6.49 million, asserting misrepresentations in the note agreements. Amedica disputed the allegations and said the demand was invalid. The company stated it lacked adequate liquidity to repay the debt early. Magna conversions were also restricted after stockholders rejected approval to exceed the applicable 19.9% share limit.
- Business outlook: Management expected operating losses and operating cash use to continue through 2015. It said recruiting new surgeons could outweigh year-to-date silicon nitride revenue declines beginning in the second half; this was an expectation, not quantified guidance. Management expected sales and marketing costs to remain flat or decline slightly and general and administrative costs to decrease following restructuring.
- Restructuring: A January workforce reduction eliminated 25 positions, about 28% of staff. The company recorded approximately $0.6 million in related severance costs, plus $0.2 million for subsequent terminations.
- Management reported disclosure controls were effective as of June 30, 2015, with no material second-quarter change in internal control over financial reporting.
Most important facts for investors to verify
- Whether the company obtained financing in time to meet the $9 million Hercules liquidity covenant and fund operations.
- The status and consequences of the Hercules and Magna default notices, including any acceleration, waiver, settlement, or enforcement action.
- Cash burn, debt service, and the classification and maturity of debt in subsequent filings.
- Whether revenue stabilizes, particularly silicon nitride product sales and the company’s surgeon-recruitment efforts, and whether lower-margin private-label sales affect gross margin.
- Potential dilution and changes in shares outstanding from warrants, convertible notes, and any subsequent equity financing.