SINTX Technologies, Inc. — 2020 Form 10-K Summary
Reporting period: Fiscal year ended December 31, 2020; comparisons are with fiscal 2019. This is an annual filing, not a standalone fourth-quarter report. SINTX develops and manufactures silicon-nitride ceramics for medical and industrial applications. Its principal product revenue comes from manufacturing spinal implants for CTL Medical.
Financial performance and position
| Metric | 2020 | 2019 |
|---|---|---|
| Product revenue | $594,000 | $689,000 |
| Gross profit / gross margin | $119,000 / approximately 20% | $138,000 / approximately 20% |
| Operating expenses | $8.623 million | $6.732 million |
| Operating loss | $8.504 million | $6.594 million |
| Net loss | $7.029 million | $4.797 million |
| Net loss attributable to common stockholders | $16.594 million, including $9.565 million in deemed dividends and preferred-stock discount accretion | $7.500 million, including $2.703 million in deemed dividends and accretion |
| Net cash used in operations | $9.112 million | $6.435 million |
| Cash and cash equivalents at year-end | $25.351 million | $1.787 million |
- Research and development expense rose 42% to $4.808 million; general and administrative expense rose 8% to $3.132 million; sales and marketing expense rose 59% to $683,000.
- Net cash provided by investing activities was $1.751 million, primarily reflecting note-receivable collections. Net cash provided by financing activities was $30.925 million, chiefly from equity and warrant-related financing.
- At December 31, 2020, total assets were $30.447 million, total liabilities $4.643 million, and stockholders’ equity $25.804 million. Current assets were $27.590 million and current liabilities $2.879 million.
- Debt included $396,000 of reported long-term debt, of which $109,000 was current. The $391,000 PPP loan was forgiven after year-end; the company said it would record approximately $400,000 of forgiveness income in 2021.
- The balance sheet also included $1.880 million of operating lease liabilities. The company had a $1.856 million current note receivable from CTL Medical, with the remaining scheduled receipts expected in 2021.
Material changes and business developments
- Revenue declined 14%, primarily because CTL Medical placed fewer orders. CTL accounted for 95% of 2020 revenue, compared with 100% in 2019; the filing says all product revenue was from silicon-nitride spinal products.
- SINTX shifted resources toward antipathogenic and other applications after reporting independent test results indicating its silicon nitride inactivated SARS-CoV-2 within a minute under test conditions. These are research findings, not evidence of regulatory approval or commercial product effectiveness.
- The company shipped $33,000 of industrial products in 2020, described as small-volume orders, primarily prototypes.
- Financing materially increased cash but diluted shareholders: 2020 included a $9.4 million rights offering of preferred stock and warrants, four registered direct common-stock offerings totaling approximately $20.9 million gross, ATM sales, and warrant exercises. Common shares outstanding increased from 2.434 million at year-end 2019 to 24.552 million at year-end 2020.
Outlook, risks and unusual items
- Management expected continued operating losses and cash use. It stated that existing capital resources and expected CTL note payments were sufficient to fund operations for at least 12 months, through March 2022, while also noting that future profitability and financing remained uncertain. No quantified revenue or earnings guidance is provided.
- In February 2021, SINTX entered an exclusive, worldwide, two-year license agreement with O2 Design for masks and filters incorporating its silicon nitride. Potential consideration includes an upfront fee, royalties, and milestone payments; SINTX is to be the exclusive material supplier. Commercialization, sales, and associated revenue remain dependent on product development and O2 Design’s execution.
- In February 2021, SINTX also entered a new at-the-market equity distribution agreement allowing up to $15 million of common-stock sales. This creates potential additional dilution. In March 2021 it received a $509,148 second-draw PPP loan, subject to loan terms and potential forgiveness.
- Key risks include ongoing losses and cash burn; dependence on CTL and prospective partners; limited market acceptance; competition; regulatory and clinical development requirements; supplier and manufacturing concentration; reimbursement constraints; intellectual-property limitations (including no composition-of-matter patent protection for solid silicon nitride); and COVID-19-related business uncertainty.
- The company reported no material pending legal proceedings. The financial statements received an unmodified audit opinion; management concluded disclosure controls and internal control over financial reporting were effective at year-end. The auditor did not provide an opinion on internal-control effectiveness.
Important facts for investors to verify
- Whether CTL orders and sales recover, given customer concentration and the absence of minimum purchase requirements under the supply arrangement.
- Whether O2 Design’s mask and filter program reaches commercialization, and the terms, timing, and collectability of license, royalty, milestone, and supply revenue.
- Cash runway and operating cash burn after 2020, including the effect of 2021 financing, the CTL note collections, and the new ATM program.
- The potential dilution from outstanding preferred stock, warrants, options, and any future equity sales; reconcile the substantial increase in common shares during 2020.
- Regulatory status and supporting evidence for proposed medical, antiviral, and industrial applications; laboratory results do not establish regulatory clearance or commercial adoption.
- The status of PPP forgiveness and the company’s ability to maintain liquidity and execute its plans without further financing.