SINTX Technologies, Inc. — 2022 Form 10-K Summary
Business context and reporting period
Reports the fiscal year ended December 31, 2022, compared with 2021; this is an annual filing, not a standalone fourth-quarter report. SINTX develops and manufactures advanced ceramics for biomedical, industrial/armor, and antipathogenic applications. Its core product is silicon nitride. It manufactures spinal-fusion products for CTL Medical, its principal customer, and is pursuing other markets. In June 2022, SINTX acquired TA&T, adding advanced-materials processing, research, and contract work. The company effected a 1-for-100 reverse stock split in December 2022; share and per-share figures are adjusted for it.
Financial performance and position
| Metric | 2022 | 2021 |
|---|---|---|
| Product revenue | $0.601 million | $0.606 million |
| Grant and contract revenue | $0.960 million | None reported |
| Total revenue | $1.561 million | $0.606 million |
| Gross profit | $1.296 million | $0.157 million |
| Operating expenses | $12.631 million | $10.777 million |
| Operating loss | $(11.335) million | $(10.620) million |
| Net loss | $(12.039) million | $(9.309) million |
| Cash used in operations | $(10.263) million | $(10.127) million |
Reported gross margin was approximately 83% in 2022 versus 26% in 2021, but 2022 gross profit included grant and contract revenue; it should not be read as product-only margin. Net loss attributable to common stockholders was $16.489 million, including a $4.450 million deemed dividend related to convertible preferred stock. Basic loss per share attributable to common stockholders was $54.67.
At December 31, 2022, cash and equivalents were $6.245 million, down from $14.273 million; current assets were $7.209 million and current liabilities $8.078 million. Total liabilities were $10.069 million, including $0.528 million of debt, $2.359 million of operating lease liabilities, and $5.126 million of derivative liabilities. Stockholders’ equity was $5.704 million. Investing activities used $1.101 million; financing activities provided $3.336 million. The filing reports no off-balance-sheet arrangements.
Material changes versus 2021
- Total revenue rose 158%, principally because of $0.960 million in grant and contract revenue; product revenue was essentially flat.
- Operating expenses increased 17%, reflecting higher R&D, general and administrative, sales and marketing, and grant-related costs. Net loss increased 29%.
- Other expense was $0.704 million, versus $1.311 million of other income in 2021. The 2022 result included a $1.091 million expense from the change in fair value of derivative liabilities.
- TA&T was consolidated from July 1, 2022. The acquisition added capabilities and contracts, but the filing does not separately state its contribution to reported 2022 revenue.
- Cash fell by $8.028 million over the year. The company raised approximately $4.7 million gross in an October rights offering.
Outlook, risks, and unusual items
Management expects continued operating losses and cash use, and says future viability depends on increasing sales and/or raising capital. The filing gives inconsistent runway statements: one passage says existing resources should fund operations through March 2024, while the risk section, incorporating the February 2023 financing, says cash should suffice through the first quarter of 2025. The company closed a February 2023 public offering for approximately $12.0 million gross and $10.9 million net, with common shares or pre-funded warrants and Class C and D warrants; proceeds were allocated to derivative liabilities. This later financing is subsequent to the 2022 balance-sheet date.
Key business risks include dependence on CTL Medical, which has no minimum purchase obligation; limited market acceptance and competition; ongoing financing needs and potential dilution; regulatory and clinical-development uncertainty; reliance on suppliers and in-house manufacturing; reimbursement constraints; and intellectual-property, product-liability, and government-contract risks. SINTX reports that one commercial customer and government agencies together represented 79% of 2022 revenue and 66% of year-end receivables.
Unusual accounting item: SINTX restated 2021 statements after determining it was ineligible for forgiveness of a roughly $0.5 million PPP loan. It repaid the loan, fees, and interest in 2022; the correction reduced 2021 equity and increased the reported loss by approximately $0.5 million, without changing 2021 cash flows. The company also reported $4.3 million of SINTX Armor equipment not yet in service at year-end; it was placed in service in first-quarter 2023. The independent auditor issued an unmodified opinion on the financial statements and identified warrant valuation as a critical audit matter. Management said disclosure controls and internal control over financial reporting were effective as of year-end.
Important facts for investors to verify
- Reconcile the stated cash runway dates and assumptions, including the effect of the February 2023 offering, subsequent cash burn, and warrant-related obligations.
- Track CTL Medical orders and concentration, and determine whether non-CTL product sales and TA&T contracts are becoming recurring revenue.
- Separate grant and contract revenue from product revenue when assessing underlying demand and gross margins.
- Assess dilution and potential share supply from preferred-stock conversions, warrants, and the February 2023 financing; confirm current shares outstanding and warrant terms.
- Review the valuation and classification of the $5.126 million derivative liability, the status and utilization of Armor assets, and progress toward commercial production.
- Confirm the implications of the PPP restatement and the remaining liquidity, debt, lease commitments, and financing needs.