SINTX Technologies, Inc. — Q1 2024 Form 10-Q
Reporting period: Three months ended March 31, 2024; compared with the three months ended March 31, 2023. SINTX develops and manufactures advanced ceramics for biomedical, technical/armor, and antipathogenic applications. Amounts below are in U.S. dollars; financial statement figures are in thousands unless otherwise noted.
Financial performance and position
| Metric | Q1 2024 | Q1 2023 / prior date |
|---|---|---|
| Total revenue | $687 | $539 |
| Product revenue | $309 | $240 |
| Grant and contract revenue | $378 | $299 |
| Gross profit / gross margin | $464 / 67.5% | $421 / 78.1% |
| Operating expenses | $3,661 | $3,978 |
| Loss from operations | $(3,197) | $(3,557) |
| Net loss | $(886) | $(293) |
| Net cash used in operating activities | $(2,733) | $(4,871) |
| Cash and cash equivalents | $5,762 at March 31, 2024 | $3,340 at December 31, 2023 |
| Total current assets / current liabilities | $7,514 / $4,088 | $5,532 / $2,906 at December 31, 2023 |
| Total liabilities / stockholders’ equity | $7,635 / $9,926 | $6,593 / $8,772 at December 31, 2023 |
Cash increased by $2.422 million during the quarter, primarily because $5.328 million of financing cash inflows exceeded operating and investing outflows. Operating cash use improved by $2.138 million year over year. The filing reports $26,000 of related-party debt, due in monthly installments through August 2024; the prior business loan was repaid. Operating lease liabilities totaled approximately $4.065 million, including $518,000 current.
Changes versus the prior comparable period
- Revenue rose 27%, with product revenue up 29% and grant and contract revenue up 26%. Management attributed growth primarily to new silicon nitride aerospace orders and government and commercial business in Salt Lake City and Maryland.
- Costs of revenue increased 89%, faster than revenue, and gross margin fell to 67.5% from 78.1%.
- Operating expenses declined 8%, including lower R&D, general and administrative, sales and marketing, and grant expenses. The operating loss narrowed by $360,000.
- Net loss increased by $593,000. Other income was lower year over year; reported results include a $2.838 million gain from the change in fair value of derivative liabilities and $550,000 of offering costs associated with derivative liabilities. These warrant-related items are noncash or financing-related and materially affect comparisons.
Outlook, risks, and notable events
- Going concern: Management expects continued operating losses and operating cash use. The company says continued operations depend on increasing sales and/or raising capital; whether it can reach profitability, positive operating cash flow, or secure financing is uncertain. The filing states these conditions raise substantial doubt about its ability to continue as a going concern.
- Financing and dilution: SINTX raised approximately $4.0 million gross in a February 2024 unit offering and approximately $1.3 million gross in a March 2024 common-stock offering. The February offering included immediately exercisable Class E and F warrants. The company also agreed to suspend ATM sales through August 2, 2024. Financing may not be available on acceptable terms, and additional equity may dilute existing holders.
- Subsequent events: An April 5, 2024 offering raised approximately $1.5 million gross. The filing reports 122,698,454 common shares outstanding as of May 8, versus 51,080,138 issued and outstanding on the March 31 balance sheet; investors should account for subsequent issuances and potential warrant-related dilution.
- Nasdaq listing: Nasdaq’s Hearings Panel granted a temporary exception through June 10, 2024, for the company to regain compliance with the minimum bid-price rule. Failure to regain compliance could result in delisting; the filing gives no assurance compliance will be restored.
- Management: On April 25, CEO and President B. Sonny Bal notified the board of his intention to retire when a replacement is named. He is to remain board chairman. The separation agreement provides for three months of salary and, if elected, three months of COBRA premiums.
- Management plans to pursue revenue growth across biomedical, technical/armor, and antipathogenic markets, and expects continued R&D investment to support opportunities. The filing provides no quantified revenue, earnings, or cash-flow guidance.
- Grant expenditures may be audited, and disallowed costs could require repayment. The company reports no material pending legal proceedings and no material changes to previously disclosed risk factors.
Important facts for investors to verify
- Current cash runway, near-term cash requirements, and the availability and terms of further financing.
- Post-quarter common shares outstanding, warrant exercises and potential dilution, and the remaining capacity and restrictions under the ATM.
- Whether SINTX regained Nasdaq bid-price compliance by the June 10, 2024 deadline and its subsequent listing status.
- Progress in converting aerospace, armor, biomedical, and antipathogenic opportunities into recurring product revenue and improved gross margins.
- The composition and valuation sensitivity of warrant derivative liabilities, which rely on Level 3 assumptions and significantly affect reported earnings.