SINTX Technologies, Inc. — 2023 Form 10-K
Reporting period: Fiscal year ended December 31, 2023; filed March 27, 2024. Figures below are in U.S. dollars unless stated otherwise. Comparisons are with fiscal 2022.
Business context
SINTX develops and manufactures advanced ceramic materials for biomedical, technical/industrial, and antipathogenic applications. Its operations include silicon-nitride medical and aerospace components, ceramic armor, and the TA&T materials-processing business. The company operates as one reportable segment. Its spinal-fusion products are manufactured for CTL Medical, while much of its newer business depends on external customers, government contracts, and development programs.
Financial performance and liquidity
| Metric | 2023 | 2022 | Change / context |
|---|---|---|---|
| Product revenue | $1.226 million | $0.601 million | Up 104% |
| Grant and contract revenue | $1.401 million | $0.960 million | Up 46% |
| Total revenue | $2.627 million | $1.561 million | Up 68% |
| Gross profit | $1.843 million | $1.296 million | Up 42%; gross margin about 70% versus 83% |
| Operating expenses | $15.201 million | $12.631 million | Up 20%, including higher R&D and grant-related costs |
| Loss from operations | $(13.358) million | $(11.335) million | Operating loss widened |
| Net loss | $(8.259) million | $(12.039) million | Improved, principally reflecting derivative-liability fair-value gains |
| Cash used in operating activities | $(14.115) million | $(10.263) million | Cash burn increased |
| Cash and cash equivalents at year-end | $3.340 million | $6.245 million | Down $2.905 million |
At December 31, 2023, current assets were $5.532 million and current liabilities were $2.906 million. Total assets were $15.365 million, total liabilities $6.593 million, and stockholders’ equity $8.772 million. Reported debt was $46,000, due in monthly installments through August 2024; the business loan was repaid during 2023. Operating lease liabilities totaled $4.199 million, including $512,000 current. No dividends were paid.
The reported net loss improvement does not indicate improved operating performance: the company recorded a $5.718 million gain from changes in the fair value of derivative liabilities, while operating loss worsened. The 2023 results also include $786,000 of offering costs associated with derivative liabilities. Basic loss per share attributable to common stockholders was $2.22 in 2023 versus $54.67 in 2022; the comparison is affected by the 1-for-100 reverse stock split in December 2022 and materially different weighted-average share counts.
Material changes and developments
- Revenue rose from a low base, with product revenue more than doubling and grant and contract revenue also increasing. Cost of revenue grew faster than total revenue, reducing gross margin.
- Research and development expense increased 35% to $8.713 million, which management attributed to patent costs, wages, prototypes, the SINTX Armor facility, and TA&T. Sales and marketing expense fell 15%.
- Cash used in operations increased by $3.852 million. Financing activities provided $11.711 million, primarily through stock and warrant-related issuances; the company ended the year with $3.340 million in cash.
- Common shares outstanding increased substantially during 2023 through financing and warrant exercises. The balance sheet reported 5.321 million shares at year-end; the cover page reported 22.680 million shares outstanding on March 11, 2024, reflecting subsequent issuance and warrant-related activity.
Outlook, risks, and unusual items
- Going concern and funding: Management and the auditor report substantial doubt about SINTX’s ability to continue as a going concern, citing recurring losses, negative operating cash flow, and the need for additional financing. The filing states that, before subsequent financing, year-end cash was expected to fund operations only through the second quarter of 2024. Profitability and positive operating cash flow remain uncertain.
- Subsequent financing and dilution: A February 2024 offering raised approximately $4.0 million gross and $3.7 million net, through units including common stock or pre-funded warrants and Class E and F warrants. The filing also reports a March 26, 2024 issuance of 28.4 million common shares for approximately $1.3 million gross. These transactions may materially dilute existing holders.
- Commercial prospects: In January 2024, SINTX announced a 10-year long-term agreement to manufacture qualified aerospace engine components for a leading aerospace manufacturer. The filing provides no quantified revenue outlook or assurance of the agreement’s future contribution.
- Armor equipment failure: A SINTX Armor sintering furnace overheated in October 2023 and became inoperable. The insurer subsequently confirmed coverage was available for the claim. Management planned replacement or repair and expected the furnace to be operational in the fourth quarter of 2024, while seeking temporary outsourced processing.
- Customer concentration: Two commercial customers and government agencies represented 80% of 2023 revenue and 78% of year-end receivables. The company also depends on CTL Medical’s sales of spinal products and on government awards and contracts.
- Other principal risks: Limited cash and continuing losses; dependence on external financing; limited market acceptance and competition; regulatory and reimbursement hurdles for medical products; dependence on suppliers and manufacturing capacity; government-contract and export-control requirements; and intellectual-property, product-liability, and cybersecurity risks. Nasdaq had notified the company of a minimum-bid-price deficiency, with an April 17, 2024 deadline to regain compliance; the company said it would consider available remedies, including a reverse split.
- Audit and controls: The auditor issued an unqualified opinion on the financial statements but included a going-concern paragraph and identified warrant-liability valuation as a critical audit matter. Management reported effective disclosure controls and internal control over financial reporting; the auditor was not engaged to audit internal controls.
Important facts for investors to verify
- Current cash, cash runway, subsequent financing proceeds, and the extent of dilution from shares, pre-funded warrants, and other warrants.
- Progress toward sustainable product revenue and whether CTL Medical, aerospace customers, government contracts, and TA&T can support growth and improve gross margins.
- Whether the armor furnace was restored or replaced on schedule, insurance proceeds received, and the effect of the outage on production and customer commitments.
- Nasdaq listing compliance status and any reverse split or further capital-raising actions.
- Derivative-warrant accounting assumptions and the distinction between fair-value gains in reported net loss and operating cash burn.