SINTX Technologies, Inc. — Q2 2021 Form 10-Q
Reporting period: Three and six months ended June 30, 2021. Unless otherwise noted, financial amounts below are in thousands of dollars. SINTX develops and manufactures silicon nitride and other ceramic materials, primarily as an OEM supplier of spinal implants to CTL Amedica, while pursuing medical and non-medical applications.
Financial performance and position
| Metric | Q2 2021 | Q2 2020 | Six months 2021 | Six months 2020 |
|---|---|---|---|---|
| Product revenue | $101 | $204 | $202 | $411 |
| Gross profit | $28 | $41 | $68 | $82 |
| Gross margin | 27.7% | 20.1% | 33.7% | 20.0% |
| Operating expenses | $2,391 | $2,025 | $5,272 | $3,920 |
| Operating loss | $(2,363) | $(1,984) | $(5,204) | $(3,838) |
| Net loss | $(2,199) | $(4,028) | $(4,832) | $(2,859) |
| Net loss per share, basic | $(0.09) | $(0.33) | $(0.20) | $(0.32) |
- Q2 gross margin improved despite lower revenue; management attributed this to newer revenue sources with higher margins. The filing’s MD&A describes the increase as 8% year over year.
- Cash and cash equivalents were $22,175 at June 30, 2021, down from $25,351 at December 31, 2020. Six-month operating cash use was $5,339, investing cash provided was $1,462, and financing cash provided was $701.
- At June 30, total assets were $26,416, total liabilities $4,937, and stockholders’ equity $21,479. Balance-sheet debt was $510 in total ($28 current and $482 long-term); this includes the $0.5 million 2021 PPP loan. Operating lease liabilities totaled about $1,682.
- Accumulated deficit was $245,939. The company reported no income-tax provision.
Material changes versus comparable periods
- Q2 revenue fell 50% year over year, which management attributed to lower orders from CTL Amedica. Six-month revenue declined 51%.
- Six-month operating expenses rose 34%, including a 36% increase in R&D and a 129% increase in sales and marketing. Management cited higher R&D activity and marketing for potential new product lines.
- Q2 net loss narrowed from 2020, mainly because the prior-year period included a $2,128 loss from revaluing derivative liabilities; 2021 included only a $14 loss from that item. For the six-month period, net loss increased from $2,859 to $4,832.
- Cash used in operations increased by $401 year over year for the first six months. Financing cash inflow was substantially lower than in 2020, which had proceeds from equity and warrant-related financings.
- Common shares outstanding increased from 24,552,409 at year-end 2020 to 24,700,074 at June 30, 2021. No shares had been sold under the new $15 million at-the-market distribution agreement by quarter-end.
Outlook, management commentary, and risks
- Management expects continued operating losses and cash use. It said existing capital resources should fund operations for at least 12 months, through August 2022, but profitability, positive operating cash flow, and future financing remain uncertain. Continued operations depend on increasing sales and/or raising capital.
- The company is pursuing OEM and private-label partnerships and applications beyond spinal fusion, including other medical uses and antipathogenic products. Management cited an independent study suggesting silicon nitride can inactivate SARS-CoV-2 after exposure; commercial outcomes are uncertain.
- On July 20, 2021, after quarter-end, SINTX acquired equipment and certain intellectual property for ceramic ballistic armor assets for $2.75 million: $2.5 million paid at closing and $250,000 due upon completion of technology transfer. The company intends to develop and commercialize armor products.
- COVID-19 could disrupt operations and third parties or restrict access to capital; the filing says the extent and duration of effects were uncertain. The SBA may audit compliance with forgiveness of the earlier PPP loan through January 2027. The new $0.5 million PPP loan bears 1% interest and may be eligible for forgiveness subject to program requirements.
- Management reported no material changes to previously disclosed risk factors, no known material pending or threatened legal proceedings, and effective disclosure controls as of June 30, 2021. No quantified revenue or earnings guidance was provided.
Important facts for investors to verify
- Whether CTL Amedica orders recover and whether customer concentration remains a material constraint on revenue.
- Cash burn, available liquidity, and the assumptions supporting management’s funding runway through August 2022, including potential use of the $15 million equity distribution agreement.
- Whether SINTX can convert its broader silicon nitride and armor initiatives into meaningful sales, and the costs and timing required.
- Eligibility for forgiveness and compliance with requirements for the 2021 PPP loan, as well as any audit exposure relating to the prior PPP loan.
- The potential dilution from outstanding warrants, preferred securities, stock options, and any future equity issuance.