Sintx Technologies, Inc. (filing registrant: Amedica Corporation) — FY 2017 Form 10-K
Period and business: This is an annual report for the year ended December 31, 2017, filed March 29, 2018. The supplied company metadata names Sintx Technologies, Inc., but the filing identifies the registrant as Amedica Corporation, ticker AMDA. Amedica develops and sells silicon nitride medical implants, principally for spinal fusion, as well as complementary metal-based spine products.
Financial performance and liquidity
| Metric | FY 2017 | FY 2016 | Change |
|---|---|---|---|
| Product revenue | $11.227 million | $15.226 million | Down 26% |
| Gross profit | $4.876 million | $11.449 million | Down 57% |
| Gross margin | 43.4% | 75.2% | Down 31.8 percentage points |
| Operating expenses | $15.929 million | $22.984 million | Down 31% |
| Operating loss | $(11.053) million | $(11.535) million | Slightly narrower |
| Net loss | $(9.329) million | $(14.763) million | Loss narrowed |
| Cash used in operations | $(4.680) million | $(7.170) million | Use reduced |
- Silicon nitride revenue was $5.258 million, down 33%; non-silicon nitride revenue was $5.969 million, down 19%. Domestic revenue was $11.088 million; international revenue was $139,000.
- Cost of revenue rose 68% to $6.352 million despite lower sales. A $4.55 million provision for slow-moving inventory was recorded in 2017, versus $1.16 million in 2016. The year-end reserve balance was approximately $9.4 million versus $4.8 million.
- Cash and cash equivalents were $539,000 at year-end, compared with $6.915 million a year earlier. Current assets were $3.210 million and current liabilities $8.271 million, a $5.061 million working-capital deficit. Total assets were $14.641 million; total liabilities were $9.199 million.
- Year-end debt carrying value was $2.961 million, all classified as current, including a $2.5 million related-party loan. Net cash decreased $6.376 million during 2017. The company reported an accumulated deficit of $220.6 million.
Changes, outlook, and material risks
- Management attributed lower revenue primarily to losing surgeons and the effects of a 2016 workforce restructuring. Operating expenses declined, but the inventory provision sharply reduced gross profit.
- The company reported recurring losses, negative operating cash flow, limited liquidity, and substantial doubt about its ability to continue as a going concern. It expected continued losses and cash use and said additional financing was necessary; financing was not assured and could dilute shareholders or impose restrictive terms.
- After year-end, the Hercules debt was exchanged for approximately $2.2 million of senior secured convertible notes bearing 15% interest, with a February 2019 maturity and conversion provisions. A January 2018 financing with L2 Capital provided for a note of up to $800,000 and warrants. These subsequent financings do not eliminate the disclosed funding risk.
- A $2.5 million loan from an entity controlled by the CEO and chairman bears 10% interest, is secured by substantially all company assets, and was due July 28, 2018. The related-party nature and repayment status merit review.
- In March 2018, FDA cleared the Valeo C+CsC with Lumen composite silicon nitride spinal implant. The company cited potential expansion through OEM/private-label partnerships and international markets, but disclosed no formal financial guidance. Hip and knee products remained candidates subject to testing, partnering, and regulatory requirements.
- Commercial adoption remains limited; competitors have substantially greater resources, and one customer accounted for 21% of 2017 revenue. The filing also cites reimbursement, regulatory, manufacturing, raw-material supply, intellectual-property, and product-liability risks.
- Management concluded disclosure controls and internal control over financial reporting were ineffective at year-end because of material weaknesses involving complex accounting, review, staffing, and monitoring. Errors led to restatements of the 2016 annual report and 2017 first-, second-, and third-quarter reports. The company said remediation was underway.
- The filing notes Nasdaq noncompliance related to failure to hold a timely annual shareholder meeting; Nasdaq had accepted a compliance plan with a June 29, 2018 deadline. The company also disclosed a 1-for-12 reverse stock split in November 2017.
Important facts for investors to verify
- Confirm the issuer identity and whether this Amedica filing is the intended filing for Sintx Technologies, Inc.
- Review the audited financial statements, restatement disclosures, and planned remediation of material weaknesses.
- Assess available liquidity, debt covenant compliance, subsequent debt conversions and financings, and the status of the related-party loan.
- Validate the scale and timing of inventory reserves, expected product demand, and the cause of the sharp gross-margin decline.
- Track FDA commercialization of the newly cleared implant, surgeon adoption, customer concentration, and any actual revenue from international or partner channels.
- Check subsequent Nasdaq listing compliance and share dilution from convertible notes, warrants, and other financing arrangements.