Sintx Technologies, Inc. (then Amedica Corporation) — FY 2015 Form 10-K
Reporting period: Year ended December 31, 2015. The filing was signed March 23, 2016. The company’s business centered on silicon-nitride biomaterial and spinal implants; it also sold complementary non-silicon-nitride spine products and was developing hip and knee components. More than 25,000 silicon-nitride spine products had been implanted, according to the company.
Financial performance and position
| Metric | 2015 | 2014 |
|---|---|---|
| Product revenue | $19.5 million | $22.8 million |
| Gross profit / gross margin | $13.2 million / 68% | $14.9 million / 65% |
| Operating expenses | $25.2 million | $39.0 million |
| Loss from operations | $(12.0) million | $(24.2) million |
| Net loss | $(23.9) million | $(32.6) million |
| Cash used in operations | $(9.1) million | $(14.5) million |
| Cash and cash equivalents at year-end | $11.5 million | $18.2 million |
- Revenue comprised $10.1 million of silicon-nitride products, down 6%, and $9.3 million of non-silicon-nitride products, down 22%. Domestic revenue declined 15%; international revenue rose to $0.16 million from $0.07 million.
- Gross margin increased three percentage points, attributed to production efficiencies, lower overhead and reduced excess-inventory charges.
- Operating expenses fell 35%, primarily from lower stock-based compensation and cost reductions. Other expense increased to $11.9 million from $8.4 million, including a $7.6 million charge from fair-value changes in derivative liabilities.
- At year-end, total assets were $36.5 million, current assets $24.1 million, and current liabilities $21.0 million. Debt principal was $17.8 million; the balance-sheet carrying amount was $17.0 million, classified entirely as current. The Hercules loan was secured by substantially all assets, including intellectual property.
Material changes, outlook and risks
- Revenue declined despite improved gross margin; management attributed the decrease mainly to lower metal-product sales, reduced activity by certain surgeons, and restructuring-related effects on silicon-nitride sales.
- The company raised funds through a September 2015 stock-and-warrant offering and subsequent warrant exercises. These transactions generated dilution and significant derivative-liability accounting effects. Common shares outstanding were 10.9 million at year-end and 11.4 million as of March 18, 2016; share figures reflect the January 2016 1-for-15 reverse split.
- Management expected continued operating losses and cash use through 2016. It said additional financing or refinancing would be needed in the second quarter of 2016 to maintain compliance with the Hercules liquidity covenant. Failure to comply could make the debt immediately payable at the lender’s option.
- The auditor’s report included a going-concern explanatory paragraph: recurring losses, negative operating cash flows and the need for financing created substantial doubt about the company’s ability to continue as a going concern.
- The Hercules term loan had a 12.7% interest rate at year-end and matured January 1, 2018; the remaining Magna note principal was approximately $0.8 million, due August 2016. Management disclosed no assurance that needed financing would be available on acceptable terms.
- Development plans remained contingent: hip components were undergoing biomechanical testing, and management anticipated a possible 2018–2019 launch only if testing and FDA clearance succeeded. The FDA had asked questions about the 24-month CASCADE clinical follow-up supporting a spinal-device submission; the company was preparing responses.
- Key risks include limited market acceptance of silicon-nitride products, dependence on distributors and concentrated customers, competition from larger device companies, regulatory and reimbursement uncertainty, reliance on suppliers and manufacturing capacity, debt-covenant and financing risk, and potential dilution.
Most important facts for investors to verify
- Whether financing or refinancing was obtained in 2016 and whether the company remained compliant with Hercules covenants.
- Subsequent cash burn, cash balance, debt repayment terms and any changes to debt classification or going-concern disclosures.
- Whether revenue stabilized and silicon-nitride sales gained adoption, including the contribution of OEM and private-label channels.
- FDA progress on the CASCADE submission and development, testing and regulatory pathway for hip and knee candidates.
- Fully diluted share count, warrant exercises, and any further equity issuance or dilution.