Business context and reporting period
Amedica Corporation’s unaudited Form 10-Q covers the three months ended March 31, 2016. The filing describes a commercial-stage biomaterials company selling spinal products, including silicon-nitride devices, and developing additional medical-device applications. The request identifies Sintx Technologies, Inc.; the filing itself names Amedica Corporation.
Key financial metrics
Amounts below are in millions of dollars, except per-share data and percentages.
| Metric | Q1 2016 | Q1 2015 / prior date |
|---|---|---|
| Product revenue | $4.173 | $4.743 |
| Gross profit / margin | $3.280 / 78.6% | $3.221 / 67.9% |
| Operating expenses | $5.764 | $7.227 |
| Operating loss | $(2.484) | $(4.006) |
| Net loss | $(3.388) | $(5.381) |
| Net loss per share, basic and diluted | $(0.30) | $(3.00) |
| Cash used in operations | $(1.465) | $(2.971) |
| Cash and cash equivalents | $7.943 at March 31 | $11.485 at December 31, 2015 |
| Current assets / current liabilities | $18.988 / $18.970 | $23.505 / $20.429 at December 31, 2015 |
| Debt carrying amount | $14.785, all classified current | $16.365 at December 31, 2015 |
Material changes versus the prior comparable period
- Revenue declined 12% to $4.173 million. Silicon-nitride revenue fell 16% to $2.238 million; non-silicon-nitride revenue fell 7% to $1.935 million.
- Management attributed lower sales to weaker private-label sales, weaker-than-expected commercial sales in a key area during expansion, pricing pressure, and hospital vendor consolidation. Domestic revenue declined 15%; international revenue rose from $11,000 to $164,000, mainly from Brazil and Europe.
- Gross profit increased slightly despite lower revenue, and gross margin rose to 78.6%. The filing cites lower costs, a medical-device excise-tax moratorium and refund, and minimal private-label revenue.
- Operating expenses fell 20%, with reductions in research and development, general and administrative, and sales and marketing costs. Net loss narrowed by $1.993 million; operating cash use also declined.
- Cash decreased $3.542 million during the quarter, including $1.834 million of debt principal payments. The weighted-average share count differed substantially from the prior-year quarter, so the reported per-share loss is not directly comparable without further review.
Outlook, risks, contingencies, and unusual items
- Management expected continuing operating losses and operating cash use through 2016. It said additional funding or refinancing would be needed early in Q3 2016 to maintain Hercules loan covenant compliance. The filing states that these uncertainties raise substantial doubt about the company’s ability to continue as a going concern.
- The Hercules loan carried a 12.7% interest rate at March 31, was secured by substantially all assets including intellectual property, and required at least $7.0 million in cash at that date. The company was compliant at quarter-end but anticipated possible noncompliance early in Q3 without financing or restructuring; the lender could demand repayment if covenant default occurred.
- After quarter-end, Riverside acquired $3.0 million of Hercules principal and exchanged it for subordinated convertible notes. By May 13, $2.4 million of note principal and interest had been converted, with $0.8 million of principal remaining; the filing also reports issuance of 1,812,788 shares to Riverside in connection with conversions. These transactions reduced Hercules principal but involved equity dilution and new convertible obligations.
- A lawsuit filed April 1 alleges breach of anti-dilution terms in a warrant and seeks damages exceeding $1.0 million. Amedica said it intended to defend the claim.
- Management expected sales and marketing costs to remain flat or decline slightly and general and administrative costs to remain relatively flat. It anticipated investment in research and development for new spinal, hip/knee, and coated-metal products. These are expectations, not quantified revenue or earnings guidance.
- The filing gives conflicting maturity dates for the Riverside exchange notes: April 3, 2018 in the financial-statement note and March 3, 2018 in MD&A.
Important facts for investors to verify
- Confirm the issuer identity and ticker: the filing cover names Amedica Corporation, while the request names Sintx Technologies, Inc.
- Review subsequent financing, covenant status, cash runway, and the terms and dilution effects of Riverside conversions and warrants.
- Verify the exchange-note maturity date and reconcile the reported post-quarter share issuances and conversions.
- Assess the status and potential financial exposure of the Hampshire warrant litigation.
- Compare the reported quarterly share counts and per-share loss with the company’s share history and capital structure.