Sintx Technologies, Inc. (identified in this filing as Amedica Corporation) — Q1 2017 Form 10-Q
Business context and reporting period
The filing covers the three months ended March 31, 2017. Amedica develops, manufactures, and sells silicon nitride ceramics, principally for spinal implants, alongside non-silicon-nitride spine products. Its products are sold primarily in the United States. The filing was signed October 31, 2017, and the company checked “No” when asked whether it had filed all required reports during the preceding 12 months.
Financial performance and position
| Metric | Q1 2017 | Q1 2016 / comparison |
|---|---|---|
| Product revenue | $2.629 million | $4.173 million; down 37% |
| Gross profit / margin | $1.968 million / 75% | $3.280 million / 79% |
| Operating expenses | $3.770 million | $5.764 million; down 35% |
| Operating loss | $1.802 million | $2.484 million |
| Net loss | $2.150 million; $0.06 per share | $3.388 million; $0.30 per share |
| Operating cash used | $1.833 million | $1.465 million |
At March 31, cash was $6.944 million; current assets were $10.263 million and current liabilities were $8.905 million. Total assets were $26.081 million, total liabilities $9.991 million, and accumulated deficit $215.285 million. Net carrying debt was $5.482 million, all classified current; Hercules principal outstanding was $5.767 million, bearing 12.7% interest and due January 1, 2018. The company used $292,000 in investing activities and generated $2.154 million from financing, including $3.807 million net proceeds from a common-stock offering. Cash increased $29,000 during the quarter.
Changes, outlook, and risks
- Revenue fell in both product categories: silicon nitride revenue was $1.459 million, down 35%, and non-silicon-nitride revenue was $1.170 million, down 40%. Management attributed the decline principally to surgeon losses and the effects of 2016 restructuring; international sales also declined after a Brazilian distributor’s prior-year instrumentation and inventory purchases did not recur.
- Operating expenses declined following workforce reductions and other cost controls. Gross margin declined four percentage points, which management attributed to product mix and reimbursement rates. Lower interest expense helped narrow the net loss.
- Management expected continued operating losses and operating cash use. It planned further cost-saving reviews and emphasized silicon nitride lateral lumbar implants, its Taurus pedicle screw system, sales-force development, and publication of clinical and scientific data. No quantified revenue or profitability guidance was provided.
- Management cited going-concern uncertainty: continued operations depend on sales growth, cost reductions, debt-covenant compliance, and/or additional financing. The company said it expected to maintain Hercules’s $2.5 million minimum-cash covenant through at least October 2017, but likely needed additional cash thereafter. Covenant breach could make the debt immediately payable at the lender’s option; further financing was uncertain and potentially dilutive or restrictive.
- As a subsequent event, on July 28, 2017, the company obtained a $2.5 million loan from an entity controlled by its CEO and board chair. It bears 10% interest, is secured by substantially all company assets junior to Hercules, and included a five-year warrant for 660,000 shares at $0.42. The filing said the loan would assist cash needs through November 2017.
- Disclosure controls were deemed ineffective at March 31 because of material weaknesses in oversight, accounting expertise, and review of complex transactions and impairment assessments. The filing notes a prior restatement of Q3 2016 results and an impairment charge. Management was considering additional accounting resources and control reviews.
Important facts for investors to verify
- Why revenue declined and whether sales recovery, surgeon retention, and new-product adoption are occurring.
- Cash runway, covenant compliance, Hercules repayment or refinancing plans, and the status and terms of subsequent financing.
- The extent of dilution from the Q1 offering, its 4.005 million warrants, and other potentially dilutive securities.
- Progress remediating material weaknesses and the implications of the prior restatement and impairment review.
- The filing’s late signature date and “No” response on required-report filing status; confirm filing history and any related disclosures.