SINTX Technologies, Inc. — Q3 2022 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2022. Financial amounts below are in U.S. dollars; “million” is abbreviated as “m” where applicable. The company develops and manufactures advanced ceramics for biomedical, industrial, and antipathogenic applications, with operations in Salt Lake City and Maryland. Results include TA&T from July 1, 2022, following its June 30 acquisition.
Financial performance
| Metric | Q3 2022 | Q3 2021 | Nine months 2022 | Nine months 2021 |
|---|---|---|---|---|
| Total revenue | $0.426m | $0.239m | $0.796m | $0.441m |
| Product revenue | $0.173m | $0.239m | $0.354m | $0.441m |
| Grant and contract revenue | $0.253m | None reported | $0.442m | None reported |
| Gross profit (margin) | $0.337m (79%) | $0.049m (21%) | $0.561m (70%) | $0.117m (27%) |
| Operating expenses | $3.130m | $2.874m | $9.015m | $8.146m |
| Operating loss | $(2.793)m | $(2.825)m | $(8.454)m | $(8.029)m |
| Net loss | $(2.724)m | $(2.343)m | $(8.081)m | $(7.175)m |
| Basic loss per share | $(0.11) | $(0.09) | $(0.33) | $(0.29) |
Q3 revenue increased 78%, chiefly due to grant and contract revenue; product revenue declined 28%. For the nine months, revenue rose 80%, while product revenue fell 20%. Management attributed higher gross profit and margins principally to grant revenue. Operating expenses rose 9% in Q3 and 11% year to date. The nine-month net loss widened 13%; other income was lower than in 2021, including because the prior-year period included PPP loan forgiveness income.
Cash, liquidity, and debt
- Cash and cash equivalents were $4.779m at September 30, 2022, down from $14.273m at December 31, 2021. Working capital was approximately $3.176m, based on current assets of $6.048m and current liabilities of $2.872m.
- For the first nine months, operating cash use was $8.180m, investing cash use was $0.805m, and financing cash use was $0.509m; cash decreased by $9.494m.
- Balance-sheet debt, including related-party debt and excluding leases, totaled approximately $0.633m: $0.398m non-related-party debt and $0.235m related-party debt. Operating lease liabilities were $2.531m.
- The company reported an accumulated deficit of $258.498m. Management expects continuing operating losses and cash use and stated that substantial doubt exists about the company’s ability to continue as a going concern without increased sales and/or additional financing.
Material developments, outlook, and risks
- TA&T acquisition: Acquired June 30, 2022, adding advanced-materials processing, fabrication, and services capabilities. The company assumed debt and lease obligations; potential earnouts depend on revenue targets, which management did not expect to be achieved. The filing presents pro forma nine-month revenue of $1.385m and net loss of $8.097m as if the acquisition had been included for the full period.
- Subsequent financing: On October 17, 2022, the company completed a rights offering for gross proceeds of approximately $4.7m. Units included Series D convertible preferred stock and warrants. The filing describes conversion and exercise prices of $0.15102 per share; the offering occurred after quarter-end.
- Nasdaq listing: The company had received a minimum-bid-price deficiency notice and an extension through January 2, 2023, to regain compliance. Delisting could impair access to public-market financing.
- Business strategy: Management is pursuing revenue opportunities across biomedical, industrial/armor, and antipathogenic markets, and expects ongoing R&D spending. It cited expanding silicon nitride applications and commercializing armor products as potential growth avenues. No quantified revenue, profit, or cash-flow guidance is provided.
- Financing and dilution: Additional financing is not assured and may be unavailable on acceptable terms; equity financing would likely dilute existing stockholders. The company’s $2.0m ATM agreement had no sales through September 30, 2022.
- Other items: The company repaid the 2021 PPP loan, with fees and interest, in June 2022 after determining it was ineligible; a prior-period forgiveness error was deemed immaterial and the December 2021 balance sheet was restated, reducing equity by approximately $0.5m. The SBA may audit the separate 2020 PPP loan through January 2027. Management reported effective disclosure controls and no material change in internal control over financial reporting during the quarter.
- Management identified COVID-19-related operational and capital-market uncertainty as a risk. It reported no material changes to previously disclosed risk factors and no known pending or threatened legal proceedings expected to have a material adverse effect.
Key facts for investors to verify
- Whether the $4.7m post-quarter rights offering provides adequate liquidity relative to continuing cash burn, and what dilution results from conversion and warrant exercise.
- Progress toward Nasdaq’s minimum-bid-price compliance deadline and the company’s access to further financing.
- Whether grant-funded activity, TA&T, armor, and new ceramic applications translate into recurring commercial revenue beyond the declining product-revenue base.
- TA&T’s actual contribution to results, repayment schedules for acquired and related-party debt, and any grant reimbursement or audit exposure.
- The filing’s stated substantial doubt about going concern and the assumptions underlying management’s expectation of continued losses and operating cash use.