SINTX Technologies, Inc. — Q3 2023 Form 10-Q
Reporting period: Three and nine months ended September 30, 2023. Financial amounts below are in millions of dollars unless stated otherwise. SINTX develops and manufactures advanced ceramics for biomedical, technical (including aerospace and armor), and antipathogenic applications.
Financial performance
| Metric | Q3 2023 | Q3 2022 | Nine months 2023 | Nine months 2022 |
|---|---|---|---|---|
| Revenue | $0.678 | $0.426 | $1.725 | $0.796 |
| Gross profit | $0.561 | $0.337 | $1.386 | $0.561 |
| Gross margin | 82.7% | 79.1% | 80.3% | 70.5% |
| Operating loss | $(3.614) | $(2.793) | $(10.635) | $(8.454) |
| Net loss | $(3.190) | $(2.724) | $(5.938) | $(8.081) |
| Operating cash used | Not provided for quarter | Not provided for quarter | $(10.987) | $(8.180) |
- Nine-month revenue increased 117%, reflecting growth in both product revenue (+82%) and grant and contract revenue (+145%). The company attributed growth primarily to new silicon nitride aerospace orders and government and commercial work in Utah and Maryland. Q3 product revenue was essentially flat year over year, while grant and contract revenue rose 102%.
- Nine-month operating expenses increased 33% to $12.021 million, led by a 48% increase in R&D to $6.889 million. Management cited patent, prototype, consulting, payroll, TA&T, and SINTX Armor costs. Operating loss widened despite higher revenue and gross profit.
- Nine-month net loss improved year over year, largely because of a $5.344 million gain from changes in the fair value of derivative liabilities, versus $0.208 million in the prior-year period. This valuation gain is not operating revenue; operating loss worsened.
- Cash and cash equivalents were $6.219 million at September 30, 2023, versus $6.245 million at December 31, 2022. Cash used in investing was $0.439 million; financing provided $11.400 million, including offering proceeds and warrant-related proceeds. Cash declined by $0.026 million overall.
- Total assets were $15.512 million and total liabilities $4.823 million. Current assets were $7.912 million and current liabilities $3.778 million. Debt was $0.072 million, all current and related to founder loans at TA&T; the business loan was repaid in Q1. Operating lease liabilities totaled approximately $1.842 million.
- Stockholders’ equity was $10.689 million, with an accumulated deficit of $268.393 million. Common shares outstanding increased from 542,145 at year-end 2022 to 4,208,150 at September 30, 2023, principally reflecting the February offering and warrant exercises. The company effected a 1-for-100 reverse split in December 2022; reported share figures reflect the split.
Liquidity, outlook, and risks
- Management states the company expects continued operating losses and cash use. Its ability to continue as a going concern depends on increasing sales and/or obtaining additional financing. The filing says these uncertainties raise substantial doubt about the company’s ability to continue as a going concern.
- No financial guidance or quantified revenue outlook is provided. Management’s stated priorities include expanding silicon nitride applications beyond spinal fusion, developing OEM and partner opportunities, building armor revenue, and continuing R&D. Management also expects additional R&D costs.
- Additional financing is not assured and could be unavailable on acceptable terms; equity financing would likely dilute existing shareholders. A shelf registration filed October 12, 2023 permits offers of up to $75 million, subject to applicable limits and offering terms. The company also filed a proposed best-efforts offering registration on October 23, 2023; the final offering price was not set in this filing.
- On October 6, 2023, a furnace used in armor manufacturing overheated and became nonfunctional. The company filed an insurance claim and was seeking temporary outsourced sintering. Coverage and outsourcing success were not assured; failure could adversely affect armor operations.
- On October 11, 2023, SINTX received a Phase II NIH grant of approximately $2.0 million over two years for development of a 3D-printed silicon nitride–PEEK spinal implant.
- On October 20, 2023, Nasdaq notified the company that its bid price had remained below $1.00 for 30 consecutive trading days. The stock continued to trade, but SINTX needed to regain compliance by April 17, 2024, or qualify for an additional compliance period, to avoid potential delisting.
- The October 5 lease amendment extended the Salt Lake City facility lease through October 2031 and added 1,230 square feet. Grant expenditures may be audited and disallowed costs could require repayment. Management reported no pending or threatened legal proceeding expected to have a material adverse effect.
Important facts for investors to verify
- Cash runway and financing needs relative to the reported $10.987 million nine-month operating cash burn and the going-concern warning.
- Whether the company can grow recurring product revenue and convert grants, contracts, and development programs into commercial sales.
- The extent of furnace damage, insurance recovery, and continuity of armor production through outsourced sintering.
- Nasdaq bid-price compliance progress and the potential effects of further equity issuance, warrants, or a reverse split on dilution.
- The composition and valuation assumptions of the Level 3 warrant derivative liability, which materially affected reported net loss.