Sintx Technologies(SINT) - 2021 Q4 - Annual Report

PART I Business SINTX Technologies specializes in silicon nitride for biomedical, industrial, and antipathogenic applications, focusing on OEM manufacturing and R&D for external partners - SINTX Technologies, a 25-year-old advanced ceramics company, focuses on biomedical, industrial, and antipathogenic applications, shifting to OEM manufacturing and R&D for external partners[28] - The company's core business utilizes proprietary silicon nitride for biomedical (spinal implants, bone growth), industrial (aerospace, armor), and antipathogenic (SARS-CoV-2 inactivation) applications[29][31][33] - Silicon nitride is produced in various forms, including solid, porous, powder, composites, and coatings, enabling diverse applications[37][40] - In 2021, SINTX entered the ceramic armor market by acquiring B4C, LLC assets and establishing SINTX Armor, Inc. for boron carbide and composite armor development[32][44] - The company relies on fourteen U.S. patents, trade secrets, and know-how, with the core patent expiring in June 2022 and newer patents focusing on antibacterial properties[56][57][60] - Medical device products are subject to extensive FDA regulation in the U.S., requiring 510(k) clearance or PMA, and international compliance like the EU CE Mark[73][74][83] Risk Factors The company faces significant risks including persistent net losses, heavy reliance on CTL Medical, intense competition, regulatory hurdles, capital needs, and Nasdaq delisting concerns - The company has a history of net losses, with $8.8 million in 2021 and $7.0 million in 2020, and an accumulated deficit of $249.9 million as of December 31, 2021[109] - A significant portion of revenue depends on CTL Medical's sales of spinal fusion products, with no minimum purchase obligations under their 10-year agreement[113][118] - The company faces intense competition from larger orthopedic companies like Medtronic, DePuy Synthes, and Stryker, possessing greater financial resources[114][115] - Additional financing is required to fund product development and commercialization; failure to secure it could lead to program delays or elimination[139] - The company lacks patent protection for the composition of matter of its solid silicon nitride, potentially allowing competitors to develop similar formulations[174] - On January 3, 2022, Nasdaq issued a delisting notice due to the stock price falling below $1.00 for 30 consecutive days; failure to comply by July 5, 2022, could result in delisting[197] Unresolved Staff Comments The company reports no unresolved staff comments from the SEC - Not applicable[200] Properties SINTX Technologies operates two leased facilities in Salt Lake City, Utah: a 29,534 sq ft corporate/manufacturing site and a 10,936 sq ft Armor business facility - The company leases a 29,534 sq. ft. corporate office and manufacturing facility in Salt Lake City, UT, with the lease expiring in December 2024[201] - A separate 10,936 sq. ft. facility is leased in Salt Lake City, UT, for the Armor business, with its lease expiring in October 2031[201] Legal Proceedings The company is not currently involved in any material legal proceedings - The company is currently not a party to any material legal proceedings[203] Mine Safety Disclosures This item is not applicable to the company's operations - This item does not apply to the company's business[204] PART II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities The company's common stock trades on NASDAQ under 'SINT', experiencing price volatility, with no history or future plans for cash dividends - The company's common stock trades on The NASDAQ Capital Market under the symbol "SINT"[207] Quarterly High and Low Stock Prices (2021) | Quarter | High ($) | Low ($) | | :--- | :--- | :--- | | First | 3.44 | 1.51 | | Second | 2.06 | 1.23 | | Third | 2.04 | 1.22 | | Fourth | 1.36 | 0.59 | - The company has not declared or paid dividends since inception and does not plan to pay cash dividends in the foreseeable future[209] Selected Financial Data This item is not applicable as the company qualifies as a smaller reporting company - Not applicable[210] Management's Discussion and Analysis of Financial Condition and Results of Operations SINTX reported an increased net loss of $8.8 million in 2021, driven by higher R&D and sales/marketing expenses, with cash decreasing to $14.3 million, though management expects sufficient capital through March 2023 Results of Operations (in thousands) | | 2021 | 2020 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Product revenue | $606 | $594 | $12 | 2% | | Gross profit | $157 | $119 | $38 | 32% | | Research and development | $5,886 | $4,808 | $1,078 | 22% | | General and administrative | $3,603 | $3,132 | $471 | 15% | | Sales and marketing | $1,288 | $683 | $605 | 89% | | Loss from operations | $(10,620) | $(8,504) | $(2,116) | 25% | | Net loss | $(8,775) | $(7,029) | $(1,746) | 25% | - R&D expenses increased by $1.1 million (22%) due to heightened activity in developing new technologies and products[233] - Sales and marketing expenses rose by $0.6 million (89%) due to increased efforts to generate interest in potential new product lines[235] - The company's continuation as a going concern depends on increasing sales or raising additional capital; management believes existing capital is sufficient through March 2023[239][245] Cash Flow Summary (in thousands) | | 2021 | 2020 | | :--- | :--- | :--- | | Net cash used in operating activities | $(10,132) | $(9,112) | | Net cash provided by (used in) investing activities | $(1,651) | $1,751 | | Net cash provided by financing activities | $705 | $30,925 | - Cash from financing activities significantly decreased from $30.9 million in 2020 to $0.7 million in 2021, reflecting reduced capital raising efforts[251] Quantitative and Qualitative Disclosures About Market Risk This item is not applicable to the company - Not applicable[276] Financial Statements and Supplementary Data This section includes audited consolidated financial statements and Tanner LLC's unqualified report, highlighting warrant valuation as a critical audit matter due to complex judgments - The consolidated financial statements are included at the end of the report, beginning on page F-1[277] - Tanner LLC's independent auditor's report identified the valuation of warrants as derivative liabilities as a Critical Audit Matter due to complex fair value estimation judgments[389][390] Changes in and Disagreements With Accountants on Accounting and Financial Disclosure The company reports no changes in or disagreements with its accountants regarding accounting and financial disclosure - None[278] Controls and Procedures As of December 31, 2021, management concluded that the company's disclosure controls and internal control over financial reporting were effective - Management concluded that the company's disclosure controls and procedures were effective as of December 31, 2021[280] - Based on the COSO framework, management determined the company's internal control over financial reporting was effective as of December 31, 2021[285][286] Other Information There is no information to report under this item - None[288] Disclosure Regarding Foreign Jurisdictions that Prevent Inspections. This item is not applicable to the company - None[289] PART III Directors, Executive Officers and Corporate Governance The company's five-member Board, with four independent directors and a staggered structure, maintains three independent committees and has adopted a Code of Business Conduct - The Board of Directors comprises five members, including B. Sonny Bal, M.D. as Chairman, President, and CEO[292] - The Board is divided into three staggered classes, with four of the five directors deemed independent under Nasdaq rules[308][309] - The Board maintains three permanent committees—Audit, Compensation, and Governance and Nominating—all composed of independent directors[310][312] - The company has adopted a Code of Business Conduct, available on its website[321] Executive Compensation This section details executive compensation, including CEO B. Sonny Bal's $483,087 total compensation in 2021, 401(k) matching, and change-in-control severance provisions 2021 Summary Compensation Table | Name and Principal Position | Year | Salary ($) | Bonus ($) | Option Awards ($) | Total Compensation ($) | | :--- | :--- | :--- | :--- | :--- | :--- | | B. Sonny Bal, CEO | 2021 | 400,000 | 40,989 | 38,291 | 483,087 | | David O'Brien, COO | 2021 | 300,000 | 25,279 | 28,053 | 370,219 | - Upon a qualifying termination following a change in control, executives receive a lump sum payment equal to two times their highest annual salary (including bonus) and full vesting of all outstanding equity awards[332] - The company offers a 401(k) plan with a company match on employee contributions[329] 2021 Non-Employee Director Compensation | Name | Fees Earned or Paid in Cash ($) | Option Awards ($) | Total ($) | | :--- | :--- | :--- | :--- | | David W. Truetzel | 120,500 | 30,520 | 151,020 | | Jeffrey S. White | 40,500 | 30,520 | 71,020 | | Eric A. Stookey | 40,000 | 30,520 | 70,520 | | Mark Froimson | 40,500 | 29,762 | 70,262 | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters As of March 1, 2022, the company had 24,713,574 common shares outstanding, with no known 5% beneficial owners and management collectively owning approximately 2% - As of March 1, 2022, 24,713,574 shares of common stock were issued and outstanding[352] - No stockholders are known by the company to beneficially own more than 5% of its common stock[355] - All executive officers and directors as a group beneficially own 484,853 shares, representing approximately 2% of the outstanding common stock[355] Certain Relationships and Related Transactions, and Director Independence The company has not engaged in material related party transactions since 2022, excluding standard compensation, and has a policy for Audit Committee review and approval - No material related party transactions have occurred since January 1, 2022, other than standard compensation and indemnification agreements for directors and officers[356] - The company has a policy requiring Audit Committee review, approval, or ratification of all related party transactions[357] Principal Accountant Fees and Services Tanner LLC served as the principal accounting firm, with total fees of $165,423 in 2021 and $312,152 in 2020, and all services pre-approved by the Audit Committee Principal Accountant Fees (in thousands) | | Year Ended Dec 31, 2021 | Year Ended Dec 31, 2020 | | :--- | :--- | :--- | | Audit fees | $127,064 | $163,434 | | Audit related fees | $38,359 | $148,718 | | Total Fees | $165,423 | $312,152 | - The Audit Committee's charter requires pre-approval of all audit and non-audit services provided by the independent auditors[365] PART IV Exhibits and Financial Statement Schedules This section indexes consolidated financial statements and lists all exhibits, including key agreements like the CTL Medical Asset Purchase Agreement and corporate governance documents - This item references the Index to Consolidated Financial Statements, beginning on page F-1[367] - An extensive list of exhibits is provided, including key agreements like the Asset Purchase Agreement with CTL Medical, corporate governance documents, and financing agreements[370][372][374] Form 10-K Summary There is no summary provided under this item - None[376]