Sintx Technologies(SINT) - 2021 Q1 - Quarterly Report

Part I. Financial Information Item 1. Financial Statements This section presents SINTX Technologies' unaudited condensed consolidated financial statements for Q1 2021 and 2020, including balance sheets, statements of operations, stockholders' equity, and cash flows, with detailed notes on accounting policies and financial disclosures Condensed Consolidated Balance Sheets Total assets decreased from $30.4 million at December 31, 2020, to $28.7 million at March 31, 2021, while total liabilities slightly increased and stockholders' equity decreased | Metric (in thousands) | March 31, 2021 | December 31, 2020 | | :-------------------- | :------------- | :---------------- | | Total Assets | $28,685 | $30,447 | | Total Liabilities | $5,087 | $4,643 | | Total Stockholders' Equity | $23,598 | $25,804 | Condensed Consolidated Statements of Operations SINTX Technologies reported a net loss of $2.6 million for Q1 2021, a significant decline from net income of $1.2 million in the prior-year period, driven by a 51% decrease in product revenue, increased operating expenses, and sharply lower other income | Metric (in thousands) | 3 Months Ended March 31, 2021 | 3 Months Ended March 31, 2020 | Change ($) | Change (%) | | :-------------------- | :---------------------------- | :---------------------------- | :--------- | :--------- | | Product Revenue | $101 | $207 | $(106) | -51% | | Gross Profit | $40 | $41 | $(1) | -2% | | Total Operating Expenses | $2,881 | $1,895 | $986 | 52% | | Loss from Operations | $(2,841) | $(1,854) | $(987) | 53% | | Other Income, Net | $208 | $3,023 | $(2,815) | -93% | | Net Income (Loss) | $(2,633) | $1,169 | $(3,802) | -325% | | Basic EPS | $(0.11) | $0.19 | $(0.30) | -158% | | Diluted EPS | $(0.11) | $(0.37) | $0.26 | -70% | Condensed Consolidated Statements of Stockholders' Equity Total stockholders' equity decreased from $25.8 million at December 31, 2020, to $23.6 million at March 31, 2021, primarily due to a net loss, partially offset by stock-based compensation and warrant exercises | Metric (in thousands) | December 31, 2020 | March 31, 2021 | Change | | :-------------------- | :---------------- | :------------- | :----- | | Common Stock (shares) | 24,552,409 | 24,684,574 | 132,165 | | Common Stock (amount) | $245 | $247 | $2 | | Additional Paid-In Capital | $266,666 | $267,091 | $425 | | Accumulated Deficit | $(241,107) | $(243,740) | $(2,633) | | Total Equity | $25,804 | $23,598 | $(2,206) | - Stock-based compensation contributed $36 thousand to equity, and warrant exercises for cash added $196 thousand[14] Condensed Consolidated Statements of Cash Flows The company experienced a net decrease in cash and cash equivalents of $1.9 million for Q1 2021, compared to a net increase of $6.4 million in the prior-year period, primarily due to a significant reduction in cash provided by financing activities | Metric (in thousands) | 3 Months Ended March 31, 2021 | 3 Months Ended March 31, 2020 | Change ($) | | :-------------------- | :---------------------------- | :---------------------------- | :--------- | | Net Cash Used in Operating Activities | $(2,992) | $(3,398) | $406 | | Net Cash Provided by Investing Activities | $406 | $396 | $10 | | Net Cash Provided by Financing Activities | $706 | $9,439 | $(8,733) | | Net Increase (Decrease) in Cash | $(1,880) | $6,437 | $(8,317) | | Cash and Cash Equivalents at End of Period | $23,471 | $8,224 | $15,247 | Notes to Condensed Consolidated Financial Statements These notes provide detailed information supporting the condensed consolidated financial statements, covering the company's organization, significant accounting policies, liquidity, capital resources, and specific financial statement line items 1. Organization and Summary of Significant Accounting Policies SINTX Technologies, Inc. is an OEM ceramics company focused on developing and commercializing silicon nitride for medical and non-medical applications, serving as an exclusive OEM provider for CTL Medical after selling its retail spine business in 2018 - SINTX Technologies, Inc. (formerly Amedica Corporation) was incorporated in Delaware on December 10, 1996[19] - The company is an OEM ceramics company specializing in silicon nitride for medical and non-medical applications, serving as CTL Amedica's exclusive OEM provider for silicon nitride spinal implants[19][22] - In October 2018, the company sold its retail spine business to CTL Medical, retaining manufacturing, R&D, and IP for core silicon nitride biomaterial technology[20] 2. Basic and Diluted Net Income (Loss) per Common Share For Q1 2021, basic and diluted net loss per share were both $(0.11), with no dilutive effect due to the net loss, contrasting with Q1 2020's basic net income per share of $0.19 and diluted net loss per share of $(0.37) | Metric | 3 Months Ended March 31, 2021 | 3 Months Ended March 31, 2020 | | :-------------------------------- | :---------------------------- | :---------------------------- | | Basic Net Income (Loss) per Share | $(0.11) | $0.19 | | Diluted Net Loss per Share | $(0.11) | $(0.37) | | Basic Weighted Average Shares Outstanding | 24,668,106 | 6,020,889 | | Diluted Weighted Average Shares Outstanding | 24,668,106 | 8,035,392 | - For Q1 2021, there was no difference between basic and diluted shares due to the anti-dilutive effect of the net loss[39] 3. Inventories Total inventories increased slightly from $487 thousand at December 31, 2020, to $515 thousand at March 31, 2021, with raw materials constituting the largest portion and most inventories classified as long-term | Inventory Type (in thousands) | March 31, 2021 | December 31, 2020 | | :---------------------------- | :------------- | :---------------- | | Raw materials | $407 | $388 | | WIP | $106 | $97 | | Finished goods | $2 | $2 | | Total Inventories | $515 | $487 | - As of March 31, 2021, approximately $0.1 million of inventories were current, and $0.4 million were long-term[41] 4. Intangible Assets Intangible assets, primarily trademarks, remained stable at $35 thousand net of accumulated amortization as of March 31, 2021, with consistent amortization expense of approximately $1.3 thousand for both periods | Metric (in thousands) | March 31, 2021 | December 31, 2020 | | :-------------------- | :------------- | :---------------- | | Trademarks | $50 | $50 | | Accumulated Amortization | $(15) | $(14) | | Net Intangible Assets | $35 | $36 | - Amortization expense for intangible assets was approximately $1.3 thousand for both the three months ended March 31, 2021, and 2020[42] 5. Fair Value Measurements The fair value of common stock warrants, classified as Level 3 derivative liabilities, increased from $1.238 million at December 31, 2020, to $1.285 million at March 31, 2021, with valuation based on the Monte Carlo Simulation - Common stock warrants are classified as Level 3 derivative liabilities and are re-measured to fair value each reporting period[43][45] Derivative Liability (in thousands) | Metric (in thousands) | March 31, 2021 | December 31, 2020 | | :-------------------- | :------------- | :---------------- | | Derivative liability (Common stock warrants) | $1,285 | $1,238 | - The valuation of common stock warrant liability uses the Monte Carlo Simulation, with key assumptions including risk-free interest rates (0.05%-0.70% for March 2021) and expected volatility (137.8%-178.1% for March 2021)[45][46] 6. Accrued Liabilities Accrued liabilities increased from $909 thousand at December 31, 2020, to $1.086 million at March 31, 2021, primarily driven by an increase in payroll and related expenses | Accrued Liability Type (in thousands) | March 31, 2021 | December 31, 2020 | | :------------------------------------ | :------------- | :---------------- | | Payroll and related expense | $690 | $600 | | Other | $396 | $309 | | Total Accrued Liabilities | $1,086 | $909 | 7. Debt The company received forgiveness for its $0.4 million 2020 PPP Loan in January 2021 and secured a new $0.5 million 2021 PPP Loan in March 2021 with a 1.0% interest rate, maturing in March 2026, which may also be forgiven - The $0.4 million 2020 PPP Loan was forgiven on January 5, 2021, and recorded as other income[50] - A new $0.5 million 2021 PPP Loan was received on March 15, 2021, with a 1.0% interest rate and a five-year term, potentially eligible for forgiveness[51][52] 8. Equity In February 2021, the company entered into a new Equity Distribution Agreement to sell up to $15.0 million of common stock through an at-the-market offering, and during Q1 2021, issued 130,275 shares for $0.2 million cash from warrant exercises - On February 25, 2021, SINTX entered into a new Equity Distribution Agreement to sell up to $15.0 million of common stock via an at-the-market offering, with no sales as of March 31, 2021[54][55] - During Q1 2021, 130,275 common shares were issued from cash warrant exercises, generating $0.2 million, and 1,890 shares from cashless warrant exercises[58] - In February 2020, a rights offering generated $9.4 million gross proceeds from units of convertible preferred stock and warrants, and in June-August 2020, four registered direct offerings issued 11,015,000 common shares for $20.9 million gross proceeds[56][59][60][61] 9. Stock-Based Compensation As of March 31, 2021, the company had 833,893 stock options outstanding with a weighted-average exercise price of $3.98, and granted 368,500 options in Q1 2021 with an estimated fair value of approximately $0.6 million | Metric | March 31, 2021 | December 31, 2020 | | :-------------------------------- | :------------- | :---------------- | | Options Outstanding | 833,893 | 465,393 | | Weighted Average Exercise Price | $3.98 | $5.53 | | Weighted Average Remaining Contractual Life (Years) | 9.4 | 9.3 | - 368,500 stock options were granted in Q1 2021, with an estimated fair value of approximately $0.6 million[62] Unrecognized Stock-Based Compensation (in thousands) | Unrecognized Stock-Based Compensation (in thousands) | Amount | Weighted Average Remaining Recognition Period (in years) | | :--------------------------------------------------- | :----- | :------------------------------------------------------- | | Stock options | $779 | 2.5 | | Stock grants | $17 | 2.1 | 10. Commitments and Contingencies The company has executive agreements for change-in-control payments and accelerated vesting of stock options, and management believes potential liabilities from ordinary course legal proceedings will not materially affect its financial position - Executive agreements include payments and accelerated stock option vesting upon a change in control[66] - Management believes potential liabilities from ordinary course legal proceedings will not materially affect financial position, operating results, or cash flows[67] 11. Note Receivable The company holds a $6.0 million noninterest-bearing note receivable from CTL Medical, maturing October 1, 2021, with a net carrying value of $1.3 million as of March 31, 2021, and expected cash proceeds of $1.4 million for the remaining term - A $6.0 million noninterest-bearing note receivable from CTL Medical matures on October 1, 2021[68] Note Receivable Metrics (in thousands) | Metric (in thousands) | March 31, 2021 | | :-------------------- | :------------- | | Net Carrying Value | $1,300 | | Expected Cash Proceeds (remaining 7 months) | $1,400 | 12. Leases The company leases office, warehouse, and manufacturing space under an operating lease extended through 2024, with both the operating lease right-of-use asset and liability approximately $1.8 million as of March 31, 2021, and a weighted-average discount rate of 6.5% - The company leases office, warehouse, and manufacturing space under an operating lease extended through 2024[70] Operating Lease Metrics (in thousands) | Metric (in thousands) | March 31, 2021 | | :-------------------- | :------------- | | Operating Lease Right-of-Use Asset | $1,819 | | Operating Lease Liability | $1,782 | | Current Portion of Operating Lease Liability | $413 | | Long-Term Portion of Operating Lease Liability | $1,369 | | Weighted-Average Discount Rate | 6.5% | - Non-cash operating lease expense for Q1 2021 was approximately $0.1 million[70] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides an overview of SINTX Technologies' business as an advanced materials company focused on silicon nitride, details its financial results, analyzes Q1 2021 operating performance, and discusses liquidity, capital resources, and COVID-19 impact Overview SINTX Technologies is an advanced materials company developing and commercializing silicon nitride for medical and non-medical applications, leveraging its unique properties and expanding into new markets beyond spinal fusion, including anti-viral applications - SINTX Technologies develops and commercializes silicon nitride for medical and non-medical applications, highlighting its properties for human implantation (bone ingrowth, infection resistance, strength)[74] - Independent study showed silicon nitride inactivates SARS-CoV-2 virus within a minute, opening opportunities for anti-viral applications in products like face masks, PPE, and high-contact surfaces[75] - The company is the first to commercialize silicon nitride medical implants and, after selling its spine business to CTL Amedica in 2018, now focuses on OEM and private label partnerships for various markets (e.g., hip/knee replacements, dental, aerospace, antipathogenic applications)[76][77][78] Components of our Results of Operations The company operates as a single reportable segment, deriving product revenue primarily from spinal fusion products sold to CTL, with gross profit margins expected to decrease due to a focus on OEM and private label partnerships, and R&D expenses anticipated to increase with new product development - The company operates within one reportable segment[81] - Product revenue is primarily from manufacturing and selling spinal fusion products to CTL under a 10-year exclusive sales agreement[83] - Gross profit percentage is expected to decrease due to expansion through OEM and private label partnerships, which offer lower margins than retail sales[86] - Research and development costs are expensed as incurred and are expected to increase with the development of new products for various applications (e.g., total joint replacements, dental, antipathogenic)[87][88] Results of Operations For Q1 2021, SINTX Technologies reported a net loss of $2.6 million, a significant decline from net income of $1.2 million in Q1 2020, primarily due to a 51% decrease in product revenue, a 52% increase in total operating expenses, and a 93% decrease in other income | Metric (in thousands) | 3 Months Ended March 31, 2021 | 3 Months Ended March 31, 2020 | $ Change | % Change | | :-------------------- | :---------------------------- | :---------------------------- | :------- | :------- | | Product Revenue | $101 | $207 | $(106) | -51% | | Costs of Revenue | $61 | $166 | $(105) | -63% | | Gross Profit | $40 | $41 | $(1) | -2% | | Research and Development | $1,595 | $994 | $601 | 60% | | General and Administrative | $1,000 | $764 | $236 | 31% | | Sales and Marketing | $286 | $137 | $149 | 109% | | Total Operating Expenses | $2,881 | $1,895 | $986 | 52% | | Loss from Operations | $(2,841) | $(1,854) | $(987) | 53% | | Other Income, Net | $208 | $3,023 | $(2,815) | -93% | | Net Income (Loss) | $(2,633) | $1,169 | $(3,802) | -325% | - Product revenue decreased by 51% due to fewer orders from CTL Amedica[92] - Gross profit remained essentially unchanged despite decreased revenue and costs, attributed to new revenue sources with higher profit margins[93] - Other income decreased by 93% primarily due to a $4.4 million change in fair value of derivative liabilities in 2020, partially offset by $0.4 million from 2020 PPP Loan forgiveness in 2021[98] Liquidity and Capital Resources The company continues to operate as a going concern, despite incurring a net loss of $2.6 million and using $3.0 million in cash from operations in Q1 2021, contributing to an accumulated deficit of $243.7 million, but management projects sufficient capital for the next 12 months - The company's ability to continue as a going concern relies on increasing sales and/or raising additional capital[101] - Management believes existing capital resources, including a $15.0 million Equity Distribution Agreement and $1.4 million from a note receivable, will fund operations for at least the next 12 months (through May 2022)[105][106][107] - The company is actively generating scientific and clinical data to support sales efforts and is expanding its sales strategy beyond spinal fusion to other silicon nitride applications, including potential anti-viral products[102] Cash Flows Net cash used in operating activities decreased by $0.4 million to $3.0 million in Q1 2021, while net cash provided by financing activities significantly decreased by $8.7 million to $0.7 million, mainly due to the absence of large rights offerings seen in Q1 2020 | Cash Flow Activity (in thousands) | 3 Months Ended March 31, 2021 | 3 Months Ended March 31, 2020 | Change ($) | | :-------------------------------- | :---------------------------- | :---------------------------- | :--------- | | Net Cash Used in Operating Activities | $(2,992) | $(3,398) | $406 | | Net Cash Provided by Investing Activities | $406 | $396 | $10 | | Net Cash Provided by Financing Activities | $706 | $9,439 | $(8,733) | - Decrease in cash used in operating activities was primarily due to a $0.7 million decrease in cash used in accounts payable, offset by increases in prepaid expenses and accounts receivable[110] - The significant decrease in financing cash flow was due to $9.4 million from rights offerings in 2020, partially offset by $0.5 million from a PPP loan and $0.2 million from warrant exercises in 2021[112] Indebtedness The company's $0.4 million 2020 PPP Loan was forgiven in January 2021, and a new $0.5 million 2021 PPP Loan was secured in March 2021 with a 1.0% interest rate, maturing in March 2026, and is also eligible for forgiveness - The $0.4 million 2020 PPP Loan was forgiven on January 5, 2021[113] - A new $0.5 million 2021 PPP Loan was received on March 15, 2021, with a 1.0% interest rate and a five-year term, subject to forgiveness conditions[114][115] Off-Balance Sheet Arrangements The company has no off-balance sheet arrangements as defined by SEC regulations - The company does not have any off-balance sheet arrangements[116] Critical Accounting Policies and Estimates There have been no material changes to the company's critical accounting policies and estimates for Q1 2021, which include judgments and assumptions regarding income taxes, contingencies, valuation of derivative liabilities, asset impairment, and accounts receivable collectability - No material changes to critical accounting policies and estimates for Q1 2021[117] - Significant estimates include accounting for income taxes, contingencies, valuation of derivative liabilities, asset impairment, and collectability of accounts receivable[117] New Accounting Pronouncements Information on new accounting pronouncements is discussed in Note 1 to the Condensed Consolidated Financial Statements - New accounting pronouncements are discussed in Note 1 of the financial statements[118] Item 3. Quantitative and Qualitative Disclosures About Market Risk This item is not applicable to the company - Not applicable[119] Item 4. Controls and Procedures The CEO and Principal Financial Officer concluded that the company's disclosure controls and procedures were effective as of March 31, 2021, with no material changes in internal control over financial reporting during Q1 2021 - Disclosure controls and procedures were effective as of March 31, 2021, as concluded by the CEO (principal executive and financial officer)[122][136] - No material changes in internal control over financial reporting occurred during Q1 2021[124] Part II. Other Information Item 1. Legal Proceedings The company is not aware of any pending or threatened legal proceedings that could materially affect its business, operating results, or financial condition, though it may be involved in various legal proceedings in the ordinary course of business - No material pending or threatened legal proceedings are known[125] - The medical device industry is characterized by frequent claims and litigation, and the company may be involved in various additional legal proceedings from time to time[125] Item 1A. Risk Factors There have been no material changes to the risk factors previously disclosed in the Annual Report on Form 10-K for the year ended December 31, 2020 - No material changes to risk factors from the 2020 Annual Report on Form 10-K[126] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds There were no unregistered sales of equity securities or use of proceeds to report - None[127] Item 3. Defaults Upon Senior Securities There were no defaults upon senior securities to report - None[128] Item 4. Mine Safety Disclosures This item is not applicable to the company - Not applicable[129] Item 5. Other Information There is no other information to report under this item - None[130] Item 6. Exhibits This section lists the exhibits filed with the Form 10-Q, including a Patent License Agreement, Promissory Note, Equity Distribution Agreement, and various certifications - Key exhibits include a Patent License Agreement (10.1), Promissory Note (10.2), Equity Distribution Agreement (10.3), and CEO/PFO certifications (31.1, 31.2, 32)[132] Signatures The report was signed on May 13, 2021, by B. Sonny Bal, Chief Executive Officer (Principal Executive Officer and Principal Financial Officer) of SINTX Technologies, Inc. - Report signed by B. Sonny Bal, CEO (Principal Executive Officer and Principal Financial Officer) on May 13, 2021[136]