Eric Olson
executive
Thank you, Kevin, and thank you to everyone joining us today. The second quarter represented meaningful progress in SINTX's transition from a development company to a commercially focused biomaterials and medical technology platform company. Our financial results show that commercial activity is beginning to become more visible. They also make clear that our work is not complete. We must convert demand into revenue, establish repeatable medical device commercialization efforts, align our cost structure with the scale of the business, and maintain adequate liquidity.
So let me begin with 3 key takeaways from the quarter. First, commercial activity is beginning to show up in our reported results. Second quarter revenue increased 199% year over year to $452,000. And product revenue increased 347% to $447,000. Gross profit increased 388% to $278,000. And gross margins improved to approximately 62% compared with 38% a year ago. These are calculated obviously from a small revenue base, and we do not want to overstate them. The important point is that higher product sales, improved pricing on certain OEM products, a favorable sales mix, and the early stage of commercial sales of the SINTX osteotomy foot and ankle wedge system are beginning to move the financial statements in the right direction.
Second, our business model is taking shape around 2 complementary sources of value. 1, our contract manufacturing and OEM activities can provide near-term revenue, customer validation, manufacturing utilization, and operating leverage. 2, our proprietary silicon nitride medical platform can create differentiated products and potential OEM licensing, distribution, and strategic partnership opportunities with greater long-term value. Both rely on the same foundation, material science, precision ceramic processing, and clinical data.
Our responsibility is to increase revenue, manage operating and working capital requirements, pursue cost and efficiency actions, and access capital prudently while focusing resources on the opportunities most likely to create value. Turning first to contract manufacturing, product revenue growth during the quarter was driven primarily by increased sales in our OEM industrial manufacturing business, reflecting improved customer demand and pricing. We view this business as an important commercial foundation. Customers rely on SINTX for technically demanding components used in applications where mechanical strength, thermal stability, wear and corrosion resistance, manufacturing consistency, and quality control are critical.
In June, we announced that SINTX had received purchase orders from multiple existing contract manufacturing customers with an aggregate value exceeding $3.2 million. Subject to customer requirements, manufacturing schedules, and commercial terms, production and shipment activities associated with these purchase orders have begun and will continue into 2027. The value of those purchase orders is meaningful relative to our current revenue base, but the announcement is the beginning of the work rather than the completion of it.
The milestones that matter are qualified production, material availability, manufacturing yield, quality release, on-time shipment, customer acceptance, recognized revenue, cash collection, and repeat orders. Because these are technically demanding components, timing may vary. We will distinguish clearly between order value and recognized revenue and will update investors as execution progresses. Our manufacturing priorities are straightforward. We are aligning production schedules to customer requirements, managing the working capital needed to support raw materials and work in progress, while protecting quality and delivery performances and evaluating where capacity, process efficiency, or external support may be required. We intend to remain disciplined. Growth that creates excessive working capital pressure or compromises quality would not be sustainable.
Turning to our proprietary medical portfolio, the SINTX foot and ankle osteotomy wedge system remains our lead commercial product. This system received FDA 510(k) clearance in late 2025. In March 2026, our first SINTX wedges were used in a reconstructive foot and ankle procedure in the U.S., and we recognized initial commercial revenue during our limited use review. Those are important commercialization milestones. They demonstrate that SINTX has moved beyond research and regulatory development into clinical use and commercial activity. We are focused on building adoption and increasing commercial activity, although the timing and amount of future revenue will depend on surgeon adoption, channel development, product availability, and other potential market factors.
FDA clearance and first clinical use, however, do not by themselves create a durable medical device business. Commercialization requires surgeon education, case support, channel development, product availability, inventory management, reliable manufacturing, reimbursement awareness, and ongoing clinical and market feedback. Our near-term objective is to establish a disciplined commercial foundation for the foot and ankle wedge system rather than to pursue growth at any cost. We are evaluating the most capital-efficient routes to market, including direct-to-surgeon engagement, distributor relationships, and broader strategic relationships. The right model must provide credible access to foot and ankle surgeons, appropriate clinical support, and an economic structure that will allow SINTX to build adoption without creating a sales infrastructure that is disproportionate to current revenue.
Silicon nitride has a combination of properties that we believe can be valuable in musculoskeletal applications, including biocompatibility, bone affinity, strength, imaging compatibility, hydrophilicity, and surface characteristics studied for resistance to bacterial adhesion and clear pathogenic characteristics. Beyond the wedge system, SINTX's broader opportunities to apply silicon nitride across multiple formats including monolithic implants, powders, coatings, coarse porous structures, and polymer composites. Potential applications span orthopedics, spine, dental, wound care, and other specialized medical markets.
The breadth of the platform is valuable, but it also creates a need for us to focus. We are prioritizing programs based on time to revenue, required capital, regulatory pathways, partner interest, manufacturing fit, and strategic value. In the near term, that means concentrating on 3 categories of activity. The first is converting contract manufacturing demand into revenue and repeat business. The second is building a credible commercial path for the SINTX foot and ankle wedge system. The third is advancing OEM licensing and strategic discussions where a partner can provide market access, development funding, manufacturing volume, or another meaningful source of value.
We do not believe SINTX must build every commercial capability internally. As discussed in today's business update, we have engaged one of our board members, [ Chris Lyons ], and his company, [ Southern Metrics ], to help coordinate and evaluate inbound strategic opportunities involving potential commercial partnerships, licensing relationships, and other business development initiatives. That engagement should not be interpreted to mean that any particular transaction is pending or will occur. The quarter also reflects our shift towards commercialization in the way expenses are classified. Sales and marketing expenses increased as we supported product launch activity.
Research and development expenses declined, but the majority of that change resulted from the reallocation of certain overhead costs to general and administrative expenses as our operating focus changed. This is important. The reduction in reported R&D expense should not be interpreted as an equivalent reduction in underlying technical activity. At the same time, the current cost structure is high relative to our revenue base. We recognize that. Management is evaluating staffing, outside services, facilities, project priorities, working capital, and other spending commercially.
