NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1.
Organization and Summary of Significant Accounting Policies
The
condensed consolidated financial statements include the accounts of SINTX Technologies, Inc. (“SINTX”) and its wholly-owned
subsidiaries, SINTX Armor, Inc. (“SINTX Armor”) and Technology Assessment and Transfer, Inc. (TA&T), which are collectively
referred to as “we” or “the Company”. SINTX is an advanced ceramics company formed in December 1996 (and was
previously known as Amedica Corporation), is focused on providing solutions in a variety of biomedical, technical, and antipathogenic
applications. We have grown from focusing primarily on the research, development and commercialization of medical devices manufactured
with silicon nitride to becoming an advanced ceramics company engaged in diverse fields, including biomedical, technical and antipathogenic
applications. This diversification enables us to focus on our core competencies, which are the manufacturing, research, and development
of products comprised from advanced ceramic materials for external partners. We seek to connect with new customers, partners and manufacturers
to help them realize the goal of leveraging our expertise in advanced ceramics to create new, innovative products across these sectors.
The Company presently manufactures ceramic powders and components in its Salt Lake City and Maryland facilities. The SINTX Salt Lake
City facility is FDA and ANVISA registered, ISO 13485:2016 certified, and ASD9100D certified. The Company’s products are primarily
sold in the United States.
The
Company is focused on building revenue generating opportunities in three business industries – biomedical, technical (including
armor), and antipathogenic – thereby connecting with current and new customers, partners and manufacturers to help realize the
goal of leveraging expertise in high-tech ceramics to create new, innovative opportunities across these sectors. We expect our continued
investment in research and development to provide additional revenue opportunities.
SINTX
believes it is the first and only manufacturer to use silicon nitride in medical applications primarily focused on spine fusion therapies.
Since then, we have developed other applications for our silicon nitride technology as well as utilized our expertise in the use of ceramic
materials in other applications. In July 2021, the Company acquired the equipment and obtained certain proprietary know-how rights with
which it is using to develop, manufacture, and commercialize protective armor from boron carbide and a composite material of silicon
carbide and boron carbide for military, law enforcement and civilian uses. The protective armor operations are housed in SINTX Armor.
In June 2022, the Company acquired TA&T, a nearly 40-year-old business with a mission to transition advanced materials and process
technologies from a laboratory environment to commercial products and services.
On
October 1, 2018, the Company completed the sale of its retail spine business to CTL Medical, a Dallas, Texas-based privately held medical
device manufacturer. As a result of the sale, CTL Medical became the exclusive owner of the Company’s portfolio of metal and silicon
nitride spine products, as well as access to future silicon nitride spine technologies developed by the Company. The Company’s
name, Amedica, was also transferred to CTL Medical, which is now CTL Amedica. The Company serves as CTL’s exclusive OEM provider
of silicon nitride products. Manufacturing, R&D, and all intellectual property related to the core, non-spine, biomaterial technology
including silicon nitride remains with the Company.
On
October 30, 2018, the Company amended its Certificate of Incorporation with the State of Delaware to change its corporate name to SINTX
Technologies, Inc. The Company also changed its trading symbol on the NASDAQ Capital Market to “SINT”.
The
Company’s new corporate brand reflects both the Company’s core competence in the science and production of silicon nitride
ceramics and other ceramics, as well as encouraging prospects for the future, as an OEM supplier of spine implants to CTL Amedica, and
multiple opportunities outside of spine.
Basis
of Presentation
These
unaudited condensed consolidated financial statements have been prepared in accordance with the rules and regulations of the United States
Securities and Exchange Commission (“SEC”) and include all assets and liabilities of the Company.
SEC
rules and regulations allow the omission of certain information and footnote disclosures normally included in financial statements prepared
in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) so long as the statements are not misleading.
In the opinion of management, these financial statements and accompanying notes contain all adjustments (consisting of normal recurring
adjustments) necessary to present fairly the financial position and results of operations for the periods presented herein. These condensed
consolidated financial statements should be read in conjunction with the consolidated audited financial statements and notes thereto
contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022, filed with the SEC on March 29, 2023.
The results of operations for the three months ended March 31, 2023, are not necessarily indicative of the results to be expected for
the year ending December 31, 2023. The Company’s significant accounting policies are set forth in Note 1 to the consolidated financial
statements in its Annual Report on Form 10-K for the year ended December 31, 2022.
Reverse
Stock Split
On
December 20, 2022, the Company effected a 1 for 100 reverse stock split of the Company’s common stock. The par value and the authorized
shares of the common and preferred stock were not adjusted as a result of the reverse stock split. All common stock shares, equivalents,
and per-share amounts for all periods presented in these consolidated financial statements have been adjusted retroactively to reflect
the reverse stock split.
Use
of Estimates
The
preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed
consolidated financial statements and the reported amounts of revenue and expenses during the period. Actual results could differ from
those estimates. As of March 31, 2023, the most significant estimate relates to derivative liabilities relating to common stock warrants.
Liquidity
and Capital Resources
The
condensed consolidated financial statements have been prepared assuming the Company will continue to operate as a going concern, which
contemplates the realization of assets and settlement of liabilities in the normal course of business, and does not include any adjustments
to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications of liabilities
that may result from uncertainty related to its ability to continue as a going concern within one year from the date of issuance of these
condensed consolidated financial statements.
For
the three months ended March 31, 2023, and 2022, the Company incurred a net loss of $0.3
million and $2.8
million, respectively, and used cash in operating
activities of $4.9
million and $3.2
million, respectively. The Company had an accumulated
deficit of $262.7 million
and $262.5 million
as of March 31, 2023, and December 31, 2022, respectively. To date, the Company’s operations have been principally financed from
proceeds from the issuance of preferred and common stock and, to a lesser extent, cash generated from product sales. It is anticipated
that the Company will continue to generate operating losses and use cash in operating activities. The Company’s continuation as
a going concern is dependent upon its ability to increase sales, and/or raise additional funds through the capital markets. Whether and
when the Company can attain profitability and positive cash flows from operations or obtain additional financing is uncertain.
The
Company is actively generating additional scientific and clinical data to have it published in leading industry publications. The unique
features of our advanced ceramic materials are not well known, and we believe the publication of such data would help sales efforts as
the Company approaches new prospects. The Company is also making additional changes to the sales strategy, including a focus on revenue
growth by expanding the use of silicon nitride in other areas outside of spinal fusion applications. The Company has also acquired equipment
and certain proprietary know-how for the purpose of developing, manufacturing and commercializing armored plates made from boron carbide
and a composite of boron carbide and silicon carbide for military, law enforcement and other civilian uses.
The
Company has common stock that is publicly traded and has been able to successfully raise capital when needed since the date of the Company’s
initial public offering in February 2014.
On
February 25, 2021, the Company entered into an Equity Distribution Agreement (as amended, the “2021 Distribution
Agreement”) with Maxim Group LLC (“Maxim”), pursuant to which the Company may sell from time to time, shares of
the Company’s common stock having an aggregate offering price of up to $2.0
million through Maxim, as agent. Subject to the terms and conditions of the 2021 Distribution Agreement, as amended, Maxim will use
its commercially reasonable efforts to sell the shares from time to time, based on our instructions. Under the 2021 Distribution
Agreement, Maxim may sell the Shares by any method permitted by law deemed to be an “at-the-market” offering (the
“ATM”) as defined in Rule 415 promulgated under the Securities Act of 1933, as amended (the “Securities
Act”), including, without limitation, sales made directly on the Nasdaq Capital Market. We have no obligation to sell any
shares under the ATM and may at any time suspend offers under the 2021 Distribution Agreement. The
Offering will terminate upon the earlier of (i) the sale of shares having an aggregate offering price of $15.0 million, (ii) the
termination by either Maxim or the Company upon the provision of fifteen (15) days written notice, or (iii) February 25, 2024. Under
the terms of the 2021 Distribution Agreement, Maxim will be entitled to a transaction fee at a fixed rate of 2.0% of the gross sales
price of Shares sold under the 2021 Distribution Agreement. The Company will also reimburse Maxim for certain expenses incurred in
connection with the 2021 Distribution Agreement and agreed to provide indemnification and contribution to Maxim with respect to
certain liabilities under the Securities Act and the Securities Exchange Act of 1934, as amended. As of March 31, 2023, there have
been no sales of shares of common stock under the 2021 Distribution Agreement. Because
the company’s public float is less than $75 million, we may not sell securities over a 12-month period in an amount greater
than one-third of our public float. In connection with the February 2023 offering, the Company agreed to not make any sales
of securities under the ATM for a period of six months from the date of closing the offering, February 10, 2023, until August 10,
2023.
On
October 17, 2022, the Company closed on the sale of 4,656 Units for gross proceeds of approximately $4.7 million pursuant to the terms
of a Rights Offering to holders of the Company’s common stock, Series B and Series C preferred stock and holders of certain outstanding
common stock warrants (See Note 7).
On
February 10, 2023, the Company closed on a public offering of 2,150,000
units with gross proceeds of approximately $12.0
million (See Note 7).
Management
has concluded existing capital resources will be sufficient to fund operations for at least the next 12 months, or through May 2024.
Grant
and Contract Revenue
Revenues
from grants, contracts, and awards provided by governmental agencies are recorded based upon the terms of the specific agreements, which
generally provide that revenue is earned when the allowable costs specified in the applicable agreement have been incurred or a milestone
has been met. Cash received from federal grants, contracts, and awards can be subject to audit by the grantor and, if the examination
results in a disallowance of any expenditure, repayment could be required.
New
Accounting Pronouncements Recently Adopted
In
August 2020, the Financial Statement Accounting Board (the “FASB”) issued ASU 2020-06 which simplifies the accounting for
convertible instruments and its application of the derivatives scope exception for contracts in an entity’s own equity. For contracts
in an entity’s own equity, the new guidance eliminates some of the current requirements for equity classification such as the requirement
that settlement in unregistered shares is permitted. In addition, the new guidance reduces the number of accounting models that require
separating embedded conversion features from convertible instruments, including eliminating the requirement to recognize a beneficial
conversion feature if the conversion feature is in the money and does not require bifurcation as a derivative liability. As a result,
only conversion features accounted for under the substantial premium model and those that require bifurcation will be accounted for separately.
The guidance also addresses how convertible instruments are accounted for in the diluted earnings per share calculation and requires
enhanced disclosures about the terms of convertible instruments and contracts in an entity’s own equity. The Company adopted the
new standards January 1, 2023. The adoption of this standard allows the Company in the future and, in certain circumstances, to avoid
derivative treatment of warrants and avoid beneficial conversion treatment of certain convertible preferred shares.
New
Accounting Pronouncements Not Yet Adopted
The
Company has reviewed all recently issued, but not yet adopted, accounting standards, in order to determine their effects, if any, on
its results of operations, financial position or cash flows. Based on that review, the Company believes that no other pronouncements
will have a significant effect on its financial statements.
2.
Basic and Diluted Net Income (Loss) per Common Share
Basic
net income (loss) per share is calculated by dividing the net income (loss) by the weighted-average number of common shares outstanding
for the period, without consideration for common stock equivalents. Diluted net loss per share is calculated by dividing the net loss
by the weighted-average number of common share equivalents outstanding for the period that are determined to be dilutive. Common stock
equivalents are primarily comprised of preferred stock and warrants for the purchase of common stock. For the three months ended March
31, 2023, there is no difference in the number of shares and net loss used to calculate basic and diluted shares outstanding because
their effect would have been anti-dilutive. The Company had potentially dilutive securities, totaling approximately 1.2 million and 2.1
million as of March 31, 2023, and 2022, respectively.
Below
are basic and diluted loss per share data for the three months ended March 31, 2023, which are in thousands except for share and per
share data:
Schedule of Basic and Diluted Loss Per Share
| |
Basic
Calculation | | |
Effect of Dilutive Warrant Securities | | |
Diluted
Calculation | |
Numerator: | |
| | | |
| | | |
| | |
Net loss | |
$ | (293 | ) | |
$ | (4,149 | ) | |
$ | (4,442 | ) |
| |
| | | |
| | | |
| | |
Denominator: | |
| | | |
| | | |
| | |
Number of shares used in per common share calculations: | |
| 2,272,992 | | |
| 258,067 | | |
| 2,558,059 | |
| |
| | | |
| | | |
| | |
Net loss per common share: | |
| | | |
| | | |
| | |
Net loss | |
$ | (0.13 | ) | |
$ | (1.61 | ) | |
$ | (1.74 | ) |
Below
are basic and diluted loss per share data for the three months ended March 31, 2022, which are in thousands except for share and per
share data:
| |
Basic
Calculation | | |
Effect of Dilutive Warrant Securities | | |
Diluted
Calculation | |
Numerator: | |
| | | |
| | | |
| | |
Net loss | |
$ | (2,845 | ) | |
$ | - | | |
$ | (2,845 | ) |
| |
| | | |
| | | |
| | |
Denominator: | |
| | | |
| | | |
| | |
Number of shares used in per common share calculations: | |
| 247,122 | | |
| - | | |
| 247,122 | |
| |
| | | |
| | | |
| | |
Net loss per common share: | |
| | | |
| | | |
| | |
Net loss | |
$ | (11.51 | ) | |
$ | - | | |
$ | (11.51 | ) |
3.
Inventories
Inventories
consisted of the following (in thousands):
Schedule of Components of Inventory
| |
| | | |
| | |
| |
March 31, 2023 | | |
December 31, 2022 | |
Raw materials | |
$ | 412 | | |
$ | 552 | |
WIP | |
| 125 | | |
| 94 | |
Finished goods | |
| 89 | | |
| 91 | |
Inventory net | |
$ | 626 | | |
$ | 737 | |
As
of March 31, 2023, inventories totaling approximately $0.4 million and $0.2 million were classified as current and long-term, respectively.
Inventories classified as current represent the carrying value of inventories as of March 31, 2023, that management estimates will be
sold or used by March 31, 2024.
4.
Fair Value Measurements
Financial
Instruments Measured and Recorded at Fair Value on a Recurring Basis
The
Company has issued certain warrants to purchase shares of common stock, which are considered derivative liabilities because they have
registration rights which could require a cash settlement and are re-measured to fair value at each reporting period in accordance with
accounting guidance. Fair value is based on the price that would be received from selling an asset or paid to transfer a liability in
an orderly transaction between market participants at the measurement date, under a three-tier fair value hierarchy which prioritizes
the inputs used in measuring fair value as follows:
|
Level
1 - |
quoted
market prices for identical assets or liabilities in active markets. |
|
|
|
|
Level
2 - |
observable
prices that are based on inputs not quoted on active markets but corroborated by market data. |
|
|
|
|
Level
3 - |
unobservable
inputs reflecting management’s assumptions, consistent with reasonably available assumptions made by other market participants.
These valuations require significant judgment. |
The
Company classifies assets and liabilities measured at fair value in their entirety based on the lowest level of input that is significant
to their fair value measurement. No financial assets were measured on a recurring basis as of March 31, 2023, and December 31, 2022.
The following tables set forth the financial liabilities measured at fair value on a recurring basis by level within the fair value hierarchy
as of March 31, 2023, and December 31, 2022 (in thousands):
Schedule of Financial Liabilities Measured at Fair Value on Recurring Basis by Level Within Fair Value Hierarchy
| |
Fair Value Measurements as of March 31, 2023 | |
Description | |
Level 1 | | |
Level 2 | | |
Level 3 | | |
Total | |
Derivative liability | |
| | | |
| | | |
| | | |
| | |
Common stock warrants | |
$ | - | | |
$ | - | | |
$ | 2,267 | | |
$ | 2,267 | |
|
|
Fair
Value Measurements as of December 31, 2022 |
|
Description |
|
Level
1 |
|
|
Level
2 |
|
|
Level
3 |
|
|
Total |
|
Derivative
liability |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
stock warrants |
|
$ |
- |
|
|
$ |
- |
|
|
$ |
5,126 |
|
|
$ |
5,126 |
|
The
Company did not have any transfers of assets and liabilities between Level 1 and Level 2 of the fair value measurement hierarchy during
the three months ended March 31, 2023, and 2022. The following table presents a reconciliation of the derivative liabilities measured
at fair value on a recurring basis using significant unobservable inputs (Level 3) during the three months ended March 31, 2023, and
2022 (in thousands):
Schedule of Fair Value Measurement Hierarchy of Derivative Liability
| |
Common Stock Warrants | |
Balance as of December 31, 2021 | |
$ | (347 | ) |
Change in fair value | |
| 41 | |
Issuance of derivatives | |
| - | |
Exercise of warrants | |
| - | |
Balance as of March 31, 2022 | |
$ | (306 | ) |
| |
| | |
Balance as of December 31, 2022 | |
$ | (5,126 | ) |
Issuance of derivatives | |
| (6,650 | ) |
Exercise of warrants | |
| 5,502 | |
Change in fair value | |
| 4,006 | |
Other | |
| 1 | |
Balance as of March 31, 2023 | |
$ | (2,267 | ) |
Common
Stock Warrants
The
Company has issued certain warrants to purchase shares of common stock, which are considered derivative liabilities because they have
registration rights which could require a cash settlement and are re-measured to fair value at each reporting period in accordance with
accounting guidance. As of March 31, 2023, and December 31, 2022, the derivative liability was calculated using the Monte Carlo Simulation
valuation.
The
assumptions used in estimating the common stock warrant liability using the Monte Carlo simulation valuation model as of March 31, 2023,
and December 31, 2022 were as follows:
Schedule of Assumptions Used in Estimating Fair Value
|
|
March
31,
2023 |
|
|
December
31,
2022 |
|
Weighted-average
risk-free interest rate |
|
|
3.60%-4.74 |
% |
|
|
3.99%-4.42 |
% |
Weighted-average
expected life (in years) |
|
|
0.11-4.87 |
|
|
|
0.07-4.80
|
|
Expected
dividend yield |
|
|
- |
% |
|
|
- |
% |
Weighted-average
expected volatility |
|
|
109.2%-141.8 |
% |
|
|
103.6%-243.0
|
% |
Other
Financial Instruments
The
Company’s recorded values of cash and cash equivalents, account and other receivables, accounts payable and accrued liabilities
approximate their fair values based on their short-term nature. The recorded value of notes payable approximates the fair value as the
interest rate approximates market interest rates.
5.
Accrued Liabilities
Accrued
liabilities consisted of the following (in thousands):
Schedule of Accrued Liabilities
| |
| | | |
| | |
| |
March 31, 2023 | | |
December 31, 2022 | |
Payroll and related expense | |
$ | 584 | | |
$ | 524 | |
Accrued payables | |
| 307 | | |
| 464 | |
Other | |
| 613 | | |
| 630 | |
Accrued liabilities | |
$ | 1,504 | | |
$ | 1,618 | |
6.
Debt
Business
Loan
On
July 20, 2021, TA&T (see Note 2), entered into a Loan Authorization and Agreement in the amount of approximately $350,000 (the “Business
Loan”). The Company made a one-time $35,000 buy down payment when acquiring the loan. The Business Loan bears interest at a rate
of 3.75% per annum. The Business Loan is secured by a general security interest in all of the assets of TA&T. The business loan was
paid in full during the first quarter of 2023 and there was no outstanding balance at March 31, 2023.
Related
Party Debt
TA&T
is obligated to repay certain personal loans made by the founders of TA&T to TA&T prior to SINTX’s acquisition of TA&T
(the Personal Loans”). The total amount of the Personal Loans at June 30, 2022, the date of acquisition, was approximately $350,000.
The Company agreed to repay the outstanding balance of the Personal Loans in (i) 24 equal monthly installments beginning September 1,
2022 and each month thereafter until paid in full as one prior owner’s portion of the Personal Loans totaling $157,000, and (ii)
for the other owner’s portion of the Personal Loans totaling $193,000. As of March 31, 2023, the related party debt had an outstanding
balance of $150,000. The outstanding balance is being paid in monthly installments ending August 1, 2024. The related party debt is not
collateralized and has no interest rate.
7.
Equity
2023
Registered Offering
On
February 10, 2023, the Company closed on a public offering of 2,150,000 units, with each unit consisting of one share of common stock,
or one pre-funded warrant to purchase one share of its common stock, one Class C Warrant to purchase one share of common stock, and one
half of one Class D Warrant with each whole Class D Warrant entitling the holder to purchase one share of common stock. Each unit was
sold at a public offering price of $5.60. The Class C and Class D Warrants are immediately exercisable at a price of $5.60 per share.
The Class C and Class D warrants each have a cashless exercise provision entitling the holders to surrender one Class C Warrant and receive
0.4 shares of common stock and on the surrender of one Class D Warrant the holder is entitled to receive 0.8 shares of common stock.
The Class C Warrants expire five years from the date of issuance and the Class D Warrants expire three years from the date of issuance.
The shares of common stock (or pre-funded warrants in lieu thereof) and accompanying warrants were only purchasable together in this
offering but were issued separately and were immediately separable upon issuance. In addition, the company issued a total of 86,000 common
stock warrants to the placement agent, Maxim Group, and the Company’s financial advisor, Ascendiant Capital. Gross proceeds, before
deducting offering expenses, totaled approximately $12.0 million. Of the $12.0 million of gross proceeds, approximately $5.4 million
were allocated to common stock and prefunded warrants ($4.8 million net of offering costs) and approximately $6.7 million were allocated
to derivative liabilities (with approximately $0.7 million of cash offering costs and $0.1 million of agent warrant offering costs recorded
as derivative expense).
2022
Rights Offering
On
October 17, 2022, the Company completed a rights offering (the “Rights Offering”) to holders of the Company’s Series
B Preferred Shares, Series C Preferred Shares, and warrants issued March 6, 2018, May 8, 2018, May 14, 2018, and February 6, 2020 (collectively,
the “Security Holders”) for subscriptions of 4,656 rights resulting in gross proceeds to the Company of approximately $4.7
million. Under the Rights Offering, the Company distributed to the Security Holders, at no charge, one non-transferable subscription
right for each share of common stock, share of Series B Preferred Stock, share of Series C Preferred Stock, and each participating warrant
(on an as-if-converted-to-common-stock basis) held on the record date, September 23, 2022. Each right entitled the holder to purchase
one unit, at a subscription price of $1,000 per unit, consisting of one share of Series D Convertible Preferred Stock with a face value
of $1,000 (and immediately convertible into shares of SINTX’s common stock at a conversion price equal to $15.102 (the “Conversion
Price”), and 66 common stock purchase warrants expiring five years from the date of issuance, which we refer to as the Class A
Warrants, and (iii) 66 common stock purchase warrants expiring three years from the date of issuance, which we refer to as the Class
B Warrants and, together with the Class A Warrants, the Warrants with each warrant exercisable for one share of common stock at an exercise
price of $2.70 per share.
2021
Equity Distribution Agreement
On
February 25, 2021, the Company entered into an Equity Distribution Agreement (as amended, the “2021 Distribution Agreement”)
with Maxim Group LLC (“Maxim”), pursuant to which the Company may sell from time to time, shares of the Company’s common
stock having an aggregate offering price of up to $2.0 million through Maxim, as agent. Subject to the terms and conditions of the 2021
Distribution Agreement, as amended, Maxim will use its commercially reasonable efforts to sell the shares from time to time, based on
our instructions. Under the 2021 Distribution Agreement, Maxim may sell the Shares by any method permitted by law deemed to be an “at-the-market”
offering as defined in Rule 415 promulgated under the Securities Act of 1933, as amended (the “Securities Act”), including,
without limitation, sales made directly on the Nasdaq Capital Market. We have no obligation to sell any shares under the ATM and may
at any time suspend offers under the 2021 Distribution Agreement. The Offering will terminate upon the earlier of (i) the sale of shares
having an aggregate offering price of $15.0 million, (ii) the termination by either Maxim or the Company upon the provision of fifteen
(15) days written notice, or (iii) February 25, 2024. Under the terms of the 2021 Distribution Agreement, Maxim will be entitled to a
transaction fee at a fixed rate of 2.0% of the gross sales price of Shares sold under the 2021 Distribution Agreement. The Company will
also reimburse Maxim for certain expenses incurred in connection with the 2021 Distribution Agreement and agreed to provide indemnification
and contribution to Maxim with respect to certain liabilities under the Securities Act and the Securities Exchange Act of 1934, as amended.
As of March 31, 2023, there have been no sales of shares of common stock under the 2021 Distribution Agreement. Because the company’s
public float is less than $75 million, we may not sell securities over a 12-month period in an amount greater than one-third of our public
float. In connection with the February 2023 offering, the Company agreed to not make any sales of securities under the ATM for a period
of six months from the date of closing the offering, February 10, 2023, until August 10, 2023.
8.
Stock-Based Compensation
A
summary of the Company’s outstanding stock option activity for the three months ended March 31, 2023, and 2022 is as follows:
Schedule of Stock Option Activity
| |
| | |
March 31, 2023 | | |
| |
| |
| | |
Weighted- Average | | |
Weighted- Average Remaining Contractual
Life | | |
Intrinsic | |
| |
Options | | |
Exercise Price | | |
(Years) | | |
Value | |
As of December 31, 2022 | |
| 11,909 | | |
$ | 234.02 | | |
| 6.9 | | |
$ | - | |
Granted | |
| - | | |
| - | | |
| - | | |
| - | |
Exercised | |
| - | | |
| - | | |
| - | | |
| - | |
Forfeited | |
| - | | |
| - | | |
| - | | |
| - | |
Expired | |
| - | | |
| - | | |
| - | | |
| - | |
As of March 31, 2023 | |
| 11,909 | | |
$ | 120.33 | | |
| 7.7 | | |
$ | - | |
Exercisable at March 31, 2023 | |
| 8,303 | | |
$ | 330.56 | | |
| 7.6 | | |
$ | - | |
Vested and expected to vest at March 31, 2023 | |
| 9,840 | | |
$ | 119.65 | | |
| 7.7 | | |
$ | - | |
| |
| | |
March 31, 2022 | | |
| |
| |
| | |
Weighted- Average | | |
Weighted- Average Remaining Contractual
Life | | |
Intrinsic | |
| |
Options | | |
Exercise Price | | |
(Years) | | |
Value | |
As of December 31, 2021 | |
| 8,339 | | |
$ | 391 | | |
| 8.7 | | |
$ | 87,553 | |
Granted | |
| 3,570 | | |
| 49 | | |
| 10.0 | | |
| - | |
Exercised | |
| - | | |
| - | | |
| - | | |
| - | |
Forfeited | |
| - | | |
| - | | |
| - | | |
| - | |
Expired | |
| - | | |
| - | | |
| - | | |
| - | |
As of March 31, 2022 | |
| 11,909 | | |
$ | 238 | | |
| 8.9 | | |
$ | 114,500 | |
Exercisable at March 31, 2022 | |
| 3,872 | | |
$ | 602 | | |
| 8.3 | | |
$ | 44,652 | |
Vested and expected to vest at March 31, 2022 | |
| 11,787 | | |
$ | 244 | | |
| 8.9 | | |
$ | 117,100 | |
The
Company estimates the fair value of each stock option on the grant date using the Black-Scholes-Merton valuation model, which requires
several estimates including an estimate of the fair value of the underlying common stock on grant date. The expected volatility was based
on an average of the historical volatility of the Company. The expected term was contractual life of option. The risk-free interest rate
was based on the U.S. Treasury yield curve in effect at the time of grant for the expected term of the option. The Company did not grant
any stock options during the first quarter of 2023.
Of the 11,909 options outstanding as of March 31,
2023, 3,551 were awarded to non-executive members of the board of directors.
Unrecognized
stock-based compensation as of March 31, 2023, is as follows (in thousands):
Schedule of Unrecognized Stock-based Compensation
| |
| | |
Weighted Average | |
| |
Unrecognized Stock-Based | | |
Remaining of Recognition | |
| |
Compensation | | |
(in years) | |
Stock options | |
$ | 268 | | |
| 1.1 | |
Stock grants | |
$ | 53 | | |
| 6.2 | |
9.
Commitments and Contingencies
The
Company has executed agreements with certain executive officers of the Company which, upon the occurrence of certain events related to
a change in control, call for payments to the executives up to three times their annual salary and accelerated vesting of previously
granted stock options.
From
time to time, the Company is subject to various claims and legal proceedings covering matters that arise in the ordinary course of its
business activities. Management believes any liability that may ultimately result from the resolution of these matters will not have
a material adverse effect on the Company’s consolidated financial position, operating results or cash flows.
10.
Leases
The
Company has entered into multiple operating leases from which it conducts its business.
SINTX
With
respect to SINTX operations, the Company leases 29,534 square feet of office, warehouse and manufacturing space under a single operating
lease. This lease expires at the end of 2024. The lease has two five-year extension options.
SINTX
Armor
On
August 19, 2021, the Company, on behalf of SINTX Armor, entered into an Industrial Lease Agreement (the “SINTX Armor Lease”)
pursuant to which the Company has agreed to lease approximately 10,936 square feet of office and manufacturing space from which SINTX
Armor will conduct its operations. The term of the SINTX Armor Lease is 122 months through October 2031.
TA&T
In
connection with operation of its business, TA&T has entered into various leases from which it conducts its research,
development and manufacturing activities. The leases have various expiration dates ranging from July 2023 through April 2025.
Leases
with an initial term of 12 months or less are not recorded on the balance sheet. Lease expense is recognized on a straight-line basis
over the term of the lease. The Company accounts for lease components separately from the non-lease components. The depreciable life
of the assets and leasehold improvements are limited by the expected lease term.
As
of March 31, 2023, the operating lease right-of-use assets totaled approximately $2.2 million, and the operating lease liability totaled
approximately $2.3 million. Non-cash operating lease expense during the three months ended March 31, 2023 and 2022, totaled approximately
$0.2 and $0.1 million, respectively. As of March 31, 2023, the weighted-average discount rate for the Company’s operating lease
was 6.5%.
Operating
lease future minimum payments together with the present values as of March 31, 2023, are summarized as follows:
Schedule of Operating Lease Future Minimum Payments
| |
| | |
Years Ending December 31, | |
March 31, 2023 | |
2023 | |
$ | 654 | |
2024 | |
| 897 | |
2025 | |
| 269 | |
2026 | |
| 190 | |
2027 | |
| 131 | |
Thereafter | |
| 539 | |
Total future minimum lease payments | |
| 2,680 | |
Less amounts representing interests | |
| (383 | ) |
Present value of lease liability | |
| 2,297 | |
| |
| | |
Current-portion of operating lease liability | |
| 750 | |
Long-term portion operating lease liability | |
$ | 1,547 | |