Sintx Technologies Inc

SINTX TECHNOLOGIES, INC.

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, focused on providing solutions in a variety of diverse fields, including biomedical, technical, and antipathogenic applications. SINTX is a company that has grown over time from focusing on the research and development of silicon nitride for use in human interbody implants to becoming an advanced ceramics company engaged in many different fields. The core strength of the Company is the manufacturing, research, and development of advanced ceramics for external partners. The Company presently manufactures subtractive and additive forms of various ceramic and ceramic composite materials including silicon nitride and carbide, zirconia and alumina. SINTX has also become expert in developing proprietary powders, compounds, resins, and filaments for use in additive manufacturing along with production of finished individual components in its Salt Lake City and Maryland facilities. The SINTX Salt Lake City facility is registered with the FDA, is cGMP and ANVISA RDC 665 compliant, as well as being ISO 9001:2015, ISO 13485:2016, and ASD9100D certified. The Company’s products are primarily sold in the United States.

The Company has historically been focused on building revenue generating opportunities in three business industries - antipathogenic, technical, and biomedical – 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.

The Company’s initial focus was the development and commercialization of products made from silicon nitride for use in spinal fusion and hip and knee replacement applications. 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 medical device 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 the intention of developing, manufacturing, and commercializing protective armor from boron carbide and a composite material of silicon carbide and boron carbide for military, law enforcement and civilian uses. The armor plant has not been fully operational since the acquisition and the Company incurred an impairment charge of approximately $4.5 million during the three months ended September 30, 2024. 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.

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 nine months ended September 30, 2024 and 2023, the Company incurred a net loss of $9.3 million and $5.9 million, respectively, and used cash in operating activities of $7.5 million and $11.0 million, respectively. The Company had an accumulated deficit of $280.0 million and $270.7 million as of September 30, 2024, and December 31, 2023, respectively. We will require substantial future capital in order to continue operating our business, conduct research and development and regulatory clearance and approval activities necessary to bring our products to market, and to establish effective marketing and sales capabilities. Our existing capital resources are not sufficient to enable us to fund the completion of the development and commercialization of all our product candidates.

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 operations. The Company’s continuation as a going concern is dependent upon its ability to increase sales, decrease expenses and raise additional funding. Whether and when the Company can attain profitability and positive cash flows from operations or obtain additional financing is uncertain.

On February 10, 2023, the Company closed on a public offering of 10,750 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. 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).

On February 2, 2024, the Company closed on a public offering of 80,000 units, with each unit consisting of one share of its common stock, or one pre-funded warrant to purchase one share of its common stock, one Class E Warrant with each warrant entitled to purchase one share of common stock, and one Class F Warrant with each warrant entitled to purchase one share of common stock. Each unit was sold at a public offering price of $50.00 resulting in gross proceeds to the Company of $4 million before deducting offering fees and expenses. The Class E and Class F Warrants were immediately exercisable at a price of $50.00 per share. The Class E Warrants expire five years from the date of issuance and the Class F Warrants expire eighteen months from the date of issuance. Of the $4.0 million of gross proceeds, approximately $0.6 million were allocated to common stock and prefunded warrants ($0.5 million net of offering costs) and approximately $3.4 million were allocated to derivative liabilities (with approximately $0.5 million of cash offering costs and $0.1 million of agent warrant offering costs recorded as derivative expense).

On March 26, 2024, the Company closed on a public offering of 142,000 shares of the Company’s common stock, (the “March 26 Offering”). Each Share was sold at a public offering price of $9.40. The aggregate proceeds to the Company from the March 26 Offering were approximately $1.3 million before deducting placement agent fees and other estimated offering expenses payable by the Company.

On April 5, 2024, the Company closed on a public offering of 358,000 shares of the Company’s common stock, (the “April 5 Offering”). Each Share was sold at a public offering price of $4.20. The aggregate proceeds to the Company from the April 5 Offering were approximately $1.5 million before deducting placement agent fees and other offering expenses payable by the Company.

On February 25, 2021, the Company, entered into an Equity Distribution Agreement (the “ATM Agreement”) with Maxim Group LLC (the “Agent”), as sales agent, as amended on January 10, 2023 and October 12, 2023, pursuant to which the Company could offer and sell shares of the Company’s common stock, par value $0.01 per share (the “Shares”), initially up to an aggregate offering price of $15,000,000, from time to time in an at-the-market public offering. On March 22, 2024, the Company suspended sales under the ATM Agreement and terminated the continuous offering. On July 11, 2024, the Company filed a Prospectus Supplement with the SEC adjusting the amount available for sale under the ATM Agreement to $3.1 million and shortly thereafter begin offering and selling Shares under the ATM Agreement to the public. During the three months ended September 30, 2024,595,560 Shares were sold under the ATM Agreement for gross proceeds of approximately $3.1 million. During the nine months ended September 30, 2024,602,357 Shares were sold under the ATM Agreement for gross proceeds of approximately $3.7 million. Because the Company is subject to General Instruction I.B.6 of Form S-3, it is restricted from selling securities in a public primary offering with a value exceeding one-third of its public float (the market value of our common stock held by our non-affiliates) in any 12-month period so long as its public float remains below $75.0 million. As of September 30, 2024, there was no capacity to offer and sell Shares under the ATM Agreement.

On June 11, 2024, the Company received formal notice from The Nasdaq Stock Market LLC (“Nasdaq”) that the Company has evidenced compliance with the $1.00 minimum bid price requirement for continued listing on The Nasdaq Capital Market under Nasdaq Listing Rule 5550(a)(2) (the “Bid Price Rule”). The Company remains subject to a “Mandatory Panel Monitor,” as that term is defined in Listing Rule 5815(d)(4)(B), for a period of one year from June 11, 2024. If, within the one-year period, the Company fails to satisfy the minimum $1.00 closing bid price threshold for 30 consecutive business days, Nasdaq will issue a delist determination rather than provide the Company with a grace period to regain compliance with the Bid Price Rule. In that event, the Company would have the opportunity to request a new hearing to address the deficiency.

We are actively seeking opportunities to raise additional equity and/or debt financing. However, such funding is not guaranteed and may not be available to the Company on favorable or acceptable terms and may involve significant restrictive covenants. Any additional equity financing, if available to the Company, will most likely be dilutive to its current stockholders. If the Company is not able to obtain additional debt or equity financing on a timely basis, the impact on the Company will be material and adverse.

The Board of Directors, together with management, is performing an ongoing evaluation of the Company’s business strategy and focus. On August 1, 2024, the board of directors appointed Eric Olson to the office of Chief Executive Officer and President to lead the evaluation process. The Board of Directors also entered into an engagement agreement with Ascendiant Partners to evaluate strategic transactions including, but not limited to, acquisitions, strategic partnerships, sell of business divisions, and reverse merger opportunities.

An option being evaluated is a change in strategic emphasis to advancements in the medical device sector. Historically engaged in both industrial and biomedical applications, SINTX would prioritize the development and commercialization of innovative medical devices, leveraging our expertise in advanced ceramics and biomaterials. Such a renewed focus would align with a commitment to improving patient outcomes through the creation of products designed for surgical, orthopedic, and other specialized medical applications. We would concentrate our resources on high-growth areas within the healthcare sector where our proprietary materials and technologies—such as silicon nitride—provide a distinct competitive advantage due to their unique strength, durability, and biocompatibility.

Through this transformation, SINTX’s aim would be to deliver meaningful innovations to the medical community. Our current research and development pipeline is centered on medical-grade devices that incorporate antimicrobial properties, enhanced imaging capabilities, and durability under physiological conditions, which are critical for orthopedic implants, spinal fusion devices, and other surgical tools. If we transition away from industrial applications, we anticipate this strategic shift will enable us to better serve the medical sector, address critical unmet needs, and position SINTX as a leading provider in the medical device market. By focusing on partnerships and collaborations with healthcare institutions and industry leaders, SINTX is positioned to expand its footprint in the medical device sector and drive shareholder value through sustainable, high-impact innovations, however, such a transition has not been approved by the Board of Directors, nor can such approval or successful transition be assured.

SINTX Technologies has initiated discussions with the leaseholder for our Centerpointe location in Salt Lake City, Utah to explore options for reducing the Company’s overall lease liability. This action aligns with our broader strategy to streamline operating expenses and the option to reallocate resources towards growth initiatives in the medical device sector. While these discussions reflect our commitment to financial optimization, there can be no assurance that negotiations will lead to a reduction in the existing lease liability. The outcome of these discussions remains uncertain, and SINTX will continue to evaluate additional measures to manage long-term obligations in alignment with our strategic objectives.

On August 8, 2024, the Board of Directors approved a plan to implement a Company-wide reduction in the workforce. This decision is part of the Company’s ongoing strategic review of its operations aimed at improving operational efficiency and reducing costs. The reduction in force reduced the number of employees of the Company from 40 to 23. During the three months ended September 30, 2024, the Company recorded expenses of approximately $0.4 million associated with the reduction in workforce.

On August 12, 2024, the Board of Directors of the Company approved a plan to cease efforts to make the armor plant operational. This decision was made to streamline operations and focus on core business areas that align with the Company’s long-term strategic goals. The armor plant has not been fully operational since the acquisition of the armor equipment in July 2021 and has been completely shut down since October 2023 due to the malfunctioning of the sintering furnace. In connection with this decision the Company incurred an impairment charge of approximately $4.5 million during the three months ended September 30, 2024. This charge primarily relates to the write-down of certain long-lived assets associated with the armor plant to their estimated fair value.

The Company’s insurance carrier has determined that a covered loss occurred when the sintering furnace malfunctioned, and coverage is available for the Company’s repair of the sintering furnace. However, the Company’s efforts to fully repair the damaged furnace continue to be delayed. Management will work with the insurance company to continue to fund the repair of the furnace. When the furnace is fully repaired, management intends to sell the furnace, and related equipment, to a third party. However, the full repair and sale of the furnace, and related equipment, cannot be assured. Therefore, in the calculation of the $4.5 million estimated impairment charge, management has assumed no proceeds will be received from a potential sale of the furnace and related equipment.

These uncertainties raise substantial doubt about our ability to continue as a going concern. The condensed consolidated financial statements do not include any adjustments that might result from the outcome of these uncertainties.

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, 2023, filed with the SEC on March 27, 2024. The results of operations for the nine months ended September 30, 2024, are not necessarily indicative of the results to be expected for the year ending December 31, 2024. 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, 2023.

Reverse Stock Split

On May 28, 2024, the Company effected a 1 for 200 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 September 30, 2024, the most significant estimate relates to derivative liabilities relating to common stock warrants.

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 Not Yet Adopted

On December 14, 2023, the Financial Accounting Standards Board issued Accounting Standards Update, No. 2023-09 “Improvements to Income Tax Disclosures.” (“ASU 2023-09”). ASU 2023-09 enhances the detail that a business is required to disclose within its income tax footnote, including, but not limited to, a breakout of the rate reconciliation into more specific categories, such as state and local income tax, and foreign taxes. Additionally, a business must break out specific jurisdictions that encompass greater than or equal to 5% of their state and local, and foreign jurisdictions. The Company will adopt ASU 2023-09 on January 1, 2025. The adoption of this Standard is not expected to have a significant impact on the Company’s financial statements.

The Company has reviewed all other 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. The Company had potentially dilutive securities that were not included in the fully diluted loss per share calculation because they would have been antidilutive totaling approximately 71 thousand and 6 thousand as of September 30, 2024, and 2023, respectively.

Below are basic and diluted loss per share data for the three months ended September 30, 2024, which are in thousands except for share and per share data:

Below are basic and diluted loss per share data for the nine months ended September 30, 2024, which are in thousands except for share and per share data:

Below are basic and diluted loss per share data for the three months ended September 30, 2023, which are in thousands except for share and per share data:

Below are basic and diluted loss per share data for the nine months ended September 30, 2023, which are in thousands except for share and per share data:

3. Inventories

Inventories consisted of the following (in thousands):

As of September 30, 2024, inventories totaling approximately $0.5 million and $0.4 million were classified as current and long-term, respectively. Inventories classified as current represent the carrying value of inventories as of September 30, 2024, that management estimates will be sold or used by September 30, 2025.

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 certain 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:

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 or liabilities (except the derivative liabilities explained above) were measured on a recurring basis as of September 30, 2024 and December 31, 2023. 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 September 30, 2024, and December 31, 2023 (in thousands):

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 nine months ended September 30, 2024, and 2023. 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 nine months ended September 30, 2024, and 2023 (in thousands):

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 September 30, 2024, and December 31, 2023, 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 September 30, 2024, and December 31, 2023, were as follows:

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):

6. Debt

Business Loan

On July 20, 2021, TA&T 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 September 30, 2024.

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 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. The related party debt was paid in full during the third quarter of 2024 and there wasno outstanding balance at September 30, 2024.

Insurance Premium Finance Arrangements

In March 2024, in connection with securing Director and Officer professional liability insurance, the Company entered into a Premium Finance Arrangement to extend the premium payment out for a period of 10 months. The Company paid a total of $40,000 up front toward the insurance premium and financed approximately $239,000. The Company will make 10 equal payments under the terms of the Premium Finance Agreement. The Premium Finance Agreement bears interest at an annual percentage rate of 8.510%. As of September 30, 2024, there was an outstanding balance of $70,000.

In June 2024, in connection with securing commercial liability insurance, the Company entered into a Premium Finance Arrangement to extend the premium payment out for a period of 10 months. The Company paid a total of $26,000 up front toward the insurance premium and financed approximately $117,000. The Company will make 10 equal payments under the terms of the Premium Finance Agreement. The Premium Finance Agreement bears interest at an annual percentage rate of 8.75%. As of September 30, 2024, there was an outstanding balance of $64,000.

7. Equity

2024 April Registered Offering

On April 5, 2024, the Company closed on a public offering 358,000 shares of the Company’s common stock, (the “Offering”). Each Share was sold at a public offering price of $4.20. The aggregate proceeds to the Company from the Offering were approximately $1.5 million before deducting placement agent fees and other estimated offering expenses payable by the Company.

2024 March Registered Offering

On March 26, 2024, the Company closed on a public offering 142,000 shares of the Company’s common stock, (the “Offering”). Each Share was sold at a public offering price of $9.40. The aggregate proceeds to the Company from the Offering were approximately $1.3 million before deducting placement agent fees and other estimated offering expenses payable by the Company.

2024 February Registered Offering

On February 2, 2024, the “Company closed on the public offering of 80,000 units consisting of (a)(i)17,000 units (the “Common Units”) to purchase shares (the “Unit Shares”) of the Company’s Common Stock, par value $0.01 per share (the “Common Stock”) and (ii)63,000 units (the “Pre-Funded Warrant Units” and together with the Common Units, the “Units”) to purchase pre-funded warrants (the “Pre-Funded Warrants and each share of Common Stock underlying a Pre-Funded Warrant, a “Pre-Funded Warrant Share”) to purchase up to 63,000 shares of Common Stock, (b) accompanying Class E warrants to purchase 80,000 shares of the Company’s Common Stock (the “Class E Warrants”), and (c) accompanying Class F warrants to purchase 80,000 shares of the Company’s Common Stock (the “Class F Warrants”). The aggregate proceeds to the Company from the Offering were approximately $4 million before deducting placement agent fees and other offering expenses payable by the Company. The offering was made pursuant to a securities purchase agreement (the “Purchase Agreement”) with certain investors (the “Purchasers”), and a placement agency agreement dated as of January 31, 2024 (the “PAA”) with Maxim Group LLC (the “Placement Agent”). Each Common Unit was sold at a public offering price of $50.00 and each Pre-Funded Warrant Unit was sold at a public offering price of $49.98. The Class E Warrants and the Class F Warrants are immediately exercisable (subject to the beneficial ownership cap at 4.99% or 9.99%) for one share of the Company’s Common Stock at an exercise price of $50.00 per share. The Class E Warrants will expire five years from the date of issuance and the Class F Warrants will expire 18 months from the date of issuance. Each Pre-Funded Warrant is exercisable for one share of the Company’s Common Stock at an exercise price of $0.0001 per share. The Pre-Funded Warrants are immediately exercisable (subject to the beneficial ownership cap at 4.99% or 9.99%) and may be exercised at any time until all of the Pre-Funded Warrants are exercised in full. The Company engaged Maxim Group LLC as the Company’s sole placement agent for the Offering pursuant to the PAA. Pursuant to the PAA, the Company agreed to pay the Placement Agent a cash placement fee equal to 7.0% of the gross proceeds of the Offering, plus reimbursement of certain expenses and legal fees up to $100,000. The Company also agreed to issue up to 3,200 Common Stock purchase warrants to the Placement Agent (the “Placement Agent Warrants”). The Placement Agent Warrants are exercisable at an exercise price of $55.00. The Placement Agent Warrants will be exercisable beginning July 31, 2024, and will expire five years after the commencement of sales in the offering.

2023 Registered Offering

On February 10, 2023, the Company closed on a public offering of 10,750 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 $1,120.00. The Class C and Class D Warrants are immediately exercisable at a price of $1,120.00 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 430 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).

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 $15 million through Maxim, as agent. On October 12, 2023, the Company entered into an amendment to the Distribution Agreement, pursuant to which the expiration date of the Distribution Agreement was extended to 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, 2025. No other changes were made to the terms of the Distribution Agreement. As of September 30, 2024, there have been 12,360 shares of common stock sold under the 2021 Distribution Agreement for gross proceeds of $1.0 million. As of September 30, 2024, the Company had no funds available for sale under the Distribution Agreement. The Company is subject to General Instruction I.B.6 of Form S-3 which limits the amounts that we may sell under the registration statement over a 12-month period to an amount equal to or less than one-third of our public float. The shares of the Company’s common stock to be sold under the Distribution Agreement will be sold and issued pursuant to the Form S-3, as amended, which was previously declared effective by the Securities and Exchange Commission, and the related prospectus and one or more prospectus supplements. 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. On October 12, 2023, the Company entered into an amendment to the Distribution Agreement, pursuant to which the expiration date of the Distribution Agreement was extended to 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, 2025. No other changes were made to the terms of the Distribution Agreement. Under the terms of the 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 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. The Company currently has registered up to $3.1 million for sale under the Distribution Agreement, pursuant to the Registration Statement on Form S-3 (File No. 333-274951). On July 11, 2024, the Company filed a Prospectus Supplement with the SEC increasing the amount available for sale under the Distribution Agreement to $3.1 million. As of September 30, 2024, there have been 607,920 shares of common stock sold under the 2021 Distribution Agreement for gross proceeds of $4.1 million. Because the company’s public float is less than $75 million, the Company is subject to General Instruction I.B.6 of Form S-3 which limits the amounts that we may sell under the registration statement over a 12-month period to an amount equal to or less than one-third of our public float. The shares of the Company’s common stock to be sold under the Distribution Agreement will be sold and issued pursuant to the Form S-3, as amended, which was previously declared effective by the Securities and Exchange Commission, and the related prospectus and one or more prospectus supplements.

8. Stock-Based Compensation

A summary of the Company’s outstanding stock option activity for the nine months ended September 30, 2024, and 2023 is as follows:

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 third quarter of 2024.

Of the 46 options outstanding as of September 30, 2024,18 were awarded to non-executive members of the board of directors.

Unrecognized stock-based compensation as of September 30, 2024, is as follows (in thousands):

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 30,764 square feet of office, warehouse and manufacturing space under a single operating lease. This lease expires in October 2031. The lease has one five-year extension option.

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 for approximately 15,840 square feet of office and manufacturing space from which it conducts its research, development and manufacturing activities. The leases have various expiration dates ranging from July 2025 through April 2030. Subsequent to December 31, 2023, we entered into an amended lease agreement reducing this area to 13,560 square feet.

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 September 30, 2024, the operating lease right-of-use assets totaled approximately $3.3 million, and the operating lease liability totaled approximately $4.1 million. Non-cash operating lease expense during the nine months ended September 30, 2024 and 2023, totaled approximately $0.4 and $0.6 million, respectively. As of September 30, 2024, the weighted-average discount rate for the Company’s operating lease was 8.8%.

Operating lease future minimum payments together with the present values as of September 30, 2024, are summarized as follows:

11. Subsequent Events