UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2022

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number 001-33624

SINTX Technologies, Inc.

(Exact name of registrant as specified in its charter)

delaware		84-1375299
(State or other jurisdiction		(IRS Employer
of incorporation or organization)		Identification No.)

1885 West 2100 South, Salt Lake City, UT		84119
(Address of principal executive offices)		(Zip Code)

(801) 839-3500

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class		Trading Symbols		Name of each exchange on which registered
Common Stock		SINT		The NASDAQ Capital Market

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports); and (2) has been subject to such filing requirements for the past 90 days: Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files); Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act:

Large accelerated filer	☐	Accelerated filer	☐

Non-accelerated filer	☐	Smaller reporting company	☒

		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act): Yes ☐ No ☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:

51,933,095 shares of common stock, $0.01 par value, were outstanding at November 9, 2022.

SINTX Technologies, Inc.

Table of Contents

Part I. Financial Information
Item 1. Financial Statements
Condensed Consolidated Balance Sheets (unaudited)	3
Condensed Consolidated Statements of Operations (unaudited)	4
Condensed Consolidated Statements of Stockholders’ Equity (unaudited)	5
Condensed Consolidated Statements of Cash Flows (unaudited)	6
Notes to Condensed Consolidated Financial Statements (unaudited)	7
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	20
Item 3. Quantitative and Qualitative Disclosures About Market Risk	26
Item 4. Controls and Procedures	26
Part II. Other Information
Item 1. Legal Proceedings	27
Item 1A. Risk Factors	27
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	27
Item 3. Defaults Upon Senior Securities	27
Item 4. Mine Safety Disclosures	27
Item 5. Other Information	27
Item 6. Exhibits	28
Signatures	29

SINTX Technologies, Inc.

Condensed Consolidated Balance Sheets - Unaudited

(in thousands, except share and per share data)

	September 30, 2022			December 31, 2021

Assets
Current assets:
Cash and cash equivalents	$	4,779		$	14,273
Account and other receivables, net of allowance		230			102
Prepaid expenses and other current assets		667			350
Inventories		326			303
Other current assets		46			-
Total current assets		6,048			15,028

Inventories		423			294
Property and equipment, net		5,493			4,025
Intangible assets, net		27			31
Operating lease right of use asset		2,491			2,385
Other long-term assets		81			77
Total assets	$	14,563		$	21,840

Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	289		$	242
Accrued liabilities		1,554			1,150
Current portion of debt		5			509
Current portion of related party debt		163			-
Derivative liabilities		139			347
Current portion of operating lease liability		720			500
Other current liabilities		2			-
Total current liabilities		2,872			2,748

Debt, net of current portion		393			-
Related party debt, net of current portion		72			-
Operating lease liability, net of current portion		1,811			1,898
Total liabilities		5,148			4,646

Commitments and Contingencies		-			-

Stockholders’ Equity:
Convertible preferred stock Series B, $0.01 par value, 130,000,000 total shares authorized inclusive of all series of preferred; 26 shares issued and outstanding as of September 30, 2022 and December 31, 2021.		-			-
Convertible preferred stock Series C, $0.01 par value, 130,000,000 total shares authorized inclusive of all series of preferred; 50 and 51 shares issued and outstanding as of September 30, 2022 and December 31, 2021 respectively.		-			-
Preferred stock value

Common stock, $0.01 par value, 250,000,000 shares authorized; 24,729,289 and 24,710,574 shares issued and outstanding as of September 30, 2022 and December 31, 2021, respectively.		247			247
Additional paid-in capital		267,666			267,364
Accumulated deficit		(258,498	)		(250,417	)
Total stockholders’ equity		9,415			17,194
Total liabilities and stockholders’ equity	$	14,563		$	21,840

The condensed consolidated balance sheet as of December 31, 2021, has been prepared using information from the audited consolidated balance sheet as of that date.

The accompanying notes are an integral part of these condensed consolidated financial statements.

SINTX Technologies, Inc.

Condensed Consolidated Statements of Operations - Unaudited

(in thousands, except share data)

	2022			2021			2022			2021
	Three Months Ended September 30,						Nine Months Ended September 30,
	2022			2021			2022			2021
Product revenue	$	173		$	239		$	354		$	441
Grant and contract revenue		253			-			442			-
Total revenue		426			239			796			441
Costs of revenue		89			190			235			324
Gross profit		337			49			561			117
Operating expenses:
Research and development		1,523			1,603			4,651			4,402
General and administrative		1,069			933			2,918			2,791
Sales and marketing		291			338			1,023			953
Grant and contract expenses		247			-			423			-
Total operating expenses		3,130			2,874			9,015			8,146
Loss from operations		(2,793	)		(2,825	)		(8,454	)		(8,029	)
Other income (expenses):
Interest expense		(4	)		(1	)		(12	)		(2	)
Interest income		5			3			8			99
Loss on disposal of assets		-			-			(1	)		-
Change in fair value of derivative liabilities		60			481			208			225
Forgiveness of PPP loan		-			-			-			391
Other income, net		8			(1	)		170			141
Total other income (expense), net		69			482			373			854
Net loss before income taxes		(2,724	)		(2,343	)		(8,081	)		(7,175	)
Provision for income taxes		-			-			-			-
Net loss	$	(2,724	)	$	(2,343	)	$	(8,081	)	$	(7,175	)

Net loss per share – basic and diluted
Basic – net loss	$	(0.11	)	$	(0.09	)	$	(0.33	)	$	(0.29	)
Diluted –net loss	$	(0.11	)	$	(0.11	)	$	(0.33	)	$	(0.29	)
Weighted average common shares outstanding:
Basic		24,724,792			24,703,156			24,717,904			24,686,533
Diluted		25,086,999			25,069,343			25,084,092			25,097,138

The accompanying notes are an integral part of these condensed consolidated financial statements.

SINTX Technologies, Inc.

Condensed Consolidated Statements of Stockholders’ Equity - Unaudited

(in thousands, except share and per share data)

	Shares		Amount		Shares		Amount		Shares		Amount		Capital		Deficit			Equity
	Preferred B Stock				Preferred C Stock				Common Stock				Paid-In		Accumulated			Total
	Shares		Amount		Shares		Amount		Shares		Amount		Capital		Deficit			Equity
Balance as of December 31, 2020		26	$	-		51	$	-		24,552,409	$	245	$	266,666	$	(241,107	)	$	25,804
Stock based compensation		-		-		-		-		-		-		36		-			36
Extinguishment of derivative liability upon exercise of warrant		-		-		-		-		-		-		195		-			195
Issuance of common stock upon exercise of warrants for cash		-		-		-		-		130,275		2		194		-			196
Issuance of common stock from the cashless exercise of warrants		-		-		-		-		1,890		-		-		-			-
Net loss		-		-		-		-		-		-		-		(2,633	)		(2,633	)
Balance as of March 31, 2021		26		-		51		-		24,684,574		247		267,091		(243,740	)		23,598
Stock based compensation		-		-		-		-		15,500		-		80		-			80
Net loss		-		-		-		-		-		-		-		(2,199	)		(2,199	)
Balance as of June 31, 2021		26		-		51		-		24,700,074		247		267,171		(245,939	)		21,479
Stock based compensation		-		-		-		-		6,000		-		104		-			104
Net loss		-		-		-		-		-		-		-		(2,343	)		(2,343	)
Balance as of September 30, 2021		26	$	-		51	$	-		24,706,074	$	247	$	267,275	$	(248,282	)	$	19,240

	Preferred B Stock				Preferred C Stock					Common Stock				Paid-In		Accumulated			Total
	Shares		Amount		Shares			Amount		Shares		Amount		Capital		Deficit			Equity
Balance as of December 31, 2021		26	$	-		51		$	-		24,710,574	$	247	$	267,364	$	(250,417	)	$	17,194
Stock based compensation		-		-		-			-		3,000		-		102		-			102
Net loss		-		-		-			-		-		-		-		(2,845	)		(2,845	)
Balance as of March 31, 2022		26		-		51			-		24,713,574		247		267,466		(253,262	)		14,451
Stock based compensation		-		-		-			-		6,000		-		88		-			88
Acquisition of subsidiary		-		-		-			-		-		-		22		-			22
Net loss		-		-		-			-		-		-		-		(2,512	)		(2,512	)
Balance as of June 30, 2022		26		-		51			-		24,719,574		247		267,576		(255,774	)		12,049
Balance		26		-		51			-		24,719,574		247		267,576		(255,774	)		12,049
Stock based compensation		-		-		-			-		9,039		-		90		-			90
Common stock issued on conversion of preferred stock		-		-		(1	)		-		676		-		-		-			-
Net loss		-		-		-			-		-		-		-		(2,724	)		(2,724	)
Balance as of September 30, 2022		26	$	-		50		$	-		24,729,289	$	247	$	267,666	$	(258,498	)	$	9,415
Balance		26	$	-		50		$	-		24,729,289	$	247	$	267,666	$	(258,498	)	$	9,415

The accompanying notes are an integral part of these condensed consolidated financial statements.

SINTX Technologies, Inc.

Condensed Consolidated Statements of Cash Flows - Unaudited

(in thousands)

	2022			2021
	Nine months Ended September 30,
	2022			2021
Cash Flow From Operating Activities
Net loss	$	(8,081	)	$	(7,175	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation expense		237			119
Amortization of right of use asset		441			331
Amortization of intangible assets		4			3
Non-cash interest income		-			(88	)
Stock based compensation		280			220
Change in fair value of derivative liabilities		(208	)		(225	)
Forgiveness of PPP loan		-			(391	)
Loss (gain) on disposal of property and equipment		1			(144	)
Bad debt expense		(2	)		-
Changes in operating assets and liabilities:
Trade accounts receivable		66			(140	)
Prepaid expenses and other current assets		(346	)		(177	)
Inventories		(151	)		(203	)
Accounts payable and accrued liabilities		25			417
Other liabilities		(32	)		-
Payments on operating lease liability		(414	)		(294	)
Net cash used in operating activities		(8,180	)		(7,747	)
Cash Flows From Investing Activities
Purchase of property and equipment		(1,109	)		(3,210	)
Proceeds from notes receivable, net of imputed interest		-			1,944
Cash acquired in acquisition (see Note 2)		303			-
Proceeds from sale of property and equipment		1			144
Net cash used in investing activities		(805	)		(1,122	)
Cash Flows From Financing Activities
Proceeds from issuance of common stock in connection with exercise of warrants		-			196
Proceeds from issuance of debt		-			510
Payments on debt		(509	)		(5	)
Net cash provided by (used in) financing activities		(509	)		701
Net decrease in cash and cash equivalents		(9,494	)		(8,168	)
Cash and cash equivalents at beginning of period		14,273			25,351
Cash and cash equivalents at end of period	$	4,779		$	17,183

Noncash Investing and Financing Activities
Right-of-Use Assets and assumption of operating lease liability	$	27		$	918
Extinguishment of derivative liabilities through exercise of warrants		-			195
Acquisition of subsidiary through assumption of debt (see Note 2)		22			-
Supplemental Cash Flow Information
Cash paid for interest	$	32		$	-

The accompanying notes are an integral part of these condensed consolidated financial statements.

SINTX TECHNOLOGIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. Organization and Summary of Significant Accounting Policies

Organization

The condensed consolidated financial statements include the accounts of SINTX Technologies, Inc. (“SINTX”) and its wholly-owned subsidiaries, SINTX Armor, Inc. (“SINTX Armor”) and SINTX TA&T, Inc. (TA&T), which are collectively referred to as “we” or “the Company”. SINTX was incorporated in the state of Delaware on December 10, 1996 (and was previously known as Amedica Corporation). The Company is an OEM advanced ceramics materials company focused on providing solutions in a variety of medical, industrial, and antipathogenic applications. SINTX is a 25-year-old 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, and this has enabled the Company to focus on core competencies. The core strength of the Company is the manufacturing, research, and development of advanced ceramics for external partners. 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 - antipathogenic, industrial (including armor), and biomedical – 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.

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 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 intends 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 Technology Assessment and Transfer, Inc. (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 (see Note 2).

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 research, development and manufacturing 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, 2021, filed with the SEC on March 25, 2022. The results of operations for the nine months ended September 30, 2022, are not necessarily indicative of the results to be expected for the year ending December 31, 2022. 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, 2021.

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, 2022, 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 nine months ended September 30, 2022, and 2021, the Company incurred a net loss of $8.1 million and $7.2 million, respectively, and used cash in operating activities of $8.2 million and $7.7 million, respectively. The Company had an accumulated deficit of $258.5 million and $250.4 million as of September 30, 2022, and December 31, 2021, 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. We believe the publication of such data would help sales efforts as the Company approaches new prospects. The Company continues to make 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. We also expect the acquisition of TA&T will further broaden the Company’s sources of revenue.

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 January 3, 2022, the Company received a notice from Nasdaq Listing Qualifications department (the “Staff”) of the Nasdaq Stock Market LLC (“Nasdaq”) stating that the bid price of the Company’s common stock for the last 30 consecutive trading days had closed below the minimum $1.00 per share required for continued listing under Listing Rule 5550(a)(2). The Nasdaq notification letter does not result in the immediate delisting of the Company’s common stock, and the stock will continue to trade uninterrupted on the The Nasdaq Capital Market under the symbol “SINT”. The letter from the Staff further indicated that if the Company did not regain compliance with Rule 5550(a)(2) by July 5, 2022, the Company may be eligible for additional time to regain compliance. On July 6, 2022, the Company received notice from the Staff that the Company was eligible for an additional 180 calendar day period, or until January 2, 2023, to regain compliance. Delisting of the Company’s common shares from The Nasdaq Capital Market may adversely impact its ability to raise capital on the public markets. The Company intends to actively monitor the closing bid price for its common stock and will consider available options to resolve the deficiency and regain compliance with Nasdaq Listing Rule 5550(a)(2).

On February 25, 2021, the Company entered into an Equity Distribution Agreement (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, 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 $2.0 million, (ii) the termination by either Maxim or the Company upon the provision of fifteen (15) days written notice, or (iii) February 25, 2023. 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 September 30, 2022, there have been no sales of shares of common stock under the 2021 Distribution Agreement.

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 Subsequent Events below for a more detailed discussion of the Rights Offering.

Although the Company is seeking to obtain additional equity and/or debt financing, such funding is not assured and may not be available to the Company on favorable or acceptable terms and may involve significant restrictive covenants. Any additional equity financing is also not assured and, 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.

These uncertainties create 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.

Risks Related to COVID-19 Pandemic

The COVID-19 pandemic is affecting the United States and global economies and may affect the Company’s operations and those of third parties on which the Company relies. In response to the spread of COVID-19 and to ensure safety of employees and continuity of business operations, we temporarily restricted access to the Salt Lake City facility, with our administrative employees continuing their work remotely and limited the number of staff in our manufacturing facility. We implemented protective measures such as wearing of face masks, maintaining social distancing, and additional cleaning. Beginning in 2021, we have offered vaccination incentives. While the potential economic impact brought by, and the duration of, the COVID-19 pandemic is difficult to assess or predict, the impact of the COVID-19 pandemic on the global financial markets may reduce the Company’s ability to access capital, which could negatively impact the Company’s short-term and long-term liquidity. The ultimate impact of the COVID-19 pandemic is highly uncertain and subject to change. The Company does not yet know the full extent of potential delays or impacts on its business, financing or other activities or on healthcare systems or the global economy as a whole. However, these effects could have a material impact on the Company’s liquidity, capital resources, operations and business and those of the third parties on which we rely.

Grant Revenue

Revenues from grants, contracts, and awards provided by governmental agencies are recorded based upon the terms of the specific grant agreements, which generally provide that revenue is earned when the allowable costs specified in the applicable grant agreement have been incurred. Cash received from federal grants 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.

Grant, contract, and award receivables relate to allowable amounts expended or otherwise incurred in connection with the terms of a grant or award and for which reimbursement or draw upon the grant funds have not yet taken place.

Correction of an Immaterial Error

During the first quarter 2022, the Company identified an error related to the removal of a loan obligation and the recording of other income for forgiveness of debt totaling approximately $0.5 million, which forgiveness was recorded on November 24, 2021. The Company has determined that the Company should not have removed the loan obligation and recorded approximately $0.5 million of other income in the financial statements as of December 31, 2021, and for the year then ended. The error affected the 2021 net loss attributable to common stockholders and net loss per share—basic and diluted. The error also affected total liabilities and accumulated deficit (and total stockholders’ equity) as of December 31, 2021. The error did not affect 2021 cash flows from operating activities and total cash flow.

In accordance with the SEC Staff Accounting Bulletin (SAB) No. 99, “Materiality,” and SAB No. 108, “Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements,” the Company evaluated the materiality of the error from qualitative and quantitative perspectives and concluded that the error was immaterial to the March 31, 2022 and December 31, 2021, financial statements. Consequently, only the December 31, 2021, consolidated balance sheet and the December 31, 2021, balance in the statement of stockholders’ equity contained in these financial statements have been restated. The change resulted a reduction of stockholders’ equity of $0.5 million as of December 31, 2021.

New Accounting Pronouncements Not Yet 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 guidance is effective for the Company for annual periods beginning after December 15, 2023, and interim periods within that year, with early adoption permitted. The Company plans to adopt the new standards January 1, 2023. The adoption of this standard will result in certain warrants currently classified as fair value liabilities to be reclassified within stockholder’s equity. We are currently assessing any other impact that adoption will have on our financial position and results of operations.

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. Business Acquisition

On June 30, 2022, the Company entered into and closed a Stock Purchase Agreement (the “Purchase Agreement”) pursuant to which the Company acquired all of the outstanding shares of common stock of Technology Assessment and Transfer, Inc. (TA&T), a corporation organized under the Laws of the State of Maryland. As a result, TA&T is a wholly owned subsidiary of the Company.

The Purchase Agreement sets forth approximately $760,000, including accrued interest, in loan obligations that the Company agreed to assume in connection with the purchase. Further, the Purchase Agreement provides for potential earnout payments to the sellers on the achievement of certain pre-determined gross revenue targets by TA&T for calendar years 2022 and 2023. Earnouts, if any, will be expensed as incurred , as management does not expect the earnouts to be achieved.

The following table summarizes the purchase price allocation (in thousands):


	June 30, 2022
Assets
Current assets
Cash and cash equivalents	$	303
Accounts and other receivables, net of allowance		193
Prepaid expenses and other receivables, net of allowance		14
Total current assets		510

Property and equipment, net		599
Operating lease right of use asset		521
Other long-term assets		7
Total assets		1,637

Liabilities and net assets acquired
Current liabilities
Accounts payable		105
Accrued liabilities		241
Current portion of debt		6
Current portion of related party debt		242
Current portion of operating lease liability		179
Total current liabilities		773

Debt, net of current portion		393
Related party debt, net of current portion		107
Operating lease liability, net of current portion		342
Total liabilities		1,615

Net assets acquired	$	22

The following proforma unaudited revenue and net loss are presented as if the acquisition had been included in the consolidated results of the Company for the nine months ended September 30, 2022 (in thousands).


	Nine Months Ended September 30, 2022
Revenue	$	1,385
Net loss	$	(8,097	)

No amounts are included in the condensed consolidated statement of operations relating to TA&T for the six months ended June 30, 2022, as the transaction was closed the end of day June 30, 2022. TA&T’s operations are included in the Company’s condensed consolidated statement of operations beginning July 1, 2022.

3. Basic and Diluted Net Loss per Common Share

Basic net loss per share is calculated by dividing the net 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 nine months ended September 30, 2022, 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 2.4 million and 1.8 million as of September 30, 2022, and 2021, respectively.

Below are basic and diluted loss per share data for the three months ended September 30, 2022, which are in thousands except for share and per share data:

	Basic Calculation			Effect of Dilutive Warrant Securities			Diluted Calculation
Numerator:
Net loss	$	(2,724	)	$	(60	)	$	(2,784	)
Deemed dividend and accretion of a discount		-			-			-
Net loss attributable to common stockholders	$	(2,724	)	$	(60	)	$	(2,784	)

Denominator:
Number of shares used in per common share calculations:		24,724,792			362,207			25,086,999

Net loss per common share:
Net loss	$	(0.11	)	$	-		$	(0.11	)
Deemed dividend and accretion of a discount		-			-			-
Net loss attributable to common stockholders	$	(0.11	)	$	-		$	(0.11	)

Below are basic and diluted loss per share data for the nine months ended September 30, 2022, which are in thousands except for share and per share data:

	Basic Calculation			Effect of Dilutive Warrant Securities			Diluted Calculation
Numerator:
Net loss	$	(8,081	)	$	(208	)	$	(8,289	)
Deemed dividend and accretion of a discount		-			-			-
Net loss attributable to common stockholders	$	(8,081	)	$	(208	)	$	(8,289	)

Denominator:
Number of shares used in per common share calculations:		24,717,904			366,188			25,084,092

Net loss per common share:
Net loss	$	(0.33	)	$	-		$	(0.33	)
Deemed dividend and accretion of a discount		-			-			-
Net loss attributable to common stockholders	$	(0.33	)	$	-		$	(0.33	)

Below are basic and diluted loss per share data for the three months ended September 30, 2021, which are in thousands except for share and per share data:

	Basic Calculation			Effect of Dilutive Warrant Securities			Diluted Calculation
Numerator:
Net loss	$	(2,343	)	$	(480	)	$	(2,823	)
Deemed dividend and accretion of a discount		-			-			-
Net loss attributable to common stockholders	$	(2,343	)	$	(480	)	$	(2,823	)

Denominator:
Number of shares used in per common share calculations:		24,703,156			366,187			25,069,343

Net loss per common share:
Net loss	$	(0.09	)	$	(0.02	)	$	(0.11	)
Deemed dividend and accretion of a discount		-			-			-
Net loss attributable to common stockholders	$	(0.09	)	$	(0.02	)	$	(0.11	)

Below are basic and diluted loss per share data for the nine months ended September 30, 2021, which are in thousands except for share and per share data:

	Basic Calculation			Effect of Dilutive Warrant Securities			Diluted Calculation
Numerator:
Net loss	$	(7,175	)	$	(225	)	$	(7,400	)
Deemed dividend and accretion of a discount		-			-			-
Net loss attributable to common stockholders	$	(7,175	)	$	(225	)	$	(7,400	)

Denominator:
Number of shares used in per common share calculations:		24,686,533			410,605			25,097,138

Net loss per common share:
Net loss	$	(0.29	)	$	-		$	(0.29	)
Deemed dividend and accretion of a discount		-			-			-
Net loss attributable to common stockholders	$	(0.29	)	$	-		$	(0.29	)

4. Inventories

Inventories consisted of the following (in thousands):

Schedule of Components of Inventory


	September 30, 2022		December 31, 2021
Raw materials	$	509	$	411
WIP		148		134
Finished goods		92		52
Inventory net	$	749	$	597

As of September 30, 2022, inventories totaling approximately $0.3 million and $0.4 million were classified as current and long-term, respectively. As of December 31, 2021, inventories totaling approximately $0.3 million and $0.3 million were classified as current and long-term, respectively. Inventories classified as current represent the carrying value of inventories as of September 30, 2022, that management estimates will be sold or used by September 30, 2023.

5. 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 September 30, 2022, and December 31, 2021. 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, 2022, and December 31, 2021 (in thousands):

	Fair Value Measurements as of September 30, 2022
Description	Level 1		Level 2		Level 3		Total
Derivative liability
Common stock warrants	$	-	$	-	$	139	$	139

	Fair Value Measurements as of December 31, 2021
Description	Level 1		Level 2		Level 3		Total
Derivative liability
Common stock warrants	$	-	$	-	$	347	$	347

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, 2022, and 2021. 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, 2022, and 2021 (in thousands):

	Common Stock Warrants
Balance as of December 31, 2020	$	(1,238	)
Change in fair value		225
Exercise of warrants		195
Balance as of September 30, 2021	$	(818	)

Balance as of December 31, 2021	$	(347	)
Change in fair value		208
Balance as of September 30, 2022	$	(139	)

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, 2022, and December 31, 2021, the derivative liability was calculated using the Monte Carlo Simulation valuation.

The assumptions used in estimating the common stock warrant liability as of September 30, 2022, and December 31, 2021 were as follows:

	September 30, 2022		December 31, 2021
Weighted-average risk-free interest rate	3.33%-4.22	%	0.06%-0.97	%
Weighted-average expected life (in years)	0.32-2.36		0.07-3.10
Expected dividend yield

SEC Form 10-Q filed by SiNtx Technologies Inc.