Sintx Technologies, Inc. - Quarter Report: 2020 September (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended September 30, 2020

[ ]	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 [X] 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 [X] 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	[X]

		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 [X]

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

25,551,059 shares of common stock, $0.01 par value, were outstanding at November 10, 2020

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	17
Item 3. Quantitative and Qualitative Disclosures About Market Risk	23
Item 4. Controls and Procedures	23
Part II. Other Information
Item 1. Legal Proceedings	24
Item 1A. Risk Factors	24
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	24
Item 3. Defaults Upon Senior Securities	24
Item 4. Mine Safety Disclosures	24
Item 5. Other Information	24
Item 6. Exhibits	25
Signatures	26

SINTX Technologies, Inc.

Condensed Consolidated Balance Sheets - Unaudited

(in thousands, except share and per share data)

	September 30, 2020			December 31, 2019

Assets
Current assets:
Cash and cash equivalents	$	27,050		$	1,787
Account and other receivables		49			136
Prepaid expenses and other current assets		225			310
Inventories, net		74			106
Notes receivable, current portion		2,189			1,724
Total current assets		29,587			4,063

Inventories, net		461			533
Property and equipment, net		287			190
Intangible assets, net		37			41
Long-term note receivable, net of current portion		194			1,944
Operating lease right-of-use-asset		2,031			2,341
Other long-term assets		36			35
Total assets	$	32,633		$	9,147

Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	157		$	191
Accrued liabilities		946			1,266
Derivative liabilities		1,600			220
Current portion of operating lease liability		393			360
Current portion of debt		238			6
Other current liabilities		25			23
Total current liabilities		3,359			2,066

Operating lease liability, net of current portion		1,580			1,867
Long term debt		158			12
Total liabilities		5,097			3,945

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 and 249 shares issued and outstanding at September 30, 2020 and December 31, 2019, respectively.		-			-
Convertible preferred stock Series C, $0.01 par value, 130,000,000 total shares authorized inclusive of all series of preferred; 51 shares and 0 shares issued and outstanding at September 30, 2020 and December 31, 2019, respectively.		-			-
Common stock, $0.01 par value, 250,000,000 shares authorized; 24,551,059 shares, and 2,434,009 shares issued and outstanding at September 30, 2020 and December 31, 2019.		246			24
Additional paid-in capital		266,665			239,256
Accumulated deficit		(239,375	)		(234,078	)
Total stockholders’ equity		27,536			5,202
Total liabilities and stockholders’ equity	$	32,633		$	9,147

The condensed consolidated balance sheet as of December 31, 2019, 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 and per share data)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2020			2019			2020			2019
Product revenue	$	66		$	173		$	478		$	437
Costs of revenue		53			151			382			364
Gross profit		13			22			96			73
Operating expenses:
Research and development		1,432			869			3,494			2,557
General and administrative		827			714			2,418			2,166
Sales and marketing		182			139			450			303
Total operating expenses		2,441			1,722			6,362			5,026
Loss from operations		(2,428	)		(1,700	)		(6,266	)		(4,953	)
Other income (expenses):
Interest expense		(1	)		(1	)		(2	)		(3	)
Interest income		78			111			267			349
Change in fair value of derivative liabilities		(287	)		144			1,750			754
Offering costs		-			-			(1,246	)		-
Other income, net		201			-			201			48
Total other income (expense), net		(9	)		254			970			1,148
Net loss before income taxes		(2,437	)		(1,446	)		(5,296	)		(3,805	)
Provision for income taxes		-			-			-			-
Net loss		(2,437	)		(1,446	)		(5,296	)		(3,805	)
Deemed dividend related to the beneficial conversion feature and accretion of a discount on series B preferred stock		(74	)		(345	)		(9,565	)		(2,703	)
Net loss attributable to common stockholders	$	(2,511	)	$	(1,791	)	$	(14,861	)	$	(6,508	)

Net loss per share – basic and diluted
Basic – net loss	$	(0.11	)	$	(0.68	)	$	(0.39	)	$	(3.00	)
Basic - deemed dividend and accretion of a discount on conversion of preferred stock		-			(0.16	)		(0.70	)		(2.13	)
Basic – attributable to common stockholders	$	(0.11	)	$	(0.84	)	$	(1.09	)	$	(5.13	)

Diluted –net loss	$	(0.11	)	$	(0.75	)	$	(0.49	)	$	(3.59	)
Diluted - deemed dividend and accretion of a discount on conversion of preferred stock		-			(0.16	)		(0.63	)		(2.13	)
Diluted – attributable to common stockholders	$	(0.11	)	$	(0.91	)	$	(1.12	)	$	(5.72	)
Weighted average common shares outstanding:
Basic		22,774,263			2,127,293			13,671,866			1,269,106
Diluted		22,774,263			2,127,293			15,094,276			1,269,106

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)

	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, 2018		4,074		$	-		-	$	-		726,455	$	7	$	237,673		$	(229,281	)	$	8,399
Net loss		-			-		-		-		-		-		-			(1,629	)		(1,629	)
Balance as of March 31, 2019		4,074			-		-		-		726,455		7		237,673			(230,910	)		6,770
Common stock issued from exercise of warrants for cash		-			-		-		-		500		-		2			-			2
Common stock issued due to conversion of preferred stock		(3,337	)		-		-		-		983,528		10		(10	)		-			-
Stock based compensation		-			-		-		-		-		-		1			-			1
Common stock issued for cash, net of fees		-			-		-		-		144,415		1		395			-			396
Removal of derivative liability upon exercise of warrant		-			-		-		-		-		-		1			-			1
Net loss		-			-		-		-		-		-		-			(730	)		(730	)
Balance as of June 30, 2019		737			-		-		-		1,854,898		18		238,062			(231,640	)		6,440
Common stock issued from exercise of warrants for cash		-			-		-		-		35,374		-		101			-			101
Common stock issued for cash, net of fees		-			-		-		-		313,463		4		886			-			890
Common stock issued due to conversion of preferred stock		(488	)		-		-		-		160,256		2		(2	)		-			-
Stock based compensation		-			-		-		-		-		-		-			-			-
Removal of derivative liability upon exercise of warrant		-			-		-		-		-		-		43			-			43
Net loss		-			-		-		-		-		-		-			(1,446	)		(1,446	)
Balance as of September 30, 2019		249		$	-		-	$	-		2,363,991	$	24	$	239,090		$	(233,086	)	$	6,028

	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, 2019		249		$	-		-		$	-		2,434,009	$	24	$	239,256		$	(234,078	)	$	5,202
Extinguishment of derivative liability upon exercise of warrant		-			-		-			-		-		-		1,557			-			1,557
Issuance of common stock from the exercise of warrants for cash		-			-		-			-		100		-		-			-			-
Issuance of common stock from the cashless exercise of warrants		-			-		-			-		3,128,895		32		(32	)		-			-
Preferred stock issued for cash, net of fees		-			-		9,440			-		-		-		3,112			-			3,112
Common stock issued on conversion of preferred stock		-			-		(9,208	)		-		6,215,742		62		(62	)		-			-
Issuance of agent warrants		-			-		-			-		-		-		168			-			168
Beneficial conversion feature on issuance of convertible preferred stock		-			-		-			-		-		-		3,111			-			3,111
Deemed dividend related to the issuance of preferred stock		-			-		-			-		-		-		(3,111	)		-			(3,111	)
Accretion of convertible preferred stock discount		-			-		-			-		-		-		6,173			-			6,173
Deemed dividend related to the conversion of preferred stock		-			-		-			-		-		-		(6,173	)		-			(6,173	)
Net income		-			-		-			-		-		-		-			1,169			1,169
Balance as of March 31, 2020		249			-		232			-		11,778,746		118		243,999			(232,909	)		11,208
Extinguishment of derivative liability upon exercise of warrant		-			-		-			-		-		-		1,451			-			1,451
Common stock issued for cash, net of fees		-			-		-			-		6,454,381		65		9,583			-			9,648
Issuance of common stock from the cashless exercise of warrants		-			-		-			-		373,750		3		(3	)		-			-
Issuance of common stock from the exercise of warrants for cash		-			-		-			-		611,868		6		911			-			917
Common stock issued on conversion of preferred stock		(123	)		-		(179	)		-		212,168		2		(2	)		-			-
Accretion of convertible preferred stock discount		-			-		-			-		-		-		207			-			207
Deemed dividend related to the conversion of preferred stock		-			-		-			-		-		-		(207	)		-			(207	)
Net loss		-			-		-			-		-		-		-			(4,028	)		(4,028	)
Balance as of June 30, 2020		126			-		53			-		19,430,913		194		255,939			(236,937	)		19,196
Extinguishment of derivative liability upon exercise of warrant		-			-		-			-		-		-		190			-			190
Stock based compensation		-			-		-			-		-		-		29			-			29
Common stock issued for cash, net of fees		-			-		-			-		4,915,000		50		10,318			-			10,368
Issuance of common stock from the cashless exercise of warrants		-			-		-			-		1,890		-		-			-			-
Issuance of common stock from the exercise of warrants for cash		-			-		-			-		127,650		1		190			-			191
Common stock issued on conversion of preferred stock		(100	)		-		(2	)		-		75,606		1		(1	)		-			-
Accretion of convertible preferred stock discount		-			-		-			-		-		-		74			-			74
Deemed dividend related to the conversion of preferred stock		-			-		-			-		-		-		(74	)		-			(74	)
Net loss		-			-		-			-		-		-		-			(2,438	)		(2,438	)
Balance as of September 30, 2020		26		$	-		51		$	-		24,551,059	$	246	$	266,665		$	(239,375	)	$	27,536

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)

	Nine Months Ended September 30,
	2020			2019
Cash Flow From Operating Activities
Net loss	$	(5,296	)	$	(3,805	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation expense		54			79
Amortization of right of use asset		310			264
Amortization of intangible assets		4			4
Non-cash interest income		(242	)		(344	)
Stock based compensation		29			2
Change in fair value of derivative liabilities		(1,750	)		(754	)
Offering Costs		325			-
Bad debt expense		-			(3	)
Changes in operating assets and liabilities:
Trade accounts receivable		87			154
Prepaid expenses and other current assets		(73	)		33
Inventories		104			(35	)
Accounts payable and accrued liabilities		(353	)		83
Payments on operating lease liability		(254	)		(557	)
Net cash used in operating activities		(7,055	)		(4,879	)
Cash Flows From Investing Activities
Purchase of property and equipment		(151	)		(141	)
Proceeds from notes receivable, net of imputed interest		1,528			1,111
Net cash provided by investing activities		1,377			970
Cash Flows From Financing Activities
Proceeds from issuance of warrant derivative liabilities		6,328			103
Proceeds from issuance of common stock, net of fees		20,015			1,285
Proceeds from issuance of preferred stock, net of fees		3,112			-
Proceeds from issuance of common stock in connection with exercise of warrants		1,109			-
Proceeds from issuance of debt		406			-
Principal payments on debt		(29	)		-
Net cash provided by financing activities		30,941			1,388
Net increase (decrease) in cash and cash equivalents		25,263			(2,521	)
Cash and cash equivalents at beginning of period		1,787			5,447
Cash and cash equivalents at end of period	$	27,050		$	2,926

Noncash Investing and Financing Activities
Reduction of derivative liability due to exercise of warrants	$	3,197		$	44
Change in par value due to conversion of preferred stock to common stock		65			-
Issuance of Common Stock for the Cashless Exercise of Warrants		35			-
Right-of-use assets and assumption of operating lease liability		-			2,704
Supplemental Cash Flow Information
Cash paid for interest	$	2		$	2

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

SINTX Technologies, Inc. (“SINTX” or “the Company”) was incorporated in the state of Delaware on December 10, 1996. SINTX is an OEM ceramics company that develops and commercializes silicon nitride for medical and non-medical applications. The core strength of SINTX is the manufacturing, research, and development of silicon nitride ceramics for external partners. The Company presently manufactures silicon nitride material and components in its FDA registered and ISO 13485:2016 certified facility. The Company believes it is the first and only manufacturer to use silicon nitride in medical applications. The Company’s products are primarily sold in the United States.

Reverse Stock Split

On July 26, 2019 the Company effected a 1 for 30 reverse stock split of the Company’s common stock. The par value and the authorized shares of the common and convertible 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 condensed financial statements have been adjusted retroactively to reflect the reverse stock split.

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. In May 2020, the Company dissolved its wholly owned subsidiary ST Sub, Inc. At the time of dissolution the subsidiary had no assets, liabilities, equity, or operations. The financial statements after May 8, 2020, are not consolidated.

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 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, 2019, filed with the SEC on March 26, 2020. The results of operations for the nine months ended September 30, 2020, are not necessarily indicative of the results to be expected for the year ending December 31, 2020. 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, 2019.

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 financial statements and the reported amounts of revenue and expenses during the period. Actual results could differ from those estimates. As of September 30, 2020, the most significant estimates relate to inventory, long-lived and intangible assets, the liability for preferred stock and common stock warrants, and the derivative liabilities.

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, 2020 and 2019, the Company incurred a net loss of $5.3 million and $3.8 million, respectively, and used cash in operations of $7.1 million and $4.9 million, respectively. The Company had an accumulated deficit of $239 million and $234 million as of September 30, 2020 and December 31, 2019, 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 operations. 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 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 6, 2020, the Company closed on a rights offering to its stockholders of units, consisting of convertible preferred stock and warrants, for gross proceeds of $9.4 million, which excludes underwriting discounts and commissions and offering expenses payable by the Company of approximately $1.2 million. Additionally, during the period of June 2020 through August 2020, the Company closed four registered direct offerings of shares of its common stock, priced at-the-market under Nasdaq rules, resulting in the issuance of a total of 11,015,000 shares of its common stock for gross proceeds of approximately $20.9 million, before considering issuance costs of approximately $1.6 million (see Note 8).

During the year ended December 31, 2019, the Company entered into an at-the-market (ATM) equity distribution agreement in which the Company may sell, from time to time, shares of common stock having an aggregate offering price of up to $2.5 million. The Company sold 527,896 shares during the year ended December 31, 2019, raising approximately $1.7 million before deducting fees to the placement agent and other offering expenses of approximately $0.2 million. During the nine month period ending September 30, 2020, the Company sold 354,500 shares of common stock, raising approximately $0.8 million deducting fees to the placement agent and other offering expenses of approximately $0.034 million. As of September 30, 2020, no funding capacity is available under the ATM. (see Note 8).

On October 1, 2018, the Company sold the retail spine business to CTL Medical. The sale included a $6 million noninterest bearing note receivable payable over a 36-month term. The 36-month term of the note receivable requires 18 payments of $138,889 followed by 18 payments of $194,444, with maturing of the note receivable to occur October 1, 2021. The Company expects cash flows of approximately $2.5 million for the remaining thirteen months.

Management has concluded that together with its existing capital resources and payments on the note receivable from the sale of the Spine business will be sufficient to fund operations for at least the next 12 months, or through November 2021. In the financial statements for the year ended December 31, 2019, the Company concluded substantial doubt existed for the Company to continue as a going concern. Beginning with the period ended March 31, 2020, the Company’s position changed as a result of the capital raises outlined in Note 8.

Risks Related to COVID-19 Pandemic

The recent outbreak of COVID-19 originated in Wuhan, China, in December 2019 and has since spread to multiple countries, including the United States and several European countries. On March 11, 2020, the World Health Organization declared the outbreak a 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. 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.

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 September 30, 2020, 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 1.6 million and 0.5 million as of September 30, 2020 and 2019, respectively.

Below are basic and diluted loss per share data for the three months ended September 30, 2020, which are in thousands except for share and per share data:

	Basic Calculation			Effect of Dilutive Warrant Securities		Diluted Calculation
Numerator:
Net loss	$	(2,437	)	$	-	$	(2,437	)
Deemed dividend and accretion of a discount		(74	)		-		(74	)
Net loss attributable to common stockholders	$	(2,511	)	$	-	$	(2,511	)

Denominator:
Number of shares used in per common share calculations:		22,774,263			-		22,774,263

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, 2020, which are in thousands except for share and per share data:

	Basic Calculation			Effect of Dilutive Warrant Securities			Diluted Calculation
Numerator:
Net loss	$	(5,296	)	$	(2,073	)	$	(7,369	)
Deemed dividend and accretion of a discount		(9,565	)		-			(9,565	)
Net loss attributable to common stockholders	$	(14,861	)	$	(2,073	)	$	(16,934	)

Denominator:
Number of shares used in per common share calculations:		13,671,866			1,422,410			15,094,276

Net income (loss) per common share:
Net loss	$	(0.39	)	$	(0.10	)	$	(0.49	)
Deemed dividend and accretion of a discount		(0.70	)		0.07			(0.63	)
Net income (loss) attributable to common stockholders	$	(1.09	)	$	(0.03	)	$	(1.12	)

Below are basic and diluted loss per share data for the three months ended September 30, 2019, which are in thousands except for share and per share data:

	Basic Calculation			Effect of Dilutive Warrant Securities			Diluted Calculation
Numerator:
Net loss	$	(1,446	)	$	(144	)	$	(1,590	)
Deemed dividend and accretion of a discount		(345	)		-			(345	)
Net loss attributable to common stockholders	$	(1,791	)	$	(144	)	$	(1,935	)

Denominator:
Number of shares used in per common share calculations:		2,127,293			-			2,127,293

Net loss per common share:
Net loss	$	(0.68	)	$	(0.07	)	$	(0.75	)
Deemed dividend and accretion of a discount		(0.16	)		-			(0.16	)
Net loss attributable to common stockholders	$	(0.84	)	$	(0.07	)	$	(0.91	)

Below are basic and diluted loss per share data for the nine months ended September 30, 2019, which are in thousands except for share and per share data:

	Basic Calculation			Effect of Dilutive Warrant Securities			Diluted Calculation
Numerator:
Net loss	$	(3,805	)	$	(753	)	$	(4,558	)
Deemed dividend and accretion of a discount		(2,703	)		-			(2,703	)
Net loss attributable to common stockholders	$	(6,508	)	$	(753	)	$	(7,261	)

Denominator:
Number of shares used in per common share calculations:		1,269,106			-			1,269,106

Net loss per common share:
Net loss	$	(3.00	)	$	(0.59	)	$	(3.59	)
Deemed dividend and accretion of a discount		(2.13	)		-			(2.13	)
Net loss attributable to common stockholders	$	(5.13	)	$	(0.59	)	$	(5.72	)

3. Inventories

Inventories consisted of the following (in thousands):

	September 30, 2020		December 31, 2019
Raw materials	$	461	$	533
WIP		72		106
Finished Goods		2		-
	$	535	$	639

As of September 30, 2020, inventories totaling approximately $0.1 million and $0.5 million were classified as current and long-term, respectively. Inventories classified as current represent the carrying value of inventories as of September 30, 2020, that management estimates will be sold by September 30, 2021.

4. Intangible Assets

Intangible assets consisted of the following (in thousands):

	September 30, 2020			December 31, 2019
Trademarks	$	50		$	50
Less: accumulated amortization		(13	)		(9	)
	$	37		$	41

Amortization expense for the nine months ended September 30, 2020, was approximately $4.0 thousand. Amortization expense for the nine months ended September 30, 2019, was approximately $4.0 thousand.

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, 2020 and December 31, 2019. 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, 2020 and December 31, 2019 (in thousands):

	Fair Value Measurements as of September 30, 2020
Description	Level 1		Level 2		Level 3		Total
Derivative liability
Common stock warrants	$	-	$	-	$	1,600	$	1,600

	Fair Value Measurements as of December 31, 2019
Description	Level 1		Level 2		Level 3		Total
Derivative liability
Common stock warrants	$	-	$	-	$	220	$	220

The Company did not have any transfers of assets and liabilities between any levels of the fair value measurement hierarchy during the nine months ended September 30, 2020 and 2019 (in thousands).

	Common Stock Warrants
Balance as of December 31, 2018	$	(1,566	)
Change in fair value		754
Exercise of warrants		44
Other, net		(1	)
Balance as of September 30, 2019	$	(769	)

Balance as of December 31, 2019	$	(220	)
Issuance of derivatives		(6,328	)
Change in fair value		1,750
Exercise of warrants		3,197
Other, net		1
Balance as of September 30, 2020	$	(1,600	)

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, 2020, and December 31, 2019, 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, 2020 and December 31, 2019 were as follows:

	September 30, 2020			December 31, 2019
Weighted-average risk-free interest rate		0.16%-0.28	%		1.62	%
Weighted-average expected life (in years)		2.61-4.36			3.4
Expected dividend yield		-	%		-	%
Weighted-average expected volatility		139.17%-160.7	%		64	%

Other Financial Instruments

The Company’s recorded values of cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities approximate their fair values based on their short-term nature. The recorded value of debt approximates the fair value as the interest rate approximates market interest rates.

6. Accrued Liabilities

Accrued liabilities consisted of the following (in thousands):

	September 30, 2020		December 31,2019
Payroll and related expense	$	646	$	589
Resterilization and repackaging costs		52		392
Other		248		285
	$	946	$	1,266

7. Debt

Equipment Loan

In September 2019, the Company entered into a debt arrangement with a finance company to purchase equipment. The debt balance was paid in full during the third quarter 2020.

PPP Loan

On April 28, 2020, the Company received funding under a Paycheck Protection Program (“PPP”) loan (the “PPP Loan”) from First State Community Bank (the “Lender”). The principal amount of the PPP Loan is $0.391 million. The PPP was established under the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) and is administered by the U.S. Small Business Administration (the “SBA”). The PPP Loan has a two-year term, maturing on April 28, 2022. The term may be extended to five-years if the Lender and we agree to do so. The interest rate on the PPP Loan is 1.0% per annum. Principal and interest are payable in 18 monthly installments, beginning on November 28, 2020, until maturity with respect to any portion of the PPP Loan which is not forgiven as described below. The Company did not provide any collateral or guarantees for the PPP Loan, nor did the Company pay any facility charge to obtain the PPP Loan. The PPP Loan provides for customary events of default, including, among others, those relating to failure to make payment, bankruptcy, breaches of representations and material adverse effects. The Company is permitted to prepay or partially prepay the PPP Loan at any time with no prepayment penalties. The PPP Loan may be partially or fully forgiven if the Company complies with the provisions of the CARES Act, including the use of PPP Loan proceeds for payroll costs, rent, utilities and other expenses, provided that such amounts are incurred during a 24-week period that commenced on April 28, 2020 and at least 60% of any forgiven amount has been used for covered payroll costs as defined by the CARES Act. Any forgiveness of the PPP Loan will be subject to approval by the SBA and the Lender and will require the Company to apply for such treatment in the future.

8. Equity

2020 Rights Offering

During February 2020, the Company closed on a rights offering capital raise wherein the Company’s holders of common stock, Series C Preferred Stock, and certain outstanding warrants on the date of record, obtained, at no charge, non-transferable subscription rights to purchase units (“Units”). Each Unit consisted of one share of Series C Convertible Preferred Stock (“Preferred Stock”) and 675 warrants to purchase common stock (“Warrants”). Each Unit sold for $1,000. Each share of the Preferred Stock is convertible, at the Company’s option at any time on or after the first anniversary of the expiration of the rights offering or at the option of the holder at any time, into a number of shares of our common stock equal to the quotient of the stated value of the Preferred Stock ($1,000) divided by the Conversion Price ($1.4814 per share). Each Warrant is exercisable for one share of our common stock at an exercise price of $1.50 per share from the date of issuance through its expiration five years from the date of issuance. The Warrants also contain a cashless exercise provision that allows the holder to receive 70% of the common stock otherwise available under the warrant to the holder electing the cashless exercise provision. The Company issued 9,440 Units, which includes 6,372,000 Warrants exercisable into shares of our common stock and preferred shares that are convertible into 6,372,350 shares of Common Stock, for gross proceeds of $9.4 million.

The Company raised $9.4 million, before consideration of issuance costs, associated with the issuance of the Units, with $3.1 million allocated to the preferred stock (with no issuance costs allocated to the preferred stock) and $5.1 million, net of issuance costs of approximately $1.2 million, allocated to the warrants. In association with the warrants that were recorded as a derivative liability, the Company immediately expensed approximately all $1.2 million of the issuance costs.

During the nine months ended September 30, 2020, Series B Convertible Preferred stockholders of the Company converted 223 shares of Series B Convertible Preferred Stock into 165,586 shares of common stock, and Series C Convertible Preferred stockholders of the Company converted 9,389 shares of Series C Convertible Preferred Stock into 6,337,930 shares of common stock.

Also, during the nine months ended September 30, 2020, holders of Warrants electing to use the cashless exercise option exercised 5,006,475 warrants, which resulted in the issuance of 3,504,535 shares of common stock. During the same period of time, holders of Warrants electing to exercise warrants for cash exercised 739,618 warrants, which resulted in the issuance of 739,618 shares of common stock, and the receipt of $1.1 million of cash.

2020 Registered Direct Offerings

During June 2020, the Company closed two registered direct offerings of shares of its common stock, priced at-the-market under Nasdaq rules, resulting in the issuance of a total of 6,100,000 shares of its common stock for gross proceeds of approximately $9.6 million, before considering issuance costs of approximately $0.8 million. On June 23, 2020, the Company entered into a Share Purchase Agreement with certain institutional purchasers, pursuant to which the Company agreed to issue and sell to the purchasers, in a registered direct offering, an aggregate of 3,700,000 shares of common stock, par value $0.01 per share. The shares were sold at a negotiated purchase price of $1.50 per share for aggregate gross proceeds to the Company of approximately $5.5 million, before deducting fees to the placement agent and other estimated offering expenses payable by the Company. Following the initial registered direct offering, on June 26, 2020, the Company entered into another Share Purchase Agreement with certain institutional purchasers pursuant to which the Company offered to the purchasers, in a registered direct offering, an aggregate of 2,400,000 shares of common stock, par value $0.01 per share. The shares were sold at a negotiated purchase price of $1.72 per share for aggregate gross proceeds to the Company of approximately $4.1 million, before deducting fees to the placement agent and other estimated offering expenses payable by the Company.

On July 16, 2020, the Company entered into a Share Purchase Agreement with certain institutional purchasers, pursuant to which the Company agreed to issue and sell to the purchasers, in a registered direct offering, an aggregate of 1,500,000 shares of common stock, par value $0.01 per share. The shares were sold at a negotiated purchase price of $2.00 per share for aggregate gross proceeds to the Company of $3.0 million, before deducting fees to the placement agent and other estimated offering expenses payable by the Company.

On August 4, 2020, the Company entered into a Share Purchase Agreement with certain institutional purchasers, pursuant to which the Company agreed to issue and sell to the purchasers, in a registered direct offering, an aggregate of 3,415,000 shares of common stock, par value $0.01 per share. The shares were sold at a negotiated purchase price of $2.40 per share for aggregate gross proceeds to the Company of $8.2 million, before deducting fees to the placement agent and other estimated offering expenses payable by the Company.

2019 ATM Stock Offerings

On June 4, 2019, the Company entered into an Equity Distribution Agreement, (the “Distribution Agreement”), with Maxim Group LLC (“Maxim”), pursuant to which the Company may sell from time to time, shares of its common stock, having an aggregate offering price of up to $1.6 million through Maxim, as agent (the “ATM Offering”). On September 12, 2019, the Company entered into an amendment to the Distribution Agreement with Maxim, which increased the maximum aggregate offering price of the shares of the Company’s common stock from $1.6 million to $2.5 million. Subject to the terms and conditions of the Distribution Agreement, Maxim will use its commercially reasonable efforts to sell the shares from time to time, based on the Company’s instructions. The Company has no obligation to sell any of the shares and may at any time suspend offers under the Distribution Agreement. The Offering will terminate upon the earlier of (i) the sale of Shares having an aggregate offering price of $2.5 million, (ii) the termination of the Distribution Agreement by either Maxim or the Company upon the provision of fifteen (15) days written notice, or (iii) September 12, 2020. The Company agrees to pay Maxim a transaction fee at a fixed rate of 4.25% of the gross sales price of shares sold under 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. During the year ended December 31, 2019, the Company raised approximately $1.7 million before deducting fees to the placement agent and other offering expenses of approximately $0.2 million, through the issuance of 527,896 shares of common stock under the Distribution Agreement with Maxim. During the nine month period ending September 30, 2020, the Company sold 354,500 shares of common stock, raising approximately $0.8 million before deducting issuance fees of approximately $0.034 million. As of September 30, 2020, no funding capacity is available under the ATM.

9. Stock-Based Compensation

During the three months ended September 30, 2020 the shareholders approved the 2020 Equity Incentive Plan. The 2020 Plan provides for the grant of nonqualified stock options, incentive stock options, restricted stock, restricted stock units, stock appreciation rights (SARs), and performance share awards to employees, officers, consultants, advisors, non-employee directors and independent contractors designated by either the board of directors of the Company or if so authorized by the board of directors, the Compensation Committee (the “Committee”) of the Board of Directors. Under the 2020 Plan, the maximum number of shares of common stock which may be issued, subject to adjustment as described below, is 1,902,520 shares of common stock, which includes 2,520 shares that have been rolled over from our 2012 Plan, as amended.

A summary of the Company’s outstanding stock option activity for the nine months ended September 30, 2020 is as follows:

	Options		Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Life (Years)		Intrinsic Value
As of December 31, 2019		377	$	7,446.69		5.3	$	-
Granted		515,017		0.47		10.0		-
Exercised		-		-		-		-
Forfeited		-		-		-		-
Expired		-		-		-		-
As of September 30, 2020		515,394	$	5.90		9.6	$	746,774
Exercisable as of September 30, 2020		377	$	7,446.69		4.6	$	-

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 the Company. The expected term was calculated utilizing the simplified method. 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 following weighted average assumptions were used in the calculation to estimate the fair value of options granted to employees during the nine months ended September 30, 2020.

	Nine Months Ended
	September 30, 2020
Weighted-average risk-free interest rate		0.34	%
Weighted-average expected life (in years)		10.0
Expected dividend yield		-	%
Weighted-average expected volatility		129.69	%

Unrecognized stock-based compensation as of September 30, 2020 is as follows (in thousands):

			Weighted Average
	Unrecognized Stock-Based		Remaining of Recognition
	Compensation		(in years)
Stock options	$	204		2.6

10. 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 financial position, operating results or cash flows.

11. Note Receivable

On October 1, 2018, the Company completed the sale of its retail spine business to CTL Medical. The sale included a $6 million noninterest bearing note receivable. The 36-month term of the note receivable requires 18 payments of $138,889 followed by 18 payments of $194,444, with maturing of the note receivable on October 1, 2021. The note receivable includes an imputed interest rate of 10%, which totaled $915,725 as of October 31, 2018, and has a 36-month amortization. As of September 30, 2020, the net carrying value of the note receivable was approximately $2.4 million, with expected cash proceeds of $2.5 million.

12. Discontinued Operations

The Company and CTL Medical entered in an asset purchase agreement on October 1, 2018, whereby CTL Medical agreed to acquire all of the Company’s commercial spine business for total consideration of $8.5 million, which includes a $6.0 million (including interest) note receivable and CTL Medical’s assumption of the Company’s $2.5 million related party note payable to North Stadium. As a result of the closing, CTL Medical is now the exclusive owner of SINTX’s portfolio of metal and silicon nitride spine products, which are presently sold under the brand names of Taurus, Preference, and Valeo, with access to future silicon nitride spine technologies. The Company has agreed to pay the cost, if any, to re-sterilize and re-package select silicon nitride spinal inventories sold to CTL Medical if the sterilization date expires prior to CTL Medical selling the inventories to a third-party customer. This agreement extends for a total of 24 months, ending on September 30, 2020. The Company estimates the sterilization and repackaging cost to approximate $0.1 million at September 30, 2020. Manufacturing, R&D, and all intellectual property related to the core, non-spine, biomaterial technology of silicon nitride remains with the Company in Salt Lake City. The Company will serve as CTL’s exclusive OEM provider of silicon nitride products.

13. Leases

The Company leases office, warehouse and manufacturing space under a single operating lease. On June 7, 2019, the lease was amended to extend the rental period through 2024 and reduce the amount of space leased from 54,428 square feet to 29,732 square feet. The new rent was effective January 1, 2020. The amended lease has two five-year extension options. As of September 30, 2020, the operating lease right-of-use asset totaled approximately $2.0 million and the operating lease liability totaled approximately $2.0 million. Non-cash operating lease expense during the nine months ended September 30, 2020, totaled approximately $0.3 million. As of September 30, 2020, the weighted-average discount rate for the Company’s operating lease was 6.5%.

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.

Operating lease future minimum payments together with the present values as of September 30, 2020, are summarized as follows:

Years Ending December 31,	September 30, 2020
2020	$	124
2021		513
2022		528
2023		544
2024		561
Thereafter		-
Total future minimum lease payments		2,270
Less amounts representing interests		(297	)
Present value of lease liability		1,973

Current-portion of operating lease liability		393
Long-term portion operating lease liability	$	1,580

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion and analysis of our financial condition and results of operations in conjunction with our consolidated financial statements for the year ended December 31, 2019 and the notes thereto, along with Management’s Discussion and Analysis of Financial Condition and Results of Operations, included in our Annual Report on Form 10-K for the year ended December 31, 2019, filed separately with the U.S. Securities and Exchange Commission. This discussion and analysis contains forward-looking statements based upon current beliefs, plans, expectations, intentions and projections that involve risks, uncertainties and assumptions, such as statements regarding our plans, objectives, expectations, intentions and projections. Our actual results and the timing of selected events could differ materially from those anticipated in these forward-looking statements as a result of several factors, including those set forth under the “Risk Factors” section of our Annual Report on Form 10-K for the year ended December 31, 2019, and any updates to those risk factors filed from time to time in our Quarterly Reports on Form 10-Q and in other filings with the Securities and Exchange Commission we may make from time-to-time.

Overview

We are an advanced materials company that develops and commercializes silicon nitride for medical and non-medical applications. The core strength of SINTX Technologies is the manufacturing, research, and development of silicon nitride ceramics for external partners. We believe that silicon nitride has a superb combination of properties that make it ideally suited for long-term human implantation. Other biomaterials are based on bone grafts, metal alloys, and polymers, all of which have well-known practical limitations and disadvantages. In contrast, silicon nitride has a legacy of success in the most demanding and extreme industrial environments. As a human implant material, silicon nitride offers bone ingrowth, resistance to bacterial and viral infection, ease of diagnostic imaging, resistance to corrosion, and superior strength and fracture resistance, among other advantages, all of which claims are validated in our large and growing inventory of peer-reviewed, published literature reports.

We recently received positive testing results from an independent study that demonstrate the potential anti-viral properties of our silicon nitride. The results suggest that silicon nitride may be useful in the reduction of the spread of COVID-19. The study results demonstrated that our unique grade of silicon nitride inactivates the SARS-CoV-2 virus within a minute after exposure and has the potential to decrease the risk of viral disease spread on surfaces. Studies have shown that coronavirus spreads between humans when an infected person coughs or sneezes. Also, the virus can remain active on a variety of commonly touched surfaces for hours to days. We believe that by incorporating our unique composition of silicon nitride into products such as face masks, and personal protective equipment, it is possible to manufacture surfaces that inactivate viral particles, thereby limiting the spread of the disease. We envision incorporating our silicon nitride into high-contact surfaces such as medical equipment, screens, countertops, and doorknobs in locations where viral persistence is a concern, such as homes, casinos, and cruise ships. We believe this anti-viral discovery will open many new opportunities for us. In composites, coatings, and mixtures, silicon nitride has maintained its antibacterial and osteogenic properties, even at small fractions. We believe that incorporating our material into a variety of commonly touched surfaces may discourage viral spread, and contribute to global health by reducing the risk of disease. We believe that our versatile silicon nitride manufacturing expertise positions us favorably to introduce new and innovative devices in the medical and non-medical fields.

We also believe that we are the first and only company to commercialize silicon nitride medical implants. Prior to October 1, 2018, we designed, manufactured and commercialized silicon nitride products for our own behalf in the spine implant market. Over 35,000 of our spinal implants manufactured with silicon nitride have been implanted into patients, with an excellent safety record. On October 1, 2018, we sold our spine implant business to CTL Medical and now manufacture spine implants made with silicon nitride for CTL Medical. Prior to selling our spine implant business to CTL Medical, we had received 510(k) regulatory clearance in the United States, a CE mark in Europe, ANVISA approval in Brazil, and ARTG and Prostheses approvals in Australia for a number of silicon nitride spine implant products designed for spinal fusion surgery. Spine implant products manufactured by us from silicon nitride are currently marketed and sold by CTL Medical under the Valeo® brand to surgeons and hospitals in the United States and to selected markets in Europe and South America. These implants are designed for use in cervical (neck) and thoracolumbar (lower back) spine surgery. We are collaborating with CTL Medical to establish commercial partners in other parts of the world and also working with other partners to obtain regulatory approval for silicon nitride implants in Japan.

The sale of our spine implant business to CTL Medical enables us to now focus on our core competencies. These include research and development of silicon nitride and the design and manufacture of medical and nonmedical products manufactured from silicon nitride and other ceramic materials for our own account and in collaboration with other medical device manufacturers. We are targeting original equipment manufacturer (“OEM”) – including CTL Medical - and private label partnerships in order to accelerate adoption of silicon nitride in future markets such as coating products with silicon nitride, hip and knee replacements, dental and maxillofacial implants, extremities, trauma, bearings, automotive and aerospace components, cutting tools, and a wide range of antipathogenic applications. Existing biomaterials, based on plastics, metals, and bone grafts have well-recognized limitations that we believe are addressed by silicon nitride.

We believe that silicon nitride addresses many of the biomaterial-related limitations in medical related fields such as hip and knee replacements, dental and maxillofacial implants, sports medicine, extremities, and trauma surgery. We further believe that the inherent material properties of silicon nitride, and the ability to formulate the material in a variety of compositions, combined with precise control of the surface properties of the material, opens up a number of commercial opportunities across orthopedic surgery, neurological surgery, maxillofacial surgery, other medical disciplines, as well as commodity items such as industrial fasteners, bushings, and valves to addressing more complex demands of hypersonic missile radomes, aerospace, air-conditioning systems, beverage dispensers, touch-screen glass, and agribusiness fungicides. In the second quarter, the Company shipped three prototype orders of industrial products totaling $7 thousand.

Components of our Results of Operations

We manage our business within one reportable segment, which is consistent with how our management reviews our business, makes investment and resource allocation decisions and assesses operating performance.

Product Revenue

We derive our product revenue primarily from the manufacture and sale of spinal fusion products used in the treatment of spine disorders to CTL Medical, with whom we entered into a 10-year exclusive sales agreement in October 2018. We are currently pursuing other sales opportunities for silicon nitride products outside the spinal fusion application and have shipped new orders for these products. We generally recognize revenue from sales where control transfers at a point in time as the title and risk of loss passes to the customer, which is at the time the product is shipped. In general, our customer does not have rights of return or exchange.

Prior to the occurrence of the COVID-19 pandemic, we believed that our product revenue would increase as CTL Medical increased sales of silicon nitride spinal fusion products, as we secured other opportunities to manufacture third party products with silicon nitride, and as we continued to introduce new products into the market. We now expect COVID-19 to adversely impact product revenue from silicon nitride spinal fusion products for the remainder of 2020, and potentially longer.

Cost of Revenue

The expenses that are included in cost of revenue include all in-house manufacturing costs for the products we manufacture.

Gross Profit

Our gross profit measures our product revenue relative to our cost of revenue. We expect our gross profit percentage to decrease as we expand the penetration of our silicon nitride technology platform through OEM and private label partnerships, which offer additional avenues for the adoption of silicon nitride. Prior to the sale of our retail spine business, our revenues and gross profits were based on our retail sales. With the focus on OEM and private label partnerships, the margins are lower, thus causing the decrease in our gross profit percentage.

Research and Development Expenses

Our research and development costs are expensed as incurred. Research and development costs consist of engineering, product development, clinical trials, test-part manufacturing, testing, developing and validating the manufacturing process, manufacturing, facility and regulatory-related costs. Research and development expenses also include employee compensation, employee and non-employee stock-based compensation, supplies and materials, consultant services, and travel and facilities expenses related to research and development activities.

We expect to incur additional research and development costs as we continue to develop new spinal fusion products, product candidates for total joint replacements, dental applications, antipathogenic products, and other products which may increase our total research and development expenses.

General and Administrative Expenses

General and administrative expenses consist primarily of salaries, benefits and other related costs, including stock-based compensation for certain members of our executive team and other personnel employed in finance, compliance, administrative, information technology, customer service, executive and human resource departments. General and administrative expenses also include other expenses not part of the other cost categories mentioned above, including facility expenses and professional fees for accounting and legal services.

RESULTS OF OPERATIONS

The following is a tabular presentation of our unaudited condensed consolidated operating results for the three months ended September 30, 2020 and 2019 (in thousands):

	Three Months Ended September 30,						$			%			Nine Months Ended September 30,						$			%
	2020			2019			Change			Change			2020			2019			Change			Change
Product revenue	$	66		$	173		$	(107	)		-62	%	$	478		$	437		$	41			9	%
Cost of revenue		53			151			(98	)		-65	%		382			364			18			5	%
Gross profit		13			22			(9	)		-41	%		96			73			23			32	%
Gross profit %		20	%		13	%		7	%		54	%		20	%		17	%		3	%		20	%

Operating expenses:
Research and development		1,432			869			563			65	%		3,494			2,557			937			37	%
General and administrative		827			714			113			16	%		2,418			2,166			252			12	%
Sales and marketing		182			139			43			31	%		450			303			147			49	%
Total operating expenses		2,441			1,722			719			42	%		6,362			5,026			1,336			27	%
Loss from operations		(2,428	)		(1,700	)		(728	)		43	%		(6,266	)		(4,953	)		(1,313	)		27	%
Other income (expense)		(9	)		254			(263	)		-104	%		970			1,148			(178	)		-16	%
Net loss before taxes		(2,437	)		(1,446	)		(991	)		69	%		(5,296	)		(3,805	)		(1,491	)		39	%
Provision for income taxes		-			-			-						-			-			-
Net loss	$	(2,437	)	$	(1,446	)	$	(991	)		69	%	$	(5,296	)	$	(3,805	)	$	(1,491	)		39	%

Product Revenue

For the three months ended September 30, 2020, total product revenue was $0.066 million as compared to $0.173 million in the same period 2019, a decrease of $0.107 million, or -62%. This decrease was due to reduction in orders from CTL Amedica.

For the nine months ended September 30, 2020, total product revenue was $0.478 million as compared to $0.437 million in the same period 2019, an increase of $0.041 million, or 9%. This increase was primarily due to an increase in orders from CTL Amedica and to some non-medical orders.

Cost of Revenue and Gross Profit

For the three months ended September 30, 2020, our cost of revenue decreased $0.098 million, or -65%, as compared to the same period in 2019. Gross profit decreased $0.009 million or -41%. Both decreases are primarily due to decrease in product revenue, and the associated decrease in costs of goods sold. Gross profit margin percentage totaled 20% and 13% for the three months ended September 30 for 2020 and 2019, respectively.

For the nine months ended September 30, 2020, our cost of revenue increased $0.018 million, or 5%, as compared to the same period in 2019. Gross profit increased $0.023 million or 32%. Both increases correspond with the increase in product revenue, and the associated increase in costs of goods sold. Gross profit margin percentage totaled 20% and 17% for the nine months ended September 30 for 2020 and 2019, respectively.

Research and Development Expenses

For the three months ended September 30, 2020, research and development expenses increased $0.6 million, or 65%, as compared to the same period in 2019. This increase was primarily attributable to an increase in R&D wages for new personnel, new equipment, and outside research activities related to testing the anti-viral properties of silicon nitride to support the Company’s strategic objective of developing new technologies and related products.

For the nine months ended September 30, 2020, research and development expenses increased $0.9 million, or 37%, as compared to the same period in 2019. This increase was primarily attributable to an increase in R&D wages for new personnel and outside research activities related to testing the anti-viral properties of silicon nitride to support the Company’s strategic objective of developing new technologies and related products.

General and Administrative Expenses

For the three months ended September 30, 2020, general and administrative expenses increased $0.1 million, or 16%, as compared to the same period in 2019. This increase is primarily due to the increase in franchise taxes, investor relations costs, and an increase in wages for new personnel.

For the nine months ended September 30, 2020, general and administrative expenses increased $0.3 million, or 12%, as compared to the same period in 2019. This increase is primarily due to the increase in franchise taxes and an increase in wages for new personnel.

Sales and Marketing Expenses

For the three months ended September 30, 2020, sales and marketing expenses increased $0.04 million, or 31%, as compared to the same period in 2019. This increase was primarily attributable to an increase in marketing activities to generate interest in and exposure to the Company’s potential new product lines.

For the nine months ended September 30, 2020, sales and marketing expenses increased $0.1 million, or 49%, as compared to the same period in 2019. This increase was primarily attributable to an increase in sales and marketing wages for new personnel and an increase in marketing activities to generate interest in and exposure to the Company’s potential new product lines.

Other Income, Net

For the three months ended September 30, 2020, other income decreased $0.3 million, or 104%, as compared to the same period in 2019. This decrease was primarily due to the unfavorable change in the fair value of the derivative liabilities in the amount of $0.4 million offset by other miscellaneous other income items of approximately $0.1 million.

For the nine months ended September 30, 2020, other income decreased $0.2 million, or 16%, as compared to the same period in 2019. This decrease was primarily due to the decrease in income due to offering costs of $1.2 million associated with the February 2020 rights offering and interest income of $0.1 million offset by the change in the fair value of the derivative liabilities in the amount of $1.0 million and the gain in the reduction of the accrued sterilization of $0.1 million.

Liquidity and Capital Resources

The Company is actively generating additional scientific and clinical data to have it published in leading industry publications. The unique features of our silicon nitride material 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. For instance, we recently received positive testing results from an independent study that demonstrate the potential anti-viral properties of our silicon nitride. We believe that we may be able to apply our silicon nitride powder to personal protection products, such as face masks, gowns and gloves, resulting in inactivation of viruses that come into contact with the items.

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 6, 2020, the Company closed on a rights offering to its stockholders of units, consisting of convertible preferred stock and warrants, for gross proceeds of $9.4 million, which excludes underwriting discounts and commissions and offering expenses payable by the Company. Additionally, during the period of June 2020 through August 2020, the Company closed four registered direct offerings of shares of its common stock, priced at-the-market under Nasdaq rules, resulting in the issuance of a total of 11,015,000 shares of its common stock for gross proceeds of approximately $20.9 million, which excludes underwriting discounts and commissions and offering expenses payable by the Company.

During the year ended December 31, 2019, the Company entered into an ATM equity distribution agreement in which the Company may sell, from time to time, shares of common stock having an aggregate offering price of up to $2.5 million. The Company sold 527,896 shares during the year ended December 31, 2019, raising approximately $1.7 million before considering issuance costs. During the nine month period ending September 30, 2020, the Company sold 354,500 shares of common stock, raising approximately $0.8 million before considering issuance costs. As a result of the sales during the first half of 2020 there are no longer any funds available to the Company under the ATM.

Risks Related to COVID-19 Pandemic

Cash Flows

The following table summarizes, for the periods indicated, cash flows from operating, investing and financing activities (in thousands) – unaudited:

	Nine Months Ended September 30,
	2020			2019
Net cash used in operating activities	$	(7,055	)	$	(4,879	)
Net cash provided by investing activities		1,377			970
Net cash provided by financing activities		30,941			1,388
Net cash provided (used)	$	25,263		$	(2,521	)

Net Cash Used in Operating Activities

Net cash used in operating activities was $7.1 million during the nine months ended September 30, 2020, compared to $4.9 million used during the nine months ended September 30, 2019, an increase of $2.2 million. The increase in the net loss from operations, and related non-cash add backs to the net loss, was $2.0 million from 2020 when compared to 2019. The increase in cash used for operating activities during 2020 was primarily due to the $2.0 million mentioned above plus changes in the movement of working capital items during 2020 as compared to the same period in 2019 as follows: a $0.4 million increase in cash used in accounts payable, and a $0.1 million increase in cash used in prepaid expenses, offset by a $0.3 million decrease in cash payments on operation lease liability.

Net Cash Provided by Investing Activities

Net cash provided by investing activities increased by $0.4 million during the nine months ended September 30, 2020, as compared to the same period in 2019. This increase was primarily due to an increase in proceeds from notes receivable.

Net Cash Provided by Financing Activities

Net cash provided by financing activities was $30.9 million during the nine months ended September 30, 2020, compared to net cash provided by financing activities of $1.4 million during the same period in 2019. The $29.5 million increase was primarily attributable an increase in proceeds from rights offerings of $9.4 million, an increase in proceeds from issuance of common stock in the amount of $18.7 million, an increase in proceeds of $1.0 million from warrants exercised for cash, and $0.4 million increase from the issuance of debt.

Indebtedness

Equipment Loan

In September 2019, the Company entered into a debt arrangement with a finance company to purchase equipment. The debt balance was paid in full during the third quarter 2020 and as of September 30, 2020, totaled $0 thousand

PPP Loan

On April 28, 2020, the Company received funding under a Paycheck Protection Program (“PPP”) loan (the “PPP Loan”) from First State Community Bank (the “Lender”). The principal amount of the PPP Loan is $0.391 million. The PPP Loan has a two-year term, maturing on April 28, 2022. The term may be extended to five-years if the Lender and we agree to do so. The interest rate on the PPP Loan is 1.0% per annum. Principal and interest are payable in 18 monthly installments, beginning on November 28, 2020, until maturity with respect to any portion of the PPP Loan which is not forgiven as described below. The PPP Loan may be partially or fully forgiven if the Company complies with the provisions of the CARES Act, including the use of PPP Loan proceeds for payroll costs, rent, utilities and other expenses, provided that such amounts are incurred during a 24-week period that commenced on April 28, 2020 and at least 60% of any forgiven amount has been used for covered payroll costs as defined by the CARES Act. Any forgiveness of the PPP Loan will be subject to approval by the SBA and the Lender and will require the Company to apply for such treatment in the future.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements, as defined in Item 303(a)(4) of Regulation S-K.

Critical Accounting Policies and Estimates

A summary of our significant accounting policies and estimates is discussed in Management’s Discussion and Analysis of Financial Condition and Results of Operations and in Note 1 to our consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2019. There have been no material changes to those policies for the nine months ended September 30, 2020. The preparation of the condensed financial statements in accordance with U.S. generally accepted accounting principles requires us to make judgments, estimates and assumptions regarding uncertainties that affect the reported amounts of assets and liabilities. Significant areas of uncertainty that require judgments, estimates and assumptions include the accounting for income taxes, contingencies, valuation of derivative liabilities, asset impairment and collectability of accounts receivable. We use historical and other information that we consider to be relevant to make these judgments and estimates. However, actual results may differ from those estimates and assumptions that are used to prepare our condensed financial statements.

New Accounting Pronouncements

No new accounting pronouncements have been adopted during the nine months ended September 30, 2020.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable.

ITEM 4. CONTROLS AND PROCEDURES

This Report includes the certifications of our Chief Executive Officer and Principal Financial Officer required by Rule 13a-14 of the Securities Exchange Act of 1934 (the “Exchange Act”). See Exhibits 31.1 and 31.2. This Item 4 includes information concerning the controls and control evaluations referred to in those certifications.

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures, as such term is defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934 (the “Exchange Act”), that are designed to ensure that information required to be disclosed in the reports filed or submitted under the Exchange Act, is recorded, processed, summarized, and reported within the time periods specified by the Commission’s rules and forms. Disclosure controls and procedures include controls and procedures designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act are properly recorded, processed, summarized and reported within the time periods required by the Commission’s rules and forms.

We carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer (principal executive officer and principal financial officer), of the effectiveness of the design and operation of these disclosure controls and procedures, as such term is defined in Exchange Act Rule 13a-15(e), as of September 30, 2020. Based on this evaluation, the Chief Executive Officer concluded that our disclosure controls and procedures were effective as of September 30, 2020, the end of the period covered by this Quarterly Report on Form 10-Q.

There were no changes in our internal control over financial reporting that occurred during the third quarter of 2020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II

ITEM 1. LEGAL PROCEEDINGS

We are not aware of any pending or threatened legal proceeding against us that could have a material adverse effect on our business, operating results or financial condition. The medical device industry is characterized by frequent claims and litigation, including claims regarding patent and other intellectual property rights as well as improper hiring practices. As a result, we may be involved in various additional legal proceedings from time to time.

Item 1A. Risk Factors

Information regarding risk factors appears in Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2019, which was filed with the SEC on March 26, 2020. There have been no material changes from the risk factors previously disclosed in the Annual Report on Form 10-K, except as noted below.

We are subject to risks associated with the spread of the novel strain of coronavirus, or COVID-19.

Our operations expose us to risks associated with the spread of COVID-19, which has affected the regions in which we conduct our operations. COVID-19 has broadly affected the global economy, resulted in significant travel and work restrictions in many regions and has put a significant strain on healthcare resources. COVID-19 is having, and we expect it will continue to have, an impact on our operations and an impact on the operations of CTL Amedica, the sole customer for our spine implant products, our collaborators, potential collaborators, third-party contractors and other entities, including governments, governmental agencies, with which we interact. To date, the most significant effects on our business have been reductions in sales of products to CTL Amedica which will result in reduced product revenue, delays in in discussions with potential collaborators, OEM customers, certain research and development activities and that many of our employees work remotely. In the future, the economic impacts of the COVID-19 outbreak could affect our business directly or indirectly. The effects on our product sales to CTL Amedica, research, development, manufacturing and commercialization activities, will be dependent on, among other things, the severity and duration of the COVID-19 outbreak as well as the impact of the outbreak on our third-party manufacturers, suppliers, subcontractors and customers. While the ultimate impact of COVID-19 on our business is highly uncertain, any negative impacts that materialize could materially adversely affect our operations, financial performance and stock price. Any negative impacts of COVID-19, alone or in combination with others, could exacerbate risk factors discussed in Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2019. The full extent to which the COVID-19 outbreak will negatively affect our operations, financial performance and stock price will depend on future developments that are highly uncertain and cannot be predicted, including the scope and duration of the outbreak and actions taken by governmental authorities and other third parties in response to the outbreak.

Our silicon nitride may not be effective in the reduction of the spread of COVID-19.

There is no guarantee that our silicon nitride will be effective in the reduction of the spread of COVID-19 by inactivating the SARS-CoV-2 virus or that we will be able to commercialize our silicon nitride for that purpose.

We may not be successful in utilizing silicon nitride in products

Although we have received positive results suggesting that it may be possible to utilize silicon nitride in products to help reduce the spread of COVID-19, there is no assurance that we will be able to integrate silicon nitride into products, or that even if we are able to do so, we will achieve positive results. Production of products for this purpose has not begun, and we may determine that it is not feasible to produce products in the desired manner, or that such products will decrease the viral disease spread on surfaces. In addition, there is significant competition from other companies trying to develop products to help treat the spread of COVID-19; many of these companies have greater resources than we do and we may not be able to successfully compete against them.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS

Exhibit Number	Exhibit Description	Filed Herewith	Incorporated by Reference herein from Form or Schedule	Filing Date	SEC File/ Reg. Number

10.1	Form of Share Purchase Agreement dated July 16, 2020		Form 8-K Exhibit 99.1	7/20/20	001-33624

10.2	Form of share Purchase Agreement dated August 4, 2020		Form 8-K Exhibit 99.1	8/06/20	001-33624

31.1	Certificate of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	X

31.2	Certificate of the Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	X

32	Certifications of the Chief Executive Officer and Principal Accounting Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	X

101.INS	XBRL Instance Document	X

101.SCH	XBRL Taxonomy Extension Schema Document	X

101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document	X

101.DEF	XBRL Taxonomy Extension Definition Linkbase Document	X

101.LAB	XBRL Taxonomy Extension Label Linkbase Document	X

101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document	X

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	SINTX Technologies, Inc.

Date: November 16, 2020	/s/ B. Sonny Bal
	B. Sonny Bal
	Chief Executive Officer (Principal Executive Officer and Principal Financial Officer)