SINT Sintx Technologies, Inc. - 10-K

ITEM 1A.

RISK FACTORS

In addition to the other information contained in this Annual Report, the following risk factors should be considered carefully in evaluating our company. Our business, financial condition, liquidity or results of operations could be materially adversely affected by any of these risks.

Risks Related to Our Capital Resources and Impairments

We will require additional financing and our failure to obtain additional funding would force us to delay, reduce or eliminate our product development programs or commercialization efforts.

We currently have limited committed sources of capital, and we have limited liquidity. Our cash and cash equivalents as of December 31, 2025 were $4.1 million. In October 2025, the Company entered into an At The Market Offering Agreement to sell shares of its common stock, from time to time, through an “at the market offering” or “ATM” program, having an aggregate offering price of $6.4 million. There is presently $6.0 million available capacity under the ATM. We will require substantial future capital in order to continue operating our business, conduct the research and development and regulatory clearance and approval activities necessary to bring our products to market, and to establish effective marketing and sales capabilities. Our existing capital resources are not sufficient to enable us to fund the completion of the development and commercialization of all of our product candidates.

We cannot determine with certainty the duration and completion costs of the current or future development and commercialization of our product candidates or if, when, or to what extent we will generate revenues from the commercialization and sale of any of these product candidates for which we obtain regulatory approval. We may never succeed in achieving regulatory approval for certain or all of these product candidates. The duration, costs and timing of clinical trials and development of our spinal fusion, joint replacement and coated metal product candidates will depend on a variety of factors, including:

the scope, rate of progress, and expense of our ongoing, as well as any additional, clinical trials and other research and development activities;

future clinical trial results we may choose to conduct;

potential changes in government regulation; and

the timing and receipt of any regulatory approvals.

A change in the outcome of any of these variables with respect to the development of our product candidates could mean a significant change in the costs and timing associated with the development of these product candidates.

In addition, if adequate funds to develop our product candidates are not available on a timely basis, we may terminate or delay the development of one or more of our product candidates, or delay activities necessary to commercialize our product candidates. Additional funding may not be available to us on acceptable terms, or at all. Any additional equity financing, if available, may not be available on favorable terms and will most likely be dilutive to our current stockholders, and debt financing, if available, may involve more restrictive covenants. Our ability to access capital when needed is not assured and, if not achieved on a timely basis, will materially harm our business, financial condition and results of operations or could cause us to cease operations.

The timing and amount of our future capital requirements will depend on many factors, including:

the level of sales of our current products and the cost of revenue and sales and marketing;

the extent of any clinical trials that we will be required to conduct in support of the regulatory clearance of our future product candidates;

the scope, progress, results and cost of our product development efforts;

the costs, timing and outcomes of regulatory reviews of our product candidates;

the number and types of products we develop and commercialize;

the costs of preparing, filing and prosecuting patent applications and maintaining, enforcing and defending intellectual property-related claims; and

the extent and scope of our general and administrative expenses.

Raising additional capital by issuing securities or through debt financings or licensing arrangements will likely cause dilution to existing stockholders, restrict our operations or require us to relinquish proprietary rights.

To the extent the Company raises additional capital through the issuance of equity or convertible debt securities, existing stockholders may experience dilution in their ownership interests. In addition, the terms of any such securities may include liquidation, conversion, dividend, or other preferential rights that are senior to or otherwise adversely affect the rights of holders of the Company’s common stock. Debt financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions such as incurring additional debt, making capital expenditures or declaring dividends. If we raise additional funds through collaboration and licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies or products or grant licenses on terms that are not favorable to us. Any of these events could adversely affect our ability to achieve our product development and commercialization goals and have a material adverse effect on our business, financial condition and results of operations.

Risks Related to Our Business and Strategy

We have incurred net losses since our inception and anticipate that we will continue to incur net losses for the foreseeable future. We may never achieve or sustain profitability.

We have incurred substantial net losses since our inception. For the years ended December 31, 2025 and 2024, we incurred a net loss of $10.4 million and $11.0 million, respectively, and used cash in operations of $8.6 million and $8.6 million, respectively. We have an accumulated deficit of $292.1 million and $281.7 million as of December 31, 2025 and 2024, respectively. Our losses have resulted principally from costs incurred in connection with our sales and marketing activities, research and development activities, manufacturing activities, general and administrative expenses associated with our operations, impairments on intangible assets and property and equipment, interest expense, loss on extinguishment of debt and offering costs. Even if we are successful in launching new products into the market, we may continue to incur losses for the foreseeable future as we continue to manufacture products for CTL Medical and other OEM customers and invest in research and development and regulatory approvals for our product candidates. While we are focused on improving margins and controlling costs and believe our new product initiatives may improve our operating results over time, we cannot predict when, or if, we will achieve profitability.

If sales revenue from any of our products or product candidates that receive marketing clearance from the FDA or other regulatory body is insufficient, if we are unable to develop and commercialize any of our product candidates, or if our product development is delayed, we may never become profitable. Even if we do become profitable, we may be unable to sustain or increase our profitability on a quarterly or annual basis.

Our success depends on our ability to successfully commercialize advanced ceramic products for biomedical, and antipathogenic applications, which to date have experienced only limited market acceptance.

We believe we are the first and only company to use silicon nitride in medical applications. To date, however, we have had limited acceptance of our silicon nitride-based products. In order to succeed in our goal of becoming a leading advanced ceramics company, we must increase market awareness of our silicon nitride interbody fusion products, including our spinal fusion implants and foot and ankle wedge systems, and develop and launch new biomedical, industrial, and antipathogenic products. If we fail in any of these endeavors or experience delays in pursuing them, we will not generate revenues as planned and will need to curtail operations or seek additional financing earlier than otherwise anticipated.

Our biomedical products may not achieve market acceptance or commercial success.

Following the sale of our spine implant business, we rely in part on third-party distribution partners to commercialize certain silicon nitride spinal fusion products that we manufacture. If these partners are unable to effectively market and sell such products or increase demand, our revenues would be adversely affected.

More broadly, our ability to generate meaningful revenue depends on market acceptance of our silicon nitride-based technologies by surgeons, hospitals, and other healthcare providers. Although we received FDA clearance for our first spinal fusion products in 2008, we have not achieved significant market share in the interbody spinal fusion market.

Our newer offerings, including the SiNAPTIC® foot and ankle wedge system, and any future products for which we obtain regulatory clearance or approval, may likewise fail to gain sufficient clinical adoption.

Market acceptance depends on numerous factors, including clinical outcomes, supporting data, reimbursement coverage and levels, pricing, surgeon familiarity, and competition from alternative biomaterials. If our products do not achieve adequate market acceptance, our business, results of operations, and financial condition would be materially adversely affected.

The orthopedic market is highly competitive, and we may not be able to compete effectively against the larger, well-established companies that dominate this market or emerging and small innovative companies that may seek to obtain or increase their share of the market.

The markets for orthopedic products are intensely competitive, and many of our competitors are much larger and have substantially more financial and human resources than we do. Many have long histories and strong reputations within the industry, and a relatively small number of companies dominate these markets. Medtronic, Inc.; DePuy Synthes Companies, a group of Johnson & Johnson companies; Stryker Corporation; Zimmer-Biomet, Inc.; Zimmer Holdings, Inc.; and Smith & Nephew plc, account for a significant number of orthopedic sales worldwide.

These companies enjoy significant competitive advantages over us, including:

broad product offerings, which address the needs of orthopedic surgeons and hospitals in a wide range of procedures;

products that are supported by long-term clinical data;

greater experience in, and resources for, launching, marketing, distributing and selling products, including strong sales forces and established distribution networks;

existing relationships with orthopedic surgeons;

extensive intellectual property portfolios and greater resources for patent protection;

greater financial and other resources for product research and development;

greater experience in obtaining and maintaining FDA and other regulatory clearances and approvals for products and product enhancements;

established manufacturing operations and contract manufacturing relationships;

significantly greater name recognition and widely recognized trademarks; and

established relationships with healthcare providers and payers.

Our products and any product candidates that we may introduce into the market may not enable us to overcome the competitive advantages of these large and dominant orthopedic companies. In addition, even if we successfully introduce additional product candidates incorporating our silicon nitride biomaterial into the market, emerging and small innovative companies may seek to increase their market share and they may eventually possess competitive advantages, which could adversely impact our business. Our competitors may also employ pricing strategies that could adversely affect the pricing of our products.

Moreover, numerous companies are developing and commercializing alternative biomaterials and surface technologies that may compete with our silicon nitride-based products in terms of safety, performance, cost, and clinical acceptance. These include advanced metals, modified polymer implants (such as enhanced PEEK formulations), ceramic-coated or oxidized metal devices, additive manufacturing solutions, and other proprietary materials designed to improve osseointegration, durability, or antimicrobial properties. For example, certain competitors have developed ceramic-coated or treated metal implants intended to address limitations associated with traditional metal devices, which may compete directly with our silicon nitride and silicon nitride-coated product offerings. Competitive materials and technologies are being advanced not only in spinal applications but also in extremity and other orthopedic segments, including foot and ankle procedures in which our SiNAPTIC® foot and ankle wedge system and potential future extremity products may compete. If competing technologies demonstrate comparable or superior clinical outcomes, are supported by more extensive clinical data, achieve broader surgeon adoption, or are offered at more competitive prices, our ability to gain or maintain market share across our product portfolio could be adversely affected.

The manufacturing process for our silicon nitride products is complex and requires sophisticated state-of-the-art equipment, experienced manufacturing personnel and highly specialized knowledge. If we are unable to manufacture our silicon nitride products on a timely basis consistent with our quality standards, our results of operation will be adversely impacted.

In order to control the quality, cost and availability of our silicon nitride products, we developed our own manufacturing capabilities. We operate a 30,764 square foot facility which is certified under the ISO 13485 medical device manufacturing standard for medical devices and operates under the FDA’s quality systems regulations, or QSRs. All operations, with the exception of raw material production, are performed at this facility.

We are the sole manufacturer of our silicon-nitride based products. Our reliance solely on our internal resources to manufacture our silicon nitride products entails risks to which we would not be subject if we had secondary suppliers for their manufacture, including:

the inability to meet our product specifications and quality requirements consistently;

a delay or inability to procure or expand sufficient manufacturing capacity to meet additional demand for our products;

manufacturing and product quality issues related to the scale-up of manufacturing;

the inability to produce a sufficient supply of our products to meet product demands;

the disruption of our manufacturing facility due to equipment failure, natural disaster or failure to retain key personnel; and

our inability to ensure our compliance with regulations and standards of the FDA, including QSRs, and corresponding state and international regulatory authorities, including the NMPA (China).

Any of these events could lead to a reduction in our product sales, product launch delays, failure to obtain regulatory clearance or approval or impact our ability to successfully sell our products and commercialize our products candidates.

We depend on a limited number of third-party suppliers for key raw materials used in the manufacturing of our silicon nitride products, and the loss of these third-party suppliers or their inability to supply us with adequate raw materials could harm our business.

We rely on a limited number of third-party suppliers for the raw materials required for the production of our silicon nitride products and product candidates. Our dependence on a limited number of third-party suppliers involves several risks, including limited control over pricing, availability, quality, and delivery schedules for raw materials. We have no supply agreements in place with any of our suppliers and cannot be certain that our current suppliers will continue to provide us with the quantities of raw materials that we require or that satisfy our anticipated specifications and quality requirements. Any supply interruption in limited or single sourced raw materials could materially harm our ability to manufacture our products until a new source of supply, if any, could be identified and qualified. We may be unable to find a sufficient alternative supply channel within a reasonable time or on commercially reasonable terms. Any performance failure on the part of our suppliers could delay the production of our silicon nitride products and product candidates and delay the development and commercialization of our product candidates, including limiting supplies necessary for commercial sale, clinical trials and regulatory approvals, which could have a material adverse effect on our business.

In order to be successful, we must expand our available product lines by commercializing new product candidates, but we may not be able to do so in a timely fashion and at expected costs, or at all.

While we currently manufacture silicon nitride spinal fusion implants that are commercialized through third-party distribution arrangements, our long-term growth depends on expanding our product portfolio across orthopedic, extremity, and other medical applications, as well as selected non-medical markets. This includes continued commercialization of our SiNAPTIC® foot and ankle wedge system and the development of additional silicon nitride-based products incorporating our advanced ceramic technologies.

To succeed in these efforts, we must continue product development and testing, scale and optimize manufacturing processes, obtain necessary regulatory clearances and approvals, establish or expand distribution and strategic partner relationships, and enhance our sales and marketing capabilities. We are also pursuing opportunities in non-medical applications, including advanced ceramic armor and other industrial technologies, which involve different market dynamics, customer requirements, and competitive landscapes.

Product development and commercialization involve substantial technical, regulatory, financial, and market risks. We may encounter delays in development timelines, increased costs, manufacturing challenges, regulatory obstacles, or slower-than-expected market adoption. There can be no assurance that any of our current or future product candidates will achieve regulatory clearance or approval, be successfully commercialized, or generate meaningful revenue. If we are unable to successfully expand and commercialize our product lines, or if commercialization is delayed, our revenues and growth prospects would be adversely affected, and we may need to reduce operations or seek additional capital sooner than anticipated.

We rely on both strategic partners and our own commercialization capabilities to develop and market our product candidates, and if these efforts are unsuccessful, we may not achieve profitability.

We currently utilize a combination of third-party commercialization arrangements and internal capabilities to develop, manufacture, and market our biomedical and antipathogenic product offerings. For certain product lines, including silicon nitride spinal fusion implants, we rely on distribution or strategic partners for commercialization. At the same time, following our acquisition of the SiNAPTIC® foot and ankle wedge system and related assets, we are undertaking direct commercialization efforts for that product line and may elect to do so for additional products in the future.

Our success will depend on the effectiveness of both these third-party relationships and our internal commercialization infrastructure. Where we rely on strategic partners, we are dependent on their ability to successfully market and distribute our products, manage customer relationships, and allocate sufficient resources to our product lines. Where we pursue commercialization independently, we must continue to build and manage sales and marketing capabilities, establish and maintain effective distribution channels, manage certified and validated commercial-scale manufacturing operations, conduct product development and testing, and obtain and maintain required regulatory clearances and approvals.

There can be no assurance that we will be able to successfully execute on either our partnered or direct commercialization strategies. If our strategic partners fail to perform as expected, if we are unable to effectively build and scale our internal commercialization capabilities, or if we experience delays or increased costs in these efforts, we may not generate revenues as anticipated and may need to curtail operations or seek additional financing sooner than expected.

Building and managing an in-house sales and distribution organization subjects us to significant operational, financial, and execution risks.

In connection with the commercialization of the SiNAPTIC® foot and ankle wedge system and potentially other future products, we are developing internal sales, marketing, and distribution capabilities. Establishing and managing an effective in-house commercial organization requires substantial time, capital, and management resources, and we have limited prior experience operating a direct sales force at scale.

We must recruit, train, and retain experienced sales representatives, including those with established relationships in the foot and ankle and broader orthopedic markets. Competition for qualified sales personnel in the medical device industry is intense, particularly for individuals with existing surgeon relationships and experience calling on hospitals, ambulatory surgery centers, and group purchasing organizations. We may be unable to attract or retain such personnel on acceptable terms, and turnover among sales representatives could disrupt customer relationships and delay revenue growth.

In addition, we may utilize independent distributors in certain territories, which introduces risks related to managing distributor performance, aligning incentives, negotiating pricing and commission structures, and maintaining consistent branding and compliance practices. Distributors may represent competing products and may not prioritize our products. Poor distributor performance or disputes over commercial terms could adversely affect sales.

Direct commercialization also requires us to manage inventory forecasting, warehousing, logistics, instrument tray deployment, and consignment arrangements. Inaccurate demand forecasting, slow inventory turnover, product returns, or obsolescence could result in write-downs and negatively impact gross margins. Furthermore, the need to maintain inventory and instrument sets in the field may increase our working capital requirements and cash burn, particularly during the early stages of market adoption.

If we are unable to effectively build, manage, and scale our internal sales and distribution infrastructure, or if the associated costs exceed our expectations, our commercialization efforts may be delayed or less successful than anticipated, which could materially adversely affect our business, results of operations, financial condition, and liquidity.

Part of our strategy is to establish and develop OEM partnerships and arrangements, which subjects us to various risks.

Because we believe silicon nitride is a superior platform and technology for application in the spine, total joint and other markets and industrial applications, we are establishing OEM partnerships with other companies to replace their materials and products with silicon nitride. Sales of products to OEM customers will expose our business to a number of risks. Sales through OEM partners could be less profitable than direct sales. Sales of our products through multiple channels could also confuse customers and cause the sale of our products to decline. In addition, OEM customers will require that products meet strict standards. Our compliance with these requirements could result in increased development, manufacturing, warranty and administrative costs. A significant increase in these costs could adversely affect our operating results. If we fail to meet OEM specifications on a timely basis, our relationships with our OEM partners may be harmed. Furthermore, we would not control our OEM partners, and they could sell competing products, may not incorporate our technology into their products in a timely manner and may devote insufficient sales efforts to the OEM products.

If hospitals and other healthcare providers are unable to obtain coverage or adequate reimbursement for procedures performed using our medical products, our products may not achieve widespread adoption.

The commercial success of our medical products, including our silicon nitride spinal implants, the SiNAPTIC® foot and ankle wedge system, and any future orthopedic or other medical devices we develop, depends in part on the availability of coverage and adequate reimbursement from governmental and private third-party payers. Hospitals and other healthcare providers that purchase and use our products generally rely on Medicare, Medicaid, private insurers, and other payers to reimburse all or a portion of the costs of the procedures in which our products are used, typically under bundled or fixed payment rates. If coverage is unavailable or reimbursement levels are insufficient, providers may be unwilling to use our products.

Coverage and reimbursement policies vary among payers and may be influenced by determinations made by the Centers for Medicare & Medicaid Services (CMS). Private payers frequently follow CMS coverage and payment decisions, and adverse determinations at the federal or state level could negatively affect reimbursement by other payers. In addition, payers may deny reimbursement if they determine that a procedure was not medically necessary, was not cost-effective, or involved a use not approved or cleared by the FDA.

The U.S. healthcare system continues to face significant cost-containment pressures. Government and private payers periodically revise payment methodologies and may reduce reimbursement rates or impose value-based purchasing and pay-for-performance measures that increase pricing pressure on hospitals and, indirectly, on medical device manufacturers. As a result, hospitals and other providers may seek to reduce the prices they pay for our products or limit adoption of products perceived as more costly than alternatives.

Hospitals and clinics often participate in group purchasing organizations (GPOs), which negotiate pricing arrangements with selected vendors. If we are unable to secure contracts with key GPOs or otherwise persuade providers to purchase our products outside of existing contracts, our ability to achieve meaningful market penetration could be adversely affected.

Internationally, reimbursement systems and pricing controls vary by country, and many jurisdictions impose price ceilings or other restrictions on medical devices. Failure to obtain favorable reimbursement or pricing approvals in international markets could limit adoption of our products outside the United States.

Adverse changes in coverage, reimbursement levels, or healthcare policy, whether in the United States or internationally, could materially adversely affect our business, results of operations, and financial condition.

A pandemic, epidemic or outbreak of an infectious disease in the United States or elsewhere may adversely affect our business, operations, and financial condition.

Future outbreaks of infectious diseases or other public health emergencies in the United States or internationally could disrupt global and domestic economies, financial markets, and healthcare systems. Such events may result in reduced access to capital markets, increased market volatility, and constraints on our ability to raise additional financing on acceptable terms, or at all.

Public health crises may also disrupt our operations and those of our suppliers, manufacturers, and distribution partners. Travel restrictions, workforce shortages, quarantines, government-mandated shutdowns, or supply chain interruptions could delay product development, manufacturing, regulatory activities, or commercialization efforts. In addition, hospitals and healthcare providers may postpone elective or non-urgent procedures during periods of healthcare system strain, which could reduce demand for our orthopedic and other medical products.

The extent and duration of any future pandemic or public health emergency and its impact on our business would depend on numerous factors beyond our control, including the severity of the outbreak, governmental responses, and the resilience of global supply chains and healthcare systems. Any such event could materially adversely affect our business, results of operations, financial condition, and liquidity.

Prolonged negative economic conditions in domestic and international markets may adversely affect us, our suppliers, partners and consumers, and could harm our financial position.

There is a risk that one or more of our current suppliers may not continue to operate. Any lender that is obligated to provide funding to us under any future credit agreement with us may not be able to provide funding in a timely manner, or at all, when we require it. The cost of, or lack of, available credit or equity financing could impact our ability to develop sufficient liquidity to maintain or grow our company. These negative changes in domestic and international economic conditions or additional disruptions of either or both of the financial and credit markets may also affect third-party payers and may have a material adverse effect on our business, results of operations, financial condition and liquidity.

In addition, we believe that various demographics and industry-specific trends will help drive growth in our target markets, but these demographics and trends are uncertain. Actual demand for our products could be significantly less than expected if our assumptions regarding these factors prove to be incorrect or do not materialize.

We are dependent on our senior management team, engineering team, and external advisors, and the loss of any of them could harm our business. We may not have sufficient personnel to effectuate our business strategy due to our recent reduction in force.

The members of our current senior management team may not be able to successfully implement our strategy. There are no assurances that the services of any of these individuals will be available to us for any specified period of time. The successful integration of our senior management team, the loss of members of our senior management team, engineering team and key external advisors, or our inability to attract or retain other qualified personnel or advisors could have a material adverse effect on our business, financial condition and results of operations. We may not have sufficient number of qualified personnel to effectuate our business strategy, which could have a material adverse effect on our business, financial condition and results of operations.

If we experience significant disruptions in our information technology systems, our business, results of operations and financial condition could be adversely affected.

The efficient operation of our business depends on our information technology systems. We rely on our information technology systems to effectively manage our sales and marketing, accounting and financial functions; manufacturing processes; inventory; engineering and product development functions; and our research and development functions. As such, our information technology systems are vulnerable to damage or interruption including from earthquakes, fires, floods and other natural disasters; terrorist attacks and attacks by computer viruses or hackers; power losses; and computer systems, or Internet, telecommunications or data network failures. The failure of our information technology systems to perform as we anticipate or our failure to effectively implement new systems could disrupt our entire operation and could result in decreased sales, increased overhead costs, excess inventory and product shortages, all of which could have a material adverse effect on our reputation, business, results of operations and financial condition.

Cybersecurity risks and failures of our information technology systems could disrupt our operations, compromise confidential information, and materially adversely affect our business.

We rely on information technology systems and digital infrastructure to operate our business, including systems used for financial reporting, manufacturing operations, supply chain management, inventory control, sales and distribution activities, research and development, and communications with customers, suppliers, employees, and other third parties. We collect, process, and store sensitive information, including proprietary business information, intellectual property, employee data, and limited customer-related information.

Our systems, and those of our third-party service providers, distributors, and manufacturing partners, may be vulnerable to cybersecurity threats, including unauthorized access, ransomware attacks, phishing schemes, malware, business email compromise, insider misconduct, and other cyber incidents. The frequency and sophistication of cyberattacks have increased in recent years, particularly against healthcare and manufacturing companies.

A successful cyberattack or other security incident could result in the loss, theft, corruption, or unauthorized disclosure of confidential information; disruption of manufacturing or supply chain operations; delays in product development or commercialization; financial loss; and reputational harm. Ransomware or other attacks affecting our manufacturing systems could interrupt production or distribution of our medical products. In addition, a material cybersecurity incident could impair our ability to maintain effective internal control over financial reporting.

We are subject to evolving federal, state, and international data privacy and cybersecurity laws and regulations, as well as contractual obligations with third parties, which require us to safeguard information and, in certain circumstances, provide notice of data breaches. Compliance with these requirements may increase our costs, and any failure to comply could result in regulatory investigations, litigation, fines, or other liabilities.

Although we maintain cybersecurity policies, procedures, and technical safeguards designed to protect our systems and data, these measures may not be sufficient to prevent all incidents. Any significant cybersecurity breach or disruption could materially adversely affect our business, results of operations, financial condition, and liquidity.

Risks Related to Regulatory Approval of Our Products and Other Government Regulations

Contracting with government entities exposes us to additional risks inherent in the government procurement process.

We provide products and services, directly and indirectly, to a variety of domestic government entities, which introduces certain risks, including extended sales and collection cycles, varying governmental budgeting processes and adherence to complex procurement regulations and other government-specific contractual requirements. We have been, are currently and may in the future be subject to audits and investigations relating to our government contracts and any violations could result in various civil and criminal penalties and administrative sanctions, including termination of contracts, payment of fines and suspension or debarment from future government business, as well as harm to our reputation and financial results.

We design, manufacture and service products that incorporate advanced technologies; the introduction of new products and technologies involves risks, and we may not realize the degree or timing of benefits initially anticipated; competition may reduce our revenues and segment share and limit our future opportunities.

We seek to achieve growth through the design, development, production, sale and support of innovative commercial products that incorporate advanced technologies. The product, program and service needs of our customers change and evolve regularly, and we invest substantial amounts in research and development efforts to pursue advancements in a wide range of technologies, products and services. Our ability to realize the anticipated benefits of our technological advancements depends on a variety of factors, including meeting development, production, certification and regulatory approval schedules; receiving regulatory approvals; execution of internal and external performance plans; availability of supplier and internally produced parts and materials; performance of suppliers and subcontractors; availability of supplier and internal facility capacity to perform maintenance, repair and overhaul services on our products; hiring and training of qualified personnel; achieving cost and production efficiencies; identification of emerging technological trends for our target end-customers (such as sustainable technologies, as described below); validation of innovative technologies; risks associated with the development of complex software; the level of customer interest in new technologies and products; and customer acceptance of products we manufacture or that incorporate technologies we develop. In addition, many of our products must adhere to strict regulatory and market-driven safety and performance standards in a variety of jurisdictions. The evolving nature of these standards, along with the long duration of development, production and aftermarket support programs, creates uncertainty regarding program profitability, particularly with our aircraft engine products. Development efforts divert resources from other potential investments in our businesses, and these efforts may not lead to the development of new technologies or products on a timely basis or meet the needs of our customers as fully as competitive offerings. In addition, the industries for our products or products that incorporate our technologies may not develop or grow as we anticipate. We or our customers, suppliers or subcontractors may encounter difficulties in developing and producing new products and services, and may not realize the degree or timing of benefits initially anticipated or may otherwise suffer significant adverse financial consequences. Due to the design complexity of our products or those of our customers or third-party manufacturers that incorporate our products into theirs or our customers’ products, we may experience delays in completing the development and introduction of new products or we may experience the suspension of production after these products enter into service due to safety concerns. Delays and/or suspension of production could result in increased development costs or deflect resources from other projects. We operate in highly competitive industries, and our competitors may have more extensive or more specialized engineering, manufacturing, marketing and servicing capabilities than we do. Our contracts are typically awarded on a competitive basis. Our bids are based upon, among other items, the cost to provide the products and services. To generate an acceptable return on our investment in these contracts, we must be able to accurately estimate our costs to provide the services and deliver the products and to be able to complete the contracts in a timely manner. If we fail to accurately estimate our costs or the time required to complete a contract, the profitability of our contracts may be materially and adversely affected. Furthermore, our competitors, including our customers, may develop competing technologies which gain industry acceptance in advance of or instead of our products, or meet particular in-demand technological needs before us or with technology that is superior to our existing or new technologies. For example, the enhanced focus on climate change has increased demand for more environmentally sustainable products and services, as described below. Our competitors may develop sustainable products or services that are available to our customers before our products or services, or that are adopted more readily than our products or services. In addition, our competitors or customers might develop new technologies or offerings that might cause our existing technologies and offerings to become obsolete or otherwise decrease demand for our offerings. In addition, the possibility exists that competitors or customers will develop aftermarket services and aftermarket parts for our products that attract customers and adversely impact our return on investment on new products. If we are unable to continue to compete successfully against our current or future competitors in our core businesses, we may experience declines in revenues and industry segment share. Any of the foregoing could have a material adverse effect on our competitive position, results of operations, financial condition or liquidity.

Exports and imports of certain of our products are subject to various export control, sanctions and import regulations and may require authorization from regulatory agencies of the U.S. or other countries.

We must comply with various laws and regulations relating to the export and import of products, services and technology from and into the U.S. and other countries having jurisdiction over our operations. In the U.S., these laws and regulations include, among others, the EAR administered by the U.S. Department of Commerce, the ITAR administered by the U.S. Department of State, embargoes and sanctions regulations administered by the U.S. Department of the Treasury, and import regulations administered by the U.S. Department of Homeland Security and the U.S. Department of Justice. Certain of our products, services and technologies have military or strategic applications and we are required to obtain licenses and authorizations from the appropriate U.S. government agencies before selling these products outside of the U.S. or importing these products into the U.S. U.S. foreign policy or foreign policy of other licensing jurisdictions may affect the licensing process or otherwise prevent us from engaging in business dealings with certain individuals, entities or countries. Any failure by us, our customers or our suppliers to comply with these laws and regulations could result in civil or criminal penalties, fines, seizure of our products, adverse publicity, restrictions on our ability to export or import our products, or the suspension or debarment from doing business with the U.S. government. Moreover, any changes in export control, sanctions or import regulations may further restrict the export of our products or services, and the possibility of such changes requires constant monitoring to ensure we remain compliant. Our ability to obtain required licenses and authorizations on a timely basis or at all is subject to risks and uncertainties, including changing U.S. government foreign policies or laws, delays in Congressional action, or geopolitical and other factors. If we are not successful in obtaining or maintaining the necessary licenses or authorizations in a timely manner, our sales relating to those approvals may be prevented or delayed, and revenue and profit previously recognized may be reversed. Any restrictions on the export or import of our products or product lines could have a material adverse effect on our competitive position, results of operations, financial condition or liquidity.

Our long-term success depends on our ability to obtain and maintain regulatory clearances and approvals for our medical products and product candidates, and we may be unable to do so in a timely manner or at all.

Our medical device products, including our silicon nitride spinal implants, extremity products such as the SiNAPTIC® foot and ankle wedge system, and any future medical device product candidates, are subject to extensive regulation by the U.S. Food and Drug Administration (FDA) and comparable regulatory authorities outside the United States. Before a new device may be commercially marketed in the United States, it generally must receive clearance under the FDA’s 510(k) premarket notification process, be authorized through the De Novo classification process, or obtain approval through the more rigorous premarket approval (PMA) process. These regulatory pathways are costly, time-consuming, and inherently uncertain.

Although many orthopedic devices are reviewed under the 510(k) process, the FDA may require additional non-clinical testing, clinical data, or other information to support a submission. Devices that we believe are eligible for 510(k) clearance may instead be required to undergo the De Novo or PMA processes, which typically involve greater data requirements and longer review periods. If we seek to conduct a clinical study of a significant risk device, we would be required to obtain FDA approval of an investigational device exemption (IDE) prior to initiating such study. Delays in preparing or submitting applications, responding to FDA requests for additional information, completing required testing, or obtaining IDE approval, if required, could delay or prevent commercialization of our product candidates or modifications to existing products.

Even after a device receives clearance or approval, we remain subject to ongoing regulatory requirements, including compliance with the FDA’s Quality System Regulation (which will transition to the Quality Management System Regulation (QMSR)), labeling and promotional restrictions, medical device reporting obligations, post-market surveillance, and FDA inspections. The FDA may disagree with our determination that a modification to a cleared device does not require a new premarket submission, which could result in enforcement actions such as warning letters, fines, product recalls, operating restrictions, or other corrective measures.

We are also subject to regulatory requirements in international markets, including under the European Union Medical Device Regulation (EU MDR) and other jurisdiction-specific frameworks. Approval processes, documentation standards, clinical evidence requirements, and timelines vary by jurisdiction, and regulatory approvals or certifications in one country do not ensure approval in another. Failure to obtain or maintain required regulatory authorizations in the United States or internationally, or significant delays in doing so, could prevent or delay commercialization of our products, increase our costs, and materially adversely affect our business, results of operations, and financial condition.

The safety and effectiveness of our products are not supported by long-term clinical data, and they may prove to be less safe or effective than our preclinical testing or limited clinical experience indicate.

We have received FDA clearance for our silicon nitride spinal implants and for the SiNAPTIC® foot and ankle wedge system, and we may seek additional regulatory clearances or approvals for future medical device products. Devices cleared through the FDA’s 510(k) process are generally required to demonstrate substantial equivalence to a legally marketed predicate device and often are supported primarily by bench testing, biocompatibility data, and other non-clinical information, rather than extensive long-term clinical trial data.

As a result, our currently marketed products and any future product candidates may not have been evaluated in long-term clinical studies prior to commercialization. Post-market surveillance, published clinical experience, or additional studies conducted by us or third parties may identify previously unrecognized adverse events, complications, or performance limitations. If our products are shown to be less safe or effective than anticipated, or if they are associated with unanticipated risks, we could be subject to regulatory enforcement actions, including recalls or withdrawal of marketing authorization, as well as product liability claims, negative publicity, reputational harm, and reduced market acceptance.

Any such developments could materially adversely affect our business, financial condition, and results of operations.

We may be required to generate clinical or additional supporting data for certain product candidates, which could increase costs and delay commercialization.

Although our currently marketed medical devices have been cleared through the FDA’s 510(k) process and we do not currently conduct, nor do we anticipate conducting, large-scale clinical trials for our existing product lines, the FDA may require clinical data or other additional testing to support future product candidates, new indications, or significant modifications to existing devices. If we seek to conduct a clinical study for a device that presents a significant risk, we would be required to obtain FDA approval of an investigational device exemption (IDE) before initiating such study.

Any requirement to conduct clinical studies could increase our development costs, require additional time and resources, and delay regulatory clearance or commercialization. Clinical studies, if required, are subject to regulatory oversight and may be affected by factors such as study design requirements, patient enrollment challenges, data variability, or adverse events. Even limited clinical investigations or post-market studies may produce results that are unfavorable or insufficient to support regulatory clearance or market acceptance.

If we are required to conduct more extensive clinical evaluations than anticipated, or if the results of any required studies are unfavorable, our ability to commercialize new or modified products could be delayed or prevented, which could materially adversely affect our business, financial condition, and results of operations.

Our relationships with healthcare providers, distributors, and third-party payers are subject to complex healthcare fraud and abuse, transparency, and privacy laws, and noncompliance could result in significant penalties and reputational harm.

Our sales, marketing, distribution, and other business arrangements with healthcare providers, hospitals, ambulatory surgery centers, distributors (including physician-owned distributorships), and other customers are subject to numerous federal, state, and foreign healthcare laws and regulations. These laws may affect the manner in which we promote, market, and sell our medical devices, including our spinal implants and the SiNAPTIC® foot and ankle wedge system.

In the United States, these laws include, among others, the federal Anti-Kickback Statute, which prohibits offering or receiving remuneration to induce referrals or purchases reimbursable under federal healthcare programs; the federal False Claims Act, which imposes civil and criminal liability for false or fraudulent claims for payment to the government; HIPAA and HITECH, which establish healthcare fraud offenses and impose privacy and security requirements for protected health information; and the Physician Payments Sunshine Act, which requires reporting of certain payments or transfers of value to physicians and teaching hospitals. Many states and foreign jurisdictions have adopted analogous fraud and abuse, transparency, and data privacy laws, some of which apply to commercial payers and may be broader in scope than federal requirements.

These laws are complex and subject to evolving interpretations. Our compliance efforts may require substantial resources, and we cannot assure that our business arrangements, or those of our distributors or customers, will not be challenged by governmental authorities. If our operations or relationships are found to violate applicable laws, we could be subject to significant civil, criminal, or administrative penalties, including fines, damages, exclusion from participation in government healthcare programs, contractual damages, reputational harm, and the restructuring of our operations. Any such action could materially adversely affect our business, results of operations, and financial condition.

Changes in effective tax rates or adverse outcomes resulting from examination of our income or other tax returns could adversely affect our results of operations and financial condition.

We are subject to taxes by the U.S. federal, state, local and foreign tax authorities, and our tax liabilities will be affected by the allocation of expenses to differing jurisdictions. Our future effective tax rates could be subject to volatility or adversely affected by a number of factors, including:

changes in the valuation of our deferred tax assets and liabilities;

expected timing and amount of the release of any tax valuation allowance;

tax effects of equity-based compensation;

changes in tax laws, regulations or interpretations thereof; or

future earnings being lower than anticipated in jurisdictions where we have lower statutory tax rates and higher than anticipated earnings in jurisdictions where we have higher statutory tax rates.

We may also be subject to audits of our income, sales and other transaction taxes by U.S. federal, state, local and foreign taxing authorities. Outcomes from these audits could have an adverse effect on our operating results and financial condition.

Changes in tax laws or their interpretation could adversely affect our business and the value of our securities.

U.S. federal, state, and foreign tax laws are subject to change, and such changes could adversely affect our financial condition, results of operations, cash flows, and the value of our securities. Legislative, administrative, or judicial developments may modify tax rates, the availability of tax credits or net operating loss carryforwards, the timing of income recognition, deductibility of expenses, or other tax attributes that affect us.

The Inflation Reduction Act of 2022 introduced significant changes to U.S. corporate taxation, including a 15% minimum tax on adjusted financial statement income for certain large corporations and a 1% excise tax on certain corporate stock repurchases. Although we do not currently expect to be subject to the corporate minimum tax based on our size and financial profile, future changes in our operations, profitability, ownership structure, or applicable law could affect our tax obligations. The stock repurchase excise tax may increase the cost of any future share repurchase transactions, if undertaken.

In addition, states and foreign jurisdictions may adopt new or revised tax laws, increase tax rates, or change the interpretation of existing laws. The impact of any such changes is uncertain and could result in increased tax expense, reduced cash flows, or additional compliance costs, which could materially adversely affect our business and the value of our securities.

Changes in healthcare laws, regulations, and reimbursement policies may increase our costs, delay regulatory review, and adversely affect pricing and demand for our products.

Healthcare systems in the United States and internationally are subject to ongoing legislative, regulatory, and policy changes intended to control costs, expand access, and improve quality. These changes may affect the regulatory requirements applicable to our medical devices, including our spinal implants and extremity products such as the SiNAPTIC® foot and ankle wedge system, as well as the reimbursement available for procedures in which our products are used.

In the United States, the FDA periodically updates its regulations, guidance, and policies governing the premarket review, clearance, and approval of medical devices, including the 510(k), De Novo, and PMA pathways. Regulatory expectations may evolve with respect to clinical data requirements, cybersecurity, quality systems (including the transition from the Quality System Regulation to the Quality Management System Regulation), and post-market surveillance. Such changes could increase the time and expense associated with obtaining or maintaining regulatory clearance or approval for our products or modifications thereto. In addition, the FDA retains authority to revisit prior clearance determinations in certain circumstances.

Healthcare reform efforts at the federal and state levels, as well as initiatives by commercial payers, may reduce coverage, limit reimbursement, or increase pricing pressures on medical device manufacturers. Value-based purchasing programs, bundled payment models, and other cost-containment initiatives may encourage hospitals and providers to seek lower-cost alternatives or restrict adoption of new technologies.

Internationally, many countries maintain government-sponsored healthcare systems that regulate pricing, reimbursement, and market access. The implementation of the European Union Medical Device Regulation (EU MDR) has increased regulatory scrutiny and compliance costs, and pricing and reimbursement controls in various jurisdictions may include price caps, mandatory discounts, reference pricing, and other measures designed to limit public expenditures. These policies may reduce the prices we are able to obtain for our products, limit patient access, or delay commercialization in certain markets.

Any significant changes in healthcare laws, regulations, or reimbursement policies could increase our regulatory and compliance burdens, reduce demand for our products, or adversely affect our revenues, profitability, and growth prospects.

Risks Related to Our Intellectual Property and Litigation

If the combination of patents, trade secrets and contractual provisions that we rely on to protect our intellectual property is inadequate, our ability to commercialize our products successfully will be harmed, and we may not be able to operate our business profitably.

Our success depends significantly on our ability to protect our proprietary rights to the technologies incorporated in our products. We rely on a combination of patent protection, trade secret laws and nondisclosure, confidentiality and other contractual restrictions to protect our proprietary technology. However, these may not adequately protect our rights or permit us to gain or keep any competitive advantage.

The issuance of a patent is not conclusive as to its scope, validity or enforceability. The scope, validity or enforceability of our issued patents can be challenged in litigation or proceedings before the U.S. Patent and Trademark Office, or the USPTO, or foreign patent offices. In addition, our pending patent applications include claims to numerous important aspects of our products under development that are not currently protected by any of our issued patents. We cannot assure you that any of our pending patent applications will result in the issuance of patents to us. The USPTO or foreign patent offices may deny or require significant narrowing of claims in our pending patent applications. Patents issued as a result of the pending patent applications, if any, may not provide us with significant commercial protection or be issued in a form that is advantageous to us. Proceedings before the USPTO or foreign patent offices could result in adverse decisions as to the priority of our inventions and the narrowing or invalidation of claims in issued patents. The laws of some foreign countries may not protect our intellectual property rights to the same extent as the laws of the United States, if at all.

Our competitors may successfully challenge and invalidate or render unenforceable our issued patents, including any patents that may be issued in the future, which could prevent or limit our ability to market our products and could limit our ability to stop competitors from marketing products that are substantially equivalent to ours. In addition, competitors may be able to design around our patents or develop products that provide outcomes that are comparable to our products but that are not covered by our patents.

We have also entered into confidentiality and assignment of intellectual property agreements with all of our employees, consultants and advisors as one of the ways we seek to protect our intellectual property and other proprietary technology. However, these agreements may not be enforceable or may not provide meaningful protection for our trade secrets or other proprietary information in the event of unauthorized use or disclosure or other breaches of the agreements.

In the event a competitor infringes upon any of our patents or other intellectual property rights, enforcing our rights may be difficult, time consuming and expensive, and would divert management’s attention from managing our business. There can be no assurance that we will be successful on the merits in any enforcement effort. In addition, we may not have sufficient resources to litigate, enforce or defend our intellectual property rights.

We have no patent protection covering the composition of matter for our solid silicon nitride or for all of the components of the process we use for manufacturing our silicon nitride, and competitors may create silicon nitride formulations substantially similar to ours.

Although we have a number of U.S. and foreign patents and pending applications relating to our solid silicon nitride products or product candidates, we have no patent protection either for the composition of matter for our silicon nitride or for the processes of manufacturing solid silicon nitride. As a result, competitors may create silicon nitride formulations substantially similar to ours and use their formulations in products that may compete with our silicon nitride products, provided they do not violate our issued product patents. Although we have, and will continue to develop, significant know-how related to these processes, there can be no assurance that we will be able to maintain this know-how as trade secrets, and competitors may develop or acquire equally valuable or more valuable know-how related to the manufacture of silicon nitride.

We could become subject to intellectual property litigation that could be costly, result in the diversion of management’s time and efforts, require us to pay damages, prevent us from marketing our commercially available products or product candidates and/or reduce the margins we may realize from our products that we may commercialize.

The medical devices industry is characterized by extensive litigation and administrative proceedings over patent and other intellectual property rights. Whether a product infringes a patent involves complex legal and factual issues, and the determination is often uncertain. There may be existing patents of which we are unaware that our products under development may inadvertently infringe. The likelihood that patent infringement claims may be brought against us increases as the number of participants in the orthopedic market increases and as we achieve more visibility in the marketplace and introduce products to market.

Any infringement claims against us, even if without merit, may cause us to incur substantial costs, and would place a significant strain on our financial resources, divert the attention of management from our core business, and harm our reputation. In some cases, litigation may be threatened or brought by a patent holding company or other adverse patent owner who has no relevant product revenues and against whom our patents may provide little or no deterrence. If we were found to infringe any patents, we could be required to pay substantial damages, including triple damages if an infringement is found to be willful, and royalties and could be prevented from selling our products unless we obtain a license or are able to redesign our products to avoid infringement. We may not be able to obtain a license enabling us to sell our products on reasonable terms, or at all, and there can be no assurance that we would be able to redesign our products in a way that would not infringe those patents. If we fail to obtain any required licenses or make any necessary changes to our technologies or the products that incorporate them, we may be unable to commercialize one or more of our products or may have to withdraw products from the market, all of which would have a material adverse effect on our business, financial condition and results of operations.

In addition, in order to further our product development efforts, we have entered into agreements with orthopedic surgeons to help us design and develop new products, and we expect to enter into similar agreements in the future. In certain instances, we have agreed to pay such surgeons royalties on sales of products which incorporate their product development contributions. There can be no assurance that surgeons with whom we have entered into such arrangements will not claim to be entitled to a royalty even if we do not believe that such products were developed by cooperative involvement between us and such surgeons. In addition, some of our surgeon advisors are employed by academic or medical institutions or have agreements with other orthopedic companies pursuant to which they have agreed to assign or are under an obligation to assign to those other companies or institutions their rights in inventions which they conceive or develop or help conceive or develop.

There can be no assurance that one or more of these orthopedic companies or institutions will not claim ownership rights to an invention we develop in collaboration with our surgeon advisors or consultants on the basis that an agreement with such orthopedic company or institution gives it ownership rights in the invention or that our surgeon advisors on consultants otherwise have an obligation to assign such inventions to such company or institution. Any such claim against us, even without merit, may cause us to incur substantial costs, and would place a significant strain on our financial resources, divert the attention of management from our core business and harm our reputation.

We may be subject to damages resulting from claims that we have wrongfully used or disclosed alleged trade secrets of our competitors or are in breach of non-competition agreements with our competitors or non-solicitation agreements.

Some of our employees were previously employed at other medical device or ceramic companies, including our competitors and potential competitors. Many of our former distributors and potential distributors sell, or in the past have sold, products of our competitors. We may be subject to claims that either we, or these employees or distributors, have inadvertently or otherwise used or disclosed the trade secrets or other proprietary information of our competitors. In addition, we have been and may in the future be subject to claims that we caused an employee or sales agent to break the terms of his or her non-competition agreement or non-solicitation agreement. Litigation may be necessary to defend against these claims. Even if we are successful in defending against these claims, litigation could result in substantial costs and be a distraction to management. If we fail in defending such claims, in addition to paying money damages, we may lose valuable intellectual property rights or personnel. A loss of key personnel or their work product could hamper or prevent our ability to commercialize products, which could have an adverse effect on our business, financial condition and results of operations.

If our advanced ceramic products or our product candidates conflict with the rights of others, we may not be able to manufacture or market our products or product candidates, which could have a material and adverse effect on us.

Our commercial success will depend in part on not infringing the patents or violating the other proprietary rights of third parties. Issued patents held by others may limit our ability to develop commercial products. All issued patents are entitled to a presumption of validity under the laws of the United States. If we need suitable licenses to such patents to permit us to develop or market our product candidates, we may be required to pay significant fees or royalties, and we cannot be certain that we would even be able to obtain such licenses. Competitors or third parties may obtain patents that may cover subject matter we use in developing the technology required to bring our products to market, that we use in producing our products, or that we use in treating patients with our products. We know that others have filed patent applications in various jurisdictions that relate to several areas in which we are developing products. Some of these patent applications have already resulted in patents and some are still pending. If we were found to infringe any of these issued patents or any of the pending patent applications, when and if issued, we may be required to alter our processes or product candidates, pay licensing fees or cease activities. If use of technology incorporated into or used to produce our product candidates is challenged, or if our processes or product candidates conflict with patent rights of others, third parties could bring legal actions against us, in Europe, the United States and elsewhere, claiming damages and seeking to enjoin manufacturing and marketing of the affected products. Additionally, it is not possible to predict with certainty what patent claims may issue from pending applications. In the United States, for example, patent prosecution can proceed in secret prior to issuance of a patent, provided such application is not filed in foreign jurisdiction. For U.S. patent applications that are also filed in foreign jurisdictions, such patent applications will not publish until 18 months from the filing date of the application. As a result, third parties may be able to obtain patents with claims relating to our product candidates which they could attempt to assert against us. Further, as we develop our products, third parties may assert that we infringe the patents currently held or licensed by them, and we cannot predict the outcome of any such action.

There has been extensive litigation in the medical devices industry over patents and other proprietary rights. If we become involved in any litigation, it could consume a substantial portion of our resources, regardless of the outcome of the litigation. If these legal actions are successful, in addition to any potential liability for damages, we could be required to obtain a license, grant cross-licenses and pay substantial royalties in order to continue to manufacture or market the affected products.

We cannot assure you that we would prevail in any legal action or that any license required under a third-party patent would be made available on acceptable terms, or at all. Ultimately, we could be prevented from commercializing a product, or forced to cease some aspect of our business operations, as a result of claims of patent infringement or violation of other intellectual property rights, which could have a material and adverse effect on our business, financial condition and results of operations.

Risks Related to Potential Litigation from Operating Our Business

We may become subject to potential product liability claims, and we may be required to pay damages that exceed our insurance coverage.

Our business exposes us to potential product liability claims that are inherent in the design, testing, manufacture, sale and distribution of our currently marketed products and each of our product candidates that we are seeking to introduce to the market. The use of orthopedic medical devices can involve significant risks of serious complications, including bleeding, nerve injury, paralysis, infection, and even death. Any product liability claim brought against us, with or without merit, could result in an increase of our product liability insurance rates or in our inability to secure coverage in the future on commercially reasonable terms, if at all. In addition, if our product liability insurance proves to be inadequate to pay a damage award, we may have to pay the excess of this award out of our cash reserves, which could significantly harm our financial condition. If longer-term patient results and experience indicate that our products or any component of a product causes tissue damage, motor impairment or other adverse effects, we could be subject to significant liability. A product liability claim, even one without merit, could harm our reputation in the industry, lead to significant legal fees, and result in the diversion of management’s attention from managing our business.

Any claims relating to our improper handling, storage or disposal of biological or hazardous materials could be time consuming and costly.

Although we do not believe that the manufacture of our silicon nitride or non-silicon nitride products will involve the use of hazardous materials, it is possible that regulatory authorities may disagree or that changes to our manufacturing processes may result in such use. Our business and facilities and those of our suppliers and future suppliers may therefore be subject to foreign, federal, state and local laws and regulations governing the use, manufacture, storage, handling and disposal of hazardous materials and waste products. We may incur significant expenses in the future relating to any failure to comply with environmental laws. Any such future expenses or liability could have a significant negative impact on our business, financial condition and results of operations.

Risks Related to Public Companies

We are a “smaller reporting company” and the reduced disclosure requirements applicable to smaller reporting companies may make our common stock less attractive to investors.

We are currently a “smaller reporting company” as defined in the Securities Exchange Act of 1934. Smaller reporting companies are able to provide simplified executive compensation disclosures in their filings, are exempt from the provisions of Section 404(b) of the Sarbanes-Oxley Act requiring that independent registered public accounting firms provide an attestation report on the effectiveness of internal control over financial reporting, and have certain other decreased disclosure obligations in their SEC filings, including, among other things, only being required to provide two years of audited financial statements in annual reports. We cannot predict whether investors will find our common stock less attractive because of our reliance on any of these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock, and our stock price may be more volatile.

We incur substantial costs as a result of being a public company and our management expects to devote substantial time to public company compliance programs.

As a public company, we incur significant legal, insurance, accounting and other expenses, including costs associated with public company reporting. We intend to invest resources to comply with evolving laws, regulations and standards, and this investment will result in increased general and administrative expenses and may divert management’s time and attention from product development and commercialization activities. If our efforts to comply with new laws, regulations and standards differ from the activities intended by regulatory or governing bodies due to ambiguities related to practice, regulatory authorities may initiate legal proceedings against us, and our business may be harmed. These laws and regulations could make it more difficult and costlier for us to obtain director and officer liability insurance for our directors and officers, and we may be required to accept reduced coverage or incur substantially higher costs to obtain coverage. These factors could also make it more difficult for us to attract and retain qualified executive officers and qualified members of our board of directors, particularly to serve on our audit and compensation committees. In addition, if we are unable to continue to meet the legal, regulatory and other requirements related to being a public company, we may not be able to maintain the listing of our common stock on the Nasdaq Capital Market, which would likely have a material adverse effect on the trading price of our common stock.

We may not be able to maintain our listing on the Nasdaq Capital Market, which would adversely affect the price and liquidity of our common stock.

As a small capitalization company, the price of our common shares has been, and is likely to continue to be, highly volatile. Any announcements concerning us or our competitors, quarterly variations in operating results, introduction of new products, delays in the introduction of new products or changes in product pricing policies by us or our competitors, acquisition or loss of significant customers, partners and suppliers, changes in earnings estimates or our ratings by analysts, regulatory developments, or fluctuations in the economy or general market conditions, among other factors, could cause the market price of our common shares to fluctuate substantially. There can be no assurance that the market price of our common shares will not decline below its current price or that it will not experience significant fluctuations in the future, including fluctuations that are unrelated to our performance.

Currently our common stock is quoted on the Nasdaq Capital Market under the symbol “SINT.” We must satisfy certain minimum listing maintenance requirements to maintain the Nasdaq Capital Market quotation, including certain governance requirements and a series of financial tests relating to stockholders’ equity or net income or market value, public float, number of market makers and stockholder, market capitalization, and maintaining a minimum bid price of $1.00 per share.

ITEM 7.

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 together with our consolidated financial statements and related notes appearing elsewhere in this Annual Report. This discussion and analysis contain 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 “Risk Factors” and elsewhere in this Annual Report.

Overview

SINTX Technologies is an advanced ceramics company formed in December 1996 that develops, manufactures, and commercializes silicon nitride biomaterials, composites, devices, and related technologies for medical and other high-value applications. SINTX provides biomedical solutions for medical devices specializing in silicon nitride (Si₃N₄) for musculoskeletal and antipathogenic applications. We also manufacture parts made from silicon nitride for customers in the electrical, aerospace and other industrial sectors. SINTX is a global leader in the research, development, and manufacturing of silicon nitride, and its products have been implanted in humans since 2008.

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.

Revenue

Our product revenue is derived from the manufacture and sale of products. These revenue sources include coatings, materials, and components for aerospace and medical device markets, toll processing services, and government contracts and grants. 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.

We believe our product revenue will increase as we secure opportunities to manufacture third party products with silicon nitride, and as we continue to introduce new products into the market.

We derive grant and contract revenue from awards provided by governmental agencies. The goal of these grants and contracts is ultimately to develop revenue producing products.

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.

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 medical devices, industrial and ceramic armor products, product candidates for antipathogenic applications, 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

Year Ended December 31, 2025 Compared to the Year Ended December 31, 2024

The following table sets forth, for the periods indicated, our results of operations for the years ended December 31, 2025 and 2024 (dollars, in thousands):

Year Ended December 31,

$ Change

% Change

Product revenue

Grant and contract revenue

Total revenue

Cost of revenue

Gross profit

Operating expenses:

Research and development

General and administrative

Sales and marketing

Armor exit costs

Reduction in force

Grant and contract expense

Total operating expenses

Loss from operations

Other income (expense), net

Net loss before income taxes

Provision for income taxes

Net loss

Revenue

Product revenue decreased $0.5 million, or 41%, compared to the same period in 2024. Grant and contract revenue decreased $1.4 million, or 82%, compared to the same period in 2024.

Revenue trends and strategic focus

The decrease in total revenue was primarily due to the Company’s ongoing strategic repositioning away from non-core, low-margin OEM technical manufacturing contracts that did not support long-term profitability. This planned reduction in OEM-related revenue is consistent with our corporate shift toward commercializing proprietary silicon nitride-based biomedical devices, which we believe offer stronger margins, a more defensible competitive position, and better long-term value for shareholders.

While this strategic realignment has led to a decline in reported revenue, we believe it is a necessary step in positioning the Company for sustainable growth. During this transitional period, we continue to invest in the development and regulatory advancement of silicon nitride-based orthopedic and surgical implants, as evidenced by the recently received 510(k) clearance for osteotomy wedges used in foot and ankle fusion procedures. Additionally, we entered into a private label agreement to supply OsseoSculpt™, a next-generation biologic designed to complement the foot and ankle osteotomy wedges. We began recognizing commercial revenue from OsseoSculpt™ in the second half of 2025. We believe that these products will serve as key revenue drivers in 2026.

Cost of Revenue and Gross Profit

Cost of revenue decreased $0.3 million, or 31%, compared to the same period in 2024, while gross profit decreased $1.6 million, or 78%, for the same period. These decreases were primarily due to the decrease in revenue mentioned above.

Research and Development Expenses

Research and development expenses decreased $0.6 million, or 12%, compared to the same period in 2024. This decrease was primarily due to a decrease in payroll related costs, patent expenses, prototypes, and outside consulting costs, partially offset by an increase in costs related to a research agreement.

General and Administrative Expenses

General and administrative expenses increased $2.2 million, or 55%, compared to the same period in 2024. This increase is primarily due to increased stock-based compensation and other headcount related costs, and fees paid to departing members of the board of directors, partially offset by lower legal expenses and outside consulting costs.

Sales and Marketing Expenses

Sales and marketing expenses decreased $0.4 million, or 61%, compared to the same period in 2024. This decrease was primarily due to decreases in payroll related costs and outside consulting costs.

Armor Exit Costs

Armor exit costs decreased $4.6 million, or 100%, compared to the same period in 2024. This decrease was attributable to the asset impairment costs at the SINTX Armor facility.

Reduction in Force Expenses

Reduction in force expenses decreased $0.4 million, or 100%, as compared to the same period in 2024. This decrease was attributable to payroll expenses related to severance and accrued vacation payouts.

Grant and Contract Expenses

Grant and contract expenses decreased $1.1 million, or 88%, compared to the same period in 2024. This decrease was primarily due to the decrease in grant and contract revenue associated with the sale of the TA&T subsidiary.

Other Income (Expense), Net

Other income (expense), net decreased $2.7 million, or 88%, compared to the same period in 2024. This decrease was primarily due to a $3.6 million decrease in the change in value of derivative liabilities, partially offset by $0.5 million change in derivative liabilities offering costs, a $0.3 million gain on disposal of property and equipment associated with SINTX Armor, and a $0.1 million increase in interest income.

Liquidity and Capital Resources

The 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 consolidated financial statements.

For the years ended December 31, 2025 and 2024, the Company incurred a net loss of $10.4 million and $11.0 million, respectively, and used cash in operations of $8.6 million and $8.6 million, respectively. The Company had an accumulated deficit of $292.1 million and $281.7 million as of December 31, 2025 and 2024, respectively. We will require substantial future capital in order to continue operating our business, conduct research and development and regulatory clearance and approval activities necessary to bring our products to market, and to establish effective marketing and sales capabilities. Our existing capital resources are not sufficient to enable us to fund the completion of the development and commercialization of all our product candidates.

To date, our 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. We expect that we will continue to generate operating losses and use cash in operations. Our continuation as a going concern is dependent upon its ability to increase sales, decrease expenses and raise additional funding. It is uncertain when, if ever, we will attain profitability and positive cash flows from operations or obtain additional financing.

We continue to seek opportunities to raise additional funding through equity and/or debt financing. However, such funding is not guaranteed and may not be available on favorable terms and may involve restrictive covenants. Any additional equity financing, if available, will most likely be dilutive to its current stockholders. If we are not able to obtain additional debt or equity financing, the impact on our company and business will be material and adverse.

The board of directors, together with management, remains focused on advancing our business strategy and focus. Our strategic emphasis is focused on utilizing our technology in making advancements in the biomedical sector. Historically engaged in both industrial and biomedical applications, we have prioritized the development and commercialization of innovative medical devices, leveraging our expertise in advanced ceramics and biomaterials. This renewed focus aligns with a commitment to improving patient outcomes through the creation of products designed for surgical, orthopedic, and other specialized medical applications. We are concentrating our resources on high-growth areas within the healthcare sector where our proprietary materials and technologies—such as silicon nitride—provide a distinct competitive advantage due to their unique strength, durability, and biocompatibility.

Through this transformation, as demonstrated by the recent FDA 510(k) clearance of our SiNAPTIC® Foot & Ankle Osteotomy Wedge System, our aim is to deliver meaningful innovations to the medical community. Our current research and development pipeline is centered on medical-grade devices that incorporate antimicrobial properties, enhanced imaging capabilities, and durability under physiological conditions, which are critical for orthopedic implants, spinal fusion devices, and other surgical tools. As we transition our focus away from industrial applications, we anticipate this strategic shift will enable us to better serve the medical sector, address critical unmet needs, and position SINTX as a leading provider in the medical device market. By focusing on partnerships and collaborations with healthcare institutions and industry leaders, we believe that we are positioned to expand our footprint in the medical device sector and drive shareholder value through sustainable, high-impact innovations.

On August 8, 2024, the board of directors approved a plan to implement a Company-wide reduction in the workforce. This decision was part of an ongoing strategic review of our operations aimed at improving operational efficiency and reducing costs.

On August 12, 2024, the board of directors approved a plan to cease efforts to make the armor plant operational. This decision was made to streamline operations and focus on core business areas that align with our long-term strategic goals. The armor plant had not been fully operational since the acquisition of the armor equipment in July 2021 and had been completely shut down since October 2023 due to the malfunctioning of the sintering furnace. In connection with this decision, we incurred an impairment charge of approximately $4.6 million during the year ended December 31, 2024. This charge primarily relates to the write-down of certain long-lived assets associated with the armor plant to their estimated fair value.

On February 19, 2025, we entered into an Entity Acquisition Agreement (the “Agreement”) with Tethon Corporation (“Tethon”), pursuant to which the Company sold to Tethon all of the issued and outstanding shares of TA&T in exchange for the assumption by Tethon of the outstanding liabilities of TA&T.

In October 2025, we received FDA 510(k) clearance for a new foot and ankle osteotomy wedge system, enabling SINTX’s commercial entry into reconstructive foot and ankle surgery in the United States. Revenue is expected to begin during the first half of 2026.

In October 2025, we entered into the 2025 ATM Agreement to sell shares of its common stock from time to time, through an “at the market offering” program, having an aggregate offering price of $6.4 million was filed with the SEC. As of December 31, 2025, there is $6.0 million remaining balance on the 2025 ATM Agreement.

In October 2025, we entered into a sublease agreement to lease the SINTX armor facility to a third party, which is expected to save the Company approximately $1.0 million over the sublease term.

While management has implemented plans intended to mitigate these conditions, we have concluded that substantial doubt exists about the Company’s ability to continue as a going concern for 12 months from the date these consolidated financial statements are issued. The consolidated financial statements do not include any adjustments that might result from the outcome of these uncertainties.

Cash Flows

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

Year Ended December 31,

Net cash used in operating activities

Net cash provided by (used in) investing activities

Net cash provided by financing activities

Net increase in cash and cash equivalents

Net Cash Used in Operating Activities

Net cash used in operating activities was $8.6 million in 2025, compared to $8.6 million used in 2024, remaining consistent year over year.

Net Cash Provided by (Used in) Investing Activities

Net cash provided by investing activities was $0.9 million during 2025, compared to $0.2 million used in investing activities during the same period in 2024, an increase of $1.1 million. The increase in cash provided by investing activities during 2025 was primarily due to $0.8 million in proceeds from the acquisition of Sinaptic Surgical, $0.5 million decrease in purchase of property and equipment and $0.3 million increase in proceeds from the sale of property and equipment, partially offset by a $0.5 million decrease in proceeds from notes receivable.

Net Cash Provided by Financing Activities

Net cash provided by financing activities was $8.2 million during 2025, compared to $9.1 million provided by financing activities during the same period in 2024, a decrease of $0.9 million. The $0.9 million decrease to net cash provided by financing activities was primarily attributable to a decrease in proceeds from issuance of warrant derivative liabilities of $3.4 million, and a decrease in proceeds from issuance of common stock and prefunded warrants of $1.7 million, partially offset by increases in proceeds from the exercise of warrants, net of cash fees, and deposit for stock issuance (in other current liabilities) of $3.6 million, proceeds from issuance of common stock in connection with ATM, net of fees of $0.3 million, and proceeds from issuance of warrants in connection with exercise of warrants of $0.2 million.

Indebtedness

Information with respect to our indebtedness may be found in Note 7 to the consolidated financial statements included in Part II, Item 8 of this Annual Report, which is incorporated by reference.

Off-Balance Sheet Arrangements

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

Related-Party Transactions

Information with respect to our related party transactions may be found in Note 14 to the consolidated financial statements included in Part II, Item 8 of this Annual Report, which is incorporated by reference.

Indemnification Agreements: We have entered into indemnification agreements with each of our executive officers and directors that require us to indemnify such persons against any and all expenses, including judgments, fines or penalties, attorney’s fees, witness fees or other professional fees and related disbursements and other out-of-pocket costs incurred, in connection with any action, suit, arbitration, alternative dispute resolution mechanism, investigation, inquiry or administrative hearing, whether threatened, pending or completed, to which any such person may be made a party by reason of the fact that such person is or was a director, officer, employee or agent of our company, provided that such director or officer acted in good faith and in a manner that the director or officer reasonably believed to be in, or not opposed to, our best interests. The indemnification agreements also set forth procedures that will apply in the event of a claim for indemnification thereunder. We believe that these provisions and agreements are necessary to attract and retain qualified persons as directors and officers.

Seasonality and Backlog

Our business is generally not seasonal in nature. The majority of our product revenue is derived from the manufacture and sale of spinal fusion products, used in the treatment of spine disorders, to CTL Medical. We also retained CTL Medical to act as our exclusive broker to offer for sale, and sell, our manufacturing services to third party developers of spinal implants and spinal devices that incorporate silicon nitride technology, which has a remaining term through 2028. CTL Medical’s sales generally consist of products that are in stock with them or maintained at hospitals or with their sales distributors. Accordingly, we do not have a backlog of sales orders.

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, 2024. There have been no material changes to those policies for the year ended December 31, 2025. The preparation of the consolidated 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 and other contingencies as well as 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 consolidated financial statements.

New Accounting Pronouncements

Information with respect to new accounting pronouncements may be found in Note 1 to the consolidated financial statements included in Part II, Item 8 of this Annual Report, which is incorporated by reference.

Revenue Recognition

The Company derives its product revenue primarily from the sale of aerospace components and spinal fusion products, used in the treatment of spine disorders to CTL Medical, with whom the Company has a 10-year exclusive sales agreement in place, through 2028. The Company is currently pursuing other sales opportunities for silicon nitride outside the spinal fusion application. The sale of the Company’s products has a single performance obligation and revenue is recognized at the time the product is shipped to the customer. In general, the Company’s customers do not have any rights of return or exchange.

Revenue is recognized when control of the goods or services promised under the contract is transferred to the customer either at a point in time (e.g., upon delivery) or over time (e.g., as performed under the contract). The Company accounts for a contract when it has approval and commitment from both parties, the rights and payment terms of the parties are identified, the contract has commercial substance and collectability of consideration is probable. Contracts are reviewed to determine whether there is one or multiple performance obligations. A performance obligation is a promise to transfer a distinct good or service to a customer and represents the unit of accounting for revenue recognition. For contracts with multiple performance obligations, the expected consideration, or the transaction price, is allocated to each performance obligation identified in the contract based on the relative standalone selling price of each performance obligation. Revenue is then recognized for the transaction price allocated to the performance obligation when control of the promised goods or services underlying the performance obligation is transferred. Contract consideration is not adjusted for the effects of a significant financing component when, at contract inception, the period between when control transfers and when the customer will pay for that good or service is one year or less. Contact modifications that provide for additional distinct goods or services at the standalone selling price are treated as separate contracts. The transaction price for our contracts reflects our estimate of returns, rebates and discounts, which historically have not been significant. Amounts billed to customers for shipping and handling are included in the transaction price and generally are not treated as separate performance obligations as these costs fulfill a promise to transfer the product to the customer. The Company does not employ salespeople to actively seek additional customers; there are no incremental costs for obtaining customers that need to be capitalized.

Account and Other Receivables and Allowance for Credit Losses Doubtful Accounts

Financial assets, which potentially subject the Company to credit losses, consist primarily of receivables. We measure expected credit losses of financial assets based on historical loss and other information available to management using type of receivable (commercial, grants or contracts, retainage, or other) and different aging categories (less than 90 days past due, over 90 days past due, over 180 days past due, and financially troubled customers). These expected credit losses are recorded to an allowance for credit losses valuation account that is deducted from receivables to present the net amount expected to be collected on the financial asset on the consolidated balance sheet. Management believes that the historical loss information it has compiled is a reasonable basis on which to determine expected credit losses for trade receivables held as of December 31, 2025, because the composition of the trade receivables as of that date is consistent with that used in developing the historical credit-loss percentages (i.e., the similar risk characteristics of its customers and its lending practices have not changed significantly over time).

Inventories

Inventories are stated at the lower of cost or net realizable value, with cost for manufactured inventory determined under the standard costs, which approximate actual costs, determined on the first-in first-out (“FIFO”) method. Manufactured inventory consists of raw material, direct labor and manufacturing overhead cost components. The Company reviews the carrying value of inventory on a periodic basis for excess or obsolete items, and records any write-down as a cost of revenue, as necessary.

Long Lived Intangible Assets

The Company evaluates the carrying value of intangibles when events or changes in circumstances indicate that the carrying value may not be recoverable. Factors the Company considers important which could trigger an impairment review include, but are not limited to, significant under-performance relative to historical or projected future operating results, significant changes in the manner of its use of acquired assets or its overall business strategy, and significant industry or economic trends. The Company amortizes definite-lived intangible assets on a straight-line basis over their useful lives. The Company recorded no impairment for definite-lived intangible assets during the year ended December 31, 2025.

Goodwill

Goodwill represents the excess of the purchase price over the fair market value of identifiable net assets. Goodwill is not amortized, but rather is tested at the reporting unit level at least annually for impairment or more frequently if triggering events or changes in circumstances indicate impairment. Initially, qualitative factors are considered to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. Some of these qualitative factors may include macroeconomic conditions, industry and market considerations, a change in financial performance, entity-specific events, a sustained decrease in share price, and consideration of the difference between the fair value and carrying amount of a reporting unit as determined in the most recent quantitative assessment. If, through this qualitative assessment, the conclusion is made that it is more likely than not that a reporting unit’s fair value is less than its carrying amount, a quantitative impairment analysis is performed. This analysis involves estimating the fair value of a reporting unit using widely accepted valuation methodologies including the income and market approaches, which requires the use of estimates and assumptions. These estimates and assumptions include revenue growth rates, discount rates, and determination of appropriate comparable entities. If the fair value of the reporting unit is less than its carrying amount, an impairment loss is recognized in an amount equal to the excess of the carrying amount over the fair value of the reporting unit, not to exceed the carrying amount of the goodwill. The Company recorded no impairment for goodwill during the year ended December 31, 2025.

Property and Equipment

Property and equipment, including leasehold improvements, are stated at cost, less accumulated depreciation and amortization. Property and equipment are depreciated using the straight-line method over the estimated useful lives of the assets, which range from three to five years. Leasehold improvements are amortized over the shorter of their estimated useful lives or the related lease term, generally five years.

The Company reviews the carrying value of the Company’s property and equipment that are held and used in the Company’s operations for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of these assets is determined based upon expected undiscounted future net cash flows from the operations to which the assets relate, utilizing management’s best estimate, assumptions, and projections at the time. If the carrying value is determined to be unrecoverable from future operating cash flows, the asset is deemed impaired, and an impairment charge would be recognized to the extent the carrying value exceeded the estimated fair value of the asset. The Company estimates the fair value of assets based on the estimated future discounted cash flows of the asset.

Income Taxes

The Company recognizes deferred tax assets and liabilities for the future tax consequences attributable to the differences between the financial statement carrying value of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the fiscal year in which those temporary differences are expected to be recovered or settled. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized.

The Company operates in various tax jurisdictions and is subject to audit by various tax authorities. The Company provides for tax contingencies whenever it is deemed probable that a tax asset has been impaired, or a tax liability has been incurred for events such as tax claims or changes in tax laws. Tax contingencies are based upon their technical merits relative tax law and the specific facts and circumstances as of each reporting period. Changes in facts and circumstances could result in material changes to the amounts recorded for such tax contingencies.

The Company recognizes uncertain income tax positions taken on income tax returns at the largest amount that is more-likely than-not to be sustained upon audit by the relevant taxing authority. An uncertain income tax position will not be recognized if it has less than a 50% likelihood of being sustained.

The Company’s policy for recording interest and penalties associated with uncertain tax positions is to record such items as a component of our income tax provision. For the years ended December 31, 2025 and 2024, the Company did not record any material interest income, interest expense or penalties related to uncertain tax positions or the settlement of audits for prior periods.

Stock-Based Compensation

The Company measures stock-based compensation expense related to employee stock-based awards based on the estimated fair value of the awards as determined on the date of grant and is recognized as expense over the remaining requisite service period. The Company utilizes the Black-Scholes-Merton option pricing model to estimate the fair value of employee stock options. The Black-Scholes-Merton model requires the input of highly subjective and complex assumptions, including the estimated fair value of the Company’s common stock on the date of grant, the expected term of the stock option, and the expected volatility of the Company’s common stock over the period equal to the expected term of the grant. The Company estimates forfeitures at the date of grant and revises the estimates, if necessary, in subsequent periods if actual forfeitures differ from those estimates. The Company accounts for stock options to purchase shares of stock that are issued to non-employees based on the estimated fair value of such instruments using the Black-Scholes-Merton option pricing model.

Derivative Liabilities

Derivative liabilities include the fair value of instruments such as common stock warrants, preferred stock warrants and convertible features of notes, which are initially recorded at fair value and are required to be re-measured to fair value at each reporting period. The change in fair value of the instruments is recognized as a component of other income (expense) in the Company’s consolidated statements of operations until the instruments settle, expire or are no longer classified as derivative liabilities. The Company estimates the fair value of these instruments using the Black-Scholes-Merton or Monte-Carlo valuation models depending on the complexity of the underlying instrument. The significant assumptions used in estimating the fair value include the exercise price, volatility of the stock underlying the instrument, risk-free interest rate, estimated fair value of the stock underlying the instrument and the estimated life of the instrument.