Annual Report for Fiscal Year Ending December 31, 2025 (Form 10-K)

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,
		2025				2024				$ Change				% Change
Product revenue		$	729			$	1,246			$	(517	)			-41	%
Grant and contract revenue			289				1,641				(1,352	)			-82	%
Total revenue			1,018				2,887				(1,869	)			-65	%
Cost of revenue			557				811				(254	)			-31	%
Gross profit			461				2,076				(1,615	)			-78	%
Operating expenses:
Research and development			4,587				5,201				(614	)			-12	%
General and administrative			6,197				3,997				2,200				55	%
Sales and marketing			242				614				(372	)			-61	%
Armor exit costs			-				4,602				(4,602	)			-100	%
Reduction in force			-				407				(407	)			-100	%
Grant and contract expense			156				1,302				(1,146	)			-88	%
Total operating expenses			11,182				16,123				(4,941	)			-31	%
Loss from operations			(10,721	)			(14,047	)			3,326				-24	%
Other income (expense), net			357				3,023				(2,666	)			-88	%
Net loss before income taxes			(10,364	)			(11,024	)			660				-6	%
Provision for income taxes			-				-				-				-	%
Net loss		$	(10,364	)		$	(11,024	)		$	660				-6	%

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,
		2025				2024
Net cash used in operating activities		$	(8,571	)		$	(8,642	)
Net cash provided by (used in) investing activities			913				(194	)
Net cash provided by financing activities			8,200				9,094
Net increase in cash and cash equivalents		$	542			$	258

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.