SkyAI, Inc 10-Q for FY2024 Q3
SkyAI, Inc. (SKYA)
About this 10-Q
SkyAI, Inc filed this 10-Q on November 14, 2024, covering the quarter ended September 30, 2024 (FY2024 Q3).
Headline figures
Quarter ended September 30, 2024, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Net loss
- $1.69M
- compared with a net loss of $2.02M a year earlier
- Diluted EPS
- -$1.27
- compared with -$3.77 a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
For
the quarterly period ended
or
For the transition period from _______ to _______
Commission
file number:
(Exact name of registrant as specified in its charter)
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(I.R.S. Employer Identification No.) |
(Address of principal executive offices) (Zip Code)
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Indicate
by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule
405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant
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Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☐ |
| ☒ | Smaller reporting company | ||
| Emerging growth company |
If
an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No
As of November 14, 2024, the issuer had shares of common stock, par value $ per share, outstanding.
SHARPS TECHNOLOGY, INC.
TABLE OF CONTENTS
| Page No. | ||
| PART I FINANCIAL INFORMATION | ||
| ITEM 1. | FINANCIAL STATEMENTS (Unaudited) | |
| Condensed Consolidated Balance Sheets | 1 | |
| Condensed Consolidated Statements of Operations | 2 | |
| Condensed Consolidated Statement of Comprehensive Loss | 3 | |
| Condensed Consolidated Statements of Stockholders’ Equity | 4 | |
| Condensed Consolidated Statements of Cash Flows | 6 | |
| Notes to the Condensed Consolidated Financial Statements | 7 | |
| ITEM 2. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS | 22 |
| ITEM 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK | 32 |
| ITEM 4. | CONTROLS AND PROCEDURES | 32 |
| PART II OTHER INFORMATION | ||
| ITEM 1. | LEGAL PROCEEDINGS | 33 |
| ITEM 1A. | RISK FACTORS | 33 |
| ITEM 2. | UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS | 33 |
| ITEM 6. | EXHIBITS | 34 |
| SIGNATURES | 35 | |
| i |
SHARPS TECHNOLOGY, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
| September 30, 2024 | December 31, 2023 | |||||||
| (Unaudited) | (Audited) | |||||||
| Assets: | ||||||||
| Current Assets | ||||||||
| Cash | $ | $ | ||||||
| Prepaid expenses and other current assets | ||||||||
| Inventories, net (Note 3) | ||||||||
| Current Assets | ||||||||
| Fixed Assets, net of accumulated depreciation (Notes 4 and 5) | ||||||||
| Other Assets (Notes 6 and 7) | ||||||||
| TOTAL ASSETS | $ | $ | ||||||
| Liabilities: | ||||||||
| Current Liabilities | ||||||||
| Accounts payable | $ | $ | ||||||
| Accrued and other current liabilities (Notes 13 and 15) | ||||||||
| Notes Payable (Note 7) | ||||||||
| Warrant liability (Notes 8 and 10) | ||||||||
| Total Current Liabilities | ||||||||
| Deferred Tax Liability | ||||||||
| Total Liabilities | ||||||||
| Commitments and Contingencies (Note 15) | ||||||||
| Stockholders’ Equity: | ||||||||
| Preferred stock, $ par value; shares authorized; shares issued and outstanding (2023: ) | ||||||||
| Common stock, $ par value; , shares authorized; ( in 2023), shares issued and outstanding (2023: ) | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated other comprehensive income | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total Stockholders’ Equity | ||||||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | $ | ||||||
The accompanying notes are an integral part of these financial statements.
| 1 |
SHARPS TECHNOLOGY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER
(UNAUDITED)
| THREE
MONTHS ENDED SEPTEMBER 30, | NINE
MONTHS ENDED SEPTEMBER 30, | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| Revenue, net | $ | $ | $ | $ | ||||||||||||
| Operating expenses: | ||||||||||||||||
| Research and development | ||||||||||||||||
| General and administrative | ||||||||||||||||
| Total operating expenses | ||||||||||||||||
| Loss from operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other income (expense) | ||||||||||||||||
| Other (expense) income (Note 15) | ( | ) | ( | ) | ||||||||||||
| FMV adjustment warrants (Note 10) | ||||||||||||||||
| Foreign currency | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Total other income (expense) | ||||||||||||||||
| Net Loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Net loss per share, basic and diluted | $ | ) | $ | ) | $ | ) | $ | ) | ||||||||
| Weighted average shares used to compute net loss per share, basic and diluted (Note 1) | ||||||||||||||||
The accompanying notes are an integral part of these financial statements.
| 2 |
SHARPS TECHNOLOGY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30
(UNAUDITED)
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| THREE
MONTHS ENDED SEPTEMBER 30, | NINE
MONTHS ENDED SEPTEMBER 30, | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| Net loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Other comprehensive income: | ||||||||||||||||
| Foreign currency translation adjustments gain/(loss) | ( | ) | ( | ) | ||||||||||||
| Comprehensive loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
The accompanying notes are an integral part of these financial statements.
| 3 |
SHARPS TECHNOLOGY, INC.
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2024
(Unaudited)
| Shares | Amount | Shares | Amount | Capital | Income | Deficit | Equity | |||||||||||||||||||||||||
| Preferred Stock | Common Stock | Additional Paid in | Accumulated Other Comprehensive | Accumulated | Total Stockholders | |||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Income | Deficit | Equity | |||||||||||||||||||||||||
| Balance -December 31, 2023 | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||||||
| Net loss for the three months ended March 31, 2024 | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Share-based compensation charges | - | - | ||||||||||||||||||||||||||||||
| Exercise of Pre-Funded Warrants | - | |||||||||||||||||||||||||||||||
| Foreign Currency Translation | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Balance - March 31, 2024 | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||||||
| Net loss for the three months ended June 30, 2024 | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Share-based compensation charges | - | - | ||||||||||||||||||||||||||||||
| Exercise of Pre-Funded Warrants | - | |||||||||||||||||||||||||||||||
| Registration A Offering | - | |||||||||||||||||||||||||||||||
| Warrant Inducements | ||||||||||||||||||||||||||||||||
| Foreign Currency Translation | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Balance - June 30, 2024 | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||||||
| Net loss for the three months ended September 30, 2024 | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Cancellation of Preferred Share | ( | ) | - | |||||||||||||||||||||||||||||
| Share-based compensation charges | - | - | ||||||||||||||||||||||||||||||
| Issuance of Common Stock – see Note 7 | , | |||||||||||||||||||||||||||||||
| Warrant exercise | - | |||||||||||||||||||||||||||||||
| Foreign Currency Translation | - | - | ||||||||||||||||||||||||||||||
| Balance - September 30, 2024 | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||||||
| 4 |
SHARPS TECHNOLOGY, INC.
CONDENSED STATEMENT OF STOCKHOLDERS’ EQUITY
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2023
(Unaudited)
| Preferred Stock | Common Stock | Common Stock Subscription | Additional Paid in | Accumulated Other Comprehensive | Accumulated | Total Stockholders’ | ||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Receivable | Capital | Income | Deficit | Equity | ||||||||||||||||||||||||||||
| Balance -December 31, 2022 | | $ | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||||||||
| Net loss for the three months ended March 31, 2023 | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||||||
| Shares issued in Offering | ||||||||||||||||||||||||||||||||||||
| Share-based compensation charges | - | - | ||||||||||||||||||||||||||||||||||
| Foreign Currency Translation | - | |||||||||||||||||||||||||||||||||||
| Balance - March 31, 2023 | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||||||||||
| Net loss for the three months ended June 30, 2023 | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||||||
| Share-based compensation charges | - | - | ||||||||||||||||||||||||||||||||||
| Foreign Currency Translation | - | |||||||||||||||||||||||||||||||||||
| Balance - June 30, 2023 | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||||||||||
| Balance | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||||||||||
| Net loss for the three months ended September 30, 2023 | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||||||
| Net loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||||||
| Share-based compensation charges | - | - | ||||||||||||||||||||||||||||||||||
| Shelf Registration Offering – see Note 8 | - | |||||||||||||||||||||||||||||||||||
| Private Placement Offering – see Note 8 | - | |||||||||||||||||||||||||||||||||||
| Foreign Currency Translation | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||||
| Balance - September 30, 2023 | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||||||||||
| Balance | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||||||||||
The accompanying notes are an integral part of these financial statements
| 5 |
SHARPS TECHNOLOGY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30
(UNAUDITED)
| 2024 | 2023 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Depreciation and amortization | ||||||||
| Stock-based compensation | ||||||||
| Accretion of debt discount | ||||||||
| FMV adjustment for Warrants | ( | ) | ( | ) | ||||
| Equity Issuance costs | ||||||||
| Escrow forfeited | ||||||||
| Foreign exchange (gain)/loss | ||||||||
| Changes in operating assets: | ||||||||
| Prepaid expenses and other current assets | ( | ) | ( | ) | ||||
| Inventory | ( | ) | ( | ) | ||||
| Accounts payable and accrued liabilities | ( | ) | ) | |||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
| Acquisition of fixed assets or deposits paid | ( | ) | ( | ) | ||||
| Escrow payment under agreement | ( | ) | ( | ) | ||||
| Net cash used in investing activities | ( | ) | ( | ) | ||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
| Net proceeds from offerings and warrant exercises | ||||||||
| Net proceeds from Debt financing | ||||||||
| Net cash provided by financing activities | ||||||||
| Effect of exchange rate changes on cash | ( | ) | ( | ) | ||||
| NET INCREASE (DECREASE) IN CASH | ( | ) | ||||||
| CASH — BEGINNING OF YEAR | ||||||||
| CASH — END OF PERIOD | $ | $ | ||||||
The accompanying notes are an integral part of these financial statements.
| 6 |
SHARPS TECHNOLOGY, INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2024 AND 2023
Note 1. Description of Business
Nature of Business and Going Concern
Sharps Technology, Inc. (“Sharps” or the “Company”) is a pre-revenue medical device company that has designed and patented various safety syringes and is seeking commercialization by manufacturing and distribution of its products.
The accompanying condensed consolidated financial statements include the accounts of Sharps Technology, Inc., and its wholly owned subsidiaries, Safegard Medical, Kft. and Sharps Technology Acquisition Corp. collectively referred to as the “Company.” The condensed consolidated balance sheet as of September 30, 2024 and the condensed consolidated statements of operations, statements of comprehensive loss, statements of stockholders’ equity and the statements of cash flow for three and nine months ended September 30, 2024 and 2023 (the “interim statements”) are unaudited. All intercompany transactions and balances have been eliminated. In the opinion of management, all adjustments (which include normal recurring adjustments) necessary to present fairly the financial position and operating results for the interim periods have been made. Certain information and footnote disclosure, normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States, have been condensed or omitted. The interim statements should be read in conjunction with the consolidated financial statements for the year ended December 31, 2023 and notes thereto contained in the Company’s Form 10-K filed with the Securities and Exchange Commission. The condensed consolidated balance sheet at December 31, 2023 has been derived from the audited financial statements at that date. The results of operations for the three and nine months ended September 30, 2024 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2024.
The
accompanying condensed consolidated financial statements have been prepared assuming that the Company will continue as a going concern.
The Company has not generated revenue or cash flow from operations since inception. As of September 30, 2024, the Company had a working
capital of $
The Company’s fiscal year ends on December 31.
On
April 13, 2022, the Company’s Initial Public Offering was deemed effective with trading commencing on April 14, 2022. The Company
received net proceeds of $
Effective
October 16, 2024,
Note 2. Summary of Significant Accounting Policies
Basis of Presentation
The accompanying condensed consolidated financial statements have been prepared by the Company in accordance with generally accepted accounting principles (“GAAP”) in the United States (“U.S.”) and are expressed in U.S. dollars.
| 7 |
SHARPS TECHNOLOGY, INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2024 AND 2023
Note 2. Summary of Significant Accounting Policies (continued)
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. As of September 30, 2024, the most significant estimates relate to derivative liabilities, stock-based compensation, long-lived asset impairments and accounting for debt and equity financing.
Cash and Cash Equivalents
The
Company considers all highly liquid investments purchased with an original or remaining maturity of three months or less at the date
of purchase to be cash equivalents. Cash and cash equivalents are maintained with various financial institutions. At September 30, 2024
and December 31, 2023, the Company had
Inventories
The Company values inventory at the lower of cost (average cost) or net realizable value. Work-in-process and finished goods inventories consist of material, labor, and manufacturing overhead. Net realizable value is the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. A reserve is established for any excess or obsolete inventories or they may be written off. At September 30, 2024, and December 31, 2023, inventory is comprised of raw materials, including packaging, work in process (components) and finished goods.
Fair Value Measurements
ASC 820, Fair Value Measurements and Disclosures, requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 establishes a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. ASC 820 prioritizes the inputs into three levels that may be used to measure fair value.
The Company’s outstanding warrants are valued on a recurring basis with the trading price which could cause fluctuations in operating results at the reporting periods.
Level 1
Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities. Valuations are based on quoted prices that are readily and regularly available in an active market and do not entail a significant degree of judgment.
Level 2
Level 2 applied to assets or liabilities for which there are other than Level 1 observable inputs such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data.
Level 2 instruments require more management judgment and subjectivity as compared to Level 1 instruments. For instance: determining which instruments are most similar to the instrument being priced requires management to identify a sample of similar securities based on the coupon rates, maturity, issuer credit rating and instrument type, and subjectively select an individual security or multiple securities that are deemed most similar to the security being priced; and determining whether a market is considered active requires management judgment.
| 8 |
SHARPS TECHNOLOGY, INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2024 AND 2023
Note 2. Summary of Significant Accounting Policies (continued)
Level 3
Level 3 applied to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities. The determination for Level 3 instruments requires the most management judgment and subjectivity.
Fixed Assets
Fixed
assets are stated at cost. Expenditures for maintenance and repairs are charged to operations as incurred. The Company’s fixed
assets consist of land, building, machinery and equipment, molds and website. Depreciation is calculated using the straight-line method
commencing on the date the asset is operating in the way intended by management over the following useful lives: Building –
Impairment of Long-Lived Assets
Long-lived assets are reviewed for impairment or whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability is measured by comparison of the carrying amount of an asset group to the future net undiscounted cash flows that the assets are expected to generate. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the projected discounted future net cash flows arising from the asset.
There were impairment losses recognized during the three and nine months ended September 30, 2024 and 2023.
Purchased Identified Intangible Assets
The Company’s identified intangible assets are amortized on a straight-line basis over their estimated useful lives of 5 years. The Company makes judgments about the recoverability of finite-lived intangible assets whenever facts and circumstances indicate that the useful life is shorter than originally estimated or that the carrying amount of assets may not be recoverable. If such facts and circumstances exist, the Company assesses recoverability by comparing the projected undiscounted net cash flows associated with the related asset or group of assets over their remaining lives against their respective carrying amounts. Impairments, if any, are based on the excess of the carrying amount over the fair value of those assets. If the useful life is shorter than originally estimated, the Company would accelerate the rate of amortization and amortize the remaining carrying value over the new shorter useful life. The Company evaluates the carrying value of indefinite-lived intangible assets whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable, and an impairment charge would be recognized to the extent that the carrying amount of such assets exceeds their estimated fair value.
Stock-based Compensation Expense
The Company measures its stock-based awards made to employees based on the estimated fair values of the awards as of the grant date. For stock option awards, the Company uses the Black-Scholes option-pricing model. Stock-based compensation expense is recognized over the requisite service period and is based on the value of the portion of stock-based payment awards that is ultimately expected to vest. The Company recognizes forfeitures of stock-based awards as they occur on a prospective basis.
Stock-based compensation expense for awards granted to non-employees as consideration for services received is measured on the date of performance at the fair value of the consideration received or the fair value of the equity instruments issued, whichever can be more reliably measured.
| 9 |
SHARPS TECHNOLOGY, INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2024 AND 2023
Note 2. Summary of Significant Accounting Policies (continued)
Derivative Instruments
The Company accounts for common stock warrants as either equity-classified or liability-classified instruments based on an assessment of the specific terms of the warrants and applicable authoritative guidance in Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC 480”), Distinguishing Liabilities from Equity (“ASC 480”) and ASC 815, Derivatives and Hedging (“ASC 815”). The assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and meet all of the requirements for equity classification under ASC 815, including whether the warrants are indexed to the Company’s own stock and whether the holders of the warrants could potentially require net cash settlement in a circumstance outside of the Company’s control, among other conditions for equity classification. This assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent quarterly period end date while the warrants are outstanding.
At their issuance date and as of September 30, 2024, certain warrants (see Notes 8 and 10) were accounted for as liabilities as these instruments did not meet all of the requirements for equity classification under ASC 815-40 based on the terms of the aforementioned warrants. The resulting warrant liabilities are re-measured at each balance sheet date until their exercise or expiration, and any change in fair value is recognized in the Company’s condensed consolidated statements of operations.
Foreign Currency Translation/Transactions
The Company has determined that the functional currency for its foreign subsidiary is the local currency. For financial reporting purposes, assets and liabilities denominated in foreign currencies are translated at current exchange rates and profit and loss accounts are translated at weighted average exchange rates. Resulting translation gains and losses are included as a separate component of stockholders’ equity as accumulated other comprehensive income or loss. Gains or losses resulting from transactions entered into in other than the functional currency are recorded as foreign exchange gains and losses in the condensed consolidated statements of operations.
Comprehensive income (loss)
Comprehensive income (loss) consists of the Company’s consolidated net loss and foreign currency translation adjustments related to its subsidiary. Foreign currency translation adjustments included in comprehensive loss were not tax effected as the Company has a full valuation allowance at September 30, 2024 and December 31, 2023. Accumulated other comprehensive income (loss) is a separate component of stockholders’ equity and consists of the cumulative foreign currency translation adjustments.
The Company computes net loss per share in accordance with ASC 260, Earnings per Share. ASC 260 requires presentation of both basic and diluted earnings per share (EPS) on the face of the consolidated statements of operations. Basic EPS is computed by dividing net income (loss) available to common stockholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period using the treasury stock method and convertible preferred stock using the if-converted method. In computing diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all dilutive potential shares if their effect is anti-dilutive. As of September 30, 2024, there were stock options and warrants, post reverse split effected, that could potentially dilute basic EPS in the future that were not included in the computation of diluted EPS because to do so would have been anti-dilutive for the periods presented.
| 10 |
SHARPS TECHNOLOGY, INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2024 AND 2023
Note 2. Summary of Significant Accounting Policies (continued)
Income Taxes
The Company must make certain estimates and judgments in determining income tax expenses for financial statement purposes. These estimates and judgments are used in the calculation of tax credits, tax benefits, tax deductions, and in the calculation of certain deferred taxes and tax liabilities. Significant changes to these estimates may result in an increase or decrease to the Company’s tax provision in a subsequent period.
The provision for income taxes was comprised of the Company’s current tax liability and changes in deferred income tax assets and liabilities. The calculation of the current tax liability involves dealing with uncertainties in the application of complex tax laws and regulations and in determining the liability for tax positions, if any, taken on the Company’s tax returns in accordance with authoritative guidance on accounting for uncertainty in income taxes. Deferred income taxes are determined based on the differences between the financial reporting and tax basis of assets and liabilities. The Company must assess the likelihood that it will be able to recover the Company’s deferred tax assets. If recovery is not likely on a more-likely-than-not basis, the Company must increase its provision for income taxes by recording a valuation allowance against the deferred tax assets that it estimates will not ultimately be recoverable. However, should there be a change in the Company’s ability to recover its deferred tax assets, the provision for income taxes would fluctuate in the period of such change.
Research and Development Costs
Research and development costs are expensed as incurred.
Advance payments for goods or services that will be used or rendered for future research and development activities are deferred and capitalized. Such amounts are recognized as an expense as the related goods are delivered or the services are performed.
Contingencies
Liabilities for loss contingencies arising from claims, assessments, litigations, fines and penalties and other sources are recognized when it is probable that a liability has been incurred and the amount of the assessment can be reasonably estimated. Gain contingencies are evaluated and not recognized until the gain is realizable or realized.
Recent Accounting Pronouncements
On August 5, 2020, the FASB issued ASU 2020-06, Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40), which simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts on an entity’s own equity. The ASU is part of the FASB’s simplification initiative, which aims to reduce unnecessary complexity in U.S. GAAP. ASU 2020-06 simplifies the guidance in U.S. GAAP on the issuer’s accounting for convertible debt instruments, requires entities to provide expanded disclosures about “the terms and features of convertible instruments” and how the instruments have been reported in the entity’s financial statements. It also removes from ASC 815-40-25-10 certain conditions for equity classification and amends certain guidance in ASC 260, Earnings per Share, on the computation of EPS for convertible instruments and contracts on an entity’s own equity. An entity can use either a full or modified retrospective approach to adopt the ASU’s guidance. The ASU’s amendments are effective for smaller public business entities fiscal years beginning after December 15, 2023. The Company does not expect the pronouncement to have a material impact on the Company and will disclose the nature and reason for any elections that the Company makes.
| 11 |
SHARPS TECHNOLOGY, INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2024 AND 2023
Note 2. Summary of Significant Accounting Policies (continued)
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. The new guidance requires disaggregated information about the effective tax rate reconciliation and additional information on taxes paid that meet a quantitative threshold. The new guidance is effective for public companies for annual reporting periods beginning after December 15, 2024, a, with early adoption permitted. The Company is currently evaluating the impacts of the new guidance on its disclosures within the consolidated financial statements.
The Company does not expect the adoption of any accounting pronouncements to have a material impact on the condensed consolidated financial statements.
We reviewed all other recently issued accounting pronouncements and have concluded they are not applicable or not expected to be significant to the accounting for our operations.
Note 3. Inventories
Inventories, net consisted of the following at:
Schedule of Inventories
| September 30, 2024 | December 31, 2023 | |||||||
| Raw materials | $ | $ | ||||||
| Work in process | ||||||||
| Finished goods | ||||||||
| Total | $ | $ | ||||||
Note 4. Fixed Assets
Fixed assets, net, is summarized as follows as of:
Schedule of Fixed Assets, Net
| September 30, 2024 | December 31, 2023 | |||||||
| Land | $ | $ | ||||||
| Building | ||||||||
| Machinery and Equipment | ||||||||
| Computer Systems and Website & Other | ||||||||
| Total Fixed Assets | ||||||||
| Less: accumulated depreciation | ( | ) | ( | ) | ||||
| Fixed asset, net | $ | $ | ||||||
Depreciation
expense of fixed assets for the nine months ended September 30, 2024 and 2023 was $
| 12 |
SHARPS TECHNOLOGY, INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2024 AND 2023
Note 5. Asset Acquisition
Safegard Medical, Kft
In June 2020, the Company entered into a Share Purchase Agreement (“Agreement”) with Safegard Medical, Kft (“Safegard”) and amendments to the Agreement, collectively, the Agreements, to purchase either the stock or certain assets of a manufacturing facility for $M in cash, plus additional consideration of common stock and options with a fair market value of $ and $, respectively. The Agreements provided the Company various periods for due diligence and post due diligence, requirements for escrow payments through the closing date (“Closing Date”).
Through the Closing Date, the Agreements provided the Company with the exclusive use of the facility in exchange for payment of the facility’s operating costs. The monthly fee (“Operating Costs”), which primarily covered the facility’s operating costs, was mainly comprised of the seller’s workforce costs, materials and other recurring monthly operating cost.
The
acquisition of Safegard, which closed on July 6, 2022, did not meet the definition of a business pursuant to ASC 805-10, and accordingly
was accounted for as an asset acquisition in accordance with ASC 805-50. The cost of the acquisition was $
The relative fair value of the assets acquired and related deferred tax liability during 2022 was as follows:
Schedule of Fair Value of Assets Acquisition
| Land | $ | |||
| Building and affixed assets | ||||
| Machinery | ||||
| Inventory | ||||
| Intangibles | ||||
| Deferred tax liability | ( | ) | ||
| Total | $ |
The
useful lives for the acquired assets is Building -
Note 6. Other Assets
Other assets as of September 30, 2024, and December 31, 2023 are summarized as follows:
Schedule of Other Assets
| September 30, 2024 | December 31, 2023 | |||||||
| Intangibles, net – See Note 6 | ||||||||
| Other – See Note 7 | ||||||||
| Total Other assets | $ | $ | ||||||
| 13 |
SHARPS TECHNOLOGY, INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2024 AND 2023
Note 7. Debt Financing
On
September 20, 2024, the Company entered into a securities purchase agreement (the “Securities Purchase Agreement”) and a
Senior Secured Note (the “Note”) for an aggregate principal amount of $
In connection with the Securities Purchase Agreement and Note, the Company entered into a Registration Rights Agreement with the Purchasers (the “Registration Rights Agreement”), requiring the Company to file a resale registration statement (the “Registration Statement”) with the U.S. Securities and Exchange Commission (the “Commission”) to register the unregistered shares of Common Stock. within forty-five (45) calendar days following the filing date, which is thirty (30) days after the closing date. The Company filed the required resale registration statement on October 23, 2024.
Note 8. Stockholders’ Equity
Capital Structure
On December 11, 2017, the Company was incorporated in Wyoming with shares of common stock authorized with a $ par value. Effective, April 18, 2019, the Company’s authorized common stock was increased to shares of common stock. The articles of incorporation also authorized preferred shares with a $ par value.
Effective
March 22, 2022, the Company completed a plan and agreement of merger with Sharps Technology, Inc., a Nevada corporation (“Sharps
Nevada”).
In July 2024, the shareholders approved the increase of the authorized common stock from to which was subsequently filed as an amendment to the articles of incorporation with the state of Nevada.
Common Stock
On September 23, 2024, as noted in Note 7, in connection with the Securities Purchase Agreement and Note the Company issued (pre reverse - ) shares of unregistered common stock.
| 14 |
On
May 31 and June 13, 2024, the Company entered into subscription agreements with certain institutional investors, pursuant to which
the Company agreed to issue and sell to the investors
(pre reverse - )
shares (the “Shares”) of Common Stock, par value $
per share of the Company at a price of $
(pre reverse -$
and received gross proceeds to the Company of $
On
May 30, 2024, the Company offered warrant inducements (the “Inducement Agreement”) to certain warrant holders (the
“Warrant Holders”) which references the warrants registered for sale under both the registration statements on Form S-1
(file No. 333-263715) and/or the registration statement on Form S-1 (File No. 333-275011) (collectively, the “Registration
Statements”) for up to a total of
The Company recorded a fair value charge in the three months and nine months ended September 30, 2024 to reflect the modification of the exercise price at the initial inducement date for the non-trading warrants relating to the February and September 2023 warrants below. (See Note 10)
| 15 |
SHARPS TECHNOLOGY, INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2024 AND 2023
Note 8 Stockholders’ Equity (continued)
On
September 29, 2023, the Company completed two simultaneous offerings and received aggregate gross proceeds of approximately $
| a. | The first offering, the securities purchase agreement offering (the “Shelf Offering”) with institutional investors and the Company resulted in the Company receiving net proceeds from the Shelf Offering and the sale of pre-funded of approximately $ | |
| b. | The second offering, the
securities purchase agreement offering (“Private Placement”) with institutional investors and the Company received net
proceeds from the Private Placement of approximately $ |
On
February 3, 2023, the Company completed a securities purchase agreement (“Offering”) with institutional investors and
received net proceeds from the Offering of approximately $
On
April 13, 2022, the Company’s initial public offering (“IPO”) was declared effective by the SEC pursuant to which the
Company issued and sold an aggregate of ( pre reverse -) units (“Units”),
The
Company’s common stock and warrants began trading on the Nasdaq Capital Market or Nasdaq on April 14, 2022. The net proceeds from
the IPO, prior to payments of certain listing and professional fees were approximately $
| 16 |
SHARPS TECHNOLOGY, INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2024 AND 2023
Note 8. Stockholders’ Equity (continued)
Warrants
| a) | In
September 2024, the Company reduced the exercise price of the |
| b) | In connection with the
Inducement Warrants in the second quarter of 2024, the Company issued
(pre reverse - )
non-trading Inducement Warrants as noted in Common Stock above. The Inducement Warrants are classified as a liability based on ASC
815 and require remeasurement at each reporting period. The Inducement Warrants are recorded at the FMV, computed using the Black
Scholes valuation method. and , recorded a FMV gain adjustment of $ | |
| c) | In connection with one-year
advisory services arrangement entered into in April 2023, the Company issued an aggregate of | |
| d) | In connection with the
Private Placement in September 2023, the Company issued (pre reverse ) non-trading PIPE Warrants as a component of
the Unit as noted in Common Stock above. The PIPE Warrants are classified as a liability based on ASC 815 and require remeasurement
at each reporting period. The PIPE Warrants are recorded at the FMV, computed using the Black Scholes valuation method. For the three
and nine months ended September 30, 2024, the Company recorded a FMV gain (loss) adjustment of $( | |
| e) | In connection with the
Offering in February 2023, the Company issued
(pre reverse -)
non-trading warrants Offering Warrants as a component of the Unit as noted in Common Stock above. The Offering Warrants are
classified as a liability based on ASC 815 and require remeasurement at each reporting period. The Offering Warrants were recorded
at the FMV, computed using the Black Scholes valuation method. For the three and nine months ended September 30, 2024 the Company
recorded FMV gain (loss) adjustments of $ | |
| f) | In connection with the IPO
in April 2022, the Company issued
(pre reverse -)
warrants (Trading Warrants) as a component of the Units and
(pre reverse - )
warrants to the underwriter (Overallotment Warrants), as noted in Common Stock above. The Trading and Overallotment Warrants were
recorded at the FMV, being the trading price of the warrants, on the IPO effective date and the Warrants are classified as a
Liability based on ASC 815. The Warrant liability requires remeasurement at each reporting period based on the trading price of the
warrants. During the three and nine months ended September 30, 2024, the Company recorded an FMV gain adjustment of $ | |
| g) | The Company issued
(pre reverse -) Warrants (“Note Warrants”) to the note holders in connection with the repayment on the IPO on April
19, 2022. The Note Warrants, which are recorded at the FMV being the trading price of the warrants, are classified as a Liability based
on ASC 815. The Note Warrants require remeasurement at each reporting period. During the three and nine months ended September 30,
2024, the Company recorded a FMV gain of $ |
| 17 |
SHARPS TECHNOLOGY, INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2024 AND 2023
Note 8. Stockholders’ Equity (continued)
| (h) | The
underwriter received
(pre reverse - |
Note 9. Preferred Stock
In
February 2018, the Company Board of Directors issued one share of Series A Preferred Stock to Alan Blackman, the Company’s
co-founder and former Director.
Note 10. Warrant Liability
Certain Warrants are accounted for as liabilities in accordance with ASC 815-40 and are presented as a Warrant liability in the accompanying condensed consolidated balance sheets. The warrant liabilities are measured at fair value at inception and on a recurring basis, with changes in fair value presented within the condensed consolidated statements of operations. The Black Scholes Option-Pricing model used the following assumptions for the nine months ended September 30, 2024 and 2023 (See Note 8).
Schedule of Fair Value of Warrant
| September 30, 2024 | September 30, 2023 | |||||||
| Expected term (years) | ||||||||
| Expected volatility | % | % | ||||||
| Risk-free interest rate | % | % | ||||||
| Dividend rate | ||||||||
The Warrant liability at September 30, 2024 and December 31, 2023 was as follows:
Schedule of Warrant Liability
| September 30, 2024 | December 31, 2023 | |||||||
| Trading and Overallotment Warrants | $ | $ | ||||||
| Note Warrants | ||||||||
| Offering Warrants – February 2023 | ||||||||
| Offering Warrants – September 2023 | ||||||||
| Inducement Warrants – May 2024 | ||||||||
| Total Warrant Liability | $ | $ | ||||||
The Warrants outstanding at September 30, 2024 and December 31, 2023 were as follows:
Schedule of Warrant Outstanding
| September 30, 2024 | December 31,2023 | |||||||
| Trading, Overallotment and Underwriter Warrants | ||||||||
| Note Warrants | ||||||||
| Offering Warrants – February 2023 | ||||||||
| Offering Warrants – September 2023 | ||||||||
| Inducement Warrants – May 2024 | ||||||||
| Warrants issued for services arrangement | ||||||||
| Total Warrants Outstanding | ||||||||
| 18 |
SHARPS TECHNOLOGY, INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2024 AND 2023
Note 10. Warrant Liability (continued)
For
the three months ended September 30, 2024, the FMV gain adjustment, which is reflected in the FMV adjustment on Warrants in the
Unaudited Condensed Consolidated Statements of Operations was $
For
the nine months September 30, 2024, the FMV gain adjustment, which is reflected in the FMV adjustment on Warrants in the Unaudited Condensed
Consolidated Statements of Operations was $
For
the three and nine months ended September 30, 2023, the FMV gain adjustment, which is reflected in the FMV adjustment gain (loss) on
Warrants in the Unaudited Condensed Consolidated Statements of Operations was $
Schedule of Stock Options Granted and Outstanding
| September 30, 2024 | ||||||||
| Options | Weighted Average Exercise Price | |||||||
| Outstanding at Beginning of year | $ | |||||||
| Granted | ||||||||
| Forfeited or cancelled | ( | ) | ||||||
| Outstanding at end of period | $ | |||||||
| Exercisable at end of period | $ | |||||||
At September 30, 2024, the Weighted Average Remaining Contractual Life is .
At September 30, 2024, the stock options outstanding and the options exercisable have exercise prices that exceed the stock market price at September 30, 2024 and as such no intrinsic value exists. Intrinsic value is defined as the difference between the exercise price of the options and the market price of the Company’s common stock.
During the nine months ended September 30, 2024, the Company granted -year options (the “Options”) to purchase a total of shares of the Company’s common stock, par value $ per share (the “Common Stock”) to its directors, executive officers, employees and consultants pursuant to the Company’s 2023 Equity Incentive Plan. The Options are exercisable at an average price of $ per share which was based on the closing price on the respective grant dates.
As of September 30, 2024, there was $ of unrecognized stock-based compensation related to unvested stock options with a weighted average fair value of $ per share, which is expected to be recognized over a weighted-average period of as of September 30, 2024.
For the three and nine months ended September 30, 2024, the Company recognized stock-based compensation expense of $ recorded in general and administrative and $, respectively, of which $ and $ was recorded in general and administrative and research and development expenses.
For the three and nine months ended September 30, 2023, the Company recognized stock-based compensation expense of $ and $, respectively, which was recorded in general and administrative.
| 19 |
SHARPS TECHNOLOGY, INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2024 AND 2023
Note 11. Stock Options (continued)
Schedule of Fair Value of Stock Option Awards
| September 30, 2024 | September 30, 2023 | |||||||
| Expected term (years) | to | to | ||||||
| Expected volatility | % to | % | % to | % | ||||
| Risk-free interest rate | % to | % | % to | % | ||||
| Dividend rate | ||||||||
Note 12. Income Taxes
At
the end of each interim reporting period, the Company estimates its effective tax rate expected to be applied for the full year.
This estimate is used to determine the income tax provision or benefit on a year-to-date basis and may change in subsequent interim
periods. Accordingly, the Company’s effective tax rate for the three and nine months ended September 30, 2024 and 2023 was
Note 13. Related Party Transactions and Balances
As
of September 30, 2024 and December 31, 2023, accounts payable and accrued liabilities include $
Note 14. Fair Value Measurements
The Company’s financial instruments include cash, accounts payable, and warrant liability. Cash and warrant liability are measured at fair value. Accounts payable is measured at amortized cost and approximates fair value due to its short duration.
As of September 30, 2024, the following financial assets and liabilities were measured at fair value on a recurring basis presented on the Company’s condensed consolidated balance sheet:
Schedule of Assets and Liabilities Measured at Fair Value on Recurring Basis
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
| Fair Value Measurements Using | ||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
| Assets | ||||||||||||||||
| Cash | $ | $ | ||||||||||||||
| Total assets measured at fair value | $ | $ | ||||||||||||||
| Liabilities | ||||||||||||||||
| Warrant liability | $ | $ | $ | |||||||||||||
| Total liabilities measured at fair value | $ | $ | $ | |||||||||||||
| 20 |
SHARPS TECHNOLOGY, INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2024 AND 2023
Note 14. Fair Value Measurements (continued)
As of December 31, 2023, the following financial assets and liabilities were measured at fair value on a recurring basis presented on the Company’s condensed consolidated balance sheet:
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
| Fair Value Measurements Using | ||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
| Assets | ||||||||||||||||
| Cash | $ | $ | ||||||||||||||
| Total assets measured at fair value | $ | $ | ||||||||||||||
| Liabilities | ||||||||||||||||
| Warrant liability | $ | $ | $ | |||||||||||||
| Total liabilities measured at fair value | $ | $ | $ | |||||||||||||
Note 15. Commitments and Contingencies
Contingencies
On
July 10, 2024, Barry Berler (“Berler”), a co-founder and former Chief Technology Officer of the Company, commenced a lawsuit
in the United States District Court for the Eastern District of New York, Barry Berler v. Sharps Technology, Inc. and Alan Blackman,
Case No. 2:24-cv-04787. In this case, Berler asserts claims for damages of an aggregate of $
On
June l7, 2024, Berler filed a demand for arbitration and statement of claim under the commercial arbitration rules of the American Arbitration
Association (“AAA”) asserting claims for payment of $
On
April 3, 2024, Plastomold Industries Ltd. (“Plastomold”) commenced a lawsuit against the Company in the United States District
Court for the Eastern District of New York, Plastomold Industries Ltd v. Sharps Technology, Inc., Case No. 2:24-CV-02580, asserting claims
for damages in the amount of $
Commitments
On
August 1, 2022, the Company cancelled the consulting agreement with Alan Blackman, Co- Chairman and Chief Operating Officer and
entered into an Employment Agreement. which provided for annual salary of $
On
May 20, 2024, the Company entered into an amendment to the Asset Purchase agreement (“Asset Purchase”) with InjectEZ,
LLC (“Seller”) for the purchase of certain assets for $
| 21 |
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis summarizes the significant factors affecting the consolidated operating results, financial condition, liquidity and cash flows of our Company as of and for the periods presented below. The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and the accompanying notes thereto included elsewhere in this Quarterly Report on Form 10-Q. Unless the context requires otherwise, references in this Quarterly Report on Form 10-Q to “we,” “us,” and “our” refer to Sharps Technology, Inc.
Forward-Looking Statements
The information in this discussion contains forward-looking statements and information within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act, which are subject to the “safe harbor” created by those sections. These forward-looking statements include, but are not limited to, statements concerning our strategy, future operations, future financial position, future revenues, projected costs, prospects and plans and objectives of management. The words “anticipates,” “believes,” “estimates,” “expects,” “intends,” “may,” “plans,” “projects,” “will,” “would” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. We may not actually achieve the plans, intentions, or expectations disclosed in our forward-looking statements and you should not place undue reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements that we make. These forward-looking statements involve risks and uncertainties that could cause our actual results to differ materially from those in the forward-looking statements, including, without limitation, the risks set forth in our filings with the SEC. The forward-looking statements are applicable only as of the date on which they are made, and we do not assume any obligation to update any forward-looking statements.
Overview
Since our inception in 2017, we have devoted substantially all our resources to the research and development and commencing the latter part of 2023 on manufacturing of our safety syringe products. To date, we have not generated any significant revenues from the sale of syringe products. We have incurred net losses in each year since our inception and, as of September 30, 2024, we had an accumulated deficit of $29,918,777. Our net loss was $4,769,774 for the nine months ended September 30, 2024. Substantially all of our net losses resulted from costs incurred in connection with our research and development efforts, payroll and consulting fees, stock compensation and general and administrative costs associated with our operations, including costs incurred for being a public company since April 14, 2022. See below, Liquidity and Capital Resources and Notes to Unaudited Condensed Consolidated Financial Statements.
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. The Company has not generated any significant revenue from the sale of syringe products or cash flow from operations since inception. As of September 30, 2024, the Company had working capital of $67,820 which is not expected to be sufficient to fund the Company’s planned operations for the next 12 months. These factors raise substantial doubt regarding the Company’s ability to continue as a going concern. The Company’s ability to continue as a going concern is dependent upon the Company’s ability to raise sufficient financing to acquire or commercialize its products into a profitable business. The Company intends to finance its commercialization activities and its working capital needs largely from the sale of equity securities and/or with additional funding from other traditional financing sources until such time that funds provided by operations are sufficient to fund working capital requirements. The financial statements of the Company do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts and classifications of liabilities that might be necessary should the Company be unable to continue as a going concern.
| 22 |
We classify our operating expenses as research and development and general and administrative expenses. We maintain a corporate office located in Melville, New York, but employees and consultants in the US work remotely and will continue to do so indefinitely. In June 2020, we entered into an agreement to acquire Safegard Medical (Safegard), a former syringe manufacturing facility in Hungary. Through the closing on July 6, 2022, we were contractually provided the exclusive use of the facility for research and development and testing in exchange for payment of the seller’s operating costs, including among others, use of Safegard’s work force, utility costs and other services.
In order to compete in the market, we must maintain inventory. Commencing in the 4th Quarter of 2022 we started building inventory. We require commercial quantities of inventory to secure orders. Delivery is expected shortly after receiving orders.
Although we currently have production capacity for our products and thus the ability to receive and fulfill orders, we have used the proceeds from the February 2023, September 2023 fund raising and fund raising in the second and third quarter of 2024 to allow us to either increase our production capacity, build inventory or support working capital requirements This will help us to generate and fulfill orders for our current product line and advance our new innovative products in connection with recent collaboration arrangements. We have produced commercial quantities of our products and built inventory to support orders in late 2024 and in 2025. (See Recent Developments)
Products, Marketing and Sales
We continue to be in discussions with healthcare companies and distributors for sales of our disposable syringe and prefillable syringe products. We intend to market these products to the U.S. and foreign governments. We received a Purchase Order for our first Securegard sales to a South America distributor which was shipped in June 2024. We will also look to sell our disposable syringe products to hospitals and clinician offices as opportunities present themselves.
The Sharps Securegard product line continues to represent our initial disposable syringe platform to be commercially available to the market. The addition of the Sologard products and SafeR products from Roncadelle are recent expansions to the Company’s product portfolio. These platforms have advanced features and benefits to support the needs of the market along with a high level of readiness for manufacturing and the ability to provide large commercial quantities for customers.
As previously disclosed, there continue to be delays in the commercialization of the Sharps Provensa product line. The product’s specialized technology requires further design and assembly optimization as identified in our previous commercialization efforts. This on-going product refinement process is typical of the development of new technology for the healthcare market to ensure the products are safe and effective for use every time. At this time Sharps is not able to determine a timeline for final commercialization of the Provensa product.
Research and Development
Substantially all of our research and development expenses to date have been incurred in connection with our syringe products. We expect to continue to incur research and development expenses for the foreseeable future as we continue to enhance our products to meet the market requirements for our Sharps syringe product line for its various intended uses throughout the world.
| 23 |
Business Developments:
Asset Purchase Agreement – Nephron Pharmaceuticals and Affiliates
On September 29, 2022, the Company entered into an agreement (the “NPC Agreement”) with Nephron Pharmaceuticals Corporation (“NPC”) and various affiliates of NPC, including InjectEZ, LLC. The NPC Agreement was intended to support several areas of the Company’s development and growth. The Company and NPC intended to supplement the NPC Agreement by entering into a manufacturing supply agreement, a sales and distribution agreement and a pharma services program to support growth, and a future agreement to support manufacturing expansion. As noted below, the sales and distribution agreement was terminated on March 8, 2024, and replaced. The original manufacturing supply agreement, noted above, was replaced as part of the Asset Purchase Agreement, entered into on September 22, 2023 and the Pharma Services agreement continues to be in place, although no activities have occurred to date. Further, under the additional agreement with NPC and affiliates of NPC (“Nephron Agreement”), the Company would provide technical advice and assistance to support manufacturing by InjectEZ, purchase certain quantities of syringes as they may order or require, and collaborate with Nephron on certain related business endeavors, but no activities have occurred to date. The Company will continue working to amend the terms of this NPC Agreement and Nephron Agreement, based on the Amended Asset Purchase Agreement below dated May 20, 2024. (See below)
On March 8, 2024, the Company and Nephron Pharmaceuticals Corporation terminated their distribution agreement dated December 8, 2022, which was partially replaced by the Agreement with Roncadelle, as stated below, and we continue to seek other parties to distribute for the US domestic market. The Company entered into a new logistics services agreement on the warehousing side with Owens and Minor (“O&M”) to replace Nephron’s distribution services. The Company can utilize O&M to provide 3PL services for both the Company and Roncadelle products, in North and South America when needed.
The Company and Nephron continue to maintain the Pharma Services Program (PSP), although no activities have occurred to date, which focuses on the creation of new business development and growth opportunities for both companies. These opportunities will include the development and sale of next generation drug delivery systems that will be produced by the Company and can be purchased by the healthcare industry, pharmaceutical markets, and Pharma companies such as Nephron and others.
On May 20, 2024, the Company entered into an Amendment to the Asset Purchase Agreement dated September 22, 2023, with Nephron and Nephron’s InjectEZ, LLC, (collectively, the “Seller”). The September 22, 2023 agreement superseded the manufacturing and supply agreement entered into in connection with the NPC Agreement on September 29, 2022, and the Nephron Agreement entered into on September 29, 2022. The Amended Asset Purchase Agreement includes the purchase of certain assets for $35M plus assumed liabilities of $4M, continues to provide for the Company to lease the Facility but excludes any leasehold improvements previously included. In connection with the Asset Purchase agreement, the Company paid a non-refundable deposit of $1M to be held in escrow under an agreeable escrow agreement as a deposit on the purchase price. The Asset Purchase agreement stipulated that the $1M deposit would be maintained until July 19, 2024, at which date, if the contemplated transaction was not consummated, through no fault of the Seller, the escrow would be released to the Seller by the escrow agent. The escrow deposit of $1,000,000 was released to the Seller and recorded in Other Expense as a forfeited agreement cost in the three months ended June 30, 2024. The Company and Seller continue to work towards a further amendment of the Asset Purchase Agreement. The closing of the Asset Purchase Agreement is contingent on obtaining further amendments and the necessary financing. There can be no assurance that the closing of the asset sale will occur.
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Sales and Distribution Agreement – Roncadelle
On March 4, 2024 (the “Effective”) Company entered into a cooperative sales and distribution agreement (the “Agreement”) with Roncadelle Operations s.r.l (“Roncadelle”). In conjunction with the execution of the Agreement, Roncadelle appointed the Company as its exclusive distributor of Roncadelle products in the United States, Canada, Central and South America and their territories. The Company appointed Roncadelle as its exclusive distributor of Sharps products in Europe, Middle East, APAC, South Africa and Australia and their territories. The Company and Roncadelle agreed to bear their own separate costs and expenses, including fees and other expenses, relating to external advisors and the preparation, negotiation, execution and performance of this Agreement and any related documents. The Agreement is effective as of the Effective Date for the initial period of one (1) year (the “Initial Term”). Upon expiration of the Initial Term, the term of the Agreement shall automatically renew for additional successive one-year terms, unless either party provides written notice of non-renewal at least ninety (90) days prior to the end of the then-current term, unless any renewal term is terminated earlier pursuant to the terms of the Agreement or applicable law. The Company continues to work with Roncadelle for product introductions and execution of the Agreement for future sales.
Supply Agreement -Stericare Solutions
On July 24, 2024, the Company, entered into a Supply Agreement (the “Supply Agreement”) with Stericare Solutions, LLC, a Texas limited liability company, (“Stericare”), pursuant to which Stericare agreed to purchase 520 million units of 10ml polypropylene (“PP”) Sologard syringes from the Company. The specific purchase price is confidential but revenues are expected in excess of $50M. Pursuant to the Supply Agreement, Stericare has agreed to purchase 520 million units of 10ml PP Sologard syringes in the following increments: 40 million units in the first year, and 120 million units every year for the remaining life of the Supply Agreement. The Supply Agreement has a five (5) year term targeted to commence November 2024 (the “Initial Term”). Upon expiration of the Initial Term, the Supply Agreement will automatically renew for additional one (1) year periods (each, a “Renewal Term”), unless a party gives the other party written notice of termination at least ninety (90) days prior to the end of the Initial Term or Renewal Term. The Agreement may be terminated by either party upon written notice to the other party if the other party breaches any material term or condition of this Agreement and fails to cure such breach within thirty (30) days after receipt of written notice thereof. The Agreement may be terminated by either party upon written notice to the other party if the other party becomes insolvent, makes an assignment for the benefit of creditors, or a petition under any bankruptcy or insolvency Law is filed by or against such party and is not dismissed within 120 days. If either party is acquired by a competitor of the other party, then either party can terminate the Agreement with six (6) months written notice.
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On July 12, 2023, The Nasdaq Stock Market LLC (“Nasdaq”) notified the Company that the bid price of its common stock had closed at less than $1.00 per share over the previous 30 consecutive business days, and, as a result, the Company was no longer in compliance with Nasdaq Listing Rule 5550(a)(2) (the “Nasdaq Rule”). In accordance with Listing Rule 5810(c)(3)(A), the Company was provided 180 calendar days, or until January 8, 2024, to regain compliance with the Rule. Subsequently, on January 16, 2024, the Company was provided an additional 180 calendar day compliance period, or until July 8, 2024, to demonstrate compliance. Pursuant to Nasdaq’s letter on July 9, 2024, the Company has not regained compliance with Listing Rule 5550(a)(2). Accordingly, its securities will be delisted from the Nasdaq Capital Market unless the Company requests a hearing and appeals Nasdaq’s determination by July 16, 2024., the trading of the Company’s common stock and warrants will be suspended at the opening of business on July 18, 2024. The Company filed a hearing request before the deadline. In the interim, the Company’s common stock and warrants have remained listed on NASDAQ under its existing symbols, “STSS” and “STSW” while it awaits the results from the hearing on August 13, 2024.
On July 15, 2024, the Company held a Special Meeting of its stockholders. At the Meeting, the following three (3) proposals were each approved.
| 1. | The Company’s stockholders approved the amendment to the Company’s articles of incorporation to increase the authorized shares of common stock from 100,000,000 shares to 500,000,000 shares; |
| 2. | The Company’s stockholders approved a proposal to authorize the Company’s Board of Directors (the “Board”), in its discretion at any time within one year after stockholder approval is obtained, to amend the Company’s Articles of Incorporation to effect a reverse stock split of shares of the Company’s common stock, at a ratio of up to 1-for-8, with the exact ratio to be determined by the Company’s Board and included in a public announcement; |
| 3. | The Company’s stockholders approved a proposal for the issuance of securities in one or more non-public offerings where the maximum discount at which the securities will be offered will be equivalent to a discount not to exceed 20% below the market price of our common stock in accordance with Nasdaq Marketplace Rule 5635(d). |
On October 7, 2024, the Company held a Special Meeting of its stockholders. The Company’s stockholders approved a proposal to authorize the Company’s Board in its discretion at any time within one year after stockholder approval is obtained, to amend the Company’s Articles of Incorporation to effect a reverse stock split of shares of the Company’s common stock, at a ratio with a range of 1-for-8 to 1 for 22, with the exact ratio to be determined by the Company’s Board. The Board approved the 1 for 22 reverse stock split on October 7, 2024 which went into effect on October 16, 2024.
Nasdaq notified the Company on November 13, 2024 that the Company regained compliance on November 5, 2024 with Listing Rule 5550(a)(2), (the “Bid Price Rule”)
Critical Accounting Policies and Significant Judgments and Estimates
This management’s discussion and analysis of our financial condition and results of operations is based on our financial statements, which we have prepared in accordance with accounting principles generally accepted in the United States. The preparation of our financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of our financial statements, as well as the reported revenues and expenses during the reported periods. We evaluate these estimates and judgments on an ongoing basis. We base our estimates on historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. The FMV adjustments, based on the trading price of outstanding warrants classified as liabilities, could impact the operating results in the reporting periods.
Nature of Business
Sharps Technology, Inc. (“Sharps” or the “Company”) continues to regard itself as a pre-revenue medical device company that has designed and patented various safety syringes and is seeking commercialization by manufacturing and distribution of its products. Through September 30, 2024, no substantial syringe product sales have occurred.
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The accompanying unaudited condensed consolidated financial statements include the accounts of Sharps Technology, Inc. and its wholly owned subsidiary, Safegard Medical, Kft. and Sharps Technology Acquisition Corp. collectively referred to as the “Company.” All intercompany transactions and balances have been eliminated.
The Company’s fiscal year ends on December 31.
On April 13, 2022, the Company’s Initial Public Offering was deemed effective with trading commencing on April 14, 2022. The Company received net proceeds of $14.2 million on April 19, 2022. (See Capital Structure and Note 8 to the Unaudited Condensed Consolidated Financial Statements)
Summary of Significant Accounting Policies
Our significant accounting policies are described in Note 2 of the accompanying condensed consolidated financial statements and further discussed in our annual financial statements included in our annual report on Form 10-K for the year ended December 31, 2023.
Off-Balance Sheet Arrangements
During the periods presented, we did not have any off-balance sheet arrangements as defined under Regulation S-K Item 303(a)(4).
Results of Operations – Three Months Ended September 30, 2024 and 2023.
| 2024 | 2023 | Change | Change % | |||||||||||||
| Research and development | $ | 145,611 | 225,191 | $ | (79,580 | ) | -35 | % | ||||||||
| General and administrative | 1,869,598 | 2,133,167 | (263,569 | ) | -12 | % | ||||||||||
| Other expense (income) | 70,905 | (17,620 | ) | 88,525 | 502 | % | ||||||||||
| FMV (gain) loss adjustment for warrants | (416,560 | ) | (321,981 | ) | (94,579 | ) | 29 | % | ||||||||
| Foreign currency | 15,506 | 3,587 | 11,919 | 332 | % | |||||||||||
| Net loss | $ | 1,685,060 | $ | 2,022,344 | $ | (337,284 | ) | -16 | % | |||||||
Revenue
The Company has not generated any significant syringe revenue to date.
Research and Development
For the three months ended September 30, 2024, Research and Development (“R&D”) expenses decreased to $145,611 compared to $225,191 for the three months ended September 30, 2023. The decrease of $79,580 was due to reduced R&D activities in 2024 as compared to 2023, primarily due to lower depreciation expense of $46,000 and lower R&D labor and consulting of $41,000 due to the overall shift to manufacturing.
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General and Administrative
For the three months ended September 30, 2024, General and Administrative (“G&A”) expenses were $1,869,598 as compared to $2,133,167 for the three months ended September 30, 2023. The decrease of $263,569 was primarily attributable to: i) a decrease in payroll and consulting fees of $57,000 from $895,000 in 2023 to $838,000 in 2024, primarily due to lower consulting services and compensation expense, ii) decrease in stock compensation expense, due to the timing of option awards, vesting and options valuations, of approximately $85,000 from $201,000 in 2023 to $116,000 in 2024. Further, we had decreases in public company and investor relation costs ($65,600), travel ($17,000), computer costs ($44,000), insurance ($39,000), patent fees ($10,000), and other expenses ($50,700), partially offset by higher professional fees ($68,300), marketing ($2,000), rent ($12,000), depreciation expense ($16,000) and board costs ($6,500).
Other expense (income)
Other was an expense of $70,905 for the three months ended September 30, 2024, compared to income of $17,620 for three months ended September 30, 2023. In 2024 and 2023 the Company generated interest income of $4,377 and $17,620, respectively. The totals in each period related to interest earned from cash balances held in interest bearing accounts. In addition, in 2024 the Company incurred accreted interest costs associated with debt financing (See Note 7 to the Unaudited Condensed Consolidated Financial Statements).
FMV Adjustment for Derivatives
Certain Warrants require the Fair Market Value (“FMV”) to be remeasured at each reporting date while outstanding with recognition of the changes in fair value to other income or expense in the condensed consolidated statement of operations. For the three months ended September 30, 2024 and 2023, the Company recorded a $416,560 FMV gain, net of a modification charge of $155,703 for the warrants exercised at the reduced exercise prices and the related modification charge and $572,264 FMV gain to reflect adjustments required for outstanding Warrants liabilities. This is compared to a $321,981 FMV gain for the three months ended September 30, 2023 (See Notes 8 and 10 to the Unaudited Condensed Consolidated Financial Statements).
Results of Operations – Nine Months Ended September 30, 2024 and 2023.
| 2024 | 2023 | Change | Change % | |||||||||||||
| Research and development | $ | 523,347 | 783,340 | $ | (259,993 | ) | -33 | % | ||||||||
| General and administrative | 5,257,015 | 6,425,154 | (1,168,139 | ) | -18 | % | ||||||||||
| Other expense (income) | 1,046,593 | (94,492 | ) | 1,141,085 | 1,208 | % | ||||||||||
| FMV (gain) loss adjustment for warrants | (2,088,747 | ) | (415,958 | ) | (1,672,789 | ) | 402 | % | ||||||||
| Foreign exchange loss | 31,566 | 41,955 | (10,389 | ) | -25 | % | ||||||||||
| Net loss | $ | 4,769,774 | $ | 6,739,999 | $ | (1,970,225 | ) | -29 | % | |||||||
Revenue
The Company has not generated any significant syringe revenue to date.
Research and Development
For the nine months ended September 30, 2024, Research and Development (“R&D”) expenses decreased to $523,347 compared to $783,340 for the nine months ended September 30, 2023. The decrease of $259,993 was primarily due to a shift to increased manufacturing and reduced R&D activities in 2024 as compared to the 2023 period which amounted to lower expenses of $121,600, principally materials of $104,000. In addition, depreciation expense decreased $138,300.
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General and Administrative
For the nine months ended September 30, 2024, General and Administrative (“G&A”) expenses were $5,257,015 as compared to $6,425,154 for the nine months ended September 30, 2023. The decrease of $1,168,139 was primarily attributable to: i) increases in payroll and consulting fees of $307,800 from $2,206,000 in 2023 to $2,514,502 in 2024, primarily due to compensation increases and additional consulting fees, ii) decrease in stock compensation expense, due to the timing of option awards, vesting and option valuations, of approximately $397,800 from $838,000 in 2023 to $441,200 in 2024, iii) decrease in public company and investor relations costs of $288,700 from $644,000 to $361,300 in 2024 primarily due to lower offering costs in the 2024 period and reduced investor relations activities. Further, we had decreases due to lower: a) marketing costs ($278,400) relating to promoting the Company, b) travel ($65,900), c) insurance costs ($87,000), d) rent ($45,000), e) general operating costs ($85,300), f) computer costs ($13,600), g) patent maintenance and registration fees ($2,200) and h) a contract settlement of $375,000 in 2023. These decreases were partially offset by higher: a) professional fees ($68,000, b) board costs ($41,500) and c) depreciation ($53,500).
Other expense (income)
Other was an expense of $1,046,593 for the nine months ended September 30, 2024, compared to income of $(94,492) for nine months ended September 30, 2023. In 2024 and 2023 the Company generated interest income of $(28,689) and $(94,492), respectively. The interest income in each period was related to interest income earned from cash balances held in interest bearing accounts. In the second quarter of 2024, the Company’s initial syringe sale of $10,871, which approximated cost, was to a distributor in South America. The escrow deposit of $1M, relating to the Asset Purchase Agreement, was released to the Seller on July 19, 2024, under the terms of the agreement and recorded as a forfeited agreement cost (See Note 15 to the Unaudited Condensed Consolidated Financial Statements). In addition, in the third quarter of 2024, the Company recorded accreted interest expense of $75,192 in connection with the debt financing (See Note 7 to the Unaudited Condensed Consolidated Financial Statements).
FMV Adjustment for Derivatives
Certain Warrants require the Fair Market Value (“FMV”) to be remeasured at each reporting date while outstanding with recognition of the changes in fair value to other income or expense in the consolidated statement of operations. For the nine months ended September 30, 2024 and 2023, the Company recorded a $2,088,747 and $415,958 FMV gain to reflect adjustments required for outstanding Warrants liabilities. (See Notes 8 and 10 to the Unaudited Condensed Consolidated Financial Statements)
Liquidity and Capital Resources
At September 30, 2024 and December 31, 2023, we had a cash balance of $2,473,197 and $3,012,908, respectively. The Company had working capital of $67,820 and $1,145,569 as of September 30, 2024 and December 31, 2023, respectively. The decrease in our working capital was primarily due to use of cash in operations and investing discussed below offset by net proceeds from the Reg A and Inducement Offerings in May and June 2024 and the net proceeds from the debt financing in September 2024 (See below and Notes 7 and 8 to the Unaudited Condensed Consolidated Financial Statements).
The Company continues to assess liquidity requirements and plans to continue to seek funding through equity offerings and/or debt financing opportunities.
On September 20, 2024, the Company entered into a securities purchase agreement (the “Securities Purchase Agreement”) and a Senior Secured Note (the “Note”) for an aggregate principal amount of $4,375,000, including OID interest of $875,000 maturing on January 31, 2025, with certain purchasers (the “Purchasers”), and the issuance of approximately 259,091 (pre reverse - 5,700,006) unregistered shares of the Company’s Common Stock. The aggregate gross proceeds to the Company were approximately $3.5 million, before deducting fees to the placement agent and other offering expenses payable by the Company of $514,700 and an escrow deposit of $250,000 required until certain security liens are filed.
On May 31 and June 13, 2024, the Company entered into subscription agreements with certain institutional investors, pursuant to which the Company agreed to issue and sell to the investors 4,197,000 shares (the “Shares”) of Common Stock, par value $0.0001 per share of the Company at a price of $0.38 and received gross proceeds to the Company of $1.6M before expenses to the placement agent and other offering expenses of $298,000 with net proceed, after reflecting par value, have been recorded in Additional Paid in Capital of $1,296, 922. The shares issued in the offering were offered at-the-market under Nasdaq rules and pursuant to the Company’s Form 1-A (the “Offering Statement”), initially filed by the Company with the Securities and Exchange Commission under the Securities Act of 1933, as amended on May 21, 2024, and qualified on May 30, 2024.
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On May 30, 2024, the Company offered warrant inducements (the “Inducement Agreement”) to certain warrant holders (the “Warrant Holders”) which references the warrants registered for sale under both the registration statements on Form S-1 (file No. 333-263715) and/or the registration statement on Form S-1 (File No. 333-275011) (collectively, the “Registration Statements”) for up to a total of 499,932 (pre reverse - 10,998,524) warrants to purchase shares of the Company’s common stock, par value $0.0001 per share. Pursuant to the Inducement Agreement, the exercise price of the existing warrants was reduced from $14.08 (pre reverse - $0.64) per share to $7.26 (pre reverse - $0.33) per share. In addition, for each warrant that was exercised, as a result of the Inducement Agreement, the Company agreed to issue the Warrant Holders unregistered warrants with an exercise price of $9.90 (pre reverse - $0.45) per share (“Inducement Warrants”). In the aggregate, 260,799 (pre reverse - 5,737,573) warrants were exercised as a result of the Inducement Agreement and accordingly, 260,799 Inducement Warrants were issued. The Company received gross proceeds of $1.9M before expenses to the placement agent and other expenses of $285,000. The net proceeds, after reflecting par value, has been recorded in Additional Paid in Capital of $978,407 and with respect to the Inducement Warrants, a liability under ASC 815 was recorded in the amount of $693,064. Certain outstanding warrants, with an exercise price of $14.08 (pre reverse - $0.64), were reduced to $7.26 (pre reverse - $0.33) based on anti-dilution terms in the respective warrant agreements.
On September 29, 2023, the Company completed two simultaneous offerings and received aggregate gross proceeds of approximately $5.6 million, before expenses to the placement agent and other offering expenses of $716,000.
| a. | The first offering, the securities purchase agreement offering (the “Shelf Offering”) with institutional investors and the Company resulted in the Company receiving net proceeds from the Shelf Offering and the sale of pre-funded of approximately $2.5 million, includes the value of the pre-funded warrants recorded in APIC, net of $362,000 in fees relating to the placement agent and other offering expenses. The Shelf Offering was priced at the market under Nasdaq rules. In connection with the Shelf Offering, the Company issued 164,478 (pre reverse -3,618,521 shares of common at a purchase price of $14.08 per unit, adjusted to $7.26 (reverse effected) at May 30, 2024, based on anti-dilution terms in the warrants and 36,636 ( pre reverse -800,000) pre-funded warrants at $14.058 ( pre reverse - $0.639) per pre-funded warrants. The exercise price of the pre-funded warrants will be $0.001 per share. | |
| b. | The second offering, the securities purchase agreement offering (“Private Placement”) with institutional investors and the Company received net proceeds from the Private Placement of approximately $2.4 million, net of $354,000 in fees relating to the placement agent and other offering expense. In connection with the Private Placement, the Company issued: (i) 117,340 (pre reverse - 2,581,479) PIPE Shares (or PIPE Pre-Funded Warrants in lieu thereof) and (ii) PIPE Warrants (non-trading) to purchase 397,727 (pre reverse -8,750,003) shares of our common stock, at a combined purchase price of $23,63 (pre reverse- $1.074) per unit (or $23.606 (pre reverse - $1.073) per pre-funded unit). The PIPE Warrants have a term of five and one-half (5.5) years from the issuance date and are exercisable for one share of common stock at an exercise price of $14.08 adjusted to $7.26 (reverse affected) at May 30, 2024, based on anti-dilution terms in the warrants. The net proceeds, after reflecting par value, has been recorded in Additional Paid in Capital of $1.6 million and with respect to the PIPE Warrants recorded as a liability under ASC 815 of $985,204. On October 16, 2023, the Company filed an S-1 (Resale) Registration Statement in connection with the Private Placement and on October 26, 2023 the S-1 went effective. (See Note 10). |
On February 3, 2023, the Company completed a securities purchase agreement (“Offering”) with institutional investors and received net proceeds from the Offering of approximately $3.2 million, net of $600,000 in fees relating to the placement agent and other offering expenses. The Offering was priced at the market under Nasdaq rules. In connection with the Offering, the Company issued 102,206 (pre reverse - 2,248,521) units at a purchase price of $37.18 (pre reverse - $1.69 per unit. Each unit consisted of one share of common stock and one non-tradable warrant (“Offering Warrants”) exercisable for one share of common stock at a price after effect of the October reverse split, of $34.32, adjusted to $14.08 at September 29, 2023 and to $7.26 at May 30, 2024, based on anti-dilution terms in the warrants and a term of five years. The Offering Warrants have a term of five years from the issuance date. On February 13, 2023, the Company filed an S-1 (Resale) Registration Statement in connection with the Offering and on April 14, 2023, an Amendment to the S-1 was filed and went effective. (See Note 10)
On April 13, 2022, the Company’s initial public offering (“IPO”) was declared effective by the SEC pursuant to which the Company issued and sold an aggregate of 170,454 ( pre reverse - 3,750,000) units (“Units”), each consisting of one share of common stock and two warrants, to purchase one share of common stock for each whole warrant, with an initial exercise price of $ 93.50 (pre reverse - $4.25) per share, adjusted to and with the effect of reverse split October 2024, $34.32 at February 3, 2023 and to $14.08 at September 29, 2023 and to $7.26 at May 30, 2024, based on anti-dilution terms in the warrants, and a term of five years. In addition, the Company granted Aegis Capital Corp., as underwriter a 45-day over-allotment option to purchase up to 15% of the number of shares included in the units sold in the offering, and/or additional warrants equal to 15% of the number of Warrants included in the units sold in the offering, in each case solely to cover over-allotments, which the Aegis Capital Corp. partially exercised with respect to 51,136 ( pre reverse -1,125,000) warrants on April 19, 2022.
The Company’s common stock and warrants began trading on the Nasdaq Capital Market or Nasdaq on April 14, 2022. The net proceeds from the IPO, prior to payments of certain listing and professional fees were approximately $14.2 million. The net proceeds, after reflecting par value, has been recorded in Additional Paid in Capital of $9.0 million and with respect to the Warrants as a liability under ASC 815 of $5.2M. (See Note 10)
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Cash Flows
Net Cash Used in Operating Activities
The Company used cash of $5,172,135 and $ 6,144,937 in operating activities for the nine months ended September 30, 2024 and 2023, respectively. The decrease in cash used of $972,802 was principally due to lower operating expenses during the nine months ended September 30, 2024.
Net Cash Used in Investing Activities
For the nine months ended September 30, 2024 and 2023, the Company used cash in investing activities of $1,069,659 and $431,379, respectively. In both periods cash was used to acquire or pay deposits for fixed assets, equipment and software. In 2024, the cash used for acquiring or paying deposits for fixed assets equipment and software was $69,659 as compared to $431,379 in the 2023 period. In connection with the Asset Purchase agreement the Company paid a non-refundable deposit of $1M to be held in escrow under an agreeable escrow agreement as a deposit on the purchase price. Under the terms of the Asset Purchase Agreement, the escrow deposit was released to the Seller and the Company recorded a forfeited agreement cost in Other Expenses (See Note 14 to the Unaudited Condensed Consolidated Financial Statements).
Net Cash Provided by Financing Activities
For the nine months ended September 30, 2024 and 2023, the Company provided cash from financing activities of $5,707,946 and $8,029,628, respectively. In the 2023 period, cash was provided from the offerings completed in February and September 2023. In the 2024 period, cash was provided from the exercise of pre-funded warrants, net proceeds from a Reg A offering and Warrant Inducements and a debt financing arrangement during September 2024 (See Note 7 and 8 to the Unaudited Condensed Consolidated Financial Statements).
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements as defined in Regulation S-K Item 303(a)(4).
Emerging Growth Company Status
We are an “emerging-growth company”, as defined in the JOBS Act, and, for as long as we continue to be an emerging growth company, we may choose to take advantage of exemptions from various reporting requirements applicable to other public companies but not to emerging growth companies, including, but not limited to, not being required to have our independent registered public accounting firm audit our internal control over financial reporting under Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. As an emerging growth company, we can also delay adopting new or revised accounting standards until such time as those standards apply to private companies. We intend to avail ourselves of these options. Once adopted, we must continue to report on that basis until we no longer qualify as an emerging growth company.
We will cease to be an emerging growth company upon the earliest of: (i) the end of the fiscal year following the fifth anniversary of the initial public offering; (ii) the first fiscal year after our annual gross revenue are $1.07 billion or more; (iii) the date on which we have, during the previous three-year period, issued more than $1.0 billion in non-convertible debt securities; or (iv) the end of any fiscal year in which the market value of our common stock held by non-affiliates exceeded $700 million as of the end of the second quarter of that fiscal year. We cannot predict if investors will find our common stock less attractive if we choose to rely on these exemptions. If, as a result of our decision to reduce future disclosure, investors find our common shares less attractive, there may be a less active trading market for our common shares and the price of our common shares may be more volatile.
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We are also a “smaller reporting company,” meaning that the market value of our stock held by non-affiliates plus the aggregate amount of gross proceeds to us as a result of the IPO is less than $700 million and our annual revenue was less than $100 million during the most recently completed fiscal year. We may continue to be a smaller reporting company if either (i) the market value of our stock held by non-affiliates is less than $250 million or (ii) our annual revenue was less than $100 million during the most recently completed fiscal year and the market value of our stock held by non-affiliates is less than $700 million. If we are a smaller reporting company at the time, we cease to be an emerging growth company, we may continue to rely on exemptions from certain disclosure requirements that are available to smaller reporting companies. Specifically, as a smaller reporting company we may choose to present only the two most recent fiscal years of audited financial statements in our Annual Report on Form 10-K and, similar to emerging growth companies, smaller reporting companies have reduced disclosure obligations regarding executive compensation.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not required for smaller reporting companies.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
As required by Rule 13a-15(b) under the Exchange Act, our management, including our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this Quarterly Report on Form 10-Q. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of the end of the period covered by this Quarterly Report on Form 10-Q, our disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms and to provide reasonable assurance that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting identified in connection with the evaluation of internal controls that occurred during the period covered by this Quarterly Report on Form 10-Q that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
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PART II — OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
From time to time, we may become involved in legal proceedings arising in the ordinary course of our business. Regardless of outcome, litigation can have an adverse impact on us due to defense and settlement costs, diversion of management resources, negative publicity, reputational harm and other factors.
On July 10, 2024, Barry Berler (“Berler”), a co-founder and former Chief Technology Officer of the Company, commenced a lawsuit in the United States District Court for the Eastern District of New York, Barry Berler v. Sharps Technology, Inc. and Alan Blackman, Case No. 2:24-cv-04787. In this case, Berler asserts claims for damages of an aggregate of $456,000 for alleged (1) failure to make full payment of certain monthly payments under his consulting agreement with the Company (the “Consulting Agreement”) in the amount of $52,500, (2) failure to pay a bonus with a target of $216,000 under the Consulting Agreement, (3) $187,500, representing 50% of the severance payment paid by the Company to Mr. Blackman, the Company’s co-founder and former Chief Operating Officer and Co-Chairman, and a declaration and injunctive relief establishing that Berler is the rightful owner of 50% of the Company’s Series A Preferred Stock (which preferred stock is no longer outstanding ). The Company has accrued for the claim for unpaid monthly consulting fees. The Company believes that Berler’s claims are without merit, intends to defend itself vigorously and has requested dismissal of these claims. In addition, on September 17, 2024, the Company filed an answer and counterclaims with respect thereto, including for recoupment of certain compensation the Company has previously paid to Berler.
On June l7, 2024, Berler filed a demand for arbitration and statement of claim under the commercial arbitration rules of the American Arbitration Association (“AAA”) asserting claims for payment of $500,000 plus interest, under the Company’s royalty agreement with Berler, as amended, rescission thereof and reversion to Berler of the intellectual property rights subject thereto. The Company believes that Berler’s claims are without merit and intends to defend itself vigorously in connection with these claims.
On April 3, 2024, Plastomold Industries Ltd. (“Plastomold”) commenced a lawsuit against the Company in the United States District Court for the Eastern District of New York, Plastomold Industries Ltd v. Sharps Technology, Inc., Case No. 2:24-CV-02580, asserting claims for damages in the amount of $1.762 million for alleged (1) failure to pay invoices, of which approximately $1 million would relate to a maintenance agreement for units allegedly manufactured and sold using machinery that was defective and has never successfully produced any saleable products, (2) breach of the implied covenant of good faith and fair dealing, (3) unjust enrichment, and (4) conversion. Plastomold asserts it provided certain products and services to the Company for which its invoices were not fully paid. The Company believes that Plastomold’s claims are without merit and intends to defend itself vigorously. On June 3, 2024, the Company filed an answer and affirmative defenses and counterclaim, which counterclaim is for damages that the Company believes would exceed the claims asserted by Plastomold, based on the insufficiency of Plastomold’s services and the results thereof, including the failure to provide machinery capable of reliably manufacturing the designated products in compliance with design specifications and functionality requirements, and with respect to which test results failed.
ITEM 1A. RISK FACTORS
Factors that could cause our actual results to differ materially from those in this Quarterly Report are any of the risks described in the Form 10-K for the year ended December 31, 2023, any of these factors could result in a significant or material adverse effect on our results of operations or financial condition. Additional risk factors not presently known to us or that we currently deem immaterial may also impair our business or results of operations. As of the date of this Quarterly Report, there have been no material changes to the risk factors disclosed in the Form 10-K for the year ended December 31, 2023. We may disclose changes to such factors or disclose additional factors from time to time in our future filings with the SEC.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Recent Sale of Unregistered Equity Securities
During the quarter ended September 30, 2024 the Company, under Reg A, issued 190,773 (pre reverse: 4.1M) unregistered but qualified shares of common stock.
During the quarter ended September 30, 2024 the Company issued 259,091 (pre reserve: 5,700,006) shares of unregistered common stock.
Use of Proceeds
On April 13, 2022, our Registration Statement on Form S-1 (No. 333-263715) was declared effective by the SEC pursuant to which we issued and sold an aggregate of 3,750,000 units, (not reverse effected), each consisting of one share of common stock and two warrants, to purchase one share of common stock for each whole warrant, with an initial exercise price of $4.25 per share (not reverse affected) and a term of five years. In addition, we granted Aegis Capital Corp., as underwriter a 45-day over-allotment option to purchase up to 15% of the number of shares included in the units sold in the offering, and/or additional warrants equal to 15% of the number of Warrants included in the units sold in the offering, in each case solely to cover over-allotments, which the Aegis Capital Corp. partially exercised with respect to 1,125,000 warrants on April 19, 2022. No payments for such expenses were made directly or indirectly to (i) any of our officers or directors or their associates, (ii) any persons owning 10% or more of any class of our equity securities or (iii) any of our affiliates. There has been no material change in the expected use of the net proceeds from our IPO as described in our final prospectus filed with the SEC on April 15, 2022. As of December 31, 2013, we have used the net proceeds from the IPO for working capital, acquisition of the Hungary facility and capital expenditures.
| 33 |
ITEM 6. EXHIBITS
| * | Filed herewith. |
| 34 |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized, on this 14 day of November 2024.
| SHARPS TECHNOLOGY, INC. | ||
| November 14, 2024 | /s/ Robert M. Hayes | |
| Robert M. Hayes | ||
| Chief
Executive Officer and Director (Principal Executive Officer) | ||
| November 14, 2024 | /s/ Andrew R. Crescenzo | |
| Andrew R. Crescenzo | ||
| Chief Financial Officer | ||
| (Principal Financial Officer) |
| 35 |
Exhibit 31.1
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER
I, Robert M. Hayes, certify that:
| 1. | I have reviewed this Quarterly Report on Form 10-Q of Sharps Technology, Inc. (the Registrant); |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
| 4. | The Registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Registrant and have: |
| a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under my supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiary, is made known to me by others within those entities, particularly during the period in which this report is being prepared; | |
| b) | Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report my conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and | |
| c) | Disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and |
| 5. | The Registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of the Registrant’s board of directors (or persons performing the equivalent function): |
| a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and | |
| b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting. |
| /s/ Robert M. Hayes | ||
| Robert M. Hayes | ||
| Chief Executive Officer (Principal Executive Officer) | ||
| Date: November 14, 2024 |
Exhibit 31.2
CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER
I, Andrew R. Crescenzo, certify that:
| 1. | I have reviewed this Quarterly Report on Form 10-Q of Sharps Technology, Inc. (the Registrant); |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
| 4. | The Registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Registrant and we have: |
| a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiary, is made known to us by others within those entities, particularly during the period in which this report is being prepared; | |
| b) | Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and | |
| c) | Disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and |
| 5. | The Registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of the Registrant’s board of directors (or persons performing the equivalent function): |
| a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and | |
| b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting. |
| /s/ Andrew R. Crescenzo | ||
| Andrew R. Crescenzo | ||
| Chief Financial Officer (Principal Financial Officer) | ||
| Date: November 14, 2024 |
Exhibit 32.1
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350
In connection with the accompanying Quarterly Report on Form 10-Q of Sharps Technology, Inc. for the period ended September 30, 2024, I, Robert M. Hayes, Chief Executive Officer of Sharps Technology, Inc., hereby certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, to my knowledge, that:
| (1) | Such Quarterly Report on Form 10-Q of Sharps Technology, Inc. for the period ended September 30, 2024, fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and | |
| (2) | The information contained in such Quarterly Report on Form 10-Q of Sharps Technology, Inc. for the period ended September 30, 2024, fairly presents, in all material respects, the financial condition and results of operations of Sharps Technology, Inc. |
| /s/ Robert M. Hayes | ||
| Robert M. Hayes | ||
| Chief Executive Officer (Principal Executive Officer) | ||
| Date: November 14, 2024 |
A signed original of the certification required by Section 906 has been provided to Sharps Technology, Inc. and will be retained by Sharps Technology, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.
Exhibit 32.2
CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350
In connection with the accompanying Quarterly Report on Form 10-Q of Sharps Technology, Inc. for the period ended September 30, 2024, I, Andrew R. Crescenzo, Chief Financial Officer of Sharps Technology, Inc., hereby certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, to my knowledge, that:
| (1) | Such Quarterly Report on Form 10-Q of Sharps Technology, Inc. for the period ended September 30, 2024, fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and | |
| (2) | The information contained in such Quarterly Report on Form 10-Q of Sharps Technology, Inc. for the period ended September 30, 2024, fairly presents, in all material respects, the financial condition and results of operations of Sharps Technology, Inc. |
| /s/ Andrew R. Crescenzo | ||
| Andrew R. Crescenzo | ||
| Chief Financial Officer (Principal Financial Officer) | ||
| Date: November 14, 2024 |
A signed original of the certification required by Section 906 has been provided to Sharps Technology, Inc. and will be retained by Sharps Technology, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.