Filed Pursuant to Rule
253(g)(3)
File No. 024-12438
OFFERING
CIRCULAR
Sharps
Technology, Inc. ®
47,000,000
Shares of Common Stock
By
this offering circular (the “Offering Circular”), Sharps Technology, Inc., a Nevada corporation, is offering on a “best-efforts”
basis a maximum of 47,000,000 shares of its common stock, par value $0.0001 per share (the “Offered Shares”), at a fixed
price of $0.38 per share, pursuant to Tier 2 of Regulation A of the United States
Securities and Exchange Commission (the “SEC”). There is no minimum purchase requirement for investors in this offering.
This
offering is being conducted on a “best-efforts” basis, which means that there is no minimum number of Offered Shares that
must be sold by us for this offering to close; thus, we may receive no or minimal proceeds from this offering. None of the proceeds received
will be placed in an escrow or trust account. All proceeds from this offering will become immediately available to us and may be used
as they are accepted. Purchasers of the Offered Shares will not be entitled to a refund and could lose their entire investments. Please
see the “Risk Factors” section, beginning on page 7, for a discussion of the risks associated with a purchase of the Offered
Shares.
We
estimate that this offering will commence within two days of SEC qualification; this offering will terminate at the earliest of (a) the
date on which the maximum offering has been sold, (b) one year from the date of SEC qualification, or (c) the date on which this offering
is earlier terminated by us, in our sole discretion. (See “Plan of Distribution”).
| | |
Number of Shares | | |
Price to Public(1) | | |
Broker-Dealer Discounts and Commissions(2) | | |
Proceeds to Company(3) | |
| Per Share: | |
| - | | |
$ | .38 | | |
$ | 0.035 | | |
$ | .345 | |
| Total Minimum: | |
| 0 | | |
$ | 0 | | |
$ | 0 | | |
$ | 0 | |
| Total Maximum: | |
| 47,000,000 | | |
$ | 17,860,000 | | |
$ | 1,628,800 | | |
$ | 16,231,200 | |
| (1) |
Reflects a public offering price of $0.38 per Offered Share. |
| |
|
| (2) |
We have engaged Aegis Capital Corp., member FINRA/SIPC (“the “Placement Agent”), to act as placement agent for this offering, in exchange for a fee of 7% of the aggregate offering price of the Offered Shares sold. |
| |
|
| (3) |
Does not account for the payment of expenses of this offering estimated at $200,000. See “Plan of Distribution.” |
Our
common stock is listed on The Nasdaq Capital Market (“Nasdaq”), under the symbol “STSS.” On May 31, 2024,
the last reported sale price of our common stock was $0.3820 per share.
Investing
in the Offered Shares is speculative and involves substantial risks. You should purchase Offered Shares only if you can afford a complete
loss of your investment. See “Risk Factors”, beginning on page 7, for a discussion of certain risks that you should consider
before purchasing any of the Offered Shares.
THE
UNITED STATES SECURITIES AND EXCHANGE COMMISSION DOES NOT PASS UPON THE MERITS OF, OR GIVE ITS APPROVAL TO, ANY SECURITIES OFFERED OR
THE TERMS OF THE OFFERING, NOR DOES IT PASS UPON THE ACCURACY OR COMPLETENESS OF ANY OFFERING CIRCULAR OR OTHER SOLICITATION MATERIALS.
THESE SECURITIES ARE OFFERED PURSUANT TO AN EXEMPTION FROM REGISTRATION WITH THE COMMISSION; HOWEVER, THE COMMISSION HAS NOT MADE AN
INDEPENDENT DETERMINATION THAT THE SECURITIES OFFERED ARE EXEMPT FROM REGISTRATION.
The
use of projections or forecasts in this offering is prohibited. No person is permitted to make any oral or written predictions about
the benefits you will receive from an investment in Offered Shares.
No
sale may be made to you in this offering, if you do not satisfy the investor suitability standards described in this Offering Circular
under “Plan of Distribution—State Law Exemption and Offerings to “Qualified Purchasers” on page 18. Before
making any representation that you satisfy the established investor suitability standards, we encourage you to review Rule 251(d)(2)(i)(C)
of Regulation A. For general information on investing, we encourage you to refer to www.investor.gov.
This
Offering Circular follows the disclosure format of Form S-1, pursuant to the General Instructions of Part II(a)(1)(ii) of Form 1-A.
The
date of this Offering Circular is June 4, 2024.
TABLE
OF CONTENTS
CAUTIONARY
STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
The
information contained in this Offering Circular includes some statements that are not historical and that are considered forward-looking
statements. Such forward-looking statements include, but are not limited to, statements regarding our development plans for our business;
our strategies and business outlook; anticipated development of our company; and various other matters (including contingent liabilities
and obligations and changes in accounting policies, standards and interpretations). These forward-looking statements express our expectations,
hopes, beliefs and intentions regarding the future. In addition, without limiting the foregoing, any statements that refer to projections,
forecasts or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements.
The words “anticipates,” “believes,” “continue,” “could,” “estimates,” “expects,”
“intends,” “may,” “might,” “plans,” “possible,” “potential,”
“predicts,” “projects,” “seeks,” “should,” “will,” “would” and
similar expressions and variations, or comparable terminology, or the negatives of any of the foregoing, may identify forward-looking
statements, but the absence of these words does not mean that a statement is not forward-looking.
The
forward-looking statements contained in this Offering Circular are based on current expectations and beliefs concerning future developments
that are difficult to predict. We cannot guarantee future performance, or that future developments affecting our company will be as currently
anticipated. These forward-looking statements involve a number of risks, uncertainties (some of which are beyond our control) or other
assumptions that may cause actual results or performance to be materially different from those expressed or implied by these forward-looking
statements.
All
forward-looking statements attributable to us are expressly qualified in their entirety by these risks and uncertainties. These risks
and uncertainties, along with others, are also described below in the section entitled “Risk Factors”. Should one or more
of these risks or uncertainties materialize, or should any of our assumptions prove incorrect, actual results may vary in material respects
from those projected in these forward-looking statements. You should not place undue reliance on any forward-looking statements and should
not make an investment decision based solely on these forward-looking statements. We undertake no obligation to update or revise any
forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required under applicable
securities laws.
OFFERING
CIRCULAR SUMMARY
The
following summary highlights material information contained in this Offering Circular. This summary does not contain all of the information
you should consider before purchasing our common stock. Before making an investment decision, you should read this Offering Circular
carefully, including the section entitled “Risk Factors” and the consolidated financial statements and the notes thereto.
Sharps Technology, Inc. and its consolidated subsidiaries are referred to herein as “Sharps,” “the Company,”
“we,” “us” and “our,” unless the context indicates otherwise.
Company
Overview
Sharps
Technology, Inc. is a medical device company that has designed and patented various safety syringes which we are seeking to commercialize
and other syringe products currently marketable.
Our
safety syringes products, which we refer to as the Sharps Provensa™ and Securgard™, are ultra-low waste and have
safety features, which we believe will provide us a competitive advantage over other syringes. Sharps Provensa is a patented and FDA-cleared
safety syringe addressing the important needs of the global healthcare market. We received FDA clearance for the Sharps Provensa on June
12, 2006, for subcutaneous and intramuscular injections into the human body.
Reincorporation
and Reverse Split
Prior
to March 22, 2022, we were a Wyoming corporation and on March 22, 2022, we reincorporated (the “Reincorporation”) as a Nevada
corporation (“Sharps Nevada”) pursuant to a merger into a newly formed Nevada corporation which was approved by our board
of directors and the holders of the majority of our outstanding shares of common stock.
Corporate
Information
The
Company was incorporated in the State of Wyoming on December 16, 2017. On March 22, 2022, we reincorporated as a Nevada corporation.
Our principal business address is 105 Maxess Road, Melville, New York 11747. We maintain our corporate website at sharpstechnology.com.
The reference to our website is an inactive textual reference only. We make available free of charge on or through our website our Annual
Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports filed or furnished
pursuant to Section 12(b) of the Exchange Act, as soon as reasonably practicable after we electronically file such material
with or otherwise furnish it to the SEC. Information on or accessed through our website or the SEC’s website is not incorporated
into this Offering Circular.
Implications
of Being an “Emerging Growth Company”
We
qualify as an “emerging growth company” under the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. As an emerging
growth company, we have elected to take advantage of reduced reporting requirements and are relieved of certain other significant requirements
that are otherwise generally applicable to public companies. As an emerging growth company:
| |
● |
we
may present only two years of audited financial statements and only two years of related Management’s Discussion and Analysis
of Financial Condition and Results of Operations; |
| |
|
|
| |
● |
we
are exempt from the requirement to obtain an attestation and report from our auditors on whether we maintained effective internal
control over financial reporting under the Sarbanes-Oxley Act; |
| |
|
|
| |
● |
we
are permitted to provide less extensive disclosure about our executive compensation arrangements; and |
| |
|
|
| |
● |
we
are not required to give our stockholders non-binding advisory votes on executive compensation or golden parachute arrangements. |
We
may take advantage of these provisions until December 31, 2027 (the last day of the fiscal year following the fifth anniversary of our
initial public offering) if we continue to be an emerging growth company. We would cease to be an emerging growth company if we have
more than $1.235 billion in annual revenue, have more than $700 million in market value of our shares held by non-affiliates or issue
more than $1.0 billion of non-convertible debt over a three-year period. We may choose to take advantage of some but not all of these
reduced burdens. We have elected to provide two years of audited financial statements. Additionally, we have elected to take advantage
of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act of 1933, as amended, or the Securities Act, for
complying with new or revised accounting standards that have different effective dates for public and private companies until the earlier
of the date we (i) are no longer an emerging growth company or (ii) affirmatively and irrevocably opt out of the extended transition
period provided in Section 7(a)(2)(B) of the Securities Act.
Offering
Summary
| Securities
Offered |
|
The
Offered Shares, 47,000,000 shares of common stock, are being offered by the Company in a “best-efforts” offering. |
| |
|
|
| Offering
Price Per Share |
|
$0.38
per Offered Share. |
| |
|
|
| Shares
Outstanding Before This Offering |
|
23,097,651
shares
of common stock issued and outstanding as of May 31, 2024. |
| |
|
|
| Shares
Outstanding After This Offering |
|
70,097,651
shares of common stock issued and outstanding,
assuming all of the Offered Shares are sold hereunder. The number of shares to be outstanding after this offering is based on 23,097,651
shares outstanding as of May 31, 2024 and excludes: |
| |
● |
20,676,319 shares
issuable upon exercise of outstanding warrants with a weighted average exercise price of $.43; |
| |
|
|
| |
● |
1
outstanding share of Series A Preferred Stock, which are not convertible into common stock. |
| Minimum
Number of Shares to Be Sold in This Offering |
|
None |
| |
|
|
| Investor
Suitability Standards |
|
The
Offered Shares are being offered and sold to “qualified purchasers” (as defined in Regulation A under the Securities
Act of 1933, as amended (the “Securities Act”). “Qualified purchasers” include any person to whom securities
are offered or sold in a Tier 2 offering pursuant to Regulation A under the Securities Act. |
| |
|
|
| Market
for our Common Stock |
|
Our
common stock is listed on Nasdaq under the symbol “STSS.” |
| |
|
|
| Termination
of this Offering |
|
This
offering will terminate at the earliest of (a) the date on which all of the Offered Shares have been sold; (b) May 30,
2025 and (c) the date on which this offering is earlier terminated by us, in our sole discretion. (See “Plan of Distribution”). |
| |
|
|
| Use
of Proceeds |
|
We
will use the proceeds of this offering for capital expenditures and working capital, or for other general corporate purposes,
or a combination thereof. See “Use of Proceeds”. |
| |
|
|
| Risk
Factors |
|
An
investment in the Offered Shares involves a high degree of risk and should not be purchased by investors who cannot afford the loss
of their entire investments. You should carefully consider the information included in the Risk Factors section of this Offering
Circular, as well as the other information contained in this Offering Circular, prior to making an investment decision regarding
the Offered Shares. See “Risk Factors”. |
Continuing
Reporting Requirements Under Regulation A
We
are required to file periodic and other reports with the SEC, pursuant to the requirements of Section 13(a) of the Exchange Act. Our
continuing reporting obligations under Regulation A are deemed to be satisfied as long as we comply with our Section 13(a) reporting
requirements.
SUMMARY
CONSOLIDATED FINANCIAL AND OTHER DATA
The
following tables present our summary financial data and should be read together with our audited consolidated financial statements for
the years ended December 31, 2023 and 2022 and the unaudited condensed consolidated financial statements for the three months ended March
31, 2024 and accompanying notes and information in “Management’s Discussion and Analysis of Financial Condition and Results
of Operations” from the aforementioned periods appearing elsewhere in this prospectus. Our financial statements are prepared and
presented in accordance with U.S. generally accepted accounting principles (“GAAP”). Our historical results are not necessarily
indicative of our future results.
Balance
Sheet Data
| | |
December 31, | | |
December 31, | | |
March 31, | |
| | |
2022 | | |
2023 | | |
2024 | |
| | |
| | |
| | |
| |
| Assets | |
| | | |
| | | |
| | |
| Total current assets | |
$ | 4,423,450 | | |
$ | 4,838,551 | | |
$ | 3,210,640 | |
| Total assets | |
$ | 11,839,656 | | |
$ | 11,789,268 | | |
$ | 9,803,822 | |
| | |
| | | |
| | | |
| | |
| Liabilities and Stockholders’ Equity | |
| | | |
| | | |
| | |
| Total current liabilities | |
$ | 2,006,522 | | |
$ | 3,692,982 | | |
$ | 2,781,192 | |
| Total liabilities | |
| 2,198,522 | | |
| 3,854,982 | | |
| 2,943,192 | |
| Total stockholders’ equity | |
| 9,641,134 | | |
| 7,934,286 | | |
| 6,860,630 | |
| Total liabilities and stockholders’
equity | |
$ | 11,839,656 | | |
$ | 11,789,268 | | |
$ | 9,803,822 | |
Statement
of Operations Data
| | |
For the Years Ended | | |
For the three Months Ended | |
| | |
December 31, | | |
March 31, 2024 | |
| | |
2023 | | |
2022 | | |
(unaudited) | |
| Revenue | |
| | | |
| | | |
| | |
| Total operating expenses | |
$ | (10,126,650 | ) | |
$ | (8,738,793 | ) | |
$ | (1,844,052 | ) |
| Loss from operations | |
| (10,126,650 | ) | |
| (8,738,793 | ) | |
| (1,844,052 | ) |
| Foreign currency and other | |
| (52,689 | ) | |
| 26,636 | | |
| (7,414 | ) |
| Interest (expense) income | |
| 138118 | | |
| (1,320,416 | ) | |
| 19,023 | |
| FMV gain adjustment for derivatives | |
| 169,583 | | |
| 5,392,911 | | |
| 850,057 | |
| Net Loss Before Provision for Taxes | |
| (9,871,638 | ) | |
| (4,639,662 | ) | |
| (982,386 | ) |
| Deferred tax benefit | |
| 30,000 | | |
| - | | |
| - | |
| Net loss | |
$ | (9,841,638 | ) | |
$ | (4,639,662 | ) | |
$ | (982,386 | ) |
RISK
FACTORS
An
investment in the Offered Shares involves substantial risks. You should carefully consider the following risk factors, in addition to
the other information contained in this Offering Circular, before purchasing any of the Offered Shares. The occurrence of any of the
following risks might cause you to lose a significant part of your investment. The risks and uncertainties discussed below are not the
only ones we face, but do represent those risks and uncertainties that we believe are most significant to our business, operating results,
prospects and financial condition. Some statements in this Offering Circular, including statements in the following risk factors, constitute
forward-looking statements. See “Cautionary Statement Regarding Forward-Looking Statements”.
Risks
Related to Our Technology, Business, and Industry
We
are an early-stage company with a history of losses.
We
incurred net losses of $9,841,638 and $4,639,662 for the years ended December 31, 2023 and 2022, respectively and $982,386 for the
three months ended March 31, 2024. We have not generated any revenue to date, and we had accumulated deficit of $26,131,390 as
of March 31, 2024. We have developed our Sharps Provensa product line but there can be no assurance that it will be commercially
successful. Our potential profitability is dependent upon a number of factors, many of which are beyond our control. If we are unable
to achieve and sustain profitability, the value of our business and common stock may significantly decrease.
We
have a limited operating history and we may not succeed.
We
have a limited operating history, and we may not succeed. We have commercialized our Securgard syringe products in mid 2023 yet no revenues
have occurred and have not yet commercialized our Sharps Provensa products. You should consider, among other factors, our prospects for
success in light of the risks and uncertainties encountered by companies that, like us, are in their early stages. For example, unanticipated
expenses, problems, and technical difficulties may occur and they may result in material challenges to our business. We may not be able
to successfully address these risks and uncertainties or successfully implement our operating strategies. If we fail to do so, such failure
could have a material adverse effect on our business, financial conditions and results of operation. We may never generate significant
revenues or achieve profitability.
We
may not succeed in commercializing Sharps products or any future product.
We
may face difficulties or delays in the commercialization of Sharps products, which could result in our inability to timely offer products
or services that satisfy the market. We may, for example, encounter difficulties due to:
| ● |
our
inability to adequately market our products; |
| ● |
our
inability to effectively scale manufacturing as needed to maintain an adequate commercial supply of our products; |
| ● |
our
inability to attract and retain skilled support team, marketing staff and sales force necessary to increase the market for our products
and to maintain market acceptance for our products; and |
| ● |
the
difficulty of establishing brand recognition and loyalty for our products. |
In
addition, to increase our production capacity, we will need to build inventory, which will require that we purchase certain additional
equipment, including molding machines and molds. We have not received any significant orders to date. Even if we succeed in building
inventory, and increasing our production capacity, there is no assurance we will receive additional orders for our Sharps = products
or any future products.
We
may encounter significant competition and may not be able to successfully compete.
There
are many medical device companies offering safety syringes, and more competitors are likely to arrive. Some of our competitors have considerably
more financial resources than us. As a result, we may not be able to successfully compete in our market, which could result in our failure
to successfully commercialize Sharps Provensa, or otherwise fail to successfully compete. We anticipate that our major domestic competitors
will include Retractable Technologies, Inc., Becton, Dickinson & Company, Medtronic Minimally Invasive Therapies, Terumo Medical
Corp., Smiths Medical, and B Braun. There can be no assurances that we will be able to compete successfully in this environment.
We
are vulnerable to new technologies.
Because
we have a narrow focus on particular product lines and technology (currently, safety needle products), we are vulnerable to the development
of superior or similar competing products and to changes in technology which could eliminate or reduce the need for our products. If
a superior or similar technology is created, the demand for our products could be adversely affected.
We
are subject to product liability risk.
As
a manufacturer and provider of safety needle products, we will face an inherent business risk of exposure to product liability claims.
Additionally, our success will depend on the quality, reliability, and safety of our products and defects in our products could damage
our reputation. If a product liability claim is made and damages are in excess of our product liability coverage (which is currently
$5 million, and which we may increase as we commence and increase sales of our products), our competitive position could be weakened
by the amount of money we could be required to pay to compensate those injured by our products. In the event of a recall, we have recall
insurance.
Our
business may be affected by changes in the health care regulatory environment.
In
the U.S. and internationally, government authorities may enact changes in regulatory requirements, reform existing reimbursement programs,
and/or make changes to patient access to health care, all of which could adversely affect the demand for our products and/or put downward
pressure on our prices. Future healthcare rulemaking could affect our business. We cannot predict the timing or impact of any future
rulemaking or changes in the law.
The
approval process for medical device products outside the United States varies among countries and may limit our ability to develop, manufacture
and sell our products internationally. Failure to obtain marketing and regulatory approval in international jurisdictions would prevent
our products from being marketed abroad.
In
order to market and sell our Provensa product line and any additional medical device products we may develop in the future in the European
Union and many other jurisdictions, we, and our collaborators, must obtain separate marketing approvals and comply with numerous and
varying regulatory requirements. We have not yet received approval or clearance to sell our products in any jurisdiction outside the
United States. The approval procedure varies among countries and may involve additional testing. We may conduct clinical trials for,
and seek regulatory approval to market, our product candidates in countries other than the United States. If we or our collaborators
seek marketing approval for a product candidate outside the United States, we will be subject to the regulatory requirements of health
authorities in each country in which we seek approval. With respect to marketing authorizations in Europe, we will be required to submit
a European Marketing Authorisation Application, or MAA, to the European Medicines Agency, or EMA, which conducts a validation and scientific
approval process in evaluating a product for safety and efficacy. The approval procedure varies among regions and countries and may involve
additional testing, and the time required to obtain approval may differ from that required to obtain FDA approval or clearance. In addition,
marketing approval or clearance by the FDA does not ensure approval or clearance by the health authorities of any other country.
Ongoing
regulation of our products may limit how we market our products, which could materially impair our ability to generate revenue.
Approval
or clearance of a medical device product may carry conditions that limit the market for the product or put the product at a competitive
disadvantage relative to alternative products. For instance, a regulatory approval or clearance may limit the indicated uses for which
we can market a product or the patient population that may utilize the product. These restrictions could make it more difficult to market
any product effectively. Accordingly we expect to continue to expend time, money and effort in all areas of regulatory compliance.
We
are dependent on our management, without whose services our business operations could cease.
At
this time, our management is wholly responsible for the development and execution of our business plan. If our management should choose
to leave us for any reason before we have hired additional personnel, our operations may fail. Even if we are able to find additional
personnel, it is uncertain whether we could find qualified management who could develop our business along the lines described herein
or who would be willing to work for compensation the Company could afford. Without such management, the Company could be forced to cease
operations and investors in our common stock or other securities could lose their entire investment.
We
may not be able to raise capital as needed to develop our products or maintain our operations.
We
expect that we will need to raise additional funds to execute our business plan and expand our operations. Additional financing may not
be available to us on favorable terms, or at all. If we cannot raise needed funds on acceptable terms, the Company’s business and
prospects may be materially adversely affected.
Health
care crises could have an adverse effect on our business.
Particularly
during 2020, several states and local jurisdictions imposed, and others in the future may impose, “shelter-in-place” orders,
quarantines, executive orders and similar government orders and restrictions for their residents to control the spread of COVID-19. Although
the manufacturing facility we operate has continued to operate during the 2020-2021 COVID-19 pandemic due to its status as an essential
business, we continue to monitor the evolving situation and cannot guarantee that the situation would be the same for any future pandemic.
In the future, we may elect or be required to close temporarily which would result in a disruption in our activities and operations.
Our supply chain, including transportation channels, may be impacted by any such restrictions as well. Any such disruption could impact
our sales and operating results.
Widespread
health crises also negatively affect economies which could affect demand for our products. While we plan to market our Sharps smart safety
syringe products for use for injecting medicines as well as Covid-19 and other vaccines, in the event of a resurgence of COVID-19 or
in the case of any future pandemic, there is no guarantee that revenues from syringes needed for vaccines would offset the effects to
our business in a global economic decline
Health
systems and other healthcare providers in our markets that provide procedures that may use our products have suffered financially and
operationally and may not be able to return to pre-pandemic levels of operations. Travel and import restrictions may also disrupt our
ability to manufacture or distribute our devices. Any import or export or other cargo restrictions related to our products or the raw
materials used to manufacture our products could restrict our ability to manufacture and ship products and harm our business, financial
condition, and results of operations.
Our
key personnel and other employees could still be affected by COVID-19 or any future pandemic, which could affect our ability to operate
efficiently.
Our
business may be adversely affected by uncertainties in obtaining and enforcing intellectual property rights.
We
believe our main competitive strength is our technology, including patent protection and trade secrets relating to the manufacture and
design of our products. We are dependent on patent rights to prevent unlawful copying of our products, and if the patent rights are invalidated
or circumvented, our business would be adversely affected. We consider patent protection to be of material importance in the design,
development, and marketing of our products.
Our
patent pending applications may not issue as patents, which may have a material adverse effect on our ability to prevent others from
commercially exploiting products similar to ours.
We
have four issued patents, two pending patent applications in the United States, and four PCT (Patent Cooperation Treaty) patent application.
We cannot be certain that we are the first inventor of the subject matter to which we have filed a particular patent application, or
if we are the first party to file such a patent application. If another party has filed a patent application to the same subject matter
as we have, we may not be entitled to the protection sought by the patent application. Further, the scope of protection of issued patent
claims is often difficult to determine. As a result, we cannot be certain that the patent applications that we file will issue, or that
our issued patents will be broad enough to protect our proprietary rights or otherwise afford protection against competitors with similar
technology. In addition, the issuance of a patent is not conclusive as to its inventorship, scope, validity or enforceability. Our competitors
may challenge or seek to invalidate our issued patents, or design around our issued patents, which may adversely affect our business,
prospects, financial condition or operating results. Also, the costs associated with enforcing patents, confidentiality and invention
agreements, or other intellectual property rights may make aggressive enforcement impracticable.
Illegal
distribution and sale by third parties of counterfeit versions of our products could have a negative impact on us.
Third
parties may illegally distribute and sell counterfeit versions of our products which do not meet our rigorous manufacturing and testing
standards. Our reputation and business could suffer harm as a result.
Risks
Related to This Offering and Our Securities
Our
common stock could be subject to extreme volatility.
The
trading price of our common stock may be affected by a number of factors, including events described in the risk factors set forth in
this offering circular, as well as our operating results, financial condition and other events or factors. In addition to the uncertainties
relating to future operating performance and the profitability of operations, factors such as variations in interim financial results
or various, as yet unpredictable, factors, many of which are beyond our control, may have a negative effect on the market price of our
common stock. In recent years, broad stock market indices, in general, and smaller capitalization companies, in particular, have experienced
substantial price fluctuations. In a volatile market, we may experience wide fluctuations in the market price of our common stock and
wide bid-ask spreads. These fluctuations may have a negative effect on the market price of our common stock. In addition, the securities
market has, from time to time, experienced significant price and volume fluctuations that are not related to the operating performance
of particular companies. These market fluctuations may also materially and adversely affect the market price of our common stock.
We
have never paid common stock dividends and have no plans to pay dividends in the future, as a result our common stock may be less valuable
because a return on an investor’s investment will only occur if our stock price appreciates.
Holders
of shares of our common stock are entitled to receive such dividends as may be declared by our Board of Directors. To date, we have paid
no cash dividends on our shares of common stock and we do not expect to pay cash dividends on our common stock in the foreseeable future.
We intend to retain future earnings, if any, to provide funds for operations of our business. Therefore, any return investors in our
common stock will be in the form of appreciation, if any, in the market value of our shares of common stock. There can be no assurance
that shares of our common stock will appreciate in value or even maintain the price at which our stockholders have purchased their shares.
Our
shares will be subject to potential delisting if we do not maintain the listing requirements of the Nasdaq Capital Market.
The
shares of our common stock are listed on the Nasdaq Capital Market, or Nasdaq. Nasdaq has rules for continued listing, including, without
limitation, minimum market capitalization and other requirements. Failure to maintain our listing, or de-listing from Nasdaq, would make
it more difficult for shareholders to dispose of our common stock and more difficult to obtain accurate price quotations on our common
stock. This could have an adverse effect on the price of our common stock. Our ability to issue additional securities for financing or
other purposes, or otherwise to arrange for any financing we may need in the future, may also be materially and adversely affected if
our common stock is not traded on a national securities exchange.
If
we fail to comply with the continued listing requirements of NASDAQ, we may face possible delisting, which would result in a limited
public market for our shares and make obtaining future debt or equity financing more difficult for us. Specifically, as disclosed in
a Current Report filed on Form 8-K on July 16, 2023, the Company had received a notice (the “Notice”) from the staff of the
Listing Qualifications Department (the “Staff”) of The Nasdaq Stock Market LLC (“Nasdaq”) notifying the Company
that it was not in compliance with Nasdaq Listing Rule 5550(a)(2) (the “Rule”) because it failed to maintain a minimum bid
price of $1.00 over the previous 30 consecutive business days dated May 26, 2023 to July 11, 2023. The Rules provide the Company a compliance
period of 180 calendar days in which to regain compliance. If at any time during this 180 day period the closing bid price of the Company’s
security is at least $1 for a minimum of ten (10) consecutive business days, the Staff will provide written confirmation of compliance
and this matter will be closed.
On
January 16, 2024, the Staff determined that the Company is eligible for an additional 180 calendar day period, or until July 8, 2024,
to regain compliance. The Staff’s determination is based on the Company meeting the continued listing requirement for market value
of publicly held shares and all other applicable requirements for initial listing on the Capital Market with the exception of the bid
price requirement, and the Company’s written notice of its intention to cure the deficiency during the second compliance period
by effecting a reverse stock split, if necessary. However, if it appears to the Staff that the Company will not be able to cure the deficiency,
the Staff will provide notice that its securities will be subject to delisting. The Company will continue to monitor the closing bid
price of its Common Stock and will consider its available options to resolve the deficiency and regain compliance with the Minimum Bid
Price Requirement within the allotted compliance period. There can be no assurance that the Company will regain compliance with the Minimum
Bid Price Requirement
We
will incur increased costs as a result of operating as a public company, and our management will be required to devote substantial time
to compliance with our public company responsibilities and corporate governance practices.
As
a public company, we will incur significant legal, accounting and other expenses that we did not incur as a private company, which we
expect to further increase after we are no longer an “emerging growth company.” The Sarbanes-Oxley Act, the Dodd-Frank Wall
Street Reform and Consumer Protection Act, the listing requirements of the Nasdaq Capital Market, and other applicable securities rules
and regulations impose various requirements on public companies. Our management and other personnel will devote a substantial amount
of time to compliance with these requirements. Moreover, these rules and regulations will increase our legal and financial compliance
costs and will make some activities more time-consuming and costly. We cannot predict or estimate the amount of additional costs we will
incur as a public company or the specific timing of such costs.
As
a result of being a public company, we are obligated to develop and maintain proper and effective internal controls over financial reporting,
and any failure to maintain the adequacy of these internal controls may adversely affect investor confidence in our company and, as a
result, the value of our common stock.
We
are required for 2023, pursuant to Section 404 of the Sarbanes-Oxley Act, to furnish a report by management on, among other things, the
effectiveness of our internal control over financial reporting as of the end of the fiscal year that coincides with the filing of our
second annual report on Form 10-K. This assessment will need to include disclosure of any material weaknesses identified by our management
in our internal control over financial reporting. In addition, our independent registered public accounting firm may be required to attest
to the effectiveness of our internal control over financial reporting in our first annual report required to be filed with the SEC following
the date we are no longer an “emerging growth company.” We have commenced the costly and time-consuming process of compiling
the system and processing documentation necessary to perform the evaluation needed to comply with Section 404, and we expect to be able
to complete our evaluation, testing and any required remediation in a timely fashion. Our compliance with Section 404 will require that
we incur substantial expenses and expend significant management efforts. We currently do not have an internal audit group, and we in
the future we may need to hire additional accounting and financial staff with appropriate public company experience and technical accounting
knowledge and compile the system and process documentation necessary to perform the evaluation needed to comply with Section 404.
Our
current controls and any new controls that we develop may become inadequate because of changes in conditions in our business. In addition,
changes in accounting principles or interpretations could also challenge our internal controls and require that we establish new business
processes, systems and controls to accommodate such changes. Additionally, if these new systems, controls or standards and the associated
process changes do not give rise to the benefits that we expect or do not operate as intended, it could adversely affect our financial
reporting systems and processes, our ability to produce timely and accurate financial reports or the effectiveness of internal control
over financial reporting. Moreover, our business may be harmed if we experience problems with any new systems and controls that result
in delays in their implementation or increased costs to correct any post-implementation issues that may arise.
Any
failure to maintain internal control over financial reporting could severely inhibit our ability to accurately report our financial condition
or results of operations. If we are unable to conclude that our internal control over financial reporting is effective, we could lose
investor confidence in the accuracy and completeness of our financial reports, the market price of our common stock could decline, and
we could be subject to sanctions or investigations by the SEC or other regulatory authorities. Failure to remedy any material weakness
in our internal control over financial reporting, or to implement or maintain other effective control systems required of public companies,
could also restrict our future access to the capital markets.
A
sale of a substantial number of shares of our common stock may cause the price of the common stock to decline.
If
our stockholders sell substantial amounts of our common stock in the public market, the market price of our common stock could fall.
These sales also may make it more difficult for us to sell equity or equity-related securities in the future at a time and price that
we deem reasonable or appropriate. Stockholders who have held their shares for at least six months are able to sell their shares pursuant
to Rule 144 under the Securities Act. Almost all of our outstanding shares are available to be sold in the open market under Rule 144
or because they have been registered under the Securities Act We have also registered shares of our common stock for sale into the public
market which are issuable upon the exercise of warrants, by certain selling stockholders named therein. These shares represent a large
number of shares of our common stock, and if sold in the market all at once or at about the same time, could depress the market price
of our common stock during the period the registration statement remains effective and could also affect our ability to raise equity
capital.
Our
stock price may be volatile, and the value of our common stock may decline.
The
market price of our common stock is likely to be highly volatile and could fluctuate widely in price in response to various factors,
many of which are beyond our control, including the following:
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actual
or anticipated fluctuations in our financial condition or results of operations; |
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variance
in our financial performance from expectations of securities analysts; |
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changes
in our projected operating and financial results; |
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changes
in laws or regulations applicable to our products; |
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announcements
by us or our competitors of significant business developments, acquisitions or new products; |
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sales
of shares of our common stock by us or our shareholders, as well as the anticipation of lock-up releases; |
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our
involvement in litigation; |
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future
sales of our common stock by us or our stockholders; |
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changes
in senior management or key personnel; |
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the
trading volume of our common stock; |
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changes
in the anticipated future size and growth rate of our market; |
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general
economic and market conditions; and |
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other
events or factors, including those resulting from war, incidents of terrorism, global pandemics or responses to these events. |
Broad
market and industry fluctuations, as well as general economic, political, regulatory and market conditions, may also negatively impact
the market price of our common stock. In the past, companies who have experienced volatility in the market price of their securities
have been subject to securities class action litigation. We may be the target of this type of litigation in the future, which could result
in substantial expenses and divert our management’s attention.
Purchasers in the offering will suffer immediate
dilution.
If
you purchase Offered Shares in this offering, the value of your shares based on our pro forma net tangible book value will immediately
be less than the offering price you paid. This reduction in the value of your equity is known as dilution. At a public offering price
of 0.38 per share, purchasers of common stock in this offering will experience immediate dilution of approximately $.03 per share, representing
the difference between the public offering price per share in this offering and our pro forma as adjusted net tangible book value per
share as of May 31, 2024, after giving effect to the Pro Forma Adjustments (as defined herein), this offering, and after deducting estimated
offering expenses, including placement agent fees, payable by us. See “Dilution.”
We
do not intend to pay dividends on our common stock for the foreseeable future.
We
have paid no dividends on our common stock to date and we do not anticipate paying any dividends to holders of our common stock in the
foreseeable future. While our future dividend policy will be based on the operating results and capital needs of the business, we currently
anticipate that we will retain any earnings to finance our future expansion and for the implementation of our business plan. Investors
should take note of the fact that a lack of a dividend can further affect the market value of our common stock and could significantly
affect the value of any investment in the Company.
Our
articles of incorporation allow for our board to create new series of preferred stock without further approval by our stockholders, which
could adversely affect the rights of the holders of our common stock.
Our
board of directors has the authority to fix and determine the relative rights and preferences of preferred stock. Our board of directors
has the authority to issue up to 1,000,000 shares of our preferred stock without further stockholder approval. 1 share of preferred stock
is designated Series A Preferred Stock and is outstanding. Our board of directors could authorize the creation of additional series of
preferred stock that would grant to holders of preferred stock the right to our assets upon liquidation, or the right to receive dividend
payments before dividends are distributed to the holders of common stock. In addition, subject to the rules of any securities exchange
on which our stock is then listed, our board of directors could authorize the creation of additional series of preferred stock that has
greater voting power than our common stock or that is convertible into our common stock, which could decrease the relative voting power
of our common stock or result in dilution to our existing stockholders.
The
holder of our Series A Preferred Stock will have 29.5% of the voting power of our stockholders for the election of directors and will
have certain senior rights upon sale of our Company under certain conditions.
There
is 1 share of Series A Preferred Stock issued and outstanding, which is held by our former co-chairman and chief operating officer, Alan
Blackman. The Series A Preferred Stock entitles the holder to 29.5% of the voting power of the Company’s stockholders only as it
relates to the elections of directors. As a result, Mr. Blackman was able to exert substantial influence over the election of directors
to the Board. However, as discussed above, Mr. Blackman resigned from the Board of the company effective July 27, 2023. Additionally,
in connection with Mr. Blackman’s resignation, once his severance payments are satisfied, Mr. Blackman shall return the Series
A Preferred Stock to the Company for cancellation.
Further,
the Series A Preferred Stock, provides that in the event the Company is sold during the two year period following completion of this
offering at a price per share of more than 500% of the initial offering price per Common Unit in this offering, the Series A Preferred
Stock will entitle the holder to 10% of the total purchase price. This may reduce the value of our common stock, as other holders, in
the event of such an acquisition, will be entitled to a lower price per share than they would otherwise receive.
Our
executive officers, directors and principal stockholders, if they choose to act together, have the ability to control or significantly
influence all matters submitted to stockholders for approval.
Our
executive officers, directors and principal stockholders in the aggregate, beneficially own approximately 17.6% of our common stock.
Such persons acting together, will have the ability to control or significantly influence all matters submitted to our stockholders for
approval, as well as our management and business affairs. This concentration of ownership may have the effect of delaying, deferring
or preventing a change in control, impeding a merger, consolidation, takeover or other business combination involving us, or discouraging
a potential acquiror from making a tender offer or otherwise attempting to obtain control of our business, even if such a transaction
would benefit other stockholders.
Additional
stock offerings in the future may dilute then-existing shareholders’ percentage ownership of the Company.
Given
our plans and expectations that we will need additional capital and personnel, we anticipate that we will need to issue additional shares
of common stock or securities convertible or exercisable for shares of common stock, including convertible preferred stock, convertible
notes, stock options or warrants. The issuance of additional securities in the future will dilute the percentage ownership of then current
stockholders.
We
are an “emerging growth company,” and we cannot be certain if the reduced reporting and disclosure requirements applicable
to emerging growth companies will make our common stock less attractive to investors.
We
are an “emerging-growth company,” as defined in the JOBS Act, and we have elected to take advantage of certain exemptions
from various reporting requirements that are applicable to other public companies that are not “emerging growth companies,”
including the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, or Section 404, 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. Pursuant to
Section 107 of the JOBS Act, as an emerging growth company, we have elected to use the extended transition period for complying with
new or revised accounting standards until those standards would otherwise apply to private companies. As a result, our consolidated financial
statements will not be comparable to the financial statements of issuers who are required to comply with the effective dates for new
or revised accounting standards that are applicable to public companies, which may make our common stock less attractive to investors.
In addition, if we cease to be an emerging growth company, we will no longer be able to use the extended transition period for complying
with new or revised accounting standards.
We
will remain an emerging-growth company until the earliest of: (1) the last day of the fiscal year following the fifth anniversary of
this offering; (2) the last day of the first fiscal year in which our annual gross revenue is $1.07 billion or more; (3) the date on
which we have, during the previous rolling three-year period, issued more than $1 billion in non-convertible debt securities; and (4)
the date we qualify as a “large accelerated filer,” with at least $700 million of equity securities held by non-affiliates.
We
cannot predict if investors will find our common stock less attractive as a result of choosing to rely on these exemptions. For example,
if we do not adopt a new or revised accounting standard, our future results of operations will not be as comparable to the results of
operations of certain other companies in our industry that adopted such standards. If some investors find our common stock less attractive
as a result, there may be a less active trading market for our common stock, and our stock price may be more volatile.
DILUTION
If
you purchase shares in this offering, your interest will be diluted to the extent of the difference between the public offering price
per share and the net tangible book value per share of our common stock after this offering. Our net tangible book value as of May
31, 2024, was $8,095,155 or $0.35 per share of common stock.
“Net
tangible book value” is total assets minus the sum of liabilities and intangible assets. “Net tangible book value per share”
is net tangible book value divided by the total number of shares of common stock outstanding.
After giving effect to the
sale by us in this offering of shares at a public offering price of $0.38 per share, and after deducting the estimated placement
agent discounts and commissions and estimated offering expenses that we will pay, our adjusted net tangible book value as of May 31,
2024, would have been approximately $24,326,355, or $0.35 per share of common stock. This amount represents no immediate
change in net tangible book value of $0.35 per share to existing stockholders and an immediate decrease of $0.03
per share to purchasers in this offering.
The
following table illustrates the dilution:
| Public offering price per share | |
$ | 0.38 | |
| Net tangible book value per share as of May 31, 2024 | |
$ | 0.35 | |
| Decreases in net tangible book value per share attributable to this offering | |
$ | 0.03 | |
| As adjusted net tangible book value per share after this offering | |
$ | 0.35 | |
| Decrease in per share to new investors | |
$ | 0.03 | |
The above table is based on 23,097,651
shares of common stock outstanding as of May 31, 2024, and excludes:
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20,676,319
shares issuable upon exercise of outstanding warrants with a weighted average exercise price of $.43; |
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|
|
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1
outstanding share of Series A Preferred Stock, which are not convertible into common stock. |
USE
OF PROCEEDS
The
table below sets forth the estimated proceeds we would derive from this offering, assuming the sale of 25%, 50%, 75% and 100% of the
Offered Shares at a public offering price of per share price of $0.38, which represents the midpoint of the offering price
range herein. There is, of course, no guaranty that we will be successful in selling any of the Offered Shares in this offering.
| | |
Assumed Percentage of Offered Shares Sold in This Offering | |
| | |
25% | | |
50% | | |
75% | | |
100% | |
| Offered Shares sold | |
| 11,750,000 | | |
| 23,500,000 | | |
| 35,250,000 | | |
| 47,000,000 | |
| Gross proceeds | |
$ | 4,465,000 | | |
$ | 8,930,000 | | |
$ | 13,395,000 | | |
$ | 17,860,000 | |
| Offering expenses (1) | |
| (557,200 | ) | |
| (914,400 | ) | |
| (1,271,600 | ) | |
| (1,628,800 | ) |
| Net proceeds | |
$ | 3,907,800 | | |
$ | 8,015,600 | | |
| 12,123,400 | | |
$ | 16,231,200 | |
| (1) |
Represents
placement agent fees, legal and accounting fees and expenses and out-of-pocket costs of escrow and clearing agent (See “Plan
of Distribution”). |
The
table below sets forth the manner in which we intend to apply the net proceeds derived by us in this offering, assuming the sale of 25%,
50%, 75% and 100% of the Offered Shares at a public per share offering price of $0.38, which represents the midpoint of the offering
price range herein. All amounts set forth below are estimates.
| | |
Use of Proceeds for Assumed Percentage of Offered Shares Sold in This Offering | |
| | |
25% | | |
50% | | |
75% | | |
100% | |
| Capital Expenditures | |
$ | 1,000,000 | | |
$ | 3,206,240 | | |
$ | 4,849,360 | | |
$ | 6,491,880 | |
| General Corporate Expenses, including Working Capital | |
| 2,907,800 | | |
| 4,809,360 | | |
| 7,274,040 | | |
| 9,739,320 | |
| TOTAL | |
$ | 3,907,800 | | |
$ | 8,015,600 | | |
$ | 12,123,400 | | |
$ | 16,231,200 | |
We
reserve the right to change the foregoing use of proceeds, should our management believe it to be in the best interest of our company.
The allocations of the proceeds of this offering presented above constitute the current estimates of our management and are based on
our current plans, assumptions made with respect to the industry in which we currently or, in the future, expect to operate, general
economic conditions and our future revenue and expenditure estimates.
Investors
are cautioned that expenditures may vary substantially from the estimates presented above. Investors must rely on the judgment of our
management, who will have broad discretion regarding the application of the proceeds of this offering. The amounts and timing of our
actual expenditures will depend upon numerous factors, including market conditions, cash generated by our operations (if any), business
developments and the rate of our growth. We may find it necessary or advisable to use portions of the proceeds of this offering for other
purposes.
In
the event we do not obtain the entire offering amount hereunder, we may attempt to obtain additional funds through private offerings
of our securities or by borrowing funds. Currently, we do not have any committed sources of financing.
PLAN
OF DISTRIBUTION
In
General
Our
company is offering a maximum of 47,000,000 Offered Shares on a “best-efforts” basis, at a fixed price of $0.38 per
Offered Share. There is no minimum purchase requirement for investors in this offering. This offering will terminate at the earliest
of (a) the date on which the maximum offering has been sold; (b) May 30, 2025;
or (c) the date on which this offering is earlier
terminated by us, in our sole discretion.
There
is no minimum number of Offered Shares that we are required to sell in this offering. All funds derived by us from this offering will
be immediately available for use by us, in accordance with the uses set forth in the section entitled “Use of Proceeds” of
this Offering Circular. No funds will be placed in an escrow account during the offering period and no funds will be returned once an
investor’s subscription agreement has been accepted by us.
The
shares will be also be offered by Aegis Capital Corp., a broker-dealer registered with the SEC and a member of FINRA (“Aegis Capital
Corp.,” or the “Placement Agent”), on a “best efforts” basis pursuant to an engagement letter to be entered
into between us and Aegis Capital Corp., which we refer to as the “Placement Agent Agreement.” Pursuant to the Placement
Agent Agreement, we will pay the Placement Agent, concurrently with each closing of this offering, a cash placement fee equal to 7.0%
of the gross proceeds of such closing. In addition, we will also pay the Placement Agent (i) 1.0% of the gross proceeds for non-accountable
expenses; (ii) up to $100,000 for fees and expenses of legal counsel and other out-of-pocket expenses, and (iii) if applicable,
the costs associated with the use of a third-party electronic road show service. In addition, we will engage and bear the expenses
of an escrow agent in connection with any closing.
We
or the Placement Agent may also ask other FINRA member broker-dealers that are registered with the SEC to participate as soliciting dealers
for this offering.
Right
of First Refusal
If,
for the period beginning on any closing date of this offering and ending twelve (12) months after the commencement of sales of the offering,
we or any of our subsidiaries (a) decides to finance or refinance any indebtedness in a securities-related transaction, the Placement
Agent (or any affiliate designated by the Placement Agent) shall have the right to act as sole book-runner, sole manager, sole placement
agent or sole agent with respect to such securities-related financing or refinancing; or (b) decides to raise funds by means of a public
offering (including at-the-market facility) or a private placement or any other capital raising financing of equity, equity-linked or
debt securities, the Placement Agent (or any affiliate designated by the Placement Agent) shall have the right to act as sole book-running
manager, sole underwriter or sole placement agent for such financing.
Lock-Up
Agreements
All
of our directors, executive officers, employees and holders of 10% or more our outstanding shares of common stock have agreed that, for
a period of sixty (60) days after any closing date of the offering, Placement Agent, (a) offer, sell, or otherwise transfer or dispose
of, directly or indirectly, any shares of capital stock of the Company or any securities convertible into or exercisable or exchangeable
for shares of capital stock of the Company; provided, however, that any sales by parties to the lock-ups shall be subject to the lock-up
agreements and provided further that none of such hares shall be saleable in the public market until the expiration of the 60-day period
described above; or (b) file or caused to be filed any registration statement with the Commission relating to the Offering of any shares
of capital stock of the Company or any securities convertible into or exercisable or exchangeable for shares of capital stock of the
Company.
The
prior sentence will not apply to (i) the shares to be sold pursuant to the Placement Agent Agreement, (ii) any shares issued upon the
exercise of an option or other security outstanding on the date of the offering, (iii) such issuances of options or grants of restricted
stock or other equity-based awards under the Company’s equity plan and the issuance of shares issuable upon exercise of any such
equity-based awards, (iv) the filing of registration statements, (v) the issuance of securities to affiliates and subsidiaries of the
Company, and, (vi) the issuance of securities in connection with mergers, acquisitions, joint ventures, licensing arrangements or any
other similar non-capital raising transactions.
The
Placement Agent Agreement, in its sole discretion, may release the shares and other securities subject to the lock-up agreements described
above in whole or in part at any time. When determining whether or not to release shares and other securities from lock-up agreements,
the Placement Agent Agreement will consider, among other factors, the holder’s reasons for requesting the release, the number of
shares and other securities for which the release is being requested and market conditions at the time.
Securities
Issuance Standstill
We
have agreed, for a period of sixty (60) days after the commencement of sales of this Offering, that we will not, without the prior written
consent of the underwriter, offer, sell, issue, enter into any agreement to issue or announce the issuance or proposed issuance of any
shares or share equivalents except for the issuance of shares or options to employees, consultants, officers or directors of our Company
pursuant to any stock or option plan duly adopted for such purpose, approved by the Company’s stockholders and issued for bona
fide services permissible under Form S-8. Except for offerings with Aegis, for sixty (60) days after any closing date of the offering,
the Company shall not effect or enter into an agreement to effect any issuances of shares in connection with an acquisition or a strategic
relationship, which may include the sale of equity securities.
Tail
Financing
We
have agreed to pay the above cash compensation to the extent that any fund which the Placement Agent contacted or introduced to us during
the term of our engagement agreement with the Placement Agent provides financing or capital in any public or private offering or capital
raising transaction during the twelve-month period following expiration or termination of our engagement agreement or the last closing
of the offering.
Procedures
for Subscribing
If
you are interested in subscribing for Offered Shares in this offering, please submit a request for information by e-mail to andrew.crescenzo@sharpstechnology.com;
all relevant information will be delivered to you by return e-mail. Thereafter, should you decide to subscribe for Offered Shares, you
are required to follow the procedures described in the subscription agreement included in the delivered information, which are:
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Electronically
execute and deliver to us a subscription agreement; and |
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Deliver
funds directly by check or by wire or electronic funds transfer via ACH to our specified bank account. |
Right
to Reject Subscriptions
After
we receive your complete, executed subscription agreement and the funds required under the subscription agreement have been transferred
to us, we have the right to review and accept or reject your subscription in whole or in part, for any reason or for no reason. We will
return all monies from rejected subscriptions immediately to you, without interest or deduction.
Acceptance
of Subscriptions
Conditioned
upon our acceptance of a subscription agreement, we will countersign the subscription agreement and issue the Offered Shares subscribed.
Once you submit the subscription agreement and it is accepted, you may not revoke or change your subscription or request your subscription
funds. All accepted subscription agreements are irrevocable.
This
Offering Circular will be furnished to prospective investors upon their request via electronic PDF format and will be available for viewing
and download 24 hours per day, 7 days per week on our company’s page on the SEC’s website: www.sec.gov.
An
investor will become a shareholder of the Company and the Offered Shares will be issued, as of the date of settlement. Settlement will
not occur until an investor’s funds have cleared and we accept the investor as a shareholder.
By
executing the subscription agreement and paying the total purchase price for the Offered Shares subscribed, each investor agrees to accept
the terms of the subscription agreement and attests that the investor meets certain minimum financial standards.
An
approved trustee must process and forward to us subscriptions made through IRAs, Keogh plans and 401(k) plans. In the case of investments
through IRAs, Keogh plans and 401(k) plans, we will send the confirmation and notice of our acceptance to the trustee.
State
Law Exemption and Offerings to “Qualified Purchasers”
The
Offered Shares are being offered and sold to “qualified purchasers” (as defined in Regulation A under the Securities Act).
As a Tier 2 offering pursuant to Regulation A under the Securities Act, this offering will be exempt from state “Blue Sky”
law review, subject to certain state filing requirements and anti-fraud provisions, to the extent that the Offered Shares offered hereby
are offered and sold only to “qualified purchasers”.
“Qualified
purchasers” include any person to whom securities are offered or sold in a Tier 2 offering pursuant to Regulation A under the Securities
Act. We reserve the right to reject any investor’s subscription in whole or in part for any reason, including if we determine,
in our sole and absolute discretion, that such investor is not a “qualified purchaser” for purposes of Regulation A. We intend
to offer and sell the Offered Shares to qualified purchasers in every state of the United States.
Issuance
of Offered Shares
Upon
settlement, that is, at such time as an investor’s funds have cleared and we have accepted an investor’s subscription agreement,
we will either issue such investor’s purchased Offered Shares in book-entry form or issue a certificate or certificates representing
such investor’s purchased Offered Shares.
Transferability
of the Offered Shares
The
Offered Shares will be generally freely transferable, subject to any restrictions imposed by applicable securities laws or regulations.
Listing
of Offered Shares
The
Offered Shares will be listed on The Nasdaq Capital Market under the symbol “STSS.”
DESCRIPTION
OF SECURITIES
General
Our
authorized capital stock consists of 100,000,000 shares of common stock, par value of $0.0001 per share, and 1,000,000 shares of preferred
stock, par value $0.0001 per share. 1 share of our preferred stock is designated as Series A Preferred Stock and is held by Alan Blackman,
our former co-chairman and former chief operating officer. However, pursuant to an agreement between Alan Blackman and the Company, the
Board of Directors of the Company currently has control of the voting of such share (See Series A Preferred Stock).
Upon
completion of this offering, shares of common stock and 1 share of Series A Preferred Stock will be issued and outstanding, which
assumes no exercise of:
| |
● |
8,625,000
shares underlying warrants offered per the IPO declared effective by the SEC on April 13, 2022; 422,795 shares underlying warrants
issued to other parties after the IPO; |
| |
● |
6,556,809
shares underlying warrants offered by the Selling
Shareholders relating to the offering on February 3, 2023 and September 2023 and 4,441,715 New Warrants issued in May 2024; |
| |
● |
630,000
warrants issued to an advisor; |
Common
Stock
Holders
of our common stock are entitled to one vote for each share on all matters submitted to a stockholder vote. Holders of common stock do
not have cumulative voting rights. Therefore, holders of a majority of the voting power of our stockholders for the election of directors
can elect all of the directors. Holders of the majority of the voting power of the Company’s stockholders, outstanding and entitled
to vote, represented in person or by proxy, are necessary to constitute a quorum at any meeting of stockholders. A vote by the holders
of a majority of the voting power of the Company’s stockholders is required to effectuate certain fundamental corporate changes
such as liquidation, merger or an amendment to the Company’s articles of incorporation.
Holders
of our common stock are entitled to share in all dividends that the board of directors, in its discretion, declares from legally available
funds. In the event of a liquidation, dissolution or winding up, each outstanding share entitles its holder to participate pro rata in
all assets that remain after payment of liabilities and after providing for each class of stock, if any, having preference over the common
stock. The Company’s common stock has no pre-emptive rights, no conversion rights and there are no withdrawal provisions applicable
to the Company’s common stock.
IPO
Warrants
The
following summary of certain terms and provisions of the warrants included in the initial public offering (“IPO Warrants”)
hereby is not complete and is subject to, and qualified in its entirety by the provisions of the form of Warrant, which is filed as an
exhibit to the registration statement of which this offering circular is a part. Prospective investors should carefully review the terms
and provisions set forth in the form of Warrant.
Exercisability.
The IPO Warrants are exercisable at any time after their original issuance and at any time up to the date that is five years after their
original issuance. The IPO Warrants are be exercisable, at the option of each holder, in whole or in part by delivering to us a duly
executed exercise notice and, at any time a registration statement registering the issuance of the shares of common stock underlying
the IPO Warrants under the Securities Act is effective and available for the issuance of such shares, or an exemption from registration
under the Securities Act is available for the issuance of such shares, by payment in full in immediately available funds for the number
of shares of common stock purchased upon such exercise. If a registration statement registering the issuance of the shares of common
stock underlying the IPO Warrants under the Securities Act is not effective or available and an exemption from registration under the
Securities Act is not available for the issuance of such shares, the holder may elect to exercise the IPO Warrants through a cashless
exercise, in which case the holder would receive upon such exercise the net number of shares of common stock determined according to
the formula set forth in the warrant. No fractional shares of common stock will be issued in connection with the exercise of the IPO
Warrants. In lieu of fractional shares, we will pay the holder an amount in cash equal to the fractional amount multiplied by the exercise
price.
Exercise
Limitation. A holder will not have the right to exercise any portion of the IPO Warrants if the holder (together with its affiliates)
would beneficially own in excess of 4.99% of the number of shares of our common stock outstanding immediately after giving effect to
the exercise, as such percentage ownership is determined in accordance with the terms of the warrants. However, any holder may increase
or decrease such percentage to any other percentage not in excess of 9.99%, provided that any increase in such percentage shall not be
effective until 61 days following notice from the holder to us.
Exercise
Price. The exercise price per whole share of common stock purchasable upon exercise of the IPO Warrants is $4.25 and adjusted to
$.64 with September 2023 offering and further adjusted to $0.33
with the warrant inducement offering. The exercise price is subject to appropriate adjustment in the event of certain stock
dividends and distributions, stock splits, stock combinations, reclassifications or similar events affecting our common stock and also
upon any distributions of assets, including cash, stock or other property to our stockholders. The exercise price is also subject to
adjustment in the event of subsequent sales of our common stock (or securities exercisable for convertible into common stock) at a purchase
price (or conversion or exercise price, as applicable) less than the then-effective exercise price. In the event of such a subsequent
sale, the exercise price will be reduced to such lower price, subject to certain exceptions and subject to a minimum exercise price set
forth in the IPO Warrants.
Forced
Exercise and Redemption. The IPO Warrants will be subject to forced exercise commencing six months from issuance subject to the condition
that the volume weighted average price of the Company’s common stock exceeds 200% of the initial exercise price ($4.25) for twenty
consecutive trading days and subject to certain other conditions set forth in the Warrants. In the event that a holder fails to exercise
the IPO Warrants within 30 days of notice of a forced exercise in accordance with the terms of the IPO Warrants, the Company may redeem
the IPO Warrants at a redemption price of $0.01 per Warrant.
Transferability.
Subject to applicable laws, the IPO Warrants may be offered for sale, sold, transferred or assigned without our consent.
Exchange
Listing. The IPO Warrants are currently listed on the Nasdaq Capital Market under the symbol “STSSW”.
Warrant
Agent. The IPO Warrants will be issued in registered form under a warrant agency agreement between VStock Transfer LLC, as warrant
agent, and us. The IPO Warrants shall initially be represented only by one or more global warrants deposited with the warrant agent,
as custodian on behalf of The Depository Trust Company (DTC) and registered in the name of Cede & Co., a nominee of DTC, or as otherwise
directed by DTC.
Fundamental
Transactions. In the event of a fundamental transaction, as described in the IPO Warrants and generally including any reorganization,
recapitalization or reclassification of our common stock, the sale, transfer or other disposition of all or substantially all of our
properties or assets, our consolidation or merger with or into another person, the acquisition of more than 50% of our outstanding common
stock, or any person or group becoming the beneficial owner of 50% of the voting power represented by our outstanding common stock, the
holders of the warrants will be entitled to receive upon exercise of the warrants the kind and amount of securities, cash or other property
that the holders would have received had they exercised the warrants immediately prior to such fundamental transaction.
Rights
as a Stockholder. Except as otherwise provided in the warrants or by virtue of such holder’s ownership of shares of our common
stock, the holder of IPO Warrants does not have the rights or privileges of a holder of our common stock, including any voting rights,
until the holder exercises the IPO Warrants.
Governing
Law. The IPO Warrants and the warrant agency agreement are governed by New York law.
September
2023 Warrants
On
September 27, 2023, Sharps Technology, Inc., (the “Company”) entered into a Securities Purchase Agreement (the “PIPE
Agreement”), with certain purchasers (the “Purchasers”), for the issuance of (i) 2,581,479 shares of our common stock
issuable upon exercise of pre-funded warrants, and (ii) 8,750,003 shares of common stock issuable upon the exercise of outstanding warrants.
The purchase price of each share is $0.64 share priced at-the-market under NASDAQ rules. The purchase price for the pre-funded warrants
is identical to the purchase price for shares, less the exercise price of $0.001 per share.
Each
unit consists of one pre-funded warrant and one non-tradable warrant (the “September 2023 Warrants”) to purchase one share
of common stock with an exercise price of $0.64 per share, as further repriced to $0.33 with the New Warrant inducement offering.
The Warrants are immediately exercisable and will expire five and a half years from the issuance date.
The
PIPE Offering closed on September 29, 2023. The aggregate gross proceeds to the Company were approximately $5.6 million before deducting
fees to the placement agent and other offering expenses payable by the Company.
The
following summary of certain terms and provisions of the September 2023
Warrants included in the Common Units offered hereby is not complete and is subject to, and qualified in its entirety by the provisions
of the form of Warrant, which is filed as an exhibit to the registration statement of which this offering circular is a part. Prospective
investors should carefully review the terms and provisions set forth in the form of Warrant.
Exercisability.
The September 2023 Warrants are exercisable
at any time after their original issuance and at any time up to the date that is five and a half years after their original issuance.
The September 2023 Warrants will be
exercisable, at the option of each holder, in whole or in part by delivering to us a duly executed exercise notice and, at any time a
registration statement registering the issuance of the shares of common stock underlying the September
2023 Warrants under the Securities Act is effective and available for the issuance
of such shares, or an exemption from registration under the Securities Act is available for the issuance of such shares, by payment in
full in immediately available funds for the number of shares of common stock purchased upon such exercise. If a registration statement
registering the issuance of the shares of common stock underlying the September 2023
Warrants under the Securities Act is not effective or available and an exemption from registration under the Securities Act is
not available for the issuance of such shares, the holder may elect to exercise the September
2023 Warrants through a cashless exercise, in which case the holder would receive
upon such exercise the net number of shares of common stock determined according to the formula set forth in the warrant. No fractional
shares of common stock will be issued in connection with the exercise of the September 2023
Warrants. In lieu of fractional shares, we will pay the holder an amount in cash
equal to the fractional amount multiplied by the exercise price.
Exercise
Limitation. A holder will not have the right to exercise any portion of the September 2023
Warrants if the holder (together with its affiliates) would beneficially own
in excess of 4.99% of the number of shares of our common stock outstanding immediately after giving effect to the exercise, as such percentage
ownership is determined in accordance with the terms of the warrants. However, any holder may increase or decrease such percentage to
any other percentage not in excess of 9.99%, provided that any increase in such percentage shall not be effective until 61 days following
notice from the holder to us.
Exercise
Price. The exercise price per whole share of common stock purchasable upon exercise of the September
2023 Warrants is $0.64, adjusted to $0,33 as of result of the warrant inducement offering.
The exercise price is subject to appropriate adjustment
in the event of certain stock dividends and distributions, stock splits, stock combinations, reclassifications or similar events affecting
our common stock and also upon any distributions of assets, including cash, stock or other property to our stockholders. The exercise
price is also subject to adjustment in the event of subsequent sales of our common stock (or securities exercisable for convertible into
common stock) at a purchase price (or conversion or exercise price, as applicable) less than the then-effective exercise price. In the
event of such a subsequent sale, the exercise price will be reduced to such lower price, subject to certain exceptions and subject to
a minimum exercise price set forth in the September 2023 Warrants.
Transferability.
Subject to applicable laws, the September 2023
Warrants may be offered for sale, sold, transferred or assigned without our consent.
Warrant
Agent. The September 2023 Warrants
will be issued in registered form under a warrant agency agreement between VStock Transfer LLC, as warrant agent, and us. The September
2023 Warrants shall initially be represented only by one or more global warrants
deposited with the warrant agent, as custodian on behalf of The Depository Trust Company (DTC) and registered in the name of Cede &
Co., a nominee of DTC, or as otherwise directed by DTC.
Fundamental
Transactions. In the event of a fundamental transaction, as described in the September 2023
Warrants and generally including any reorganization, recapitalization or reclassification
of our common stock, the sale, transfer or other disposition of all or substantially all of our properties or assets, our consolidation
or merger with or into another person, the acquisition of more than 50% of our outstanding common stock, or any person or group becoming
the beneficial owner of 50% of the voting power represented by our outstanding common stock, the holders of the warrants will be entitled
to receive upon exercise of the warrants the kind and amount of securities, cash or other property that the holders would have received
had they exercised the warrants immediately prior to such fundamental transaction.
Rights
as a Stockholder. Except as otherwise provided in the warrants or by virtue of such holder’s ownership of shares of our common
stock, the holder of a September 2023 Warrants
does not have the rights or privileges of a holder of our common stock, including any voting rights, until the holder exercises
the September 2023 Warrants.
Governing
Law. The September 2023 Warrants and the warrant agency agreement are governed by New York
law.
May
2024 New Warrants
On
May 30, 2024, Sharps Technology, Inc. (the “Company”) entered into a warrant inducement (the “Inducement Agreement”)
with certain warrant holders (the “Warrant Holders”) which references the warrants (the “Existing 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) (the “Registration Statements”) in the amount of 10,998,524 warrants to purchase shares of the
Company’s common stock, par value $0.0001 per share (the “Common Stock”).
Pursuant
to the Inducement Agreement, the holders of the Existing Warrants agreed to reduce the exercise price of their Existing Warrants totaling
10,998,524, from $0.64 per share to $0.33 per share. Additionally, the Company agreed to issue unregistered warrants with an exercise
price of $0.45 per share to purchase 10,998,524 shares of Common Stock (the “New Warrants”), pursuant to a warrant agreement
(the “New Warrant Agreement”).
If
exercised in full, the Company will receive aggregate gross proceeds up to approximately $3,299,557, before deducting expenses payable
by the Company.
Terms
of the New Warrants
The
New Warrants will have an exercise price of $0.45 per share and will be exercisable on and after the date that is sixty (60) days following
the date of issuance.
The
New Warrants will expire on the five (5) year anniversary of their initial exercise date. If at the time of exercise there is no effective
registration statement registering the New Warrants, or the prospectus contained therein is not available for the issuance of the New
Warrants to the holder or the resale of the New Warrants by the holder, then the New Warrants may also be exercised, in whole or in part,
at such time by means of a “cashless exercise”.
The
exercise price and the number of shares of Common Stock issuable upon exercise of each New Warrant are subject to certain adjustments
in the event of certain stock dividends and distributions, stock splits, stock combinations, reclassifications or similar events affecting
the Common Stock. In the event of a fundamental transaction, as described in the New Warrant Agreement, the holders of the New Warrants
will be entitled to receive upon exercise of the New Warrants the, from the Company or any successor entity the same type or form of
consideration (and in the same proportion), at the Black Scholes Value (as defined in the New Warrant Agreement) of the unexercised portion
of the New Warrant, that is being offered and paid to the holders of Common Stock of the Company in connection with the fundamental transaction,
whether that consideration be in the form of cash, stock or any combination thereof, or whether the holders of Common Stock are given
the choice to receive from among alternative forms of consideration in connection with the fundamental transaction; provided, further,
that if holders of Common Stock of the Company are not offered or paid any consideration in such fundamental transaction, such holders
of Common Stock will be deemed to have received common stock/shares of the successor entity (which entity may be the Company following
such fundamental transaction) in such fundamental transaction.
The
“Beneficial Ownership Limitation” shall be 4.99% (or, upon election by a holder prior to the issuance of any New Warrants,
9.99%) of the number of shares of Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock
issuable upon exercise of the New Warrant.
The
New Warrant Agreement does not entitle the holder to any voting rights, dividends or other rights as a stockholder of the Company prior
to the exercise hereof as set forth in Section 2(d)(i), except as expressly set forth in Section 3.
The
New Warrants described herein have not been registered under the Securities Act of 1933, as amended (the “Securities Act”),
and may not be sold in the United States absent registration or an applicable exemption from the registration requirements.
February
2023 Warrants
On
February 1, 2023, Sharps Technology, Inc., (the “Company”) entered into a Securities Purchase Agreement (the “PIPE
Agreement”), with certain purchasers (the “Purchasers”), for the issuance of 2,248,521 units (the “PIPE Offering”),
at a purchase price of $1.69 per unit priced at-the-market under NASDAQ rules. Each unit consist
of one share of common stock and one non-tradable warrant (the “Warrant”) to purchase one share of common stock with an exercise
price of $1.56 per share. The Warrants are immediately exercisable and will expire five years from the issuance date.
The
PIPE Offering closed on February 3, 2023. The aggregate gross proceeds to the Company were approximately $3.8 million, before deducting
fees to the placement agent and other offering expenses payable by the Company.
Registration
Rights Agreement
In
connection with the PIPE Agreement, 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 “SEC”) to register the shares and shares underlying the Warrants issued under
the PIPE Agreement within fifteen (15) days after the closing date (the “Filing Date”).
Pursuant to the Registration Rights Agreement, the Registration Statement shall be declared effective the sooner of (a) two Trading Days
(as defined therein) following receipt of a notice of no review from the SEC, provided that the Company’s financial statements
are current at such time or (b) within thirty (30) days after the Filing Date. The Company will be obligated to pay certain liquidated
damages to the Purchasers if the Company fails to file the Registration Statement when required, fails to cause the Registration Statement
to be declared effective by the SEC when required, of if the Company fails to maintain the effectiveness of the Registration Statement.
Placement
Agent Agreement
Aegis
Capital Corp. (“Aegis”) acted as the exclusive placement agent in connection with the PIPE Offering under a Placement Agent
Agreement, dated as of February 1, 2023, between the Company and Aegis (the “Placement Agent Agreement”). Pursuant to the
Placement Agent Agreement, Aegis was paid a commission equal to 10.0% of the gross proceeds received
by the Company in the PIPE Offering. The Company reimbursed Aegis $100,000 for certain fees and expenses incurred by them, including
attorney fees. The Company also agreed to pay Aegis 10.0% of the proceeds from the exercise of the Warrants issued in the PIPE Offering.
Blank
Check Preferred Stock
Our
articles of incorporation authorize the issuance of up to 1,000,000 shares of preferred stock, par value $0.0001 per share, in one or
more series, subject to any limitations prescribed by law, without further vote or action by the stockholders. Each such series of preferred
stock shall have such number of shares, designations, preferences, voting powers, qualifications, and special or relative rights or privileges
as shall be determined by our board of directors, which may include, among others, dividend rights, voting rights, liquidation preferences,
conversion rights and preemptive rights.
Series
A Preferred Stock
One
share of our authorized preferred stock has been designated Series A Preferred Stock and is outstanding and held by our co-chairman and
chief operating officer, Alan Blackman. However, pursuant to an agreement between Alan Blackman and the Company, the Board of Directors
of the Company currently has control of the voting of such share.
The
Series A Preferred Stock entitles the holder to 29.5% of the voting power of the Company’s stockholders with respect to the election
of directors. Further, the Series A Preferred Stock is not convertible to common stock, has no rights to dividends, and has no liquidation
rights.
On
December 22, 2022, the Company filed a Certificate of Amendment to Designation with the Secretary
of State of Nevada to amend the voting rights for the holder of the Company’s Series A Preferred Stock to be entitled to twenty-nine
and one-half percent (29.5%) vote from twenty-five percent (25%) vote. The amendment was provided for in the employment agreement of
the Company’s former Chief Operating Officer, Alan Blackman who is the holder of the Series A Preferred Stock.
In
the event the Company is sold during the two year period following completion of this offering at a price per share of more than 500%
of the initial offering price per Common Unit in this offering, the Series A Preferred Stock, as in effect upon completion of this offering,
will entitle the holder to 10% of the total purchase price. Pursuant to an arrangement with Alan
Blackman effective July 27, 2023, Mr. Blackman has granted the board the right to vote such shares during the period that the Company
is making certain payments to him. Once the Company makes the necessary payments, the share of Series A Preferred Stock will be surrendered
for cancellation.]
Transfer
Agent and Registrar
VStock
Transfer LLC is transfer agent and registrar for our common stock.
BUSINESS
Background
and Overview
Sharps
Technology, Inc. is a medical device company that has designed and patented various safety syringes and is seeking to commercialize them.
We were initially incorporated under the laws of the State of Wyoming on December 16, 2017. Prior to March 22, 2022, we were a Wyoming
corporation and on March 22, 2022, we reincorporated as a Nevada corporation pursuant to a merger into a newly formed Nevada corporation
which was approved by our board of directors and the holders of the majority of our outstanding shares of common stock Sharps was incorporated
to purchase, develop, and commercialize a body of intellectual property resulting in a family of smart safety syringe products and innovative
drug delivery devices. Sharps closed the acquisition of this intellectual property in the fourth quarter of 2017. The intellectual property
we purchased consisted of issued patent and patent files, new designs and iterations, samples, regulatory files, manufacturing files,
product testing files, and market research files relating to such safety syringe products.
In
June 2020, we entered into an asset/share purchase agreement with Safegard Medical and certain other parties and in August 2020, October
2020, and July 2021, we entered into amendments to this agreement (as amended, the “Safegard Agreement”). Under the Safegard
Agreement, we received an option to purchase either the stock of Safegard or certain assets of Safegard, including a manufacturing facility
in Hungary registered with the FDA and CE for the manufacture of safety syringes, for $2.5 million in cash plus additional consideration
of 28,571 shares of common stock and 35,714 stock options with an exercise price of $7.00. Under the Safegard Agreement, we were granted
the right to operate this facility at our expense and continued to do so through the closing date which occurred on July 6, 2022.
Sharps’
smart safety syringe products, which we refer to as Securgard™, Sologard™, and Sharps Provensa™, are ultra-low waste
syringes that incorporate both passive and active safety and reuse prevention features, which we believe will provide us a competitive
advantage over other syringes. The Sharps Securegard and Sologard lines, currently being marketed by the Company, are multi-feature safety
syringes that had gained market acceptance prior to Sharps’ acquisition but not been marketed or sold for several years due to
a decision by the owners to wind down the business. Safegard and Sologard are both FDA and WHO approved and Safegard currently carries
the European CE Mark. The Sharps Provensa syringe is a patented passive safety syringe that gained FDA clearance for subcutaneous and
intramuscular injections in June 2006. All three of these product lines are focused on innovatively addressing the most important needs
of the global healthcare market in the area of disposable syringes. The Company has not yet generated any revenues from the sale of the
Sharps products.
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, t. The NPC Agreement 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, will be replaced as part of the Asset Purchase Agreement, entered into on September 22,
2023 (see below) and the Pharma Services agreement continues to be in place, but no activities have occurred to date. The Company is
currently working to amend the terms of this NPC Agreement. based on the below September 22, 2023 Asset Purchase Agreement.
The
Pharma Services Program (PSP) with Nephron is intended to create new business development 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, as well as by Nephron.
On
September 29, 2022, the Company also entered into an agreement (the “Nephron Agreement”) with InjectEZ, LLC (“InjectEZ”),
Nephron Pharmaceuticals Corporation (“NPC”), Nephron SC, Inc. (“NSC”), and Nephron Sterile Compounding Center
LLC (“Sterile”) (NPC, NSC, and Sterile are sometimes collectively referred to as “Nephron”), pursuant to which
Sharps was to 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. The Company is currently working to amend
the terms of the Nephron Agreement based on the below September 22, 2023 Asset Purchase Agreements.
On
September 22, 2023, the Company entered into a series of agreements with Nephron and Nephron’s wholly owned subsidiary InjectEZ,
LLC. The Company entered into an asset purchase agreement (the “Asset Purchase Agreement”) to purchase certain equipment
and leasehold improvements at Nephron’s facility (the “Facility”) in West Columbia, South Carolina. The Company continues
to work with Nephron towards the purchase of the Nephron facility pursuant to the Asset Purchase Agreement dated September 22, 2023.
This Asset Purchase Agreement, when closed, will supersede the manufacturing and supply agreement entered into in connection with
the NPC Agreement on September 29, 2022, as noted in the subsequent paragraph. On May 20, 2024, the Company entered into an Amendment
to the Asset Purchase Agreement and a new Purchase Agreement with Nephron and its related entities. The closing of the Asset Purchase
Agreement is contingent on obtaining the necessary financing and there can be no assurance that the closing of the asset purchase
will occur.
The
Amendment to the Asset Purchase Agreement changes the purchase price to $35,000,000 and obligates the Company to assume up to $4,000,000
in liabilities related to the assets being purchased. The asset list was also slightly modified. It provides that the parties have 45
days to close on the transaction, subject to the Company’s right to extend for an additional 15 days.
On
May 20, 2024, the Company entered into a five-year Purchase Agreement (the “Purchase Agreement”) with Nephron whereby Nephron
agreed to utilize the Company as its exclusive pre-filled copolymer syringe manufacturer and to purchase a minimum aggregate of approximately
$188.5 million dollars of syringes over the term of the Purchase Agreement. The Purchase Agreement contains specific quantities of products
required to be purchased from the Company during the term of the Purchase Agreement. Notwithstanding the foregoing, the Purchase Agreement
is contingent on the closing of the Asset Purchase Agreement as amended.
On
March 4, 2024 (the “Effective Date”), the 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.
On
March 8, 2024, the Company and Nephron Pharmaceuticals Corporation terminated their distribution agreement dated December 8, 2022. The
Nephron distribution agreement has been partially replaced by the aforementioned Agreement with Roncadelle, as stated above, and plans
to use 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 had no revenues from
the Nephron Distribution Agreement and does not believe that the cancellation is material. The Company is currently negotiating its contract
with O&M to provide 3PL services for both the Company and Roncadelle products, in North and South America, beginning in the third
quarter of 2024. The Company and Nephron continue to maintain the Pharma Services Program (PSP) that 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.
Although
we currently have production capacity for our products and thus the ability to receive and fulfill orders, we used the proceeds from
the February 2023 and September 2023 fund raising to allow us to further increase our production capacity, build inventory and 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 are currently continuing to produce commercial quantities of our products
and building inventory to support the Sales and distribution Agreement with Roncadelle, in anticipation of receiving additional orders
in 2024.
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 and have already received a Purchase Order for our first Securegard sales
to South America. We will also look to sell our disposable syringe products to hospitals and clinician offices as opportunities present
themselves.
Our Products
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.
There
continues 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 with 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.
Competitive
Environment
We
anticipate our major domestic competitors will include Retractable Technologies, Inc., Becton Dickinson & Company, Medtronic Minimally
Invasive Therapies (“Medtronic,” formerly known as Covidien), Terumo Medical Corp., Smiths Medical, and B Braun. Our competitors
may have greater financial resources, larger and more established sales, marketing, and distribution organizations; and greater market
influence, including long-term and/or exclusive contracts.
We
anticipate that we will compete primarily on the basis of healthcare worker and patient safety, product performance, and quality. We
believe our competitive advantages will include the combination of passive safety and ultra low waste features.
Government
Regulations
In
the United States, the Federal Food, Drug and Cosmetic Act, or FDCA, FDA regulations and other federal and state statutes and regulations
govern, among other things, medical device design and development, preclinical and clinical testing, premarket clearance or approval,
registration and listing, manufacturing, labeling, storage, advertising and promotion, sales and distribution, export and import, and
post-market surveillance. The FDA regulates the design, manufacturing, servicing, sale and distribution of medical devices. Failure to
comply with applicable U.S. requirements may subject a company to a variety of administrative or judicial sanctions, such as FDA refusal
to approve pending applications, warning letters, product recalls, product seizures, total or partial suspension of production or distribution,
injunctions, fines, civil penalties and criminal prosecution.
Unless
an exemption applies, each medical device we wish to distribute commercially in the United States will require marketing authorization
from the FDA prior to distribution. The two primary types of FDA marketing authorization applicable to a device are premarket notification,
also called 510k clearance, and premarket approval, also called PMA approval. The type of marketing authorization is generally linked
to the classification of the device. The FDA classifies medical devices into one of three classes (Class I, II or III) based on the degree
of risk the FDA determines to be associated with a device and the level of regulatory control deemed necessary to ensure the device’s
safety and effectiveness. Devices requiring fewer controls because they are deemed to pose lower risk are placed in Class I or II. Class
I devices are deemed to pose the least risk and are subject only to general controls applicable to all devices, such as requirements
for device labeling, premarket notification and adherence to the FDA’s current Good Manufacturing Practices, or cGMP, known as
the Quality System Regulations, or QSR. Class II devices are intermediate risk devices that are subject to general controls and may also
be subject to special controls such as performance standards, product-specific guidance documents, special labeling requirements, patient
registries or post-market surveillance. Class III devices are those for which insufficient information exists to assure safety and effectiveness
solely through general or special controls and include life sustaining, life-supporting or implantable devices, devices of substantial
importance in preventing impairment of human health, or which present a potential, unreasonable risk of illness or injury. Our Sharps
Provensa has been cleared by the FDA under the 510k premarket notification process (Class II).
Outside
of the United States, our ability to market our products will be contingent also upon our receiving marketing authorizations from the
appropriate foreign regulatory authorities, whether or not FDA approval or clearance has been obtained. The foreign regulatory approval
process in most industrialized countries generally encompasses risks similar to those we will encounter in the FDA approval or clearance
process. The requirements governing conduct of clinical trials and marketing authorizations, and the time required to obtain requisite
approvals, may vary widely from country to country and differ from those required for FDA approval or clearance.
The
sale of medical products is subject to laws and regulations pertaining to health care fraud and abuse, including state and federal anti-kickback,
anti-self-referral, and false claims laws in the United States.
Intellectual
Property
Intellectual
property rights, particularly patent rights, are material to our business. We own four patents used in the Sharps Provensa, which expire
between 2035 and 2040. Our issued patents include a design patent (USD743,025) for the ornamental design for a safety syringe which will
reach full term and expire on November 10, 2029, a patent (US 10,980,950) for an ultra low-waste needle and syringe system that automatically
and passively renders a needle safe during the injection process, a patent (US 11,154,663) for a pre-filled safety needle and syringe
system, and a patent (US 11,497,860) for a Ultra-Low Waste Disposable Safety Syringe for Low Dose Injections.
We
have two additional pending patent applications in the United States and four PCT (Patent Cooperation Treaty) patent applications. The
patent applications, which we own, have an anticipated expiration date of 2039/2040. The pending patent applications are for (i) an ultra-low
waste disposable syringe with self-adjusting integrating safety features, and (ii) a needle and syringe system with automatic safety
shield that renders a needle safe. Our pending patent applications are for utility patents. With respect to the last of these patent
applications, we have, in addition to our United States patent application, also filed PCT patent applications. The PCT applications
have entered National Phase. Some of the issued US patents have issued in other countries, some are still pending.
We
have certain trademarks for Sharps Provensa, Sharps Provensa Ultra-Low Waste and filed applications to register other trademarks for
use in our Sharps Provensa product line.
Employees
We
have fifty-seven full-time employees, two of which are our Chief Executive Officer and Chief Financial Officer, and retain the services
of additional personnel, as needed, on an independent contractor basis to support R&D, Finance, Marketing and Regulatory areas. We
do not have any part-time employees. Of the fifty-seven employees, fifty work at our facilities in Hungary. We expect to add additional
employees as we increase production capacity.
Facilities
We
lease office space, on a month-to-month basis, at 105 Maxess Road, Melville, New York 11747. Our monthly rent is $200.
We
operate a manufacturing facility in Hungary acquired in July 2022, which we previously used for development and testing of our products
and we currently use primarily for the manufacture of Sharps Provensa safety syringe. We are prepared to move our owned molds, machinery
and equipment to an alternative manufacturing location if necessary. See “Background and Overview.”
Legal
Proceedings
We
are not a party to any material legal proceeding, nor is our property the subject of any material legal proceedings.
Impact
of COVID-19
In
March 2020, the World Health Organization declared coronavirus COVID-19 a global pandemic. This contagious disease outbreak has adversely
affected workforces, economies, and financial markets globally leading to an economic downturn in certain industries and countries. It
is not possible for the Company to predict the duration or magnitude of the adverse results of the outbreak and its effects on the Company’s
business or ability to raise funds. Management continues to monitor the situation but has not experienced a significant disruption to
its product development efforts.
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 audited consolidated financial statements and notes included
in this offering circular and our Annual Report on Form 10-K as of and for the years ended December 31, 2023, and 2022.
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 and through the fourth quarter of 2022, we have devoted substantially all of our resources to the research and
development of our safety syringe products Commencing in the fourth quarter of 2022 we started building inventory of syringe products.
To date, we have generated no revenue. We have incurred net losses of $9,841,638 and $4,639,662 for the years ended December 31, 2023
and 2022, respectively and $982,386 for the three months ended March 31, 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 Initial Public Offering, Liquidity and Capital Resources and Notes to Consolidated Financial
Statements
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, in connection with the agreement to acquire Safegard, a syringe manufacturing facility in Hungary, which was completed 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 build inventory. Commencing in the 4th Quarter of 2022 started building inventory.
We require commercial quantities of inventory to secure orders. Delivery is expected shortly after receiving orders.
Research
and Development
Research
and development expense consists of expenses incurred while performing research and development activities for our various syringe products.
We recognize research and development expenses as they are incurred. Our research and development expense primarily consist of:
| ● |
Manufacturing
and testing costs and related supplies and materials; |
| |
|
| ● |
Consulting
fees paid for our Chief Technology Officer; |
| ● |
Operating
costs paid to Safegard, through the acquisition date for use of Safegard’s workforce, utilities and other services, relating
to the facility being utilized; and |
| |
|
| ● |
Third-party
costs, including engineering, incurred for development and design. |
Substantially
all of our research and development expenses to date have been incurred in connection with our syringe products. We expect our research
and development expenses to increase 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.
Initial
Public Offering
On
April 13, 2022, our registration statement on Form S-1 (File No. 333-263715), as amended, related to our IPO was declared effective by
the SEC, and our common stock and warrants began trading on the Nasdaq Capital Market, or Nasdaq, on April 14, 2022. Our IPO closed on
April 19, 2022. Net proceeds from the IPO were approximately $14.2 million. In connection with the closing of the IPO, the Company used
net proceeds to repay the Note Payable of $2 million.
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”) 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 consolidated financial statements include the accounts of Sharps Technology, Inc. and its wholly owned subsidiaries, Safegard
Medical, Inc, and Sharps 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 Consolidated Financial Statements)
In
March 2020, the World Health Organization declared coronavirus COVID-19 a global pandemic. This contagious disease outbreak has adversely
affected workforces, economies, and financial markets globally leading to an economic downturn in certain industries and countries. It
is not possible for the Company to predict the duration or magnitude of the adverse results of the outbreak and its effects on the Company’s
business or ability to raise funds. Management continues to monitor the situation but has not experienced a significant disruption to
its product development efforts.
Summary
of Significant Accounting Policies
Basis
of Presentation
The
accompanying 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.
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.
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 December 31, 2023
and 2022, the Company had no cash equivalents
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 December
31, 2023 and 2022, inventory is comprised of raw materials, components and finished goods.
Fair
Value Measurements
Fair
Value Measurements and Disclosures, require 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.
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 no 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 date.
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.
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 – 20
years, Machinery and Equipment – 3 -10 years and Website – 3 years. The expected life for Molds is based lesser of the number
of parts that will be produced based on the expected mold capability or 5 years.
Impairment
of Long-Lived Assets
Long-lived
assets are reviewed annually 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.
Identified
Intangible Assets
Identified
Intangible Assets
When
applicable, the Company’s identified intangible assets are amortized on a straight-line basis over their estimated useful lives.
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 on an annual basis, 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. The stock-based awards are granted at an exercise price
that represents the fair market value of the underlying common stock based on the stock price, at which the Company sold stock in private
placements completed by the Company, during the period such options were issued. 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.
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 March 31, 2024, certain warrants 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 consolidated statement of operations (See Notes 7, 8 and 10 to the Condensed Consolidated Financial Statements).
Basic
and Diluted Loss Per Share
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. At
March 31 2024, basic EPS includes 2,985,038 of pre-funded warrants (see Note 8). 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
May 31, 2024, there were 23,085,155 stock options and warrants 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.
Income
Taxes
The
Company must make certain estimates and judgments in determining income tax expense 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 composed 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.
Contingencies
Contingencies
are evaluated and a liability is recorded when the matter is both probable and reasonably estimable. Gain contingencies are evaluated
and not recognized until the gain is realizable or realized.
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
Comparison
of the Years Ended December 31, 2023 and, 2022.
| | |
Year Ended | | |
| |
| | |
December 31, 2023 | | |
December 31, 2022 | | |
Change | | |
Change % | |
| Research and development | |
$ | 1,605,547 | | |
| 2,280,933 | | |
$ | (675,386 | ) | |
| (30 | )% |
| General and administrative | |
| 8,521,103 | | |
| 6,457,860 | | |
| 2,063,243 | | |
| 32 | % |
| Interest expense (income) | |
| (138,118 | ) | |
| 1,320,416 | | |
| (1,458,534 | ) | |
| 110 | % |
| FMV gain adjustment for derivatives | |
| (169,583 | ) | |
| (5,392,911 | ) | |
| 5,223,328 | | |
| (97 | )% |
| Foreign currency Loss | |
| 44,463 | | |
| 496 | | |
| 43,967 | | |
| 88 | % |
| Other | |
| 8,226 | | |
| (27,132 | ) | |
| 35,358 | | |
| (130 | )% |
| Deferred Tax (Benefit) | |
| (30,000 | ) | |
| - | | |
| (30,000 | ) | |
| 100 | % |
| Net loss | |
$ | 9,841,638 | | |
$ | 4,639,662 | | |
$ | 5,201,976 | | |
| (112 | )% |
Revenue
The
Company has not generated any revenue to date.
Research
and Development
For
the year ended December 31, 2023, Research and Development (“R&D”) expenses decreased to $1,605,547 compared to $2,280,933
for the year ended December 31, 2022. The decrease of $675,386 was due to decreased R&D costs incurred at the Safegard facility which
transitioned principally from R&D activities to manufacturing. The decrease occurred in materials and general operating costs of
approximately $1M, of which, a) $575,000 related to cost incurred prior to the acquisition in July 2022 for utilization of the facility,
which included Safegard’s workforce and facility operating cost and b) decreases in material and other operating of $426,000 from
$545,000 in 2022 to $119,000 in 2023. Further, we had decreases in labor related costs of $224,000 specifically related to decreases
in stock compensation of $83,000 from $97,000 in 2022 to $14,000 in 2023, decreases in engineering and other labor costs of $141,000
from $492,000 in 2022 to $351,000 in 2023 and other decreases of $10,000. The overall decrease was partially offset by $560,000 charge
in 2023 for an impairment of certain molds.
General
and Administrative
For
the year ended December 31, 2023, General and Administrative (“G&A”) expenses were $8,521,103 as compared to $6,457,860
for the year ended December 31, 2022. The increase of $2,063,243 was primarily attributable to increases in payroll and related of: i)
payroll and consulting fees of $1,530,000 from $1,630,000 in 2022 to $3,160,000 in 2023, primarily due to increased amounts of payroll,
increased staffing and higher usage of various consulting services and ii) increase in stock compensation expense, due to timing of option
awards and vesting, of approximately $34,000 from $916,000 in 2022 to $950,000 in 2023. In addition, we had increases in G&A for
the year ended December 31, 2023, of approximately $498,000 principally from increased: professional fees $318,000, depreciation $238,000,
general operating costs $251,000, insurance $126,000, technology related costs, including implementation of new ERP system $128,000 and
separation expense of $375,000 for former officer. These were partially offset by lower public company costs and investor relations $818,000,
travel $90,000 and patent fees $31,000.
Interest
expense (income)
Interest
income, net of interest expense, was $138,118 for the year ended December 31, 2023, compared to interest expense of $1,320,416 for the
year ended December 31, 2022. Interest improved, net by $1,458,534 due to a) interest earned on invested cash in 2023 of $138,118 as
compared to $42,900 in 2022 and b) the decrease in interest expense and accreted interest of approximately $1,363,316 was primarily relating
to the financing entered in December 2021which was repaid at the IPO closing with net proceeds.
FMV
Adjustment for Derivatives
The
value of the Note Warrants requires 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 statement of operations and comprehensive loss. For the
years ended December 31, 2023, and 2022 the Company recorded a $169,583 and $5,392,911 FMV gain adjustment respectively to reflect the
decrease in the Note Warrants and Warrants liabilities issued. (See Notes 7, 8 and 10 to the Consolidated Financial Statements)
Liquidity
and Capital Resources
At
December 31, 2023, and 2022, we had a cash balance of $3,012,908 and $4,170,897, respectively. The Company has working capital of $1,145,569
as of December 31, 2023, vs working capital of $2,416,928, as of December 31, 2022. The decrease in our working capital, after net proceeds
from offerings of $8,029,628, was primarily related to the use of cash of $9,205,577 in operations and investing in fixed assets purchased.
The Company intends to finance its future development and commercialization activities and its working capital needs largely from the
sale of equity securities and/or with additional funding from other traditional financing sources.
On
April 13, 2022, we completed its IPO which was declared effective by the SEC, and the Company’s common stock and warrants began
trading on the Nasdaq Capital Market or Nasdaq on April 14, 2022 and which closed on April 19, 2022. The net proceeds from the IPO were
approximately $14.2 million of which $5,778,750 was attributed to the warrant liability (See Notes 8 and 10 to the Consolidated Financial
Statements).
On
February 3, 2023, we completed a securities purchase agreement). On September 29, 2023, the Company completed two simultaneous offerings.
(See Liquidity and Capital Resources as of March 31, 2024 below)
Cash
Flows
Net
Cash Used in Operating Activities
The
Company used cash of $8,507,300 and $6,433,159 in operating activities for the year ended December 31, 2023 and 2022, respectively. The
increase in cash used was principally due to the Company incurring additional G&A expenses, buildup of inventory partially offset
by lower R&D activities as described above during year ended December 31, 2022.
Net
Cash Used in Investing Activities
For
the years ended December 31, 2023 and 2022, the Company used cash in investing activities of $698,277 and $3,117,916, respectively.
In both years, cash was used to acquire or pay deposits for machinery and equipment of $698,277 and $542,662, respectively. In the year
ended December 31, 2022, the Company used $2,365,576, for the acquisition of Safegard or related escrow payments.
Net
Cash Provided by Financing Activities
For
the year ended December 31, 2023 and 2022, the Company provided cash from financing activities of $8,029,628 and $12,235,475 respectively.
In the 2023 period, the cash provided was from the net proceeds from the Offerings in February and September 2023. In the 2022 period,
the cash provided was primarily from the IPO net proceeds of $14,202,975, prior to the effect of recording the liability attributed to
the warrants from the IPO, less the Notes repayment of $2,000,000.
Results
of Operations – Three Months Ended March 31, 2024 and 2023.
| | |
2024 | | |
2023 | | |
Change | | |
Change % | |
| Research and development | |
$ | 197,439 | | |
| 333,888 | | |
$ | (136,449 | ) | |
| (41 | )% |
| General and administrative | |
| 1,646,613 | | |
| 1,983,912 | | |
| (337,299 | ) | |
| (17 | )% |
| Interest expense (income) | |
| (19,023 | ) | |
| (36,792 | ) | |
| 17,769 | | |
| (48 | )% |
| FMV (gain) loss adjustment for derivatives | |
| (850,057 | ) | |
| (184,085 | ) | |
| (665,972 | ) | |
| 362 | % |
| Foreign currency Loss | |
| 7,414 | | |
| 6,681 | | |
| 733 | | |
| 11 | % |
| Other | |
| - | | |
| 8,226 | | |
| (8,226 | ) | |
| 100 | % |
| Net loss | |
$ | 982,386 | | |
$ | 2,111,830 | | |
$ | (1,129,444 | ) | |
| (53 | )% |
Revenue
The
Company has not generated any revenue to date.
Research
and Development
For
the three months ended March 31, 2024, Research and Development (“R&D”) expenses decreased to $197,439 compared to $333,888
for the three months ended March 31, 2023. The decrease of $136,449 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 $87,000. In addition, other R&D expenses decreased related
to: (i) engineering and consulting by $6,000, and (ii) depreciation related to equipment by $46,000, partially offset by an increase
in stock compensation of $3,000.
General
and Administrative
For
the three months ended March 31, 2024, General and Administrative (“G&A”) expenses were $1,646,613 as compared to $1,983,912
for the three months ended March 31, 2023. The decrease of $337,299 was primarily attributable to: i) increases in payroll and consulting
fees of $281,000 from $570,000 in 2023 to $851,000 in 2024, due to compensation increases and head count increases, ii) decrease in stock
compensation expense, due to the timing of option awards and vesting, of approximately $260,000 from $383,000 in 2023 to $123,000 in
2024, iii) decrease in public company and investor relations costs of $421,000 from $479,000 to $58,000 as 2024 costs primarily due to
no period offering costs in the 2024 period and reduced investor relations activities. Further, we had increases in depreciation of $38,000,
professional fees $53,000, computer $16,500, other expenses $14,000, Board costs $27,500, patent and registration fees $13,000, partially
offset by decreases in rent $38,000, travel $11,000, and insurance $50,000.
Interest
expense (income)
Interest
income, was $19,023 for the three months ended March 31, 2024,
compared to interest income of $36,792 for three months ended March 31, 2023. Interest income was earned from cash balances held
in interest bearing accounts that benefited from rate increases in 2024. The decrease is due to lower balances in interest bearing accounts.
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 three months ended March
31, 2024 and 2023, the Company recorded a $850,057 and $184,085 FMV gain to reflect adjustments required for outstanding Warrants liabilities.
(See Notes 7, 8 and 10 to the Unaudited Condensed Consolidated Financial Statements)
Liquidity
and Capital Resources
At
March 31, 2024 and December 31, 2023, we had a cash balance of $1,165,913 and $3,012,908, respectively. The Company had working capital
of $429,448 and $1,145,569 as of March 31, 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 Offerings in February 2023 and September
2023. (See below and Note 8 to the Unaudited Condensed Consolidated Financial Statements).
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 3,618,521 shares of common at a purchase price of $0.64 per unit, as further repriced to $0,33 with the warrant inducement
offering, and 800,000 pre-funded warrants at $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)
2,581,479 PIPE Shares (or PIPE Pre-Funded Warrants in lieu thereof) and (ii) PIPE Warrants
(non-trading) to purchase 8,750,003 shares of our common stock, at a combined purchase price
of $1.074 per unit (or $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 $0.64. 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
Notes 8 and 10 to the Unaudited Condensed Consolidated Financial Statements |
On
February 3, 2023, we completed a securities purchase agreement (“Offering”) with institutional investors and received net
proceeds from the Offering were 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, we issued 2,248,521 units at a purchase
price of $1.69 per unit. Each unit consists of one share of common stock and one non-tradable warrant (Offering Warrant) exercisable
for one share of common stock at a price of $1.56 adjusted to $0.64 at September 29, 2023, as further repriced to $0,33 with the warrant
inducement offering, 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. (See Notes 8 to the Unaudited Condensed Consolidated Financial Statements)
On
April 13, 2022, we completed our IPO which was declared effective by the SEC, and the Company’s common stock and warrants began
trading on the Nasdaq Capital Market or Nasdaq on April 14, 2022 and which closed on April 19, 2022. The net proceeds from the IPO were
approximately $14.2 million of which $5,778,750 was attributed to the warrant liability (See Notes 8 and 10 to the Unaudited Condensed
Consolidated Financial Statements).
Cash
Flows
Net
Cash Used in Operating Activities
The
Company used cash of $1,889,315 and $2,062,670 in operating activities for the three months ended March 31, 2024 and 2023, respectively.
The decrease in cash used of $173,355, was principally due to the Company incurring lower operating expenses during the three months
ended March 31, 2024.
Net
Cash Used in Investing Activities
For
the three months ended March 31, 2024 and 2023, the Company used cash in investing activities of $2,852 and $163,272, respectively. In
both periods cash was used to acquire or pay deposits for fixed assets, equipment and software.
Net
Cash Provided by Financing Activities
For
the three months ended March 31, 2024 and 2023, the Company provided cash from financing activities of $396 and $3,238,711,
respectively. In the 2023 period, the cash provided from the Offerings completed in February 2023 and September 2023 and in the 2024
period from the exercise of pre-funded warrants.
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.
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.
DIRECTORS,
EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
Directors
and Executive Officers
Our
directors and executive officers, their ages, positions held, and duration of such, are as follows:
| Name |
|
Position
Held with Our Company |
|
Age |
|
Date
First Elected or Appointed |
| |
|
|
|
|
|
|
| Robert
M. Hayes |
|
Chief
Executive Officer and Director |
|
57 |
|
September
2021 |
| Andrew
R. Crescenzo |
|
Chief
Financial Officer |
|
67 |
|
May
2019 |
| Soren
Bo Christiansen, MD |
|
Chairman |
|
68 |
|
April 2018 |
| Paul
K. Danner |
|
Director |
|
66 |
|
September
2021 |
| Timothy
J. Ruemler |
|
Director |
|
65 |
|
September
2021 |
| Brenda
Baird Simpson |
|
Director |
|
65 |
|
April
2022 |
| Jason
L. Monroe |
|
Director |
|
37 |
|
April
2022 |
Certain
biographical information about each of these individuals is set forth below.
Executive
Officers
Robert
M. Hayes
Robert
M. Hayes has been the Chief Executive Officer and director for Sharps Technology since September 2021. Before joining the Company, he
served as Senior Director of Product Management and Innovation and other roles with Gerresheimer Pharmaceutical Glass from 2010 to 2021
where he led commercial sales and strategic partnerships with top global healthcare companies. He has over 25 years’ experience
in the healthcare, medical device, and pharmaceutical manufacturing industry. Mr. Hayes received his Bachelor of Business Administration
from University of Toledo. Mr. Hayes’ healthcare industry and product management experience qualify him to serve on our board of
directors.
Andrew
R. Crescenzo
Andrew
R. Crescenzo, CPA has been Chief Financial Officer for Sharps Technology since May 2019 under a consulting agreement with CFO Consulting
Partners LLP through September 30, 2022 and as an employee since October 1, 2022. Before joining the Company, Mr. Crescenzo served in
various finance roles from 2006 to 2019 in biotech, manufacturing and distribution, including, CFO of United Metro Energy from 2014 to
2016; Senior VP of Finance of Enzo Biochem (NYSE:ENZ) from 2006 to 2014. Prior to 2006, he was an Executive Director from 2002 to 2006
and a Senior Manager from 1997 to 2002 at Grant Thornton LLP. Mr. Crescenzo is a Certified Public Accountant and received his Bachelor
of Business Administration from Adelphi University.
Non-Executive
Directors
Dr.
Soren Bo Christiansen
Soren
Bo Christiansen, Chairman of the Board for Sharps Technology, joined the team in April 2018 as a Board member, became Chairman of the
Board in December 2018 (and has been co-Chairman since 2021), and was CEO from April 2019 until he stepped down in September 2021. Dr.
Christiansen worked for Merck & Co. Inc. for 30 years in Denmark, USA and Switzerland. He was Sr. VP Merck Vaccines (head of the
Global Commercial division), President Eastern Europe, Middle East & Africa and during the last four years of his career, he was
President for Europe, Middle East, Africa and Canada. He holds a medical degree from University of Copenhagen Denmark. Dr. Christiansen’s
medical and pharmaceutical knowledge and experience qualifies him to serve on our board of directors.
Paul
K. Danner
Paul
K. Danner, a member of the Board of Directors and Chairperson of the Audit Committee, joined Sharps Technology in September 2021. Since
2013, Mr. Danner has been chief financial and administrative officer of PAY2DAY Solutions, Inc. dba Authvia, a FinTech software developer
that provides merchants and consumers with a cloud-based CPaaS (Communications Platform as a Service) platform capable of providing end-to-end
payment flows, billing, consumer management, payment analytics, and consumer insights. From 2016 to 2018, Mr. Danner was chief executive
officer of Alliance MMA, Inc., which was a mixed martial arts organization offering promotional opportunities for aspiring mixed martial
arts fighters. As a senior business leader, Mr. Danner has served three Nasdaq-listed companies as the senior corporate executive. Additionally,
he has acquired extensive Board of Director expertise through six separate appointments totaling more than twenty-five years with three
Nasdaq and OTCQB listed companies including Chairman, Corporate Secretary and Audit Committee assignments, as well as two development-stage
ventures and one not-for-profit enterprise. Mr. Danner served as a Naval Aviator flying the F-14 Tomcat, and subsequently as an Aerospace
Engineering Duty Officer supporting the Naval Air Systems Command, for 8 years on active duty plus 22 years with the reserve component
of the United States Navy. He retired from the Navy in 2009 with the rank of Captain. Mr. Danner earned a BS degree in Business Finance
from Colorado State University, and he holds an MBA from the Strome College of Business at Old Dominion University. Mr. Danner’s
executive and marketing experience qualify him to serve on our board of directors.
Timothy
J. Ruemler
Timothy
J. Ruemler, a member of the Board of Directors and Chairperson of the Nominating Committee, joined Sharps Technology in September 2021.
He was division President SW Florida for Centex Homes from 1993 to 2007, where he was responsible for all aspects of the Real Estate
division’s activities. Mr. Ruemler has been retired since 2007. While at Centex Homes, Mr. Ruemler also held the positions of Sales
Manager, Construction Manager, Controller, and Assistant Controller for the Naples, Raleigh and Tampa divisions from 1986 until 1993.
Prior to his career at Centex Homes, he held auditor positions. He holds a BS in Accounting from Indiana State University. Mr. Ruemler’s
business operational experience qualify him to serve on our board of directors.
Brenda
Baird Simpson
Brenda
Baird Simpson has served on our board of directors in April 2022. Ms. Simpson has been senior vice president & chief nursing officer
at Centura Health in Centennial, CO since 2021. She was system vice president & chief nursing executive at Northeast Georgia Health
System from 2016 to 2021, and system senior vice president & chief nursing officer at CHI St. Vincent Health System in Little Rock,
AR, from 2007 to 2016. Ms. Simpson received a DNP from the University of South Alabama, an MSN from the University of Tennessee, Knoxville,
a BSN from Tennessee State University, Nashville, and an AND from the University of Tennessee, Martin. Ms. Simpson’s medical experience
qualifies her to serve on our board of directors.
Jason
L. Monroe
Jason
L. Monroe has served on our board of directors in April 2022 and serves as Chairperson of the Compensation Committee. Mr. Monroe has
been sales manager at CVS Health since 2016, and was a pharmacy manager at CVS Health from 2014 to 2015. He was Adjunct Professor for
Pharmacy Technician program at Houston Community College from 2017 to 2019. Mr. Monroe received a PharmD from the Texas Southern University
College of Pharmacy & Health Science and a BS from Prairie View A&M University. Mr. Monroe’s healthcare experience qualifies
him to serve on our board of directors.
Board
Composition
Our
board currently consists of six directors, Robert M. Hayes, Soren Bo Christiansen, Paul K. Danner, and Timothy J. Ruemler. Mr. Ruemler,
Mr. Danner, Ms. Simpson and Mr. Monroe are “independent directors” within the meaning of the Listing Rules
of the Nasdaq Stock Market.
Family
Relationships
No
family relationships exist between any of our officers or directors.
Director
Independence
The
Board evaluates the independence of each nominee for election as a director of our Company in accordance with the Nasdaq Listing Rules.
A majority of our Board Are “independent directors” within the meaning of the Nasdaq Listing Rules, and all directors who
sit on our Audit Committee, Nominating and Corporate Governance Committee and Compensation Committee must also be independent directors.
Board
of Directors Term of Office
Directors
are elected at our annual meeting of shareholders and serve for one year until the next annual meeting of shareholders or until their
successors are elected and qualified.
Committees
of our Board of Directors
We
have established an Audit Committee, a Compensation Committee or a Nominating Committee, or any committees performing similar functions.
We have an audit committee that consists of Paul Danner, Jason Monroe and Brenda Simpson, a compensation committee consists of Timothy
Ruemler, Paul Danner, and Jason Monroe, and a nominating committee that consists of Timothy Ruemler, Jason Monroe, and Paul Danner.
Code
of Business Conduct and Ethics
We
have a Code of Business Conduct and Ethics (the “Code”) which applies to all of our directors, officers and employees. The
full text of our Code will be posted on our website under the Investor Relations section. We intend to disclose future amendments to,
or waivers of, our Code, as and to the extent required by SEC regulations, at the same location on our website identified above or in
public filings. Information contained on our website is not incorporated by reference into this offering circular, and you should not
consider information contained on our website to be part of this offering circular or in deciding whether to purchase our shares of common
stock.
Involvement
in Certain Legal Proceedings
Our
directors and executive officers have not been involved in any of the following events during the past ten years:
| 1. |
any
bankruptcy petition filed by or against such person or any business of which such person was a general partner or executive officer
either at the time of the bankruptcy or within two years prior to that time; |
| |
|
| 2. |
any
conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other minor
offenses); |
| |
|
| 3. |
being
subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction,
permanently or temporarily enjoining him from or otherwise limiting his involvement in any type of business, securities or banking
activities or to be associated with any person practicing in banking or securities activities; |
| |
|
| 4. |
being
found by a court of competent jurisdiction in a civil action, the SEC or the Commodity Futures Trading Commission to have violated
a Federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated; |
| 5. |
being
subject of, or a party to, any Federal or state judicial or administrative order, judgment decree, or finding, not subsequently reversed,
suspended or vacated, relating to an alleged violation of any Federal or state securities or commodities law or regulation, any law
or regulation respecting financial institutions or insurance companies, or any law or regulation prohibiting mail or wire fraud or
fraud in connection with any business entity; or |
| |
|
| 6. |
being
subject of or party to any sanction or order, not subsequently reversed, suspended, or vacated, of any self-regulatory organization,
any registered entity or any equivalent exchange, association, entity or organization that has disciplinary authority over its members
or persons associated with a member. |
EXECUTIVE
COMPENSATION
Unless
otherwise specified, all dollar amounts in this section are in thousands except per share amounts and par values. All historical share
and per-share amounts reflected throughout this section have been adjusted to reflect the Reverse Stock Split.
Summary
Compensation Table
The
table and discussion below present compensation information for the following executive officers, who constitute our Named Executive
Officers (as defined in Item 402(m)(2) of Regulation S-K promulgated under the Securities Act:
| |
● |
Robert
M. Hayes, Chief Executive Officer; |
| |
● |
Alan
R. Blackman, Former Chief Operating Officer and Co-Chairman of the Board terminated effective May 1, 2023; and |
| |
● |
Andrew
R. Crescenzo, Chief Financial Officer |
| Name and Principal Position | |
Year | | |
Salary
($) | | |
Bonus
($) | |
|
Stock
Awards(1)
($) | | |
Option
Awards(2)
($) | | |
All Other
Compensation
($) | | |
Total
($) | |
| Robert M. Hayes(1) | |
| 2023 | | |
| 416,666 | | |
| 100,000 | |
|
| - | | |
| 272,307 | | |
| - | | |
| 788,973 | |
| | |
| 2022 | | |
| 313,333 | | |
| - | |
|
| - | | |
| 56,124 | | |
| - | | |
| 369,457 | |
| | |
| | | |
| | | |
| | |
|
| | | |
| | | |
| | | |
| | |
| Alan R. Blackman (2) | |
| 2023 | | |
| 106,670 | | |
| - | |
|
| - | | |
| 81,278 | | |
| - | | |
| 187,948 | |
| | |
| 2022 | | |
| 272,669 | | |
| 250,000 | |
|
| - | | |
| 40,088 | | |
| 37,000 | | |
| 599,757 | |
| | |
| | | |
| | | |
| | |
|
| | | |
| | | |
| | | |
| | |
| Andrew R. Crescenzo(3) | |
| 2023 | | |
| 225,000 | | |
| - | |
|
| - | | |
| 20,629 | | |
| 11,232 | | |
| 258,861 | |
| | |
| 2022 | | |
| 146,250 | | |
| - | |
|
| - | | |
| 12,026 | | |
| - | | |
| 158,276 | |
| (1) |
Mr.
Hayes was appointed our chief executive officer on September 15, 2021. |
| (2) |
Reflects
consulting fees and/or salary earned, including accrued and unpaid compensation of $91,667 and $ 2022. Other 2022 payments represent
tax differential payments of $29,000 and expense allowance of $8,000. |
| (3) |
Reflects
2022 compensation as employee from October 1, 2022 to December 31, 2022 and consulting fees paid by CFO Consulting Partners LLC from
January 1, 2022 to September 30, 2022. Other payments in 2023 reflect reimbursement for medical insurance. |
| (4) |
See
Note 11 to the audited consolidated financial statements for assumptions used in valuation. |
Executive
Employment Agreements
On
November 10, 2023, the Company executed an Employment Agreement with Robert Hayes, its Chief Executive Officer amending the employment
letter dated September 6, 2021. The agreement term automatically renews for successive one-year terms as of the commencement date unless
prior written notice by either party within ninety days prior to end of the current term. The agreement provides for termination of employment
and severance benefits under stated conditions and restrictive covenants. The agreement provides for annual compensation retroactive
to June 1, 2023 of $600,000 from $400,000 and a stated increase with the successful acquisition of InjectEZ and other terms of the acquisition
agreement (See Note 5). The agreement provides for bonus compensation for: (i) closing the Nephron acquisition agreement, (ii) long-term
incentives for achieving revenue targets and market caps for the Company’s stock and (iii) other Company achievements. In addition,
the agreement provides for benefits and paid time off.
We
are party to an employment agreement, dated September 9, 2021, with Andrew R. Crescenzo, our chief financial officer. Under the agreement,
we pay Mr. Crescenzo an annual salary of $225,000 and was awarded, a one-time $18,750 incentive payment upon the commencement of the
Agreement. In 2021, Mr. Crescenzo, while serving as the Company’s CFO through a consulting arrangement with CFO Consulting Partners
received options to purchase 15,089 shares of common stock at an exercise price of $7.00 per share, vesting over 1 year. In 2022, Mr.
Crescenzo was granted options to purchase 15,000, shares of common stock at an exercise price of $1.21, vesting over 2 years. The agreement
can be terminated by either party for any reason upon 90 days’ written notice.
Outstanding
Equity Awards at Fiscal Year-End
The
following table discloses information regarding outstanding equity awards granted or accrued as of December 31, 2023, for our named executive
officers.
| Option Awards | |
| | |
Stock Awards |
| Name | |
Number of Securities Underlying Unexercised Options (#) Vested | | |
Number of Securities Underlying Unexercised Options (#) Unvested | | |
Option Exercise Price ($) | | |
Option Expiration Date | |
Number of Shares or Units of Stock (#) that Vested | | |
Market value of Shares or Units of Stock (#) that have not Vested | |
| | |
| | |
| | |
| | |
| |
| | |
| |
| Robert M. Hayes | |
| 154,125 | | |
| 171,875 | | |
| 1.37 | | |
1/25/2028 | |
| - | | |
| - | |
| | |
| 49,856 | | |
| 20,144 | | |
| 1.21 | | |
5/2/2027 | |
| - | | |
| - | |
| | |
| 95,238 | | |
| 19,038 | | |
| 7.00 | | |
9/9/2026 | |
| - | | |
| - | |
| | |
| | | |
| | | |
| | | |
| |
| | | |
| | |
| Andrew R. Crescenzo | |
| 11,979 | | |
| 11,290 | | |
| 1.37 | | |
1/25/2028 | |
| - | | |
| - | |
| | |
| 12,075 | | |
| 2,925 | | |
| 1.21 | | |
5/2/2027 | |
| - | | |
| - | |
| | |
| 7,143 | | |
| - | | |
| 7.00 | | |
9/30/2026 | |
| - | | |
| - | |
| | |
| 14,085 | | |
| - | | |
| 7.00 | | |
9/30/2026 | |
| - | | |
| - | |
| | |
| 15,089 | | |
| - | | |
| 4.38 | | |
10/1/2025 | |
| - | | |
| | |
Equity
Incentive Plan
On
January 24, 2023, the Company’s Board of Directors initially adopted the 2023 Equity Incentive Plan (the “2023 Plan”),
to provide for the issuance of up to 1,400,000 options and/or shares of restricted stock be available for issuance to officers, directors,
employees and consultants. The 2023 Plan was subsequently updated to provide for the issuance of up to 3,500,000 options and/or shares
of restricted stock. The 2023 Plan was approved by shareholders at the annual meeting.
On
March 28, 2022, the Company adopted the Sharps Technology, Inc. 2022 Equity Incentive Plan (the “2022 Plan”), pursuant to
which up to an aggregate of 779,000 shares of common stock are available for issuance. Awards under the 2022 Plan may include options
(including incentive stock options and non-qualified stock options), stock appreciation rights, restricted stock, restricted stock units,
performance share awards, or other equity-based awards, each as defined under the 2022 Plan.
| During the
year ended December 31, 2023, the Company granted five-year options (the “Options”) to purchase a total of: |
| |
| |
a) |
975,000 shares of the Company’s
common stock, par value $0.0001 per share (the “Common Stock”) to its directors, executive officers, employees and consultants
pursuant to the Company’s. 2022 and 2023 Equity Incentive Plans. The Options are exercisable at $1.37 per share which was the
closing price on January 25, 2023. |
| |
b) |
90,000 shares of the Company’s
Common Stock in connection with an employment or consulting agreements at the exercise price, representing the closing price on the
grant date ranging from $0.82 to $1.30. |
On
April 26, 2024, the Company granted five-year Options under the 2023 Equity Incentive Plan to purchase a total of 1,395,000 shares of
the Company’s common stock, par value $.0001 per shares to its directors, executive officers, employees and consultants. The exercise
price of the Options granted was the closing stock price on the grant date.
The
following table sets forth compensation we paid to our directors during the year ended December 31, 2023 (excluding compensation under
the Summary Compensation table above).
| | |
Fees Earned or Paid in Cash | | |
Stock Awards | | |
Option Awards | | |
All Other Compensation | | |
Total | |
| Name | |
($) | | |
($) | | |
($) | | |
($) | | |
($) | |
| Timothy J. Ruemler (1) | |
| 30,000 | | |
| - | | |
| 73,141 | | |
| - | | |
| 103,141 | |
| Paul K. Danner (1,4) | |
| 70,000 | | |
| - | | |
| 73,141 | | |
| - | | |
| 143,141 | |
| Dr Soren Bo. Christiansen (2) | |
| 48,000 | | |
| - | | |
| 109,711 | | |
| - | | |
| 157,711 | |
| Brenda Baird Simpson (3) | |
| 24,000 | | |
| - | | |
| 73,141 | | |
| - | | |
| 97,141 | |
| Jason L. Monroe (3) | |
| 30,000 | | |
| - | | |
| 73,141 | | |
| - | | |
| 103,141 | |
| (1) |
Appointed
as Directors in September 2021 |
| (2) |
Served
as CEO and Chairman of the Board through September 15, 2021. Effective September 16, 2021, served as Co-Chairman of the Board through
May1, 2024 and then appointed Chairman |
| (3) |
Appointed
as Directors in April 2022 |
| (4) |
Non-director
services performed |
MARKET
PRICE OF AND DIVIDENDS ON THE COMPANY’S COMMON STOCK
AND
RELATED STOCKHOLDER MATTERS
Market
Information
Our
common stock trades on the Nasdaq Capital Market under the symbol “STSS.”
Holders
As
of May 31, 2024, there were approximately 95 holders of record of our common stock. Because many of our shares of common stock
are held by brokers and other institutions on behalf of stockholders, this number is not indicative of the total number of stockholders
represented by these stockholders of record.
Dividends
We
have not paid any and have no present intention of paying any dividends on our capital stock. Our current policy is to retain earnings,
if any, for use in our operations and in the development of our business. As a result, we anticipate that only appreciation of the price
of our common stock, if any, will provide a return to investors for at least the foreseeable future.
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The
following table sets forth certain information, as of May 31, 2024, with respect to the beneficial ownership of the outstanding
common stock by (i) any holder of more than ten (10%) percent; (ii) each of our executive officers and directors; and (iii) our directors
and executive officers as a group.
The
table lists applicable percentage ownership based on 23,097,651 shares of common stock outstanding as of May 31, 2024.
In addition, under the rules beneficial ownership include shares of our common stock issuable pursuant to the exercise of stock options
and warrants that are either immediately exercisable or exercisable within 60 days of May 31, 2024. These shares are deemed to
be outstanding and beneficially owned by the person holding those options or warrants for the purpose of computing the percentage ownership
of that person, but they are not treated as outstanding for the purpose of computing the percentage ownership of any other person.
We
have determined beneficial ownership in accordance with the rules of the SEC. These rules generally attribute beneficial ownership of
securities to persons who possess sole or shared voting power or investment power with respect to those securities. Unless otherwise
indicated, the persons or entities identified in this table have sole voting and investment power with respect to all shares shown as
beneficially owned by them, subject to applicable community property laws. Except as otherwise noted below, the address for persons listed
in the table is c/o Sharps Technology, Inc, 105 Maxess Road, Ste. 124, Melville, New York 11747.
| Name and Address of Beneficial Owner(1)(2) | |
Title of Class | |
Amount and
Nature of Beneficial Ownership | | |
Percent of Class(3) | |
| Robert M. Hayes (1) | |
Common | |
| 535,599 | | |
| 2.3 | % |
| Andrew R. Crescenzo (2) | |
Common | |
| 117,079 | | |
| * | |
| Dr. Soren Bo Christiansen (3) | |
Common | |
| 533,917 | | |
| 2.3 | % |
| Paul K. Danner (4) | |
Common | |
| 299,159 | | |
| * | |
| Timothy J. Ruemler (5) | |
Common | |
| 1,372,441 | | |
| 5.9 | % |
| Brenda Baird Simpson (6) | |
Common | |
| 139,338 | | |
| * | |
| Jason L. Monroe (7) | |
Common | |
| 142,195 | | |
| * | |
| All directors and current executive officers as a group 7 persons) | |
Common | |
| 3,139,728 | | |
| 12.6 | % |
| (1) |
Represents 439,717
shares underlying options. |
| |
|
| (2) |
Includes 101,579
shares underlying options. |
| |
|
| (3) |
Includes 376,774
shares underlying options. |
| |
|
| (4) |
Includes 299,159
shares underlying options. |
| |
|
| (5) |
Includes 310,766 shares
underlying options. |
| |
|
| (6) |
Includes 139,338
shares underlying options. |
| |
|
| (7) |
Includes 139,338
shares underlying options. |
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS
Other
than as set forth below and compensation arrangements, including employment, there have been no transactions since January 1, 2020, in
which the amount involved in the transaction exceeded or will exceed the lesser of $120,000 or one percent of the average of our total
assets as at the year-end for the last two completed fiscal years, and to which any of our directors, executive officers or beneficial
holders of more than 5% of our capital stock, or any immediate family member of, or person sharing the household with, any of these individuals,
had or will have a direct or indirect material interest.
As
of December 31, 2023 and 2022, accounts payable and accrued liabilities include $32,974 and $105,667, respectively, payable to officers
and directors of the Company. At March 31, 2024, accounts payable and accrued liabilities includes $29,000 payable to officers and
directors of the Company The amounts are unsecured, non-interest bearing and are due on demand.
Policies
and Procedures for Related Party Transactions
In
connection with this offering, we expect to adopt a written related party transactions policy that will provide that transactions with
directors, officers and holders of five percent or more of our voting securities and their affiliates, each a related party must be approved
by our audit committee. This policy will become effective on the date on which the registration statement of which this offering circular
is part is declared effective by the SEC. Pursuant to this policy, the audit committee will have the primary responsibility for reviewing
and approving or disapproving “related party transactions,” which are transactions between us and related persons in which
the aggregate amount involved exceeds or may be expected to exceed the lesser of (i) $120,000 or (ii) one percent of the average of our
total assets for the last two completed fiscal years, and in which a related person has or will have a direct or indirect material interest.
For purposes of this policy, a related person will be defined as a director, executive officer, nominee for director, or greater than
5% beneficial owner of our common stock, in each case since the beginning of the most recently completed year, and their immediate family
members.
In
considering related-person transactions, our audit committee or another independent body of our board of directors will take into account
the relevant available facts and circumstances including, but not limited to:
| |
● |
the
risks, costs and benefits to us; |
| |
● |
the
impact on a director’s independence in the event the related person is a director, immediate family member of a director or
an entity with which a director is affiliated; |
| |
● |
the
terms of the transaction; |
| |
● |
the
availability of other sources for comparable services or products; and |
| |
● |
the
terms available to or from, as the case may be, unrelated third parties under the same or similar circumstances. |
The
audit committee or other independent body of our board of directors will not approve any related party transaction unless it is on the
same basis as an arms’ length transaction and approved by a majority of the disinterested directors.
EXPERTS
The
consolidated financial statements included in this offering statement as of December 31, 2023, and for the year ended December
31, 2023, has been included herein in reliance upon the report of PKF O’Connor Davies, LLP independent registered public
accounting firm, appearing elsewhere herein, and upon the authority of said firm as experts in accounting and auditing.
The
consolidated financial statements included in this offering statement as of December 31, 2022, and for the year ended December
31, 2022, have been included herein in reliance upon the report of Manning Elliott LLP, independent registered public accounting firm,
appearing elsewhere herein, and upon the authority of said firm as experts in accounting and auditing.
LEGAL
MATTERS
Certain
legal matters with respect to the Offered Shares offered by this Offering Circular will be passed upon by Sichenzia Ross Ference Carmel
LLP, New York, New York. The Placement Agent is being represented by Kaufman & Canoles, P.C.
WHERE
YOU CAN FIND MORE INFORMATION
We
have filed an offering statement on Form 1-A with the SEC under the Securities Act with respect to the common stock offered by this Offering
Circular. This Offering Circular, which constitutes a part of the offering statement, does not contain all of the information set forth
in the offering statement or the exhibits and schedules filed therewith. For further information with respect to us and our common stock,
please see the offering statement and the exhibits and schedules filed with the offering statement. Statements contained in this Offering
Circular regarding the contents of any contract or any other document that is filed as an exhibit to the offering statement are not necessarily
complete, and each such statement is qualified in all respects by reference to the full text of such contract or other document filed
as an exhibit to the offering statement. The offering statement, including its exhibits and schedules, may be accessed at the SEC’s
website http://www.sec.gov. These filings will be available as soon as reasonably practicable after we electronically file such material
with, or furnish it to, the SEC.
INDEX
TO FINANCIAL STATEMENTS
Report
of Independent Registered Public Accounting Firm
To
the Stockholders and Board of Directors
Sharps
Technology, Inc.
Opinion
on the Consolidated Financial Statements
We
have audited the accompanying consolidated balance sheet of Sharps Technology, Inc. (the “Company”) as of December 31, 2023,
and the related consolidated statements of operations, comprehensive loss, stockholders’ equity and cash flows for the year ended
December 31, 2023, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion,
the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December
31, 2023, and the results of its operations and its cash flows for the year ended December 31, 2023, in conformity with accounting principles
generally accepted in the United States of America.
Going
Concern Uncertainty
The
accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed
in Note 2 to the consolidated financial statements, the Company has not generated revenue or cash flow from operations since inception,
and does not have an established source of funding sufficient to cover its operating costs. These conditions raise substantial doubt
about the Company’s ability to continue as a going concern. Management’s plans in regard to these matters are also described
in Note 2. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis
for Opinion
These
consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion
on the Company’s consolidated financial statements based on our audit. We are a public accounting firm registered with the Public
Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance
with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We
conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.
The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part
of our audit, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing
an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our
audit included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due
to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence
regarding the amounts and disclosures in the consolidated financial statements. Our audit also included evaluating the accounting principles
used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe
that our audit provides a reasonable basis for our opinion.
We
have served as the Company’s auditor since December 20, 2023.
New
York, New York
March
28, 2024
PCAOB
ID No. 127
*
* * * *
PKF
O’CONNOR DAVIES LLP
245
Park Avenue, New York, NY 10167 I Tel: 212.867.8000 or 212.286.2600 I Fax: 212.286.4080 I www.pkfod.com
PKF
O’Connor Davies LLP is a member firm of the PKF International Limited network of legally independent firms and does not accept
any responsibility or liability for the actions or inactions on the part of any other individual member firm or firms.
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To
the Stockholders and the Board of Directors of Sharps Technology Inc.
Opinion
on the Consolidated Financial Statements
We
have audited the accompanying consolidated balance sheets of Sharps Technology Inc. and its subsidiary (the “Company”) as
of December 31, 2022 and 2021, the related consolidated statements of operations, comprehensive loss, stockholders’ equity and
cash flows for the years then ended, and the related notes (collectively referred to as the “consolidated financial statements”).
In
our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as
of December 31, 2022 and 2021, and the results of its operations and its cash flows for the years then ended in conformity with accounting
principles generally accepted in the United States of America.
Basis
for Opinion
These
consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion
on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public
Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company
in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission
and the PCAOB.
We
conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.
The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part
of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing
an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our
audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether
due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence
regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles
used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.
We believe that our audits provide a reasonable basis for our opinion.
CHARTERED
PROFESSIONAL ACCOUNTANTS
Vancouver,
Canada
March
30, 2023
PCAOB
ID:1524
We
have served as the Company’s auditor since 2018.
SHARPS
TECHNOLOGY, INC.
CONSOLIDATED
BALANCE SHEETS
| | |
December 31, 2023 | | |
December 31, 2022 | |
| | |
| | |
| |
| Assets: | |
| | | |
| | |
| Current Assets | |
| | | |
| | |
| Cash | |
$ | 3,012,908 | | |
$ | 4,170,897 | |
| Prepaid expenses and other current assets | |
| 116,508 | | |
| 66,749 | |
| Inventories, Net (Note 3) | |
| 1,709,135 | | |
| 185,804 | |
| Current Assets | |
| 4,838,551 | | |
| 4,423,450 | |
| | |
| | | |
| | |
| Fixed Assets, net of accumulated depreciation (Notes 4 and 5) | |
| 6,822,142 | | |
| 7,004,890 | |
| Other Assets (Notes 5 and 6) | |
| 128,575 | | |
| 411,316 | |
| TOTAL ASSETS | |
$ | 11,789,268 | | |
$ | 11,839,656 | |
| | |
| | | |
| | |
| Liabilities: | |
| | | |
| | |
| Current Liabilities | |
| | | |
| | |
| Accounts payable (Note 4) | |
$ | 794,107 | | |
$ | 543,226 | |
| Accrued expenses and other | |
| 476,090 | | |
| 311,458 | |
| Warrant liability (Notes 8 and 10) | |
| 2,422,785 | | |
| 1,151,838 | |
| Total Current Liabilities | |
| 3,692,982 | | |
| 2,006,522 | |
| | |
| | | |
| | |
| Deferred Tax Liability (Note 12) | |
| 162,000 | | |
| 192,000 | |
| Total Liabilities | |
| 3,854,982 | | |
| 2,198,522 | |
| | |
| | | |
| | |
| Commitments and Contingencies (Note 15) | |
| - | | |
| - | |
| Subsequent Events (Note 16) | |
| - | | |
| - | |
| | |
| | | |
| | |
| Stockholders’ Equity: | |
| | | |
| | |
| Preferred stock, $.0001 par value; 1,000,000 shares authorized; 1 share issued and outstanding | |
| - | | |
| - | |
| Common stock, $.0001 par value; 100,000,000, shares authorized; 15,274,457 shares issued and outstanding and (2022: 9,407,415) | |
| 1,528 | | |
| 941 | |
| | |
| | | |
| | |
| Additional paid-in capital | |
| 32,489,950 | | |
| 24,733,306 | |
| Accumulated other comprehensive income | |
| 591,812 | | |
| 214,253 | |
| Accumulated deficit | |
| (25,149,004 | ) | |
| (15,307,366 | ) |
| Total Stockholders’ Equity | |
| 7,934,286 | | |
| 9,641,134 | |
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | |
$ | 11,789,268 | | |
$ | 11,839,656 | |
The
accompanying notes are an integral part of these financial statements.
SHARPS
TECHNOLOGY, INC.
CONSOLIDATED
STATEMENTS OF OPERATIONS
| | |
For the year ended | | |
For the year ended | |
| | |
December 31, 2023 | | |
December 31, 2022 | |
| | |
| | |
| |
| Revenue, net | |
$ | - | | |
$ | - | |
| | |
| | | |
| | |
| Operating expenses: | |
| | | |
| | |
| Research and development (Note 5) | |
| 1,605,547 | | |
| 2,280,933 | |
| General and administrative | |
| 8,521,103 | | |
| 6,457,860 | |
| Total operating expenses | |
| (10,126,650 | ) | |
| (8,738,793 | ) |
| Loss from operations | |
| (10,126,650 | ) | |
| (8,738,793 | ) |
| | |
| | | |
| | |
| Other income (expense) | |
| | | |
| | |
| Interest income (expense) | |
| 138,118 | | |
| (1,320,416 | ) |
| FMV adjustment on contingent stock & warrants | |
| 169,583 | | |
| 5,392,911 | |
| Foreign currency and other | |
| (52,689 | ) | |
| 26,636 | |
| Net loss Before Provision for Taxes | |
$ | (9,871,638 | ) | |
$ | (4,639,662 | ) |
| Deferred Tax Benefit | |
| 30,000 | | |
| - | |
| Net Loss | |
| (9,841,638 | ) | |
| (4,639,662 | ) |
| Net loss per share, basic and diluted | |
$ | (0.76 | ) | |
$ | (0.57 | ) |
| Weighted average shares used to compute net loss per share, basic and diluted | |
| 13,032,717 | | |
| 8,100,410 | |
The
accompanying notes are an integral part of these financial statements.
SHARPS
TECHNOLOGY, INC.
CONSOLIDATED
STATEMENTS OF COMPREHENSIVE LOSS
| | |
For the year ended | | |
For the year ended | |
| | |
December 31, 2023 | | |
December 31, 2022 | |
| Net loss | |
$ | (9,841,638 | ) | |
$ | (4,639,662 | ) |
| | |
| | | |
| | |
| Other comprehensive income: | |
| | | |
| | |
| | |
| | | |
| | |
| Foreign currency translation adjustments | |
| 377,559 | | |
| 214,253 | |
| | |
| | | |
| | |
| Comprehensive loss | |
$ | (9,464,079 | ) | |
$ | (4,425,409 | ) |
The
accompanying notes are an integral part of these financial statements.
SHARPS
TECHNOLOGY, INC.
CONSOLIDATED
STATEMENTS OF STOCKHOLDERS’ EQUITY
FOR
THE YEARS ENDED DECEMBER 31, 2023 AND 2022
| | |
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, 2021 | |
| 1 | | |
$ | - | | |
| 5,187,062 | | |
$ | 519 | | |
$ | (32,500 | ) | |
$ | 13,835,882 | | |
$ | - | | |
$ | (10,667,704 | ) | |
$ | 3,136,197 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Net
loss for the year ended December 31, 2022 | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| (4,639,662 | ) | |
| (4,639,662 | ) |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Shares
issued in Initial Public Offering | |
| - | | |
| | | |
| 3,750,000 | | |
| 375 | | |
| - | | |
| 8,974,282 | | |
| - | | |
| - | | |
| 8,974,657 | |
| Issuance
of shares for contingent stock liability | |
| - | | |
| | | |
| 235,294 | | |
| 24 | | |
| - | | |
| 495,976 | | |
| - | | |
| - | | |
| 496,000 | |
| Share-based
compensation charges | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 1,136,638 | | |
| - | | |
| - | | |
| 1,136,638 | |
| Fractional
share adjustment | |
| - | | |
| - | | |
| 59 | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | |
| Issuance
of common stock for services | |
| - | | |
| - | | |
| 235,000 | | |
| 23 | | |
| - | | |
| 290,528 | | |
| - | | |
| - | | |
| 290,551 | |
| Foreign
currency translation | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 214,253 | | |
| - | | |
| 214,253 | |
| Collection
of stock subscription | |
| - | | |
| - | | |
| - | | |
| - | | |
| 32,500 | | |
| - | | |
| - | | |
| - | | |
| 32,500 | |
| Balance
– December 31, 2022 | |
| 1 | | |
$ | - | | |
| 9,407,415 | | |
| 941 | | |
$ | - | | |
$ | 24,733,306 | | |
$ | 214,253 | | |
$ | (15,307,366 | ) | |
$ | 9,641,134 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Net
loss for the year ended December 31, 2023 | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| (9,841,638 | ) | |
| (9,841,638 | ) |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Share-based
compensation charges | |
| | | |
| | | |
| | | |
| | | |
| | | |
| 963,023 | | |
| | | |
| | | |
| 963,023 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Shares
issued in Offering | |
| | | |
| | | |
| 2,248,521 | | |
| 225 | | |
| | | |
| 2,783,160 | | |
| | | |
| | | |
| 2,783,385 | |
| Shelf
Registration Offering – see Note 8 | |
| | | |
| | | |
| 3,618,521 | | |
| 362 | | |
| | | |
| 2,457,642 | | |
| | | |
| | | |
| 2,458,004 | |
| Private
Placement Offering – see Note 8 | |
| | | |
| | | |
| | | |
| | | |
| | | |
| 1,552,819 | | |
| | | |
| | | |
| 1,552,819 | |
| Foreign
currency translation | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| 377,559 | | |
| | | |
| 377,559 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Balance
– December 31, 2023 | |
| 1 | | |
$ | | | |
| 15,274,457 | | |
| 1,528 | | |
$ | | | |
$ | 32,489,950 | | |
$ | 591,812 | | |
$ | (25,149,004 | ) | |
$ | 7,934,286 | |
The
accompanying notes are an integral part of these financial statements.
SHARPS
TECHNOLOGY, INC.
CONSOLIDATED
STATEMENTS OF CASH FLOWS
| | |
For the year ended | | |
For the year ended | |
| | |
December 31, 2023 | | |
December 31, 2022 | |
| CASH FLOWS FROM OPERATING ACTIVITIES: | |
| | | |
| | |
| Net loss | |
$ | (9,841,638 | ) | |
$ | (4,639,662 | ) |
| Adjustments to reconcile net loss to net cash used in operating activities: | |
| | | |
| | |
| Depreciation and amortization | |
| 882,177 | | |
| 654,572 | |
| Stock-based compensation | |
| 963,023 | | |
| 1,012,592 | |
| Issuance of common stock for services | |
| - | | |
| 290,551 | |
| Accretion of debt discount | |
| - | | |
| 1,299,985 | |
| FMV for adjustment for contingent stock | |
| - | | |
| (181,000 | ) |
| FMV adjustment for Contingent warrants and warrants | |
| (169,583 | ) | |
| (5,211,911 | ) |
| Fixed asset impairment | |
| 560,000 | | |
| - | |
| Deferred tax benefit | |
| (30,000 | ) | |
| - | |
| IPO issuance costs relating to warrants | |
| 205,112 | | |
| 550,433 | |
| Foreign exchange loss | |
| 44,463 | | |
| 496 | |
| Changes in operating assets | |
| | | |
| | |
| Prepaid expenses | |
| (82,169 | ) | |
| (58,754 | ) |
| Inventory | |
| (1,441,462 | ) | |
| (34,109 | ) |
| Other assets | |
| (12,735 | ) | |
| (12,000 | ) |
| Accounts payable and accrued liabilities | |
| 415,512 | | |
| (104,352 | ) |
| Net cash used in operating activities | |
| (8,507,300 | ) | |
| (6,433,159 | ) |
| | |
| | | |
| | |
| CASH FLOWS FROM INVESTING ACTIVITIES: | |
| | | |
| | |
| Deposits paid on fixed assets and components | |
| - | | |
| (209,678 | ) |
| Purchase of fixed assets | |
| (698,277 | ) | |
| (542,662 | ) |
| Asset acquisition | |
| - | | |
| (2,365,576 | ) |
| Net cash used in investing activities | |
| (698,277 | ) | |
| (3,117,916 | ) |
| | |
| | | |
| | |
| CASH FLOWS FROM FINANCING ACTIVITIES: | |
| | | |
| | |
| Net proceeds from Initial Public Offering and additional offerings | |
| 8,029,628 | | |
| 14,202,975 | |
| Repayment of note payable | |
| - | | |
| (2,000,000 | ) |
| Proceeds from subscriptions receivable | |
| - | | |
| 32,500 | |
| Net cash provided by financing activities | |
| 8,029,628 | | |
| 12,235,475 | |
| | |
| | | |
| | |
| Effect of exchange rate changes on cash | |
| 17,960 | | |
| 7,331 | |
| | |
| | | |
| | |
| NET INCREASE (DECREASE) IN CASH | |
| (1,157,989 | ) | |
| 2,691,731 | |
| CASH — BEGINNING OF YEAR | |
| 4,170,897 | | |
| 1,479,166 | |
| CASH — END OF YEAR | |
$ | 3,012,908 | | |
$ | 4,170,897 | |
| | |
| | | |
| | |
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | |
| | | |
| | |
| Cash paid for interest | |
$ | - | | |
$ | 47,111 | |
| Cash paid for taxes | |
$ | - | | |
$ | - | |
| | |
| | | |
| | |
| Non-cash investing and financing activity: | |
| | | |
| | |
| FMV for Common stock issued for contingent shares | |
$ | - | | |
$ | 496,000 | |
| FMV for Warrants issued for contingent warrants | |
$ | - | | |
$ | 554,312 | |
| Common stock issued and vested stock options for fixed assets acquired | |
$ | - | | |
$ | 63,612 | |
| Common stock issued and vested stock options issued as consideration for acquisition | |
$ | - | | |
$ | 60,435 | |
The
accompanying notes are an integral part of these financial statements.
SHARPS
TECHNOLOGY, INC.
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2023 AND 2022
Note
1. Description of Business
Nature
of Business
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 consolidated financial statements include the accounts of Sharps Technology, Inc. and its wholly owned subsidiaries, Safegard
Medical (Hungary) KFT, 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 Note 8).
Note
2. Summary of Significant Accounting Policies
Basis
of Presentation
The
accompanying 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.
The
accompanying 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 December 31, 2023, the Company used cash in operations
of $8,507,300 and has cash of $3,012,908 which is not 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 future development and 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.
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 December 31, 2023, the most significant estimates relate to derivative liabilities and stock-based compensation.
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 December 31, 2023
and 2022, the Company had no cash equivalents.
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 December 31, 2023 and 2022, inventory is comprised of raw materials, components and finished
goods.
SHARPS
TECHNOLOGY, INC.
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2023 AND 2022
Note
2. Summary of Significant Accounting Policies (continued)
Fair
Value Measurements
ASC
820, Fair Value Measurements and Disclosures, require 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 fair valued on a recurring basis with the trading price or FMV using Black Sholes 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.
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, computer system 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 –
20 years, Machinery and Equipment – 3 -10 years and Computer systems and Website – 3 years. The expected life for Molds is
based lesser of the number of parts that will be produced based on the expected mold capability or 5 years.
Impairment
of Long-Lived Assets
Long-lived
assets are reviewed annually 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.
The
Company recorded an impairment of $560,000 during the year ended December 31, 2023 and no impairment during the year ended December 31,
2022.
SHARPS
TECHNOLOGY, INC.
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2023 AND 2022
Note
2. Summary of Significant Accounting Policies (continued)
Purchased
Identified Intangible Assets
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 finite-lived intangible assets on an annual basis, 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. For restricted stock awards, the estimated fair value is
generally the fair market value of the underlying stock on the grant date. 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.
SHARPS
TECHNOLOGY, INC.
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2023 AND 2022
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 December 31, 2023, certain warrants (see Notes 8 and 10) are 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 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 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 December 31, 2023 and 2022. Accumulated other comprehensive income (loss) is a separate component of stockholders’ equity and
consists of the cumulative foreign currency translation adjustments.
Basic
and Diluted Loss Per Share
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. Basic
EPS includes the 3,381,479 of pre-funded warrants (see Note 8). 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 December 31, 2023,
there were 22,950,155 stock options and warrants 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.
Income
Taxes
The
Company must make certain estimates and judgments in determining income tax expense 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.
SHARPS
TECHNOLOGY, INC.
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2023 AND 2022
Note
2. Summary of Significant Accounting Policies (continued)
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
is currently evaluating the impact of ASU 2020-06 on its consolidated financial statements and does not expect the adoption of this amended
guidance to have a material impact on the Company’s consolidated financial statements.
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, and for
non-public companies for annual reporting periods beginning after December 15, 2025, with early adoption permitted for both. The Company
will adopt the new standard in the annual reporting period beginning after December 15, 2025 and 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 consolidated financial statements.
The
Company 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.
SHARPS
TECHNOLOGY, INC.
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2023 AND 2022
Note
3. Inventories
Inventories,
net consisted of the following at December 31, 2023 and 2022:
| | |
December 31, 2023 | | |
December 31, 2022 | |
| Raw materials | |
$ | 254,461 | | |
$ | 106,088 | |
| Work in process | |
| 170,464 | | |
| 49,144 | |
| Finished goods | |
| 1,284,210 | | |
| 30,572 | |
| Total | |
$ | 1,709,135 | | |
$ | 185,804 | |
Note
4. Fixed Assets
Fixed
asset, net, as of December 31, 2023 and 2022, are summarized as follows:
| | |
December 31, 2023 | | |
December 31, 2022 | |
| | |
| | |
| |
| Land | |
$ | 260,460 | | |
$ | 242,240 | |
| Building | |
| 3,022,490 | | |
| 2,824,481 | |
| Machinery and Equipment | |
| 4,464,317 | | |
| 4,601,293 | |
| Computer and Website | |
| 290,661 | | |
| 16,600 | |
| | |
| 8,037,928 | | |
| 7,684,614 | |
| Less: accumulated depreciation | |
| (1,215,786 | ) | |
| (679,724 | ) |
| Fixed asset, net | |
$ | 6,822,142 | | |
$ | 7,004,890 | |
Depreciation
expense of fixed assets for the year ended December 31, 2023 and 2022 was $876,064 and $647,690, respectively. Substantially, all of
the Company’s fixed assets are located at the Company’s Hungary location.
In
the fourth quarter of 2023, the Company recorded, in Research and Development expenses, an asset impairment of $560,000 relating to Molds,
which were included in Machinery and Equipment, due to a decision to discontinue usage of certain molds.
During
the year ended December 2022, the Company recorded $63,612 in fixed asset costs relating to the estimated fair market value for options
granted in 2021 for the acquired machinery. As of December 31, 2023, the Company has $100,000 in remaining payments for machinery purchased,
which is included in accounts payable.
Note
5. Asset Acquisition
In
June 2020, the Company entered into a Share Purchase Agreement (“Agreement”) with Safegard Medical (“Safegard”)
and amendments to the Agreement, collectively, the Agreements, to purchase either the stock or certain assets of a manufacturing facility
for $2.5M in cash, plus additional consideration of 28,571 shares of common stock with an estimated fair market value of $7.00, 35,714
stock options with an exercise price of $7.00 and 50,000 stock options with an exercise price of $4.25. The purchase price includes the
fair market value of the common stock of $200,000 and the vested options of $183,135. 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.
During
the year ended December 31, 2022, the Company had remitted $594,000, respectively for the aforementioned Operating Costs. The remittance
of operating costs was discontinued after the Closing Date. These costs were included in research and development expense in the consolidated
statement of operations as the activities at the facility in 2022 were related to design and testing of the Company’s products.
SHARPS
TECHNOLOGY, INC.
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2023 AND 2022
Note
5. Asset Acquisition (continued)
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 $2,936,712, including transaction
costs of $53,576, with the allocation to the assets acquired on a relative fair value basis. The intangibles relate to permits and a
limited workforce acquired. Under ASC 805-50, no goodwill is recognized. The operating results for Safegard are included in the consolidated
balance sheet and consolidated statements of operations for the period beginning after the closing on July 6, 2022.
The
relative fair value of the assets acquired and related deferred tax liability is as follows:
| Land | |
$ | 226,000 | |
| Building and affixed assets | |
| 2,684,000 | |
| Machinery | |
| 158,000 | |
| Inventory | |
| 32,000 | |
| Intangibles | |
| 64,712 | |
| Deferred tax liability | |
| (192,000 | ) |
| | |
| | |
| Total | |
$ | 2,936,712 | |
The
useful lives for the acquired assets is Building - 20 years; Machinery – 5 to 10 years; Intangibles – 5 years. The related
depreciation and amortization is being recorded on a straight-line basis.
Note
6. Other Assets
Other
assets as of December 31, 2023 and 2022 are summarized as follows:
| | |
December 31, | | |
December 31, | |
| | |
2023 | | |
2022 | |
| | |
| | |
| |
| Intangibles, net | |
$ | 52,513 | | |
$ | 62,480 | |
| Deposits or advance payments on machinery, molds and components (see Note 15) | |
| - | | |
| 336,466 | |
| Other | |
| 76,062 | | |
| 12,370 | |
| | |
$ | 128,575 | | |
$ | 411,316 | |
Intangibles
are related to the Asset Acquisition (see Note 5) and consist of an acquired workforce and permits. Amortization for the year ended December
31, 2023 was $15,184.
Note
7. Note Purchase Agreement
On
December 14, 2021, the Company entered into a Note Purchase Agreement (“NPA”) with three unrelated third-party purchasers
(“Purchasers”). The Purchasers provided financing to the Company in the form of bridge financing, aggregating principal of
$2,000,000 (the “Notes”). The principal under the Notes shall be payable on the earlier of (i) December 14, 2022, and (ii)
the date on which the Company consummates an initial public offering (“IPO”), herein referred to as the “Maturity Date”.
The Notes bore interest at 8% with interest payments due monthly. The Company and the Purchasers had entered into a Security Agreement
whereby the Notes were collateralized by substantially all the assets of the Company, both tangible and intangible both currently owned
with stated exclusions, as defined, and any future acquired with stated exclusions, as defined.
SHARPS
TECHNOLOGY, INC.
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2023 AND 2022
Note
7. Note Purchase Agreement (continued)
The
NPA provided for covenants that until all of the Notes have been converted, exchanged, redeemed or otherwise satisfied in accordance
with their terms, the Company shall not, and the Company shall not permit any of its subsidiaries without the prior written consent of
the Purchasers: a) incur or guarantee any new debt, b) issue any securities that would cause a breach or default under the NPA, c) incur
any liens other than permitted, d) redeem or repurchase shares, e) declare or pay any cash dividend or distribution, e) sell, lease or
dispose of assets other than in the ordinary course of business, or f) engage in different line of business.
As
additional consideration to the Purchasers for providing the financing, the Company also agreed to a) issue each Purchaser a number of
shares of the Company’s Common Stock equal to 50% of the original principal amount of each Purchaser’s Note (the “Contingent
Stock”) and b) issue each Purchaser a number of warrants, which would allow the Purchasers to purchase additional shares of the
Company’s Common Stock, equal to 50% of the original principal amount each Purchaser’s Note for a term of 5.0 years (the
“Contingent Warrants”).
For
both the Contingent Stock and the Contingent Warrants, the number of shares and warrants that each Purchaser will be issued was unknown
at the time of the NPA and was determined based on a formula of 50% of the original principal amount divided by a “Subsequent Offering
Price” based on the valuation in a future offering of Common stock or other equity interest in the Company (such offering referred
to as a “Consummated Offering”) during the period beginning on December 14, 2021 through and including the date the Company
consummates an initial public offering (“IPO”) (such period referred to as the “Subsequent Offering Period”).
In
accordance with ASC 480-10-25-14, a fixed monetary amount exists at inception for the total value of Contingent Stock that may be issued
to each Purchaser. The Contingent Stock is not considered outstanding at inception, as it will only be issued upon the consummation of
a Consummated Offering, and accordingly, is a conditional obligation. As such the fair market value (“FMV”) of the Contingent
Stock at inception was $677,000, which was recorded as debt discount. Similarly, a fixed monetary amount further exists at inception
for the total value of Contingent Warrants that may be issued to each Purchaser. Accordingly, a conditional obligation exists and as
such the FMV of Contingent Warrants at inception was $585,000, which was recorded as debt discount. The Company incurred $197,500 of
debt issuance costs associated with the NPA. The debt issuance costs were allocated between the Notes, Contingent Stock and Contingent
Warrants in a manner that was consistent with the allocation of the proceeds of the Notes. The portion of the debt issuance costs which
were allocated to the Contingent Stock and Contingent Warrants, which was $124,460, was expensed during the year ended December 31, 2021.
The debt issuance costs allocated to the Notes were recorded as a debt discount.
The
Contingent Stock and Contingent Warrant liabilities were measured at FMV on the date of issuance (based on the Black-Scholes valuation
model).
At
inception, the Notes were recorded at the net amount of approximately $665,000, after adjusting for debt discounts of approximately $1,335,000
relating to the debt issuance costs, Contingent Stock and Contingent Warrants. Management calculates the effective interest rate (“EIR”)
to consider the potential repayment at redemption date by reference to the face value amount after taking into account the stated 8%
interest rate. In 2022, through the repayment date, the Company recorded interest expense of $39,111 and accreted interest of $1,299,895
and repaid the $2,000,000 in Notes with proceeds from the IPO that closed on April 19, 2022.
The
value of the Contingent Stock and Contingent Warrants is required to be re-measured at FMV at each reporting date, using either the Black-Scholes
valuation model or other valuation method, if deemed more appropriate, with recognition of the changes in fair value to other income
or expense in the consolidated statement of operations in accordance with ASC 480, Debt and Equity. On April 19, 2022, the Company issued
235,295 shares of Common Stock to settle the Contingent Stock liability, re-measured the liability at its estimated FMV based on the
stock’s trading price and reclassified $496,000 to Common Stock Par Value and Additional Paid in Capital.
In
connection with the closing of the IPO, 235,295 warrants were issued to settle the Contingent Warrant liability (“Note Warrants”)
with an exercise price of $4.25 adjusted to $0.64 at September 29, 2023, based on anti-dilution terms in the warrants. The terms of the
Note Warrants continue to require classification as a liability under ASC 815 with recognition of the changes in fair value to other
income or expense in the consolidated statement of operations in accordance with ASC 480 Debt and Equity. (See Notes 8 and 10)
SHARPS
TECHNOLOGY, INC.
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2023 AND 2022
Note
8. Stockholders’ Equity
Capital
Structure
On
December 11, 2017, the Company was incorporated in Wyoming with 20,000,000 shares of common stock authorized with a $0.0001 par value.
Effective, April 18, 2019, the Company’s authorized common stock was increased to 50,000,000 shares of common stock. The articles
of incorporation also authorized 10,000 preferred shares with a $0.001 par value.
Effective
March 22, 2022, the Company completed a plan and agreement of merger with Sharps Technology, Inc., a Nevada corporation (“Sharps
Nevada”). Pursuant to the merger agreement, (i) the Company merged with and into Sharps Nevada, (ii) each 3.5 shares of common
stock of the Company were converted into one share of common stock of Sharps Nevada and (iii) the articles of incorporation and bylaws
of Sharps Nevada, became the articles of incorporation and bylaws of the surviving corporation. The Company’s authorized common
stock and preferred stock increased from 50,000,000 to 100,000,000 and 10,000 to 1,000,000 shares, respectively. The par value of preferred
stock decreased from $0.001 to $0.0001 per share.
Common
Stock
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 warrants of approximately $2.5 million, includes
the value of the pre-funded warrants recorded in Additional Paid in Capital, 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 3,618,521 shares of common at a purchase price of $0.64 per unit and 800,000 pre-funded warrants at $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 expenses. In connection with the Private Placement, the Company issued: (i) 2,581,479 PIPE Shares (or PIPE Pre-Funded Warrants
in lieu thereof) and (ii) PIPE Warrants (non-trading) to purchase 8,750,003 shares of our common stock, at a combined purchase price
of $1.074 per unit (or $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 $0.64. 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. At December 31, 2023 the warrant liability is $1,036,875. (See Notes 8
and 10). |
On
February 3, 2023, the Company completed a securities purchase agreement (“Offering”) with institutional investors and received
net proceeds from the Offering were 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 2,248,521 units
at a purchase price of $1.69 per unit. Each unit consists of one share of common stock and one non-tradable warrant exercisable for one
share of common stock at a price of $1.56, adjusted to $0.64 at September 29, 2023, based on anti-dilution terms in the warrants. The
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.
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 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 $4.25 per share 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 1,125,000 warrants on April 19, 2022.
SHARPS
TECHNOLOGY, INC.
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2023 AND 2022
Note
8. Stockholders’ Equity (continued)
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)
During
the year ended December 31, 2022, the Company issued 235,000 shares of common stock at the trading stock price in connection with services
provided to the Company and recorded a charge of $290,551, In addition, the Company issued 235,295 common shares relating to the Note
Purchase agreement. (See Note 7)
Warrants
| |
|
a) In
connection with a one-year advisory services arrangement entered into in April 2023, the Company issued 495,000 warrants during the
year ended December 31, 2023 at an exercise price of $1.56. The warrants have a three-year term and were fully vested on issuance.
The FMV of the warrants recorded for the year end ended December 31, 2023 was $42,915 as computed using the Black Sholes valuation
model. The assumptions for the year ended December 31, 2023 were: a) expected term – 3 years, b) expected volatility –
24.49% to 44.83%, c) risk free rate- 3.58% to 4.67.% and d) dividend rate – 0%. |
| |
|
|
| |
|
b) In
connection with the Private Placement in September 2023, the Company issued 8,750,003 non-trading PIPE Warrants as a component of
the Unit as noted in Common Stock above. The PIPE Warrants were recorded at the FMV, computed using the Black Sholes valuation method.
The PIPE Warrant’s liability requires remeasurement at each reporting period. The PIPE Warrants are classified as a liability
based on ASC 815. At the issuance date and December 31, 2023, the liability was $985,204 and $1,036,875, respectively and for the
year ended December 31, 2023 a FMV loss adjustment of $51,671 was recorded (See Note 10). |
| |
|
|
| |
|
c) In
connection with the Offering in February 2023, the Company issued 2,248,521 non-trading warrants Offering Warrants as a component
of the Unit as noted in Common Stock above. The Offering Warrant’s liability requires remeasurement at each reporting period.
The Offering Warrants were recorded at the FMV, computed using the Black Sholes valuation method. The Offering Warrants are classified
as a liability based on ASC 815. At the issuance date and at December 31, 2023 the liability was $455,326 and $234,072, respectively.
During the year ended December 31, 2023, the Company recorded a FMV gain adjustment of $221,254. (See Note 10). |
| |
|
|
| |
|
d) In
connection with the IPO in April 2022, the Company issued 7,500,000 warrants (Trading Warrants) as a component of the Units and 1,125,000
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. At December 31, 2023 and 2022, the liability
was $1,121,250. During years ended December 31, 2023 and 2022, the Company recorded a FMV loss (gain) adjustment of $0 and $(4,784,559),
respectively (See Note 10). |
SHARPS
TECHNOLOGY, INC.
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2023 AND 2022
Note
8. Stockholders’ Equity (continued)
| |
|
e) The Company has issued
235,295 Warrants (“Note Warrants”) to the Purchasers of the Notes on April 19, 2022. The Note Warrants have an exercise
price of $4.25 and a term of five years. At December 31,2023 and 2022, the liability was $30,588. During the years ended December
31, 2023 and 2022, the Company recorded a FMV loss (gain) of $0 and ($127,059), respectively. (See Note 10) |
| |
|
|
| |
|
f) The underwriter received
187,500 warrants in connection with the IPO for a nominal cost of $11,250. The Warrants have an exercise price of $5.32 and are exercisable
after October 9, 2022. The FMV at the date of issuance was $228,750 computed using the Black Sholes valuation model with the following
assumptions: a) volatility of 93.47%, five-year term, risk free interest rate 2.77% and 0% dividend rate. These warrants were recorded
in Equity at the estimated FMV and classified as additional issuance costs. |
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 Director. The Series A Preferred Stock entitles the holder to vote on any matters related to the election of directors and was reduced
from 50.1% at December 31, 2022 to 29.5%, effective with the IPO. The Series A Preferred Stock has no right to dividends, or distributions
in the event of a liquidation and is not convertible into common stock. In the event the Company is sold during the two-year period following
completion of IPO at a price per share of more than 500% of the initial offering price per Unit in the IPO, the Series A Preferred Stock,
as in effect upon completion of the IPO, will entitle the holder to 10% of the total purchase price. (See Note 15)
Note
10. Warrant Liability
The
Warrants were accounted for as liabilities in accordance with ASC 815-40 and are presented as a Warrant liability in the accompanying
consolidated balance sheet. The warrant liabilities are measured at fair value at inception and on a recurring basis, with changes in
fair value presented within the consolidated statement of operations, The non-trading warrants, related to the February 2023 and September
2023 offerings, are valued using the Black-Scholes pricing model. The assumptions for the year ended December 31, 2023 were as follows:
(See Notes 7 and 8)
| | |
Year Ended
December 31, 2023 | |
| Expected term (years) | |
| 4.10 to 5.50 | |
| Expected volatility | |
| 45.30% to 70.44 | % |
| Risk-free interest rate | |
| 3.53% to 4.54 | % |
| Dividend rate | |
| 0 | % |
The
Warrant liability at December 31, 2023 and 2022 was as follows:
| | |
2023 | | |
2022 | |
| Trading and Overallotment Warrants | |
$ | 1,121,250 | | |
| 1,121,250 | |
| Note Warrants | |
| 30,588 | | |
| 30,588 | |
| Offering Warrants – February 2023 | |
| 234,072 | | |
| - | |
| Offering Warrants – September 2023 | |
| 1,036,875 | | |
| - | |
| Total Warrant Liability | |
$ | 2,422,785 | | |
| 1,151,838 | |
The
Warrants outstanding at December 31, 2023 and 2022 were as follows:
| | |
December 31, 2023 | | |
December 31, 2022 | |
| | |
| | |
| |
| Trading and Overallotment Warrants | |
| 8,812,500 | | |
| 8,812,500 | |
| Note Warrants | |
| 235,294 | | |
| 235,294 | |
| Offering Warrants – February 2023 | |
| 2,248,521 | | |
| - | |
| Offering Warrants – September 2023 | |
| 8,750,003 | | |
| - | |
| Warrants issued for services arrangement | |
| 495,000 | | |
| - | |
| Total Warrants Outstanding | |
| 20,541,318 | | |
| 9,047,794 | |
SHARPS
TECHNOLOGY, INC.
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2023 AND 2022
Note
10. Warrant Liability (continued)
For
the years ended December 31, 2023 and 2022 the FMV loss (gain) adjustment, which is reflected in the FMV adjustment on Warrants in the
Consolidated Statements of Operations was ($169,583) and ($4,784,559), respectively.
Note
11. Stock Options
On
January 24, 2023, the Company’s Board of Directors initially adopted the 2023 Equity Incentive Plan (the “2023 Plan”),
to provide for the issuance of up to 1,400,000 options and/or shares of restricted stock be available for issuance to officers, directors,
employees and consultants. The 2023 Plan was subsequently updated to provide for the issuance of up to 3,500,000 options and/or shares
of restricted stock. The 2023 Plan was approved by shareholders at the annual meeting
A
summary of options granted and outstanding is presented below.
| | |
2023 | | |
2022 | |
| | |
Options | | |
Weighted
Average
Exercise
Price | | |
Options | | |
Weighted
Average
Exercise
Price | |
| Outstanding at Beginning of year | |
| 1,358,122 | | |
$ | 4.37 | | |
| 1,137,479 | | |
$ | 5.18 | |
| Granted | |
| 1,065,000 | | |
| 1.35 | | |
| 367,500 | | |
| 1.63 | |
| Cancelled | |
| | | |
| | | |
| (3,571 | ) | |
| (4.38 | ) |
| Forfeited | |
| (14,286 | ) | |
$ | 1.75 | | |
| (143,286 | ) | |
$ | (3.77 | ) |
| | |
| | | |
| | | |
| | | |
| | |
| Outstanding at end of year | |
| 2,408,836 | | |
$ | 3.03 | | |
| 1,358,122 | | |
$ | 4.37 | |
| | |
| | | |
| | | |
| | | |
| | |
| Exercisable at end of year | |
| 1,881,327 | | |
$ | 3.47 | | |
| 1,132,861 | | |
$ | 4.59 | |
| 1) |
During
the year ended December 31, 2023, the Company granted five-year options (the “Options”) to purchase a total of: |
| |
|
a) |
975,000 shares of the Company’s
common stock, par value $0.0001 per share (the “Common Stock”) to its directors, executive officers, employees and consultants
pursuant to the Company’s. 2022 and 2023 Equity Incentive Plans. The Options are exercisable at $1.37 per share which was the
closing price on January 25, 2023. |
| |
|
b) |
90,000 shares of the Company’s
Common Stock in connection with an employment or consulting agreements at the exercise price, representing the closing price on the
grant date ranging from $0.82 to $1.30. |
| |
During the year ended December
31, 2023, 660,000 Options have been granted under the 2023 Equity Incentive Plan and the remaining 405,000 Options were issued under
the 2022 Equity Incentive Plan. At December 31, 2023, 1,748,836 Options are outstanding under the 2022 Equity Incentive Plan. |
During
the years ended December 31, 2023 and 2022, the estimated weighted-average grant-date fair value of options granted was $.80 per share
and $1.63 per share, respectively. As of December 31, 2023 and 2022, there was $498,454 and $475,097, respectively, of unrecognized stock-based
compensation related to unvested stock options with a weighted average fair value of $.94 and $2.05 per share, respectively, which is
expected to be recognized over a weighted-average period sixteen months as of December 31, 2023.
The
following table summarizes information about options outstanding at December 31, 2023:
Exercise
Prices | | |
Options
Outstanding | | |
Aggregate
Intrinsic Value | | |
Weighted Average
Remaining
Contractual Life | | |
Options
Exercisable | | |
Aggregate Intrinsic Value
on Exercisable
Shares | |
| | | |
| | |
| | |
| | |
| | |
| |
| $ | .82 to .92 | | |
| 40,000 | | |
| - | | |
| 4.58 | | |
| 18,794 | | |
| - | |
| $ | 1.21 | | |
| 307,500 | | |
| - | | |
| 3.42 | | |
| 240,386 | | |
| - | |
| $ | 1.30 | | |
| 50,000 | | |
| - | | |
| 4.21 | | |
| 43,750 | | |
| - | |
| $ | 1.37 | | |
| 975,000 | | |
| - | | |
| 4.17 | | |
| 561,719 | | |
| - | |
| $ | 1.75 | | |
| 54,285 | | |
| - | | |
| 2.25 | | |
| 54,285 | | |
| - | |
| $ | 2.80 | | |
| 141,429 | | |
| - | | |
| 2.25 | | |
| 141,429 | | |
| - | |
| $ | 1.39 | | |
| 10,000 | | |
| - | | |
| 3.75 | | |
| 10,000 | | |
| - | |
| $ | 4.25 | | |
| 50,000 | | |
| - | | |
| 3.75 | | |
| 50,000 | | |
| - | |
| $ | 4.38 | | |
| 244,286 | | |
| - | | |
| 1.25 | | |
| 244,286 | | |
| - | |
| $ | 7.00 | | |
| 536,335 | | |
| - | | |
| 2.00 | | |
| 516,679 | | |
| - | |
At
December 31,2023, the stock options outstanding and the options exercisable have exercise prices that exceed the stock market price at
December 31, 2023 and as such no intrinsic value exist. Intrinsic value is defined as the difference between the exercise price of the
options and the market price of the Company’s common stock.
SHARPS
TECHNOLOGY, INC.
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2023 AND 2022
Note
11. Stock Options (continued)
In
2023 and 2022, the Company recognized stock-based compensation expense of $920,108, of which $906,745 and $13,363 was recorded in general
and administrative and research and development expenses, respectively and $1,012,592, of which $915,797 and $96,795 was recorded in
general and administrative and research and development expenses, respectively. Further, in 2022, the Company recorded stock-based charges
of $63,612 relating to purchase of machinery (See Note 4) and $60,435 relating to an Acquisition. (See Note 5.)
The
fair value of stock option awards accounted for under ASC 718 was estimated at the date of grant using a Black-Scholes option-pricing
model with the following assumptions:
| | |
Year Ended
December 31, 2023 | | |
Year Ended
December 31, 2022 | |
| Expected term (years) | |
| 2.88 to 3.25 | | |
| 2.50 to 3.00 | |
| Expected volatility | |
| 75.40% to 89.93 | % | |
| 100.81% to 110.74 | % |
| Risk-free interest rate | |
| 3.71% to 4.27 | % | |
| 2.90% to 3.47 | % |
| Dividend rate | |
| 0 | % | |
| 0 | % |
Note
12. Income Taxes
A
reconciliation of the Federal statutory rate of 21% and 28% in the years ended December 31, 2023 and 2022, respectively to the total
effective rate applicable to income (loss) is as follows:
| | |
Year Ended | | |
Year Ended | |
| | |
December 31, 2023 | | |
December 31, 2022 | |
| | |
| | |
| |
| Expected benefit at statutory federal tax rate | |
$ | (2,073,230 | ) | |
$ | (974,329 | ) |
| Permanent differences – net | |
| (35,469 | ) | |
| (859,515 | ) |
| State and local taxes, net of federal tax benefit | |
| - | | |
| (265,607 | ) |
| Other | |
| (24,569 | ) | |
| (21,965 | ) |
| Change in valuation allowance | |
| 2,103,268 | | |
| 2,121,416 | |
| Income tax expense (benefit) | |
$ | (30,000 | ) | |
$ | - | |
The
components of the Company’s deferred tax assets (liabilities) are as follows:
| | |
Year Ended
December 31,
2023 | | |
Year Ended
December 31,
2022 | |
| Deferred tax assets (liabilities): | |
| | | |
| | |
| Fixed assets | |
$ | (281,073 | ) | |
$ | (268,594 | ) |
| Interest | |
| 35,178 | | |
| 62,310 | |
| Research and development expenses | |
| 400,810 | | |
| 454,942 | |
| Stock-based compensation | |
| 895,509 | | |
| 917,351 | |
| Charitable Contributions | |
| 420 | | |
| | |
| Net operating losses - federal | |
| 4,456,242 | | |
| 2,898,411 | |
| Net operating losses – state and local | |
| 543,264 | | |
| 921,350 | |
| Net operating losses - foreign | |
| 233,114 | | |
| 37,686 | |
| Research credit | |
| 28,985 | | |
| 28,985 | |
| Less valuation allowance | |
| (6,474,449 | ) | |
| (5,244,441 | ) |
| Net deferred tax liability | |
$ | (162,000 | ) | |
$ | (192,000 | ) |
SHARPS
TECHNOLOGY, INC.
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2023 AND 2022
Note
12. Income Taxes (continued)
The
authoritative guidance requires the asset and liability method of accounting for deferred income taxes. Deferred tax assets and liabilities
are determined based on the difference between the financial statement and tax bases of assets and liabilities. Deferred tax assets or
liabilities at the end of each period are determined using the tax rate expected to be in effect when taxes are actually paid or recovered.
The
guidance also requires that a valuation allowance be established when it is more likely than not that all or a portion of a deferred
tax asset will not be realized. A review of all available positive and negative evidence needs to be considered, including a company’s
current and past performance, the market environment in which the company operates, length of carryback and carryforward periods and
existing contracts that will result in future profits. After reviewing all the evidence, the company has recorded a full valuation allowance.
As
of December 31, 2023, the Company had U.S. federal net operating loss carryforwards of approximately $21,222,000 of which $241,000, if
not fully utilized, expires by 2038 and which $20,981,000 do not expire. The Company has foreign net operating loss carryforwards of
$2,590,000, if not fully utilized, expire through 2028. Utilization is dependent on generating sufficient taxable income prior to expiration
of the tax loss carryforwards.
The
geographical components of loss before income taxes consisted of the following for the years ended December 31:
| | |
Year Ended | | |
Year Ended | |
| | |
December 31,
2023 | | |
December 31,
2022 | |
| | |
| | |
| |
| United Stated Operations | |
$ | (8,173,807 | ) | |
$ | (3,978,832 | ) |
| International Operations | |
| (1,667,831 | ) | |
| (660,830 | ) |
| (Loss) Income before taxes | |
| (9,871,638 | ) | |
| (4,639,662 | ) |
Note
13. Related Party Transactions and Balances
As
of December 31, 2023 and 2022, accounts payable and accrued liabilities include $32,974 and $105,667, respectively, payable to officers,
and directors of the Company. The amounts are unsecured, non-interest bearing and are due on demand (See Note 15).
Note
14. Fair Value Measurements
The
Company’s financial instruments include cash, accounts payable, notes payable, contingent stock and warrant liability and warrant
liability. Cash, contingent stock liability, contingent warrant liability and warrant liability are measured at fair value. Accounts
payable and notes payable are measured at amortized cost and approximates fair value due to their short duration and market rate for
similar instruments, respectively.
SHARPS
TECHNOLOGY, INC.
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2023 AND 2022
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 consolidated balance sheet:
| | |
Fair Value Measurements Using | | |
| |
| | |
Level 1 | | |
Level 2 | | |
Level 3 | | |
Total | |
| | |
| | |
| | |
| | |
| |
| Assets | |
| | | |
| | | |
| | | |
| | |
| Cash | |
$ | 3,012,908 | | |
| - | | |
| - | | |
$ | 3,012,908 | |
| | |
| | | |
| | | |
| | | |
| | |
| Total assets measured at fair value | |
$ | 3,012,908 | | |
| - | | |
| - | | |
$ | 3,012,908 | |
| | |
| | | |
| | | |
| | | |
| | |
| Liabilities | |
| | | |
| | | |
| | | |
| | |
| Warrant liability | |
$ | - | | |
| 2,422,785 | | |
| — | | |
$ | 2,422,785 | |
| | |
| | | |
| | | |
| | | |
| | |
| Total liabilities measured at fair value | |
$ | - | | |
| 2,422,785 | | |
| - | | |
$ | 2,422,785 | |
As
of December 31, 2022, the following financial assets and liabilities were measured at fair value on a recurring basis presented on the
Company’s consolidated balance sheet:
| | |
Fair Value Measurements Using | | |
| |
| | |
Level 1 | | |
Level 2 | | |
Level 3 | | |
Total | |
| | |
| | |
| | |
| | |
| |
| Assets | |
| | | |
| | | |
| | | |
| | |
| Cash | |
$ | 4,170,897 | | |
| - | | |
| - | | |
$ | 4,170,897 | |
| | |
| - | | |
| - | | |
| - | | |
| | |
| Total assets measured at fair value | |
$ | 4,170,897 | | |
| - | | |
| | | |
$ | 4,170,897 | |
| | |
| | | |
| | | |
| | | |
| | |
| Liabilities | |
| | | |
| | | |
| | | |
| | |
| Warrant liability | |
$ | 1,151,838 | | |
| - | | |
| - | | |
$ | 1,151,838 | |
| | |
| | | |
| | | |
| | | |
| | |
| Total liabilities measured at fair value | |
$ | 1,151,838 | | |
| - | | |
| - | | |
$ | 1,151,838 | |
Note
15. Commitments and Contingencies
Fixed
Assets and Other
At
December 31, 2023, the remaining amounts due under outstanding orders of $56,874 is recorded in Accounts Payable. At December 31, 2022,
the Company has outstanding orders to purchase equipment, molds and component parts for research and development of $609,953 of which
advance payments of $209,678 have been made and recorded in Other Assets (See Note 6).
SHARPS
TECHNOLOGY, INC.
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2023 AND 2022
Note
15. Commitments and Contingencies (continued)
Contingencies
At
each reporting period, the Company evaluates whether or not a potential loss amount or a potential range of loss is probable and reasonably
estimable under the provisions of the authoritative guidance that addresses accounting for contingencies. The Company is currently not
involved in any material litigation or other loss contingencies.
Royalty
Agreement
In
connection with the purchase of certain intellectual property in July 2017, Barry Berler and Alan Blackman entered into a royalty agreement
which provides that Barry Berler will be entitled to a royalty of four percent (4%) of net sales derived from the use, sale, lease, rent
and export of products related to the intellectual property. The royalty continues until the patent expires or is no longer used in the
Company’s product. The royalty agreement was assumed by the Company in December 2017.
In
September 2018, the Royalty Agreement was amended to reduce the royalty to 2% and further provided for a single payment of $500,000 to
Barry Berler within three years in return for cancellation of all further royalty obligations of the Company. In May 2019, the Royalty
Agreement was further amended to change the payment date to on or before May 31, 2021 or during the term of the amended Royalty Agreement
should the Company be acquired or a controlling interest be acquired. The Company has not made the aforementioned payment or incur any
change in control as such the 2% royalty remains in place.
Employment
Agreements
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 provides for annual salary of $256,000, which provides for increases, and provisions compensation
adjustments, expense and tax differential reimbursements, benefits and bonuses. As of September 1, 2022, the annual salary is $320,000.
At June 30, 2022, the Company approved and accrued a $250,000 bonus to Mr. Blackman for services provided in 2022, of which $65,000 was
paid subsequent to December 31, 2022. The Company terminated Mr. Blackman’s Employment Agreement effective May 1, 2023. Mr. Blackman
continued to serve as the Co-Chairman and a member of the Board of Directors. Subsequent to June 30, 2023, the Company and Mr. Blackman
entered into a separation agreement whereby, Mr. Blackman will be paid severance payments of approximately $346,000, which was recorded
as an expense and an accrued expense as of June 30, 2023, over thirteen months, continue his medical benefits for such period with a
cost of approximately $29,000 which has been accrued at June 30, 2023. At December 31, 2023, the outstanding balance due Mr. Blackman
is $218,000, which is recorded in accrued expenses. Further, all unvested options were fully vested and the Company recorded a charge
of $60,000. In connection with the separation agreement, Mr. Blackman no longer serves as Co-Chairman or Board member and has agreed
to vote his Series A Preferred Stock in favor of the election, reelection, and/or designation of each individual nominated to serve as
a director on the Board of Director as shall be identified in an applicable proxy statement filed by the Company for such election of
directors. Once the payments due Mr. Blackman are fully paid, the Series A Preferred Stock shall be deemed immediately cancelled and
forfeited and without further consideration. The Series A Preferred shall at such time be returned to the status of an authorized but
unissued share of preferred stock of the Company.
SHARPS
TECHNOLOGY, INC.
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2023 AND 2022
Note
15. Commitments and Contingencies (continued)
On
September 30, 2022, the Company entered into a formal employment agreement, effective on such date and will continue until terminated
by either party, subject to the terms of the agreement, with Andrew R. Crescenzo who has been serving as the Company’s Chief Financial
Officer on a contract services basis for the last three years. The agreement provided for annual compensation of $225,000 and plus a
one-time $18,750 incentive payment upon the commencement of the agreement. During the course of the term, Mr. Crescenzo will be eligible
for (i) performance bonuses to be granted at the discretion of the Company’s Compensation Committee and (ii) to participate in
the Company’s 2022 Equity Incentive Plan. The agreement contains customary employment terms and conditions.
In
October 2022, the Company entered into a service agreement (“Service Agreement”) with an unrelated third-party for marketing
and investor relations services. The Service Agreement, which has a term of one year, has various deliverables and provides payments
to the third party as follows; a) an initial fee of $90,000, b) monthly fees through the term of $12,500, c) 200,000 shares of restricted
common stock and d) $300,000 specifically related to digital marketing activities. As stated in Note 8, the 200,000 shares of restricted
common stock were valued at $230,000, representative of the trading price on the issuance.
On
February 9, 2023, the Company, appointed Justin Page, as Vice President of Technical Operations with a start date of February 15, 2023.
The agreement provides for annual compensation of $235,000 and Options to purchase 50,000 shares of Common Stock at the exercise price
of $1.30, the closing price on the grant date. During the course of the term, Mr. Paige will be eligible for (i) performance bonuses
to be granted at the discretion of the Company’s Compensation Committee and (ii) to participate in the Company’s Equity Incentive
Plan. The agreement contains customary employment terms and conditions and provides for severance of six months if a change in control
occurs, as defined.
On
November 10, 2023, the Company executed an Employment Agreement with Robert Hayes, its Chief Executive Officer amending the employment
letter dated September 6, 2021. The agreement term automatically renews for successive one-year terms as of the commencement date unless
prior written notice by either party within ninety days prior to end of the current term. The agreement provides for termination of employment
and severance benefits under stated conditions and restrictive covenants. The agreement provides for annual compensation retroactive
to June 1, 2023 of $600,000 from $400,000 and a stated increase with the successful acquisition of InjectEZ and other terms of the acquisition
agreement (See Note 5). The agreement provides for bonus compensation for: (i) closing the Nephron acquisition agreement, (ii) long-term
incentives for achieving revenue targets and market caps for the Company’s stock and (iii) other Company achievements. In addition,
the agreement provides for benefits and paid time off.
Note
16. Subsequent Events
In
January 2024, the holders of 398,441 of pre-funded warrants exercised their warrants at the exercise price of $.001.
SHARPS
TECHNOLOGY, INC.
CONDENSED
CONSOLIDATED BALANCE SHEETS
| | |
March 31, 2024 | | |
December 31, 2023 | |
| | |
(Unaudited) | | |
(Audited) | |
| Assets: | |
| | | |
| | |
| Current Assets | |
| | | |
| | |
| Cash | |
$ | 1,165,913 | | |
$ | 3,012,908 | |
| Prepaid expenses and other current assets | |
| 202,335 | | |
| 116,508 | |
| Inventories,
net (Note 3) | |
| 1,842,392 | | |
| 1,709,135 | |
| Current Assets | |
| 3,210,640 | | |
| 4,838,551 | |
| | |
| | | |
| | |
| Fixed Assets, net of accumulated
depreciation (Notes 4 and 5) | |
| 6,470,940 | | |
| 6,822,142 | |
| Other
Assets (Notes 5 and 6) | |
| 122,242 | | |
| 128,575 | |
| TOTAL ASSETS | |
$ | 9,803,822 | | |
$ | 11,789,268 | |
| | |
| | | |
| | |
| Liabilities: | |
| | | |
| | |
| Current Liabilities | |
| | | |
| | |
| Accounts
payable (Note 4) | |
$ | 753,810 | | |
$ | 794,107 | |
| Accrued
and other current liabilities (Notes 13 and 15) | |
| 454,654 | | |
| 476,090 | |
| Warrant
liability (Notes 8 and 10) | |
| 1,572,728 | | |
| 2,422,785 | |
| Total Current Liabilities | |
| 2,781,192 | | |
| 3,692,982 | |
| | |
| | | |
| | |
| Deferred Tax Liability | |
| 162,000 | | |
| 162,000 | |
| Total Liabilities | |
| 2,943,192 | | |
| 3,854,982 | |
| | |
| | | |
| | |
| Commitments and Contingencies
(Note 15) | |
| - | | |
| - | |
| | |
| | | |
| | |
| Stockholders’ Equity: | |
| | | |
| | |
| Preferred stock, $.0001 par value;1,000,000 shares authorized; 1 share issued
and outstanding | |
| - | | |
| - | |
| Common stock, $ $.0001 par value; 100,000,000, shares authorized; 15,670,898
shares issued and outstanding (2023: 15,274,457) | |
| 1,568 | | |
| 1,528 | |
| Additional paid-in capital | |
| 32,616,693 | | |
| 32,489,950 | |
| Accumulated other comprehensive income | |
| 373,759 | | |
| 591,812 | |
| Accumulated deficit | |
| (26,131,390 | ) | |
| (25,149,004 | ) |
| Total Stockholders’ Equity | |
| 6,860,630 | | |
| 7,934,286 | |
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | |
$ | 9,803,822 | | |
$ | 11,789,268 | |
The
accompanying notes are an integral part of these financial statements.
SHARPS
TECHNOLOGY, INC.
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR
THE THREE MONTHS ENDED MARCH 31
(UNAUDITED)
| | |
2024 | | |
2023 | |
| | |
| | |
| |
| Revenue, net | |
$ | - | | |
$ | - | |
| | |
| | | |
| | |
| Operating expenses: | |
| | | |
| | |
| Research and development | |
| 197,439 | | |
| 333,888 | |
| General and administrative | |
| 1,646,613 | | |
| 1,983,912 | |
| Total operating expenses | |
| (1,844,052 | ) | |
| (2,317,800 | ) |
| Loss from operations | |
| (1,844,052 | ) | |
| (2,317,800 | ) |
| | |
| | | |
| | |
| Other income (expense) | |
| | | |
| | |
| Interest income (expense) | |
| 19,023 | | |
| 36,792 | |
| FMV adjustment warrants | |
| 850,057 | | |
| 184,085 | |
| Foreign currency and other | |
| (7,414 | ) | |
| (14,907 | ) |
| Total Other Income (Expense) | |
| 861,666 | | |
| 205,970 | |
| Net loss | |
$ | (982,386 | ) | |
$ | (2,111,830 | ) |
| | |
| | | |
| | |
| Net loss per share, basic and diluted | |
$ | (0.05 | ) | |
$ | (0.20 | ) |
| Weighted average shares used to compute net loss per share, basic and diluted | |
| 18,655,936 | | |
| 10,731,544 | |
The
accompanying notes are an integral part of these financial statements.
SHARPS
TECHNOLOGY, INC.
CONDENSED
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
FOR
THE THREE MONTHS ENDED MARCH 31
(UNAUDITED)
| | |
2024 | | |
2023 | |
| Net loss | |
$ | (982,386 | ) | |
$ | (2,111,830 | ) |
| | |
| | | |
| | |
| Other comprehensive income (loss) | |
| | | |
| | |
| | |
| | | |
| | |
| Foreign currency translation adjustments | |
| (218,053 | ) | |
| 270,983 | |
| | |
| | | |
| | |
| Comprehensive loss | |
$ | (1,200,439 | ) | |
$ | (1,840,847 | ) |
The
accompanying notes are an integral part of these financial statements.
SHARPS
TECHNOLOGY, INC.
CONDENSED
CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY
FOR
THE THREE MONTHS ENDED MARCH 31, 2023
(Unaudited)
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| | |
Preferred Stock | | |
Common Stock | | |
Additional
Paid in | | |
Accumulated
Other Comprehensive | | |
Accumulated | | |
Total Stockholders | |
| | |
Shares | | |
Amount | | |
Shares | | |
Amount | | |
Capital | | |
Income | | |
Deficit | | |
Equity | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| |
| Balance -December 31, 2022 | |
| 1 | | |
$ | - | | |
| 9,407,415 | | |
$ | 941 | | |
$ | 24,733,306 | | |
$ | 214,253 | | |
$ | (15,307,366 | ) | |
$ | 9,641,134 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Net loss for the three months ended March 31, 2023 | |
| - | | |
| | | |
| - | | |
| - | | |
| - | | |
| - | | |
| (2,111,830 | ) | |
| (2,111,830 | ) |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Shares issued in Offering | |
| - | | |
| | | |
| 2,248,521 | | |
| 225 | | |
| 2,783,160 | | |
| - | | |
| | | |
| 2,783,385 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Share-based compensation charges | |
| - | | |
| | | |
| - | | |
| - | | |
| 383,100 | | |
| - | | |
| - | | |
| 383,100 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Foreign Currency Translation | |
| - | | |
| | | |
| - | | |
| - | | |
| - | | |
| 270,983 | | |
| - | | |
| 270,983 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Balance - March 31, 2023 | |
| 1 | | |
$ | - | | |
| 11,655,936 | | |
$ | 1,166 | | |
$ | 27,899,566 | | |
$ | 485,236 | | |
$ | (17,419,196 | ) | |
$ | 10,966,772 | |
SHARPS
TECHNOLOGY, INC.
CONDENSED
STATEMENT OF STOCKHOLDERS’ EQUITY
FOR
THE THREE MONTHS ENDED MARCH 31, 2024
(Unaudited)
| | |
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 | |
| 1 | | |
$ | - | | |
| 15,274,457 | | |
$ | 1,528 | | |
$ | 32,489,950 | | |
$ | 591,812 | | |
$ | (25,149,004 | ) | |
$ | 7,934,286 | |
| Balance | |
| 1 | | |
$ | - | | |
| 15,274,457 | | |
$ | 1,528 | | |
$ | 32,489,950 | | |
$ | 591,812 | | |
$ | (25,149,004 | ) | |
$ | 7,934,286 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Net loss for the three months ended March 31, 2024 | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| (982,386 | ) | |
| (982,386 | ) |
| Net loss | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| (982,386 | ) | |
| (982,386 | ) |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Share-based compensation charges | |
| - | | |
| - | | |
| - | | |
| - | | |
| 126,387 | | |
| - | | |
| - | | |
| 126,387 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Exercise of Pre-Funded Warrants | |
| - | | |
| - | | |
| 396,441 | | |
| 40 | | |
| 356 | | |
| - | | |
| - | | |
| 396 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Foreign Currency Translation | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| (218,053 | ) | |
| -- | | |
| (218,053 | ) |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Balance - March 31, 2024 | |
| 1 | | |
| - | | |
| 15,670,898 | | |
$ | 1,568 | | |
$ | 32,616,693 | | |
$ | 373,759 | | |
$ | (26,131,390 | ) | |
$ | 6,860,630 | |
| Balance | |
| 1 | | |
| - | | |
| 15,670,898 | | |
$ | 1,568 | | |
$ | 32,616,693 | | |
$ | 373,759 | | |
$ | (26,131,390 | ) | |
$ | 6,860,630 | |
The
accompanying notes are an integral part of these financial statements.
SHARPS
TECHNOLOGY, INC.
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR
THE THREE MONTHS ENDED MARCH 31
(UNAUDITED)
| | |
2024 | | |
2023 | |
| CASH FLOWS FROM OPERATING ACTIVITIES: | |
| | | |
| | |
| Net loss | |
$ | (982,386 | ) | |
$ | (2,111,830 | ) |
| Adjustments to reconcile net loss to net cash used in operating activities: | |
| | | |
| | |
| Depreciation and amortization | |
| 195,411 | | |
| 216,090 | |
| Stock-based compensation and common stock issued for services | |
| 126,387 | | |
| 383,100 | |
| FMV adjustment for Warrants | |
| (850,057 | ) | |
| (184,085 | ) |
| Foreign exchange gain | |
| (7,414 | ) | |
| (6,681 | ) |
| Changes in operating assets: | |
| | | |
| | |
| Prepaid expenses and other current assets | |
| (91,158 | ) | |
| (56,674 | ) |
| Inventory | |
| (202,446 | ) | |
| (360,916 | ) |
| Other assets | |
| - | | |
| (36,227 | ) |
| Accounts payable and accrued liabilities | |
| (77,652 | ) | |
| 94,553 | |
| Net cash used in operating activities | |
| (1,889,315 | ) | |
| (2,062,670 | ) |
| | |
| | | |
| | |
| CASH FLOWS FROM INVESTING ACTIVITIES: | |
| | | |
| | |
| Acquisition of fixed assets or deposits paid | |
| (2,852 | ) | |
| (163,272 | ) |
| Net cash used in investing activities | |
| (2,852 | ) | |
| (163,272 | ) |
| | |
| | | |
| | |
| CASH FLOWS FROM FINANCING ACTIVITIES: | |
| | | |
| | |
| Exercise of Pre-Funded warrants | |
| 396 | | |
| - | |
| Net proceeds from Initial Public Offering and additional
offerings | |
| - | | |
| 3,238,711 | |
| Net cash provided by financing activities | |
| 396 | | |
| 3,238,711 | |
| | |
| | | |
| | |
| Effect of exchange rate changes on cash | |
| 44,776 | | |
| 73,580 | |
| | |
| | | |
| | |
| NET INCREASE (DECREASE) IN CASH | |
| (1,846,995 | ) | |
| 1,086,349 | |
| CASH — BEGINNING OF YEAR | |
| 3,012,908 | | |
| 4,170,897 | |
| CASH — END OF PERIOD | |
$ | 1,165,913 | | |
$ | 5,257,246 | |
The
accompanying notes are an integral part of these financial statements.
SHARPS
TECHNOLOGY, INC.
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE THREE MONTHS ENDED MARCH 31, 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 March 31, 2024 and the condensed consolidated statements of operations, statements of comprehensive loss, statements
of stockholders’ equity and the statements of cash flow for the three months ended March 31, 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 months ended March
31, 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 March 31, 2024, the Company had a working capital
of $429,448 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 unaudited condensed consolidated 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.
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 Note 8).
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.
SHARPS
TECHNOLOGY, INC.
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE THREE MONTHS ENDED MARCH 31, 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 March 31, 2024, the most significant estimates relate to derivative liabilities and stock-based compensation.
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 March 31, 2024 and
December 31, 2023, the Company had no cash equivalents.
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 March 31, 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 fair 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.
SHARPS
TECHNOLOGY, INC.
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE THREE MONTHS ENDED MARCH 31, 2024 AND 2023
Note
2. Summary of Significant Accounting Policies (continued)
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.
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 – 20
years, Machinery and Equipment – 3-10 years and Website and Computer Systems – 3 years. The expected life for Molds is based
on the lesser of the number of parts that will be produced based on the expected mold capability or 5 years.
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 no impairment losses recognized during the three months ended March 31, 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.
SHARPS
TECHNOLOGY, INC.
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE THREE MONTHS ENDED MARCH 31, 2024 AND 2023
Note
2. Summary of Significant Accounting Policies (continued)
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.
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 March 31, 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 March 31, 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.
SHARPS
TECHNOLOGY, INC.
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE THREE MONTHS ENDED MARCH 31, 2024 AND 2023
Note
2. Summary of Significant Accounting Policies (continued)
Basic
and Diluted Loss Per Share
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. Basic
EPS includes 2,985,038 of pre-funded warrants (see Note 8). 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 March 31, 2024,
there were 23,085,155 stock options and warrants 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.
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.
SHARPS
TECHNOLOGY, INC.
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE THREE MONTHS ENDED MARCH 31, 2024 AND 2023
Note
2. Summary of Significant Accounting Policies (continued)
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.
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
| | |
March 31, 2024 | | |
December 31, 2023 | |
| Raw materials | |
$ | 306,322 | | |
$ | 254,461 | |
| Work in process | |
| 134,347 | | |
| 170,464 | |
| Finished goods | |
| 1,401,723 | | |
| 1,284,210 | |
| Total | |
$ | 1,842,392 | | |
$ | 1,709,135 | |
SHARPS
TECHNOLOGY, INC.
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE THREE MONTHS ENDED MARCH 31, 2024 AND 2023
Note
4. Fixed Assets
Fixed
assets, net, is summarized as follows as of:
Schedule of Fixed
Assets, Net
| | |
March 31, 2024 | | |
December 31, 2023 | |
| | |
| | |
| |
| Land | |
$ | 247,333 | | |
$ | 260,460 | |
| Building | |
| 2,879,828 | | |
| 3,022,490 | |
| Machinery and Equipment | |
| 4,650,570 | | |
| 4,464,317 | |
| Computer Systems and Website & Other | |
| 290,661 | | |
| 290,661 | |
| Total Fixed Assets | |
| 8,068,392 | | |
| 8,037,928 | |
| Less: accumulated depreciation | |
| (1,597,452 | ) | |
| (1,215,786 | ) |
| Fixed asset, net | |
$ | 6,470,940 | | |
$ | 6,822,142 | |
Depreciation
expense of fixed assets for the three months ended March 31, 2024 and 2023 was $190,121 and $212,109, respectively. Substantially, all
the Company’s fixed assets are located at the Company’s Hungary location. As of March 31, 2024, the Company has $100,000
in remaining payments for machinery purchased, which is included in accounts payable.
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 $2.5M in cash, plus additional consideration of 28,571 shares of common stock with an estimated fair market value of $7.00, 35,714
stock options with an exercise price of $7.00 and 50,000 stock options with an exercise price of $4.25. The purchase price includes the
fair market value of the common stock of $200,000 and the vested options of $183,135. 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 $2,936,712, including transaction
costs of $53,576, with the allocation to the assets acquired on a relative fair value basis. The intangibles relate to permits and a
limited workforce acquired. Under ASC 805-50, no goodwill is recognized. The operating results for Safegard are included in the condensed
consolidated financial statements for the period beginning after the closing on July 6, 2022.
SHARPS
TECHNOLOGY, INC.
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE THREE MONTHS ENDED MARCH 31, 2024 AND 2023
Note
5. Asset Acquisition (continued)
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 | |
$ | 226,000 | |
| Building and affixed assets | |
| 2,648,000 | |
| Machinery | |
| 158,000 | |
| Inventory | |
| 32,000 | |
| Intangibles | |
| 64,712 | |
| Deferred tax liability | |
| (192,000 | ) |
| | |
| | |
| Total | |
$ | 2,936,712 | |
The
useful lives for the acquired assets is Building - 20 years; Machinery – 5 to 10 years; Intangibles – 5 years. The related
depreciation and amortization is being recorded on a straight-line basis.
Note
6. Other Assets
Other
assets as of March 31, 2024 and December 31, 2023 are summarized as follows:
Schedule of Other Assets
| | |
March 31, 2024 | | |
December 31, 2023 | |
| Intangibles, net | |
| 46,180 | | |
| 52,513 | |
| Other | |
| 76,062 | | |
| 76,062 | |
| Other assets | |
$ | 122,242 | | |
$ | 128,575 | |
Intangibles
are related to the Asset Acquisition (see Note 5) and consist of an acquired workforce and permits. Amortization for the three months
ended March 31, 2024 and 2023 was $5,290 and $3,980, respectively.
Note
7. Note Purchase Agreement
On
December 14, 2021, the Company entered into a Note Purchase Agreement (“NPA”) with three unrelated third-party purchasers
(“Purchasers”). The Purchasers provided financing to the Company in the form of bridge financing, aggregating principal of
$2,000,000 (the “Notes”). The principal under the Notes was payable on the earlier of (i) December 14, 2022, and (ii) the
date on which the Company consummates an initial public offering (“IPO”), herein referred to as the “Maturity Date”.
The Notes bore interest at 8% with interest payments due monthly. The Company and the Purchasers had entered into a Security Agreement
whereby the Notes were collateralized by substantially all the assets of the Company, both tangible and intangible both currently owned
with stated exclusions, as defined, and any future acquired with stated exclusions, as defined.
As
additional consideration to the Purchasers for providing the financing, the Company issued to each Purchaser a) a number of shares of
the Company’s Common Stock equal to 50% of the original principal amount of each Purchaser’s Note (the “Contingent
Stock”) and b) a number of warrants, which would allow the Purchasers to purchase additional shares of the Company’s Common
Stock, equal to 50% of the original principal amount each Purchaser’s Note for a term of 5.0 years (the “Contingent Warrants”).
For
both the Contingent Stock and the Contingent Warrants, the number of shares and warrants that each Purchaser was issued was determined
based on a formula of 50% of the original principal amount divided by a “Subsequent Offering Price” based on the valuation
in a future offering of Common stock or other equity interest in the Company (such offering referred to as a “Consummated Offering”)
during the period beginning on December 14, 2021 through and including the date the Company consummates an initial public offering (“IPO”)
(such period referred to as the “Subsequent Offering Period”).
SHARPS
TECHNOLOGY, INC.
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE THREE MONTHS ENDED MARCH 31, 2024 AND 2023
Note
7. Note Purchase Agreement (continued)
In
accordance with ASC 480-10-25-14, a fixed monetary amount existed at inception for the total value of Contingent Stock that may be issued
to each Purchaser. Similarly, a fixed monetary amount further existed at inception for the total value of Contingent Warrants that may
be issued to each Purchaser. The Contingent Stock and Contingent Warrant liabilities were measured at FMV on the date of issuance (based
on the Black-Scholes valuation model).
The
Company repaid the $2,000,000 in Notes with proceeds from the IPO that closed on April 19, 2022 and the Company issued 235,295 shares
of Common Stock to settle the Contingent Stock liability, re-measured the liability at its estimated FMV based on the stock’s trading
price and reclassified $496,000 to Common Stock Par Value and Additional Paid in Capital. Further, with the closing of the IPO, 235,295
warrants were issued to settle the Contingent Warrant liability (“Note Warrants”) with an exercise price of $4.25, adjusted
to $0.64 at September 29, 2023, based on anti-dilution terms in the warrants. The terms of the Note Warrants continue to require classification
as a liability under ASC 815 with recognition of the changes in fair value to other income or expense in the consolidated statement of
operations in accordance with ASC 480 Debt and Equity. (See Note 8 and 10).
Note
8. Stockholders’ Equity
Capital
Structure
On
December 11, 2017, the Company was incorporated in Wyoming with 20,000,000 shares of common stock authorized with a $0.0001 par value.
Effective, April 18, 2019, the Company’s authorized common stock was increased to 50,000,000 shares of common stock. The articles
of incorporation also authorized 10,000 preferred shares with a $0.001 par value.
Effective
March 22, 2022, the Company completed a plan and agreement of merger with Sharps Technology, Inc., a Nevada corporation (“Sharps
Nevada”). Pursuant to the merger agreement, (i) the Company merged with and into Sharps Nevada, (ii) each 3.5 shares of common
stock of the Company were converted into one share of common stock of Sharps Nevada and (iii) the articles of incorporation and bylaws
of Sharps Nevada, became the articles of incorporation and bylaws of the surviving corporation. The Company’s authorized common
stock and preferred stock increased from 50,000,000 to 100,000,000 and 10,000 to 1,000,000 shares, respectively. The par value of preferred
stock decreased from $0.001 to $0.0001 per share.
Common
Stock
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 3,618,521 shares of common at a purchase price of $0.64 per unit and 800,000 pre-funded warrants at $0.639 per pre-funded
warrants. The exercise price of the pre-funded warrants will be $0.001 per share. |
SHARPS
TECHNOLOGY, INC.
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE THREE MONTHS ENDED MARCH 31, 2024 AND 2023
Note
8. Stockholders’ Equity (continued)
| |
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) 2,581,479 PIPE Shares (or PIPE
Pre-Funded Warrants in lieu thereof) and (ii) PIPE Warrants (non-trading) to purchase 8,750,003 shares of our common stock, at a
combined purchase price of $1.074 per unit (or $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 $0.64. 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 2,248,521 units
at a purchase price of $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 of $1.56, adjusted to $0.64 at September 29, 2023, 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 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 $4.25 per share, adjusted to $1.56 at
February 3, 2023 and to $0.64 at September 29, 2023, 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 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)
Warrants
| |
a) |
In
connection with one-year advisory services arrangement entered into in April 2023, the Company issued 135,000 warrants during the
three months ended March 31, 2024, an aggregate of 630,000 over the one-year term, at an exercise price of $1.56. The warrants have
a three-year term and were fully vested on issuance. The FMV of the warrants issued in the three months ended March 31, 2024 was
$8,590 which was computed using the Black Sholes valuation model with the following assumptions: a) volatility of 33.46% to 81.62%,
three-year term, risk free interest rate of 4.20% to 4.21% and 0% dividend rate. |
SHARPS
TECHNOLOGY, INC.
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE THREE MONTHS ENDED MARCH 31, 2024 AND 2023
Note
8. Stockholders’ Equity (continued)
| |
b) |
In
connection with the Private Placement in September 2023, the Company issued 8,750,003 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 Sholes valuation method. For the three
months ended March 31, 2024, the Company recorded a FMV gain adjustment of $325,304. (See Note 10). |
| |
|
|
| |
c) |
In
connection with the Offering in February 2023, the Company issued 2,248,521 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 Sholes valuation method. For the
three months ended March 31, 2024 and 2023 the Company recorded FMV gain adjustments of $81,738 and $184,085, respectively. (See
Note 10). |
| |
|
|
| |
d) |
In
connection with the IPO in April 2022, the Company issued 7,500,000 warrants (Trading Warrants) as a component of the Units and 1,125,000
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 months ended March 31, 2024 and 2023, the Company recorded an FMV gain adjustment of $431,250 and $0, respectively.
(See Note 10). |
| |
|
|
| |
e) |
The
Company issued 235,295 Warrants (“Note Warrants”) to the Purchasers of the Notes 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 months ended March 31, 2024 and 2023, the Company recorded a FMV
gain of $11,765 and $0, respectively. (See Notes 7 and 10). |
| |
|
|
| |
f) |
The
underwriter received 187,500 warrants in connection with the IPO for a nominal cost of $11,250. The Warrants have an exercise price
of $5.32 and are exercisable after October 9, 2022. The FMV at the date of issuance was $228,750 computed using the Black Sholes
valuation model with the following assumptions: a) volatility of 93.47%, five-year term, risk free interest rate 2.77% and 0% dividend
rate. The estimated FMV was classified as additional issuance costs. |
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 Director. The Series A Preferred Stock entitles the holder to vote on any matters related to the election of directors and was reduced
from 50.1% at December 31, 2021 to 29.5%, effective with the IPO. The Series A Preferred Stock has no right to dividends, or distributions
in the event of a liquidation and is not convertible into common stock. In the event the Company is sold during the two-year period following
completion of IPO at a price per share of more than 500% of the initial offering price per Unit in the IPO, the Series A Preferred Stock,
as in effect upon completion of the IPO, will entitle the holder to 10% of the total purchase price. (See Note 15)
SHARPS
TECHNOLOGY, INC.
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE THREE MONTHS ENDED MARCH 31, 2024 AND 2023
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 three months ended March 31, 2024 and 2023 (See Notes 7 and 8).
Schedule
of Fair Value of Warrant
| | |
March 31, 2024 | | |
March 31, 2023 | |
| Expected term (years) | |
| 3.85
to 5 | | |
| 4.86 | |
| Expected volatility | |
| 68.05 | % | |
| 45.23 | % |
| Risk-free interest rate | |
| 4.10
to 4.20% | | |
| 3.53 | % |
| Dividend rate | |
| 0 | | |
| 0 | |
The
Warrant liability at March 31, 2024 and December 31, 2023 was as follows:
Schedule
of Warrant Liability
| | |
March
31, 2024 | | |
December
31, 2023 | |
| Trading and Overallotment Warrants | |
$ | 690,000 | | |
$ | 1,121,250 | |
| Note Warrants | |
| 18,824 | | |
| 30,588 | |
| Offering Warrants – February 2023 | |
| 152,333 | | |
| 234,072 | |
| Offering Warrants – September 2023 | |
| 711,571 | | |
| 1,036,875 | |
| Total Warrant Liability | |
$ | 1,572,728 | | |
$ | 2,422,785 | |
The
Warrants outstanding at March 31, 2024 and December 31, 2023 were as follows:
Schedule
of Warrant Outstanding
| | |
March
31, 2024 | | |
December
31,2023 | |
| | |
| | |
| |
| Trading and Overallotment Warrants | |
| 8,812,500 | | |
| 8,812,500 | |
| Note Warrants | |
| 235,295 | | |
| 235,295 | |
| Offering Warrants – February 2023 | |
| 2,248,521 | | |
| 2,248,521 | |
| Offering Warrants – September 2023 | |
| 8,750,003 | | |
| 8,750,003 | |
| Warrants issued for services arrangement | |
| 630,000 | | |
| 495,000 | |
| Total Warrants Outstanding | |
| 20,676,319 | | |
| 20,541,319 | |
For
the three months ended March 31, 2024 and 2023, the FMV gain adjustment, which is reflected in the FMV adjustment on Warrants in the
Condensed Consolidated Statements of Operations was $850,057 and $184,085, respectively.
SHARPS
TECHNOLOGY, INC.
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE THREE MONTHS ENDED MARCH 31, 2024 AND 2023
Note
11. Stock Options
A
summary of options granted and outstanding is presented below.
Schedule
of Stock Options Granted and Outstanding
| | |
March 31, 2024 | |
| | |
Options | | |
Weighted
Average
Exercise
Price | |
| Outstanding at Beginning of year | |
| 2,408,836 | | |
$ | 3.03 | |
| Granted | |
| - | | |
| - | |
| Forfeited | |
| - | | |
| - | |
| Outstanding at end of period | |
| 2,408,836 | | |
$ | 3.03 | |
| | |
| | | |
| | |
| Exercisable at end of period | |
| 2,026,788 | | |
$ | 3.34 | |
On
January 24, 2023, the Company’s Board of Directors initially adopted the 2023 Equity Incentive Plan (the “2023 Plan”),
to provide for the issuance of up to 1,400,000 options and/or shares of restricted stock be available for issuance to officers, directors,
employees and consultants. The 2023 Plan was subsequently updated to provide for the issuance of up to 3,500,000 options and/or shares
of restricted stock. The 2023 Plan was approved by shareholders at the annual meeting. At March 31, 2024, there are 660,000 Options outstanding
under the 2023 Equity Incentive Plan and 1,748,836 Options outstanding under the 2022 Equity Inventive Plan. (see Note 16)
As
of March 31, 2024, there was $355,730 of unrecognized stock-based compensation related to unvested stock options with a weighted average
fair value of $0.93 per share, which is expected to be recognized over a weighted-average period fourteen months as of March 31, 2024.
The
following table summarizes information about options outstanding at March 31, 2024:
Schedule
of Information About Options Outstanding
| Exercise Prices | | |
Shares Outstanding | | |
Weighted Average Remaining Contractual
Life | | |
Shares Exercisable | |
| $ | 0.82
to 0.92 | | |
| 40,000 | | |
| 4.33 | | |
| 27,856 | |
| $ | 1.21 | | |
| 307,500 | | |
| 3.17 | | |
| 292,564 | |
| $ | 1.30 | | |
| 50,000 | | |
| 3.96 | | |
| 50,000 | |
| $ | 1.37 | | |
| 975,000 | | |
| 3.92 | | |
| 632,604 | |
| $ | 1.39 | | |
| 10,000 | | |
| 3.50 | | |
| 10,000 | |
| $ | 1.75 | | |
| 54,285 | | |
| 2.00 | | |
| 54,285 | |
| $ | 2.80 | | |
| 141,429 | | |
| 2.00 | | |
| 141,429 | |
| $ | 4.25 | | |
| 50,000 | | |
| 3.50 | | |
| 50,000 | |
| $ | 4.38 | | |
| 244,286 | | |
| 1.00 | | |
| 244,286 | |
| $ | 7.00 | | |
| 536,336 | | |
| 1.75 | | |
| 523,764 | |
SHARPS
TECHNOLOGY, INC.
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE THREE MONTHS ENDED MARCH 31, 2024 AND 2023
Note
11. Stock Options (continued)
At
March 31, 2024, the stock options outstanding and the options exercisable have exercise prices that exceed the stock market price at
March 31, 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.
For
the three months ended March 31, 2024, the Company recognized stock-based compensation expense of $117,797, of which $114,456 and $3,341
was recorded in general and administrative and research and development expenses, respectively.
For
the three months ended March 31, 2023, the Company recognized stock-based compensation expense of $383,100 which was recorded in general
and administrative.
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 months ended March 31, 2024 was 0% compared to the effective tax rate
of 0% for three months ended March 31, 2023. The Company’s effective tax rates for both periods were affected primarily by a full
valuation allowance on domestic net deferred tax assets.
Note
13. Related Party Transactions and Balances
As
of March 31, 2024 and December 31, 2023, accounts payable and accrued liabilities include $29,000 and $32,974, respectively, payable
to officers and directors of the Company. The amounts are unsecured, non-interest bearing and are due on demand (See Note 15).
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 March 31, 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 | |
| | |
| | |
| | |
| | |
| |
| Assets | |
| | | |
| | | |
| | | |
| | |
| Cash | |
$ | 1,165,913 | | |
| - | | |
| - | | |
$ | 1,165,913 | |
| | |
| | | |
| | | |
| | | |
| | |
| Total assets measured at fair value | |
$ | 1,165,913 | | |
| - | | |
| - | | |
$ | 1,165,913 | |
| | |
| | | |
| | | |
| | | |
| | |
| Liabilities | |
| | | |
| | | |
| | | |
| | |
| Warrant liability | |
$ | - | | |
| 1,572,728 | | |
| - | | |
$ | 1,572,728 | |
| | |
| | | |
| | | |
| | | |
| | |
| Total liabilities measured at fair value | |
$ | - | | |
| 1,572,728 | | |
| - | | |
$ | 1,572,728 | |
SHARPS
TECHNOLOGY, INC.
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE THREE MONTHS ENDED MARCH 31, 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 | |
$ | 3,012,908 | | |
| - | | |
| - | | |
$ | 3,012,908 | |
| | |
| | | |
| | | |
| | | |
| | |
| Total assets measured at fair value | |
$ | 3,012,908 | | |
| - | | |
| - | | |
$ | 3,012,908 | |
| | |
| | | |
| | | |
| | | |
| | |
| Liabilities | |
| | | |
| | | |
| | | |
| | |
| Warrant liability | |
$ | - | | |
| 2,422,785 | | |
| — | | |
$ | 2,422,785 | |
| | |
| | | |
| | | |
| | | |
| | |
| Total liabilities measured at fair value | |
$ | - | | |
| 2,422,785 | | |
| - | | |
$ | 2,422,785 | |
Note
15. Commitments and Contingencies
Contingencies
At
each reporting period, the Company evaluates whether or not a potential loss amount or a potential range of loss is probable and reasonably
estimable under the provisions of the authoritative guidance that addresses accounting for contingencies. The Company is currently not
involved in any material litigation or other loss contingencies.
Royalty
Agreement
In
connection with the purchase of certain intellectual property in July 2017, Barry Berler and Alan Blackman entered into a royalty agreement
which provides that Barry Berler will be entitled to a royalty of four percent (4%) of net sales derived from the use, sale, lease, rent
and export of products related to the intellectual property. The royalty continues until the patent expires or is no longer used in the
Company’s product. The royalty agreement was assumed by the Company in December 2017.
In
September 2018, the Royalty Agreement was amended to reduce the royalty to 2% and further provided for a single payment of $500,000 to
Barry Berler within three years in return for cancellation of all further royalty obligations of the Company. In May 2019, the Royalty
Agreement was further amended to change the payment date to on or before May 31, 2021 or during the term of the amended Royalty Agreement
should the Company be acquired or a controlling interest be acquired. The Company has not made the aforementioned payment or incurred
any change in control as such the 2% royalty remains in place.
SHARPS
TECHNOLOGY, INC.
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE THREE MONTHS ENDED MARCH 31, 2024 AND 2023
Note
15. Commitments and Contingencies (continued)
Employment
Agreements and Other
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 $256,000, which provides for increases, and provisions compensation
adjustments, expense and tax differential reimbursements, benefits and bonuses. As of September 1, 2022, the annual salary is $320,000.
At June 30, 2022, the Company approved and accrued a $250,000 bonus to Mr. Blackman for services provided in 2022, of which $65,000 was
paid subsequent to December 31, 2022. The Company terminated Mr. Blackman’s Employment Agreement effective May 1, 2023. Mr. Blackman
continued to serve as the Co-Chairman and a member of the Board of Directors. Subsequent to June 30, 2023, the Company and Mr. Blackman
entered into a separation agreement whereby, Mr. Blackman will be paid severance payments of approximately $346,000, which was recorded
as an expense and an accrued expense as of June 30, 2023, over thirteen months, continue his medical benefits for such period with a
cost of approximately $29,000 which has been accrued at June 30, 2023. At March 31, 2024, the outstanding balance due Mr. Blackman is
$98,000, which is recorded in accrued expenses. Further, all unvested options were fully vested and the Company recorded a charge of
$60,000 in 2023. In connection with the separation agreement, Mr. Blackman no longer serves as Co-Chairman or Board member and has agreed
to vote his Series A Preferred Stock in favor of the election, reelection, and/or designation of each individual nominated to serve as
a director on the Board of Director as shall be identified in an applicable proxy statement filed by the Company for such election of
directors. Once the payments due Mr. Blackman are fully paid, the Series A Preferred Stock shall be deemed immediately cancelled and
forfeited and without further consideration. The Series A Preferred shall at such time be returned to the status of an authorized but
unissued share of preferred stock of the Company.
On
September 30, 2022, the Company entered into a formal employment agreement, effective on such date and will continue until terminated
by either party, subject to the terms of the agreement, with Andrew R. Crescenzo who has been serving as the Company’s Chief Financial
Officer on a contract services basis for the last three years. The agreement provided for annual compensation of $225,000 and plus a
one-time $18,750 incentive payment upon the commencement of the agreement. During the course of the term, Mr. Crescenzo will be eligible
for (i) performance bonuses to be granted at the discretion of the Company’s Compensation Committee and (ii) to participate in
the Company’s 2022 Equity Incentive Plan. The agreement contains customary employment terms and conditions.
In
October 2022, the Company entered into a service agreement (“Service Agreement”) with an unrelated third-party for marketing
and investor relations services. The Service Agreement, which had a term of one year, had various deliverables and provided for payments
to the third party as follows; a) an initial fee of $90,000, b) monthly fees through the term of $12,500, c) 200,000 shares of restricted
common stock and d) $300,000 specifically related to digital marketing activities. The 200,000 shares of restricted common stock were
valued at $230,000, representative of the trading price on the issuance.
On
February 9, 2023, the Company, appointed Justin Page, as Vice President of Technical Operations with a start date of February 15, 2023. The agreement
provides for annual compensation of $235,000 and options to purchase 50,000 shares of common stock at the exercise price of $1.30, the
closing price on the grant date. During the course of the term, Mr. Page will be eligible for (i) performance bonuses to be granted at
the discretion of the Company’s Compensation Committee and (ii) to participate in the Company’s Equity Incentive Plan. The
agreement contains customary employment terms and conditions and provides for severance of six months if a change in control occurs,
as defined.
On
November 10, 2023, the Company executed an Employment Agreement with Robert Hayes, its Chief Executive Officer amending the employment
letter dated September 6, 2021. The agreement term automatically renews for successive one-year terms as of the commencement date unless
prior written notice by either party within ninety days prior to end of the current term. The agreement provides for termination of employment
and severance benefits under stated conditions and restrictive covenants. The agreement provides for annual compensation retroactive
to June 1, 2023 of $600,000 from $400,000 and a stated increase with the successful acquisition of InjectEZ and other terms of the acquisition
agreement (See Note 5). The agreement provides for bonus compensation for: (i) closing the Nephron acquisition agreement, (ii) long-term
incentives for achieving revenue targets and market caps for the Company’s stock and (iii) other Company achievements. In addition,
the agreement provides for benefits and paid time off.
Note
16. Subsequent Events
On
April 26, 2024, the Company granted five-year Options under the 2023 Equity Incentive Plan to purchase a total of 1,395,000 shares of
the Company’s common stock, par value $.0001 per shares to its directors, executive officers, employees and consultants. The exercise
price of the Options granted was the closing stock price on the grant date.
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