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As
filed with the Securities and Exchange Commission on April 14,
2023.
Registration
No. 333-269743
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
AMENDMENT NO. 1
TO
FORM
S-1
REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OF 1933
Sharps
Technology, Inc.
(Exact
name of registrant as specified in its charter)
Nevada |
|
3841 |
|
82-3751728 |
(State
or other jurisdiction of
incorporation
or organization) |
|
(Primary
Standard Industrial
Classification
Code Number) |
|
(I.R.S.
Employer
Identification
Number) |
Sharps
Technology, Inc.
105
Maxess Road, Ste. 124
Melville,
New York 11747
(631)
574 -4436
(Address,
including zip code, and telephone number, including area code, of registrant’s principal executive offices)
Robert
M. Hayes
Chief
Executive Officer
Sharps
Technology, Inc.
105
Maxess Road, Ste. 124
Melville,
New York 11747
(631)
574 -4436
(Name,
address, including zip code, and telephone number, including area code, of agent for service)
Copies
to:
Arthur
Marcus, Esq.
Sichenzia
Ross Ference LLP
1185
Avenue of the Americas
New
York, NY 10036
(212)
930-9700
Approximate
date of commencement of proposed sale to the public: As soon as practicable after this registration statement becomes effective.
If
any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933 check the following box. ☒
If
this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the
following box and list the Securities Act registration statement number of the earlier effective registration statement for the same
offering. ☐
If
this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
If
this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
Indicate
by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company,
or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller
reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
|
Large
accelerated filer ☐ |
Accelerated
filer ☐ |
|
Non-accelerated
filer ☒ |
Smaller
reporting company ☒ |
|
|
Emerging
growth company ☒ |
If
an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act.
The
registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the
registrant will file a further amendment which specifically states that this registration statement will thereafter become effective
in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the registration statement will become effective
on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.
The
registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the
registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective
in accordance with Section 8(a) of the Securities Act of 1933 or until this Registration Statement shall become effective on such date
as the Commission, acting pursuant to said Section 8(a), may determine.
The
information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement
filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and is not soliciting
an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.
PRELIMINARY
PROSPECTUS |
|
SUBJECT
TO COMPLETION |
|
APRIL
14, 2023 |
4,497,042
Shares of Common Stock Offered by the Selling
Stockholders
This
prospectus relates to the offering and resale by the selling stockholders (the “Selling Stockholders”) identified
herein of up to 4,497,042 shares of common stock issued or issuable to such selling stockholders including (i) 2,248,521 shares of our
common stock, and (ii) 2,248,521 shares of common stock issuable upon the exercise of outstanding warrants (“SS Warrants”,
as defined in the Selling Stockholders’ section, beginning on page 47
of this prospectus. The shares described in the preceding
sentence, under (i) and (ii) shall collectively be referred to as the “Common Units”. Please see “Private Placement
of Shares of Common Stock and Warrants” beginning on page 46 of this prospectus.
We
will not receive any proceeds from the sale of shares of common stock by the selling stockholders. Upon the cash exercise of the warrants
however, we will receive the exercise price of such warrants, for an aggregate of approximately $3,507,692.
The
selling stockholders may sell all or a portion of the shares of common stock beneficially owned by them and offered hereby from time
to time directly or through one or more underwriters, broker-dealers or agents. Please see the section entitled “Plan of
Distribution” on page 52 of this prospectus for more information. For information on the selling stockholders, see the section
entitled “Selling Stockholders” on page 47 of this prospectus. We will bear all fees and expenses incident to
our obligation to register the shares of common stock.
Our
common stock is quoted on the Nasdaq Capital Market under the symbol “STSS.” On April 10, 2023, the last reported
sale price per share of our common stock was $1.72.
We
may amend or supplement this prospectus from time to time by filing amendments or supplements as required. You should read the entire
prospectus and any amendments or supplements carefully before you make your investment decision.
Investing
in our common stock involves a high degree of risk. See “Risk Factors” beginning on page 8 of this prospectus for a discussion
of information that you should consider before investing in our securities.
Neither
the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined
if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
The
date of this prospectus is April 14, 2023
TABLE
OF CONTENTS
ABOUT
THIS PROSPECTUS
You
may only rely on the information contained in this prospectus or that we have referred you to. We have not authorized anyone to provide
you with different information. This prospectus does not constitute an offer to sell or a solicitation of an offer to buy any securities
other than the common stock offered by this prospectus. This prospectus does not constitute an offer to sell or a solicitation of an
offer to buy any common stock in any circumstances in which such offer or solicitation is unlawful. Neither the delivery of this prospectus
nor any sale made in connection with this prospectus shall, under any circumstances, create any implication that there has been no change
in our affairs since the date of this prospectus. For investors outside the United States: Neither we nor the selling stockholders have
done anything that would permit this offering or possession or distribution of this prospectus in any jurisdiction where action for that
purpose is required, other than in the United States. Persons outside the United States who come into possession of this prospectus must
inform themselves about, and observe any restrictions relating to, the offering of the shares of common stock and the distribution of
this prospectus outside the United States.
Unless
the context otherwise requires, references to “we,” “our,” “us,” or the “Company” in
this prospectus mean Sharps Technology, Inc., a Nevada corporation and its subsidiary.
GENERAL
MATTERS
Unless
otherwise indicated, all references to “dollars,” “US$,” or “$” in this prospectus are to United
States dollars.
This
prospectus contains various company names, product names, trade names, trademarks and service marks, all of which are the properties
of their respective owners.
Unless
otherwise indicated or the context otherwise requires, all information in this prospectus assumes no exercise of the over-allotment option.
Unless
otherwise indicated, all references to “GAAP” in this prospectus are to United States generally accepted accounting principles.
Information
contained on our websites, including sharpstechnology.com, shall not be deemed to be part of this prospectus or incorporated herein by
reference and should not be relied upon by prospective investors for the purposes of determining whether to purchase the securities offered
hereunder.
For
investors outside the United States, neither we nor any of our agents have done anything that would permit this offering or possession
or distribution of this prospectus in any jurisdiction where action for that purpose is required, other than in the United States. You
are required to inform yourself about and to observe any restrictions relating to this offering and the distribution of this prospectus.
USE
OF MARKET AND INDUSTRY DATA
This
prospectus includes market and industry data that has been obtained from third party sources, including industry publications, as well
as industry data prepared by our management on the basis of its knowledge of and experience in the industries in which we operate (including
our management’s estimates and assumptions relating to those industries based on that knowledge). Management’s knowledge
of such industries has been developed through its experience and participation in those industries. Although our management believes
such information to be reliable, neither we nor our management have independently verified any of the data from third party sources referred
to in this prospectus or ascertained the underlying economic assumptions relied upon by such sources. Furthermore, references in this
prospectus to any publications, reports, surveys or articles prepared by third parties should not be construed as depicting the complete
findings of the entire publication, report, survey or article. The information in any such publication, report survey or article is not
incorporated by reference in this prospectus.
TRADEMARKS
We
own or have rights to various trademarks, service marks and/or trade names that we use in connection with the operation of our business.
This prospectus may also contain trademarks, service marks and trade names of third parties, which are the property of their respective
owners. Our use or display of third parties’ trademarks, service marks and trade names or products in this prospectus is not intended
to, and does not imply a relationship with, or endorsement or sponsorship by us. Solely for convenience, the trademarks, service marks
and trade names referred to in this prospectus may appear without the ®, TM or SM symbols, but the
omission of such references is not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable
law, our rights or the right of the applicable owner of these trademarks, service marks and trade names.
PROSPECTUS
SUMMARY
This
summary highlights selected information that is presented in greater detail elsewhere in this prospectus. This summary does not contain
all of the information you should consider before investing in our securities. You should read this entire prospectus carefully, including
the sections titled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results
of Operations” and our financial statements and the related notes included elsewhere in this prospectus, before making an investment
decision. Unless the context otherwise requires, the terms “the Company,” “Sharps,” ‘Sharps Technology,”
“we,” “us” and “our” in this prospectus refer to Sharps Technology, Inc.
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.
As
further discussed below, although we currently have some production capacity for our products and thus ability to receive and fulfill
orders, we expect that the February 2023 Private Placement will allow us to increase our production capacity and thus help us to generate
and fulfill orders for our product line and advance our new products in connection with recent collaboration arrangements with Nephron
Pharmaceutical. We anticipate that we will commence receiving orders for and producing commercial quantities of our products. However,
we have not generated sales or received any orders to date and there is no assurance we will receive any orders for our products.
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. The information that can be accessed through our website is not part
of this prospectus, and investors should not rely on any such information in deciding whether to purchase our securities.
THE
OFFERING
Issuer |
|
Sharps
Technology, Inc. |
|
|
|
Securities
Offered by the Selling Stockholders |
|
4,497,042
shares of our common stock, including 2,248,521
shares of common stock issuable upon the exercise of warrants. |
|
|
|
Trading
Market |
|
The
common stock offered in this prospectus is quoted on the Nasdaq Capital Market under the symbol “STSS”. |
|
|
|
Common
Stock Outstanding Before this Offering |
|
11,655,936
shares |
|
|
|
Common
Stock Outstanding After this Offering |
|
13,904,457
shares (1) |
|
|
|
Use
of Proceeds |
|
We
will not receive any of the proceeds from the sale of the shares of our common stock being offered for sale by the selling stockholders.
Upon the exercise of the warrants for an aggregate of 2,248,521 shares of common stock by payment of cash however, we will receive
the exercise price of the warrants, or an aggregate of approximately $3,507,692 from the investors in the February
2023 Private Placement (the “February 2023 Private Placement”). |
|
|
|
Plan
of Distribution |
|
The
selling stockholders may sell all or a portion of the shares of common stock beneficially owned by them and offered hereby from time
to time directly or through one or more underwriters, broker-dealers or agents. Registration of the common stock covered by this
prospectus does not mean, however, that such shares necessarily will be offered or sold.
See
“Plan of Distribution.” |
|
|
|
Risk
Factors |
|
Please
read “Risk Factors” and other information included in this prospectus for a discussion of factors you should carefully
consider before deciding to invest in the securities offered in this prospectus. |
1 |
The
number of shares of common stock shown above to be outstanding after this offering is based on 11,655,936 shares outstanding
as of April 10, 2023 and assumes the exercise of the warrants into 2,248,521 shares of common stock. |
Emerging
Growth Company under the JOBS Act
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; |
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|
|
|
● |
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; |
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|
|
● |
we
are permitted to provide less extensive disclosure about our executive compensation arrangements; and |
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● |
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 $1.07 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.
SUMMARY
CONSOLIDATED FINANCIAL AND OTHER DATA
The
following tables present our summary financial data and should be read together with our unaudited financial statements and audited financial
statements and accompanying notes and information in “Management’s Discussion and Analysis of Financial Condition and Results
of Operations” 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, |
|
| |
2022 | | |
2021 |
|
| |
| | |
|
|
Assets | |
| | | |
| |
|
Total
current assets | |
$ | 4,423,450 | | |
$ | 1,609,155 |
|
Total
assets | |
$ | 11,839,656 | | |
$ | 5,902,350 |
|
Liabilities
and Stockholders’ Equity | |
| | | |
| |
|
Total
current liabilities | |
$ | 2,006,522 | | |
$ | 2,766,153 |
|
Total liabilities | |
| 2,198,522 | | |
| 2,766,153 |
|
Total
stockholders’ equity | |
| 9,641,134 | | |
| 3,136,197 |
|
Total
liabilities and stockholders’ equity | |
$ | 11,839,656 | | |
$ | 5,902,350 |
|
Statement
of Operations Data
| |
For the Years Ended
December 31, | |
| |
2022 | | |
2021 | |
Revenue | |
$ | - | | |
$ | - | |
Total operating expenses | |
| 8,738,793 | | |
| 4,497,666 | |
Loss from operations | |
| (8,738,793 | ) | |
| (4,497,666 | ) |
Other income (expense) | |
| | | |
| | |
Interest expense | |
| (1,320,416 | ) | |
| (166,746 | ) |
FMV gain adjustment for derivatives | |
| 5,392,911 | | |
| - | |
Foreign currency and other | |
| 26,636 | | |
| | |
Net loss | |
$ | (4,639,662 | ) | |
$ | (4,664,412 | ) |
RISK
FACTORS
Investing
in our securities involves a high degree of risk. You should carefully consider the risks and uncertainties described below, together
with all of the other information in this prospectus, including the section titled “Management’s Discussion and Analysis
of Financial Condition and Results of Operations” and our financial statements and related notes, before making a decision to invest
in our securities. Our business, financial condition, results of operations and prospects could be adversely affected by these risks.
In that event, the market price of our common stock could decline, and you could lose part or all of your investment.
Risks
Related to Our Technology, Business, and Industry
We
are an early-stage company with a history of losses.
We
incurred net losses of $4,639,662 and $4,664,412 for the year ended December 31, 2022 and 2021, respectively. We have not generated any
revenue to date, and we had an accumulated deficit of $15,307,366 as of December 31, 2022. 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 not yet commercialized our Sharps Provensa or other 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 syringe products or any future product.
We
may face difficulties or delays in the commercialization of Sharps Provensa or any future 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:
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● |
our
inability to adequately market our products; |
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● |
our
inability to effectively scale manufacturing as needed to maintain an adequate commercial supply of our products; |
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● |
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 orders to date. Even if we succeed in building inventory, and
increasing our production capacity, there is no assurance we will receive any orders for our Sharps Provensa 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 disposable syringe products, 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 syringe 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 and other 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 three issued patents, three pending patent applications in the United States, and one 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 prospectus, 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.
This
offering constitutes the selling stockholders’ offering of our shares. We have listed the shares of our common stock 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.
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
will be required, 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 will 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 not yet 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 may not be able to
complete our evaluation, testing and any required remediation in a timely fashion once initiated. 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 will 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.
Future
sales of our common stock in the public market could cause the market price of our common stock to decline.
Sales
of a substantial number of shares of our common stock in the public market following the completion of this offering, or the perception
that these sales might occur, could depress the market price of our common stock and could impair our ability to raise capital through
the sale of additional equity securities. Some of our existing equity holders have substantial unrecognized gains on the value of the
equity they hold based upon the price of this offering, and therefore, they may take steps to sell their shares or otherwise secure the
unrecognized gains on those shares. We are unable to predict the timing of or the effect that such sales may have on the prevailing market
price of our common stock.
Our
stock price may be volatile, and the value of our common stock may decline.
We
cannot predict the prices at which our common stock will trade. The initial public offering price of our units will be determined by
negotiations between us and the underwriters and may not bear any relationship to the market price at which our common stock will trade
after this offering or to any other established criteria of the value of our business and prospects, and the market price of our common
stock following this offering may fluctuate substantially and may be lower than the initial public offering price. In addition, the trading
price of our common stock following this offering is likely to be volatile and could be subject to fluctuations in response to various
factors, some of which are beyond our control. These fluctuations could cause you to lose all or part of your investment in our common
stock as you might be unable to sell your shares at or above the price you paid in this offering. Factors that could cause fluctuations
in the trading price of our common stock include 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.
If
securities or industry analysts do not publish research or publish unfavorable or inaccurate research about our business, the market
price and trading volume of our common stock could decline.
The
market price and trading volume of our common stock following the completion of this offering will be heavily influenced by the way analysts
interpret our financial information and other disclosures. We do not have control over these analysts. If few securities analysts commence
coverage of us, or if industry analysts cease coverage of us, our stock price could be negatively affected. If securities or industry
analysts do not publish research or reports about our business, downgrade our common stock, or publish negative reports about our business,
our stock price would likely decline. If one or more of these analysts cease coverage of us or fail to publish reports on us regularly,
demand for our common stock could decrease, which might cause our stock price to decline and could decrease the trading volume of our
common stock.
Management
will have broad discretion as to the use of the proceeds from the February 2023 private placement and may not use the proceeds
effectively.
Our
management will have broad discretion in the application of the net proceeds from the February 2023 private placerment and could
spend the proceeds in ways that may not improve our results of operations or enhance the value of our common stock. Our failure to apply
these funds effectively could have a material adverse effect on our business and cause the price of our common stock to decline.
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 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 will be able to exert substantial influence over the election of directors to
the Board.
Further, the Series
A Preferred Stock, provides that in the event the Company is sold during the two year period commencing on April 19, 2023, at a price
per share of more than 500% of $4.25, 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 23% 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.
SPECIAL
NOTE REGARDING FORWARD-LOOKING STATEMENTS
This
prospectus contains, in addition to historical information, forward-looking statements. These statements are based on our management’s
beliefs and assumptions and on information currently available to our management. The forward-looking statements are contained principally
under the headings “Prospectus Summary,” “Risk Factors,” “Management’s Discussion and Analysis of
Financial Condition and Results of Operations,” “Use of Proceeds” and “Business.” Forward-looking statements
include statements concerning:
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● |
our
possible or assumed future results of operations; |
|
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● |
our
business strategies; |
|
|
|
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● |
our
ability to attract and retain customers; |
|
|
|
|
● |
our
ability to sell products to customers; |
|
|
|
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● |
our
cash needs and financing plans; |
|
|
|
|
● |
our
competitive position; |
|
|
|
|
● |
our
industry environment; |
|
|
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● |
our
potential growth opportunities; |
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|
|
● |
the
effects of future regulation; and |
|
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|
|
● |
the
effects of competition. |
All
statements in this prospectus that are not historical facts are forward-looking statements. We may, in some cases, use terms such as
“anticipates,” “believes,” “could,” “estimates,” “expects,” “intends,”
“may,” “plans,” “potential,” “predicts,” “projects,” “should,”
“will,” “would” or similar expressions that convey uncertainty of future events or outcomes to identify forward-looking
statements.
The
outcome of the events described in these forward-looking statements are subject to known and unknown risks, uncertainties and other factors
that may cause our actual results, performance or achievements to be materially different from any future results, performances or achievements
expressed or implied by the forward-looking statements. These important factors include our financial performance and the other important
factors we discuss in greater detail in “Risk Factors.” You should read these factors and the other cautionary statements
made in this prospectus as applying to all related forward-looking statements wherever they appear in this prospectus. Given these factors,
you should not place undue reliance on these forward-looking statements. Also, forward-looking statements represent our management’s
beliefs and assumptions only as of the date on which the statements are made. We undertake no obligation to publicly update any forward-looking
statements, whether as a result of new information, future events or otherwise, except as required by law. You should read this prospectus
and the documents that we reference in this prospectus and have filed as exhibits to the registration statement, of which this prospectus
is a part, completely and with the understanding that our actual future results may be materially different from what we currently expect.
USE
OF PROCEEDS
We
will not receive any of the proceeds from the sale of the shares of our common stock being offered for sale by the selling stockholders.
Upon the exercise of the warrants for an aggregate of 2,248,521 shares of common stock assuming all payments are made by cash and there
is no reliance on cashless exercise provisions however, we will receive the exercise price of the warrants, or an aggregate of approximately
$3,507,692, from the investor in the February 2023 Private Placement. We will bear all fees and expenses incident to our obligation
to register the shares of common stock. Brokerage fees, commissions and similar expenses, if any, attributable to the sale of shares
offered hereby will be borne by the selling stockholder.
There
is no assurance the warrants will be exercised for cash. We intend to use such proceeds, if any, for general corporate, working capital
purposes and capital expenditures.
DIVIDEND
POLICY
We
have never declared or paid any cash dividends on our common stock. We do not anticipate paying any cash dividends to stockholders in
the foreseeable future. In addition, any future determination to pay cash dividends will be at the discretion of the board of directors
and will be dependent upon our financial condition, results of operations, capital requirements, and such other factors as the Board
of Directors deem relevant. There are no restrictions in our articles of incorporation or bylaws that restrict us from declaring dividends.
CAPITALIZATION
The
following table sets forth our cash and our capitalization as of December 31, 2022 on:
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an
actual basis; and |
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|
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on a pro forma as adjusted basis to give effect to (i) the sale by us of
2,248,541 Common Units in this offering, at $1.69 per Common Unit, after deducting underwriting discounts and commissions and estimated
offering expenses payable by us, |
You
should read this table in conjunction with “Use of Proceeds,” “Management’s Discussion and Analysis of Financial
Condition and Results of Operations,” and our audited financial statements for the year ended December 31, 2022 and
the related notes thereto, included in this prospectus.
| |
As of December 31, 2022 | |
| |
Actual | | |
Pro forma as adjusted | |
Cash | |
$ | 4,170,897 | | |
$ | 7,383,197 | |
Total liabilities | |
| 2,198,522 | | |
| 2,540,830 | |
Stockholders’ equity: | |
| | | |
| | |
Preferred Stock, $0.0001 par value: 1,000,000 shares authorized, 1 share issued and outstanding | |
| - | | |
| | |
Common Stock, $0.0001 par value: 100,000,000 shares authorized; 9,407,415 shares issued and outstanding, actual; 11,656,936, shares issued and outstanding, pro forma as adjusted | |
| 941 | | |
| 1,166 | |
Additional paid-in capital | |
| 24,733,306 | | |
| 27,603,074 | |
Accumulated other comprehensive income | |
| 214,253 | | |
| 214,253 | |
Accumulated deficit | |
| (15,307,366 | ) | |
| 15,307,366 | |
Total stockholders’ equity | |
$ | 9,641,134 | | |
$ | 12,511,127 | |
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
You
should read the following discussion and analysis of financial condition and results of operations in conjunction with our financial
statements and related notes appearing elsewhere in this prospectus. In addition to historical information, the following discussion
and analysis includes forward looking statements that involve risks, uncertainties and assumptions. Our actual results and the timing
of events could differ materially from those anticipated in these forward looking statements as a result of a variety of factors, including
those discussed in “Risk Factors” and elsewhere in this prospectus. See the discussion under “Special Note Regarding
Forward Looking Statements” beginning on page 16 of this prospectus.
Overview
Since
our inception in 2017, we have devoted substantially all of our resources to the research and development of our safety syringe products.
To date, we have generated no revenue. We have incurred net losses in each year of $4,639,662 and $4,664,412 for the years ended December
31, 2022 and 2021, respectively. 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 former 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 we have 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:
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Manufacturing
and testing costs and related supplies and materials; |
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|
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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 |
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|
|
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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 product to meet the market requirements
for our Sharps Provensa 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.
Recent
Development
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, that we believe will provide multiple future opportunities
for the Company. The NPC Agreement is for a period of four (4) years, expiring on September 28, 2026, and continues thereafter for successive
one (1) year periods.
The
NPC Agreement is intended to support several areas of the Company’s development and growth. The Company and NPC intend 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.
The
manufacturing and supply agreement will be focused on the development and manufacture of high value pre-fillable syringe systems that
can be utilized by Nephron which are highly sought after by the healthcare industry and pharmaceutical markets, with projected product
supply beginning in mid-2023. The syringe lines will utilize highly automated equipment and controlled environments established by Nephron.
These premium offerings will be made from what we believe are the highest quality raw materials, on the most innovative technology. These
products will be compliant with the USP standards required in the United States, as well as the EP and JP international standards, as
applicable The products that the Company and Nephron intend to develop and commercialize are designed to provide solutions to support
Nephron’s current fill/finish strategies, as well as their pipeline of new drug applications, and sets forward a strategy to support
branded pharma and advanced therapies including ophthalmic and biologic applications. Our seasoned understanding of pharma fill/finish
processes and equipment and strong connections with preferred component suppliers and large pharmaceutical companies sets the groundwork
for an effective market strategy in partnership with Nephron.
On
December 8, 2022, the Company completed the sales and distribution agreement (the “Distribution Agreement”) portion of the
overall agreement with Nephron Pharmaceuticals Corporation and Nephron SC, Inc. (collectively, “Nephron”), pursuant to which
the Company appointed Nephron as its exclusive distributor for the sale and distribution of the products subject to the Distribution
Agreement in and throughout the United States. Pursuant to the Distribution Agreement, the price of shipping products will be based on
the cost of delivery to Nephron’s warehouse and the Company will pay for the cost of delivery to Nephron. The Distribution Agreement
has a term of two years and will continue in effect unless either party notifies the other party of its desire to terminate. At any time
and for any reason, either party can terminate the Distribution Agreement after thirty (30) days’ notice and in the event of a
breach of any of the Distribution Agreement’s terms and provisions, either party can terminate the Distribution Agreement by providing
90 days written notice. The Company has the right to terminate the Distribution Agreement with 60 days written notice in the event that
certain conditions are met as set forth in the Distribution Agreement.
The
Company’s collaboration will include the creation of a Pharma Services Program (PSP) designed to support Healthcare customers that
need innovative solutions and products to support their business. This program will create new business development growth opportunities
for both companies. We believe that these opportunities for the Company will include the development and sale of next generation drug
delivery systems for Nephron products, the healthcare industry, and pharmaceutical markets. The development of the program will help
create new fill/finish project opportunities that will utilize innovative packaging solutions developed by the Company. These new customer
projects will help create a future pipeline of growth for both companies working together. Initial, and currently confidential, projects
have been identified and will be further developed through the collaboration efforts of Nephron and the Company. The opportunity to create
new innovative technologies to support Nephron and the healthcare industry would be transformative for the Company and its future.
The
Company will be working with Nephron on plans for future expansion, innovation, collaboration and building for long-term success. To
further support the planned growth for the Pharma Services Program, we will be working to expand our U.S. operations in South Carolina
with the help of NPC. This expansion may include the construction of an additional manufacturing facility, located on the Nephron campus,
that would be focused on the manufacture of specialized drug delivery technologies to support Nephron and the healthcare and pharmaceutical
industries. Through this plan of accelerated expansion, we believe that the Company will be able to deliver increased capacity, driving
growth and ultimately, profitability for the high value products’ segment of our business.
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. The warrants have a term of five years from the issuance date.
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 subsidiary, Safegard
Medical, Inc, 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.
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, 2022 and 2021, 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.
Goodwill
and Purchased Identified Intangible Assets
Goodwill
When
applicable, goodwill will be recorded as the difference, if any, between the aggregate consideration paid for an acquisition and the
fair value of the net tangible and identified intangible assets acquired under a business combination. Goodwill also includes acquired
assembled workforce, which does not qualify as an identifiable intangible asset. The Company reviews impairment of goodwill annually
in the third quarter, or more frequently if events or circumstances indicate that the goodwill might be impaired. The Company first assesses
qualitative factors to determine whether it is necessary to perform the quantitative goodwill impairment test. If, after assessing the
totality of events or circumstances, the Company determines that it is not more likely than not that the fair value of a reporting unit
is less than its carrying amount, then the quantitative goodwill impairment test is unnecessary. If, based on the qualitative assessment,
it is determined that it is more likely than not that the fair value of a reporting unit is less than its carrying amount, then the Company
proceeds to perform the quantitative goodwill impairment test. The Company first determines the fair value of a reporting unit using
weighted results derived from an income approach and a market approach. The income approach is estimated through the discounted cash
flow method based on assumptions about future conditions such as future revenue growth rates, new product and technology introductions,
gross margins, operating expenses, discount rates, future economic and market conditions, and other assumptions. The market approach
estimates the fair value of the Company’s equity by utilizing the market comparable method which is based on revenue multiples
from comparable companies in similar lines of business. The Company then compares the derived fair value of a reporting unit with its
carrying amount. If the carrying value of a reporting unit exceeds its fair value, an impairment loss will be recognized in an amount
equal to that excess, limited to the total amount of goodwill allocated to that reporting unit.
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 December 31, 2022, the 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 and comprehensive loss (See Notes 7, 8 and 10 to the 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 statement of operations and comprehensive loss. 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 year. 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 at December 31, 2022, there were 10,405,916 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 antidilutive 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, 2022 and, 2021.
| |
Year Ended | | |
| |
| |
December
31, 2022 | | |
December
31, 2021 | | |
Change | | |
Change % | |
Research and development | |
$ | 2,280,933 | | |
| 1,690,865 | | |
$ | 590,068 | | |
| 35 | % |
General and administrative | |
| 6,457,860 | | |
| 2,806,801 | | |
| 3,651,059 | | |
| 130 | % |
Interest expense (income) | |
| 1,320,416 | | |
| 166,746 | | |
| 1,153,670 | | |
| 692 | % |
FMV gain adjustment for derivatives | |
| (5,392,911 | ) | |
| - | | |
| (5,392,911 | ) | |
| - | |
Foreign currency Loss | |
| 496 | | |
| - | | |
| 496 | | |
| - | |
Other | |
| (27,132 | ) | |
| - | | |
| (27,132 | ) | |
| - | |
Net loss | |
$ | 4,639,662 | | |
$ | 4,664,412 | | |
$ | (24,750 | ) | |
| 1 | % |
Revenue
The
Company has not generated any revenue to date.
Research
and Development
For
the year ended December 31, 2022, Research and Development (“R&D”) expenses increased to $2,280,933 compared to $1,690,865
for the year ended December 31, 2021. The increase of $590,068 was due to increased R&D costs incurred at Safegard for labor $181,000
and other costs $207,000, which commenced after the acquisition on July 6, 2022. In addition, we had increases in depreciation related
to R&D equipment of $597,000 which had commenced in the fourth quarter of 2021. We had increases in stock compensation and consulting
fees of $4,000 from $321,000 in 2021 to $325,000 in 2022, decreases in engineering of $4,000 from $169,000 in 2021 to $165,000 2022 and
decreases in other R&D costs of $119,000 from $331,000 in 2021 to $212,000 in 2022. The aforementioned changes were offset by the
decrease in the Safegard operating cost of $275,000 from $850,000 in 2021 to $575,000 in 2022, incurred prior to acquisition. The operating
costs primarily related to the use of Safegard’s workforce, utility costs incurred and other services. The facility, since June
2020 and following the acquisition, has been used for further development, production of current prototype samples and related testing.
General
and Administrative
For
the year ended December 31, 2022, General and Administrative (“G&A”) expenses were $6,457,860 as compared to $2,806,801
for the year ended December 31, 2021. The increase of $3,651,059 was primarily attributable to increases in payroll and related of: i)
payroll and consulting fees of $805,000 from $918,000 in 2021 to $1,723,000 in 2022, primarily due to increased amounts of payroll and
increased staffing, including fifty-two staff members and $187,000 relating to the Safegard acquisition from date of acquisition and
additional other staff and pay of $618,000 from $918,000 in 2021 to $1,355,000 in 2022 and ii) decrease in stock compensation expense,
due to timing of option awards and vesting, of approximately $175,000 from $1,091,000 in 2021 to $916,000 in 2022. In addition, we had
increases in G&A in the year ended December 31, 2022 of approximately $3,021,000 principally from increased: marketing and promotion
($878,000), professional fees ($178,000), travel ($152,000), board fees ($151,000), insurance ($521,000). public company and investor
relations related ($294,000), issuance costs related to the warrants ($550,000), rent and office expenses ($109,000) and other ($188,000).
Interest
expense (income)
Interest
expense, net of interest income, was $1,320,416 for the year ended December 31, 2022, compared to interest expense of $166,746 for the
year ended December 31, 2021. Interest expense increased by $1,153,670 due to the financing entered into in December 2021 which resulted
in interest payable at the 8% face amount of $47,111 plus accreted interest of $1,299,985 on the $2,000,000 Note Payable which 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
year ended December 31, 2022, the Company recorded a $5,392,911 FMV gain to reflect the decrease in the Note Warrants and Warrants liabilities
issued with the IPO. (See Notes 7, 8 and 10 to the Consolidated Financial Statements)
Liquidity
and Capital Resources
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).
At
December 31, 2022 and 2021, we had a cash balance of $4,107,897 and $1,479,166, respectively. The Company has working capital of $2,416,928
as of December 31, 2022 vs working capital deficiency of $1,156,998, as of December 31, 2021. The increase in our working capital was
primarily related to net proceeds from our initial public offering of approximately $14.2 million prior to the effect of recording the
liability attributed to the warrants from the IPO, less use of cash in operations, investing in fixed assets purchased, repayment of
the Note Payable of $2.0 million and $2.4 million paid relating to the Safegard acquisition.
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 exercisable for one share of common
stock at a price of $1.56. The warrants have a term of five years from the issuance date. (See Notes 16 to the Consolidated Financial
Statements)
Cash
Flows
Net
Cash Used in Operating Activities
The
Company used cash of $6,433,159 and $3,147,736 in operating activities for the year ended December 31, 2022 and 2021, respectively. The
increase in cash used was principally due to the Company incurring additional G&A expenses and R&D activities as described above
during year ended December 31, 2022.
Net
Cash Used in Investing Activities
For
the year ended December 31, 2022 and 2021, the Company used cash in investing activities of $3,117,916 and $2,343,730, respectively.
In both years, cash was used to acquire or pay deposits for machinery and equipment of $542,662 and $2,221,830, respectively. Further,
in the year ended December 31, 2022 and 2021, the Company used $2,365,576 and $75,000, respectively the acquisition of Safegard or related
escrow payments.
Net
Cash Provided by Financing Activities
For
the year ended December 31, 2022 and 2021, the Company provided cash from financing activities of $12,235,475 and $5,180,429 respectively.
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. In 2021, the cash provided was from stock subscriptions
from a private placement.
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.
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 incorporated
under the laws of the State of Nevada in the first quarter of 2022. Sharps was incorporated to purchase, develop, and commercialize a
body of intellectual property resulting in a family of smart safety syringe products. 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 Kft. 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 the Securegard product line of safety syringes
and 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 USD. Under
the Safegard Agreement, Sharps was granted the right to operate the facility in Hungary 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™ and Sharps Provensa™, are ultra-low waste syringes that incorporate both
safety and reuse prevention features, which we believe will provide us a competitive advantage over other syringes. The Sharps Securegard
is a multi-feature safety syringe 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. It is both FDA and WHO approved and carries the European
CE Mark. The Sharps Provensa is a patented safety syringe that gained FDA clearance for subcutaneous and intramuscular injections in
June 2006. Both of these product lines are focused on innovatively addressing the important needs of the global healthcare market in
the area of disposable syringes.
On September 29, 2022, the
Sharps Technology 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 will 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 Nephron Agreement is for a period of four (4) years, expiring on
September 28, 2026 and continues thereafter for successive one (1) year periods. The Agreement includes provisions for collaborations
in the areas of Manufacturing and Supply, a Pharma Services Program, and Distribution, as detailed below. NPC is a West Columbia, S.C.-based
company that develops and produces safe, affordable generic inhalation solutions and suspension products. NPC also operates an industry-leading
503B Outsourcing Facility division, which produces pre-filled sterile syringes, luer-lock vials, IV bottles and IV bags for hospitals
across America, in an effort to alleviate drug shortage needs. NPC launched a CLIA-certified diagnostics lab in 2020 where it tests people
for COVID-19 and administers vaccinations.
A copy of the Nephron Agreement
was filed as Exhibit 10.1 to the Current Report on Form 8-K filed on October 4, 2022, and is also incorporated herein as Exhibit 10.27.
Through the Nephron Agreement,
Sharps is entering into a manufacturing and supply agreement with InjectEZ regarding the development and manufacture of high value pre-fillable
syringe systems that can be used by the healthcare industry, pharmaceutical markets and including Nephron on terms agreed upon by the
parties. The Nephron Agreement will allow for the supply of the pre-fillable systems of different sizes and with specialized technology
that will be compatible with industry standards and technology beginning in the third quarter, as recently advised by Nephron. The Agreement
also allows for further expansion of manufacturing capabilities by Sharps Technology working with InjectEZ to support future industry
and customer demand of pre-fillable systems as detailed in the Agreement.
Additionally, Sharps is entering
into a Pharma Services Program (PSP) with Nephron that will 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 Sharps and
can be purchased by the healthcare industry, pharmaceutical markets, as well as by Nephron.
On December 8, 2022, Sharps
entered into a distribution agreement (the “Distribution Agreement”) with Nephron Pharmaceuticals pursuant to which the Sharps
Technology appointed Nephron as its exclusive distributor for the sale and distribution of the products subject to the Distribution Agreement
in and throughout the United States. Pursuant to the Distribution Agreement, the price of shipping products will be based on the cost
of delivery to Nephron’s warehouse and the Company will pay for the cost of delivery to Nephron. The Distribution Agreement has
a term of two years and will continue in effect unless either party notifies the other party of its desire to terminate. At any time
and for any reason, either party can terminate the Distribution Agreement after thirty (30) days’ notice and in the event of a
breach of any of the Distribution Agreement’s terms and provisions, either party can terminate the Distribution Agreement by providing
90 days written notice. The Company has the right to terminate the Distribution Agreement with 60 days written notice in the event that
certain conditions are met as set forth in the Distribution.
A
copy of the Distribution Agreement was filed as Exhibit 10.1 to the Current Report on Form 8-K filed on December 13, 2022, and also incorporated
herein as Exhibit 10.28.
Although we currently have
production capacity for our products and thus ability to receive and fulfill orders, we expect that the proceeds from the February 2023
Private Placement will allow us to further increase our production capacity. 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 with Nephron Pharmaceuticals.
We are currently building inventory though our Distribution Agreement with Nephron and anticipate that we will commence receiving orders
for and continue producing commercial quantities of our products in the second quarter of 2022.
We continue to be in discussions
with healthcare companies and distributors for sales of our disposable syringe products. We intend to market these products to the US
and foreign governments. In certain situations, we will also look to sell our disposable syringe products to hospitals and clinician
offices as opportunities present themselves.
We expect that the Sharps
Securegard product line will represent our initial disposable syringe platform to be commercially available to the market. The Securegard
platform has an advanced set of 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 have been delays in
the commercialization of the Sharps Provensa product line. The Provensa product’s combination of specialized technology has created
the need for further optimization related to the final assembly steps for the product. This was identified as we moved towards commercialization
for the product line and the need to generate production quantities to support customer orders. This type of delay is typical with the
development of new technology for the healthcare market to ensure the products are safe and effective for use every time. We are endeavoring
to address all obstacles to advance the commercialization of the Provensa product line as soon as possible.
Our Products
DISPOSABLE SYRINGES:
Smart safety disposable syringes
with Ultra-low waste space technology are the preferred syringe platform for the administration of many vaccines and injectable medications.
Their design inherently reduces the amount of thrown way, wasted therapies and thus improves the supply of crucial and in-demand medicines.
Both syringe lines carry less than 20 microliters of dead space, as compared to the 70 microliters “Low Dead Space” designation
and the up 140 microliters dead space found in competitors’ syringes. In addition, both passive and active safety features are
those most requested by clinicians in the field, in order to avoid infectious needlestick injuries, and reuse prevention features are
a requirement by the World Health Organization.
The Sharps Securegard and
Provensa safety syringe product lines have been designed to address the three primary administration concerns with syringe delivery systems:
1. Accidental needlestick injuries: these
occur when the clinician is stuck with an infected needle. According to the WHO, these accidents likely take place in excess of 2 million
times per year. When a clinician receives an infectious needlestick injury, any blood borne disease which the patient had, could be transmitted
to them. A 2016 World Health Organization Commission reported that over 16 billion injections are delivered worldwide each year (pre-Covid
era). A recent analysis showed that 55.1% of healthcare workers had sustained a needlestick injury, or NSI, at some point in their career.
Over one million healthcare worker NSIs are documented each year in the US and Europe and over 3 million worldwide with the true incidence
believed to be more than double those numbers as over half of injuries go unreported. US data on injury trends disturbingly show recent
worsening despite safety campaigns and protocols. In a 2016 study, economic analysis has placed the average cost of an NSI at $747 (direct
plus indirect costs) and strongly supported the use of safety-engineered devices for injection. Low compliance with recommended safety
protocols can be seen upon examination of injury data where a majority of injuries continue to occur with non-safety devices or before
full activation of a safety-protection feature.
2. Wasted medicine/dead space: all needle
and syringes have space which permits the accumulation of injectable medications which cannot be accessed and are thrown away with each
injection. Both Sharps Securegard and Provensa have less than 20 microliters of waste space - others have as much as 140 microliters
of waste space. Without knowing what syringe is going to be used, pharmaceutical companies must overfill their vials to account for this
loss. For difficult to manufacture injectable medications, this reduces the number of life saving doses which could be available to the
public. When doses are extremely small, waste space can exceed the required dose. That means more medications are being thrown away than
injected into the patient. When healthcare providers use ultra-low waste syringes with multi-dose vials it allows for the availability
of up to 20% to 40% more medication for patients that need the treatment.
3. Reuse prevention: the reuse of a needle
or syringe puts patients and populations in danger of contracting debilitating and deadly bloodborne diseases such as Hepatitis B, Hepatitis
C, and possibly HIV. Both passive and active features are designed into Sharps syringes to eliminate this risk. Reuse prevention is recognized
by the WHO as a required feature for its syringe distribution programs and the Securegard product line has been approved by the organization.
PREFILLABLE SYRINGES:
Sharps Technology is poised
to expand its commercialized product portfolio through its collaboration with Nephron Pharmaceuticals. The Sharps-Nephron manufacturing
and supply agreement is focused on the development and manufacture of high value pre-fillable syringe systems that are highly sought
after by the healthcare industry and pharmaceutical markets, with projected product supply beginning the 4th quarter of 2023.
Plans are already being developed by Sharps for further expansion of its current manufacturing capabilities to support the anticipated
future industry and customer demand for pre-fillable syringe systems capable of incorporating passive safety, low waste, and reuse prevention
features as applicable. The prefillable syringe lines will utilize highly automated equipment and controlled environments established
in collaboration with Nephron. These premium offerings will be made from what the Company believes to be the highest quality raw materials,
on the most innovative technology, and will be compliant with the USP standards required in the United States as well as the EP and JP
international standards. The products provide an alternative high-quality solution to glass syringes by utilizing inert polymers such
as Cyclic Olefin Polymer (COP) and Cyclic Olefin Copolymer (COC). These polymer syringes have many of the same characteristics as current
pharmaceutical glass to support long term drug stability. The product pipeline includes 1mL short, 2.25mL, 5 mL, 10ml and 50ml volumetric
sizes, silicone free systems and ophthalmic drug delivery for the ever-growing cosmetics market, dual chamber systems for lyophilized
products, and custom container solutions for autoinjectors.
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 three 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, 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, and a patent (US 11,154,663) for a pre-filled safety needle and syringe system.
We
have three additional pending patent applications in the United States and one PCT (Patent Cooperation Treaty) patent application. The
patent applications, which we own, have an anticipated expiration date of June 22, 2040. The pending patent applications are for (i)
an ultra-low waste disposable syringe with self-adjusting integrating safety features, (ii) an ultra-low waste disposable safety syringe
for low dose injections, and (iii) 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 a PCT patent application. A PCT application is a single utility patent filing that provides international
patent-pending status. By itself, a PCT application will not lead to foreign patents. To obtain foreign patents for this PCT patent application,
we will need to file individual patent applications at a later time.
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-eight full-time employees, one of which is our Chief Executive Officer, and retain the services of additional personnel
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-eigth employees, fifty-two work at our facilities in Hungary. We expect to add additional employees in order to 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
The
following table provides information regarding our executive officers and directors as of the date of this prospectus:
Name |
|
Age |
|
Position(s) |
Executive Officers: |
|
|
|
|
Robert M. Hayes |
|
56 |
|
Chief Executive Officer and Director |
Alan R. Blackman |
|
74 |
|
Co-Chairman, Chief Investment Officer and Chief Operating
Officer |
Andrew R. Crescenzo |
|
66 |
|
Chief Financial Officer |
Non-Executive Directors and Director Nominees: |
|
|
|
|
Soren Bo Christiansen, MD |
|
67 |
|
Co-Chairman |
Paul K. Danner |
|
65 |
|
Director |
Timothy J. Ruemler |
|
64 |
|
Director |
Brenda Baird Simpson |
|
65 |
|
Director |
Jason Monroe |
|
36 |
|
Director |
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.
Alan
R. Blackman
Alan
R. Blackman is a Co-Founder of Sharps Technology since 2017. Commencing in December 2016 and prior to Sharps Technology, he began working
with Barry Berler, the inventor of what is now the Sharps Provensa Ultra- Low Waste smart safety syringe. He serves as the Company’s
Co-Chairman of the Board since 2021 and has served as a Board Member and Secretary since inception. He is also the Company’s Chief
Investment Officer and Chief Operating OfficerN. Prior to his involvement with Sharps Technology, Mr. Blackman was an investor
in the medical device industry. His medical device experience has included cold sterilant technology, infra-red technology for the diagnosis
of deep vein thrombosis, programmable cardiac event monitoring, doppler technology and specialty sutures (surgical stapling). Mr. Blackman
received his Bachelor of Science degree from Long Island University. Mr. Blackman’s experience as our co-founder qualifies 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, Co -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 five directors, Robert M. Hayes, Alan R. Blackman, Soren Bo Christiansen, Paul K. Danner, and Timothy J.
Ruemler. Mr. Ruemler and 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 prospectus, and you should not consider
information contained on our website to be part of this prospectus 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
The
amounts below represent the compensation awarded to or earned by or paid to our named executive officers who served as our chief executive
officer or had total compensation of at least $100,000 for the years ended December 31, 2022 and 2021.
Summary
Compensation Table
Name and Principal Position | |
Calendar Year | | |
Salary
or Consulting $ | | |
Bonus $ | | |
Stock Awards $ | | |
Other Payments $ | | |
Option Awards
(6) $ | | |
Total | |
| |
| | |
| | |
| | |
| | |
| | |
| | |
| |
Robert M. Hayes, CEO (1) | |
| 2022 | | |
$ | 313,333 | | |
| - | | |
| - | | |
| - | | |
$ | 56,124 | | |
$ | 369,457 | |
| |
| 2021 | | |
$ | 82,750 | | |
| - | | |
| - | | |
| - | | |
$ | 541,779 | | |
$ | 624,529 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Dr. Soren Bo Christiansen, Co- Chairman of the Board, former CEO (2) | |
| 2021 | | |
$ | 170,000 | | |
| - | | |
| - | | |
| - | | |
$ | 24,547 | | |
$ | 194,547 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Alan R. Blackman, COO and Co- Chairman of the Board (3) | |
| 2022 | | |
$ | 272,669 | | |
$ | 250,000 | | |
| | | |
| 37,000 | | |
$ | 40,088 | | |
$ | 599,757 | |
| |
| 2021 | | |
$ | 257,000 | | |
| - | | |
| - | | |
| - | | |
$ | 187,096 | | |
$ | 444,096 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Barry Berler, CTO (4) | |
| 2022 | | |
| 216,000 | | |
| - | | |
| - | | |
| 30,000 | | |
$ | 40,088 | | |
$ | 286,088 | |
| |
| 2021 | | |
$ | 216,000 | | |
| - | | |
| - | | |
| - | | |
$ | 187,096 | | |
$ | 403,096 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Andrew R. Crescenzo, CFO (5) | |
| 2022 | | |
$ | 146,250 | | |
| - | | |
| - | | |
| - | | |
$ | 12,026 | | |
$ | 158,276 | |
| |
| 2021 | | |
$ | 73,375 | | |
| - | | |
| - | | |
| - | | |
$ | 68,209 | | |
$ | 141,584 | |
(1) |
Mr. Hayes was appointed
our chief executive officer on September 15, 2021. |
(2) |
Compensation relates
to Dr. Christiansen serving as chief executive officer and chairman of the Board from April 2019 to September 15, 2021. |
(3) |
Reflects consulting
fees and/or salary earned, including accrued and unpaid compensation of $91,667 and $54,000 at December 31, 2022 and 2021, respectively.
Other payments represent tax differential payments of $29,000 and expense allowance of $8,000. |
(4) |
Other compensation reflects
travel allowances. |
(5) |
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 and in 2021 consulting fees from CFO Consulting Partners, LLC, including $7,875 accrued and unpaid,
as of December 31, 2021. |
(6) |
See Note 11 to the audited
financial statements for assumptions used in valuation. |
Executive
Employment Agreements
We
are party to an employment agreement, dated September 9, 2021, with Robert M. Hayes, our chief executive officer. Under the agreement,
we pay Mr. Hayes an annual salary of $270,000, and Mr. Hayes will be entitled to a performance bonus if the Company achieves certain
revenue amounts. Mr. Hayes also received options to purchase 114,286 shares of common stock at an exercise price of $7.00 per share,
vesting over 3 years. In 2022, Mr. Hayes was granted options to purchase 70,000, shares of common stock at an exercise price of $1.21,
vesting over 2 years. In August 2022, the agreement was amended to increase Mr. Hayes annual salary to $400,000. The agreement can be
terminated by either party for any reason upon 60 days’ written notice.
We
were party to a consulting agreement, dated December 2020 and through July 31 2022, with Alan Blackman, our co-founder, chief operating
officer and chief investment officer. Under the agreement. Mr. Blackman was entitled to compensation of $18,000 per month. The agreement
provided for an annual bonus in the target amount of $216,000, commensurate with the Company’s results and subject to the approval
of the board. Effective August 1, 2022, we are a party to an employment agreement (2022 Agreement) with a 24 month term with Mr., Blackman
in which he received an initial annual salary of $256,000 increased to $320,000, based on an adjustment formula, and payment for tax
differential. The 2022 Agreement provides for performance bonus at stated periods based on stated criteria with the bonus amount approved
by the Company’s compensation committee. Mr. Blackman also received options: a) in 2021, to purchase 38,571 shares of common stock
with an exercise price of $7.00 per share, vesting over 3 years and b) in 2022, to purchase 50,000 shares of common stock with an exercise
price of $1.21per share vesting over 2 years. The agreement can be terminated by either party for any reason upon 30 days’ written
notice. Subsequent to December 31, 2022, the Company provided an amended notice to Mr. Blackman of the termination of his employment
agreement with the Company effective May 1, 2023. Following his receipt of the amended notice of termination from the Company, Mr. Blackman
notified the Company that he believed he had resigned from the Company for “good reason.” The Company believes Mr. Blackman’s
allegations are without merit and unsupportable under the terms of his employment agreement. Also following his receipt of the amended
notice of termination from the Company, Mr. Blackman, who was and continues to serve as a Co-Chairman of the Board of Directors of the
Company, alleged that his notice of termination was in retaliation for his “whistleblowing efforts.” The Company is unaware
of a whistleblower claim by Mr. Blackman, his engagement in any whistleblowing protected activity or his complaining or reporting of
any unlawful activity to the Company. The Company believes these allegations are also without merit and will vigorously defend against
them in the event that Mr. Blackman commences legal action.
We
entered into to a consulting agreement, dated May 28, 2019, with Barry Berler, our chief technology officer. Under the agreement. Mr.
Berler was entitled to compensation of $10,000 per month. The agreement had a term of five years commencing June 1, 2019. In December
2020, we entered into a new consulting agreement with Mr. Berler, under which Mr. Berler is entitled to compensation of $18,000 per month
and provides for an annual bonus in the target amount of $216,000, commensurate with the Company’s results and subject to the approval
of the board. Mr. Berler also received options: a) in 2021, to purchase 38,571 shares of common stock with an exercise price of $7.00
per share, vesting over 3 years and b) in 2022, to purchase 50,000 shares of common stock with an exercise price of $1.21 per share vesting
over 2 years. The agreement can be terminated by either party for any reason upon 90 days’ written notice.
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 $1.21, vesting over 2 years. The agreement
can be terminated by either party for any reason upon 90 days’ written notice.
Compensation
of Directors
The
following table sets forth compensation we paid to our directors during the year ended December 31, 2022 (excluding compensation under
the Summary Compensation table above).
| |
Fees Earned or Paid in Cash | | |
Stock Awards | | |
Option Awards | | |
All Other Compensation | | |
Total | |
Name | |
($) | | |
($) | | |
($) | | |
($) | | |
($) | |
Timothy J. Ruemler (1) | |
| 26,000 | | |
| - | | |
| 8,018 | | |
| - | | |
| 34,018 | |
Paul K. Danner (1,4) | |
| 28,000 | | |
| - | | |
| 8,018 | | |
| 2,400- | | |
| 38,418 | |
Dr Soren Bo. Christiansen (2,4) | |
| 44,000 | | |
| - | | |
| 12,026 | | |
| 25,000- | | |
| 81,026 | |
Brenda Simpson (3) | |
| 14,000 | | |
| - | | |
| 8,018 | | |
| - | | |
| 22,018 | |
Jason Monroe (3) | |
| 17,500 | | |
| - | | |
| 8,018 | | |
| | | |
| 22,018 | |
(1) |
Appointed as Directors
in September 2021 |
(2) |
Served as CEO and Chairman
of the Board through September 15, 2021. Effective September 16, 2021, serves as Co-Chairman of the Board. |
(3) |
Appointed as Directors
in April 2022 |
(4) |
Non-director services
performed |
Outstanding
Equity Awards at Fiscal Year-End
The
following table discloses information regarding outstanding equity awards granted or accrued as of December 31, 2022, 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 | |
| 38,848 | | |
| 31,152 | | |
| 1.21 | | |
5/2/2027 | |
| | | |
| | |
| |
| 65,346 | | |
| 48,939 | | |
| 7.00 | | |
9/9/2026 | |
| - | | |
| - | |
| |
| | | |
| | | |
| | | |
| |
| | | |
| - | |
Alan R. Blackman | |
| 27,749 | | |
| 22,251 | | |
| 1.21 | | |
5/2/2027 | |
| | | |
| | |
| |
| 5,143 | | |
| | | |
| 7.00 | | |
9/30/2026 | |
| - | | |
| - | |
| |
| 38,571 | | |
| | | |
| 7.00 | | |
1/1/2026 | |
| - | | |
| - | |
| |
| | | |
| | | |
| | | |
| |
| | | |
| | |
Barry B. Berler | |
| 27,749 | | |
| 22,251 | | |
| 1.21 | | |
5/2/2027 | |
| | | |
| | |
| |
| 5,143 | | |
| | | |
| 7.00 | | |
9/30/2026 | |
| - | | |
| - | |
| |
| 38,571 | | |
| | | |
| 7.00 | | |
1/1/2026 | |
| - | | |
| - | |
| |
| | | |
| | | |
| | | |
| |
| | | |
| | |
Andrew R. Crescenzo | |
| 8,325 | | |
| 6,675 | | |
| 1.21 | | |
5/2/2027 | |
| | | |
| | |
| |
| 15,089 | | |
| | | |
| 7.00 | | |
9/30/2026 | |
| - | | |
| - | |
| |
| 7,143 | | |
| | | |
| 4.37 | | |
12/31/2024 | |
| - | | |
| - | |
| |
| 14,285 | | |
| | | |
| 4.37 | | |
10/1//2025 | |
| - | | |
| - | |
Equity
Incentive Plan
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.
On
January 25, 2023, the Company’s Board of Directors adopted the 2023 Equity Incentive Plan (the “2023 Plan”). The 2023
Plan provides for the issuance of up to 1,400,000 options and/or shares of restricted stock to be available for issuance to officers,
directors, employees and consultants. The 2023 plan will be submitted to the Company’s shareholders for approval.
On January 25, 2023, the Company granted five-year options (the “Options”)
to purchase a total of 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. Of the Options granted, Options to purchase
an aggregate of 495,000 shares of Common Stock were issued to executive officers Options to purchase an aggregate of 455,000 shares of
Common Stock were issued to directors and Options to purchase an aggregate of 75,000 shares of Common Stock to employees and a consultant.
A
copy of the 2023 Plan was filed as Exhibit 10.1 to the Current Report on Form 8-K filed on January 27, 2023, and is also incorporated
herein as Exhibit 10.33.
CERTAIN
RELATIONSHIPS AND RELATED PARTY 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, 2022 and December 31, 2021, accounts payable and accrued liabilities include $105,667 and $59,375, respectively,
payable to officers and directors of the Company. The amounts are unsecured, non-interest bearing and are due on demand.
In
connection with the purchase of certain intellectual property in July 2017, Barry Berler, our chief technology officer, and Alan R. Blackman,
our chief investment officer and chief operating officer, entered into a royalty agreement which provided that Barry Berler would 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 date the payment will be due 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.
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 prospectus 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.
PRINCIPAL
STOCKHOLDERS
The following table sets forth
certain information, as of March 27, 2023, 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 11,665,936 shares of common stock outstanding as of March 27, 2023. 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 March 27, 2023. 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 | |
Number of shares
of common stock beneficially owned | | |
Percentage of
common stock beneficially owned | |
Directors and Executive Officers: | |
| | | |
| | |
Robert M. Hayes (1) | |
| 308,631 | | |
| 2.6 | |
Alan R. Blackman (2) | |
| 879,059 | | |
| 7.5 | |
Andrew R. Crescenzo (3) | |
| 66,975 | | |
| * | |
Dr. Soren Bo Christiansen (4) | |
| 395,235 | | |
| 3.3 | |
Paul K. Danner (5) | |
| 65,685 | | |
| * | |
Timothy J. Ruemler (6) | |
| 1,107,649 | | |
| 9.3 | |
Brenda Baird Simpson (7) | |
| 40,633 | | |
| * | |
Jason Monroe (8) | |
| 43,390 | | |
| * | |
All Directors and Officers as a Group (8 persons) | |
| 2,907,258 | | |
| 23 | |
(1) |
Represents 246,949 shares underlying options. |
|
|
(2) |
Includes 262,286 shares owned by spouse and 115,630 shares underlying
options. Mr. Blackman also owns our 1 outstanding share of Series A Preferred Stock, which will provide him with 29.5% of the voting
power of our stockholders with respect to the election of directors. |
|
|
(3) |
Includes 66,975 shares underlying options. |
|
|
(4) |
Includes 238,093 shares underlying options. |
|
|
(5) |
Includes 65,585 shares underlying options. |
|
|
(6) |
Includes 208,443 shares underlying options. |
|
|
(7) |
Includes 40,633 shares underlying options. |
|
|
(8) |
Includes 40,633 shares underlying options. |
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 co-chairman and chief operating officer.
Upon
completion of this offering, 11,656,936 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; and |
|
● |
2,248,521
shares underlying warrants offered by the selling stockholders per this offering. |
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 prospectus 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 $1.56. 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 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.
Selling
Stockholders’ Warrants
On
February 1, 2023, 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 “Selling Stockholders’ Warrants” or “SS Warrants”) 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.
The
following summary of certain terms and provisions of the SS 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 prospectus is a part. Prospective investors should carefully review
the terms and provisions set forth in the form of Warrant.
Exercisability.
The SS 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 SS 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 SS
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 SS 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 SS 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 SS 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 SS 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 SS
Warrants is $1.56. 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 SS
Warrants.
Transferability.
Subject to applicable laws, the SS Warrants may be offered for sale, sold, transferred or
assigned without our consent.
Warrant
Agent. The SS Warrants will be issued in registered form under a warrant agency agreement
between VStock Transfer LLC, as warrant agent, and us. The SS 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 SS 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 an SS Warrants does not have the rights or privileges of a holder of
our common stock, including any voting rights, until the holder exercises the SS Warrants.
Governing
Law. The SS Warrants and the warrant agency agreement are governed by New York law.
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.
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 not 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 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.
Transfer
Agent and Registrar
VStock
Transfer LLC is transfer agent and registrar for our common stock.
Limitations
of Liability and Indemnification
Our
articles of incorporation and bylaws limit the liability of our officers and directors and provide that we will indemnify our officers
and directors, in each case, to the fullest extent permitted by the Nevada Revised Statutes, or the NRS.
NRS
Section 78.7502 provides that a corporation shall indemnify any director, officer, employee or agent of a corporation against expenses,
including attorneys’ fees, actually and reasonably incurred by him in connection with any defense to the extent that a director,
officer, employee or agent of a corporation has been successful on the merits or otherwise in defense of any action, suit or proceeding
referred to in Section 78.7502(1) or 78.7502(2), or in defense of any claim, issue or matter therein.
NRS
78.7502(1) provides that a corporation may indemnify any person who was or is a party or is threatened to be made a party to any threatened,
pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, except an action by or in
the right of the corporation, by reason of the fact that he is or was a director, officer, employee or agent of the corporation, or is
or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses, including attorneys’ fees, judgments, fines and amounts paid in settlement
actually and reasonably incurred by him in connection with the action, suit or proceeding if he: (a) is not liable pursuant to NRS 78.138;
or (b) acted in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the corporation,
and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful.
NRS
Section 78.7502(2) provides that a corporation may indemnify any person who was or is a party or is threatened to be made a party to
any threatened, pending or completed action or suit by or in the right of the corporation to procure a judgment in its favor by reason
of the fact that he is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation
as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against expenses,
including amounts paid in settlement and attorneys’ fees actually and reasonably incurred by him in connection with the defense
or settlement of the action or suit if he: (a) is not liable pursuant to NRS 78.138; or (b) acted in good faith and in a manner which
he reasonably believed to be in or not opposed to the best interests of the corporation. Indemnification may not be made for any claim,
issue or matter as to which such a person has been adjudged by a court of competent jurisdiction, after exhaustion of all appeals there
from, to be liable to the corporation or for amounts paid in settlement to the corporation, unless and only to the extent that the court
in which the action or suit was brought or other court of competent jurisdiction determines upon application that in view of all the
circumstances of the case, the person is fairly and reasonably entitled to indemnity for such expenses as the court deems proper.
NRS
Section 78.747 provides that except as otherwise provided by specific statute, no director or officer of a corporation is individually
liable for a debt or liability of the corporation, unless the director or officer acts as the alter ego of the corporation. The court
as a matter of law must determine the question of whether a director or officer acts as the alter ego of a corporation.
The
indemnification provisions in our bylaws may discourage stockholders from bringing a lawsuit against directors for breach of their fiduciary
duties. They may also reduce the likelihood of derivative litigation against directors and officers, even though an action, if successful,
might provide a benefit to us and our stockholders. Our results of operations and financial condition may be harmed to the extent we
pay the costs of settlement and damage awards against directors and officers pursuant to these indemnification provisions.
At
present, there is no pending litigation or proceeding involving any of our directors or officers as to which indemnification is required
or permitted, and we are not aware of any threatened litigation or proceeding that may result in a claim for indemnification.
Listing
We
have applied to list our common stock and warrants on the Nasdaq Capital Market under the symbols “SSTS” and “SSTSW”,
respectively.
Disclosure
of Commission Position on Indemnification for Securities Act Liabilities
Insofar
as indemnification for liabilities under the Securities Act may be permitted to officers, directors or persons controlling the Company
pursuant to the foregoing provisions, the Company has been informed that is it is the opinion of the SEC that such indemnification is
against public policy as expressed in such Securities Act and is, therefore, unenforceable.
PRIVATE
PLACEMENT OF SHARES OF COMMON STOCK AND WARRANTS
No
unregistered equity securities were issued during the April 19, 2022 through December 31, 2022 except for the 235,000 shares issued in
connection with services provided to the Company.
PIPE
Agreement
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.
The
PIPE Agreement, the Registration Rights Agreement, the Placement Agent Agreement and the Warrant are filed as Exhibits 10.1, 10.2, 10.3
and 10.4, respectively, to the Current Report on Form 8-K filed on February 6, 2023, and also incorporated herein as Exhibits 10.29,
10.30, 10.31 and 10.32, respectively.
SELLING
STOCKHOLDERS
The
common stock being offered by the selling stockholders are those previously issued to the investor in the February 2023 Private Placement
and those issuable to the investor upon exercise of the warrants. For additional information regarding the issuances of those shares
of common stock and warrants, see “Private Placement of Shares of Common Stock and Warrants” above. We are registering the
shares of common stock in order to permit the selling stockholders to offer the shares for resale from time to time. Except for the ownership
of the shares of common stock and warrants, the selling stockholders have not had any material relationship with us within the past 2
years.
The
table below lists the selling stockholders and other information regarding the beneficial ownership of the shares of common stock by
the selling stockholders. The second column lists the number of shares of common stock beneficially owned each of the by the selling
stockholders, based on its ownership of the shares of common stock and warrants, as of April 10, 2023, assuming exercise of the
warrants held by the selling stockholders on that date, without regard to any limitations on exercises. As of April 10, 2023,
11,656,936 shares of the Company’s’ common stock were issued and outstanding.
The
third column lists the shares of common stock being offered by this prospectus by the selling stockholders.
This
prospectus generally covers the resale of the sum of (i) the number of shares of common stock issued to the investor in the February
2023 Private Placement as described above and (ii) the maximum number of shares of common stock issuable upon exercise of the related
warrants, determined as if the outstanding warrants were exercised in full as of the trading day immediately preceding the date this
registration statement was initially filed with the SEC, each as of the trading day immediately preceding the applicable date of determination
and all subject to adjustment as provided in the registration right agreement, without regard to any limitations on the exercise of the
warrants. The fourth column assumes the sale of all of the shares offered by the selling stockholders pursuant to this prospectus.
Under
the terms of the warrants, the investor may not exercise the warrants to the extent such exercise would cause such investor, together
with its affiliates and attribution parties, to beneficially own a number of shares of common stock which would exceed 4.99% of our then
outstanding common stock following such exercise, excluding for purposes of such determination shares of common stock issuable upon exercise
of the warrants which have not been exercised (the “Beneficial Ownership Limitation”). The number of shares in the second
column does not reflect this limitation. The selling stockholder may sell all, some or none of their shares in this offering. See “Plan
of Distribution.”
Name of Selling Stockholder | |
Number of shares of Common Stock Owned Prior to Offering | | |
Maximum Number of shares of Common Stock to be Sold Pursuant to this Prospectus | | |
Number of shares of Common Stock Owned After Offering | |
Walleye Opportunities Master Fund Ltd. (1) | |
| 1,183,432 | | |
| 1,183,432 | | |
| 0 | |
Iroquois Master Fund Ltd. (2) | |
| 256,567 | | |
| 82,840 | | |
| 173,727 | |
Intracoastal Capital LLC (3) | |
| 291,844 | | |
| 177,514 | | |
| 114,330 | |
Hudson Bay Master Fund Ltd. (4) | |
| 1,061,716 | | |
| 591,716 | | |
| 470,000 | |
Evergreen Capital Management LLC (5) | |
| 548,334 | | |
| 118,334 | | |
| 430,000 | |
Empery Asset Master, LTD. (6) | |
| 1,307,564 | | |
| 701,742 | | |
| 605,822 | |
Empery Tax Efficient, LP (7) | |
| 412,385 | | |
| 253,208 | | |
| 159,177 | |
Empery Tax Efficient II, LP (8) | |
| 269,666 | | |
| 204,814 | | |
| 64,852 | |
District 2 Capital Fund LP (9) | |
| 1,125,339 | | |
| 591,716 | | |
| 533,623 | |
Bigger Capital Fund, LP (10) | |
| 1,120,539 | | |
| 591,716 | | |
| 528,823 | |
(1) |
Includes 591,716 shares of common stock underlying warrants without giving effect to limitations on beneficial ownership set forth therein. The shares may be deemed to be indirectly beneficially owned by William England, as the authorized signatory of Walleye Opportunities Master Fund Ltd. |
(2) |
Includes 41,420 shares of common stock underlying warrants without
giving effect to limitations on beneficial ownership set forth therein. The shares may be deemed to be indirectly beneficially owned
by Kimberly Page, as the managing member of Iroquois Capital Management, LLC, the investment manager of Iroquois Master Fund Ltd.
The affiliated Iroquois Capital Investment Group, LLC owns 18,400 warrants of STSSW. |
(3) |
Includes 88,757 shares of common stock underlying warrants without
giving effect to limitations on beneficial ownership set forth therein. The shares may be deemed to be indirectly beneficially owned
by Keith Goodman, as the authorized signatory of Intracoastal Capital LLC (“Intracoastal”). Mitchell P. Kopin and
Daniel B. Asher, each of whom are managers of Intracoastal have shared voting control and investment discretion over the securities
reported herein that are held by Intracoastal. As a result, each of Mr. Kopin and Mr. Asher may be deemed to have beneficial ownership
(as determined under Section 13(d) of the Exchange Act) of the securities reported herein that are held by Intracoastal. |
(4) |
Includes 295,858 shares of common stock underlying warrants without
giving effect to limitations on beneficial ownership set forth therein. The shares may be deemed to be indirectly beneficially owned
by Richard Allison, as the authorized signatory of Hudson Bay Master Fund Ltd (“Hudson Bay Fund”). Hudson Bay Capital
Management LP, the investment manager of Hudson Bay Fund, has voting and investment power over these securities. Sander Gerber is
the managing member of Hudson Bay Capital GP LLC, which is the general partner of Hudson Bay Capital Management LP. Each of Hudson
Bay Fund and Sander Gerber disclaims beneficial ownership over these securities. |
(5) |
Includes 59,172 shares of common stock underlying warrants without giving effect to limitations on beneficial ownership set forth therein. The shares may be deemed to be indirectly beneficially owned by Jeffrey Pazdro, as the manager and authorized signatory of Evergreen Capital Management LLC. |
(6) |
Includes 350,871 shares of common stock underlying warrants without
giving effect to limitations on beneficial ownership set forth therein. Empery Asset Management LP, the authorized agent of Empery
Asset Master Ltd (“EAM”), has discretionary authority to vote and dispose of the shares held by EAM and may be deemed
to be the beneficial owner of these shares. Martin Hoe and Ryan Lane, in their capacity as investment managers of Empery Asset Management
LP, may also be deemed to have investment discretion and voting power over the shares held by EAM. EAM, Mr. Hoe and Mr. Lane each
disclaim any beneficial ownership of these shares. |
(7) |
Includes 126,604 shares of common stock underlying warrants without
giving effect to limitations on beneficial ownership set forth therein. Empery Asset Management LP, the authorized agent of Empery
Tax Efficient, LP (“ETE”), has discretionary authority to vote and dispose of the shares held by ETE and may be deemed
to be the beneficial owner of these shares. Martin Hoe and Ryan Lane, in their capacity as investment managers of Empery Asset Management
LP, may also be deemed to have investment discretion and voting power over the shares held by ETE. ETE, Mr. Hoe and Mr. Lane each
disclaim any beneficial ownership of these shares. |
(8) |
Includes 102,407 shares of
common stock underlying warrants without giving effect to limitations on beneficial ownership set forth therein. Empery Asset Management
LP, the authorized agent of Empery Tax Efficient II, LP (“ETE II”), has discretionary authority to vote and dispose of
the shares held by ETE II and may be deemed to be the beneficial owner of these shares. Martin Hoe and Ryan Lane, in their capacity
as investment managers of Empery Asset Management LP, may also be deemed to have investment discretion and voting power over the
shares held by ETE II. ETE II, Mr. Hoe and Mr. Lane each disclaim any beneficial ownership of these shares. |
(9) |
Includes 295,858 shares of common stock underlying warrants without giving effect to limitations on beneficial ownership set forth therein. The shares may be deemed to be indirectly beneficially owned by Michael Bigger, as the managing member of District 2 Capital Fund LP. |
(10) |
Includes 295,858 shares of common stock underlying warrants without giving effect to limitations on beneficial ownership set forth therein. The shares may be deemed to be indirectly beneficially owned by Michael Bigger, as the managing member of Bigger Capital Fund, LP. |
PLAN
OF DISTRIBUTION
Each
selling stockholder of the securities and any of their pledgees, assignees and successors-in-interest may, from time to time, sell any
or all of their securities covered hereby on the principal Trading Market or any other stock exchange, market or trading facility on
which the securities are traded or in private transactions. These sales may be at fixed or negotiated prices. A selling stockholder may
use any one or more of the following methods when selling securities:
|
● |
ordinary
brokerage transactions and transactions in which the broker dealer solicits purchasers; |
|
|
|
|
● |
block
trades in which the broker dealer will attempt to sell the securities as agent but may position and resell a portion of the
block as principal to facilitate the transaction; |
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● |
purchases
by a broker dealer as principal and resale by the broker dealer for its account; |
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● |
an
exchange distribution in accordance with the rules of the applicable exchange; |
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● |
privately
negotiated transactions; |
|
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● |
settlement
of short sales; |
|
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● |
in
transactions through broker dealers that agree with the selling stockholders to sell a specified number of such securities
at a stipulated price per security; |
|
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● |
through
the writing or settlement of options or other hedging transactions, whether through an options exchange or otherwise; |
|
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● |
a
combination of any such methods of sale; or |
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● |
any
other method permitted pursuant to applicable law. |
The
selling stockholders may also sell securities under Rule 144 or any other exemption from registration under the Securities Act, if available,
rather than under this prospectus.
Broker
dealers engaged by the selling stockholders may arrange for other brokers dealers to participate in sales. Broker dealers may receive
commissions or discounts from the selling stockholders (or, if any broker dealer acts as agent for the purchaser of securities, from
the purchaser) in amounts to be negotiated, but, except as set forth in a supplement to this prospectus, in the case of an agency transaction
not in excess of a customary brokerage commission in compliance with FINRA Rule 2440; and in the case of a principal transaction a markup
or markdown in compliance with FINRA IM-2440.
In
connection with the sale of the securities or interests therein, the selling stockholders may enter into hedging transactions with broker-dealers
or other financial institutions, which may in turn engage in short sales of the securities in the course of hedging the positions they
assume. The selling stockholders may also sell securities short and deliver these securities to close out their short positions, or loan
or pledge the securities to broker-dealers that in turn may sell these securities. The selling stockholders may also enter into option
or other transactions with broker-dealers or other financial institutions or create one or more derivative securities which require the
delivery to such broker-dealer or other financial institution of securities offered by this prospectus, which securities such broker-dealer
or other financial institution may resell pursuant to this prospectus (as supplemented or amended to reflect such transaction).
The
selling stockholders and any broker-dealers or agents that are involved in selling the securities may be deemed to be “underwriters”
within the meaning of the Securities Act in connection with such sales. In such event, any commissions received by such broker-dealers
or agents and any profit on the resale of the securities purchased by them may be deemed to be underwriting commissions or discounts
under the Securities Act. Each selling stockholder has informed the Company that it does not have any written or oral agreement or understanding,
directly or indirectly, with any person to distribute the securities.
The
Company is required to pay certain fees and expenses incurred by the Company incident to the registration of the securities. The Company
has agreed to indemnify the selling stockholders against certain losses, claims, damages and liabilities, including liabilities under
the Securities Act.
We
agreed to keep this registration statement effective until the earlier of (i) the date on which the securities may be resold by the selling
stockholders without registration and without regard to any volume or manner-of-sale limitations by reason of Rule 144, without the requirement
for the Company to be in compliance with the current public information under Rule 144 under the Securities Act or any other rule of
similar effect or (ii) all of the securities have been sold pursuant to this prospectus or Rule 144 under the Securities Act or any other
rule of similar effect. The resale securities will be sold only through registered or licensed brokers or dealers if required under applicable
state securities laws. In addition, in certain states, the resale securities covered hereby may not be sold unless they have been registered
or qualified for sale in the applicable state or an exemption from the registration or qualification requirement is available and is
complied with.
Under
applicable rules and regulations under the Securities Act, any person engaged in the distribution of the resale securities may not simultaneously
engage in market making activities with respect to the common stock for the applicable restricted period, as defined in Regulation M,
prior to the commencement of the distribution. In addition, the selling stockholders will be subject to applicable provisions of the
Securities Act and the rules and regulations thereunder, including Regulation M, which may limit the timing of purchases and sales of
the common stock by the selling stockholders or any other person. We will make copies of this prospectus available to the selling stockholders
and have informed them of the need to deliver a copy of this prospectus to each purchaser at or prior to the time of the sale (including
by compliance with Rule 172 under the Securities Act).
LEGAL
MATTERS
The
validity of the securities offered by this prospectus will be passed upon for us by Sichenzia Ross Ference LLP, New York, New York.
EXPERTS
The
financial statements included in this registration statement as of December 31, 2022 and 2021, and for each of the years
in the two-year period 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.
WHERE
YOU CAN FIND ADDITIONAL INFORMATION
We
have filed with the SEC a registration statement on Form S-1 under the Securities Act with respect to the securities offered by this
prospectus. This prospectus, which constitutes a part of the registration statement, does not contain all of the information set forth
in the registration statement, some of which is contained in exhibits to the registration statement as permitted by the rules and regulations
of the SEC. For further information with respect to us and our securities, we refer you to the registration statement, including the
exhibits filed as a part of the registration statement. Statements contained in this prospectus concerning the contents of any contract
or any other document are not necessarily complete. If a contract or document has been filed as an exhibit to the registration statement,
please see the copy of the contract or document that has been filed. Each statement in this prospectus relating to a contract or document
filed as an exhibit is qualified in all respects by the filed exhibit. The SEC maintains an Internet website that contains reports, proxy
statements and other information about issuers, like us, that file electronically with the SEC. The address of that website is www.sec.gov.
We
are subject to the information and reporting requirements of the Exchange Act and, in accordance with this law, will file periodic reports,
proxy statements and other information with the SEC. We also maintain a website at sharpstechnology.com. Upon completion of this offering,
you may access these materials free of charge as soon as reasonably practicable after they are electronically filed with, or furnished
to, the SEC. Information contained on our website is not a part of this prospectus and the inclusion of our website address in this prospectus
is an inactive textual reference only.
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.
/s/
Manning Elliott LLP
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
The
accompanying notes are an integral part of these financial statements.
SHARPS
TECHNOLOGY, INC.
CONSOLIDATED
STATEMENTS OF OPERATIONS
The
accompanying notes are an integral part of these financial statements.
SHARPS
TECHNOLOGY, INC.
CONSOLIDATED
STATEMENTS OF COMPREHENSIVE LOSS
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, 2022 AND 2021
The
accompanying notes are an integral part of these financial statements.
SHARPS
TECHNOLOGY, INC.
CONSOLIDATED
STATEMENTS OF CASH FLOWS
The
accompanying notes are an integral part of these financial statements.
SHARPS
TECHNOLOGY, INC.
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR
YEARS ENDED DECEMBER 31, 2022 AND 2021
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 subsidiary,
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.
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, 2022, 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.
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, 2022 and 2021, 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, 2022 AND 2021
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 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 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.
There
were no impairment losses recognized during the years ended December 31, 2022 and 2021.
SHARPS
TECHNOLOGY, INC.
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2022 AND 2021
Note
2. Summary of Significant Accounting Policies (continued)
Goodwill
and Purchased Identified Intangible Assets
Goodwill
When
applicable, goodwill will be recorded as the difference, if any, between the aggregate consideration paid for an acquisition and the
fair value of the net tangible and identified intangible assets acquired under a business combination. Goodwill also includes acquired
assembled workforce, which does not qualify as an identifiable intangible asset. The Company reviews impairment of goodwill annually
in the third quarter, or more frequently if events or circumstances indicate that the goodwill might be impaired. The Company first assesses
qualitative factors to determine whether it is necessary to perform the quantitative goodwill impairment test. If, after assessing the
totality of events or circumstances, the Company determines that it is not more likely than not that the fair value of a reporting unit
is less than its carrying amount, then the quantitative goodwill impairment test is unnecessary. If, based on the qualitative assessment,
it is determined that it is more likely than not that the fair value of a reporting unit is less than its carrying amount, then the Company
proceeds to perform the quantitative goodwill impairment test. The Company first determines the fair value of a reporting unit using
weighted results derived from an income approach and a market approach. The income approach is estimated through the discounted cash
flow method based on assumptions about future conditions such as future revenue growth rates, new product and technology introductions,
gross margins, operating expenses, discount rates, future economic and market conditions, and other assumptions. The market approach
estimates the fair value of the Company’s equity by utilizing the market comparable method which is based on revenue multiples
from comparable companies in similar lines of business. The Company then compares the derived fair value of a reporting unit with its
carrying amount. If the carrying value of a reporting unit exceeds its fair value, an impairment loss will be recognized in an amount
equal to that excess, limited to the total amount of goodwill allocated to that reporting unit.
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 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.
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.
SHARPS
TECHNOLOGY, INC.
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2022 AND 2021
Note
2. Summary of Significant Accounting Policies (continued)
At
their issuance date and as of December 31, 2022, the 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 consolidated statements of operations and comprehensive loss.
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 and comprehensive loss.
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, 2022 and 2021. 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 statement of operations and comprehensive loss. 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 year. 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 at December 31, 2022, there were 10,405,916 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 antidilutive 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 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.
SHARPS
TECHNOLOGY, INC.
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2022 AND 2021
Note
2. Summary of Significant Accounting Policies (continued)
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
In
March 2020, the FASB issued ASC Topic 848, Reference Rate Reform. ASC Topic 848 provides relief for impacted areas as it relates
to impending reference rate reform. ASC Topic 848 contains optional expedients and exceptions for applying GAAP to debt arrangements,
contracts, hedging relationships, and other areas or transactions that are impacted by reference rate reform. This guidance is effective
upon issuance for all entities and elections of certain optional expedients are required to apply the provisions of the guidance.
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
continues to assess all potential impact of the standard and will disclose the nature and reason for any elections that the Company makes.
The
Company does not expect the adoption of any accounting pronouncements to have a material impact on the 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 December 31, 2022 and 2021:
Schedule of Inventories
|
|
December 31, 2022 |
|
|
December 31, 2021 |
|
Raw materials |
|
$ |
106,088 |
|
|
$ |
121,994 |
|
Work in process |
|
|
49,144 |
|
|
|
- |
|
Finished goods |
|
|
30,572 |
|
|
|
- |
|
Total |
|
$ |
185,804 |
|
|
$ |
121,994 |
|
Note
4. Fixed Assets
Fixed
asset, net, as of December 31, 2022 and 2021, are summarized as follows:
Schedule of Property, Plant and Equipment
| |
December 31, 2022 | | |
December 31, 2021 | |
| |
| | |
| |
Land | |
$ | 242,240 | | |
$ | - | |
Building | |
| 2,824,481 | | |
| - | |
Machinery and Equipment | |
| 4,601,293 | | |
| 3,778,766 | |
Website | |
| 16,600 | | |
| 16,600 | |
Fixed asset, gross | |
| 7,684,614 | | |
| 3,795,366 | |
Less: accumulated depreciation | |
| (679,724 | ) | |
| (32,034 | ) |
Fixed asset, net | |
$ | 7,004,890 | | |
$ | 3,763,332 | |
Depreciation
expense of fixed assets for the year ended December 31, 2022 and 2021 was $647,690
and $28,699,
respectively. Substantially, all of the Company’s fixed assets are located at the Company’s Hungary location.
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, 2022, the Company has $100,000 in remaining payments for machinery purchased,
which is included in accounts payable.
SHARPS
TECHNOLOGY, INC.
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2022 AND 2021
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 and 2021, the Company had remitted $594,000 and $770,000, 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 and comprehensive loss as the activities at the facility in 2022 and 2021 were related
to design and testing of the Company’s products.
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 and comprehensive loss 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:
Schedule of Fair Value of the 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 December 31, 2022 and 2021 are summarized as follows:
Schedule of Other Assets
| |
December 31, | | |
December 31, | |
| |
2022 | | |
2021 | |
Acquisition (see Note 5) | |
$ | - | | |
$ | 472,701 | |
Intangibles, net | |
| 62,480 | | |
| - | |
Deposits or advance payments on machinery, molds and components (see Note 15) | |
| 336,466 | | |
| - | |
Other | |
| 12,370 | | |
| 57,162 | |
Other assets | |
$ | 411,316 | | |
$ | 529,863 | |
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, 2022 was $6,882.
SHARPS
TECHNOLOGY, INC.
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2022 AND 2021
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.
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
(2021 - $nil)
and accreted interest of $1,299,895
(2021 - $nil)
and repaid the $2,000,000
in Notes with proceeds from the IPO that closed on April 19, 2022.
SHARPS
TECHNOLOGY, INC.
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2022 AND 2021
Note
7. Note Purchase Agreement (continued)
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. 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. During the year ended December 31, 2022, the Company recorded a FMV income adjustment of $554,412
to reduce the Warrant liability from $585,000
at December 31, 2021 to $30,588
at December 31, 2022. (See Notes 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
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.
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)
During
2021, the Company completed stock subscriptions through a private placement for 487,204 shares of common stock at $7.00 per share. The
Company received cash proceeds of $3,377,929 and had a subscription receivable of $32,500 which was received in January 2022. In addition,
the Company issued 71,429 shares with an estimated fair value of $500,000 to a vendor for engineering and design services provided for
equipment and for partial payments for equipment begin manufactured (See Note 4), 28,571 shares related to an acquisition (See Note 5)
and 2,857 shares for services with an estimated fair value of $20,000.
SHARPS
TECHNOLOGY, INC.
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2022 AND 2021
Note
8. Stockholders’ Equity (continued)
Warrants
|
a) |
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 the IPO, the liability was $5,778,750
and at December 31, 2022 the liability was $1,121,250.
During year ended December 31, 2022, the Company recorded a FMV gain adjustment of $4,657,500,
(See Note 10). |
|
|
|
|
b) |
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 the issuance date, the liability was $157,647 During the year ended December 31, 2022,
the Company recorded a FMV gain of 127,058. (See Note 10) |
|
|
|
|
c) |
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.
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 and comprehensive loss. (See Notes 7 and 8)
The
Warrant liability at December 31, 2022 was as follows:
Schedule
of Warrant Liability
| |
| | |
Note Warrants | |
$ | 30,588 | |
Trading and Overallotment Warrants | |
| 1,121,250 | |
Total | |
$ | 1,151,838 | |
Warrant liability | |
$ | 1,151,838 | |
The
Warrants outstanding at December 31, 2022 were as follows:
Schedule
of Warrant Outstanding
| |
| | |
Note warrants | |
| 235,295 | |
Trading and Overallotment Warrants | |
| 8,812,500 | |
Total | |
| 9,047,795 | |
Warrant outstanding | |
| 9,047,795 | |
The
following table presents the changes in the Warrant liability of the Level 1 warrants issued on April 14, 2022, the effective date of
the IPO measured at fair value:
Schedule
of Changes in the Warrant Liability
| |
Total | |
| |
| |
FMV of Note Warrants, at issuance | |
$ | 157,647 | |
| |
| | |
FMV of Trading and Overallotment Warrants, at issuance | |
| 5,778,750 | |
| |
| | |
Change in fair value of warrant liability, issuance through December 31, 2022 | |
| (4,784,559 | ) |
| |
| | |
Fair Value at December 31, 2022 | |
$ | 1,151,838 | |
SHARPS
TECHNOLOGY, INC.
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2022 AND 2021
Note
11. Stock Options
A
summary of options granted and outstanding is presented below.
Schedule
of Stock Options Granted and Outstanding
| |
2022 | | |
2021 | |
| |
Options | | |
Weighted Average Exercise Price | | |
Options | | |
Weighted Average Exercise Price | |
Outstanding at Beginning of year | |
| 1,137,479 | | |
$ | 5.18 | | |
| 792,857 | | |
$ | 3.64 | |
Granted | |
| 367,500 | | |
| 1.63 | | |
| 511,764 | | |
| 7.00 | |
Cancelled | |
| (3,571 | ) | |
| (4.38 | ) | |
| (21,875 | ) | |
| (4.38 | ) |
Forfeited | |
| (143,286 | ) | |
$ | (3.77 | ) | |
| (145,157 | ) | |
$ | (2.57 | ) |
| |
| | | |
| | | |
| | | |
| | |
Outstanding at end of year | |
| 1,358,122 | | |
$ | 4.37 | | |
| 1,137,479 | | |
$ | 5.18 | |
| |
| | | |
| | | |
| | | |
| | |
Exercisable at end of year | |
| 1,132,861 | | |
$ | 4.59 | | |
| 825,847 | | |
$ | 5.38 | |
During
the years ended December 31, 2022 and 2021, the estimated weighted-average grant-date fair value of options granted was $1.63 per share
and $4.55 per share, respectively. As of December 31, 2022 and 2021, there was $475,097 and $1,260,990, respectively, of unrecognized
stock-based compensation related to unvested stock options, which is expected to be recognized over a weighted-average period sixteen
months as of December 31, 2022.
The
following table summarizes information about options outstanding at December 31, 2022:
Schedule
of Information About Options Outstanding
Exercise Prices | | |
Options Outstanding | | |
Aggregate Intrinsic Value | | |
Weighted Average Remaining Contractual Life | | |
Options Exercisable | | |
Aggregate Intrinsic Value on Exercisable Shares | |
| | |
| | |
| | |
| | |
| | |
| |
$ | 1.21 | | |
| 307,500 | | |
| - | | |
| 4.42 | | |
| 168,551 | | |
$ | - | |
$ | 1.39 | | |
| 10,000 | | |
| - | | |
| 4.67 | | |
| 10,000 | | |
$ | - | |
$ | 1.75 | | |
| 68,571 | | |
| - | | |
| .25 | | |
| 68,571 | | |
$ | - | |
$ | 2.80 | | |
| 141,429 | | |
| - | | |
| .50 | | |
| 141,429 | | |
$ | - | |
$ | 4.25 | | |
| 50,000 | | |
| - | | |
| 4.50 | | |
| 37,500 | | |
$ | - | |
$ | 4.38 | | |
| 244,286 | | |
| - | | |
| 2.25 | | |
| 244,286 | | |
$ | - | |
$ | 7.00 | | |
| 536,336 | | |
| - | | |
| 3.00 | | |
| 462,524 | | |
$ | - | |
The
aggregate intrinsic values of stock options outstanding and exercised December 31, 2022 were calculated as the difference between the
exercise price of the options and the fair value of the Company’s common stock on December 31, 2022.
In
2022 and 2021, the Company recognized stock-based compensation expense of $1,012,592, of which $915,796 and $96,795 was recorded in general
and administrative and research and development expenses, respectively and $1,195,819, of which $1,091,227 and $105,592 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) and in 2021, the
Company recorded stock-based charges relating to consideration for purchase of machinery of $253,337 (see Note 4) and relating to an
Acquisition for $122,701 (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:
Schedule
of Fair Value of Stock Option Awards
|
|
Year
Ended
December 31, 2022 |
|
|
Year
Ended
December 31, 2021 |
|
Expected
term (years) |
|
|
2.50
to 3.00 |
|
|
|
2.50
to 3.25 |
|
Expected
volatility |
|
|
100.81%
to 110.74 |
% |
|
|
97.26%
to 116.06 |
% |
Risk-free
interest rate |
|
|
2.90%
to 3.47 |
% |
|
|
0.18%
- .81 |
% |
Dividend
rate |
|
|
0 |
% |
|
|
0 |
% |
SHARPS
TECHNOLOGY, INC.
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEARS ENDED DECEMBER 31, 2022 AND 2021
Note
12. Income Taxes
A
reconciliation of the Federal statutory rate (28%) to the total effective rate applicable to income (loss) is as follows:
Schedule
of Reconciliation of Federal Statutory Rate to Total Effective Rate
| |
| | |
| |
| |
Year Ended | | |
Year Ended | |
| |
December 31, 2022 | | |
December 31,
2021 | |
| |
| | |
| |
Expected benefit at statutory federal tax rate | |
$ | (974,329 | ) | |
$ | (979,527 | ) |
Permanent differences – net | |
| (859,515 | ) | |
| - | |
State and local taxes, net of federal tax benefit | |
| (265,607 | ) | |
| (311,373 | ) |
Other | |
| (21,965 | ) | |
| (57,563 | ) |
Change in valuation allowance | |
| 2,121,416 | | |
| 1,348,463 | |
Income tax Expense (Benefit)
Total | |
$ | - | | |
$ | - | |
The
components of the Company’s deferred tax assets (liabilities) are as follows:
Schedule
of Components of Deferred tax Assets
| |
Year Ended December 31, 2022 | | |
Year Ended December 31, 2021 | |
Deferred tax assets (liabilities): | |
| | | |
| | |
Fixed assets | |
$ | (268,594 | ) | |
$ | 3,837 | |
Interest | |
| 62,310 | | |
| 46,361 | |
Research and development expenses | |
| 454,942 | | |
| - | |
Stock-based compensation | |
| 917,351 | | |
| 637,112 | |
Net operating losses - federal | |
| 2,898,411 | | |
| 1,687,053 | |
Net operating losses – state and local | |
| 921,350 | | |
| 536,282 | |
Net operating losses - foreign | |
| 37,686 | | |
| - | |
Research credit | |
| 28,985 | | |
| 28,985 | |
Deferred tax assets gross | |
| 5,052,441 | | |
| 2,939,630 | |
Less valuation allowance | |
| (5,244,441 | ) | |
| (2,939,630 | ) |
Net deferred tax liability | |
$ | (192,000 | ) | |
$ | - | |
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.
Note
13. Related Party Transactions and Balances
As
of December 31, 2022 and 2021, accounts payable and accrued liabilities include $105,667
and $59,375,
respectively, payable to officers and directors of the Company. The amounts are unsecured, non-interest bearing and are due on
demand (See Note 15).
SHARPS
TECHNOLOGY, INC.
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEAR ENDED DECEMBER 31, 2022 AND 2021
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.
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:
Schedule
of Assets and Liabilities Measured at Fair Value on Recurring Basis
| |
Level 1 | | |
Level 2 | | |
Level 3 | | |
Total | |
| |
Fair Value Measurements Using | | |
| |
| |
Level 1 | | |
Level 2 | | |
Level 3 | | |
Total | |
| |
| | |
| | |
| | |
| |
Assets | |
| | | |
| | | |
| | | |
| | |
Cash | |
$ | 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, 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).
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.
SHARPS
TECHNOLOGY, INC.
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE YEAR ENDED DECEMBER 31, 2022 AND 2021
Note
15. Commitments and Contingencies (continued)
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.
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.
Note
16. Subsequent Events
On
January 25, 2023, the Company granted five-year options (the “Options”) to purchase a total of 975,000
shares of the Company’s common stock, par
value $0.0001
per share (the “Common Stock”) to
its directors, executive officers, employee 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. Of the Options granted, Options to purchase an aggregate of 495,000
shares of Common Stock were issued to executive
officers Options to purchase an aggregate of 455,000
shares of Common Stock were issued to directors
and Options to purchase an aggregate of 75,000
shares of Common Stock to employees and a consultant.
On
January 25, 2023, the Company’s Board of Directors adopted the 2023 Equity Incentive Plan (the “2023 Plan”). The 2023
Plan provides for the issuance of up to 1,400,000
options and/or shares of restricted stock to
be available for issuance to officers, directors, employees and consultants. The 2023 Plan is subject to shareholder approval at
the annual meeting.
On
February 09, 2023, the Company, appointed Justin Paige, 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
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.
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.
PART
II
INFORMATION
NOT REQUIRED IN PROSPECTUS
Item
13. Other Expenses of Issuance and Distribution.
The
following table sets forth all expenses to be paid by the registrant in connection with the issuance and distribution of the securities
to be registered, other than underwriting discounts and commissions. All amounts shown are estimates except for the SEC registration
fee:
SEC registration fee | |
$ | 753.45 | |
Legal fees and expenses | |
$ | 50,000 | |
Accounting fees and expenses | |
$ | 13,000 | |
Placement agent non-accountable expense reimbursement | |
| | |
Miscellaneous fees and expenses | |
$ | | |
Total | |
$ | 63,753.45 | |
Item
14. Indemnification of Directors and Officers.
Our
articles of incorporation and bylaws limit the liability of our officers and directors and provide that we will indemnify our officers
and directors, in each case, to the fullest extent permitted by the Nevada Revised Statutes, or the NRS.
NRS
Section 78.7502 provides that a corporation shall indemnify any director, officer, employee or agent of a corporation against expenses,
including attorneys’ fees, actually and reasonably incurred by him in connection with any defense to the extent that a director,
officer, employee or agent of a corporation has been successful on the merits or otherwise in defense of any action, suit or proceeding
referred to in Section 78.7502(1) or 78.7502(2), or in defense of any claim, issue or matter therein.
NRS
78.7502(1) provides that a corporation may indemnify any person who was or is a party or is threatened to be made a party to any threatened,
pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, except an action by or in
the right of the corporation, by reason of the fact that he is or was a director, officer, employee or agent of the corporation, or is
or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses, including attorneys’ fees, judgments, fines and amounts paid in settlement
actually and reasonably incurred by him in connection with the action, suit or proceeding if he: (a) is not liable pursuant to NRS 78.138;
or (b) acted in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the corporation,
and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful.
NRS
Section 78.7502(2) provides that a corporation may indemnify any person who was or is a party or is threatened to be made a party to
any threatened, pending or completed action or suit by or in the right of the corporation to procure a judgment in its favor by reason
of the fact that he is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation
as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against expenses,
including amounts paid in settlement and attorneys’ fees actually and reasonably incurred by him in connection with the defense
or settlement of the action or suit if he: (a) is not liable pursuant to NRS 78.138; or (b) acted in good faith and in a manner which
he reasonably believed to be in or not opposed to the best interests of the corporation. Indemnification may not be made for any claim,
issue or matter as to which such a person has been adjudged by a court of competent jurisdiction, after exhaustion of all appeals there
from, to be liable to the corporation or for amounts paid in settlement to the corporation, unless and only to the extent that the court
in which the action or suit was brought or other court of competent jurisdiction determines upon application that in view of all the
circumstances of the case, the person is fairly and reasonably entitled to indemnity for such expenses as the court deems proper.
NRS
Section 78.747 provides that except as otherwise provided by specific statute, no director or officer of a corporation is individually
liable for a debt or liability of the corporation, unless the director or officer acts as the alter ego of the corporation. The court
as a matter of law must determine the question of whether a director or officer acts as the alter ego of a corporation.
Insofar
as indemnification for liabilities arising under the Securities Act may be permitted to the Registrant’s directors, officers and
controlling persons pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the Commission,
such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable.
Item
15. Recent Sale of Unregistered Securities
No
unregistered equity securities were issued during the period April 19, 2022 through March 27, 2023 except for the 235,000 shares issued
in connection with services provided to the Company.
During
2022, the Company issued 367,500 stock options at exercise prices ranging from $1.08 to $4.25.
During
2021, the Company completed stock subscriptions through a private placement for 487,204 shares of common stock at $7.00 per share. In
addition, the Company issued 71,429 shares to a vendor for engineering and design services provided for equipment and for partial payments
for equipment being manufactured, 28,571 shares related to an acquisition and 2,857 shares for services.
During
2021, the Company granted 511,764 stock options at an exercise price of $7.00, including 71,248 stock options granted to a vendor relating
to an equipment purchase, 114,285 stock options under an executive employment agreement and 35,714 options relating to an acquisition
agreement.
The
offers, sales, and issuances of the above securities were exempt from registration under the Securities Act by virtue of Section 4(a)(2)
of the Securities Act as transactions by an issuer not involving any public offering, or in reliance on Rule 701 promulgated under Section
3(b) of the Securities Act because the transactions were pursuant to compensatory benefit plans or contracts relating to compensation
as provided under Rule 701.
Item
16. Exhibits and Financial Statement Schedules.
Exhibits
See
the Exhibit Index immediately preceding the signature page hereto for a list of exhibits filed as part of this registration statement
on Form S-1, which Exhibit Index is incorporated herein by reference.
Financial
Statement Schedules
All
financial statement schedules are omitted because the information called for is not required or is shown either in the financial statements
or in the notes thereto.
Item
17. Undertakings.
The
undersigned registrant hereby undertakes to provide to the underwriters at the closing specified in the underwriting agreements certificates
in such denominations and registered in such names as required by the underwriters to permit prompt delivery to each purchaser.
Insofar
as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers, and controlling persons
of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer, or controlling person of the registrant in the successful defense of any action, suit, or proceeding)
is asserted by such director, officer, or controlling person in connection with the securities being registered, the registrant will,
unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the
final adjudication of such issue.
The
undersigned registrant hereby undertakes that:
|
(1) |
For
purposes of determining any liability under the Securities Act, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant
to Rule 424(b) (1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the
time it was declared effective. |
|
|
|
|
(2) |
For
the purpose of determining any liability under the Securities Act, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof. |
EXHIBIT
INDEX
Exhibit
Number |
|
Description |
3.1 |
|
Articles of Incorporation of Registrant (incorporated by reference to the Form S-1/ Amendment 4 filed on April 12, 2022; registration number 333-263715) |
3.2 |
|
Certificate of Designation of Series A Preferred Stock (incorporated by reference to the Form S-1/ Amendment 4 filed on April 12, 2022; registration number 333-263715) |
3.3 |
|
Bylaws of Registrant (incorporated by reference to the Form S-1/ Amendment 4 filed on April 12, 2022; registration number 333-263715) |
3.4 |
|
Certificate of Amendment to Designation, filed on December 22, 2022 (incorporated by reference to 8-K filed on December 22, 2022) |
5.1 |
|
Legal Opinion of Sichenzia Ross Ference LLP |
10.1 |
|
Asset/Share Purchase Agreement, dated June 10, 2020, among the Company, Safegard Medical (Hungary) Ktf,, Numan Holding Ltd, Cortrus Services SA and Latitude Investments Limited (incorporated by reference to the Form S-1/ Amendment 4 filed on April 12, 2022; registration number 333-263715) |
10.2 |
|
Amendment No. 1 to Asset/Share Purchase Agreement, dated June 24, 2020 (incorporated by reference to the Form S-1/ Amendment 4 filed on April 12, 2022; registration number 333-263715) |
10.3 |
|
Amendment No. 2 to Asset/Share Purchase Agreement, dated August 27, 2020 (incorporated by reference to the Form S-1/ Amendment 4 filed on April 12, 2022; registration number 333-263715) |
10.4 |
|
Amendment No. 3 to Asset/Share Purchase Agreement, dated October 28, 2020 (incorporated by reference to the Form S-1/ Amendment 4 filed on April 12, 2022; registration number 333-263715) |
10.5 |
|
Amendment No. 4 to Asset/Share Purchase Agreement, dated July 19, 2021 (incorporated by reference to the Form S-1/ Amendment 4 filed on April 12, 2022; registration number 333-263715) |
10.6 |
|
Amendment No. 5 to Asset/Share Purchase Agreement, dated February 28, 2022 (incorporated by reference to the Form S-1/ Amendment 4 filed on April 12, 2022; registration number 333-263715) |
10.7 |
|
Letter, dated September 23, 2021, from Numan Holding Ltd (incorporated by reference to the Form S-1/ Amendment 4 filed on April 12, 2022; registration number 333-263715) |
10.8 |
|
Employment Agreement, dated September 9, 2021, between the Company and Robert Hayes (incorporated by reference to the Form S-1/ Amendment 4 filed on April 12, 2022; registration number 333-263715) |
10.9 |
|
Consulting Agreement between the Company and Alan Blackman (incorporated by reference to the Form S-1/ Amendment 4 filed on April 12, 2022; registration number 333-263715) |
10.10 |
|
Amended Consulting Agreement, dated May 28, 2019, between the Company and Barry Berler (incorporated by reference to the Form S-1/ Amendment 4 filed on April 12, 2022; registration number 333-263715) |
10.11
|
|
Royalty Agreement, dated July 11, 2017, between Alan Blackman and Barry Berler (incorporated by reference to the Form S-1/ Amendment 4 filed on April 12, 2022; registration number 333-263715) |
10.12 |
|
Amendment to Royalty Agreement, dated September 4, 2018 (incorporated by reference to the Form S-1/ Amendment 4 filed on April 12, 2022; registration number 333-263715) |
10.13 |
|
Consulting Agreement, dated January 1, 2021, between the Company and Berry Berler (incorporated by reference to the Form S-1/ Amendment 4 filed on April 12, 2022; registration number 333-263715) |
10.14 |
|
Note Purchase Agreement, dated December 14, 2021, among the Company and the purchasers named therein (incorporated by reference to the Form S-1/ Amendment 4 filed on April 12, 2022; registration number 333-263715) |
10.15 |
|
Form of Note (incorporated by reference to the Form S-1/ Amendment 4 filed on April 12, 2022; registration number 333-263715) |
10.16 |
|
Security Agreement among the Company and the secured parties named therein (incorporated by reference to the Form S-1/ Amendment 4 filed on April 12, 2022; registration number 333-263715) |
10.17 |
|
Consent to be named as a director nominee of Jason Monroe (incorporated by reference to the Form S-1/ Amendment 4 filed on April 12, 2022; registration number 333-263715) |
10.18 |
|
Consent to be named as a director nominee of Brenda Baird Simpson (incorporated by reference to the Form S-1/ Amendment 4 filed on April 12, 2022; registration number 333-263715) |
10.19 |
|
Form of Warrant for this offering (incorporated by reference to the Form S-1/ Amendment 4 filed on April 12, 2022; registration number 333-263715) |
10.20 |
|
Form of Pre-Funded Warrant for this offering (incorporated by reference to the Form S-1/ Amendment 4 filed on April 12, 2022; registration number 333-263715) |
10.21 |
|
Form of Warrant Agent Agreement (Pre-Funded Warrants) (incorporated by reference to the Form S-1/ Amendment 4 filed on April 12, 2022; registration number 333-263715) |
10.22
|
|
2022 Equity Incentive Plan (incorporated by reference to the Form S-1/ Amendment 4 filed on April 12, 2022; registration number 333-263715) |
10.23
|
|
Plan and Agreement of Merger, dated March 22, 2022, between Sharps Technology, Inc., a Wyoming corporation, and Sharps Technology, Inc., a Nevada corporation (incorporated by reference to the Form S-1/ Amendment 4 filed on April 12, 2022; registration number 333-263715) |
10.24
|
|
Form of Warrant Agent Agreement (Warrants) (incorporated by reference to the Form S-1/ Amendment 4 filed on April 12, 2022; registration number 333-263715) |
10.25
|
|
Form of Representative’s Warrant (incorporated by reference to the Form S-1/ Amendment 4 filed on April 12, 2022; registration number 333-263715) |
10.26 |
|
Amendment No. 6 to Asset/Share Purchase Agreement, dated April 13, 2022 (incorporated by reference to 8-K filed on April 19, 2022) |
10.27 |
|
Agreement, dated September 29, 2022, by and among Sharps Technology, Inc., InjectEZ, LLC, Nephron Pharmaceuticals Corporation, Nephron SC, Inc. and Nephron Sterile Compounding Center LLC (incorporated by reference to 8-K filed on October 4, 2022) |
10.28 |
|
Distribution Agreement, dated December 8, 2022, by and among Sharps Technology, Inc., Nephron Pharmaceuticals Corporation and Nephron SC, Inc. (incorporated by reference to 8-K filed on December 13, 2022) |
10.29 |
|
PIPE Agreement, dated February 1, 2023 (incorporated by reference to 8-K filed on December 22, 2022) |
10.30
|
|
Registration Rights Agreement, dated February 1, 2023 (incorporated by reference to 8-K filed on December 22, 2022)
|
10.31 |
|
Placement Agent Agreement, dated February 1, 2023 (incorporated by reference to 8-K filed on December 22, 2022) |
10.32 |
|
Warrant, dated February 1, 2023 (incorporated by reference to 8-K filed on December 22, 2022) |
10.33 |
|
2023
Equity Incentive Plan (incorporated by reference to 8-K filed on January 27, 2023) |
23.1 |
|
Consent of Manning Elliott LLP* |
23 |
|
Consent of Sichenzia Ross Ference LLP (included in Exhibit 5.1)* |
24.1 |
|
Power of Attorney (incorporated by reference to the Form S-1/ Amendment 4 filed on April 12, 2022; registration number 333-263715) |
107 |
|
Filing Fees Exhibit |
SIGNATURES
Pursuant
to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement on Form S-1 to be signed
on its behalf by the undersigned, thereunto duly authorized, in the city of Melville, State of New York, on the 14th day
of April, 2023.
|
SHARPS
TECHNOLOGY, INC |
|
|
|
By: |
/s/
Robert M. Hayes |
|
|
Robert
M. Hayes |
|
|
Chief
Executive Officer and Director |
Pursuant
to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities
and on the dates indicated.
Signature |
|
Title |
|
Date |
|
|
|
|
|
/s/
Robert M. Hayes |
|
Chief
Executive Officer and Director |
|
April
14, 2023 |
Robert
M. Hayes |
|
(Principal
Executive Officer) |
|
|
|
|
|
|
|
/s/
Andrew R. Crescenzo |
|
Chief
Financial Officer |
|
April
14, 2023 |
Andrew
R. Crescenzo |
|
(Principal
Financial and Accounting Officer) |
|
|
|
|
|
|
|
/s/
Alan R. Blackman* |
|
Co-Chairman,
Chief Investment Officer |
|
April
14, 2023 |
Alan
R. Blackman |
|
and
Chief Operating Officer |
|
|
|
|
|
|
|
/s/
Dr. Soren Bo Christiansen* |
|
Co-Chairman |
|
April
14, 2023 |
Dr
Soren Bo Christiansen |
|
|
|
|
|
|
|
|
|
/s/
Paul K. Danner* |
|
Director |
|
April
14, 2023 |
Paul
K. Danner |
|
|
|
|
|
|
|
|
|
/s/
Timothy J. Ruemler* |
|
Director |
|
April
14, 2023 |
Timothy
J. Ruemler |
|
|
|
|
|
|
|
|
|
/s/
Brenda Bird Simpson* |
|
Director |
|
April
14, 2023 |
Brenda
Bird Simpson |
|
|
|
|
|
|
|
|
|
/s/
Jason Monroe* |
|
Director |
|
April
14, 2023 |
Jason
Monroe |
|
|
|
|
*
By: |
/s/
Robert M. Hayes |
|
|
Attorney-in-fact
|
|
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