SkyAI, Inc. 10-Q

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2022 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _______ to _______ Commission file number: 001-41355 Sharps Technology, Inc. (Exact name of registrant as specified in its charter) Nevada 82-3751728 (State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.) 105 Maxess Road , Melville , New York 11747 (Address of principal executive offices) (Zip Code) (631 ) 574 -4436 (Registrant’s telephone number, including area code) Securities registered pursuant to Section 12(b) of the Act: Title of each class Trading Symbol(s) Name of each exchange on which registered Common Stock, $0.0001 par value STSS NASDAQ Capital Market Common Stock Purchase Warrants STSSW NASDAQ Capital Market Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☐ No ☒* * The registrant became subject to the requirement to file reports on April 13, 2022 and has filed all reports required since April 13, 2022. Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐ Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. Large accelerated filer ☐ Accelerated filer ☐ 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 13(a) of the Exchange Act. ☐ Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒ As of August 15, 2022, the issuer had 9,207,415 shares of common stock, par value $0.0001 per share, outstanding. SHARPS TECHNOLOGY, INC. TABLE OF CONTENTS Page No. PART I FINANCIAL INFORMATION 1 ITEM 1. FINANCIAL STATEMENTS (Unaudited) 1 Condensed Balance Sheets 1 Condensed Statements of Operations and Comprehensive Income (Loss) 2 Condensed Statements of Stockholders’ Equity 3 Condensed Statements of Cash Flows 5 Notes to the Condensed Financial Statements 6 ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 19 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 24 ITEM 4. CONTROLS AND PROCEDURES 24 PART II OTHER INFORMATION 25 ITEM 1. LEGAL PROCEEDINGS 25 ITEM 1A. RISK FACTORS 25 ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS 25 ITEM 6. EXHIBITS 26 SIGNATURES 27 i PART 1 — FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS SHARPS TECHNOLOGY, INC. CONDENSED BALANCE SHEETS June 30, 2022 December 31, 2021 (Unaudited) (Audited) Assets: Current Assets Cash $ 7,808,181 $ 1,479,166 Prepaid expenses 35,537 7,995 Inventory 127,441 121,994 Current Assets 7,971,159 1,609,155 Fixed Assets, net of accumulated depreciation 4,181,099 3,763,332 Other Assets 2,873,864 529,863 TOTAL ASSETS $ 15,026,122 $ 5,902,350 Liabilities: Current Liabilities Accounts payable and accrued liabilities $ 558,298 $ 804,138 Notes payable, net of discount - 700,015 Contingent stock liability - 677,000 Warrant liability 2,465,820 585,000 Total Current Liabilities 3,024,118 2,766,153 Commitments and Contingencies (Notes 5 and 14) - - Subsequent Events (Note 15) 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; 9,207,415 shares issued and outstanding at June 30, 2022 ( 5,187,062 shares issued and outstanding December 31, 2021) 922 519 Common stock subscription receivable - ( 32,500 ) Additional paid-in capital 24,060,753 13,835,882 Accumulated deficit ( 12,059,671 ) ( 10,667,704 ) Total Stockholders’ Equity 12,002,004 3,136,197 TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $ 15,026,122 $ 5,902,350 1 SHARPS TECHNOLOGY, INC. CONDENSED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) FOR THE THREE AND SIX MONTHS ENDED JUNE 30, (Unaudited) 2022 2021 2022 2021 THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30, 2022 2021 2022 2021 Revenue, net $ - $ - $ - $ - Operating expenses: Research and development 556,868 375,511 1,063,243 843,075 General and administrative 2,230,801 435,376 3,061,710 883,953 Total operating expenses 2,787,669 810,887 4,124,953 1,726,028 Loss from operations ( 2,787,669 ) ( 810,887 ) ( 4,124,953 ) ( 1,726,028 ) Other income (expense) Interest income (expense) ( 1,100,507 ) 240 ( 1,345,944 ) 692 FMV income (expense) adjustment for Contingent Stock and Warrants 4,365,930 - 4,078,930 - Total Other Income (Expense) 3,265,423 240 2,732,986 692 Net income (loss) and comprehensive income (loss) $ 477,754 $ ( 810,647 ) $ ( 1,391,967 ) $ ( 1,725,336 ) Net earnings (loss) per share, basic and diluted $ 0.06 $ ( 0.17 ) $ ( 0.20 ) $ ( 0.37 ) Weighted average shares used to compute net earnings (loss) per share, basic and diluted 8,669,372 4,827,000 6,928,217 4,712,000 2 SHARPS TECHNOLOGY, INC. CONDENSED STATEMENTS OF STOCKHOLDERS’ EQUITY FOR THE SIX MONTHS ENDED JUNE 30, 2021 (Unaudited) Shares Amount Shares Amount Amount Capital Deficit Equity Preferred Stock Common Stock Additional Paid-in Accumulated Total Stockholders’ Shares Amount Shares Amount Amount Capital Deficit Equity Balance – December 31, 2020 1 - 4,597,000 $ 460 $ - $ 8,133,655 $ ( 6,003,292 ) $ 2,130,823 Net loss for the three months ended March 31, 2021 - - - - - - ( 914,689 ) ( 914,689 ) Share-based payments - - - - - 189,237 - 189,237 Issuance of common stock for equipment order - - 14,286 1 - 99,999 - 100,000 Balance - March 31, 2021 1 - 4,611,286 $ 461 $ - $ 8,422,891 $ ( 6,917,981 ) $ 1,505,371 Net loss for the three months ended June 30, 2021 - - - - - - ( 810,647 ) ( 810,647 ) Share-based payments - - - - - 104,766 - 104,766 Issuance of common stock from subscriptions - - 237,143 24 1,659,976 - 1,660,000 Issuance of common stock for equipment order - - 57,143 6 - 399,994 - 400,000 Balance – June 30, 2021 1 - 4,905,572 $ 491 $ - $ 10,587,627 $ ( 7,728,628 ) $ 2,859,490 3 SHARPS TECHNOLOGY, INC. CONDENSED STATEMENT OF STOCKHOLDER’S EQUITY FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2022 (Unaudited) Preferred Stock Common Stock Common Stock Subscription Additional Paid in Accumulated Total Stockholder’s Shares Amount Shares Amount Receivable Capital Deficit Equity Balance -December 31, 2021 1 $ - 5,187,062 $ 519 $ ( 32,500 ) $ 13,835,882 $ ( 10,667,704 ) 3,136,197 Beginning Balance 1 $ - 5,187,062 $ 519 $ ( 32,500 ) $ 13,835,882 $ ( 10,667,704 ) 3,136,197 Net loss for the three months ended March 31, 2022 - - - - - - ( 1,869,721 ) ( 1,869721 ) Share-based compensation charges - - - - - 328,460 - 328,460 Collections of common stock subscriptions - - 32,500 - - 32,500 Balance - March 31, 2022 1 $ - 5,187,062 $ 519 $ - $ 14,164,342 $ ( 12,537,425 ) $ 1,627,436 Net income for the three months ended June 30, 2022 - - - - - - 477,754 477,754 Net income (loss) - - - - - - 477,754 477,754 Shares issued in Initial Public Offering 3,750,000 375 - 8,974,282 - 8,974,657 Issuance of shares for contingent stock liability 235,294 24 - 495,976 - 496,000 Fractional share adjustment 59 - - - Share-based compensation charges - - - - - 365,606 - 365,606 Shares issued for services - - 35,000 4 - 60,547 - 60,551 Balance – June 30, 2022 1 $ - 9,207,415 $ 922 $ - $ 24,060,753 $ ( 12,059,671 ) $ 12,002,004 Ending Balance 1 $ - 9,207,415 $ 922 $ - $ 24,060,753 $ ( 12,059,671 ) $ 12,002,004 4 SHARPS TECHNOLOGY, INC. CONDENSED STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS ENDED JUNE 30 2022 2021 CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $ ( 1,391,967 ) $ ( 1,725,336 ) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 156,100 3,500 Stock-based compensation 589,553 294,003 Common stock issued for services 60,551 - Accretion of debt discount 1,299,985 - FMV adjustment for Contingent Stock ( 181,000 ) - FMV adjustment for Warrants ( 3,897,930 ) - IPO Issuance costs relating to Warrants 550,433 - Changes in operating assets Prepaid expenses and other ( 27,542 ) - Inventory ( 5,448 ) - Accounts payable and accrued liabilities ( 245,840 ) 15,501 Net cash used in operating activities ( 3,093,105 ) ( 1,412,332 ) CASH FLOWS FROM INVESTING ACTIVITIES: Acquisition of machinery and equipment ( 463,355 ) ( 1,473,250 ) Other assets – escrow and other ( 2,350,000 ) ( 85,262 ) Net cash used in investing activities ( 2,813,355 ) ( 1,558,512 ) CASH FLOWS FROM FINANCING ACTIVITIES: Net Proceeds from Initial Public Offering Units 14,202,975 - Repayment of note payable ( 2,000,000 ) - Proceeds from subscriptions and subscriptions receivable 32,500 1,660,000 Net cash provided by financing activities 12,235,475 1,660,000 NET INCREASE (DECREASE) IN CASH 6,329,015 ( 1,310,844 ) CASH — BEGINNING OF PERIOD 1,479,166 1,790,203 CASH — END OF PERIOD $ 7,808,181 $ 479,359 SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid for interest $ 47,111 $ - Non-cash investing and financing activity: FMV for Common stock issued for contingent shares $ 496,000 - Vested stock options and common stock for fixed assets acquired $ 63,612 $ 500,000 Vested stock options issued as consideration for acquisition $ 40,901 $ - 5 SHARPS TECHNOLOGY, INC. NOTES TO THE CONDENSED FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED JUNE 30, 2022 AND 2021 (Unaudited) 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 Company’s fiscal year ends on December 31. On April 13, 2022, the Company 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 7) Note 2. Summary of Significant Accounting Policies Basis of Presentation The accompanying 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 amounts reported in the financial statements and accompanying notes. The accounting estimates and assumptions that require management’s most significant, difficult, and subjective judgment include the valuation and recognition of stock-based compensation expense, contingent stock liability, contingent warrant liability, inventory obsolescence provision, depreciation of fixed assets and deferred tax asset valuation. Actual results experienced by the Company may differ from management’s 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 June 30, 2022 and December 31, 2021, inventory is comprised of raw materials. 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 with the trading price which could cause fluctuations in operating results at the reporting periods. 6 SHARPS TECHNOLOGY, INC. NOTES TO THE CONDENSED FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED JUNE 30, 2022 AND 2021 (Unaudited) Note 2. Summary of Significant Accounting Policies (continued) 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 machinery, 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: Machinery and Equipment – 3 - 10 years and Website – 3 years. The expected life for Molds is based number of parts that will be produced based on the expected mold capability. 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 three and six months ended June 30, 2022 and 2021. 7 SHARPS TECHNOLOGY, INC. NOTES TO THE CONDENSED FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED JUNE 30, 2022 AND 2021 (Unaudited) 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 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. 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. At their issuance date and as of June 30, 2022, the warrants (see Note 7) 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 statement of operations and comprehensive loss. 8 SHARPS TECHNOLOGY, INC. NOTES TO THE CONDENSED FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED JUNE 30, 2022 AND 2021 (Unaudited) Note 2. Summary of Significant Accounting Policies (continued) Basic and Diluted Loss Per Share The Company computes net loss per share in accordance with ASC 260, Earnings per Share. ASC 260 requires presentation of both basic and diluted earnings per share (EPS) on the face of the 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 June 30, 2022, there were 10,452,773 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. Contingencies From time to time, the Company may be involved in legal and administrative proceedings and claims of various types. The Company records a liability in its financial statements for these matters when a loss is known or considered probable and the amount can be reasonably estimated. Management reviews these estimates in each accounting period as additional information becomes known and adjusts the loss provision when appropriate. If the loss is not probable or cannot be reasonably estimated, a liability is not recorded in the consolidated financial statements. If a loss is probable but the amount of loss cannot be reasonably estimated, the Company discloses the loss contingency and an estimate of possible loss or range of loss (unless such an estimate cannot be made). The Company does not recognize gain contingencies until they are realized. Legal costs incurred in connection with loss contingencies are expensed as incurred. 9 SHARPS TECHNOLOGY, INC. NOTES TO THE CONDENSED FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED JUNE 30, 2022 AND 2021 (Unaudited) Note 3. 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 financial statements. Note 4. Fixed Assets Fixed asset, net, as of June 30, 2022 and December 31, 2021, are summarized as follows: Schedule of Machinery and Equipment June 30, 2022 December 31, 2021 Website $ 16,600 $ 16,600 Machinery and equipment 4,352,633 3,778,766 Fixed asset, gross 4,369,233 3,795,366 Less: accumulated depreciation ( 188,134 ) ( 32,034 ) Fixed asset, net $ 4,181,099 $ 3,763,332 Depreciation expense of fixed assets for the six months ended June 30, 2022 and 2021 was $ 156,100 and $ 3,500 , respectively. During the six months ended June 30, 2022, the Company recorded $ 63,512 in fixed asset costs relating to the estimated fair market value for options granted in 2021 for the acquired machinery. As of June 30, 2022, the Company has $ 100,000 in remaining payments for machinery purchased, which is included in accounts payable and accrued expenses. 10 SHARPS TECHNOLOGY, INC. NOTES TO THE CONDENSED FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED JUNE 30, 2022 AND 2021 (Unaudited) Note 5. Other Assets Other assets as of June 30, 2022 and December 31, 2021 are summarized as follows: Schedule of Other Assets 2022 2021 Acquisition (see below) $ 2,873,494 $ 472,701 Other 370 57,162 Other assets $ 2,873,864 $ 529,863 Acquisition Agreement In June 2020, the Company entered into a Share Purchase Agreement (“Agreement”) and amendments to the Agreement through June 30, 2022, collectively, the Agreements, to purchase either the stock or certain assets of a manufacturing facility for $ 2.5 M in cash, plus additional consideration of 28,571 shares of common stock with an estimated fair market value of $ 7.00 and 35,714 stock options with an exercise price of $ 7.00 . At March 31, 2022, the fair market value of the common stock of $ 200,000 and the vested options of $ 163,602 is included in Other Assets, The Agreements provided the Company various periods for due diligence and post due diligence, requirements for escrow payments of $ 150,000 and a closing date was expected by June 30, 2022 (“Closing Date”). Due to delayed approvals and registrations by the Hungarian government, the Company agreed to increase the escrow balance an additional $ 2,350,000 . As of June 30, 2022, the Company has paid $ 2,500,000 in escrow payments, which is recorded in Other Assets. The escrow payments may be forfeited upon: the occurrence of any damage to the assets caused by the actions of the Company; the occurrence of any debt on the books of the seller as a result of an expense initiated by the Company; any failure by the Company to fund the Operating Costs; and any material breach by the Company of its obligations under this Agreement that causes any financial damage to either the seller or the assets. On the Closing Date, the Escrow balances will be applied to the final payment due the Sellers. (See Note 15) Through the Closing Date, the Agreements provide 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 covers the facility’s operating costs, is mainly comprised of the seller’s workforce costs, materials and other recurring monthly operating cost. The payment of the Operating Costs does not provide the Company with rights associated with a rent agreement. As a result, the payment of operating costs was concluded not to be in substance a lease agreement, and therefore no right-of-use asset or lease liability were recognized. During the three and six months ended June 30, 2022, the Company had remitted $ 337,000 (2021 - $ 226,000 ) and $ 771,000 (2021 - $ 691,000 ), respectively for the aforementioned Operating Costs. These costs were included in research and development expense in the 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. 11 SHARPS TECHNOLOGY, INC. NOTES TO THE CONDENSED FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED JUNE 30, 2022 AND 2021 (Unaudited) Note 6. 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 bear interest at 8 % with interest payments due monthly. The Company and the Purchasers have entered into a Security Agreement whereby the Notes are 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 provides 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 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 is unknown at the time of the NPA and will be 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”). 12 SHARPS TECHNOLOGY, INC. NOTES TO THE CONDENSED FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED JUNE 30, 2022 AND 2021 (Unaudited) Note 6. Note Purchase Agreement (continued) 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 in 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 has been 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. For six months ended June 30, 2022, 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 Notes with proceeds from the IPO that closed on April 19, 2022. The Contingent Stock and Contingent Warrant liabilities were measured at FMV on the date of issuance using the Black-Scholes valuation model. 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, with recognition of the changes in fair value to other income or expense in the 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 Contingent Warrants (“Note Warrants”) with an exercise price of $ 4.25 . were issued. 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 statement of operations in accordance with ASC 480 Debt and Equity. During the six months ended June 30, 2022, the Company recorded a FMV income adjustment of $ 520,000 to reduce the Warrant liability from $ 585,000 at December 31, 2021 to $ 65,000 at June 30,2022. (See Notes 7 and 9) 13 SHARPS TECHNOLOGY, INC. NOTES TO THE CONDENSED FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED JUNE 30, 2022 AND 2021 (Unaudited) Note 7. 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 and with respect to the Warrants as a liability under ASC 815. (See Note 9) During the six months ended June 30, 2022, the Company issued 35,000 shares of common stock at the trading stock price in connection with services provided to the Company and recorded a charge of $ 60,551 , In addition, the Company issued 235,295 common shares relating to the Note Purchase agreement. (See Note 6) 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 June 30, 2022 the liability was $ 2,401,338 . During the three months ended June 30, 2022, the Company recorded a FMV income adjustment of $ 3,378,412 . (See Note 9) 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. (See Note 6) 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 $ 228,655 computed using the Black Sholes valuation method with the following assumptions: a) volatility of 93.47 %, five -year term, risk free interest rate 2.77 % and 0 % dividend rate. The FMV was classified as additional issuance costs. 14 SHARPS TECHNOLOGY, INC. NOTES TO THE CONDENSED FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED JUNE 30, 2022 AND 2021 (Unaudited) Note 8. 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 25 %, 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 9. 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 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 statement of operations and comprehensive income (loss). (See Note 6 and 7) The Warrant liability at June 30, 2022 was as follows: Schedule of Warrant Liability Note Warrants (b) $ 65,482 Trading and Overallotment Warrants (a) 2,400,338 Total $ 2,465,820 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 $ 157,647 FMV of Trading and Overallotment Warrants 5,778,750 Change in fair value of warrant liability ( 3,470,577 ) Fair Value at June 30. 2022 $ 2,465,820 15 SHARPS TECHNOLOGY, INC. NOTES TO THE CONDENSED FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED JUNE 30, 2022 AND 2021 (Unaudited) Note 10. Stock Options A summary of options granted and outstanding is presented below: Schedule of Stock Options Granted and Outstanding June 30, 2022 Shares Weighted Average Exercise Price Outstanding at beginning of period 1,137,479 $ 5.18 Options granted 267,500 1.21 Outstanding at end of period 1,404,979 $ 4.42 Exercisable at end of period 1,070,910 $ 4.55 During the six months ended June 30 2022, the Company issued 267,500 stock options. As of June 30, 2022 there was $ 781,386 of unrecognized stock-based compensation related to unvested stock options, which is expected to be recognized over a weighted-average period of 29 months. The following table summarizes information about options outstanding at June 30, 2022: Schedule of Options Outstanding Exercise Prices Shares Outstanding Weighted Average Remaining Contractual Life Shares Exercisable $ 1.21 267,500 4.80 103,946 $ 1.75 97,143 $ .75 97,143 $ 2.80 155,714 $ 1.00 155,714 $ 4.38 344,286 $ 2.75 332,624 $ 7.00 540,336 $ 3.75 388,483 For the three months ended June 30, 2022 and 2021, the Company recognized stock-based compensation expense of $ 365,606 , of which $ 325,736 and $ 39,870 was recorded in general and administrative and research and development expenses, respectively and $ 104,766 in 2021, of which $ 94,454 and $ 10,312 was recorded in general and administrative and research and development expenses, respectively. For the six months ended June 30, 2022 and 2021, the Company recognized stock-based compensation expense of $ 589,553 , of which $ 539,371 and $ 50,182 was recorded in general and administrative and research and development expenses, respectively and $ 293,983 in 2021, of which $ 232,107 and $ 61,876 was recorded in general and administrative and research and development expenses, respectively. Further, for the six months ended June 30, 2022, the Company recorded stock-based charges relating to consideration for purchase of machinery of $ 63,512 (See Note 4) and $ 40,901 relating to an Acquisition. (See Note 5) 16 SHARPS TECHNOLOGY, INC. NOTES TO THE CONDENSED FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED JUNE 30, 2022 AND 2021 (Unaudited) Note 11. Income Taxes At the end of each interim reporting period, the Company estimates its effective tax rate expected to be applied for the full year. This estimate is used to determine the income tax provision or benefit on a year-to-date basis and may change in subsequent interim periods. Accordingly, the Company’s effective tax rate for the three and six months ended June 30, 2022 was 0 %, compared to the effective tax rate of 0 % for the three and six months ended June 30, 2021. The Company’s effective tax rates for both periods were affected primarily by a full valuation allowance on domestic net deferred tax assets. Note 12. Related Party Transactions and Balances As of June 30, 2022 and December 31, 2021, accounts payable and accrued liabilities include $ 294,419 and $ 59,375 , respectively, payable to officers and directors and the Company. The amounts are unsecured, non-interest bearing and are due on demand. (See Note 15). Note 13. Fair Value Measurements The Company’s financial instruments consisted of cash, accounts payable, notes payable, contingent stock liability and contingent warrant liability. Cash, contingent stock liability and contingent stock 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 June 30, 2022, the following financial assets and liabilities were measured at fair value on a recurring basis presented on the Company’s balance sheet: Schedule of Assets and Liabilities Measured at Fair Value on Recurring Basis Level 1 Level 2 Level 3 June 30, 2022 Fair Value Measurements Using Balance as at Level 1 Level 2 Level 3 June 30, 2022 $ $ $ $ Assets Cash 7,808,181 - - 7,808,181 - - Total assets measured at fair value 7,808,181 - 7,808,181 Liabilities Warrants liability 2,465,820 2,465,820 Total liabilities measured at fair value 2,465,820 2,465,820 Note 14. Commitments and Contingencies Contingencies At each reporting period, the Company evaluates whether or not a potential loss amount or a potential range of loss is probable and reasonably estimable under the provisions of the authoritative guidance that addresses accounting for contingencies. The Company is currently not involved in any 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. 17 SHARPS TECHNOLOGY, INC. NOTES TO THE CONDENSED FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED JUNE 30, 2022 AND 2021 (Unaudited) Note 14. Commitments and Contingencies (continued) 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. Engagement Agreement On October 2, 2021, the Company entered into an engagement agreement with Aegis Capital Corp. (“Aegis”), and on January 21, 2022, the engagement agreement was amended. Pursuant to the engagement agreement as amended, the Company engaged Aegis to act as underwriter in connection with a proposed public offering of common stock and warrants by the Company. The agreement contemplates that (subject to execution of an underwriting agreement for the offering) Aegis would be entitled to an 8 % underwriting discount, a 1 % non-accountable expense allowance, reimbursement of certain expenses, and warrants to purchase 5% of the number of shares of common stock sold in the offering, with an exercise price equal to 125% of the public offering price and a term of four years and six months commencing six months from the closing of the offering . The agreement has a termination date of twelve months from the date thereof or upon completion of the proposed offering which occurred on April 14, 2022. Note 15. Subsequent Events Acquisition The Company closed on the Acquisition for the shares of Safegard Medical (see Note 5) on July 8, 2022 and released $ 2,450,000 in escrow funds. The remaining $ 50,000 in escrow will be held until finalization of any transfer taxes due. Employment Agreement Subsequent to June 30, 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 and provisions compensation adjustments, expense and tax differential reimbursements, benefits and bonuses. At June 30, 2022, the Company approved and accrued a $ 250,000 bonus to Mr. Blackman for services provided in 2022. 18 ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and the accompanying notes thereto included elsewhere in this Quarterly Report on Form 10-Q and our final prospectus or the Prospectus, filed with the Securities and Exchange Commission or the SEC, pursuant to Rule 424(b) under the Securities Act of 1933, as amended or the Securities Act), on April 15, 2022. The information in this discussion contains forward-looking statements and information within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act, which are subject to the “safe harbor” created by those sections. These forward-looking statements include, but are not limited to, statements concerning our strategy, future operations, future financial position, future revenues, projected costs, prospects and plans and objectives of management. The words “anticipates,” “believes,” “estimates,” “expects,” “intends,” “may,” “plans,” “projects,” “will,” “would” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. We may not actually achieve the plans, intentions, or expectations disclosed in our forward-looking statements and you should not place undue reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements that we make. These forward-looking statements involve risks and uncertainties that could cause our actual results to differ materially from those in the forward-looking statements, including, without limitation, the risks set forth in our other filings with the SEC, including the Prospectus. The forward-looking statements are applicable only as of the date on which they are made, and we do not assume any obligation to update any forward-looking statements. Unless the context requires otherwise, references in this Quarterly Report on Form 10-Q to “we,” “us,” and “our” refer to Sharps Technology, Inc. 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 since our inception and, as of June 30, 2022, we had an accumulated deficit of $ 12,059,672. Our net income (loss) was $477,754 and $(1,391,967) for the three and six months ended June 30, 2022. Substantially all of our net loss resulted from costs incurred in connection with our research and development efforts, payroll and consulting fees, stock compensation, 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 Unaudited Condensed 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 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 8, 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. During the quarter ended June 30, 2022, we transferred an additional $2,350,000 to an Escrow Account for a total of $2,500,000 in advance of final government approval of the Acquistion. In order to compete in the market, we must build inventory. Commercial quantities of inventory are required to secure orders. Delivery is expected shortly after receiving orders. Research and Development Research and development expense consists of expenses incurred while performing research and development activities for our various syringe products. We recognize research and development expenses as they are incurred. Our research and development expense primarily consist of: ● Manufacturing and testing costs and related supplies and materials; ● Consulting fees paid and stock compensation expense for our Chief Technology Officer; ● Operating costs paid to Safegard, including among others, for use of Safegard’s work force, utilities and other services, relating to the facility being utilized and materials purchased on our behalf; and ● Third-party costs, including engineering incurred for development and design. 19 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 initial public offering (“IPO”) was declared effective by the SEC, and our common stock and warrants began trading on the Nasdaq Capital Market or Nasdaq on April 14, 2022. Our IPO closed on April 19, 2022. Net proceeds from the IPO were approximately $14.2 million. In connection with the closing of the IPO, the Company used net proceeds to repay the Note Payable of $2 million. Critical Accounting Policies and Estimates and Recent Accounting Standards 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. Results of Operations – three months ended June 30, 2022 Three Months Ended June 30, 2022 June 30, 2021 Change Change % $ $ $ % Research and development $ 556,868 $ 375,511 $ 181,357 48 % General and administrative 2,230,801 435,376 1,795,425 412 % Interest expense (income) 1,100,507 (240 ) 1,100,747 100 % FMV (income) expense adjustment for Contingent Stock & Warrants (4,365,930 ) (4,365,930 ) 100 % Net income (loss) $ 477,754 (810,647 ) 1,288,401 158 % Revenue The Company has not generated any revenue to date. Research and Development For the three months ended June 30, 2022, Research and Development (“R&D”) expenses increased to $556,868 compared to $375,511 for the three months ended June 30 2021. The increase of $181,357 was primarily due to increased R&D costs of approximately $71,000 from $266,000 in 2021 to $337,000 in 2022 paid to Safegard for operating costs to use their facility and the purchase of raw materials. The facility, since June 2020, has been used for further development, production of current prototype samples and related testing. The operating costs primarily related to use of Safegard’s workforce, utility costs incurred and other services. In addition, we had increases in depreciation related to R&D equipment of $81,000 and that commenced in the quarters in 2021. We had an approximate $29,000 increase in stock compensation as grants fully vested. 20 General and Administrative For the three months ended June 30, 2022, General and Administrative (“G&A”) expenses were $2,230,801 as compared to $435,376 for the three months ended June 30, 2021. The increase of $1,795,425 was primarily attributable to increases in: i) payroll and consulting fees of $314,000 from $202,000 in 2021 to $516,000 in 2022, primarily due to increased amounts of payroll and increased staffing, ii) increases in stock compensation expense, due to new option awards and increases in vesting of previously issued options, of approximately $231,000 from $94,000 in 2021 to $326,000 in 2022, relating to employees and consultants. We had an average of two employees in 2021 and through September 2021 which increased to four in the last quarter of 2021. We engaged an average of 3 consultants in 2022 and 2021, for varying amounts of services. In addition, we had increases in G&A in the three months ended June 30, 2022 of approximately $1,250,000, principally from increased marketing and promotion ($67,000), professional fees ($82,000), travel ($81,000), board fees ($83,000), insurance ($154,000), public company and investor relations related ($211,000), issuance costs relating to warrants ($550,000) and other expenses ($22,000). Interest expense (income) Interest expense, net of interest income of $1,061 was $1,100,507 for the three months ended June 30, 2022, compared to interest income of $240 for the three months ended June 30, 2021. Interest expense increased, by $1,100,747 due to the financing entered into in December 2021 which resulted in interest payable at the 8% face amount of $8,000 plus accreted interest of $1,092,747 on the $2,000,000 Notes Payable which were repaid with proceeds from IPO. FMV Adjustment for Contingent Stock and Warrants The value of the Contingent Stock and Contingent Warrants (“Note Warrants”) required 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 income (loss). For the three months ended June 30, 2022, the Company recorded a $351,000, fair market fair (FMV) benefit to reflect the decrease in the Contingent Stock through the date the shares were issued. For the three months ended June 30, 2022, the Company recorded a $4,014,000 FMV income to reflect the decrease in the Note Warrants and Warrants issued with the IPO. (See Note 6, 7 and 9 to the Unaudited Condensed Financial Statements) Results of Operations – six months ended June 30, 2022 Six Months Ended June 30, 2022 June 30, 2021 Change Change % $ $ $ % Research and development $ 1,063,243 843,075 220,168 26 % General and administrative 3,061,710 882,953 2,178,757 247 % Interest expense / (income) 1,345,944 (692 ) 1,346,636 100 % FMV (income) expense adjustment for Contingent Stock & Warrants (4,078,930 ) 0 (4,078,930 ) 100 % Net loss $ 1,391,967 1,725,336 (333,369 ) (19 )% 21 Revenue The Company has not generated any revenue to date. Research and Development For the six months ended June 30, 2022, Research and Development (“R&D”) expenses increased to $1,063,243 compared to $843,075 for the six months ended June 30, 2021. The increase of $220,168 was primarily due to increased R&D costs of approximately $80,000 from $691,000 in 2021 to $771,000 in 2022 paid to Safegard for operating costs to use their facility and the purchase of R&D materials. The facility, since June 2020, has been used for further development, production of current prototype samples and related testing. The operating costs primarily related to use of Safegard’s workforce, utility costs incurred and other services. In addition, we had increases in depreciation related to R&D equipment of $152,000 that commenced in the later quarters in 2021. We had decreases in stock compensation expense of approximately $12,000 from $62,000 for the first six months ended June 30, 2021 to $50,000 for the six months ended June 30, 2022. The decline was primarily due to the timing of vested awards. General and Administrative For the six months ended June 30, 2022, General and Administrative (“G&A”) expenses were $3,061,710 as compared to $882,953 for the six months ended June 30, 2021. The increase of $2,178,757 was primarily attributable to increases in: i) payroll and consulting fees of $400,000 from $382,000 in 2021 to $782,000 in 2022, primarily due to increased amounts of payroll and fees paid and additional employees on staff, ii) increases in stock compensation expense, due to new option awards and increases in vesting of previously issued options, of approximately $307,000 from $232,000 in 2021 to $539,000 in 2022, relating to employees and consultants. We had an average of two employees in 2021 and through September 2021 which increased to four in the last quarter of 2021. We engaged an average of 3 consultants in 2022 and 2021, for varying amounts of services. In addition, we had increases in G&A in the six months ended June 30, 2022 of approximately $1,471,1,000, principally from increased marketing and promotion ($103,000), patent fees and registrations ($20,000), professional fees ($159,000), travel ($109,000), board fees ($98,000), insurance ($165,000), public company related expenses and investor relations ($218,000), issuance costs relating to the warrants ($550,000), rent expense ($19,000) and other expenses ($30,000). Interest expense (income) Interest expense, net of interest income of $1,152, was $1,345,944 for the six months ended June 30, 2022, compared to interest income of $692 for the six months ended June 30, 2021. Interest expense increased by $1,346,636 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 Contingent Stock and Warrants The value of the Contingent Stock, Note Warrants and other 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) expense in the statement of operations and comprehensive income (loss). For the six months ended June 30, 2022, the Company recorded a $181,000 fair market value (FMV) benefit to reflect the decrease in the Contingent Stock liability through the date the shares were issued. For the six months ended June 30, 2022, the Company recorded a $3,898,000 FMV income adjustment to reflect the decrease in Note Warrants and Warrants issued with the IPO. (See Note 6 and 7 to the Unaudited Condensed Financial Statements) Liquidity and Capital Resources On April 13, 2022, the Company completed its initial public offering (“IPO”) which was declared effective by the Security and Exchange Commission (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 $5,779,000 was attributed to the Warrant liability. (See Note 7 and 9 to the Unaudited Condensed Financial Statements) 22 At June 30, 2022 and December 31, 2021, we had a cash balance of $7,808,181, and $1,479,166, respectively. The Company has working capital of $4,947,040as of June 30, 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 in additional escrow paid relating to the Safegard acquisition agreement. Cash Flows Net Cash Used in Operating Activities The Company used cash of $3,093,105 and $1,412,332 in operating activities for the six months ended June 30, 2022 and 2021, respectively. The increase in cash used was principally due to the Company incurring additional SG&A expenses and R&D activities as described above during six months ended June 30, 2022. Net Cash Used in Investing Activities For the six months ended June 30, 2022 and 2021, the Company used cash in investing activities of $2,813,355 and $1,558,512, respectively. In both periods, the cash was used to acquire or pay deposits for machinery and equipment of $463,355 and $1,473,250, respectively. Further, in the six months ended June 30, 2022 and 2021 the Company used $2,350,000 and $75,000, respectively for escrow payments relating to the Safegard acquisition. Net Cash Provided by Financing Activities For the six months ended June 30, 2022 and 2021, the Company provided cash from financing activities of $12,235,475 and $1,660,000, 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. 23 We are also a “smaller reporting company,” meaning that the market value of our stock held by non-affiliates plus the aggregate amount of gross proceeds to us as a result of the IPO is less than $700 million and our annual revenue was less than $100 million during the most recently completed fiscal year. We may continue to be a smaller reporting company if either (i) the market value of our stock held by non-affiliates is less than $250 million or (ii) our annual revenue was less than $100 million during the most recently completed fiscal year and the market value of our stock held by non-affiliates is less than $700 million. If we are a smaller reporting company at the time, we cease to be an emerging growth company, we may continue to rely on exemptions from certain disclosure requirements that are available to smaller reporting companies. Specifically, as a smaller reporting company we may choose to present only the two most recent fiscal years of audited financial statements in our Annual Report on Form 10-K and, similar to emerging growth companies, smaller reporting companies have reduced disclosure obligations regarding executive compensation ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Not required for smaller reporting companies. ITEM 4. CONTROLS AND PROCEDURES Evaluation of Disclosure Controls and Procedures As required by Rule 13a-15(b) under the Exchange Act, our management, including our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this Quarterly Report on Form 10-Q. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of the end of the period covered by this Quarterly Report on Form 10-Q, our disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms and to provide reasonable assurance that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer. Changes in Internal Control over Financial Reporting There were no changes in our internal control over financial reporting identified in connection with the evaluation required by Rule 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during the period covered by this Quarterly Report on Form 10-Q that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. Inherent Limitations on Effectiveness of Controls Our management, including our Chief Executive Officer and Chief Financial Officer, do not expect that our disclosure controls or our internal control over financial reporting will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been or would be detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by management override of the controls. The design of any system of controls is also based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected. 24 PART II — OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS We are not currently a party to any material legal proceedings. From time to time, we may become involved in legal proceedings arising in the ordinary course of our business. Regardless of outcome, litigation can have an adverse impact on us due to defense and settlement costs, diversion of management resources, negative publicity, reputational harm and other factors. ITEM 1A. RISK FACTORS Factors that could cause our actual results to differ materially from those in this Quarterly Report are any of the risks described in the Prospectus for our IPO filed with the SEC on April 15, 2022. Any of these factors could result in a significant or material adverse effect on our results of operations or financial condition. Additional risk factors not presently known to us or that we currently deem immaterial may also impair our business or results of operations. As of the date of this Quarterly Report, there have been no material changes to the risk factors disclosed in the Prospectus for our IPO filed with the SEC on April 15, 2022. We may disclose changes to such factors or disclose additional factors from time to time in our future filings with the SEC. ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS Recent Sale of Unregistered Equity Securities No unregistered equity securities were issued during the period ended June 30, 2022 except for the 35,000 shares issued in connection with services provided to the Company. In connection with the completion of the IPO we repaid the $2,000,000 Notes Payable and settled the Contingent Stock liability by issuing 235,295 shares of common stock. Further, the Company issued 235,295 warrants to the Purchasers in connection with the Note Purchase agreement. Use of Proceeds On April 13, 2022, our Registration Statement on Form S-1 (No. 333-263715) was declared effective by the SEC pursuant to which we issued and sold an aggregate of 3,750,000 units, 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, we granted Aegis Capital Corp., as underwriter a 45-day over-allotment option to purchase up to 15% of the number of shares included in the units sold in the offering, and/or additional warrants equal to 15% of the number of Warrants included in the units sold in the offering, in each case solely to cover over-allotments, which the Aegis Capital Corp. partially exercised with respect to 1,125,000 warrants on April 19, 2022. No payments for such expenses were made directly or indirectly to (i) any of our officers or directors or their associates, (ii) any persons owning 10% or more of any class of our equity securities or (iii) any of our affiliates. There has been no material change in the planned use of proceeds from our initial public offering from that described in the Prospectus. 25 ITEM 6. EXHIBITS Exhibit Number Description 10.1 * Employment Agreement between the Company and Alan R. Blackman dated August 1, 2022. 31.1* Certification of Co-Chief Executive Officers (Principal Executive Officer) Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 31.2* Certification of Chief Financial Officer (Principal Financial and Accounting Officer) Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 32.1** Certification of Co-Chief Executive Officers (Principal Executive Officer) Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 32.2** Certification of Chief Financial Officer (Principal Financial and Accounting Officer) Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 101.INS Inline XBRL Instance Document 101.SCH Inline XBRL Taxonomy Extension Schema Document 101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document 101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document 101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document 101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document 104* Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101) * Filed herewith. 26 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized, on this 25 day of May, 2022. SHARPS TECHNOLOGY, INC. August 15, 2022 /s/ Robert M. Hayes Robert M. Hayes Chief Executive Officer and Director (Principal Executive Officer) August 15, 2022 /s/ Andrew R. Crescenzo Andrew R. Crescenzo Chief Financial Officer (Principal Financial Officer) 27