SkyAI, Inc. 10-K

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations The following discussion and analysis summarizes the significant factors affecting the consolidated operating results, financial condition, liquidity and cash flows of our Company as of and for the periods presented below. The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our audited financial statements and notes included in this Annual Report on Form 10-K as of and for the years ended December 31, 2025 and 2024. Unless the context requires otherwise, references in this Annual Report on Form 10-K to “we,” “us,” and “our” refer to Sharps Technology, Inc. Forward-Looking Statements The information in this discussion contains forward-looking statements and information within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act, which are subject to the “safe harbor” created by those sections. These forward-looking statements include, but are not limited to, statements concerning our strategy, future operations, future financial position, future revenues, projected costs, prospects and plans and objectives of management. The words “anticipates,” “believes,” “estimates,” “expects,” “intends,” “may,” “plans,” “projects,” “will,” “would” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. We may not actually achieve the plans, intentions, or expectations disclosed in our forward-looking statements and you should not place undue reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements that we make. These forward-looking statements involve risks and uncertainties that could cause our actual results to differ materially from those in the forward-looking statements, including, without limitation, the risks set forth in our filings with the SEC. The forward-looking statements are applicable only as of the date on which they are made, and we do not assume any obligation to update any forward-looking statements . Overview Since our inception in 2017 and through the fourth quarter of 2022, we devoted substantially all of our resources to the research and development of our safety syringe products. Commencing in the fourth quarter of 2022 we started building inventory of syringe products. We commenced generating syringe revenues in 2025. In October 2025, we discontinued R&D and the manufacture of syringe products, and any future inventory to be marketed will be sourced from third-party manufacturers. For the year 2025, we reported a net loss of $282.5M, primarily resulting from stock compensation charges, unrealized losses on our Solana holdings and asset impairments. For the year ending December 31, 2025, the Company used cash in operations of $10.7M. The Company’s addition of the business strategy with digital assets resulted in an investment in Digital Assets at a fair market value of $250.1M and current cash of $10.4M at December 31, 2025. We classify our revenues as net revenues, cost of goods sold and gross margin/loss from our Medical Device segment and staking revenue from Digital Assets segment. Operating expenses include transaction expenses relating to digital asset activities, research and development from medical device packaging and selling, general and administrative expenses related to both of our segments and our corporate office. We maintain a corporate office located in Melville, New York, US and foreign employees and consultants work remotely and will continue to do so indefinitely. 33 Products, Marketing and Sales We continue to be in discussions with healthcare companies and distributors for sales of our existing inventory of disposable syringe products. We continue to market these products to prospective customers, which include foreign governments, hospitals and healthcare groups as opportunities present themselves. Research and Development Substantially all of our research and development expenses to date have been incurred in connection with our syringe products. As a result of the Settlement Agreement (See Recent Developments), the Company will no longer be engaging in research and development activities. Recent Developments Formation of Treasury Oversight Committee We have adopted a treasury policy (the “Treasury Policy”) under which the principal holding in our treasury reserve on the balance sheet is allocated to digital assets, starting with Solana (“SOL”). Our Board of Directors (the “Board”) approved updates to our Treasury Policy on December 20, 2025, authorizing the formation of the Treasury Oversight Committee. As of December 31, 2025, the Company held over 2.0M SOL. Settlement of Outstanding Litigations and Spinoff of Hungarian Subsidiary Subsequent to the announcement of the Settlement Agreement terms on August 21, 2025, the Company adopted a new strategy as a medical device sales and distribution enterprise engaged in the marketing and distribution of syringe products other medical devices and would no longer be performing research, design, and manufacturing activities. On October 6, 2025, the Company entered into a confidential settlement agreement and release (the “Settlement Agreement”) whereby the Company and the Parties have agreed to unconditionally and irrevocably release and discharge each other and their respective representatives from and against any and all claims alleged in the Litigation (the “Settlement”). Pursuant to the Settlement Agreement, the Company entered into definitive agreements, including a bill of sale, assignment and assumption agreement providing for the transfer by the Company to the other party of certain assets, and a contract for the transfer of business share providing for the assignment by the Company of all of the Company’s right, title and interest in and to the issued and outstanding shares of Safegard Medical Kft, our Hungarian subsidiary. In addition, the Company executed agreements for the transfer of certain patents and registered trademarks, along with the related goodwill associated therewith. The Settlement Agreement and other definitive agreements closed on October 14, 2025. Share Repurchase Program On October 2, 2025, the Board approved a share repurchase program (the “2025 Repurchase Program”) providing for the repurchase of up to $100,000,000 of the Company’s outstanding shares of Common Stock. The 2025 Repurchase Program enables the Company to repurchase its shares in the open market and in negotiated transactions. The Repurchase Program does not obligate the Company to repurchase shares of Common Stock and the specific timing and amount of repurchases will vary based on available capital resources and other financial and operational performance metrics, market conditions, securities law limitations, and other factors. 34 In connection with the 2025 Repurchase Program, on October 6, 2025, the Company entered into an Open Market Share Repurchase Agreement (the “Repurchase Agreement”) with Cantor (the “Broker”) whereby the Broker has agreed to act as a non-exclusive agent on behalf of the Company to repurchase shares of Common Stock in the open market pursuant to Rule 10b-18 of the Securities Exchange Act of 1934, as amended. The Repurchase Agreement will continue in effect until terminated by either the Company or the Broker, with or without cause, upon written notice to the other party. The Company will pay Broker a commission at a rate of $0.02 for each share of Common Stock repurchased pursuant to the Repurchase Agreement. Amended and Restated Bylaws On January 15, 2026, the Board approved and adopted the Amended and Restated Bylaws of the Company (the “Bylaws”) to update certain procedures and make various technical and conforming changes. The Bylaws were effective immediately and include, among other things, the following changes (the “Amendments”): ● Clarify and update provisions to require that stockholder actions be taken at duly called meetings; ● Adopt advance notice requirements for stockholder proposals and director nominations; and ● Adopt a Nevada exclusive forum provision for certain actions. The foregoing description of the Bylaws and the Amendments does not purport to be complete and is qualified in its entirety by the terms and conditions of the Bylaws, a copy of which is attached hereto as Exhibit 3.5 and is incorporated herein by reference. 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 fair market value adjustments, based on either the trading price or fair market value of outstanding warrants, for those classified as liabilities, could impact the operating results in the reporting periods. Further, the market volatility of our Investments in digital assets could impact the operating results in the reporting periods. Nature of Business Sharps Technology, Inc. is a medical device sales and distribution enterprise focused on the marketing and distribution of syringe products, including the Securgard syringe product line and related drug-delivery systems. The Company commenced generating initial revenue in the quarter ended June 30 2025. The Company intends to continue its distribution platform with established third-party manufacturers. Sharps Technology is committed to maintaining compliance with all applicable regulatory and quality standards governing the marketing and distribution of medical devices, including those established by the U.S. Food and Drug Administration (FDA) and comparable international authorities. On August 24, 2025, the Company adopted a digital asset treasury strategy focused on accumulating SOL, the native digital asset of the Solana blockchain. The Company has recently begun to explore strategic acquisitions and/or investments globally. To this goal, our treasury strategy and engineering teams continue to analyze these opportunities and develop our own digital products. We have been and continue to prioritize long-term growth of the Company’s business, potentially using proceeds from the sale of SOL to fund our expansion plans described above. 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. Summary of Significant Accounting Policies Our significant accounting policies are described in Note 2 of the accompanying annual financial statements. 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). 35 Results of Operations Comparison of the Years Ended December 31, 2025 and, 2024. TWELVE MONTHS ENDED DECEMBER 31, 2025 2024 Net Revenue 204,120 - Cost of goods sold 198,576 - Cost of goods sold - inventory reserve 418,869 - Total cost of goods sold 617,445 - Gross Margin (Loss) (413,325 ) - Staking Revenue, Net 6,805,009 - Operating expenses: Warrant issuance – related party 101,331,513 - Consulting fees – related parties 3,433,333 - Selling, general and administrative 16,052,069 5,036,366 Research and development 198,762 531,233 Unrealized loss on digital assets 152,952,163 - Realized loss on digital assets 1,286,284 Digital asset transaction expenses 872,934 - Total Operating Expenses 276,127,058 5,567,599 Loss from Operations (269,735,374 ) (5,567,599 ) Other Income (Expense): Interest income (expense), net (416,660 ) (1,664,712 ) Fair market value adjustment on warrants 4,803,098 3,016,936 Realized loss on derivatives (4,986,500 ) - Other expense - (1,009,891 ) Total Other Income (Expense) (600,062 ) 342,333 Loss Before Provision for Taxes (270,335,436 ) (5,225,266 ) Tax Provision - - Loss from Continuing Operations (270,335,436 ) (5,225,266 ) Discontinued Operations: Loss from discontinued operations (11,220,342 ) (4,100,935 ) Loss on disposal (1,078,348 ) - Income tax benefit 132,000 30,000 Loss from Discontinued Operations (12,166,690 ) (4,070,935 ) Net Loss (282,502,126 ) (9,296,201 ) Product Net Revenue/Gross Margin For the year ended December 31, 2025, we recognized revenues of $204,120 related to the Sologard syringes sold under a customer agreement. There was no product revenue in 2024. For the year ended December 31, 2025, an inventory reserve of $418,869 was recorded to reduce the carrying value of the inventory of continuing operations to its net realizable value. The gross margin was $5,544 before this reserve. The net realizable value adjustment related to the inventory at our Hungarian subsidiary that was sold is included in the results of discontinued operations. Staking Revenue – net For the year ended December 31, 2025, the Company recognized net staking revenue of $6,805,009 resulting from the digital treasury strategy implemented during the third quarter. As of December 31, 2025, approximately 95% of the Company’s SOL holdings were staked. Transaction expense – digital assets For the year ended December 31, 2025, $872,934 in transaction expenses relate to custodian and exchange for digital asset investments, including a significant fee in connection with the transfer of locked SOL contributed in-kind as part of the August 2025 PIPE transaction. 36 Unrealized and realized loss on digital assets During the year ended December 31, 2025 the Company recognized $152,952,163 in unrealized and $1,286,284 in realized losses on investments in digital assets. The unrealized loss resulted from the decrease from an average cost basis of our SOL investments of approximately $198 to the market value of $124 at December 31, 2025. Research and Development For the year ended December 31, 2025, research and development expenses, which relate to the Medical Device segment, decreased to $198,762 compared to $531,233 for the year ended December 31, 2024. Substantially all of our R&D expenses to date have been incurred in connection with our syringe products. The Company curtailed its Medical Device activities in 2025 and does not intend to engage in R&D and manufacturing activities going forward related to medical devices. Selling, General and Administrative For the year ended December 31, 2025, Selling, General and Administrative expenses were $16,052,069 as compared to $5,036,366 for the year ended December 31, 2024. The increase of $11,015,703 was primarily related to (a) stock compensation increased by $5.6 million (b) payroll and consulting fees increased by approximately $3 million, primarily due to increased staffing levels for the Digital Asset Treasury build out and severance paid to for the former Chief Executive Officer and increased public company expenses following our adoption of the digital asset strategy. Warrant issuance – related party This amount of $101,331,513 relates to warrants issued to our Strategic Advisor. See Note 15 to the Consolidated Financial Statements. Consulting fees – related parties This amount of $3,433,333 includes consulting fees of $3,333,333 to Sol Edge and marketing fees of $100,000 to Sol Markets. See Note 15 to the Consolidated Financial Statements. Impairment of long-lived fixed assets During the years ended December 31, 2025 and December 31, 2024, the Company recorded no asset impairment on fixed assets related to our continuing medical device operations. Asset impairment adjustments of approximately $7.5 million and $1.8 million respectively were recorded related to the Company’s manufacturing operations. These are included in the results of discontinued operations. Interest expense, net Net interest expense was $416,660 for the year ended December 31, 2025, compared to $1,664,712 for the year ended December 31, 2024. Net interest expense decreased due to higher average cash balances in the current period directly related to the net proceeds from the 2025 offerings and repayment of the Company’s debt at the beginning of 2025 FMV Adjustment for Warrants For certain warrants classified as liabilities, the Fair Market Value (“FMV”) is required to be recorded at the date the warrants are issued and then be remeasured at each reporting date while outstanding. If the terms of the warrants are modified, the changes in fair value are recognized to other income or expense in the Consolidated Statement of Operations. For the years ended December 31, 2025 and December 31, 2024, the Company recorded FMV gain adjustments of approximately $4.8 million and $3 million respectively. (See Notes 10 and 12 to the Consolidated Financial Statements). Other income (expense) Other expense in 2024 was primarily due to the forfeiture of an escrow deposit of $1M. Liquidity and Capital Resources The Company identifies cash and equivalents, payment stablecoins, and unlocked SOL as liquidity resources. As of December 31, 2025, the Company had a cash balance of $10,382,744. As of December 31, 2024, the Company held $754,802 in cash. The Company had working capital of $14,187,484 at December 31, 2025, as compared to a working capital deficiency of $2,011,679 as of December 31, 2024. The increase in our working capital of $16,199,163 was directly impacted by the cash provided by the August 2025 PIPE. As of December 31, 2025, the Company held $250,111,125 in Digital Assets with a large portion unlocked and readily available for sale. During the year ended December 31, 2025, the Company completed offerings that provided liquidity and capital: a) Gross proceeds from the Cash Securities Purchase Agreements and Cryptocurrency Securities Purchase Agreements in August 2025 aggregated $411M, which investors paid using the following currency: USD cash of $181M, locked SOL of $137M, unlocked SOL of $7M, USDC of $62M, and USDT of $24M. The net proceeds of $403M, reported in Additional Paid in Capital, reflect placement agent fees, legal fees, and expenses of $7.5M. b) The Company issued 2.2M shares of common stock under the Sales Agreement and received net proceeds from the Sales Agreement of approximately $18.9M after fees paid to the Agents and other offering expenses totaling approximately $1 million, reflected in Additional Paid in Capital. The Company intends to maintain sufficient cash and other immediately liquid resources on hand to satisfy current obligations. 37 In 2024, the Company completed various offerings and private placements. The proceeds from such financings were used to fund working capital, to build inventory, and to fund capital expenditures and operating costs. Cash Flows Net Cash Used in Operating Activities The Company used cash of $10,990,651 and $4,401,392 in operating activities for the years ended December 31, 2025 and 2024, respectively. The increase in change in cash used in operations was principally due to the Company incurring transaction fees relating to digital assets, and higher G&A expenses primarily due to the initiation of the digital asset strategy, partially offset by lower R&D activities. Net loss from continuing operations for the year ended December 31, 2025 was $270,335,436 with approximately $260M in net non-cash adjustments. For the year ended December 31, 2024 net loss was $5,225,266 with less than $1 million in net non-cash adjustments. ● In 2025, stock-based compensation totaled $107,468,174, with $101,331,513 to a related party, a significant increase from $520,830 in 2024 ● Unrealized and realized losses on digital assets were $152,952,163 in 2025, with no digital asset activity in 2024 ● Realized losses on derivatives totaled $4,986,500 in 2025, with no such derivative activity in 2024 ● Gains on fair market value adjustments on warrants were $4,803,098 and $3,016,936 in 2025 and 2024, respectively ● 2025 had gains from non-cash net staking rewards less validator operating expenses of $6,801,179, with no such activity in 2024 Net Cash Used in Investing Activities For the year ended December 31, 2025 and 2024, the Company used cash in investing activities of $187,522,741 and $1,000,000, respectively. In 2025, the primary increase related to the purchase of digital assets of $170,519,290 and purchase of stablecoin of $17,003,451 following the August 2025 offering. Net Cash Provided by Financing Activities For the year ended December 31, 2025 and 2024, the Company provided cash from financing activities of $215,509,777 and $5,907,407, respectively. In 2025, the net proceeds of $212,102,902, were mainly from the Offering in August and the ATM Sales Agreement. This also included a repayment of the Company’s debt financing in the first quarter of 2025 of $4,222,012 as well as the proceeds from the margin loan of $7,628,888. The margin loan was paid down using approximately $4,620,000 worth of USDC during 2025. Payment Stablecoin Activities The Company first utilized payment stablecoins as part of the August PIPE, with a direct inflow of $86,104,502 between USDC and USDT contributed in-kind and an additional $17,003,451 purchased with cash from the same offering as a component of the overall deployment of these funds to digital asset custodians and ultimately the purchase of SOL. During 2025, the full amount of USDT and USDC was utilized to purchase SOL, repay the margin loan and for a payment to a related party for consulting services. Therefore, payment stablecoin balances are not part of the Company’s liquidity reserve as of December 31, 2025. Off-Balance Sheet Arrangements We do not have any off-balance sheet arrangements as defined in Regulation S-K Item 303(a)(4). 38 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. Item 7A. Quantitative and Qualitative Disclosures About Market Risk Not applicable. 39