SkyAI, Inc. 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations The following discussion and analysis summarizes the significant factors affecting the condensed 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 Quarterly Report on Form 10-Q. 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. In August 2025 we adopted a digital commodity treasury strategy focused on accumulating Solana (“SOL”), the native digital commodity of the Solana blockchain. For the three months ended March 31, 2026, we reported a net loss of approximately $86 million, primarily resulting from unrealized and realized losses on our Solana holdings of approximately $71 million and $11 million, respectively. 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 commodities segment. Operating expenses include transaction expenses relating to digital commodity 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. 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. 3 Research and Development Substantially all of our research and development expenses to date have been incurred in connection with our syringe products. Following the transfer by the Company 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, the Hungarian subsidiary in October 2025, the Company is no longer engaging in medical device related research and development activities and is limiting its medical device activity to sales and distribution. The Company is now engaging in research and development for certain potential new products. Recent Developments On January 10, 2026, we executed a short-term lease for a 3,116 square foot office facility in Shenzhen, China to serve as the temporary headquarters of our Asia-based operations. On May 2, 2026 we were able to lease a 1,467 square foot office in Hong Kong to serve as the permanent headquarters for our Asia-based operations. 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 commodities could impact the operating results in the reporting periods. Nature of Business 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. The Company 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 revenue in the quarter ended June 30 2025. As of October 6, 2025, with the ownership transfer of Safegard Medical Kft complete, the Company discontinued all design and manufacturing endeavors to focus instead solely on marketing and distribution. 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 commodity treasury strategy focused on SOL, the native digital commodity 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, using proceeds from the sale of SOL to fund operating expenses and our expansion plans. Summary of Significant Accounting Policies Our significant accounting policies are described in Note 2 of the accompanying condensed consolidated financial statements and further discussed in our annual financial statements included in our annual report on Form 10-K for the year ended December 31, 2025. 4 Results of Operations Comparison of the Three Months Ended March 31, 2026 and 2025. 2026 2025 Net Revenue $ 192,780 $ - Cost of goods sold 202,578 Gross Margin (Loss) (9,798 ) Staking Revenue, net 3,134,109 - Operating expenses: Consulting fees – related party 2,500,000 - Selling, general and administrative 5,053,320 1,364,295 Research and development 137,097 - Unrealized loss on digital commodities 70,846,202 - Realized loss on digital commodities 10,789,841 - Digital commodity transaction expenses 63,821 - Total Operating Expenses 89,390,281 1,364,295 Loss from Operations (86,265,970 ) (1,364,295 ) Other Income (Expense): Interest income (expense), net 10,038 (626,991 ) Fair market value adjustment on warrants 16,708 4,618,889 Foreign currency loss (8 ) - Other Income, net 26,738 3,991,898 Income (Loss) Before Provision for Taxes (86,239,232 ) 2,627,603 Tax Provision - - Income (Loss) from Continuing Operations (86,239,232 ) 2,627,603 Discontinued Operations: Loss from discontinued operations - (830,769 ) Income tax benefit - 132,000 Loss from Discontinued Operations - (698,769 ) Net Income (Loss) $ (86,239,232 ) $ 1,928,834 Product Net Revenue/Gross Margin For the three months ended March 31, 2026, we recognized revenues of $192,780 from the sale of the Sologard product line of syringes. There was no product revenue in the three months ended March 31, 2025. Staking Revenue – net For the three months ended March 31, 2026, the Company recognized net staking revenue of $3,134,109 resulting from the digital treasury strategy implemented during the third quarter of 2025. As of March 31, 2026, approximately 95% of the Company’s SOL holdings were staked. 5 Transaction expense – digital commodities For the three months ended March 31, 2026, $63,821 in transaction expenses relate to custodian and exchange for digital commodity investments. Unrealized loss on digital commodities During the three months ended March 31, 2026, the Company recognized $70,846,202 in unrealized loss on investments in digital commodities. The unrealized loss resulted from a decrease of the average fair market value per unit of our investments net of the reduction in the discount on our Locked SOL. Realized loss on digital commodities During the three months ended March 31, 2026, the Company recognized $10,789,841 in realized losses on investments in digital commodities. The realized loss reflected the difference between the average price of $92.89 per SOL received for the sale of 100,000 SOL and the cost basis of $200.79 from the period following the August 2025 PIPE. Research and Development For the three months ended March 31, 2026, Research and Development (“R&D”) expenses increased to $137,097 compared to none in continuing operations for the three months ended March 31, 2025. This increase resulted from new R&D activities based at the Company’s Hong Kong operation. Selling, General and Administrative For the three months ended March 31, 2026, General and Administrative (“G&A”) expenses were $5,053,320 as compared to $1,364,295 for the three months ended March 31, 2025. The increase of $3,689,025 was primarily attributable to the following factors ● An increase of approximately $2.3 million in payroll and related costs of: ○ Higher payroll of $88,319 from $423,438 in 2025 to $511,757 in 2026, ○ An increase in stock compensation expense, due to timing of option awards and vesting, of $2,185,908 from $44,300 in 2025 to $2,230,208 in 2026. ● All other G&A expenses increased approximately $1.4 million primarily due to higher professional & legal fees $441,144, insurance costs $319,128, and consulting fees $428,417. Consulting fees – related parties This amount of $2,500,000 represents consulting fees to Sol Edge. See Note 13 to the Condensed Consolidated Financial Statements. Net Interest expense (income) Net Interest income was $10,038 for the three months ended March 31, 2026, compared to interest expense of $626,991 for the three months ended March 31, 2025. Net interest changed by $637,029 due to a) interest earned on invested cash in 2026 of $29,268 as compared to $81,399 in 2025 b) interest expense of $708,390 for the accreted interest on the debt financing that originated in the third quarter of 2024 as compared to $19,229 in interest expense during first quarter of 2026. 6 FMV Adjustment for Warrants The value of the Warrants recorded as a liability requires the Fair Market Value (“FMV”) to be recorded at the date warrants are issued and then be remeasured at each reporting date while outstanding with recognition of the changes in fair value to other income or expense in the Condensed Consolidated Statement of Operations. For the three months ended March 31, 2026, and 2025 the Company recorded a FMV gain adjustment of $16,708 and $4,618,889, respectively. Liquidity and Capital Resources At March 31, 2026, and December 31, 2025, we had a cash balance of $12,320,547 and $10,382,745, respectively. The Company had working capital of $16,160,964 at March 31, 2026 as compared to a working capital of $ 14,187,484 as of December 31, 2025. The increase in our working capital of $1,973,480, after net proceeds from the sale of Solana in 2026 of $9,288,716, was primarily related to the use of cash of $2,677,122 in operations, and cash used to repay the margin loan of $3,084,931. The Company intends to finance its future development and commercialization activities and its working capital needs with a combination of the sale of a portion of its Solana holdings, the sale of equity securities and/or with additional funding from other traditional financing sources until such time that funds provided by operations are sufficient to fund working capital requirements. The Company is debt free and intends to maintain sufficient cash and other immediately liquid resources on hand to satisfy current obligations. Cash Flows Net Cash Used in Operating Activities The Company used cash of $2,677,122 and $1,417,691 in operating activities for the three months ended March 31, 2026 and 2025, respectively. The change in cash used was principally due to the Company incurring higher G&A expenses and new R&D activities, as described above, during the three months ended March 31, 2026. Net Cash Used in Investing Activities For the three months ended March 31, 2026 and 2025, the Company provided cash from investing activities of $9,288,716 and none, respectively. In the first quarter of 2026, 100,000 SOL were sold at an average price of $92.89 per SOL, generating a realized loss on digital commodities of $10,789,841. Net Cash Provided by Financing Activities For the three months ended March 31, 2026 and 2025, the Company used and provided cash from financing activities of $4,673,792 and $13,953,031 respectively. In the 2025 period, the cash provided was from the $18.2 million in net proceeds from the Offerings in January 2025 offset by the debt repayment of $4.2 million. In the 2026 period, the cash was used for the repayment of the margin loan $3,084,931 and the share repurchase program $1,588,861. 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). 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. 7 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 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Not required for smaller reporting companies.