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, 2024 and 2023. Unless the context requires otherwise, references in this Annual Report on Form 10-K to “we,” “us,” and “our” refer to Sharps Technology, Inc. 20 Forward-Looking Statements The information in this discussion contains forward-looking statements and information within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act, which are subject to the “safe harbor” created by those sections. These forward-looking statements include, but are not limited to, statements concerning our strategy, future operations, future financial position, future revenues, projected costs, prospects and plans and objectives of management. The words “anticipates,” “believes,” “estimates,” “expects,” “intends,” “may,” “plans,” “projects,” “will,” “would” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. We may not actually achieve the plans, intentions, or expectations disclosed in our forward-looking statements and you should not place undue reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements that we make. These forward-looking statements involve risks and uncertainties that could cause our actual results to differ materially from those in the forward-looking statements, including, without limitation, the risks set forth in our filings with the SEC. The forward-looking statements are applicable only as of the date on which they are made, and we do not assume any obligation to update any forward-looking statements . Overview Since our inception in 2017 and through the fourth quarter of 2022, we have devoted substantially all of our resources to the research and development of our safety syringe products Commencing in the fourth quarter of 2022 we started building inventory of syringe products. To date, we have generated no revenue. We have incurred net losses of $9,296,202 and $9,841,638 for the years ended December 31, 2024 and 2023, respectively. Substantially all of our net losses resulted from costs incurred in connection with our research and development efforts, payroll and consulting fees, stock compensation and general and administrative costs associated with our operations, including costs incurred for being a public company since April 14, 2022. See below Initial Public Offering, Liquidity and Capital Resources and Notes to Consolidated Financial Statements We classify our operating expenses as research and development, and general and administrative expenses. We maintain a corporate office located in Melville, New York, but employees and consultants in the US work remotely and will continue to do so indefinitely. In June 2020, in connection with the agreement to acquire Safegard, a syringe manufacturing facility in Hungary, which was completed on July 6, 2022, we were contractually provided the exclusive use of the facility for research and development and testing in exchange for payment of the seller’s operating costs, including among others, use of Safegard’s work force, utility costs and other services. To remain competitive, we must build inventory. We began this process in the 4 th Quarter of 2022. To secure orders we require commercial quantities of inventory with delivery expected shortly after ordwer are. 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 Substantially all of our research and development expenses to date have been incurred in connection with our syringe products. We expect our research and development expenses to increase for the foreseeable future as we continue to enhance our products to meet the market requirements for our Sharps syringe product line for its various intended uses throughout the world. 21 Initial Public Offering On April 13, 2022, our registration statement on Form S-1 (File No. 333-263715), as amended, related to our IPO was declared effective by the SEC, and our common stock and warrants began trading on the Nasdaq Capital Market, or Nasdaq, on April 14, 2022. Our IPO closed on April 19, 2022. Net proceeds from the IPO were approximately $14.2 million. In connection with the closing of the IPO, the Company used net proceeds to repay the Note Payable of $2 million. Recent Developments Offering On January 29, 2025, the Company closed on an offering the (“2025 Offering”) and received gross proceeds of approximately $20.0 million, before deducting underwriting fees and other offering expenses payable by the Company. The net proceeds were approximately $18.2M, of which $4.2M was used to repay the outstanding Notes. The 2025 Offering consisted of 14,285,714 units consisting of 9,029,814 Common Units with gross proceeds of $12.6M and 5,255,900 Pre-Funded Units with gross proceeds of $7.4M, with each unit consisting of one share of Common Stock. In addition, each unit includes; (i) one Series A Registered Common Warrant to purchase one share of Common Stock per warrant at an exercise price of $1.75 (“2025 Series A Warrant”) and (ii) one Series B Registered Common Warrant to purchase one share of Common Stock per warrant at an exercise price of $1.75 or pursuant to an alternative cashless exercise option (“2025 Series B Warrant”), collectively, the 2025 Warrants. The public offering price per Common Unit was $1.40 or $1.3999 for each Pre-Funded Unit, which is equal to the public offering price per Common Unit sold in the offering minus an exercise price of $0.0001 per Pre-Funded Warrant. The Pre-Funded Warrants are immediately exercisable and may be exercised at any time until exercised in full. Immediately after closing 4,980,900 of the Pre-funded units were exercised and the Company received $498 in proceeds. The 2025 Series A Warrants are exercisable immediately and expire 60 months after stockholder approval. The number of securities issuable under the 2025 Series A Warrants is subject to adjustment. The 2025 Series B Warrants are exercisable immediately and expire 30 months after stockholder approval. The number of securities issuable under the 2025 Series B Warrants is subject to adjustment. The Company granted Aegis Capital Corp. (“Aegis”) an overallotment, being a 45-day option to purchase additional shares of Common Stock and/or Warrants of (i) up to 15.0% of the number of shares of Common Stock sold in the offering, (ii) up to 15.0% of the number of 2025 Series A Warrants sold in the offering and (iii) up to 15.0% of the number of 2025 Series B Warrants sold in the offering. The purchase price per additional share of Common Stock is equal to the public offering price of one Common Unit (less $0.00001 allocated to each full Warrant), less the underwriting discount. The purchase price per additional 2025 Warrant is $0.00001. On January 29, 2025, Aegis exercised its over-allotment option with respect to 2,142,857, 2025 Series A Warrants and 2,142,857, 2025 Series B Warrants and the Company received net proceeds of approximately $43. The 2025 Offering was made pursuant to an effective registration statement on Form S-1 (No. 333-284237) previously filed with the U.S. Securities and Exchange Commission (SEC) and declared effective by the SEC on January 27, 2025. Regulation A Offering On December 5, 2024, the Company, entered into subscription agreements with certain institutional investors, pursuant to which the Company agreed to issue and sell to the investors 248,430 shares (the “Shares”) of Common Stock, par value $0.0001 per share of the Company at a price of $1.95 per share for gross proceeds to the Company of $484,438 before deducting placement agent fees and commissions of $84,671 with net proceeds, after reflecting par value, have been recorded in Additional Paid in Captial of $399,742. The Shares issued in the offering were offered at-the-market under Nasdaq rules and pursuant to the Company’s Form 1-A (the “Offering Statement”), initially filed by the Company with the Securities and Exchange Commission (the “SEC”) under the Securities Act of 1933 (the “Securities Act”), as most recently amended on November 18, 2024, and qualified on December 3, 2024. Private Placement On September 20, 2024, the Company entered into a securities purchase agreement (the “Securities Purchase Agreement”) and a Senior Secured Note (the “Note”) for an aggregate principal amount of $4,375,000, including OID interest of $875,000 maturing on January 31, 2025, with certain purchasers (the “Purchasers”), and the issuance of approximately 259,091 (pre reverse - 5,700,006 ) unregistered shares of the Company’s Common Stock. The aggregate gross proceeds to the Company were approximately $3.5 million, before deducting fees to the placement agent and other offering expenses payable by the Company of $514,700 and an escrow deposit of $250,000 required until certain security liens are filed. The Note and the common stock were recorded at the relative fair values of $2.6M and $852,000, respectively, in accordance with ASC 470-20-25-2. The aforementioned expenses were allocated based on the aforementioned fair values as a reduction to the carrying amount of the debt and a reduction of the equity in accordance with ASC 505-10. For the year ended December 31, 2024, the Company recorded accreted interest and fees of 1,705,014 In connection with the Securities Purchase Agreement and Note, the Company entered into a Registration Rights Agreement with the Purchasers (the “Registration Rights Agreement”), requiring the Company to file a resale registration statement (the “Registration Statement”) with the U.S. Securities and Exchange Commission (the “Commission”) to register the unregistered shares of Common Stock. within forty-five (45) calendar days following the filing date, which is thirty (30) days after the closing date. The Company filed the required resale registration statement on October 23, 2024. Distribution Agreement On March 4, 2024 (the “Effective Date”) the Company entered into a cooperative sales and distribution agreement (the “Agreement) with Roncadelle Operations s.r.l.. The Agreement was effective as of the Effective Date for the initial period of one (1) year (the “Initial Term”). Upon expiration of the Initial Term, the term of the Agreement shall automatically renew for additional successive one year terms, unless either party provides written notice of non-renewal at least ninety (90) days prior to the end of the then-current term, unless any renewal term is terminated earlier pursuant to the terms of the Agreement or applicable law. On February 5, 2025, the parties reassessed the Agreement and mutually agreed to terminate the Agreement. The Company obtained no economic benefit with the Agreement and has other distribution efforts. The Company incurred no liability on terminationof the Agreement. Nasdaq Compliance On March 12, 2025, the Company received a notification letter from The Nasdaq Stock Market advising that, for 30 consecutive business days preceding the notification letter, the Company did not meet the minimum $1.00 per share bid price requirement for continued inclusion on The Nasdaq Capital Market pursuant to Nasdaq Marketplace Listing Rule 5550(a)(2). Normally, a company would be afforded a 180-calendar day period to demonstrate compliance with the Minimum Bid Price Requirement. However, pursuant to Listing Rule 5810(c)(3)(A)(iv) the Company is not eligible for any compliance period specified in Rule 5810(c)(3)(A) because the Company has effected a reverse stock split over the prior one-year period or has effected one or more reverse stock splits over the prior two-year period with a cumulative ratio of 250 shares or more to one. Accordingly, the Company’s securities are subject to delisting from Nasdaq. The Company timely requested an appeal of the determination and is awaiting the notice of the hearing date. 22 Critical Accounting Policies and Significant Judgments and Estimates This management’s discussion and analysis of our financial condition and results of operations is based on our financial statements, which we have prepared in accordance with accounting principles generally accepted in the United States. The preparation of our financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of our financial statements, as well as the reported revenues and expenses during the reported periods. We evaluate these estimates and judgments on an ongoing basis. We base our estimates on historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. The FMV adjustments, based on the trading price of outstanding warrants classified as liabilities, could impact the operating results in the reporting periods. Nature of Business Nature of Business Sharps Technology, Inc. (“Sharps” or the “Company”) is a medical device company that has designed and patented various safety syringes and has note safety syringe products that were acquired and is seeking commercialization by manufacturing and distribution of its products. The accompanying consolidated financial statements include the accounts of Sharps Technology, Inc. and its wholly owned subsidiary, Safegard Medical, Inc, collectively referred to as the “Company.” All intercompany transactions and balances have been eliminated. The Company’s fiscal year ends on December 31. On April 13, 2022, the Company’s Initial Public Offering was deemed effective with trading commencing on April 14, 2022. The Company received net proceeds of $14.2 million on April 19, 2022. (See Capital Structure and Note 8 to the Consolidated Financial Statements) Summary of Significant Accounting Policies Basis of Presentation The accompanying consolidated financial statements have been prepared by the Company in accordance with generally accepted accounting principles (“GAAP”) in the United States (“U.S.”) and are expressed in U.S. dollars. Segment Reporting The Company operates as one operating segment. The Company’s chief operating decision maker (“CODM”) is its Chief Executive Officer and Chief Financial Officer. The CODM manages operations and business as one operating segment for the purposes of allocating resources, making operating decisions and evaluating financial performance. Use of Estimates The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. Cash and Cash Equivalents The Company considers all highly liquid investments purchased with an original or remaining maturity of three months or less at the date of purchase to be cash equivalents. Cash and cash equivalents are maintained with various financial institutions. At December 31, 2024 and 2023, the Company had no cash equivalents. Inventories The Company values inventory at the lower of cost (average cost) or net realizable value. Work-in-process and finished goods inventories consist of material, labor, and manufacturing overhead. Net realizable value is the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. A reserve is established for any excess or obsolete inventories, or they may be written off. At December 31, 2024 and 2023, inventory is comprised of raw materials, components and finished goods. 23 Fair Value Measurements Fair Value Measurements and Disclosures, require an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 establishes a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. ASC 820 prioritizes the inputs into three levels that may be used to measure fair value. Level 1 Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities. Valuations are based on quoted prices that are readily and regularly available in an active market and do no entail a significant degree of judgment. Level 2 Level 2 applied to assets or liabilities for which there are other than Level 1 observable inputs such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market date. Level 2 instruments require more management judgment and subjectivity as compared to Level 1 instruments. For instance: determining which instruments are most similar to the instrument being priced requires management to identify a sample of similar securities based on the coupon rates, maturity, issuer credit rating and instrument type, and subjectively select an individual security or multiple securities that are deemed most similar to the security being priced; and determining whether a market is considered active requires management judgment. Level 3 Level 3 applied to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities. The determination for Level 3 instruments requires the most management judgment and subjectivity. Fixed Assets Fixed assets are stated at cost. Expenditures for maintenance and repairs are charged to operations as incurred. The Company’s fixed assets consist of land, building, machinery and equipment, molds and website. Depreciation is calculated using the straight-line method commencing on the date the asset is operating in the way intended by management over the following useful lives: Building – 20 years, Machinery and Equipment – 3 -10 years and Website – 3 years. The expected life for Molds is based lesser of the number of parts that will be produced based on the expected mold capability or 5 years. Impairment of Long-Lived Assets Long-lived assets are reviewed annually for impairment or whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability is measured by comparison of the carrying amount of an asset group to the future net undiscounted cash flows that the assets are expected to generate. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the projected discounted future net cash flows arising from the asset. 24 Identified Intangible Assets Identified Intangible Assets When applicable, the Company’s identified intangible assets are amortized on a straight-line basis over their estimated useful lives. The Company makes judgments about the recoverability of finite-lived intangible assets whenever facts and circumstances indicate that the useful life is shorter than originally estimated or that the carrying amount of assets may not be recoverable. If such facts and circumstances exist, the Company assesses recoverability by comparing the projected undiscounted net cash flows associated with the related asset or group of assets over their remaining lives against their respective carrying amounts. Impairments, if any, are based on the excess of the carrying amount over the fair value of those assets. If the useful life is shorter than originally estimated, the Company would accelerate the rate of amortization and amortize the remaining carrying value over the new shorter useful life. The Company evaluates the carrying value of indefinite-lived intangible assets on an annual basis, and an impairment charge would be recognized to the extent that the carrying amount of such assets exceeds their estimated fair value. Stock-based Compensation Expense The Company measures its stock-based awards made to employees based on the estimated fair values of the awards as of the grant date. For stock option awards, the Company uses the Black-Scholes option-pricing model. The stock-based awards are granted at an exercise price that represents the fair market value of the underlying common stock based on the stock price, at which the Company sold stock in private placements completed by the Company, during the period such options were issued. Stock-based compensation expense is recognized over the requisite service period and is based on the value of the portion of stock-based payment awards that is ultimately expected to vest. The Company recognizes forfeitures of stock-based awards as they occur on a prospective basis. Stock-based compensation expense for awards granted to non-employees as consideration for services received is measured on the date of performance at the fair value of the consideration received or the fair value of the equity instruments issued, whichever can be more reliably measured. Derivative Instruments The Company accounts for common stock warrants as either equity-classified or liability-classified instruments based on an assessment of the specific terms of the warrants and applicable authoritative guidance in Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC 480”), Distinguishing Liabilities from Equity (“ASC 480”) and ASC 815, Derivatives and Hedging (“ASC 815”). The assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and meet all of the requirements for equity classification under ASC 815, including whether the warrants are indexed to the Company’s own stock and whether the holders of the warrants could potentially require net cash settlement in a circumstance outside of the Company’s control, among other conditions for equity classification. This assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent quarterly period end date while the warrants are outstanding. At their issuance date and as of December 31, 2024, the warrants were accounted for as liabilities as these instruments did not meet all of the requirements for equity classification under ASC 815-40 based on the terms of the aforementioned warrants. The resulting warrant liabilities are re-measured at each balance sheet date until their exercise or expiration, and any change in fair value is recognized in the Company’s Consolidated Statement of Operations (See Notes 8 and 10 to the Consolidated Financial Statements). 25 Basic and Diluted Loss Per Share The Company computes net loss per share in accordance with ASC 260, Earnings per Share. ASC 260 requires presentation of both basic and diluted earnings per share (EPS) on the face of the consolidated statements of operations. Basic EPS is computed by dividing net income (loss) available to common stockholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Basic EPS includes in 2023 153,703 of pre-funded warrants (see Note 8). Diluted EPS gives effect to all dilutive potential common shares outstanding during the period using the treasury stock method and convertible preferred stock using the if-converted method. In computing diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all dilutive potential shares if their effect is anti-dilutive. As of December 31, 2024, there were 852,994 stock options and warrants that could potentially dilute basic EPS in the future that were not included in the computation of diluted EPS because to do so would have been anti-dilutive for the periods presented. Income Taxes The Company must make certain estimates and judgments in determining income tax expense for financial statement purposes. These estimates and judgments are used in the calculation of tax credits, tax benefits, tax deductions, and in the calculation of certain deferred taxes and tax liabilities. Significant changes to these estimates may result in an increase or decrease to the Company’s tax provision in a subsequent period. The provision for income taxes was composed of the Company’s current tax liability and changes in deferred income tax assets and liabilities. The calculation of the current tax liability involves dealing with uncertainties in the application of complex tax laws and regulations and in determining the liability for tax positions, if any, taken on the Company’s tax returns in accordance with authoritative guidance on accounting for uncertainty in income taxes. Deferred income taxes are determined based on the differences between the financial reporting and tax basis of assets and liabilities. The Company must assess the likelihood that it will be able to recover the Company’s deferred tax assets. If recovery is not likely on a more-likely-than-not basis, the Company must increase its provision for income taxes by recording a valuation allowance against the deferred tax assets that it estimates will not ultimately be recoverable. However, should there be a change in the Company’s ability to recover its deferred tax assets, the provision for income taxes would fluctuate in the period of such change. Contingencies Contingencies are evaluated and a liability is recorded when the matter is both probable and reasonably estimable. Gain contingencies are evaluated and not recognized until the gain is realizable or realized. Off-Balance Sheet Arrangements During the periods presented, we did not have any off-balance sheet arrangements as defined under Regulation S-K Item 303(a)(4). Results of Operations Comparison of the Years Ended December 31, 2024 and, 2023. Year Ended December 31, 2024 December 31, 2023 Change Change % Research and development $ 2,471,762 $ 1,605,547 $ 866,215 54 % General and administrative 7,154,948 8,521,103 (1,366,155 ) -16 % Net Interest expense (income) 1,664,712 (138,118 ) 1,802,830 -1,305 % FMV gain adjustment for derivatives (3,016,936 ) (169,583 ) (2,847,353 ) 1,679 % Foreign currency Loss 41,825 44,463 (2,638 ) -6 % Other Expense 1,009,891 8,226 1,001,665 12,177 % Deferred Tax (Benefit) ( 30,000 ) (30,000 ) 0 0 % Net loss $ 9,296,202 $ 9,841,638 $ (545,436 ) -6 % 26 Revenue The Company has not generated any revenue to date. Research and Development For the year ended December 31, 2024, Research and Development (“R&D”) expenses increased decreased to $2,471,762 compared to $1,605,547 for the year ended December 31, 2023. The increase of $866,215 was due to a) an increase in asset machinery impairments in 2024 of $1,210,000, representing an impairment of machinery of $1,770,000 in 2024 as compared to an asset impairment of $560,000 in 2023 b) lower depreciation expense of $178,100 and d.) lower R&D labor, consulting and materials of $165,600 given the shift from R&D activities to manufacturing. General and Administrative For the year ended December 31, 2024, General and Administrative (“G&A”) expenses were $7,154,948 as compared to $8,521,103 for the year ended December 31, 2023. The decrease of $1,366,155 was primarily attributable to a decrease of $187,100 in payroll and related of: i) payroll and consulting fees higher by $245,100 from $3,163,400 in 2023 to $3,408,500 in 2024, primarily due to increased amounts of payroll associated with higher average staffing levels throughout the year and higher usage of various consulting services offset by ii) a decrease in stock compensation expense, due to timing of option awards and vesting, of approximately $433,000 from $950,000 in 2023 to $517,000 in 2024. All other G&A expenses decreased $1,179,000 primarily due to; lower marketing, public company and investor relation costs ($549,900), a settlement in 2023 for ($375,000), lower travel ($105,000), lower insurance costs ($117,500), lower rent ($36,800), lower computer costs ($21,600), lower professional fees ($11,000), lower general operating costs ($74,400), lower patent fees ($9,700), partially offset by higher board costs ($52,000) and depreciation ($69,900). Net Interest expense (income) Net Interest expense, was $1,664,712 for the year ended December 31, 2024, compared to interest income of $138,118 for the year ended December 31, 2023. Net Interest changed, by $1,802,829 due to a) interest earned on invested cash in 2024 of $40,303 as compared to $138,118 in 2023 b) higher interest expense of $1,705,014 for the accreted interest on the debt financing that originated in the third quarter of 2024. Other Other expenses increased $1,001,665 primarily due to a forfeiture of a $1M escrow deposit associated with an asset acquisition agreement that was terminated due to delay in obtaining financing. FMV Adjustment for Derivatives The value of the Note Warrants requires the Fair Market Value (“FMV”) to be remeasured at each reporting date while outstanding with recognition of the changes in fair value to other income or expense in the Consolidated Statement of Operations. For the years ended December 31, 2024, and 2023 the Company recorded a FMV gain adjustment of $3,016,936 and $169,583, respectively to reflect the decrease in the Note Warrants and Warrants liabilities outstanding. (See Notes 7, 8 and 10 to the Consolidated Financial Statements) Liquidity and Capital Resources At December 31, 2024, and 2023, we had a cash balance of $864,041 and $3,012,908, respectively. The Company has a working capital deficit of $2,011,678 as of December 31, 2024, as compared to working capital of $1,145,569, as of December 31, 2023. The decrease in our working capital, after net proceeds from offerings in 2024 of $5,907,407, was primarily related to the use of cash of $8,092,681 in operations, investing in fixed assets purchased and the $1M forfeited escrow deposit. The Company intends to finance its future development and commercialization activities and its working capital needs largely from the sale of equity securities and/or with additional funding from other traditional financing sources. Subsequent to December 31, 2024, the Company closed an Offering and received net proceeds of $18.2M of which $4.2M was used to repay the short-term Note. The Company intends to finance its future development and commercialization activities and its working capital needs with the recent offering proceeds and further with 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. See Note 7,8 and 16 to the Consolidated Financial Statements. 27 In 2024 and 2023, the Company completed various offerings and private placements. (“Financings”) The proceeds from such Financings was used to fund working capital to build inventory, fund capital expenditure and operating costs. Cash Flows Net Cash Used in Operating Activities The Company used cash of $6,929,545 and $8,507,300 in operating activities for the year ended December 31, 2024 and 2023, respectively. The change in cash used was principally due to the Company incurring G&A expenses, increase in inventory partially offset by lower R&D activities, excluding non-cash items, as described above during year ended December 31, 2024. Net Cash Used in Investing Activities For the year ended December 31, 2024 and 2023, the Company used cash in investing activities of $1,163,137 and $698,277, respectively. In both years, cash was used to acquire or pay deposits for machinery and equipment of $163,137 and $698,277 respectively. In 2024, the Company incurred a $1,000,000 forfeiture cost under an agreement, as described in other expense above. Net Cash Provided by Financing Activities For the year ended December 31, 2024 and 2023, the Company provided cash from financing activities of $5,907,407 and $8,029,628 respectively. In the 2024 period, the cash provided was from the net proceeds from the Offerings in May and September 2024. In the 2023 period, the cash provided was from the net proceeds from the Offerings in February and September 2023 Off-Balance Sheet Arrangements We do not have any off-balance sheet arrangements as defined in Regulation S-K Item 303(a)(4). Emerging Growth Company Status We are an “emerging-growth company”, as defined in the JOBS Act, and, for as long as we continue to be an emerging growth company, we may choose to take advantage of exemptions from various reporting requirements applicable to other public companies but not to emerging growth companies, including, but not limited to, not being required to have our independent registered public accounting firm audit our internal control over financial reporting under Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. As an emerging growth company, we can also delay adopting new or revised accounting standards until such time as those standards apply to private companies. We intend to avail ourselves of these options. Once adopted, we must continue to report on that basis until we no longer qualify as an emerging growth company. We will cease to be an emerging growth company upon the earliest of: (i) the end of the fiscal year following the fifth anniversary of the initial public offering; (ii) the first fiscal year after our annual gross revenue are $1.07 billion or more; (iii) the date on which we have, during the previous three-year period, issued more than $1.0 billion in non-convertible debt securities; or (iv) the end of any fiscal year in which the market value of our common stock held by non-affiliates exceeded $700 million as of the end of the second quarter of that fiscal year. We cannot predict if investors will find our common stock less attractive if we choose to rely on these exemptions. If, as a result of our decision to reduce future disclosure, investors find our common shares less attractive, there may be a less active trading market for our common shares and the price of our common shares may be more volatile. We are also a “smaller reporting company,” meaning that the market value of our stock held by non-affiliates plus the aggregate amount of gross proceeds to us as a result of the IPO is less than $700 million and our annual revenue was less than $100 million during the most recently completed fiscal year. We may continue to be a smaller reporting company if either (i) the market value of our stock held by non-affiliates is less than $250 million or (ii) our annual revenue was less than $100 million during the most recently completed fiscal year and the market value of our stock held by non-affiliates is less than $700 million. If we are a smaller reporting company at the time, we cease to be an emerging growth company, we may continue to rely on exemptions from certain disclosure requirements that are available to smaller reporting companies. Specifically, as a smaller reporting company we may choose to present only the two most recent fiscal years of audited financial statements in our Annual Report on Form 10-K and, similar to emerging growth companies, smaller reporting companies have reduced disclosure obligations regarding executive compensation. Item 7A. Quantitative and Qualitative Disclosures About Market Risk Not required for smaller reporting companies. 28