Sharps Technology, Inc. (NASDAQ:STSS) is a pre-revenue medical device company that has designed and patented various safety syringe products, positioning itself to be a key player in the evolving medical device market. With a focus on innovation and patient safety, Sharps Technology is poised to capitalize on the growing demand for advanced syringe solutions.
Company Background
Sharps Technology, Inc. was incorporated in Wyoming in December 2017 with an initial authorization of 20 million shares of common stock. The company's focus from inception has been on the design, research and development, manufacturing, and commercialization of safety syringe products. In April 2019, the company increased its authorized common stock to 50 million shares, reflecting its growth ambitions. A significant corporate restructuring took place in March 2022 when the company completed a merger with Sharps Technology, Inc., a Nevada corporation. This merger resulted in an increase of authorized common stock from 50 million to 100 million shares and preferred stock from 10,000 to 1 million shares. Additionally, the par value of preferred stock was adjusted from $0.00 to $0.0001 per share.
Initial Public Offering
A pivotal moment in the company's history came on April 13, 2022, when its initial public offering (IPO) was declared effective by the SEC. Sharps Technology issued and sold 3.75 million units, each comprising one share of common stock and two warrants to purchase one share of common stock. This IPO provided the company with net proceeds of approximately $14.2 million, excluding certain listing and professional fees, marking its transition to a publicly-traded entity.
Strategic Acquisition
In June 2020, Sharps Technology made a strategic move by entering into an agreement to acquire Safegard Medical, a former syringe manufacturing facility in Hungary. This agreement, which closed on July 6, 2022, provided the company with exclusive use of the facility for research, development, and testing purposes in exchange for covering the seller's operating costs. This acquisition has been instrumental in enhancing the company's research and development capabilities.
Financial Performance
Despite these significant milestones, Sharps Technology has yet to generate substantial revenues from its syringe products. The company has incurred net losses each year since its inception, with an accumulated deficit of $25.15 million as of December 31, 2023. These losses are primarily attributed to costs associated with research and development efforts, payroll and consulting fees, stock compensation, and general administrative expenses, including those related to being a public company since April 2022.
Company Journey and Challenges
Sharps Technology's journey has been marked by significant milestones and challenges. In 2020, the company entered into an agreement to acquire Safegard Medical, a manufacturing facility in Hungary, further strengthening its production capabilities. This strategic move provided the company with exclusive use of the facility for research, development, and testing purposes, laying the groundwork for future growth.
Despite the absence of substantial syringe product sales to date, Sharps Technology has remained dedicated to its mission. The company's financial performance has been characterized by net losses in each year since its inception, totaling $9.84 million in 2023 and $4.64 million in 2022. These losses can be attributed to the significant investments in research and development, as well as the costs associated with being a public company since its initial public offering in April 2022.
Financials and Liquidity
As of September 30, 2024, Sharps Technology reported a cash balance of $2.47 million, a decrease from the $3.01 million it held at the end of 2023. The company's working capital stood at $67,820, indicating the need for additional funding to support its ongoing operations and commercialization efforts.
In response to the financial challenges, Sharps Technology has taken strategic steps to secure its future. In September 2024, the company entered into a $3.5 million bridge financing agreement, providing much-needed capital to support its operations. Additionally, in May and June 2024, the company raised $1.6 million through a Reg A offering, further bolstering its financial position.
The company's solvency and liquidity situation remains a concern, as its current ratio of 1.01 and quick ratio of 0.57 suggest potential challenges in meeting short-term obligations. However, the recent financing activities have provided a temporary reprieve, allowing Sharps Technology to focus on advancing its product pipeline and exploring commercial partnerships.
For the fiscal year 2023, Sharps Technology reported a net loss of $9,841,638, with negative operating cash flow (OCF) of $8,507,300 and negative free cash flow (FCF) of $9,205,577. The most recent quarter (Q3 2024) showed no revenue, a net loss of $1,685,060, negative OCF of $1,643,459, and negative FCF of $1,693,763.
The company's debt-to-equity ratio stands at 0.36, indicating a relatively low level of leverage. However, with no significant revenue generation to date, Sharps Technology continues to rely on external financing to fund its operations.
Research and Development
Sharps Technology's research and development efforts have been a central focus, with expenses totaling $523,350 and $783,340 for the nine-month periods ended September 30, 2024, and 2023, respectively. These investments have been crucial in refining the company's syringe products and ensuring they meet the evolving needs of the healthcare industry. The decrease in R&D expenses by 33% compared to the prior year period is primarily due to reduced R&D activities and lower depreciation.
General and Administrative Expenses
The company's general and administrative expenses have also been a significant factor, amounting to $5.26 million and $6.43 million for the nine-month periods ended September 30, 2024, and 2023, respectively. These costs have been primarily driven by payroll, consulting fees, stock-based compensation, and public company-related expenses, reflecting the company's ongoing efforts to establish a strong operational foundation. The 18% decrease compared to the prior year period was driven by lower payroll, stock compensation, public company costs, and other expense reductions.
Commercialization Progress
Despite the challenges, Sharps Technology has made notable progress in its commercialization efforts. In the second quarter of 2024, the company recorded its first syringe sale, shipping 10,870 units to a distributor in South America. This initial transaction, while modest in scale, represents a significant milestone for the company as it continues to navigate the complex healthcare market.
Furthermore, Sharps Technology has secured a strategic partnership with Roncadelle, a global manufacturer and distributor of medical devices. Under this agreement, Sharps has been appointed as the exclusive distributor of Roncadelle's products in the United States, Canada, Central, and South America, while Roncadelle has been named the exclusive distributor of Sharps' products in Europe, the Middle East, APAC, and South Africa.
This partnership is expected to broaden Sharps Technology's reach and accelerate the adoption of its syringe products in various markets. Additionally, in July 2024, the company announced a five-year, $50 million supply agreement with Stericare Solutions, LLC, a significant step in securing large-scale orders and generating revenue.
Product Segments
Sharps Technology currently has three main product segments:
1. Sharps Securegard: This product line represents Sharps' initial disposable syringe platform that is commercially available to the market. The company received its first purchase order for Securegard sales to a South American distributor, which were shipped in June 2024.
2. Sologard and SafeR: These products are recent additions to Sharps' portfolio. They feature advanced features and benefits to support market needs, along with a high level of readiness for manufacturing and the ability to provide large commercial quantities for customers.
3. Provensa: This product line, which utilizes specialized technology, has experienced delays in commercialization. The company is continuing the product refinement process to ensure the Provensa products are safe and effective for use.
Industry Challenges and Opportunities
The medical device industry has faced several challenges in recent years, including supply chain disruptions and regulatory scrutiny. Notably, the FDA has raised quality concerns over Chinese-manufactured syringes, resulting in multiple recalls and warnings. This has created an opportunity for Sharps Technology, as healthcare facilities seek alternatives to these products.
Furthermore, the Biden Administration's decision to impose a 50% tariff on Chinese-made syringes and needles in May 2024 has further shifted the market dynamics, potentially driving increased demand for domestically produced syringe solutions. Sharps Technology is well-positioned to capitalize on these industry shifts, leveraging its innovative products and strategic partnerships to gain a foothold in the evolving medical device landscape.
Legal Challenges
Sharps Technology is currently facing several legal challenges:
1. On July 10, 2024, Barry Berler, a co-founder and former Chief Technology Officer of the company, commenced a lawsuit against the company and its co-founder Alan Blackman. The lawsuit alleges failure to make full payment of certain monthly payments and a bonus, and seeks a declaration that Berler is the rightful owner of 50% of the company's Series A Preferred Stock. The company has accrued for the claim for unpaid monthly consulting fees but believes Berler's claims are without merit.
2. On June 17, 2024, Berler filed a demand for arbitration asserting claims for payment of $500,000 plus interest under the company's royalty agreement with Berler. The company believes these claims are also without merit.
3. On April 3, 2024, Plastomold Industries Ltd. commenced a lawsuit against the company, asserting claims for damages of $1.76 million for alleged failure to pay invoices, breach of the implied covenant of good faith and fair dealing, unjust enrichment, and conversion. The company believes Plastomold's claims are without merit.
Future Outlook
Looking ahead, Sharps Technology has outlined ambitious plans to address the growing demand for its syringe products. In May 2024, the company announced the signing of a $35 million asset purchase agreement with Nephron Pharmaceuticals Corporation and its affiliate, InjectEZ, LLC. This acquisition is expected to establish Sharps Technology's position in the prefillable syringe (PFS) industry in the United States, complementing its existing disposable syringe offerings.
Concurrent with the asset purchase agreement, Sharps Technology signed a five-year, $200 million syringe sales agreement with Nephron. This landmark deal is poised to secure significant product orders for the company, with shipments anticipated to commence by the second quarter of 2025.
Conclusion
While Sharps Technology has faced its share of challenges, the company's unwavering commitment to innovation and patient safety, coupled with its strategic partnerships and industry tailwinds, suggest a promising future. As the medical device market continues to evolve, Sharps Technology is well-positioned to emerge as a leading provider of advanced syringe solutions, driving positive change in the healthcare industry. However, the company's ability to generate significant revenue remains a key challenge and will be crucial for its long-term success. Sharps Technology continues to assess its liquidity requirements and plans to seek additional funding through equity offerings and/or debt financing opportunities to support its commercialization and growth initiatives.