SKYX Platforms Corp. 10-K

ITEM 9A. CONTROLS AND PROCEDURES Evaluation of Disclosure Controls and Procedures Our management is responsible for establishing and maintaining a system of disclosure controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e) under the Exchange Act) that is designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer’s management, including its principal executive officer and principal financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Management recognizes that there are inherent limitations to the effectiveness of any system of disclosure controls and procedures and any controls and procedures, no matter how well designed and operated, can only provide reasonable assurance of achieving their control objectives. As of the end of the period covered by this report, management, including our Principal Executive Officer and Principal Financial Officer, evaluated the effectiveness of our disclosure controls and procedures. Based upon the evaluation, our Principal Executive Officer and Principal Financial Officer concluded that our disclosure controls and procedures were effective as of December 31, 2021. Our management concluded that the consolidated financial statements included in this report fairly present, in all material respects, our financial position, results of operations and cash flows for the periods presented in accordance with GAAP. Management’s Annual Report on Internal Controls over Financial Reporting This Form 10-K does not include a report of management’s assessment regarding internal control over financial reporting or an attestation report of our independent registered public accounting firm due to a transition period established by rules of the SEC for newly public companies. Changes in Internal Controls Over Financial Reporting: There were no changes in our internal control over financial reporting during the quarter ended December 31, 2021 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. ITEM 9B. OTHER INFORMATION On March 7, 2022, the Company changed its corporate headquarters and principal executive offices from 11030 Jones Bridge Road, Suite 206, Johns Creek, Georgia 30022 to 2855 W. McNab Road, Pompano Beach, Florida 33069. The Company also updated the telephone number for its principal executive offices to (855) 759-7584. The Company’s 2022 Annual Meeting of Stockholders is scheduled to be held on June 14, 2022. Stockholders of record as of April 18, 2022 will be entitled to receive notice of, and vote at, the annual meeting. Stockholder proposals intended to be considered for inclusion in the Company’s proxy materials for the 2022 Annual Meeting of Stockholders are required to be submitted to the Company by March 18, 2022, which the Company has determined is a reasonable time before it begins printing and sending its proxy materials. In accordance with the Company’s Bylaws, stockholder nominations of director candidates and stockholder proposals to be presented at the 2022 Annual Meeting of Stockholders, but not submitted for inclusion in the Company’s proxy materials, are required to be delivered to the Secretary of the Company no later than March 18, 2022. The Bylaws specify the information that is required to accompany any such stockholder notices. In March 2022, the Compensation Committee recommended, and the Board approved, the following compensation program for the non-employee directors of the Company: ● Annual cash retainer of $30,000, paid in quarterly installments (beginning as of February 14, 2022 and pro-rated as applicable), which directors may elect to have paid in the form of shares of common stock; ● Annual grant of 5,000 shares of restricted stock, which will vest immediately upon the date of grant; ● Annual grant of options to purchase 5,000 shares of common stock with an exercise price equal to the closing price of the Company’s common stock on Nasdaq on the date of grant, which will vest in twelve equal monthly installments and expire five years from the date of grant; ● For service as a member of the Audit Committee, Compensation Committee and/or Nominating and Corporate Governance Committee: (i) an annual grant of 1,000 shares of restricted stock, which will vest immediately upon the date of grant, and (ii) an annual grant of options to purchase 1,000 shares of common stock with an exercise price equal to the closing price of the Company’s common stock on Nasdaq on the date of grant, which will vest in twelve equal monthly installments and expire five years from the date of grant; ● For service as the Chair of the Audit Committee, Compensation Committee and/or Nominating and Corporate Governance Committee: (i) an additional annual grant of 1,000 shares of restricted stock, which will vest immediately upon the date of grant, and (ii) an additional annual grant of options to purchase 1,000 shares of common stock with an exercise price equal to the closing price of the Company’s common stock on Nasdaq on the date of grant, which will vest in twelve equal monthly installments and expire five years from the date of grant; and ● For non-employee members of the Business Development Committee of the Board: (i) an annual grant of 12,500 shares of restricted stock, which will vest immediately upon the date of grant, and (ii) an annual grant of options to purchase 12,500 shares of common stock with an exercise price equal to the closing price of the Company’s common stock on Nasdaq on the date of grant, which will vest in twelve equal monthly installments and expire five years from the date of grant. Non-employee directors will also receive reimbursement of reasonable out-of-pocket expenses for attending Board and committee meetings. ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS Not applicable. 52 PART III ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE The following table sets forth the name and position of each of our executive officers and directors, and each such person’s age as of February 23, 2022. All directors serve one-year terms or until each of their successors are duly qualified and elected. The officers are elected by our Board. Name Age Position(s) Rani R. Kohen 56 Director, Executive Chairman John P. Campi 77 Chief Executive Officer Steven M. Schmidt 67 President Marc-Andre Boisseau 57 Chief Financial Officer Patricia Barron 61 Chief Operations Officer Phillips S. Peter 90 Director Thomas J. Ridge 76 Director Dov Shiff 74 Director Leonard J. Sokolow 65 Director Gary N. Golden 67 Director Efrat L. Greenstein Brayer 59 Director Nancy DiMattia 61 Director The following information provides a brief description of the business experience of each executive officer and director. Rani R. Kohen has founded the Company and invented our technologies. He has served as Executive Chairman of the board since 2016 and as Chairman of our board of directors since November 2012. Mr. Kohen also previously served as our Chief Executive Officer from 2004, through 2012. Mr. Kohen is a businessman, entrepreneur and inventor of our technologies. He brings strategic acumen with over 20 years of experience in business, as well as in advanced smart home technologies, product design, lighting, and other related businesses. Since founding the Company, he has succeeded in attracting and engaging accomplished board members, talented management and leading executives from various industries. He has led every major milestone achieved by the Company to date, including securing substantial financing to support the Company’s growth. The board of directors believes that with Mr. Kohen’s leadership and qualifications, the continuity that he brings with his advanced business strategies, he will continue to move us forward towards achieving our goals. John P. Campi has served as our Chief Executive Officer since November 2014 and served as our Chief Financial Officer through December 31, 2021. Mr. Campi founded Genesis Management, LLC in 2009, and retired in 2014 upon accepting the role of our Chief Executive Officer. Mr. Campi has extensive experience in the field of cost management, is recognized as a founder of the strategic cost-management discipline known as Activity-Based Cost Management and has extensive experience in the field of supply chain management. From December 2007 to December 2008, Mr. Campi served as the Chief Procurement Officer and an Executive Vice President for Chrysler, where he was responsible for all worldwide purchasing and supplier quality activities. From September 2003 to January 2007, Mr. Campi served as the Senior Vice President of Sourcing and Vendor Management for The Home Depot, Inc., where he led the drive for standardization and optimization of The Home Depot, Inc.’s global supply chain. From April 2002 to September 2003, Mr. Campi served as the Chief Procurement Officer and Vice President for DuPont Global Sourcing and Logistics. Prior to 2002, Mr. Campi led the Global Sourcing activities for GE Power Energy and held a variety of positions with Federal Mogul, Parker-Hannifin Corporation and PricewaterhouseCoopers. Mr. Campi previously served on the board of Trustees of Case Western Reserve University and has been appointed an Emeriti Trustee. Mr. Campi also has served as a member of the advisory board of directors for three startup companies and has served as a Member of the Financial Executives Institute and the Institute of Management Accountants. Mr. Campi received his MBA from Case Western Reserve University. Mr. Campi has extensive executive and advisory experience with established and startup companies, as well as in cost-management and supply chain management. 53 Steven M. Schmidt has served as our President since June 2021 and has served as a consultant to the Company since August 2019. Mr. Schmidt formed Schmidt Family Investments LLC, which invests in early stage companies, in May 2017, of which he is the sole principal. Mr. Schmidt previously served in a variety of roles at Office Depot, Inc. from July 2007 through May 2016, including as Executive Vice President and President, International from November 2011 to May 2016, Executive Vice President, Corporate Strategy and New Business Development from July 2011 until November 2011 and President, North American Business Solutions from July 2007 until November 2011. Prior to joining Office Depot, Inc., Mr. Schmidt spent 11 years with the ACNielsen Corporation, most recently serving as President and Chief Executive Officer. Prior to joining ACNielsen, Mr. Schmidt spent eight years at the Pillsbury Food Company, serving as President of its Canadian and Southeast Asian operations. He has also held management positions at PepsiCo and Procter & Gamble. Marc-Andre Boisseau serves as our Chief Financial Officer and as our principal financial officer and principal accounting officer since January 1, 2022. Mr. Boisseau is a partner of Boisseau, Felicione & Associates Inc., which provides assurance, advisory and tax services for public and private companies in a variety of industries and which he founded in February 2002. Among other things, Mr. Boisseau served at Citrix Systems, Inc., a publicly-traded software development company, as Corporate Controller from 1995 to December 1999 and as Principal Accounting Officer from March 1997 to December 1999, and as a senior auditor at Ernst & Young. Mr. Boisseau is a certified public accountant. Patricia Barron has served as our Chief Operations Officer since June 2007. Prior to joining the Company, Ms. Barron was the President and owner of LTG Services, Inc., a company focused on safety consulting services, specializing in the review and compliance of electrical products requiring UL, CSA, and CE certifications, since 1989. Prior to that, Ms. Barron worked as a consultant and engineer in the lighting, safety and approval industry and, from June 1977 to August 1984, worked as an engineering assistant for Underwriters Laboratories, Inc. (n/k/a UL) in the ceiling fan category. Ms. Barron received her MBA from Georgia State University. Ms. Barron has extensive industry and executive experience. Phillips S. Peter has served as a director of the Company since November 2012. Since December 2014, Mr. Peter has served as a Senior Vice President of Ridge Global, LLC. From 1994 to 2014, Mr. Peter practiced law at Reed Smith LLP, where he focused his practice on legislative and regulatory matters before U.S. Congress, the executive branch of the federal government, and other administrative agencies. Prior to that, Mr. Peter was an officer at GE, where he held executive positions from 1973 to 1994. He is also a veteran of the U.S. Army. Our board believes Mr. Peter’s qualifications to serve as a member of our board include his extensive experience in regulatory affairs, his past industry experience and his demonstrated leadership ability. Governor Thomas J. Ridge has served as a director of the Company since June 2013. Mr. Ridge has served as President and Chief Executive Officer of Ridge Global, LLC, a global strategic consulting company and provider of insurance and risk transfer solutions, since July 2006, where he also currently serves as Chairman of the board. In 2014, Mr. Ridge co-founded Ridge Schmidt Cyber, an executive services firm addressing the increasing demands of cybersecurity. In April 2010, Mr. Ridge became a partner in Ridge Policy Group, a bipartisan, full-service government affairs and issue management group. From January 2003 to January 2005, Mr. Ridge served as the Secretary of the United States Department of Homeland Security, and from September 2001 through January 2003, Mr. Ridge served as the Special Assistant to the President for Homeland Security. Mr. Ridge served two terms as Governor of the Commonwealth of Pennsylvania, from 1995 to 2001, and served as a member of the U.S. House of Representatives from January 1983 until January 1995. Mr. Ridge previously served as a member of the board of directors of The Hershey Company (NYSE: HSY), a global confectionery leader, from November 2007 to May 2018, Advaxis, Inc. (Nasdaq: ADXS), a clinical-stage biotechnology company, from August 2015 to March 2018, and LifeLock, Inc. (then NYSE: LOCK), a provider of identity theft protection, from March 2010 to February 2017, until its merger with a subsidiary of Symantec Corporation, as well as several other public companies. Mr. Ridge serves as Co-Chair of the Bipartisan Commission on Biodefense, as Chairman of the board of the National Organization on Disability, and as a member of board of trustees of the Center for the Study of the Presidency, among other private organizations. Our board believes Mr. Ridge’s qualifications to serve as a member of our board include his vast experience in both government and industry, his service on other public and private company boards and his expertise in retail, risk management and cybersecurity. 54 Dov Shiff has served as a director of the Company since February 2014. Mr. Shiff is presently President and Chief Executive Officer of the Shiff Group of Companies. The Shiff Group owns and operates hotels and other real estate in Israel, including Hayozem Resorts & Hotels Ltd., Marina Hotel Tel Aviv Ltd. and Zvidan Investments Ltd. Our board believes Mr. Shiff’s qualifications to serve as a member of our board include his experience in developing and operating new businesses. Leonard J. Sokolow has served as a director of the Company since November 2015. Mr. Sokolow has served as Chief Executive Officer and President of Newbridge Financial, Inc. and Chairman of its broker dealer subsidiary, Newbridge Securities Corporation, since January 2015. Mr. Sokolow previously served in a variety of roles at vFinance, Inc., a publicly traded financial services company, including as Chairman of the board of directors from January 2007, a member of the board of directors from November 1997 and Chief Executive Officer from November 1999 through July 2008, when it merged into National Holdings Corporation, a publicly traded financial services company. Mr. Sokolow also served as President of vFinance, Inc. from January 2001 through December 2006. From July 2008 until July 2012, Mr. Sokolow was President of National Holdings Corporation, and from July 2008 until July 2014, he was Vice Chairman of the board of directors of National Holdings Corporation. From July 2012 until December 2014, Mr. Sokolow was a consultant and partner at Caribou LLC, a strategic advisory services firm. Mr. Sokolow was Founder, Chairman and Chief Executive Officer of the Americas Growth Fund Inc., a closed-end management investment company, from 1994 to 1998. From 1988 until 1993, Mr. Sokolow was an Executive Vice President and the General Counsel of Applica Inc., a publicly traded appliance marketing and distribution company. From 1982 until 1988, Mr. Sokolow practiced corporate, securities and tax law and was one of the founding attorneys and a partner of an international boutique law firm. From 1980 until 1982, he worked as a Certified Public Accountant for Ernst & Young and KPMG Peat Marwick. Mr. Sokolow has served on the board of directors of Consolidated Water Co. Ltd. (Nasdaq: CWCO), a developer and operator of advanced water supply and treatment plants and water distribution systems, since June 2006, where he currently serves as Chairman of the Audit Committee and as a member of the Nominations and Corporate Governance Committee. In addition, Mr. Sokolow has served on the board of directors of Vivos Therapeutics, Inc. (Nasdaq: VVOS), a medical technology company focused on developing and commercializing innovative treatments for adult patients suffering from sleep-disordered breathing, since June 2020, where he currently serves as Chair of the Audit Committee and as a member of the Nominating and Corporate Governance Committee, and on the board of directors of Agrify Corporation (Nasdaq: AGFY), a developer of precision hardware and software grow solutions for the indoor agriculture marketplace, as well as providing associated consulting, engineering, and construction services, since December 2021, where he currently serves as a member of the Audit Committee and the Compensation Committee. Mr. Sokolow previously served on the board of directors of, and as Chairman of the Audit Committee for, Marquee Energy Ltd. (formerly Alberta Oilsands Inc.) (then TSXV: MQX), an energy company. Our board believes Mr. Sokolow’s qualifications to serve as a member of our board include his extensive experience in the financial industry, his service on other public company boards and his history of executive leadership in developing and operating businesses. Gary N. Golden has served as a director of the Company since February 2022. Mr. Golden is currently with Tatum CFO Partners, a company that provides interim executive resources across the C-suite. During his time with Tatum CFO Partners, during 2021, Mr. Golden served as interim Chief Financial Officer of ADB Companies, which provides strategy, design, execution and program management services for the communication, utility, and technology industries. Prior to that, during 2021, Mr. Golden served as a project manager and professional services contractor for MMC Group, Inc., which offers full-service workforce solutions, and as interim controller at SportClips Haircuts. During 2020, he served as a special project auditor for WebsterRogers LLP, a South Carolina-based accounting and consulting firm that provides a broad spectrum of assurance, tax and advisory services. From 2013 to 2019, Mr. Golden served as Chief Financial Officer at NBG Home, an affiliate of Nielsen & Bainbridge and one of the largest home decor manufacturing companies and importers globally. From 2008 to 2013, Mr. Golden served as Chief Financial Officer and Professional Services Contractor for MMC Group, Inc. Mr. Golden has served in a variety of other financial and operational roles, including as Vice President, Controller of Kinko’s Inc., Senior Vice President and Corporate Controller of Blockbuster, Inc., and in controller and internal audit roles at Fuqua Industries and Qualex, Inc. Mr. Golden is a licensed Certified Public Accountant who began his career at Arthur Andersen & Company. Our board believes Mr. Golden’s qualifications to serve as a member of our board include his financial expertise, including his status as an “audit committee financial expert,” and his experience in the home goods and lighting industry. 55 Efrat L. Greenstein Brayer has served as a director of the Company since February 2022. Ms. Greenstein Brayer currently serves as Co-Founder and Chief Executive Officer of Merkavah Inc. (d/b/a Ezzree), which provides online emotional and spiritual support care services, and has been principal attorney of the law office of Laura Greenstein since 2000, where she provides services as a corporate finance attorney. Ms. Greenstein Brayer previously served as a contract attorney with Holland & Knight from 2006 through 2012, as associate counsel at Bank Hapoalim B.M. from 1996 through 2000, as an associate at Rogers & Wells (later acquired by Clifford Chance) from 1993-1996, and as an associate at Haight, Gardner, Poor & Havens (later acquired by Holland & Knight) from 1988 through 1993. Ms. Greenstein Brayer has also served as an officer or director of several private companies. Our board believes Ms. Greenstein Brayer’s qualifications to serve as a member of our board include her corporate law expertise and her experience founding and serving as Chief Executive Officer of a private company. Nancy DiMattia has served as a director of the Company since February 2022. Ms. DiMattia previously served as Senior Vice President and Chief Financial Officer of Tile Shop Holdings, Inc., a publicly-traded, specialty retailer of natural stone and man-made tiles, setting and maintenance materials, and related accessories, from September 2019 until January 2022, where she continues to serve in an advisory capacity through March 2022. She also previously provided consulting services to Tile Shop Holdings, Inc. from July 2019 until September 2019. Before joining Tile Shop Holdings, Inc., Ms. DiMattia gained over twenty-five years of experience in financial reporting and accounting processes in positions of increasing responsibility at Virginia Tile Company. She most recently served as the Corporate Controller from 2005 until March 2019. During her tenure at Virginia Tile Company, she was responsible for establishing sound financial management, promoting effective internal accounting controls, developing and leading highly competent accounting teams, and maintaining a documented system of accounting policies and procedures. Our board believes Ms. DiMattia’s qualifications to serve as a member of our board include her retail industry experience and financial expertise. Family Relationships There are no family relationships among any of our directors or executive officers or any person nominated to become a director or executive officer. Composition of our Board of Directors Our business and affairs are managed under the direction of our board of directors, which currently consists of eight directors. The number of directors is determined by our board of directors or our stockholders, but will not be less than five persons, subject to the terms of our articles of incorporation and our bylaws. Each director will be elected to one-year terms and will hold office until his or her successor is duly elected and qualified or until his or her earlier death, resignation or removal. Vacancies and newly created directorships on the board of directors may be filled at any time by the remaining directors. Diversity Two of our directors are women, representing approximately 25% of our board of directors. We believe that having a diverse board of directors can offer a breadth and depth of perspectives that enhance our performance. The nominating and corporate governance committee will, when evaluating candidates for service on the board, consider the manner in which a candidate’s appointment to the board would impact the overall composition of the board with regard to diversity of viewpoint, professional experience, education, skill, age, gender identity, nationality, race, ethnicity and sexual orientation. Board Leadership Structure and Board’s Role in Risk Oversight We have chosen to separate the Chief Executive Officer and Board Chairman positions, as our board of directors believes that having separate positions is the appropriate leadership structure for us at this time and demonstrates our commitment to good corporate governance. We believe that separating the positions of Chief Executive Officer and chairperson of the board of directors allows our Chief Executive Officer to focus on our day-to-day business, while allowing a chairperson of the board to lead the board of directors in its fundamental role of providing advice to and independent oversight of management. 56 One of the key functions of our board of directors is informed oversight of our risk management process. In particular, our board of directors is responsible for monitoring and assessing strategic risk exposure. Our executive officers are responsible for the day-to-day management of the material risks we face. Our board of directors administers its oversight function directly as a whole. Our board of directors will also administer its oversight through various standing committees, which address risks inherent in their respective areas of oversight. For example, our audit committee is responsible for overseeing the management of risks associated with financial reporting, accounting and auditing matters; our compensation committee oversees the management of risks associated with our compensation policies and programs; and our nominating and corporate governance committee oversees the management of risks associated with director independence, conflicts of interest, composition and organization of our board of directors and director succession planning. Board Committees Our board of directors has three standing committees: an audit committee, a compensation committee and a nominating and corporate governance committee. Each member of each committee of our board of directors qualifies as an independent director in accordance with the listing standards of Nasdaq. Each committee operates pursuant to a charter adopted by our board of directors. The full text of our audit committee charter, compensation committee charter and nominating and corporate governance committee charter are posted on the investor relations portion of our website at www.skyplug.com. Audit Committee Our audit committee consists of Ms. Greenstein Brayer, Ms. DiMattia and Mr. Golden, who is the chair of the audit committee. The functions of the audit committee include: ● appointing, approving the compensation of and assessing the independence of our independent registered public accounting firm; ● pre-approving audit and permissible non-audit services, and the terms of such services, to be provided by our independent registered public accounting firm; ● reviewing the overall audit plan with our independent registered public accounting firm and members of management responsible for preparing our financial statements; ● reviewing and discussing with management and our independent registered public accounting firm our annual and quarterly financial statements and related disclosures; ● reviewing our disclosure controls and procedures, as well as reviewing disclosures regarding our internal control over financial reporting; ● establishing policies and procedures for the receipt, retention and treatment of accounting-related complaints and concerns; ● recommending to the board of directors, based upon the audit committee’s review and discussions with management and our independent registered public accounting firm, whether our audited financial statements will be included in our annual reports on Form 10-K; ● discussing with management our policies with respect to risk assessment and risk management and our significant financial risk exposures, as well as information security and technology risks (including cybersecurity); ● preparing the audit committee report required by SEC rules to be included in our annual proxy statement; 57 ● reviewing and overseeing all related person transactions for potential conflict of interest situations, as well as annually reviewing the related party transactions policy; ● overseeing compliance with, and annually reviewing, the code of business conduct and ethics; and ● reviewing quarterly earnings releases. All members of our audit committee meet the requirements for financial literacy under the applicable rules and regulations of the SEC and Nasdaq listing rules. Our board of directors has determined that Mr. Golden qualifies as an “audit committee financial expert” within the meaning of applicable SEC regulations and meets the financial sophistication requirements of Nasdaq listing standards. In making this determination, our board of directors considered Mr. Golden’s prior experience, business acumen and independence. Both our independent registered public accounting firm and management will periodically meet privately with our audit committee. Compensation Committee Our compensation committee consists of Ms. Greenstein Brayer, Ms. DiMattia, and Mr. Golden, who is the chair of the compensation committee. The functions of the compensation committee include: ● annually reviewing our overall compensation policy as it applies to our employees generally, and the corporate goals and objectives relevant to compensation of the Executive Chairman, Chief Executive Officer and our other executive officers; ● reviewing and approving or recommending to the board of directors the compensation of our executive officers; ● reviewing and approving or recommending to the board of directors our incentive compensation plans and equity-based plans; ● reviewing and recommending to the board of directors the compensation of our non-management directors; ● reviewing the executive compensation disclosures and, if and when required, preparing the compensation committee report required by SEC rules to be included in our annual proxy statement or Form 10-K, as applicable; ● overseeing risks relating to our compensation policies, practices and procedures; ● reviewing our strategies related to human capital management; and ● reviewing and approving the retention, termination or compensation of any consulting firm or outside advisor to assist in the evaluation of compensation matters. Each member of our compensation committee is a non-employee director, as defined in Rule 16b-3 promulgated under the Exchange Act. Nominating and Corporate Governance Committee Our nominating and corporate governance committee consists of Ms. DiMattia, Mr. Golden and Ms. Greenstein Brayer, who is the chair of the nominating and corporate governance committee. The functions of the nominating and corporate governance committee include: ● identifying and evaluating individuals qualified to become members of the board of directors; 58 ● recommending to the board of directors the persons to be nominated for election as directors and to each of the board’s committees; ● considering, developing and recommending to the board of directors policies and procedures with respect to the nomination of directors or other corporate governance matters; ● reviewing disclosures relating to our corporate governance practices to be included in our proxy statement or Form 10-K, as applicable; ● reviewing our policies and practices regarding corporate social responsibility and environmental, social and governance matters and related risks; ● reviewing proposals submitted by stockholders for inclusion in our proxy materials; and ● overseeing the evaluation of our board of directors and board committees. Our board of directors may from time to time establish other committees. Code of Business Conduct and Ethics Our board of directors has adopted a Code of Business Conduct and Ethics, which applies to all of our directors, employees, and officers (including our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions). The full text of our Code of Business Conduct and Ethics is posted on our website at www.skyplug.com. We intend to satisfy the disclosure requirement under Item 5.05 of Form 8-K regarding an amendment to, or waiver from, a provision of our Code of Ethics and Business Conduct by posting such information on our website within four business days following the date of the amendment or waiver. Involvement in Certain Legal Proceedings To the best of our knowledge, none of our directors or executive officers were involved in any legal proceedings described in Item 401(f) of Regulation S-K in the past 10 years. 59 ITEM 11. EXECUTIVE COMPENSATION EXECUTIVE COMPENSATION Compensation Overview Our “named executive officers” for the year ended December 31, 2021 were: ● John P. Campi, Chief Executive Officer and Chief Financial Officer through December 31, 2021; ● Rani R. Kohen, Executive Chairman; ● Steven M. Schmidt, President; and ● Patricia Barron, Chief Operations Officer. Our executive compensation program reflects our continued growth and development-oriented focus. We recognize that our ability to excel depends on the knowledge, skill and teamwork of our employees. To this end, we strive to create an environment of mutual respect, encouragement and teamwork that rewards commitment and performance and is responsive to the needs of our employees. The principles and objectives of our compensation and benefits programs for our employees generally, and for our named executive officers specifically, include to align our compensation program with our corporate strategies, financial objectives and the long-term interests of our stockholders; retain and reward executives whose knowledge, skills and performance ensure our continued success; and ensure that total compensation is fair, reasonable and competitive. The compensation received by our named executive officers is based primarily on their experience and knowledge as well as their responsibilities and individual contributions to the Company. As we transition from a private company to a publicly traded company, the compensation committee of our board of directors will evaluate our compensation values and philosophy and compensation plans and arrangements as circumstances require. As part of this review process, we expect the compensation committee to apply our values and philosophy, while considering the compensation levels needed to ensure our executive compensation program remains competitive. We will also review whether we are meeting our retention objectives and the potential cost of replacing a key employee. Executive Compensation Program Components Base Salary Executive officer base salaries are based on job responsibilities and individual contribution and are designed to attract and retain employees over time. Each of our named executive officers receives a base salary set forth in an employment agreement entered into with the Company, and the board has the discretion to review and adjust each named executive officer’s base salary. Each of Mr. Campi, Mr. Kohen and Ms. Barron received an annual base salary of $150,000, $250,000, and $150,000, respectively, during the year ended December 31, 2021. Mr. Kohen’s annual base salary increased to $300,000, effective as of January 1, 2022. Mr. Schmidt does not receive an annual base salary. In light of challenges of the COVID-19 pandemic and preparation for our initial public offering, our named executive officers received decreased cash compensation in 2020 and 2021. Incentive and Bonus Compensation Each named executive officer’s employment agreement also provides for the receipt of incentive and/or bonus compensation, which may be paid annually in cash and/or stock. These incentive compensation and bonus awards are designed to focus our executive officers on our business objectives of growing our business, including increasing our revenue and income. 60 Mr. Campi is eligible to receive annual incentive compensation consisting of both a cash component, based on our annual gross revenue and annual net income, and an equity component, consisting of a number of options to purchase common stock determined based on our quarterly net income. Mr. Kohen is eligible to receive annual incentive compensation based on our annual gross revenue, which may be paid in cash, stock and/or options, as well as supplemental bonus compensation of performance-based stock options to purchase up to 17,000,000 shares of common stock at an exercise price ranging between $4.00 and $12.00 per share, determined based on the achievement of specified market capitalizations of the Company, and the potential to receive further options based on the achievement of additional specific market capitalizations of the Company, as described further below under “Agreements with Named Executive Officers.” Ms. Barron is eligible to receive annual incentive compensation consisting of a cash payment based on our net revenues. Mr. Schmidt is eligible to receive a stock bonus of 20,000 shares that will be payable upon achievement of certain sales program goals, and he may be eligible to receive additional bonus compensation as determined by the Company. The actual incentive and/or bonus compensation earned by each of our named executive officers during our most recent fiscal year is set forth in the “Summary Compensation Table” below. Other Equity Compensation and Awards Our executive officers may also receive equity awards under our 2021 Stock Incentive Plan (the “2021 Plan”). We use equity awards to align the interests of our named executive officers with those of our stockholders. We believe that equity awards, such as stock options and non-vested restricted stock, encourage our named executive officers to focus on our long-term success as reflected in increases to our stock prices over a period of several years, growth in our profitability and other elements. In addition to the equity incentive and supplemental bonus awards described above, the Chairman Agreement (as defined below) with Mr. Kohen provides for, effective January 1, 2022, the grant of five-year options to purchase 1,020,000 shares of common stock, which have an exercise price of $12.00 per share, vest as to 340,000 shares on each of January 1, 2023, 2024 and 2025, and expire January 1, 2027. Mr. Schmidt’s employment agreement provides for the following equity grants: a five-year option to purchase 60,000 shares of common stock at an exercise price of $0.10 per share, which will vest in three equal annual installments on each of October 1, 2020, 2021 and 2022; a five-year option to purchase 60,000 shares of common stock at an exercise price of $6.00 per share, which will vest in three equal annual installments on each of October 1, 2020, 2021 and 2022; a five-year option to purchase 100,000 shares of common stock at an exercise price of $12.00 per share, which vests in four equal annual installments on each of June 1, 2021, 2022, 2023 and 2024 (which includes a signing bonus of options to purchase 25,000 shares); and an annual grant of 25,000 shares of common stock on each of June 1, 2022, 2023 and 2024. We also grant equity-based sign-on bonuses when necessary and appropriate to advance our and our stockholders’ interests, including to attract or retain top executive-level talent. Each of Mr. Campi’s, Mr. Kohen’s and Ms. Barron’s 2019 agreement provided for a sign-on bonus of a stock option to purchase 120,000, 120,000 and 100,000 shares of common stock, respectively, at an exercise price of $6.00 per share, which vested in full on December 31, 2020, January 1, 2020 and December 31, 2020, respectively. Mr. Schmidt’s agreement provided for a signing bonus of 25,000 shares of common stock and options to purchase 25,000 shares of common stock at an exercise price of $12.00 per share, which vested in full on June 1, 2021. Mr. Kohen’s Chairman Agreement provides for a sign-on bonus of a stock option to purchase 120,000 shares of common stock at an exercise price of $12.00 per share, which was granted effective January 1, 2022 and will vest in full on January 1, 2023. Benefits and Perquisites We provide health insurance to our full-time employees, including our named executive officers. We generally do not provide perquisites or personal benefits to our named executive officers, except in limited circumstances. For instance, Mr. Kohen is eligible to receive a $1,000 per month vehicle allowance, pursuant to the Chairman Agreement, as further described in the summary compensation table. 61 Summary Compensation Table The following table sets forth summary compensation information for the named executive officers and includes all compensation earned by the named executive officers for the respective period, regardless of whether such amounts were actually paid during the period. Name and Principal Position (1) Year Salary ($) (6) Bonus ($) Stock Awards ($) (2)(5) Option Awards ($) (2)(5) Non-Equity Incentive Plan Compensation ($) (3) Non-Qualified Deferred Compensation Earnings ($) All Other Compensation ($) Total ($) John P. Campi 2021 150,000 — — — 99 — — 150,099 Chief Executive Officer and Chief Financial Officer (through December 31, 2021) 2020 150,000 — — — 1,413 — — 151,413 Rani R. Kohen 2021 250,000 — — — 198 — — (4) 250,198 Executive Chairman 2020 250,000 — 360,000 — 2,826 — 4,830 (4) 617,656 Patricia Barron 2021 150,000 — — — 99 — — 150,099 Chief Operations Officer 2020 150,000 6,000 — — 1,413 — — 157,413 Steven M. Schmidt President 2021 — — 75,000 64,962 — — — 139,962 (1) Mr. Schmidt has served as a consultant to the Company since August 2019 and has served as our President since June 2021. (2) The value of stock awards and options in this table represents the fair value of such awards granted or modified during the fiscal year, as computed in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718 (“Topic 718”). The assumptions used to determine the valuation of the awards are discussed in Note 2 and Note 10 to our consolidated financial statements for the year ended December 31, 2021. (3) Non-Equity Incentive Plan Compensation reflects incentive compensation and commission payable pursuant to each individual’s respective employment agreement, typically as a percent of the Company’s net revenue or sales earned, and in each case as described below under “Agreements with Named Executive Officers.” (4) For 2020, represents vehicle allowance paid pursuant to the 2019 Chairman Agreement (as defined below). During both 2021 and 2020, due to circumstances resulting from the impact of the COVID-19 pandemic and preparation for our initial public offering, Mr. Kohen received only a portion of the allowance provided for in the 2019 Chairman Agreement in 2020 and no allowance in 2021. The amount included in this table only includes the portion of the allowance that Mr. Kohen received. (5) Pursuant to the new employment agreements entered into in September 2019, each of Mr. Campi, Mr. Kohen and Ms. Barron was granted an equity-based “sign-on” bonus of stock options with an exercise price of $6.00 per share. In addition, Mr. Kohen became eligible to receive 1,020,000 shares of common stock as of January 1, 2019 and was also granted the following options during 2019: (i) options to purchase 1.5 million shares at an exercise price of $3.00 per share, (ii) options to purchase 500,000 shares at an exercise price of $4.00 per share; and (iii) options to purchase 1.0 million shares at an exercise price of $6.00 per share. Mr. Kohen also received 120,000 shares of common stock as of January 1, 2020. Pursuant to his amended employment agreement, during 2021, Mr. Schmidt received 25,000 shares of common stock and options to purchase 100,000 shares of common stock at an exercise price of $12.00 per share. These option and stock awards are further described below under “Agreements with Named Executive Officers”. (6) During 2021 and 2020, each of Mr. Campi, Mr. Kohen and Ms. Barron deferred a portion of their salary due to circumstances resulting from the impact of the COVID-19 pandemic and preparation for our initial public offering, including $150,000 and $87,413, respectively, deferred by Mr. Campi, $67,500 and $140,833, respectively, deferred by Mr. Kohen and $0 and $12,413, respectively, deferred by Ms. Barron. These deferred amounts are included in this table. 62 Outstanding Equity Awards at December 31, 2021 Fiscal Year End The following table sets forth certain information regarding outstanding equity awards held by the named executive officers as of December 31, 2021: Option Awards Stock Awards Name Number of securities underlying unexercised options (#) exercisable Number of securities underlying unexercised options (#) unexercisable Equity incentive plan awards: Number of securities underlying unexercised unearned options (#) Option exercise price ($) Option expiration date Number of shares or units of stock that have not vested (#) Market value of shares or units of stock that have not vested ($) Equity incentive plan awards: Number of unearned shares, units or other rights that have not vested (#) Equity incentive plan awards: Market or payout value of unearned shares, units or other rights that have not vested ($) Rani R. Kohen (1) 1,000,000 — — $ 0.60 11/15/2025 — — — — Rani R. Kohen (1) 800,000 340,000 (2) — $ 6.00 (2) 9/1/2024 — — — — Rani R. Kohen (1)(3) 1,500,000 — — $ 3.00 (3) 11/21/2024 — — — — Rani R. Kohen (1)(3) 500,000 — — $ 4.00 (3) 11/21/2024 — — — — Rani R. Kohen (1)(3) 1,000,000 — — $ 6.00 (3) 11/21/2024 — — — — John P. Campi 120,000 — — $ 6.00 9/1/2024 — — — — Patricia Barron 500,000 — — $0.60 – $1.80 (4) 11/15/2025 — — — — Patricia Barron 100,000 — — $3.00 – $4.00 (5) 4/19/2027 — — — — Patricia Barron 100,000 — — $ 6.00 9/1/2024 — — — — Steven M. Schmidt (8) 40,000 20,000 (6) — (6) 10/1/2024 — — — — Steven M. Schmidt (8) 40,000 20,000 (6) — $ 6.00 (6) 10/1/2024 — — — — Steven M. Schmidt (8) 25,000 75,000 (7) — $ 12.00 (7) 6/1/2026 — — — — (1) These options were granted pursuant to executive chairman agreements entered into with Mr. Kohen. 63 (2) These options become exercisable on September 1, 2022 and have an exercise price of $6.00 per share. (3) Pursuant to Mr. Kohen’s chairman agreement, Mr. Kohen was granted the following supplemental bonus options as it was determined that the applicable performance conditions had been satisfied: (i) options to purchase 1,500,000 shares of common stock at an exercise price of $3.00 per share; (ii) options to purchase 500,000 shares of common stock at an exercise price of $4.00 per share; and (iii) options to purchase 1,000,000 shares of common stock at an exercise price of $6.00 per share. These options were exercisable as of the date of grant and expire November 21, 2024. Pursuant to the Chairman Agreement, Mr. Kohen has the following options as supplemental bonus compensation, subject to the Company achieving the specified market capitalization: (i) options to purchase 500,000 shares of common stock at $4.00 per share, upon the Company achieving each of the following market capitalizations: $1.5 billion and $2.0 billion; (ii) options to purchase 500,000 shares of common stock at $5.00 per share, upon the Company achieving each of the following market capitalizations: $2.5 billion and $3.0 billion; (iii) options to purchase 500,000 shares of common stock at an exercise price of $6.00 per share, upon the Company achieving each of the following market capitalizations: $1.5 billion and $2.0 billion; (iv) options to purchase 500,000 shares of common stock at an exercise price of $7.00 per share, upon the Company achieving each of the following market capitalizations: $3.0 billion, $4.0 billion, $5.0 billion and $6.0 billion; and (v) options to purchase 500,000 shares of common stock at an exercise price of $8.00 per share, upon the Company achieving each of the following market capitalizations: $7.0 billion, $8.0 billion, $9.0 billion and $10.0 billion. As of January 1, 2022, Mr. Kohen has additional supplemental bonus options to purchase shares of common stock, subject to the achievement of certain Company market valuation, as described below under “Agreements with Named Executive Officers.” (4) Represents the range of exercise prices – options to purchase 200,000 shares have an exercise price of $0.60 per share, 150,000 have an exercise price of $1.20 per share and 150,000 have an exercise price of $1.80 per share. (5) Represents the range of exercise prices – options to purchase 50,000 shares have an exercise price of $3.00 per share and 50,000 have an exercise price of $4.00 per share. (6) The options become exercisable on October 1, 2022. Options to purchase 60,000 shares have an exercise price of $0.10 per share and 60,000 have an exercise price of $6.00 per share. (7) These options become exercisable in three equal installments on each of June 1, 2022, 2023 and 2024 and have an exercise price of $12.00 per share. (8) Mr. Schmidt’s employment agreement provides for an annual grant of 25,000 shares of common stock on each of June 1, 2022, 2023 and 2024. Agreements with Named Executive Officers John P. Campi (Chief Executive Officer) Effective September 1, 2019, the Company entered into an Executive Employment Agreement with John Campi, its Chief Executive Officer and then-Chief Financial Officer (the “Campi Agreement”), which superseded Mr. Campi’s previous employment agreement effective September 1, 2016. The Campi Agreement provided for an initial term of one year, which expired August 31, 2020. The term may be, and has been, renewed by the mutual agreement of Mr. Campi and the Company. Subject to other customary terms and conditions of such agreements, the Campi Agreement provides that Mr. Campi will receive: (i) a base salary of $150,000 per year, which may be adjusted each year at the discretion of the board; (ii) a sign-on bonus of a stock option to purchase 120,000 shares of common stock at an exercise price of $6.00 per share, which vested in its entirety on December 31, 2020; (iii) incentive compensation consisting of (a) a cash component, paid on an annual basis, equal to (x) 0.25% of the Company’s annual gross revenue and (y) 3.0% of the Company’s annual net income, and (b) a stock option component, consisting of five-year options to purchase shares of common stock in an amount equal to 0.5% of the Company’s quarterly net income, the exercise price of which will be determined at the time such options are granted. Mr. Campi is also entitled to receive expense reimbursement for reasonable expenses, including travel and entertainment, incurred in the performance of his duties. Pursuant to the Campi Agreement, Mr. Campi may be terminated for “cause,” which is defined as an act of fraud, embezzlement, theft or neglect of or refusal to substantially perform the duties of his employment that is materially injurious to the financial condition or business reputation of the Company; a material violation of the Campi Agreement by Mr. Campi that is not cured within 30 days of written notice; and Mr. Campi’s death, disability or incapacity. Following the expiration of the initial term, the Campi Agreement may be terminated by the board of directors at its discretion, in which case Mr. Campi will receive a payment equal to 50% of his then-applicable annual base salary. In addition, Mr. Campi may terminate the Campi Agreement at his discretion by providing at least 30 days’ prior written notice to the Company. 64 In the event the Company is acquired, is the non-surviving entity in a merger or sells all or substantially all of its assets, the Campi Agreement will survive, and the Company will use its best efforts to ensure that the transferee or surviving company is bound by the provisions of the Campi Agreement. All shares granted will vest immediately. Rani R. Kohen (Executive Chairman) Effective September 1, 2019, the Company entered into an Executive Chairman Agreement with Rani R. Kohen (as amended, the “2019 Chairman Agreement”) to serve as the Company’s Executive Chairman and Chairman of the board of directors, which superseded Mr. Kohen’s previous chairman agreement effective September 1, 2016. Effective as of January 1, 2022, the Company entered into a new Executive Chairman Agreement with Mr. Kohen (the “Chairman Agreement”), which superseded the 2019 Chairman Agreement and contains substantially the same terms. The Chairman Agreement provides that Mr. Kohen will serve for an initial term of three years and that the Chairman Agreement will automatically renew unless Mr. Kohen or the board of directors decide otherwise. Subject to other customary terms and conditions of such agreements, the Chairman Agreement provides that Mr. Kohen will receive: (i) a base salary of $300,000 per year commencing January 1, 2022 (an increase from $250,000 per year under the 2019 Chairman Agreement), which will be increased by the Company in the event the Company has a significant cash raise; (ii) annual equity compensation consisting of options to purchase 1,020,000 shares of common stock at an exercise price of $12.00 per share, which vest in three equal annual installments on each of January 1, 2023, 2024 and 2025 (subject to certain exceptions) and will have a five-year term; (iii) a sign-on bonus stock option to purchase 120,000 shares of common stock at an exercise price of $12.00 per share, which will vest in its entirety on January 1, 2023 and has a five-year term; (iv) supplemental bonus compensation of stock options to purchase up to 6,000,000 shares of common stock at an exercise price ranging between $6.00 and $8.00 per share, determined based on the achievement of specified market capitalizations of the Company, as described further below, which will have a five-year term; (v) supplemental bonus compensation such that, in the event the Company achieves a $10.0 billion valuation, for each valuation increase of $1.0 billion up to $30.0 billion Company valuation, Mr. Kohen will receive an option to purchase 500,000 shares at an exercise price of $12.00 per share; (vi) supplemental bonus compensation of stock options to purchase up to 4,000,000 shares of common stock at an exercise price ranging between $3.00 and $5.00 per share, determined based on the achievement of specified market capitalizations of the Company, as provided by the previous chairman agreement and described further below; and (vii) incentive compensation equal to 0.5% of the Company’s gross revenue, which will be paid in cash, stock and/or options on an annual basis. In the event the Company exceeds a $30.0 billion valuation, the Company and Mr. Kohen will negotiate a mutually acceptable amendment to the Chairman Agreement. Mr. Kohen is eligible for the following supplemental bonus compensation under the Chairman Agreement (in addition to the supplemental bonus compensation described in clause (v) above): (i) options to purchase 500,000 shares of common stock at an exercise price of $6.00 per share, upon the Company achieving each of the following market capitalizations: $500.0 million, $1.0 billion, $1.5 billion and $2.0 billion; (ii) options to purchase 500,000 shares of common stock at an exercise price of $7.00 per share, upon the Company achieving each of the following market capitalizations: $3.0 billion, $4.0 billion, $5.0 billion and $6.0 billion; and (iii) options to purchase 500,000 shares of common stock at an exercise price of $8.00 per share, upon the Company achieving each of the following market capitalizations: $7.0 billion, $8.0 billion, $9.0 billion and $10.0 billion. Mr. Kohen additionally remains eligible to receive the following supplemental bonus compensation, pursuant to the prior chairman agreement: (i) options to purchase 500,000 shares of common stock at $3.00 per share, upon the Company achieving each of the following market capitalizations: $300.0 million, $500.0 million and $750.0 million; (ii) options to purchase 500,000 shares of common stock at $4.00 per share, upon the Company achieving each of the following market capitalizations: $1.0 billion, $1.5 billion and $2.0 billion; and (iii) options to purchase 500,000 shares of common stock at $5.00 per share, upon the Company achieving each of the following market capitalizations: $2.5 billion and $3.0 billion. As of December 31, 2021, the following options have vested: (i) options to purchase 1.5 million shares at an exercise price of $3.00 per share, (ii) options to purchase 500,000 shares at an exercise price of $4.00 per share; and (iii) options to purchase 1.0 million shares at an exercise price of $6.00 per share. 65 Mr. Kohen is also entitled to receive a car allowance of $1,000 per month, reimbursement for cell phone costs and expense reimbursement for reasonable expenses, including travel and entertainment, incurred in the performance of his duties. In addition, in the event Mr. Kohen invents additional new products and applications for the Company, including products based on the Company’s existing intellectual property, Mr. Kohen will be entitled to receive additional compensation, which will be determined by the board of directors. Pursuant to the Chairman Agreement, Mr. Kohen may be terminated for “cause,” which is defined as an act of fraud, embezzlement or theft; a material violation of the Chairman Agreement by Mr. Kohen that is not cured within 60 days of written notice; and Mr. Kohen’s death, disability or incapacity. During the initial term of the Chairman Agreement, if Mr. Kohen is terminated without cause, (i) the Company will pay Mr. Kohen an amount calculated by multiplying Mr. Kohen’s monthly salary at the time of such termination by the number of months remaining in the initial term; (ii) Mr. Kohen’s annual equity compensation will vest on a pro rata basis; and (iii) Mr. Kohen will receive full payment of all unpaid incentive compensation. Following the expiration of the initial term, the Chairman Agreement may be terminated by the board of directors at its discretion, in which case Mr. Kohen will receive full payment for all incentives and will be entitled to compensation for his invented products. Mr. Kohen may terminate the Chairman Agreement at his discretion by providing at least 90 days’ prior written notice to the Company. In the event Mr. Kohen’s employment is terminated by reason of his death, the Company will pay Mr. Kohen’s beneficiaries 12 months of Mr. Kohen’s base salary or Mr. Kohen’s base salary through the remainder of the year in which Mr. Kohen’s death occurs, whichever is greater, and all annual stock compensation, incentive compensation and supplemental bonus compensation due to Mr. Kohen will be bequeathed to his beneficiaries. In the event the Company is acquired, is the non-surviving party in a merger or sells all or substantially all of its assets, the Chairman Agreement will not be terminated, and the Company will ensure that the transferee or surviving company is bound by the provisions of the Chairman Agreement. All shares granted and any other compensation will vest and be paid immediately. Patricia Barron (Chief Operations Officer) Effective September 1, 2019, the Company entered into an Executive Employment Agreement with Patricia Barron, its Chief Operations Officer (the “Barron Agreement”), which superseded Ms. Barron’s previous employment agreement effective July 1, 2016. The Barron Agreement provided for an initial term of one year, which term may be, and has been, renewed by the mutual agreement of Ms. Barron and the Company. Subject to other customary terms and conditions of such agreements, the Barron Agreement provides that Ms. Barron will receive: (i) a base salary of $150,000 per year, which may be adjusted each year at the discretion of the board; (ii) a sign-on bonus of a stock option to purchase 100,000 shares of common stock at an exercise price of $6.00 per share, which vested in its entirety on December 31, 2020; and (iii) cash incentive compensation equal to 0.25% of the Company’s net revenue, payable on an annual or quarterly basis. Ms. Barron is also entitled to receive expense reimbursement for reasonable expenses, including travel and entertainment, incurred in the performance of her duties. Pursuant to the Barron Agreement, Ms. Barron may be terminated for “cause,” which is defined as an act of fraud, embezzlement, theft or neglect of or refusal to substantially perform the duties of her employment that is materially injurious to the financial condition or business reputation of the Company; a material violation of the Barron Agreement by Ms. Barron that is not cured within 30 days of written notice; and Ms. Barron’s death, disability or incapacity. Following the expiration of the initial term, the Barron Agreement may be terminated by the board of directors at its discretion, in which case Ms. Barron will receive one month of her then-applicable annual base salary for every year of employment by the Company, as well as any unpaid incentive compensation. In addition, Ms. Barron may terminate the Barron Agreement at her discretion by providing at least 30 days’ prior written notice to the Company. In the event the Company is acquired, is the non-surviving entity in a merger or sells all or substantially all of its assets, the Barron Agreement will survive, and the Company will use its best efforts to ensure that the transferee or surviving company is bound by the provisions of the Barron Agreement. All shares granted will vest immediately. 66 Steven M. Schmidt (President) The Company initially entered into a consultant agreement with Steven M. Schmidt on August 20, 2019, as amended June 1, 2021 (as amended, the “Schmidt Agreement”), pursuant to which amendment Mr. Schmidt agreed to serve as the Company’s President. The Schmidt Agreement provides for a three-year term, which may be renewed upon the signed written consent of the Company and Mr. Schmidt. Subject to other customary terms and conditions of such agreement, the Schmidt Agreement provides that Mr. Schmidt will receive: (i) a five-year option to purchase 60,000 shares of common stock at an exercise price of $0.10 per share, which will vest in three equal annual installments on each of October 1, 2020, 2021 and 2022; (ii) a five-year option to purchase 60,000 shares of common stock at an exercise price of $6.00 per share, which will vest in three equal annual installments on each of October 1, 2020, 2021 and 2022; (iii) a stock bonus of 20,000 shares that will be payable upon achievement of certain sales program goals; (iv) a signing bonus of 25,000 shares of common stock; (v) a five-year option to purchase 100,000 shares of common stock at an exercise price of $12.00 per share, which vests in four equal annual installments on each of June 1, 2021, 2022, 2023 and 2024 (which includes a signing bonus of options to purchase 25,000 shares); and (vi) an annual grant of 25,000 shares of common stock on each of June 1, 2022, 2023 and 2024. Mr. Schmidt may be eligible to receive additional bonus compensation as determined by the Company. Pursuant to the Schmidt Agreement, Mr. Schmidt may be terminated for “cause,” which is defined as an act of fraud, embezzlement, theft or neglect of or refusal to substantially perform his duties that is materially injurious to the financial condition or business reputation of the Company; a material violation of the Schmidt Agreement by Mr. Schmidt that is not cured within 30 days of written notice; Mr. Schmidt’s death, disability or incapacity; willful misconduct that damages the Company, its reputation, products, services or customers; and being charged with a felony or misdemeanor involving moral turpitude. The Company may terminate the Schmidt Agreement at any time, in which case Mr. Schmidt will immediately receive all shares of common stock provided for under the Schmidt Agreement and all options provided for will immediately vest. Mr. Schmidt may terminate the Schmidt Agreement at his discretion by providing at least 30 days’ prior written notice to the Company. In the event the Company is acquired, is the non-surviving entity in a merger or sells all or substantially all of its assets, the provisions and rights provided for in Schmidt Agreement will survive, and the Company will use its best efforts to ensure that the transferee or surviving company is bound by the provisions of the Schmidt Agreement. All shares granted will vest immediately. Marc-Andre Boisseau (Chief Financial Officer) Effective January 1, 2022, the Company entered into an employment agreement with Marc-Andre Boisseau, pursuant to which Mr. Boisseau agreed to serve as the Company’s Chief Financial Officer (the “Boisseau Agreement”). Subject to other customary terms and conditions of such agreement, the Boisseau Agreement provides that Mr. Boisseau will: (i) receive a base salary of $144,000 per year, subject to annual review and adjustment; (ii) receive a signing bonus consisting of (1) 10,000 shares of common stock, to be issued in four equal installments within 15 days following the end of each quarter in 2022 and (2) a three-year stock option to purchase 10,000 shares of common stock at an exercise price of $12.00 per share, which will vest in four equal installments at the end of each quarter in 2022; and (iii) be eligible to receive performance-based compensation in the form of a bonus, payable in equity and/or cash, as determined by the compensation committee, subject to the achievement of performance metrics and other criteria as determined by the Executive Chairman and approved by the compensation committee. Mr. Boisseau is also entitled to receive expense reimbursement for reasonable expenses, approved in writing by the Executive Chairman and Chief Executive Officer, incurred in the performance of his duties. The Boisseau Agreement also contains customary non-competition and non-solicitation covenants and does not provide for any specified severance benefits. The Boisseau Agreement provides that Mr. Boisseau’s employment is “at will,” and either party may terminate his employment at any time and for any reason, without cause, upon 90 days’ advance written notice. 67 Stock Incentive Plans 2018 Stock Incentive Plan (as Amended and Restated) The board of directors initially approved the 2018 Stock Incentive Plan (as amended and restated, the “2018 Plan”) on April 26, 2018, and in each of August 2019 and November 2021, the board of directors approved the amendment and restatement of the 2018 Plan. In connection with the effectiveness of our 2021 Plan, no further awards will be granted under the 2018 Plan. However, all outstanding awards will continue to be governed by their existing terms. Under the 2018 Plan, the board has the sole authority to implement, interpret and administer the 2018 Plan, unless the board delegates (i) all or any portion of its authority to implement, interpret and/or administer the 2018 Plan to a committee of the board, or (ii) the authority to grant and administer awards, subject to certain conditions, under the 2018 Plan to an officer of the Company. The 2018 Plan relates to the issuance of up to 10,000,000 shares of common stock, subject to adjustment, and will terminate on April 26, 2028, unless earlier terminated. No single participant under the 2018 Plan may receive more than 25% of all options awarded in a single year. Any employee of the Company or an affiliate, a director or a consultant to the Company or an affiliate may be an “Eligible Person” under the 2018 Plan. The 2018 Plan provides Eligible Persons the opportunity to participate in the enhancement of stockholder value by the award of options and common stock, granted as stock bonus awards, restricted stock awards, deferred share awards and performance-based awards, under the 2018 Plan. The Company may make payment of bonuses and/or consulting fees to certain Eligible Persons in options and common stock, or any combination thereof. The board, or the appropriate committee, may, among other things, prescribe the form, and terms and conditions, of the agreement governing awards granted under the 2018 Plan and adopt, amend and rescind policies and procedures pertaining to the administration of the 2018 Plan. Stock Options The board, or the appointed committee, shall have sole and absolute discretionary authority (i) to determine, authorize and designate those persons pursuant to the 2018 Plan who are to receive options under the 2018 Plan, (ii) to determine the number of shares of common stock to be covered by such options and the terms thereof, (iii) to determine the type of option granted, and (iv) to determine other such details concerning the vesting, termination, exercise, transferability and payment of such options. Options will be granted in accordance with such determinations as evidenced by a written option agreement. Bonus and Restricted Stock Awards The board, or the applicable committee, may, in its sole discretion, grant awards of common stock in the form of bonus awards and restricted stock awards. The terms and conditions of each stock award agreement may change from time to time and need not be uniform with respect to Eligible Persons, and the terms and conditions of separate stock award agreements need not be identical. Deferred Stock Awards The board, or the committee, may authorize grants of shares of common stock to be received at a future date upon such terms and conditions as the board, or the committee, may determine. Such awards will be conferred upon the Eligible Person as consideration for the performance of services and subject to the fulfillment of specified conditions during the deferral period. The terms and conditions of each deferred stock award agreement may change from time to time and need not be uniform with respect to Eligible Persons, and the terms and conditions of separate deferred stock award agreements need not be identical. 68 Performance Share Awards The board, or the committee, may authorize grants of shares of common stock, which will become payable upon the achievement of specified performance objectives, upon such terms and conditions as the board, or the committee, may determine. Such awards shall be conferred upon the Eligible Person upon the achievement of specified performance objectives during a specified performance period, such objectives and period being set forth in the grant. Such grants may include a minimum acceptable level of achievement and/or a formula for measuring and determining the number of performance shares to be issued if performance exceeds the threshold level but does not meet a maximum achievement level. The terms and conditions of each performance share award may change from time to time and need not be uniform with respect to Eligible Persons, and the terms and conditions of separate performance share award agreements need not be identical. Adjustments If the Company effects a subdivision or consolidation of its shares or other capital readjustment, the payment of a stock dividend or other increase or reduction of the number of shares of common stock outstanding, without receiving consideration therefore in money, services or property, then (i) the number, class and per share price of shares of common stock subject to outstanding options and other awards under the 2018 Plan and (ii) the number of and class of shares then reserved for issuance under the 2018 Plan and the maximum number of shares for which awards may be granted to an Eligible Person during a specified time period will be appropriately and proportionately adjusted. The board, or a committee, will make such adjustments, and its determinations will be final, binding and conclusive. Change in Control If the Company is merged or consolidated with another entity or sells or otherwise disposes of substantially all of its assets to another company while options or stock awards remain outstanding under the 2018 Plan, unless provisions are made in connection with such transaction for the continuance of the 2018 Plan and/or the assumption or substitution of such options or stock awards with new options or stock awards covering the stock of the successor company, or parent or subsidiary thereof, with appropriate adjustments as to the number and kind of shares and prices, then all outstanding options and stock awards that have not been continued or assumed, or for which a substituted award has not been granted, will, whether or not vested or then exercisable, unless otherwise specified in the stock option or stock award agreement, terminate immediately as of the effective date of any such merger, consolidation or sale. Federal Income Tax Consequences Subject to other customary terms, the Company may, prior to certificating any common stock, deduct or withhold from any payment pursuant to a stock option or stock award agreement an amount that is necessary to satisfy any withholding requirement of the Company that the Company believes, in good faith, is necessary in connection with U.S. federal, state or local taxes as a consequence of the issuance or lapse of restrictions on such common stock. 2015 Stock Incentive Plan The Company previously granted equity awards under the 2015 Plan, which contained substantially the same terms as the 2018 Plan, described above. The Company no longer grants awards under the 2015 Plan as it was replaced by the 2018 Plan. 2021 Stock Incentive Plan The 2021 Plan was adopted by our board of directors in December 2021 and approved by our stockholders in February 2022 and became effective February 9, 2022 (the “Effective Date”). The following provides a summary of the 2021 Plan. 69 Eligibility and Types of Awards The 2021 Plan authorizes the grant of equity-based compensation awards to those employees of, and consultants to, the Company and its subsidiaries who are selected by the compensation committee, and the 2021 Plan also authorizes the compensation committee to grant awards to non-employee directors of the Company. Awards under the 2021 Plan may be granted in the form of stock options, stock appreciation rights (sometimes referred to as “SARs”), restricted shares, restricted share units, and other share-based awards. Administration The compensation committee, which is comprised of non-employee directors, will administer awards granted under the 2021 Plan. To the extent permitted by applicable law, the compensation committee may delegate its authority to one or more officers or directors of the Company. Further, the board of directors may reserve to itself any of the compensation committee’s authority and may act as the administrator of the 2021 Plan. Shares Available Subject to adjustments as described below, the total number of shares that may be delivered under the 2021 Plan will not exceed 20,000,000 shares (all of which potentially may be issued pursuant to awards of incentive stock options). Shares tendered or withheld to pay the exercise price of a stock option or to cover tax withholding, and shares repurchased by the Company with stock option proceeds, will not be added back to the number of shares available under the 2021 Plan. Upon exercise of any stock appreciation right that may be settled in shares, the full number of shares subject to that award will be counted against the number of shares available under the 2021 Plan, regardless of the number of shares used to settle the stock appreciation right upon exercise. To the extent that any award under the 2021 Plan or any award granted under the 2018 Plan prior to the effectiveness of the 2021 Plan is forfeited, canceled, surrendered, or terminated without the issuance of shares or an award is settled only in cash, the shares subject to such awards granted but not delivered will be added to the number of shares available for awards under the 2021 Plan. Shares available for awards under the 2021 Plan may consist of authorized and unissued shares, treasury shares (including shares purchased by the Company in the open market) or a combination of the foregoing. Stock Options Subject to the terms and provisions of the 2021 Plan, options to purchase shares may be granted to eligible individuals at any time and from time to time as determined by the compensation committee. Options may be granted as incentive stock options (to employees only) or as nonqualified stock options. The compensation committee will determine the number of options granted to each recipient. Each option grant will be evidenced by an award agreement that specifies whether the options are intended to be incentive stock options or nonqualified stock options and such additional limitations, terms and conditions as the compensation committee may determine, consistent with the provisions of the 2021 Plan. The exercise price for each stock option may not be less than 100% of the fair market value of a share of common stock on the date of grant, and each stock option shall have a term no longer than 10 years. Stock options granted under the 2021 Plan may be exercised by such methods and procedures as determined by the compensation committee from time to time. Stock Appreciation Rights The compensation committee in its discretion may grant SARs under the 2021 Plan. A SAR entitles the holder to receive from the Company upon exercise an amount equal to the excess, if any, of the aggregate fair market value of a specified number of shares that are the subject of such SAR over the aggregate exercise price for the underlying shares. The exercise price for each SAR may not be less than 100% of the fair market value of a share on the date of grant, and each SAR shall have a term no longer than 10 years. 70 The Company may make payment in settlement of the exercise of a SAR by delivering shares, cash or a combination of shares and cash as set forth in the applicable award agreement. Each SAR will be evidenced by an award agreement that specifies the date and terms of the award and such additional limitations, terms and conditions as the compensation committee may determine, consistent with the provisions of the 2021 Plan. Restricted Shares Under the 2021 Plan, the compensation committee may grant or sell restricted shares to participants ( i.e. , shares that are subject to a substantial risk of forfeiture based on continued service and/or the achievement of performance objectives and that are subject to restrictions on transferability) under the 2021 Plan. Except for these restrictions and any others imposed by the compensation committee, upon the grant of restricted shares, the recipient generally will have rights of a stockholder with respect to the restricted shares, including the right to vote the restricted stock and to receive dividends and other distributions paid or made with respect to the restricted shares. However, any dividends payable with respect to unvested restricted shares will be accumulated or reinvested in additional restricted shares until the vesting of the award. During the applicable restriction period, the recipient may not sell, transfer, pledge, exchange or otherwise encumber the restricted shares. Each award of restricted shares will be evidenced by an award agreement that specifies the terms of the award and such additional limitations, terms and conditions, which may include restrictions based upon the achievement of performance objectives, as the compensation committee may determine. Restricted Share Units The compensation committee may grant or sell restricted share units to participants under the 2021 Plan. Restricted share units constitute an agreement to deliver shares (or an equivalent value in cash) to the participant at the end of a specified restriction period and/or upon the achievement of specified performance objectives, subject to such other terms and conditions as the compensation committee may specify, consistent with the provisions of the 2021 Plan. Restricted share units are not common shares and do not entitle the recipients to any of the rights of a stockholder. Restricted share units will be settled in cash, shares or a combination of cash and shares. Each restricted share unit award will be evidenced by an award agreement that specifies the terms of the award and such additional limitations, terms and conditions as the compensation committee may determine, which may include restrictions based upon the achievement of performance objectives. Other Share-Based Awards The compensation committee may grant other share-based awards to participants under the 2021 Plan. Other share-based awards are awards that are valued in whole or in part by reference to shares of common stock, or are otherwise based on the value of the common stock, such as unrestricted shares or time-based or performance-based units that are settled in shares and/or cash. Each other share-based award will be evidenced by an award agreement that specifies the terms of the award and such additional limitations, terms and conditions as the compensation committee may determine, consistent with the provisions of the 2021 Plan. Dividend Equivalents As determined by the compensation committee in its discretion, restricted share units and other share-based awards may provide the participant with a deferred and contingent right to receive dividend equivalents, either in cash or in additional shares. Any such dividend equivalents will be accumulated or deemed reinvested until such time as the underlying award becomes vested (including, where applicable, vesting based on the achievement of performance objectives). No dividend equivalents may be granted with respect to shares underlying any stock option or SAR. 71 Change in Control If a participant is a party to an employment, retention, change in control, severance or similar agreement with the Company or a subsidiary that addresses the effect of a change in control on the participant’s awards, then that agreement will control the treatment of the participant’s awards under the 2021 Plan in the event of a change in control. In all other cases, the compensation committee retains the discretion to determine the treatment of awards granted under the 2021 Plan in the event of a change in control. For example, the compensation committee may determine (without the consent of any participant) to accelerate the vesting of any award (in whole or in part), to make cash payments in cancellation of vested awards, or to cancel any stock options or SARs without consideration if the price per share in the change of control transaction does not exceed the exercise price per share of the applicable award. The 2021 Plan generally defines a change in control to include the acquisition of more than 50% of the Company’s then- outstanding common stock, other than acquisitions directly from, or by, the Company or by any employee benefit plan sponsored or maintained by the Company, and the consummation of a reorganization, merger, consolidation, sale or other disposition of all or substantially all of the Company’s assets, unless, following such transaction, the Company’s stockholders own more than 50% of the common stock of the resulting entity in substantially the same proportions as their ownership of the Company’s common stock prior to the transaction, no stockholder beneficially owns, directly or indirectly, 50% or more of the outstanding common stock of the entity resulting from such transaction (except to the extent that such ownership existed prior to the transaction), and at least a majority of the members of the board of directors of the resulting entity were members of the Company’s board of directors at the time of the transaction. The 2021 Plan contains the complete, detailed definition of change in control. Adjustments In the event of any equity restructuring, such as a stock dividend, stock split, spin-off, rights offering or recapitalization through a large, nonrecurring cash dividend, the compensation committee will adjust the number and kind of shares that may be delivered under the 2021 Plan, the number and kind of shares subject to outstanding awards and the exercise price or other price of shares subject to outstanding awards, to prevent dilution or enlargement of rights. In the event of any other change in corporate capitalization, or in the event of a merger, consolidation, liquidation or similar transaction, the compensation committee may, in its discretion, make such an equitable adjustment, to prevent dilution or enlargement of rights. However, unless otherwise determined by the compensation committee, the number of shares subject to any award will always be rounded down to a whole number. Moreover, in the event of any such transaction or event, the compensation committee, in its discretion, may provide in substitution for any or all outstanding awards such alternative consideration (including cash) as it, in good faith, may determine to be equitable in the circumstances and may require in connection therewith the surrender of all awards so replaced. The compensation committee, in its sole discretion, may also provide at any time for the exercisability of outstanding stock options and SARs, the lapse of time-based vesting restrictions and the satisfaction of performance objectives applicable to outstanding awards, or the waiver of any other limitation or requirement under any awards. Transferability Except as the compensation committee otherwise determines, awards granted under the 2021 Plan will not be transferable by a participant other than by will or the laws of descent and distribution. Except as otherwise determined by the compensation committee, stock options and SARs will be exercisable during a participant’s lifetime only by him or her or, in the event of the participant’s incapacity, by his or her guardian or legal representative. Any award made under the 2021 Plan may provide that any shares issued as a result of the award will be subject to further restrictions on transfer. No Repricing of Stock Options or Stock Appreciation Rights Except in connection with an adjustment involving a change in capitalization or other corporate transaction or event as provided for in the 2021 Plan, the compensation committee may not authorize the amendment of any outstanding stock option or stock appreciation right to reduce the exercise price, and no outstanding stock option or stock appreciation right may be cancelled in exchange for stock options or stock appreciation rights having a lower exercise price, or for another award or for cash, without the approval of the Company’s stockholders. 72 Compensation Recovery Policy Awards granted under the 2021 Plan shall be subject to forfeiture or recoupment pursuant to any compensation recovery policy that the Company may adopt in the future. Term of the 2021 Plan; Amendment and Termination No awards may be granted under the 2021 Plan after the date that is 10 years from the Effective Date, or such earlier date as the 2021 Plan may be terminated by the board of directors. The board of directors may, without stockholder approval, amend or terminate the 2021 Plan, except in any respect as to which stockholder approval is required by the 2021 Plan, by law, regulation or the rules of an applicable stock exchange. Termination or Change in Control Benefits Our named executive officers may become entitled to certain benefits or enhanced benefits in connection with a qualifying termination and/or a change in control of our Company. Our named executive officers’ employment agreements entitle them to certain benefits upon certain terminations or in connection with a change in control of the Company. For additional discussion, see “Agreements with Named Executive Officers” above. Each of our named executive officers holds equity awards that were granted subject to the general terms and termination and change in control provisions of our stock incentive plans. The forms of agreements governing outstanding awards granted under the plans contain additional such provisions. For additional discussion, please see “2018 Stock Incentive Plan (as Amended and Restated)” and “2021 Stock Incentive Plan” above. DIRECTOR COMPENSATION Director Compensation We do not pay cash compensation to our non-employee directors for service on our board. Our non-employee directors are reimbursed for reasonable expenses incurred in attending meetings and carrying out duties as board members. Directors who are employed by us do not receive compensation for service on our board of directors. As compensation for service on our board during 2021, each non-employee director was entitled to receive, effective December 31, 2021, 20,000 shares of common stock and five-year options to purchase 25,000 shares of common stock, which vest on the effective date of grant, have an exercise price of $12.00 per share and expire December 31, 2026. As compensation for his former role as chairman of the audit committee and for his service on the corporate development committee, Mr. Sokolow was additionally eligible to receive 4,000 shares of common stock and five-year options to purchase 75,000 shares of common stock, which vest on the effective date of grant, have an exercise price of $12.00 and expire December 31, 2026. As compensation for service on our board during 2020, each non-employee director was entitled to receive, effective December 31, 2020, 15,000 shares of common stock and five-year options to purchase 25,000 shares of common stock, which vest on the effective date of grant, have an exercise price of $12.00 per share and expire December 31, 2025. As compensation for his former role as chairman of the audit committee and for his service on the corporate development committee, Mr. Sokolow was additionally eligible to receive 4,000 shares of common stock and five-year options to purchase 75,000 shares of common stock, which vest on the effective date of grant, have an exercise price of $12.00 and expire December 31, 2025. In December 2021, Mr. Sokolow exercised an option to purchase 75,000 shares, dated January 1, 2017, with an exercise price of $2.60 per share, and Mr. Shiff exercised an option to purchase 25,000 shares, dated January 1, 2017, with an exercise price of $2.60 per share. For information regarding the non-employee director compensation program adopted in March 2022, see “Item 9B. Other Information.” 73 Director Compensation Table The following table summarizes the compensation paid to each non-employee director who served during the fiscal years ended December 31, 2021 and 2020. All compensation earned by Mr. Kohen during 2021 and 2020 has been reported in the “Summary Compensation Table” above under “Executive Compensation.” Name Year Fees earned or paid in cash ($) Stock awards ($) (1) Option awards ($) (1) Non-equity incentive plan compensation ($) Nonqualified deferred compensation earnings ($) All other compensation ($) Total ($) Phillips S. Peter 2021 — 60,000 — — — — 60,000 2020 — 117,000 61,430 — — — 178,430 Thomas J. Ridge 2021 — 60,000 — — — — 60,000 2020 — 117,000 62,895 — — — 179,895 Dov Shiff 2021 — 60,000 — — — — 60,000 2020 — 105,000 61,430 — — — 166,430 Leonard J. Sokolow 2021 — 72,000 — — — — 72,000 2020 — 129,000 227,069 — — — 356,069 (1) The table reflects the grant date fair value, as computed in accordance with Topic 718, of the restricted share awards and options granted to directors in fiscal year 2021 and 2020. The value of the options granted during 2021 was $0, as the exercise price of such options was higher than the market value of our common stock. The assumptions used to determine the valuation of the awards are discussed in Note 2 and Note 10 to our consolidated financial statements for the year ended December 31, 2021. There were no unvested stock or option awards held by non-employee directors as of December 31, 2021 or 2020. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS The following table sets forth certain information known to us regarding beneficial ownership of our issued and outstanding common stock as of February 23, 2022 for: ● each of our named executive officers; ● each of our directors and director nominees; ● all of our executive officers and directors and director nominees as a group; and ● each person or group of affiliated persons known by us to be the beneficial owner of more than 5% of our common stock. Beneficial ownership is determined in accordance with the rules of the SEC and generally includes voting or investment power with respect to securities. Under those rules, beneficial ownership includes any shares as to which the individual or entity has sole or shared voting power or investment power, and includes securities that the individual or entity has the right to acquire, such as through the exercise of issued stock options or warrants or conversion of convertible notes or preferred stock, within 60 days of February 23, 2022. Except as noted by footnote, and subject to community property laws where applicable, we believe, based on the information provided to us, that the persons and entities named in the table below have sole voting and investment power with respect to all common stock shown as beneficially owned by them. 74 The percentage of beneficial ownership is based on 77,092,905 shares of common stock issued and outstanding as of February 23, 2022. Except as otherwise indicated below, the address of each beneficial owner is c/o SQL Technologies Corp., 2855 W. McNab Road, Pompano Beach, Florida 33069. Common Stock Beneficially Owned Name and Address of Beneficial Owner Number of Shares and Nature of Beneficial Ownership Percentage of Total Common Stock Greater than 5% Stockholders Dov Shiff, Director (1) 15,075,330 19.5 % Rani R. Kohen, Executive Chairman and Director (2) 14,043,970 17.1 % Motek 7 SQL LLC (3) 6,118,004 7.9 % Strul Associates Limited Partnership (4) 5,737,500 7.4 % Steven Siegelaub (5) 4,317,025 5.5 % Directors and Named Executive Officers (not otherwise included above) Thomas J. Ridge, Director (6) 1,605,000 2.1 % Phillips S. Peter, Director (7) 730,000 * Leonard J. Sokolow, Director (8) 1,879,838 2.4 % Gary N. Golden, Director — * Efrat L. Greenstein Brayer, Director — * Nancy DiMattia, Director — * Steven M. Schmidt, President (9) 171,667 * John P. Campi, Chief Executive Officer (10) 1,310,952 1.7 % Patricia Barron, Chief Operations Officer (11) 800,000 1.0 % All directors and current executive officers as a group (12 persons) (12) 35,616,757 41.7 % * Represents beneficial ownership of less than one percent. (1) Based on a Form 4 and Schedule 13D filed by Mr. Shiff on February 16, 2022. Includes 10,779,618 shares of common stock held by Shiff Group Investments Ltd., 235,712 shares of common stock held by Shiff Group Assets Ltd., 3,855,000 shares of common stock held directly by Mr. Shiff and 40,000 shares held by Mr. Shiff’s spouse, as well as 125,000 shares of common stock underlying stock options that are currently exercisable and 40,000 shares of common stock issuable upon conversion of the principal amount of an outstanding convertible note held by Shiff Group Investments Ltd. As the President and Chief Executive Officer of Shiff Group Investments Ltd. and a controlling person of Shiff Group Assets Ltd., Mr. Shiff may be deemed to be the beneficial owner of the shares held by such entities and have voting and dispositive power over such shares. (2) Based on a Form 3 and Schedule 13D filed by Mr. Kohen on February 9, 2022 and February 15, 2022, respectively. Includes 9,143,970 shares of common stock held by KRNB Holdings LLC and 100,000 shares of common stock held by Mr. Kohen’s family member, as well 4,800,000 shares of common stock underlying stock options that are currently exercisable. As manager of KRNB Holdings LLC, Mr. Kohen may be deemed to be the beneficial owner of the shares held by KRNB Holdings LLC and have voting and dispositive power over such shares. (3) Based on a Schedule 13G filed by Motek 7 SQL LLC on February 16, 2022. As manager of Motek 7 SQL LLC, Hillel Bronstein may be deemed to be the beneficial owner of the shares held by Motek 7 SQL LLC and have voting and dispositive power over such shares. The business address of Motek 7 SQL LLC is c/o Mansfield Bronstein, PA, 500 Broward Blvd., Suite 1450, Fort Lauderdale, FL 33394. (4) As President of Strul Associates Limited Partnership, Aubrey Strul may be deemed to be the beneficial owner of the shares held by Strul Associates Limited Partnership and have voting and dispositive power over such shares. The address for Strul Associates Limited Partnership is 20320 Fairway Oaks Drive, #362, Boca Raton, Florida 33434. 75 (5) Based on a Schedule 13G filed by Mr. Siegelaub on February 16, 2022. Includes the following shares of common stock: (i) 667,316 shares held by Safety Investors 2014 LLC; (ii) 413,435 shares held by Investment 2013, LLC; (iii) 184,622 shares held by 301 Office Ventures, LLC; (iv) 87,424 shares held by Enterprises 2013, LLC; (v) 731,021 shares held by Investment 2018, LLC; (vi) 42,857 shares held by DRS Real Estate Ventures LLC; (vii) 83,333 shares held jointly by Mr. Siegelaub and his spouse; and (viii) 68,814 shares held by Mr. Siegelaub. This also includes: (i) 20,000 shares of common stock issuable upon conversion of the principal amount of an outstanding convertible note held by Sky Technology Partners, LLC; (ii) 200,000 shares of common stock underlying stock options held jointly by Mr. Siegelaub and his spouse that are currently exercisable; (iii) 41,667 shares issuable upon exercise of warrants held by Investment 2018 LLC; and (iv) the following shares of common stock issuable upon conversion of Series A Preferred Stock: 1,000,000 shares held by Safety Investors 2014 LLC and 776,536 shares held by Investment 2013 LLC. As the managing member of each of 301 Office Ventures, LLC, Enterprises 2013, LLC, Investment 2013 LLC, Safety Investors 2014 LLC, Investment 2018 LLC, DRS Real Estate Ventures LLC and Sky Technology Partners, LLC, Mr. Siegelaub may be deemed to the beneficial owner of the shares held by such entities and have voting and dispositive power over such shares. The address for Mr. Siegelaub and his affiliated entities is 361 E Hillsboro Blvd., Deerfield Beach, FL 33441. (6) Includes 780,000 shares of common stock, 625,000 shares of common stock underlying stock options that are currently exercisable and 200,000 shares of common stock issuable upon conversion of Series A Preferred Stock held by Mr. Ridge. (7) Includes 305,000 shares of common stock and 425,000 shares of common stock underlying stock options that are currently exercisable held by Mr. Peter. (8) Includes 309,667 shares of common stock held by Mr. Sokolow, 3,600 shares of common stock held by Newbridge Securities Corporation and 317,656 shares of common stock held by Bridge Line Ventures. This also includes: (i) 950,000 shares of common stock underlying stock options held by Mr. Sokolow that are currently exercisable; (ii) 16,667 shares of common stock issuable upon conversion of the principal amount of an outstanding convertible note held by Mr. Sokolow; and (iii) the following shares of common stock issuable upon exercise of outstanding warrants: 28,759 shares issuable upon exercise of Newbridge Warrants held by Mr. Sokolow, 21,865 shares issuable upon exercise of Newbridge Warrants held by Newbridge Securities Corporation and 231,624 shares issuable upon exercise of the Bridge Line Ventures Warrants. Mr. Sokolow is the Chief Executive Officer and President of Newbridge Financial, Inc. and Chairman of Newbridge Securities Corporation, its broker dealer subsidiary, and, accordingly, may be deemed to be the beneficial owner of the shares held by Newbridge Securities Corporation and have voting and dispositive power over such shares. Mr. Sokolow is Chief Executive Officer and President of Bridge Line Advisors, LLC, the manager of Bridge Line Ventures, and, accordingly, may be deemed to be the beneficial owner of the shares held by Newbridge Securities Corporation and have voting and dispositive power over such shares. (9) Includes 66,667 shares of common stock and 105,000 shares of common stock underlying stock options that are currently exercisable held by Mr. Schmidt. (10) Includes 1,184,285 shares of common stock, 120,000 shares of common stock underlying stock options that are currently exercisable and 6,667 shares of common stock issuable upon conversion of the principal amount of an outstanding convertible note held by Mr. Campi. (11) Includes 100,000 shares of common stock and 700,000 shares of common stock underlying stock options that are currently exercisable held by Ms. Barron. (12) Includes 27,221,175 shares of common stock, as well as 7,850,000 shares of common stock underlying stock options that are currently exercisable, 282,248 shares of common stock issuable upon the exercise of warrants, 63,334 shares of common stock issuable upon the conversion of the principal amount of outstanding convertible notes and 200,000 shares of common stock issuable upon conversion of Series A Preferred Stock. 76 Changes in Control We are unaware of any contract, or other arrangement or provision, the operation of which may at any subsequent date result in a change in control of our Company. Stock Incentive Plan Information The following table sets forth equity compensation plan information as of December 31, 2021: Plan category (a) Number of securities to be issued upon exercise of outstanding options, warrants and rights (b) Weighted-average exercise price of outstanding options, warrants and rights (c) Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a) Equity compensation plans approved by security holders: 2015 Stock Incentive Plan, 2018 Stock Incentive Plan and Executive Chairman options (1)(2) 20,537,182 $ 4.76 — Equity compensation plans not approved by security holders — — — Total 20,537,182 $ 4.76 — (1) Includes 20,537,182 shares of common stock issuable upon exercise of stock options granted pursuant to our stock incentive plans and to our Executive Chairman under his employment agreement, all of which were approved by our security holders, at a weighted average exercise price of $4.76 per share, which includes: (a) 4,910,000 shares of common stock issuable upon exercise of stock options granted under the 2015 Stock Incentive Plan; (b) 5,627,182 shares of common stock issuable upon exercise of stock options granted under the 2018 Stock Incentive Plan; and (c) 10,000,000 shares of common stock issuable to our Executive Chairman upon vesting and exercise of performance-based stock options granted to our Executive Chairman pursuant to his employment agreement, of which 3,000,000 had vested as of December 31, 2021. The Executive Chairman was granted an additional 10,000,000 performance-based options effective January 1, 2022, and an additional 1,140,000 options under the 2018 Stock Incentive Plan, all of which have not vested and which are not included in this table. (2) The 2015 Stock Incentive Plan was previously replaced and terminated by the 2018 Plan and, as such, no securities remained available for issuance under such plan as of December 31, 2021. The 2018 Plan was replaced and terminated by the 2021 Plan, which became effective February 9, 2022 and pursuant to which 20,000,000 shares are authorized for issuance. In connection with the effectiveness of our 2021 Plan, no further awards will be granted under the 2018 Plan. However, all outstanding awards will continue to be governed by their existing terms. The 2018 Plan and the awards granted to the Executive Chairman were approved by stockholders in February 2022. 77 Item 13. CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS, and Director Independence Director Independence Our board of directors has determined that all members of the board of directors, except Rani R. Kohen, Dov Shiff and Leonard J. Sokolow, are independent directors, including for purposes of the rules of Nasdaq and the SEC. In making such independence determination, our board of directors considered the relationships that each non-employee director has with us and all other facts and circumstances that our board of directors deemed relevant in determining their independence, including the transactions described below under “Certain Relationships and Related Party Transactions” and beneficial ownership of our capital stock by each non-employee director. The composition and functioning of our board of directors and each of our committees complies with all applicable requirements of Nasdaq and the rules and regulations of the SEC. Certain Relationships and Related Party Transactions The following is a description of transactions or series of transactions since January 1, 2020, to which we were or will be a party, in which: ● the amount involved in the transaction exceeds the lesser of (i) $120,000 or (ii) 1% of the average of our total assets at year end for the last two completed fiscal years; and ● in which any of our executive officers, directors, director nominees or holders of 5% or more of any class of our voting capital stock, or any immediate family member of any of the foregoing, had or will have a direct or indirect material interest. Officer and Director Compensation Compensation arrangements for our named executive officers and our directors are described in this Form 10-K under Item 11. “Executive Compensation.” Notes Payable In September 2020, Leonard J. Sokolow, a member of the Company’s board of directors, entered into a securities purchase agreement with the Company, pursuant to which Mr. Sokolow agreed to purchase a three-year subordinated convertible promissory note in the principal face amount of $250,000. Subject to other customary terms, the note matures on September 22, 2023 and accrues interest at a rate of 6% per annum, which is payable annually in cash or common stock, at the holder’s discretion. At any time after issuance and prior to or on the maturity date, the note is convertible at the option of the holder into shares of common stock at a conversion price of $15.00 per share. Upon notice to the holder, the Company may prepay, in whole or in part, the outstanding balance of the note at any time prior to the maturity date; provided, that the holder has the right to convert the note into shares of common stock in lieu of prepayment. Upon the occurrence of certain events of default and written notice from the holder, the note will become immediately due and payable and, until paid in full, will bear interest at a rate of 12% per annum. The outstanding balance under the note was $250,000 as of both December 31, 2021 and 2020. In October 2020, Sky Technology Partners, LLC, the managing member of which is Steven Siegelaub, who, with his affiliates, is a greater than 5% holder of the Company’s common stock, entered into a securities purchase agreement with the Company, pursuant to which Sky Technology Partners, LLC agreed to purchase a three-year subordinated convertible promissory note in the principal face amount of $300,000. The note matures on October 30, 2023, and the terms of this note are substantially the same as the September 2020 note purchased by Mr. Sokolow. The outstanding balance under the note was $300,000 as of both December 31, 2021 and 2020. In November 2020, Shiff Group Investments Ltd., of which Mr. Shiff is the President and Chief Executive Officer, entered into a securities purchase agreement with the Company, pursuant to which Mr. Shiff agreed to purchase a three-year subordinated convertible promissory note in the principal face amount of $600,000. The note matures on November 3, 2023, and the terms of this note are substantially the same as the September 2020 note purchased by Mr. Sokolow. The outstanding balance under the note was $600,000 as of both December 31, 2021 and 2020. In November 2020, John Campi, our Chief Executive Officer, entered into a securities purchase agreement with the Company, pursuant to which Mr. Campi agreed to purchase a three-year subordinated convertible promissory note in the principal face amount of $100,000. The note matures on November 10, 2023, and the terms of this note are substantially the same as the September 2020 note purchased by Mr. Sokolow. The outstanding balance under the note was $100,000 as of both December 31, 2021 and 2020. 78 Newbridge Securities Corporation In October 2018, the Company entered into an investment banking agreement with Newbridge Securities Corporation, pursuant to which Newbridge Securities Corporation agreed to provide business development, consulting and advisory services, including capital raising and placement agency services, to the Company. This agreement was renewed periodically prior to its termination. Leonard J. Sokolow, a member of the Company’s board of directors, is the Chief Executive Officer and President of Newbridge Financial, Inc. and Chairman of Newbridge Securities Corporation, its broker dealer subsidiary. In connection with entering into the agreement, the Company paid Newbridge Securities Corporation a $25,000 fee and agreed to issue shares of common stock equal to $50,000, which were paid as of December 31, 2020. Pursuant to the agreement, the Company agreed to pay placement agent fees equal to 8.0% of the gross purchase price upon closing of sales of the Company’s equity securities and 4.0% upon closing of any line of credit, secured or unsecured term loan or other non-convertible debt facility arranged by Newbridge Securities Corporation for the Company. Upon the closing of any such equity or debt transaction, the Company agreed to issue to Newbridge Securities Corporation, or its permitted assigns, warrants to purchase: (i) in an equity transaction, 10% of the sum of (A) the number of shares of common stock issued by the Company and (B) the number of shares of common stock issuable by the Company upon the exercise or conversion of convertible securities issued; and (ii) in a debt transaction, 10% of the facility amount, divided by a per share price equal to the last equity, warrants or options issued by the Company at the time of closing. The agreement further provided, among other things, that such warrants would contain provisions providing for cashless exercise, price protection and piggyback registration rights and would not be callable or redeemable by the Company. The agreement also provided for sales commission with respect to certain agreements, including territorial licenses, marketing agreements and commercial contracts. If the transaction were with an organization located, identified or introduced by Newbridge Securities Corporation, the Company was required to pay Newbridge Securities Corporation a $75,000 fee at closing, plus 1% of the net revenues received by the Company, payable quarterly during the contract’s term. If the Company requested Newbridge Securities Corporation assist with closing the transaction, the Company was required to pay Newbridge Securities Corporation a $50,000 fee at closing, plus 0.25% of the net revenues received by the Company, payable quarterly for the lesser of five years or the contract’s term. For investors introduced by the Company, the compensation payable to Newbridge Securities Corporation was 50% of the then-applicable fees for an investor introduced by Newbridge Securities Corporation. For investors introduced by a third party, the fee payable to Newbridge Securities Corporation was mutually agreed upon by the Company and Newbridge Securities Corporation. Pursuant to the agreement, as of December 31, 2021, the Company had paid Newbridge Securities Corporation an aggregate of $609,472 in placement agent fees (not including expenses). In March 2021, effective as of December 31, 2020, the Company issued 10,000 shares to Newbridge Securities Corporation and its affiliates pursuant to the agreement, of which Newbridge Securities Corporation received 3,600 shares and Mr. Sokolow received 4,500 shares. In addition, on December 31, 2020, the Company issued three-year warrants to purchase an aggregate of up to 14,375 shares of common stock at an exercise price of $12.00 per share (subject to adjustment, including in the event of certain subsequent equity sales by the Company) (the “2020 Newbridge Warrants”), including warrants to purchase up to 5,674 shares and 4,469 shares issued to Newbridge Securities Corporation and Mr. Sokolow, respectively. In addition, during 2021, the Company issued 2021 Newbridge Warrants, consisting of the following three-year warrants with an exercise price of $12.00 per share (subject to adjustment, including in the event of certain subsequent equity sales by the Company): (i) warrants dated October 26, 2021 to purchase an aggregate of up to 3,750 shares of common stock, including warrants to purchase up to 725 shares and 1,088 shares issued to Newbridge Securities Corporation and Mr. Sokolow, respectively, (ii) warrants dated November 29, 2021 to purchase an aggregate of up to 12,501 shares of common stock, including warrants to purchase up to 2,250 shares and 3,375 shares issued to Newbridge Securities Corporation and Mr. Sokolow, respectively, and (iii) warrants dated December 22, 2021 to purchase an aggregate of up to 73,434 shares, including warrants to purchase up to 13,216 shares and 19,827 shares issued to Newbridge Securities Corporation and Mr. Sokolow, respectively (together with the 2020 Newbridge Warrants, the “Newbridge Warrants”). The Newbridge Warrants may be exercised, in whole or in part, at any time on or prior to the third anniversary of the effective date of the warrant. Among other terms, the Newbridge Warrants provide for cashless exercise if, one year following the effective date of the warrant, there is no effective registration statement registering the shares of common stock issuable upon exercise of the Newbridge Warrants, as well as certain anti-dilution rights. The Newbridge Warrants also provide for certain piggyback registration rights, subject to certain exceptions, including, for the 2021 Newbridge Warrants, if the registration statement is for an initial public offering, such that, if the Company registers any of its securities either for its own account or for the account of other security holders, the holders of the Newbridge Warrants are entitled to include their shares in the registration. Subject to certain exceptions, if the offering is being underwritten, the Company and the underwriters may limit the number of shares included in the underwritten offering if the underwriters believe that including such shares would adversely affect the offering. 79 The Company entered into an investment banking engagement agreement with Newbridge Securities Corporation in May 2021, pursuant to which Newbridge Securities Corporation agreed to provide certain corporate advisory services. The agreement had a 12 month term, during which the Company agreed to pay Newbridge Securities Corporation’s pre-approved expenses. The Company agreed to pay a $500,000 corporate advisory fee, in the form of restricted common stock, upon successful listing of the Company’s common stock on a U.S. national securities exchange. The number of shares issued was to be determined based on the initial offering price in the offering, and such shares would have been subject to a six-month lock-up provision. The Company would have been required to pay such fee if it successfully listed on an exchange during the term of the agreement or within nine months following expiration of the term. The Company entered into a separate investment banking engagement agreement in May 2021 with Newbridge Securities Corporation relating to merger and acquisition services. The agreement had a 12 month term, which would have been automatically extended on a month-to-month basis if negotiations or discussions were ongoing at the end of the term. The Company agreed to pay Newbridge Securities Corporation’s pre-approved reasonable expenses during the term. Upon closing of a merger or acquisition transaction facilitated by Newbridge Securities Corporation, the Company agreed to pay, in equity, a transaction fee equal to 2.0% of the aggregate consideration (as defined in the agreement) of such transaction. The equity received would have been subject to a six-month leak-out provision. The Company would have been required to pay the transaction fee after expiration of the agreement or if the Company terminated the agreement without cause (as defined in the agreement), if the Company (i) completed a merger or acquisition transaction with a party identified by Newbridge Securities Corporation within 12 months of such termination or (ii) entered into an agreement contemplating a merger or acquisition with a party identified by Newbridge Securities Corporation during the term of the agreement or the following 12 months, which agreement was ultimately consummated. In January 2022, the Company and Newbridge Securities Corporation entered into a termination agreement, pursuant to which the three investment banking agreements described above were terminated, and the parties agreed that there are no continuing rights or obligations under such agreements, and that Newbridge is not entitled to any fees or payments, in cash or otherwise, pursuant to such agreements. Bridge Line Ventures The Company and Bridge Line Ventures,the manager of which is Bridge Line Advisors, LLC, of which Leonard J. Sokolow, a member of our board of directors, is Chief Executive Officer and President, entered into the following stock purchase agreements (collectively, the “Bridge Line SPAs”): ● Stock Purchase Agreement, dated February 26, 2021, as amended March 30, 2021, June 30, 2021 and August 31, 2021, pursuant to which Bridge Line Ventures purchased 25,373 shares of common stock at a purchase price per share of $12.00. ● Stock Purchase Agreement, dated March 30, 2021, as amended April 30, 2021, June 30, 2021 and August 31, 2021, pursuant to which Bridge Line Ventures purchased 37,500 shares of common stock at a purchase price per share of $12.00. ● Stock Purchase Agreement, dated April 30, 2021, as amended June 30, 2021 and August 31, 2021, pursuant to which Bridge Line Ventures purchased 2,084 shares of common stock at a purchase price per share of $12.00. ● Stock Purchase Agreement, dated June 30, 2021, as amended August 31, 2021, pursuant to which Bridge Line Ventures purchased 150,000 shares of common stock at a purchase price per share of $12.00. ● Stock Purchase Agreement, dated August 31, 2021, pursuant to which Bridge Line Ventures purchased 16,667 shares of common stock at a purchase price per share of $12.00. 80 Each of the Bridge Line SPAs contains substantially the same terms. Among other things, the Bridge Line SPAs contain anti-dilutive price protection measures, which apply for 24 months following the date of closing of the Bridge Line SPAs, subject to certain exceptions, which anti-dilution provisions were triggered by the Company’s initial public offering. As such, on February 14, 2022, the Company issued 86,032 shares of common stock to Bridge Line Ventures. The Bridge Line SPAs also provide for certain piggyback registration rights, such that, subject to certain exceptions, including if the registration statement is for an initial public offering, if the Company registers any of its securities either for its own account or for the account of other security holders, Bridge Line Ventures is entitled to include its shares in the registration. Subject to certain exceptions, if the offering is being underwritten, the Company and the underwriters may limit the number of shares included in the underwritten offering if the underwriters believe that including such shares would adversely affect the offering. In addition, the Company may require Bridge Line Ventures agree to a six month lock-up of its shares following the effective date of the applicable registration statement. The Bridge Line SPAs also contain a standstill provision pursuant to which Bridge Line Ventures agreed to certain restrictions related to the Company for three years following the effective date of each of the Bridge Line SPAs, including, among other things, prohibitions on, either alone or together with any other person, acquiring additional shares of the Company’s common stock or any of its assets, soliciting proxies or seeking representation on our board of directors, unless the Company agrees to such actions in writing. For additional information, see “Description of Capital Stock.” In addition, on each of June 30, 2021 and August 31, 2021, pursuant to the Bridge Line SPAs, Bridge Line Ventures received a three-year warrant to purchase up to 214,957 and 16,667 shares of the Company’s common stock, respectively, at an initial exercise price of $12.00 per share (subject to adjustment, including in the event of certain subsequent equity sales by the Company) (the “Bridge Line Ventures Warrants”). The initial exercise price of $12.00 per share was automatically adjusted to $9.80 per share pursuant to applicable anti-dilution provisions in connection with the completion of the Company’s initial public offering. The Bridge Line Ventures Warrants may be exercised, in whole or in part, at any time on or prior to June 30, 2024 or August 31, 2024, respectively. Among other terms, the Bridge Line Ventures Warrants provide for cashless exercise of the Bridge Line Ventures Warrants if, after June 30, 2022 or August 31, 2022, respectively, there is no effective registration statement registering the shares of common stock issuable upon exercise of the Bridge Line Ventures Warrants. In addition, the Bridge Line Ventures Warrants contain certain piggyback registration rights, which are substantially the same as those provided in by the Bridge Line SPAs. Other Options and Warrants In June 2020, the Company issued a three-year volume warrant to purchase up to 1,125,000 shares of common stock to Strul Associates Limited Partnership, pursuant to a May 2016 private placement. The exercise price was $3.00 if exercised prior to June 1, 2021, $3.25 if exercised on or after June 1, 2021 and prior to June 1, 2022 and $3.50 if exercised on or after June 1, 2022 through June 1, 2023 (in each case, subject to adjustment, including in the event of certain subsequent equity sales by the Company). The warrant was exercisable in whole or in part at any time prior to or on June 1, 2023. In December 2020, Strul Associates Limited Partnership exercised the warrant in full and acquired an aggregate of 1,012,500 shares of common stock, including 675,000 shares of common stock for an aggregate purchase price of $2,025,000 and a net total of 337,500 shares of common stock pursuant to a cashless exercise of the remainder of the warrant. 81 In November 2021, Investment 2018, LLC purchased 41,667 shares and three-year warrants to purchase up to 41,667 shares of common stock at an initial exercise price of $12.00 per share (subject to adjustment, including in the event of certain subsequent equity sales by the Company), for an aggregate purchase price of $500,000. In connection with the completion of the Company’s initial public offering, applicable anti-dilution provisions were automatically triggered, and, accordingly, Investment 2018, LLC received 9,354 shares of common stock on February 14, 2022 and the initial exercise price of the warrants of $12.00 per share was automatically adjusted to $9.80 per share. As the managing member of Investment 2018 LLC, Mr. Siegelaub may be deemed to the beneficial owner of the shares held by such entity. In December 2021, Mr. Sokolow exercised an option to purchase 75,000 shares, dated January 1, 2017, with an exercise price of $2.60 per share, and Mr. Shiff exercised an option to purchase 25,000 shares, dated January 1, 2017, with an exercise price of $2.60 per share. Initial Public Offering In the initial public offering, 455,353 shares were purchased by our directors, officers and greater than 5% stockholders at the public offering price. Policies and Procedures for Related Party Transactions Our board of directors has adopted a written related party transactions policy, effective as of February 9, 2022, which sets forth the policies and procedures for the review and approval or ratification of related person transactions. Pursuant to this policy, the audit committee has the primary responsibility for reviewing and approving or disapproving “related party transactions,” which are transactions, arrangements or relationships between us and related persons in which the aggregate amount involved in any fiscal year exceeds or may be expected to exceed the lesser of $120,000 or 1% of the average of our total assets as year-end for the last two completed fiscal years and in which a related person has or will have a direct or indirect material interest. For purposes of this policy, a related person is defined as an executive officer, director, nominee for director or greater than 5% beneficial owner of our common stock, in each case since the beginning of the most recently completed fiscal year, and their immediate family members. 82 ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES The following table sets forth the aggregate fees billed to us for the years ended December 31, 2021 and December 31, 2020 by our independent auditors, M&K CPAs, PLLC: 2021 2020 Audit Fees (1) $ 48,000 $ 23,000 Audit-Related Fees — — Tax Fees — — All Other Fees — — Total Fees $ 48,000 $ 23,000 (1) Audit fees represent amounts billed for professional services rendered for the audit of our annual financial statements. In addition, 2021 also included audit fees for professional services rendered in relation to the review of our registration statement and other documents filed with the SEC in connection with our initial public offering. Pre-Approval Policy Our current audit committee was formed in connection with our initial public offering, at which time the audit committee also adopted a new charter. Since the formation of our current audit committee, and on a going-forward basis, the audit committee has and will pre-approve all auditing services and permitted non-audit services to be performed for us by our independent registered public accounting firm, including the fees and terms thereof (subject to the de minimis exceptions for non-audit services described in the Exchange Act which are approved by the audit committee prior to the completion of the audit). 83 PART IV ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES (a)(1) Financial Statements Report of Independent Registered Public Accounting Firm Audited Consolidated Balance Sheets as of December 31, 2021 and December 31, 2020 Audited Consolidated Statements of Operations for the Years ended December 31, 2021 and 2020 Audited Consolidated Statements of Stockholders’ Deficit for the Years Ended December 31, 2021 and 2020 Audited Consolidated Statements of Cash Flows for the Years ended December 31, 2021 and 2020 Notes to Audited Financial Statements (a)(2) Financial Statement Schedules Schedules have been omitted because the information required to be set forth therein is not applicable or is shown in the financial statements or notes thereto. (a)(3) Exhibit Index Exhibit No. Description of Exhibit 1.1 Underwriting Agreement, dated February 9, 2022, between the Company and The Benchmark Company, LLC, as Representative of the Underwriter (incorporated by reference to Exhibit 1.1 to the Company’s Current Report on Form 8-K filed with the SEC on February 14, 2022). 3.1 Articles of Incorporation of the Company (incorporated herein by reference to Exhibit 3.1 to the Company’s Registration Statement on Form S-1 (File No. 333-261829) filed with the SEC on December 22, 2021). 3.2 Articles of Amendment to Articles of Incorporation, including the Certificate of Designation of Rights, Preferences and Privileges of Series A Convertible Preferred Stock (effective August 12, 2016) (incorporated herein by reference to Exhibit 3.2 to the Company’s Registration Statement on Form S-1 (File No. 333-261829) filed with the SEC on December 22, 2021). 3.3 Articles of Amendment to Articles of Incorporation (effective February 7, 2022) (incorporated by reference to Exhibit 3.3 to the Company’s Current Report on Form 8-K filed with the SEC on February 14, 2022). 3.4 First Amended and Restated Bylaws of the Company (effective February 9, 2022) (incorporated by reference to Exhibit 3.4 to the Company’s Current Report on Form 8-K filed with the SEC on February 14, 2022). 4.1 Description of the Company’s Registered Securities (filed herewith). 4.2 Specimen Common Stock Certificate (incorporated herein by reference to Exhibit 4.2 to the Company’s Registration Statement on Form S-1 (File No. 333-261829) filed with the SEC on December 22, 2021). 4.3 Representative’s Warrant, dated February 9, 2022 (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed with the SEC on February 14, 2022). 10.1+ GE Trademark License Agreement, dated as of June 15, 2011, by and between SQL Lighting & Fans, LLC and GE Trademark Licensing, Inc. (incorporated herein by reference to Exhibit 10.1 to the Company’s Registration Statement on Form S-1 (File No. 333-261829) filed with the SEC on December 22, 2021). 10.2 First Amendment to Trademark License Agreement, dated April 17, 2013, by and between SQL Lighting & Fans, LLC and GE Trademark Licensing, Inc (incorporated herein by reference to Exhibit 10.2 to the Company’s Registration Statement on Form S-1 (File No. 333-261829) filed with the SEC on December 22, 2021). 10.3 Second Amendment to Trademark License Agreement, dated August 13, 2014, by and between SQL Lighting & Fans, LLC and GE Trademark Licensing, Inc (incorporated herein by reference to Exhibit 10.3 to the Company’s Registration Statement on Form S-1 (File No. 333-261829) filed with the SEC on December 22, 2021). 84 10.4 Third Amendment to Trademark License Agreement, dated September 25, 2018, by and between SQL Lighting & Fans, LLC and GE Trademark Licensing, Inc (incorporated herein by reference to Exhibit 10.4 to the Company’s Registration Statement on Form S-1 (File No. 333-261829) filed with the SEC on December 22, 2021). 10.5 Fourth Amendment to Trademark License Agreement, dated May 2019, by and between SQL Lighting & Fans, LLC and GE Trademark Licensing, Inc (incorporated herein by reference to Exhibit 10.5 to the Company’s Registration Statement on Form S-1 (File No. 333-261829) filed with the SEC on December 22, 2021). 10.6 Letter Agreement relating to Trademark License Agreement, dated December 1, 2020, between SQL Lighting & Fans, LLC and GE Trademark Licensing, Inc (incorporated herein by reference to Exhibit 10.6 to the Company’s Registration Statement on Form S-1 (File No. 333-261829) filed with the SEC on December 22, 2021). 10.7†+ Master Services Agreement, dated June 14, 2019, between GE Technology Development, Inc. and SKY Technology, LLC (incorporated herein by reference to Exhibit 10.7 to the Company’s Registration Statement on Form S-1 (File No. 333-261829) filed with the SEC on December 22, 2021). 10.8 Promissory Note, dated April 13, 2016, by Safety Quick Lighting & Fans Corp., in favor of Nielsen & Bainbridge, LLC (incorporated herein by reference to Exhibit 10.8 to the Company’s Registration Statement on Form S-1 (File No. 333-261829) filed with the SEC on December 22, 2021). 10.9+ Pledge and Security Agreement, dated April 13, 2016, by Safety Quick Lighting & Fans Corp., in favor of Nielsen & Bainbridge, LLC (incorporated herein by reference to Exhibit 10.9 to the Company’s Registration Statement on Form S-1 (File No. 333-261829) filed with the SEC on December 22, 2021). 10.10† Memorandum of Understanding, dated January 31, 2018, between Safety Quick Lighting & Fans Corp. and Nielsen & Bainbridge, LLC (incorporated herein by reference to Exhibit 10.10 to the Company’s Registration Statement on Form S-1 (File No. 333-261829) filed with the SEC on December 22, 2021). 10.11+ Promissory Note, dated December 14, 2021, by the Company, in favor of Nielsen & Bainbridge, LLC (incorporated herein by reference to Exhibit 10.11 to the Company’s Registration Statement on Form S-1 (File No. 333-261829) filed with the SEC on December 22, 2021). 10.12+ Form of Securities Subscription Agreement used in 2020 Private Placements (incorporated herein by reference to Exhibit 10.12 to the Company’s Registration Statement on Form S-1 (File No. 333-261829) filed with the SEC on December 22, 2021). 10.13+ Form of Securities Subscription Agreement and Warrant used in 2021 Private Placements (incorporated herein by reference to Exhibit 10.13 to Amendment No. 1 to the Company’s Registration Statement on Form S-1 (File No. 333-261829) filed with the SEC on January 10, 2022). 10.14* 2015 Stock Incentive Plan (incorporated herein by reference to Exhibit 10.14 to the Company’s Registration Statement on Form S-1 (File No. 333-261829) filed with the SEC on December 22, 2021). 10.15* Form of Stock Option Agreement (2015 Plan) (incorporated herein by reference to Exhibit 10.15 to the Company’s Registration Statement on Form S-1 (File No. 333-261829) filed with the SEC on December 22, 2021). 10.16* Form of Stock Award Agreement (2015 Plan) (incorporated herein by reference to Exhibit 10.16 to the Company’s Registration Statement on Form S-1 (File No. 333-261829) filed with the SEC on December 22, 2021). 10.17* 2018 Stock Incentive Plan, as amended and restated (incorporated herein by reference to Exhibit 10.17 to the Company’s Registration Statement on Form S-1 (File No. 333-261829) filed with the SEC on December 22, 2021). 10.18* Form of Stock Option Agreement (2018 Plan) (incorporated herein by reference to Exhibit 10.18 to the Company’s Registration Statement on Form S-1 (File No. 333-261829) filed with the SEC on December 22, 2021). 10.19* Form of Stock Award Agreement (2018 Plan) (incorporated herein by reference to Exhibit 10.19 to the Company’s Registration Statement on Form S-1 (File No. 333-261829) filed with the SEC on December 22, 2021). 10.20* Executive Chairman Agreement, dated September 1, 2019, between the Company and Rani R. Kohen (incorporated herein by reference to Exhibit 10.20 to the Company’s Registration Statement on Form S-1 (File No. 333-261829) filed with the SEC on December 22, 2021). 85 10.21*+ Amendment to Executive Chairman Agreement, effective September 1, 2019, between the Company and Rani R. Kohen (incorporated herein by reference to Exhibit 10.21 to the Company’s Registration Statement on Form S-1 (File No. 333-261829) filed with the SEC on December 22, 2021). 10.22* Executive Employment Agreement, dated September 1, 2019, between the Company and John P. Campi (incorporated herein by reference to Exhibit 10.22 to the Company’s Registration Statement on Form S-1 (File No. 333-261829) filed with the SEC on December 22, 2021). 10.23* Consultant Agreement, dated August 20, 2019, between the Company and Steven M. Schmidt (incorporated herein by reference to Exhibit 10.23 to the Company’s Registration Statement on Form S-1 (File No. 333-261829) filed with the SEC on December 22, 2021). 10.24* First Amendment to Consulting Agreement, dated June 1, 2021, between the Company and Steven M. Schmidt (incorporated herein by reference to Exhibit 10.24 to the Company’s Registration Statement on Form S-1 (File No. 333-261829) filed with the SEC on December 22, 2021). 10.25* Executive Employment Agreement, dated September 1, 2019, between the Company and Patricia Barron (incorporated herein by reference to Exhibit 10.25 to the Company’s Registration Statement on Form S-1 (File No. 333-261829) filed with the SEC on December 22, 2021). 10.26 Form of Stock Option Agreement used in connection with the stock subscriptions dated February 21, 2017, March 24, 2017 and April 11, 2017 (incorporated herein by reference to Exhibit 10.26 to the Company’s Registration Statement on Form S-1 (File No. 333-261829) filed with the SEC on December 22, 2021). 10.27 Form of 2017 Warrant (incorporated herein by reference to Exhibit 10.27 to the Company’s Registration Statement on Form S-1 (File No. 333-261829) filed with the SEC on December 22, 2021). 10.28 Investment Banking Agreement, dated September 28, 2018 and executed October 3, 2018, between Newbridge Securities Corporation and SQL Technologies Corp., as amended (incorporated herein by reference to Exhibit 10.28 to the Company’s Registration Statement on Form S-1 (File No. 333-261829) filed with the SEC on December 22, 2021). 10.29 Form of Placement Agent Warrant (incorporated herein by reference to Exhibit 10.29 to the Company’s Registration Statement on Form S-1 (File No. 333-261829) filed with the SEC on December 22, 2021). 10.30 Investment Banking Agreement, dated May 20, 2021, between the Company and Newbridge Securities Corporation (relating to corporate advisory services) (incorporated herein by reference to Exhibit 10.30 to the Company’s Registration Statement on Form S-1 (File No. 333-261829) filed with the SEC on December 22, 2021). 10.31 Investment Banking Agreement, dated May 20, 2021, between the Company and Newbridge Securities Corporation (relating to merger and acquisition services) (incorporated herein by reference to Exhibit 10.31 to the Company’s Registration Statement on Form S-1 (File No. 333-261829) filed with the SEC on December 22, 2021). 10.32+ Form of Stock Purchase Agreement between SQL Technologies Corp. and Bridge Line Ventures, LLC Series ST-1 (incorporated herein by reference to Exhibit 10.32 to the Company’s Registration Statement on Form S-1 (File No. 333-261829) filed with the SEC on December 22, 2021). 10.33 Form of Common Stock Purchase Warrant issued by SQL Technologies Corp. to Bridge Line Ventures, LLC Series ST-1 (incorporated herein by reference to Exhibit 10.33 to the Company’s Registration Statement on Form S-1 (File No. 333-261829) filed with the SEC on December 22, 2021). 10.34 Form of Securities Purchase Agreement related to Purchase of Subordinated Convertible Balloon Promissory Note, including form of Subordinated Convertible Balloon Promissory Note (incorporated herein by reference to Exhibit 10.34 to the Company’s Registration Statement on Form S-1 (File No. 333-261829) filed with the SEC on December 22, 2021). 10.35+ Paycheck Protection Program Term Note, entered into by the Company, as Borrower, for the benefit of PNC Bank, National Association, as Lender, as of April 13, 2020 (incorporated herein by reference to Exhibit 10.35 to the Company’s Registration Statement on Form S-1 (File No. 333-261829) filed with the SEC on December 22, 2021). 10.36 Amendment to the Paycheck Protection Term Note, effective June 5, 2020 (incorporated herein by reference to Exhibit 10.36 to the Company’s Registration Statement on Form S-1 (File No. 333-261829) filed with the SEC on December 22, 2021). 86 10.37+ Second Draw Paycheck Protection Program Term Note, entered into by the Company, as Borrower, for the benefit of PNC Bank, National Association, as Lender, as of February 3, 2021 (incorporated herein by reference to Exhibit 10.37 to the Company’s Registration Statement on Form S-1 (File No. 333-261829) filed with the SEC on December 22, 2021). 10.38+ Loan Authorization and Agreement (Economic Injury Disaster Loan), dated June 24, 2020, between the U.S. Small Business Administration and the Company (incorporated herein by reference to Exhibit 10.38 to the Company’s Registration Statement on Form S-1 (File No. 333-261829) filed with the SEC on December 22, 2021). 10.39 Note (Secured Disaster Loans), entered into by the Company, as Borrower, for the benefit of the U.S. Small Business Administration, as of June 24, 2020 (incorporated herein by reference to Exhibit 10.39 to the Company’s Registration Statement on Form S-1 (File No. 333-261829) filed with the SEC on December 22, 2021). 10.40 Security Agreement, dated June 24, 2020, between the U.S. Small Business Administration and the Company (incorporated herein by reference to Exhibit 10.40 to the Company’s Registration Statement on Form S-1 (File No. 333-261829) filed with the SEC on December 22, 2021). 10.41* 2021 Stock Incentive Plan (effective February 9, 2022) (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on February 14, 2022). 10.42* Form of Nonqualified Stock Option Agreement (2021 Plan) (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed with the SEC on February 14, 2022). 10.43* Form of Incentive Stock Option Agreement (2021 Plan) (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed with the SEC on February 14, 2022). 10.44* Form of Restricted Shares Award Agreement (2021 Plan) (incorporated by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K filed with the SEC on February 14, 2022). 10.45* Executive Chairman Agreement, effective as of January 1, 2022, between the Company and Rani R. Kohen (incorporated herein by reference to Exhibit 10.45 to the Company’s Registration Statement on Form S-1 (File No. 333-261829) filed with the SEC on December 22, 2021). 10.46* Chief Financial Officer Agreement, effective as of January 1, 2022, between the Company and Marc-Andre Boisseau (incorporated herein by reference to Exhibit 10.46 to Amendment No. 1 to the Company’s Registration Statement on Form S-1 (File No. 333-261829) filed with the SEC on January 10, 2022). 10.47 Termination Agreement, dated January 7, 2022, between the Company and Newbridge Securities Corporation (incorporated herein by reference to Exhibit 10.47 to Amendment No. 1 to the Company’s Registration Statement on Form S-1 (File No. 333-261829) filed with the SEC on January 10, 2022). 21.1 List of Subsidiaries (filed herewith). 23.1 Consent of Independent Registered Public Accounting Firm (filed herewith). 24.1 Power of Attorney (included on signature page). 31.1 Certification by Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith). 31.2 Certification by Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith). 32.1 Certification by Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith). 32.2 Certification by Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith). * Indicates management contract or any compensatory plan, contract or arrangement. + Certain of the exhibits and schedules to this exhibit have been omitted in accordance with Regulation S-K Item 601(a)(5). The Company agrees to furnish a copy of all omitted exhibits and schedules to the SEC upon its request. † Portions of this exhibit (indicated by bracketed asterisks) are omitted in accordance with the rules of the SEC because they are both not material and the Company customarily and actually treats such information as private or confidential. ITEM 16. FORM 10-K SUMMARY None. 87 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. SQL TECHNOLOGIES CORP. By:  /s/ John P. Campi John P. Campi, Chief Executive Officer Date: March 8, 2022 POWER OF ATTORNEY Each individual whose signature appears below constitutes and appoints John P. Campi, Chief Executive Officer, and Marc-Andre Boisseau, Chief Financial Officer, and each of them singly, his or her true and lawful attorneys-in-fact and agents with full power of substitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign any and all amendments to this Annual Report on Form 10-K and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all the said attorneys-in-fact and agents or any of them or their or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Signature Title Date /s/ John P. Campi Chief Executive Officer March 8, 2022 John P. Campi (Principal Executive Officer) /s/ Marc-Andre Boisseau Chief Financial Officer March 8, 2022 Marc-Andre Boisseau (Principal Financial and Accounting Officer) /s/ Rani R. Kohen Director, Executive Chairman of the Board March 8, 2022 Rani R. Kohen /s/ Leonard J. Sokolow Director March 8, 2022 Leonard J. Sokolow /s/ Nancy DiMattia Director March 8, 2022 Nancy DiMattia /s/ Gary N. Golden Director March 8, 2022 Gary N. Golden /s/ Efrat L. Greenstein Brayer Director March 8, 2022 Efrat L. Greenstein Brayer /s/ Phillips S. Peter Director March 8, 2022 Phillips S. Peter /s/ Thomas J. Ridge Director March 8, 2022 Thomas J. Ridge /s/ Dov Shiff Director March 8, 2022 Dov Shiff 88 FINANCIAL STATEMENTS SQL TECHNOLOGIES CORP. AND SUBSIDIARY CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2021 AND 2020 Index to Consolidated Financial Statements Pages Report of Independent Registered Public Accounting Firm (PCAOB ID:2738) F-2 Consolidated Balance Sheets – December 31, 2021 and 2020 F-3 Consolidated Statements of Operations – December 31, 2021 and 2020 F-4 Consolidated Statements of Stockholders’ Deficit – December 31, 2021 and 2020 F-5 Consolidated Statements of Cash Flows – December 31, 2021 and 2020 F-7 Notes to Consolidated Financial Statements F-8 F- 1 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Stockholders of SQL Technologies Corp. and Subsidiary Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of SQL Technologies Corp. and Subsidiary (the Company) as of December 31, 2021 and 2020, and the related consolidated statements of operations, stockholders’ deficit, and cash flows for each of the years in the two-year period ended December 31, 2021, and the related notes (collectively referred to as the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its consolidated operations and its cash flows for each of the years in the two-year period ended December 31, 2021, in conformity with accounting principles generally accepted in the United States of America. Basis for Opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB . We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and the significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe our audits provide a reasonable basis for our opinion. Critical Audit Matters The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinion on the critical audit matters or on the accounts or disclosures to which they relate. Due to the net loss and negative cash flows from operations for the year, the Company evaluated the need for a going concern. Auditing management’s evaluation of a going concern can be a significant judgment given the fact that the Company uses management estimates on future revenues and expenses which are not able to be easily substantiated. To evaluate the appropriateness of the lack of going concern paragraph in our audit opinion, we examined and evaluated the financial information that was the initial cause for this consideration along with management’s plans to mitigate the going concern. /s/ M&K CPAS, PLLC We have served as the Company’s auditor since 2018 Houston, TX March 8, 2022 F- 2 SQL Technologies Corp. and Subsidiary Consolidated Balance Sheets (Audited) December 31, 2021 December 31, 2020 Assets Current assets: Cash and cash equivalents $ 10,426,249 $ 2,308,871 Accounts receivable, net 115 1,543 Inventory 918,651 918,651 Prepaid expenses 40,903 — Total current assets 11,385,918 3,229,065 Other assets: Furniture and equipment, net 25,710 67,735 Patents, net 540,033 403,092 Other assets 2,174 2,174 Total other assets 567,917 473,001 Total Assets $ 11,953,835 $ 3,702,066 Liabilities and Stockholders’ Deficit Current liabilities: Accounts payable $ 507,250 $ 1,008,051 Notes payable, current 404,648 344,032 Accrued expenses 522,086 358,621 GE royalty obligation 1,200,000 500,000 Total current liabilities 2,633,984 2,210,704 Long term liabilities: Notes payable 5,492,572 5,286,642 Convertible notes 1,300,000 1,250,000 GE royalty obligation 2,638,000 3,838,000 Total long-term liabilities 9,430,572 10,374,642 Total liabilities 12,064,556 12,585,346 Commitments and Contingent Liabilities: Redeemable preferred stock - subject to redemption: $0 par value; 20,000,000 shares authorized; 13,256,936 and 13,456,936 shares issued and outstanding at December 31, 2021 and December 31, 2020, respectively 3,314,233 3,364,233 Stockholders’ Deficit: Common stock: $0 par value, 500,000,000 shares authorized; 66,295,288 and 64,515,231 shares issued and outstanding at December 31, 2021 and December 31, 2020, respectively 57,356,139 34,353,592 Common stock to be issued — 8,088,474 Additional paid-in capital 13,524,247 13,755,891 Accumulated deficit (74,269,898 ) (68,410,028 ) Total stockholders’ deficit (3,389,512 ) (12,212,071 ) Non-controlling interest (35,442 ) (35,442 ) Total deficit (3,424,954 ) (12,247,513 ) Total Liabilities and Stockholders’ Deficit $ 11,953,835 $ 3,702,066 The accompanying notes are an integral part of the consolidated financial statements. F- 3 SQL Technologies Corp. and Subsidiary Consolidated Statements of Operations (Audited) For the Year Ended December 31, 2021 2020 Revenue $ 43,109 $ 258,376 Cost of revenues (149,286 ) (503,033 ) Gross loss (106,177 ) (244,657 ) Selling, general and administrative expenses 5,081,906 8,741,320 Loss from operations (5,188,083 ) (8,985,977 ) Other income / (expense) Interest expense (560,418 ) (515,515 ) Other income, loan forgiveness 10,000 257,468 Gain on exchange 8,051 408 Interest income 36 1,511 Total other expense, net (542,331 ) (256,128 ) Net loss including noncontrolling interest (5,730,414 ) (9,242,105 ) Less: net loss attributable to non-controlling interest — — Preferred dividends 129,456 130,206 Net loss attributed to common shareholders $ (5,859,870 ) $ (9,372,311 ) Net loss per share - basic and diluted $ (0.09 ) $ (0.15 ) Weighted average number of common shares outstanding during the year – basic and diluted 64,943,703 62,754,177 The accompanying notes are an integral part of the consolidated financial statements. F- 4 SQL Technologies Corp. and Subsidiary Consolidated Statements of Stockholders’ Deficit (Audited) Common Stock, $0 Par Value Additional Shares (Issued) Shares (To Be Issued) To Be Issued Amount Paid-In Capital Accumulated Deficit Noncontrolling Interest Stockholders’ Deficit Balance, December 31, 2020 61,901,075 2,614,156 $ 8,088,474 $ 34,353,592 $ 13,755,891 $ (68,410,028 ) $ (35,442 ) $ (12,247,513 ) Issuance of prior year unissued stock 2,614,156 (2,614,156 ) (8,088,474 ) 8,088,474 — — — — Common stock issued per PPM 896,837 — — 10,761,972 — — — 10,761,972 Common stock issued per PPM, Bridge Line Ventures 231,624 — — 2,779,464 — — — 2,779,464 Common stock issued, exercise of options 50,000 — — 130,000 — — — 130,000 Common stock issued, exercise of warrants 21,250 — — 74,375 (74,375 ) — — — Common stock issued, pursuant to services provided 223,845 — — 766,260 216,122 — — 982,382 Common stock issued pursuant to director compensation policy 84,000 — — 252,000 — — — 252,000 Common stock issued pursuant to chairman agreement — — — — 128,649 — — 128,649 Conversion of preferred stock 200,000 — — 50,000 — — — 50,000 Common stock issued for the cashless exercise of warrants — — — — — — — — Common stock issued for the cashless exercise of options 39,167 — — — — — — — Stock issued to joint venture partner, interest expense 33,334 — — 100,002 — — — 100,002 Placement fees paid, pursuant to issuance of common stock per PPM 2019 — — — — (502,040 ) — — (502,040 ) Dividends paid — — — — — (129,456 ) — (129,456 ) Net loss — — — — — (5,730,414 ) — (5,730,414 ) Balance, December 31, 2021 66,295,288 — $ — $ 57,356,139 $ 13,524,247 $ (74,269,898 ) $ (35,442 ) $ (3,424,954 ) The accompanying notes are an integral part of the consolidated financial statements. F- 5 SQL Technologies Corp. and Subsidiary Consolidated Statements of Stockholders’ Deficit (continued) (Audited) Common Stock, $0 Par Value Additional Shares (Issued) Shares (To Be Issued) To Be Issued Amount Paid-In Capital Accumulated Deficit Noncontrolling Interest Stockholders’ Deficit Balance, December 31, 2019 60,326,074 2,207,998 $ 6,780,000 $ 30,514,076 $ 11,710,444 $ (59,037,717 ) $ (35,442 ) $ (10,068,639 ) Common stock issued per PPM 8,334 10,000 120,000 100,009 (120,000 ) — — 100,009 Common stock issued per exercise of warrants 1,012,500 — — 2,025,000 — — — 2,025,000 Common stock issued pursuant to director compensation policy — 156,000 468,000 — — — — 468,000 Common stock issued per employee agreement 214,000 150,000 450,000 642,000 — — — 1,092,000 Common stock issued per consulting agreement 6,834 90,158 270,474 72,508 — — — 342,982 Common stock issued to joint venture partner 333,333 — — 999,999 — — — 999,999 Option expense, pursuant to director compensation policy — — — — 2,165,447 — — 2,165,447 Dividends paid — — — — — (130,206 ) — (130,206 ) Net loss — — — — — (9,242,105 ) — (9,242,105 ) Balance, December 31, 2020 61,901,075 2,614,156 $ 8,088,474 $ 34,353,592 $ 13,755,891 $ (68,410,028 ) $ (35,442 ) $ (12,247,513 ) The accompanying notes are an integral part of the consolidated financial statements. F- 6 SQL Technologies Corp. and Subsidiary Consolidated Statements of Cash Flows (Audited) For the year ended December 31, 2021 2020 Cash flows from operating activities: Net loss attributable to SQL Technologies $ (5,730,414 ) $ (9,242,105 ) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation expense 42,025 74,277 Amortization of patent 42,262 32,032 (Other income), loan forgiveness (10,000 ) (257,468 ) Non-cash equity-based compensation expense 464,953 5,068,428 Non-cash equity-based compensation expense, related party 998,080 — Change in operating assets and liabilities: Accounts receivable 1,428 417,994 Prepaid expenses (40,902 ) 5,629 Inventory — 325,357 Right-to-use assets — 54,112 Other assets — 16,080 Royalty obligation (500,000 ) (87,508 ) Lease, current — (53,210 ) Accounts payable (58,651 ) 158,468 Accrued expenses 163,464 358,621 Net cash used in operating activities (4,627,755 ) (3,129,293 ) Cash flows from investing activities: Purchase of property and equipment — (15,336 ) Payment of patent costs (179,203 ) (94,540 ) Net cash used in investing activities (179,203 ) (109,876 ) Cash flows from financing activities: Proceeds from common stock issuance 13,039,396 100,009 Proceeds from exercise of warrants — 2,025,000 Proceeds from exercise of options 130,000 — Proceeds from SBA - PPP notes payable 178,235 279,500 Proceeds from SBA - EIDL notes payable — 150,000 Proceeds from issuance of convertible notes 50,000 1,250,000 Dividends paid (129,456 ) (130,206 ) Principal repayments of SBA – PPP note payable (839 ) — Principal repayments on note (343,000 ) — Net cash provided by financing activities 12,924,336 3,674,303 Increase (decrease) cash and cash equivalents 8,117,378 435,134 Cash and cash equivalents at beginning of period 2,308,871 1,873,737 Cash and cash equivalents at end of period $ 10,426,249 $ 2,308,871 Supplementary disclosure of non-cash financing activities: Issuance of common stock listed as “to be issued” in prior year $ 8,088,474 — Reclassed of accrued interest to note 442,150 — Stock issuance, placement fees 502,040 — Preferred stock conversion to common 50,000 — Stock issuance, cashless exercise of warrants $ 74,375 — Cash paid during the year for: Interest $ 560,418 $ 515,515 The accompanying notes are an integral part of the consolidated financial statements. F- 7 SQL Technologies Corp. and Subsidiary Notes to Consolidated Financial Statements (Audited) NOTE 1 ORGANIZATION AND NATURE OF OPERATIONS SQL Technologies Corp., a Florida corporation (the “Company”), was originally organized in May 2004 as a limited liability company under the name of Safety Quick Light, LLC. The Company was converted to corporation on November 6, 2012. Effective August 12, 2016, the Company changed its name from “Safety Quick Lighting & Fans Corp.” to “SQL Technologies Corp.” The Company holds over 60 U.S. and global patents and patent applications and has received a variety of final electrical code approvals, including UL, United Laboratories of Canada (cUL) and Conformité Européenne (CE), inclusion in the 2017 and 2020 NEC Code Book. The Company maintains offices in Johns Creek, Georgia, Pompano Beach, Florida, and Guangdong Province, China. The Company has a series of advanced-safe smart platform technologies. The Company’s first-generation technologies enable light fixtures, ceiling fans and other electrically wired products to be installed safely and plugged-in into a ceiling’s electrical outlet box within seconds, and without the need to touch hazardous wires. The plug and play technology method is a universal power-plug device that has a matching receptacle that is simply connected to the electrical outlet box on the ceiling, enabling a safe and quick plug and play installation of light fixtures and ceiling fans in just seconds. The plug and play power-plug technology, eliminates the need of touching hazardous electrical wires while installing light fixtures, ceiling fans and other hard wired electrical products. In recent years the Company has expanded the capabilities of its power-plug product, to include advanced safe and quick universal installation methods, as well as advanced smart capabilities. The smart features include control of light fixtures and ceiling fans by the SkyHome App, through WIFI, Bluetooth Low Energy and voice control. It allows scheduling, energy savings eco mode, dimming, back-up emergency light, night light, light color changing and much more. The Company’s second-generation technology is an all-in-one safe and smart advanced platform that is designed to enhance all-around safety and lifestyle of homes and other buildings. NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The following is a summary of the Company’s significant accounting policies: Basis of Presentation The accompanying consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP) under the accrual basis of accounting. Principles of Consolidation The consolidated financial statements include the accounts of SQL Technologies Corp. (f/k/a Safety Quick Lighting & Fans Corp.) and its subsidiary, SQL Lighting & Fans LLC. All intercompany accounts and transactions have been eliminated in consolidation. Non-controlling Interest The Company owns 98.8% of SQL Lighting & Fans LLC, which was formed in Florida on April 27, 2011. The subsidiary had no activity during 2021 and 2020 . F- 8 Product Warranty The Company’s warranty policy provides repair or replacement of products returned for defects within ninety days of purchase. The Company’s warranties are of an assurance-type and come standard with all Company products to cover repair or replacement should product not perform as expected. Provisions for estimated expenses related to product warranties are made at the time products are sold. These estimates are established using historical information about the nature, frequency and average cost of warranty claim settlements as well as product manufacturing and recovery from suppliers. Management actively studies trends of warranty claims and takes action to improve product quality and minimize warranty costs. The Company estimates the actual historical warranty claims coupled with an analysis of unfulfilled claims to record a liability for specific warranty purposes. As of December 31, 2021 and 2020, products returned for repair or replacement have been immaterial. Accordingly, a warranty liability has not been deemed necessary. Use of Estimates The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Such estimates and assumptions impact both assets and liabilities, including but not limited to: net realizable value of accounts receivable and inventory, estimated useful lives and potential impairment of property and equipment, the valuation of intangible assets, estimate of fair value of share based payments and derivative liabilities, estimates of fair value of warrants issued and recorded as debt discount, estimates of tax liabilities and estimates of the probability and potential magnitude of contingent liabilities. Making estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the financial statements, which management considered in formulating its estimate could change in the near term due to one or more future nonconforming events. Accordingly, actual results could differ significantly from estimates. Reclassifications For comparability, reclassifications of certain prior-year balances were made in order to confirm with current-year presentations. Risks and Uncertainties The Company’s operations are subject to risk and uncertainties including financial, operational, regulatory and other risks including the potential risk of business failure. The Company has experienced, and in the future, expects to continue to experience, variability in its sales and earnings. The factors expected to contribute to this variability include, among others, (i) the uncertainty associated with the commercialization and ultimate success of the product, (ii) competition inherent at large national retail chains where product is expected to be sold, (iii) general economic conditions and (iv) the related volatility of prices pertaining to the cost of sales. Cash and Cash Equivalents Cash and cash equivalents are carried at cost and represent cash on hand, demand deposits placed with banks or other financial institutions, and all highly liquid investments with an original maturity of three months or less. The Company had $10,426,249 and $2,308,871 in cash and cash equivalents as of December 31, 2021 and December 31, 2020, respectively. Accounts Receivable and Allowance for Doubtful Accounts Accounts receivable are recorded at the invoiced amount and do not bear interest. The Company extends unsecured credit to its customers in the ordinary course of business but mitigates the associated risks by performing credit checks and actively pursuing past due accounts. The Company recognizes an allowance for losses on accounts receivable in an amount equal to the estimated probable losses net of recoveries. The allowance is based on an analysis of historical bad debt experience, current receivables aging, and expected future bad debts, as well as an assessment of specific identifiable customer accounts considered at risk or uncollectible. F- 9 The Company’s net balance of accounts receivable at December 31, 2021 and December 31, 2020: December 31, 2021 December 31, 2020 Accounts receivable $ 115 $ 1,543 All amounts were deemed collectible at December 31, 2021 and December 31, 2020 and accordingly, the Company had not incurred any bad debt expense at December 31, 2021 and December 31, 2020. Inventory Inventories are stated at the lower of cost, determined on the first-in, first-out (FIFO) method. Cost principally consists of the purchase price (adjusted for lower of cost or market), customs, duties, and freight. The Company periodically reviews historical sales activity to determine potentially obsolete items and evaluates the impact of any anticipated changes in future demand. December 31, 2021 December 31, 2020 Inventory, component parts $ 918,651 $ 918,651 The Company will maintain an allowance based on specific inventory items that have shown no activity over a 24-month period. The Company tracks inventory as it is disposed, scrapped or sold at below cost to determine whether additional items on hand should be reduced in value through an allowance method. As of December 31, 2021, and December 31, 2020, the Company has determined that no allowance is required. Furniture and Equipment Furniture and equipment is stated at cost, less accumulated depreciation, and is reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Depreciation of property and equipment is provided utilizing the straight-line method over the estimated useful lives, ranging from 3 to 7 years of the respective assets. Expenditures for maintenance and repairs are charged to expense as incurred. Upon sale or retirement of property and equipment, the related cost and accumulated depreciation are removed from the accounts and any gain or loss is reflected in the statements of operations. Intangible Asset Patent The Company developed various patents for an installation device used in light fixtures and ceiling fans. Costs incurred for submitting the applications to the United States Patent and Trademark Office for these patents have been capitalized. Patent costs are amortized using the straight-line method over the related 15-year lives. The Company begins amortizing patent costs once a filing receipt is received stating the patent serial number and filing date from the Patent Office. The Company incurs certain legal and related costs in connection with patent applications. The Company capitalizes such costs to be amortized over the expected life of the patent to the extent that an economic benefit is anticipated from the resulting patent or alternative future use is available to the Company. The Company also capitalizes legal costs incurred in the defense of the Company’s patents when it is believed that the future economic benefit of the patent will be maintained or increased, and a successful defense is probable. Capitalized patent defense costs are amortized over the remaining expected life of the related patent. The Company’s assessment of future economic benefit or a successful defense of its patents involves considerable management judgment, and an unfavorable outcome of litigation could result in a material impairment charge up to the carrying value of these assets. F- 10 GE Agreements The Company has two U.S. and global agreements with General Electric (“GE”) related to the Company’s products. ● The first agreement is a U.S. and Global Trademark Agreement dated June 15, 2011 (as later amended), which expires November 30, 2023 and is generally renewed for five-year periods. Pursuant to such agreement, the Company may use the GE brand logo on certain products, including plug and play smart and standard ceiling fans and Sky’s SQL standard and smart plug and play devices. The Company has exclusive U.S. and global rights, including Canada, Asia, Europe, China, Australia, New Zealand and India, subject to a mutually agreed to commercialization plan, to market plug and play smart and standard ceiling fans and Sky’s SQL standard and smart plug and play devices under the GE brand. GE will assist the Company with manufacturing standards, audit of factories, audit of materials, and quality control under “Six Sigma” guidelines, as well as with public relations for products and other. ● The second agreement is a U.S. and Global Licensing and Master Service Agreement dated June 14, 2019. The agreement expires on June 14, 2024 and includes automatic renewal provisions. Pursuant to such agreement, GE’s licensing team has the rights to exclusively license Sky’s Standard and Smart plug-and-play products in the U.S. and worldwide. Pursuant to the agreement, the Company expects that GE’s licensing team will seek and arrange licensee partners for our products in the U.S. and globally, including negotiating agreement terms, managing contracts, collecting payments, auditing partners, assisting with patent strategy and protection, and assisting in auditing product quality control under the “Six Sigma” guidelines. For products licensed to third parties, the Company and GE will each receive a specified percentage of the earned revenue realized from such licensing, unless otherwise provided in the applicable statement of work. Fair Value of Financial Instruments The Company measures assets and liabilities at fair value based on an expected exit price as defined by the authoritative guidance on fair value measurements, which represents the amount that would be received on the sale of an asset or paid to transfer a liability, as the case may be, in an orderly transaction between market participants. As such, fair value may be based on assumptions that market participants would use in pricing an asset or liability. The authoritative guidance on fair value measurements establishes a consistent framework for measuring fair value on either a recurring or nonrecurring basis whereby inputs, used in valuation techniques, are assigned a hierarchical level. The following are the hierarchical levels of inputs to measure fair value: ● Level 1 – Observable inputs that reflect quoted market prices in active markets for identical assets or liabilities. ● Level 2 – Inputs reflect quoted prices for identical assets or liabilities in markets that are not active; quoted prices for similar assets or liabilities in active markets; inputs other than quoted prices that are observable for the assets or liabilities; or inputs that are derived principally from or corroborated by observable market data by correlation or other means. ● Level 3 – Unobservable inputs reflecting the Company’s assumptions incorporated in valuation techniques used to determine fair value. These assumptions are required to be consistent with market participant assumptions that are reasonably available. The carrying amounts of the Company’s financial assets and liabilities, such as cash and cash equivalents, accounts receivable, inventory, prepaid expenses, other current assets, accounts payable, accrued interest payable, certain notes payable and notes payable – related party, and GE royalty obligation, approximate their fair values because of the short maturity of these instruments. F- 11 Embedded Conversion Features The Company evaluates embedded conversion features within convertible debt under ASC 815 “Derivatives and Hedging” to determine whether the embedded conversion feature(s) should be bifurcated from the host instrument and accounted for as a derivative at fair value with changes in fair value recorded in earnings. If the conversion feature does not require derivative treatment under ASC 815, the instrument is evaluated under ASC 470-20 “Debt with Conversion and Other Options” for consideration of any beneficial conversion features. Derivative Financial Instruments The Company does not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks. The Company evaluates all of its financial instruments, including stock purchase warrants, to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then revalued at each reporting date, with changes in the fair value reported as charges or credits to income. As of December 31, 2021, the Company had reserved for issuance 29,323,681 shares of common stock associated with conversion features on Series A Preferred Stock, warrants, options, and convertible notes. These shares have been reserved for issuance by the Company’s stock transfer agent, and accordingly, no derivative liability has been calculated on these shares. Extinguishments of Liabilities The Company accounts for extinguishments of liabilities in accordance with ASC 405-20 (formerly SFAS 140) “Accounting for Transfers and Servicing of Financial Assets and Extinguishment of Liabilities”. When the conditions are met for extinguishment accounting, the liabilities are derecognized and the gain or loss on the sale is recognized. Stock-based Compensation The Company periodically issues common stock and stock options to officers, directors, employees and consultants for services rendered. The Company accounts for stock incentive awards issued to employees and non-employees in accordance with FASB ASC 718, Stock Compensation. Accordingly, stock-based compensation is measured at the grant date, based on the fair value of the award. Stock-based awards to employees are recognized as an expense over the requisite service period, or upon the occurrence of certain vesting events. Additionally, stock-based awards to non-employees are expensed over the period in which the related services are rendered. In June 2018, the FASB issued ASU 2018-07—Compensation—Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting, which simplifies the accounting for share-based payments to nonemployees by aligning it with the accounting for share-based payments to employees subject to certain exceptions. The Company adopted ASU 2018-07 with respect to grants of shares of common stock of the Company made in January 2019. The adoption of ASU 2018-07 did not have a material impact on the consolidated financial statements. Prior to the adoption of ASU 2018-07 in January 2019, stock-based awards granted to non-employees were accounted for in accordance with ASU 505-50 – Equity-Based Payments to Non-Employees (“ASU 505-50”). ASU 505-50 measures stock-based compensation at either the fair value of the consideration received, or the fair value of the equity instruments issued, whichever is more reliably measurable. If the fair value of the equity instruments issued is used, it is measured using the stock price and other measurement assumptions as of the earlier of (1) the date at which a commitment for performance by the counterparty to earn the equity instruments is reached, or (2) the date at which the counterparty’s performance is completed. The expense resulting from share-based payments is recorded in operating expenses in the statements of operations. F- 12 Revenue Recognition During the years ended December 31, 2021 and 2020, the Company derived revenues from the sale of GE branded fans and lighting fixtures to large retailers through retail and online sales. The Company determines the correct revenue recognition using the following steps: Step 1: Identify the contract with a customer Step 2: Identify the performance obligations in the contract Step 3: Determine the transaction price Step 4: Allocate the transaction price to the performance obligations in the contract Step 5: Recognize revenue when (or as) the Company satisfies a performance obligation Trade allowances and a provision for estimated returns and other allowances are recorded at the time sales are made, considering historical and anticipated trends. A majority of our sales revenue is recognized when products are shipped from our manufacturing facilities and from our third-party logistics facility. Cost of Revenues Cost of revenues represents costs directly related to produce, acquire and source inventory for sale, and provisions for inventory shrinkage and obsolescence. These costs include costs of purchased products, inbound freight, and custom duties. Selling, General and Administrative Expenses Shipping and handling costs incurred by the Company to deliver finished goods are expensed and recorded in selling, general and administrative expenses. Additionally, selling, general and administrative expenses include marketing, professional fees, distribution, warehouse costs, and other related selling costs. Selling expenses include costs incurred in the selling of merchandise. General and administrative expenses include costs incurred in the administration or general operations of the business. Stock compensation expense consists of non-cash charges resulting from the issuance of stock units and stock options that are disclosed in the selling, general and administrative expenses and included as operating expenses. Loss Per Share Basic net earnings (loss) per share is computed by dividing net income (loss) for the period by the weighted average number of common stock outstanding during each period. Diluted earnings (loss) per share is computed by dividing net income (loss) for the period by the weighted average number of common stock, common stock equivalents and potentially dilutive securities outstanding during each period. The Company uses the “treasury stock” method to determine whether there is a dilutive effect of outstanding convertible debt, option and warrant contracts. For the years ended December 31, 2021 and 2020, the Company recognized net loss and a dilutive net loss, and the effect of considering any common stock equivalents would have been antidilutive for the period. Therefore, separate computation of diluted earnings (loss) per share is not presented for the periods presented. F- 13 The Company had the following anti-dilutive common stock equivalents at December 31, 2021 and December 31, 2020: December 31, 2021 December 31, 2020 Stock Warrants 2,127,895 1,602,415 Stock Options 13,852,182 6,525,000 Convertible Notes 86,668 83,334 Total 16,066,745 8,210,749 At December 31, 2020, the Company recorded but did not issue 2,614,156 shares of common stock, valued at approximately $8,088,474. These shares are reflected in the accompanying balance sheet and stockholders’ deficit statement. Income Tax Provision The Company accounts for income taxes under Section 740-10-30 of the FASB Accounting Standards Codification, which requires recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax assets and liabilities are based on the differences between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Deferred tax assets are reduced by a valuation allowance to the extent management concludes it is more likely than not that the assets will not be realized. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the Consolidated Statements of Operations in the period that includes the enactment date. The Company adopted section 740-10-25 of the FASB Accounting Standards Codification (Section 740-10-25). Section 740-10-25 addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements. Under Section 740-10-25, the Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position should be measured based on the largest benefit that has a greater than fifty (50) percent likelihood of being realized upon ultimate settlement. Section 740-10-25 also provides guidance on derecognition, classification, interest and penalties on income taxes, accounting in interim periods and requires increased disclosures. The estimated future tax effects of temporary differences between the tax basis of assets and liabilities are reported in the accompanying consolidated balance sheets, as well as tax credit carrybacks and carryforwards. The Company periodically reviews the recoverability of deferred tax assets recorded on its consolidated balance sheets and provides valuation allowances as management deems necessary. Management makes judgments as to the interpretation of the tax laws that might be challenged upon an audit and cause changes to previous estimates of tax liability. In addition, the Company operates within multiple taxing jurisdictions and is subject to audit in these jurisdictions. In management’s opinion, adequate provisions for income taxes have been made for all years. If actual taxable income by tax jurisdiction varies from estimates, additional allowances or reversals of reserves may be necessary. Uncertain Tax Positions The Company did not take any uncertain tax positions and had no adjustments to its income tax liabilities or benefits pursuant to the provisions of Section 740-10-25 for the reporting periods ended December 31, 2021 and 2020. F- 14 Related Parties The Company follows subtopic 850-10 of the FASB Accounting Standards Codification for the identification of related parties and disclosure of related party transactions. Pursuant to Section 850-10-20 the related parties include (a) Affiliates of the Company; (b) Entities for which investments in their equity securities would be required, absent the election of the fair value option under the Fair Value Option Subsection of Section 825–10–15, to be accounted for by the equity method by the investing entity; (c) Trusts for the benefit of employees, such as pension and profit-sharing trusts that are managed by or under the trusteeship of management; (d) Principal owners of the Company; (e) Management of the Company; (f) Other parties with which the Company may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests; and (g) Other parties that can significantly influence the management or operating policies of the transacting parties or that have an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests. The consolidated financial statements shall include disclosures of material related party transactions, other than compensation arrangements, expense allowances, and other similar items in the ordinary course of business. However, disclosure of transactions that are eliminated in the preparation of consolidated or combined financial statements is not required in those statements. The disclosures shall include: (a) the nature of the relationship(s) involved; (b) a description of the transactions, including transactions to which no amounts or nominal amounts were ascribed, for each of the periods for which income statements are presented, and such other information deemed necessary to an understanding of the effects of the transactions on the financial statements; (c) the dollar amounts of transactions for each of the periods for which income statements are presented and the effects of any change in the method of establishing the terms from that used in the preceding period; and (d) amounts due from or to related parties as of the date of each balance sheet presented and, if not otherwise apparent, the terms and manner of settlement. Contingencies The Company follows subtopic 450-20 of the FASB Accounting Standards Codification to report accounting for contingencies. Certain conditions may exist as of the date the consolidated financial statements are issued, which may result in a loss to the Company, but which will only be resolved when one or more future events occur or fail to occur. The Company assesses such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company or un-asserted claims that may result in such proceedings, the Company evaluates the perceived merits of any legal proceedings or un-asserted claims as well as the perceived merits of the amount of relief sought or expected to be sought therein. If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in the Company’s financial statements. If the assessment indicates that a potentially material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, and an estimate of the range of possible losses, if determinable and material, would be disclosed. Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the guarantees would be disclosed. However, there is no assurance that such matters will not materially and adversely affect the Company’s business, consolidated financial position, and consolidated results of operations or consolidated cash flows. Recently Issued Accounting Pronouncements Management does not believe that any recently issued, but not yet effective accounting pronouncements, if adopted, would have a material effect on its consolidated financial statements. F- 15 NOTE 3 FURNITURE AND EQUIPMENT Furniture and equipment consisted of the following: December 31, 2021 December 31, 2020 Machinery and equipment $ 31,456 $ 31,456 Computer equipment 6,846 6,846 Furniture and fixtures 36,059 36,059 Tooling and production 309,111 309,111 Leasehold improvements 30,553 30,553 Total 414,025 414,025 Less: accumulated depreciation (388,315 ) (346,290 ) Total, net $ 25,710 $ 67,735 Depreciation expense amounted to $42,025 and $74,277 for the years ended December 31, 2021 and 2020, respectively. NOTE 4 INTANGIBLE ASSETS Intangible assets (patents and trademarks) consisted of the following: December 31, 2021 December 31, 2020 Patents $ 649,969 $ 470,766 Trademark 45,450 45,450 Less: accumulated amortization (155,386 ) (113,124 ) Total, net $ 540,033 $ 403,092 Amortization expense on intangible assets was $42,262 and $32,032 for the years ended December 31, 2021 and 2020, respectively. The following table sets forth the estimated amortization expense for future periods : Year Ending December 31 2022 $ 46,345 2023 45,055 2024 44,098 2025 44,098 2026 44,098 2027 and thereafter 316,339 Total $ 540,033 NOTE 5 DEBT The following table presents the details of the principal outstanding: December 31, 2021 2020 a) PPP1 Loan $ 11,193 $ 22,032 b) PPP2 Loan 178,235 — c) EIDL 150,000 150,000 d) Note payable 5,557,792 5,458,642 e) Convertible Notes 1,300,000 1,250,000 Total $ 7,197,220 $ 6,880,674 Notes payable, current portion 404,648 344,032 Non-current term notes payable $ 6,792,572 $ 6,536,642 F- 16 Principal payments on all Notes referred to above (inclusive of the note payable, the Convertible Notes, and CARES Act Loans) are due as follows: Year ending December 31, 2022 $ 404,648 2023 470,352 2024 1,771,867 2025 3,069,846 2026 1,336,728 2027 and thereafter 143,779 Total $ 7,197,220 CARES Act Loans In March 2020, the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) was enacted. Among other things, the CARES Act established the Paycheck Protection Program (“PPP”), which funded eligible businesses through federally guaranteed loans. Under the PPP, companies are eligible for forgiveness of principal and accrued interest if the proceeds are used for eligible costs, which include, but are not limited to, payroll, benefits, mortgage, lease, and utility expenses. a) Paycheck Protection Program Loan - On April 13, 2020, the Company was granted a loan (the “PPP1 Loan”) under the Paycheck Protection Program in the aggregate amount of $269,500. The PPP1 Loan matures on April 13, 2025 and bears interest at a rate of 1.0% per annum, which is payable monthly following the deferral period, described below. The note may be prepaid at any time prior to maturity with no prepayment penalties. Effective June 2020, certain provisions of the PPP1 Loan were amended. The amendment modified the original payment deferment period from six months to either (i) the date that the U.S. Small Business Administration (the “SBA”) remits the Company’s loan forgiveness to the bank or (ii) the date that a final determination is made that no portion of the PPP Loan is forgiven, subject to the Company requesting forgiveness of the PPP Loan within a specified time period.. During 2021, the Company requested forgiveness of the PPP1 Loan in accordance with the application requirements and received notice that $257,468 note payable balance had been forgiven. The Company recognized the forgiveness amount of $257,468 as Other Income during the year ended December 31, 2020. As of December 31, 2021 and 2020, the loan balance was $11,193 and $22,032, respectively. Monthly principal and interest payments of $289 started in October 2021 with a maturity of April 13, 2025. b) Second Paycheck Protection Program Loan - On February 3, 2021, the Company was granted a loan (the “PPP2 Loan”) under the Paycheck Protection Program Second Draw program in the aggregate amount of $178,235, pursuant to the Paycheck Protection Program under the CARES Act. The PPP2 Loan matures on February 3, 2026 and bears interest at a rate of 1.0% per annum, which will be payable monthly upon expiration of the payment deferral period. The payment deferral period will expire on either (i) the date that the SBA remits the Company’s loan forgiveness to the bank or (ii) the date that a final determination is made that no portion of the PPP2 Loan is forgiven, subject to the Company requesting forgiveness of the PPP2 Loan within a specified time period. The note may be prepaid at any time prior to maturity with no prepayment penalties. The Company recorded the principal amount of $178,235 due on the PPP2 Loan in non-current notes payable in the consolidated balance sheet as of December 31, 2021. Under the terms of the PPP2 Loan, certain amounts of the PPP2 Loan may be forgiven if they are used for qualifying expenses as described in the CARES Act. The Company believes it used the entire PPP2 Loan amount for qualifying expenses and, during 2021, the Company requested forgiveness in accordance with the application requirements. As of the date of this filing, the Company has not received a reply to its request and there can be no assurance that such PPP2 Loan will be forgiven, in whole or in part. F- 17 c) EIDL Loan - On June 24, 2020, the Company received a loan (the “EIDL Loan”) from the SBA under its Economic Injury Disaster Loan (“EIDL”) assistance program in light of the impact of the COVID-19 pandemic on the Company’s business, pursuant to which the Company entered into a promissory note and security agreement with the SBA. The principal amount of the EIDL Loan is $150,000, with proceeds to be used for working capital purposes. Interest on the EIDL Loan accrues at the rate of 3.75% per annum and installment payments, including principal and interest, are due monthly beginning twenty-four months from the date of the EIDL Loan. The balance of principal and interest is due and payable 30 years from the date of the promissory note. The EIDL Loan may be prepaid in part or in full, at any time, without penalty. Additionally, the EIDL Loan is collateralized by certain of the Company’s property as specified within the security agreement. The EIDL Loan contains certain customary events of default and, in the event an event of default occurs, the SBA may require immediate repayment of all amounts due. As part of the EIDL Loan, the Company also received an advance of $10,000 from the SBA, which is construed as a grant. Accordingly, this advance has been recognized as Other Income during 2021. d) Note payable (“NBG”) On December 14, 2021, the Company entered into a new secured promissory note with Nielsen & Bainbridge, LLC (“NBG”), in the amount of approximately $5.9 million, which amended and replaced the April 2016 promissory note. The unpaid principal bears annual interest at the Wall Street Journal prime rate plus 1.75% per year (as compared to an interest rate of 9% per annum prior to the amendment and restatement of the April 2016 note). The amended note matures in December 2026. The note is secured by a first priority security interest in substantially all of the Company’s assets. With regard to the NBG note payable, the Company will make the following principal payments plus an amount equal to all accrued and unpaid interest as follows: Year ending December 31, 2022 $ 400,000 2023 400,000 2024 1,730,106 2025 1,730,106 2026 1,297,580 Total $ 5,557,792 The Company may prepay the amounts due under the amended note at any time and from time to time. The note contains customary events of default and, in the event that an event of default occurs, the amended note and all accrued interest will become immediately due and payable. In conjunction with the original note with NBG, and the ongoing consultation on product sales and distribution, in each of March 2019, August 2020 and November 2021, the Company issued 333,333 shares, 333,333 shares, and 33,334 shares of its common stock, respectively, to NBG, for an aggregate issuance of 1,000,000 shares, including additional shares issued during 2018. As of December 31, 2021, the Company paid $343,000 of principal plus accrued interest of $473,152 on the NBG note. As of December 31, 2021, and December 31, 2020, the outstanding balance on this note was $5,557,792 and $5,458,642, respectively. At December 31, 2021 and 2020, accrued interest was $0 and $120,650, respectively. F- 18 e) Convertible Notes December 31, 2021 2020 Convertible Notes, dated 9/23/2020 $ 250,000 $ 250,000 Convertible Notes, dated 11/10/2020 100,000 100,000 Convertible Notes, dated 10/30/2020 300,000 300,000 Convertible Notes, dated 11/3/2020 600,000 600,000 Convertible Notes, dated 01/13/2021 50,000 — Total $ 1,300,000 $ 1,250,000 Included in Convertible Notes are loans provided to the Company from two directors, an officer and two investors. The notes each have the following terms: three-year subordinated convertible promissory note of principal face amounts. Subject to other customary terms, the note matures in three years and accrues interest at a rate of 6% per annum, which is payable annually in cash or common stock, at the holder’s discretion. At any time after issuance and prior to or on the maturity date, the note is convertible at the option of the holder into shares of common stock at a conversion price of $15.00 per share. Upon notice to the holder, the Company may prepay, in whole or in part, the outstanding balance of the note at any time prior to the maturity date; the holder has the right to convert the note into shares of common stock in lieu of prepayment. Upon the occurrence of certain events of default, and upon written notice from the holder, the note will become immediately due and payable and, until paid in full, will bear interest at a rate of 12% per annum. Accrued interest on Convertible Notes was $92,919 and $13,621 as of December 31, 2021 and 2020, respectively. NOTE 6 GE ROYALTY OBLIGATIONS On June 15, 2011, we entered into the License Agreement with GE, pursuant to which we have the right to market certain ceiling light and fan fixtures displaying the GE brand. The Company and GE subsequently amended the License Agreement, including on April 17, 2013, August 13, 2014, September 25, 2018, May 2019 and December 1, 2020. The License Agreement imposes certain manufacturing and quality control conditions that we must maintain in order to continue to use the GE brand. The License Agreement is nontransferable and cannot be sublicensed. Various termination clauses are applicable to the License Agreement; however, none were applicable as of December 31, 2021 and December 31, 2020. On August 13, 2014, we entered into a second amendment to the License Agreement pertaining to our royalty obligations. Under the initial terms of the amendment, we agreed to pay to GE a minimum trademark license fee of $12.0 million by November 30, 2018 (the “Initial Royalty Obligation”) for the rights assigned in the original contract. The amendment provided that, if we did not pay to GE royalties equal to the Initial Royalty Obligation over the term of the License Agreement, we would owe the difference to GE in December 2018. We are expanding our relationship with GE to collaborate on mutual capabilities, and in December 2020, we entered into the current amendment to the License Agreement. The amendments following the second amendment expanded our product range, including smart, and added additional global territory rights. The License Agreement has been extended for an additional five years and expires on November 30, 2023. Pursuant to the third amendment, entered into September 2018, the approximate remaining $10.0 million Initial Royalty Obligation that was due on November 30, 2018 was waived, and we agreed to pay GE an aggregate amount of $6.0 million, consisting of three annual installments of $2.0 million to be paid to GE in each of December 2018, 2019 and 2020. In December 2020, we entered into the current amendment, which restructured the royalty payment obligations due of approximately $4.4 million, plus $0.7 million in interest. We agreed to pay a total of $5.1 million to GE in quarterly installments through December 2023, including $100,000 due December 2020, an aggregate of $500,000 due in four equal installments in 2021, an aggregate of $1.2 million due in four equal installments in 2022 and an aggregate of $3.3 million due in four equal installments in 2023 (the “Minimum Payments”). In the event the Company receives significant funding rounds of at least $50.0 million in funding, it is required to use a portion of such funding to pay certain amounts to GE. The Minimum Payments will be in addition to the royalty payments made to GE during the respective year, as set forth below. F- 19 Royalty payments are due quarterly, using a December 1 – November 30 contract year and based upon the prior quarter’s sales. Royalty payments will be paid from sales of GE branded product subject to the following repayment schedule: Net Sales in Contract Year Percentage of Contract Year Net Sales owed to GE $0 to $50,000,000 7% $50,000,001 to $100,000,000 6% $100,000,000+ 5% The Company made principal payments of $500,000 plus royalty payments of $5,727 for the year ended December 31, 2021. The Company made principal payments of $100,000 plus royalty payments of $12,493 for the year ended December 31, 2020As of December 31, 2021 and 2020, the outstanding balance of the aggregate Minimum Payment was $3,838,000 and $4,338,000, respectively. Minimum future payment obligations are approximately as follows: Year Minimum Obligation 2022 $ 1,200,000 2023 2,638,000 Total principal payments $ 3,838,000 NOTE 7 ACCRUED EXPENSES Accrued expenses consisted of the following: December 31, 2021 2020 Accrued interest, convertible notes $ 92,919 $ 13,621 Accrued wages 429,167 345,000 $ 522,086 $ 358,621 NOTE 8 INCOME TAXES Income taxes are provided for the tax effects of transactions reported in the financial statements and consist of taxes currently due. Deferred taxes relate to differences between the basis of assets and liabilities for financial and income tax reporting which will be either taxable or deductible when the assets or liabilities are recovered or settled. At December 31, 2021, the Company had a net operating loss carryforward of approximately $65,468,815 available to offset future taxable income indefinitely. Utilization of future net operating losses may be limited due to potential ownership changes under Section 382 of the Internal Revenue Code. At December 31, 2020, the Company had a net operating loss carryforward of approximately $59,833,233 available to offset future taxable income indefinitely. Utilization of future net operating losses may be limited due to potential ownership changes under Section 382 of the Internal Revenue Code. In assessing the realization of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred income tax assets will not be realized. The ultimate realization of deferred income tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred income tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. Based on consideration of these items, management has determined that enough uncertainty exists relative to the realization of the deferred income tax asset balances to warrant the application of a full valuation allowance as of December 31, 2021 and 2020. F- 20 The effects of temporary differences that gave rise to significant portions of deferred tax assets at December 31, 2021 and December 31, 2020 were approximately as follows: December 31 2021 2020 Net operating loss carryforward $ 65,468,815 $ 59,833,233 Gross Deferred Tax Assets 16,667,051 15,232,344 Less Valuation Allowance (16,667,051 ) (15,232,344 ) Total Deferred Tax Assets – Net $ — $ — The Company’s tax expense differs from the statutory tax expense for the years ended December 31, 2021 and December 31, 2020 and the reconciliation is as follows. 2021 2020 Computed statutory tax benefit – Federal $ (1,171,879 ) $ (1,880,444 ) Computed statutory tax benefit – State (204,495 ) (417,818 ) Change in valuation allowance 1,376,374 2,298,262 $ — $ — NOTE 9 RELATED PARTY TRANSACTIONS Convertible Notes Due to Related Parties Convertible Notes due to Related Parties represent amounts provided to the Company from two directors and the Chief Executive Officer of the Company, as well as a greater than 5% investor. See Note 5 “e) Convertible Notes” for additional information regarding the convertible notes. As of December 31, 2021 and 2020, the outstanding balance on the Convertible Promissory Notes, associated with Related Party transactions was $1,250,000 and $1,250,000, respectively; plus accrued interest of $90,002 and $13,621, respectively. Newbridge Securities Corporation In October 2018, the Company entered into an investment banking agreement with Newbridge Securities Corporation, pursuant to which Newbridge Securities Corporation agreed to provide business development, consulting and advisory services, including capital raising and placement agency services, to the Company. This agreement is renewed periodically and remained in effect as of December 31, 2021; however, the agreement was terminated in January 2022. Leonard J. Sokolow, a member of the Company’s board of directors, is the Chief Executive Officer and President of Newbridge Financial, Inc. and Chairman of Newbridge Securities Corporation, its broker dealer subsidiary. In connection with entering into the agreement, the Company paid Newbridge Securities Corporation a $25,000 fee and agreed to issue shares of common stock equal to $50,000, which were paid as of December 31, 2020. Pursuant to the agreement, the Company agreed to pay placement agent fees equal to 8.0% of the gross purchase price upon closing of sales of the Company’s equity securities and 4.0% upon closing of any line of credit, secured or unsecured term loan or other non-convertible debt facility arranged by Newbridge Securities Corporation for the Company. Upon the closing of any such equity or debt transaction, the Company agreed to issue to Newbridge Securities Corporation, or its permitted assigns, warrants to purchase: (i) in an equity transaction, 10% of the sum of (A) the number of shares of common stock issued by the Company and (B) the number of shares of common stock issuable by the Company upon the exercise or conversion of convertible securities issued; and (ii) in a debt transaction, 10% of the facility amount, divided by a per share price equal to the last equity, warrants or options issued by the Company at the time of closing. The agreement further provides, among other things, that such warrants will contain provisions providing for cashless exercise, price protection and piggyback registration rights and will not be callable or redeemable by the Company. F- 21 The agreement also provides for sales commission with respect to certain agreements, including territorial licenses, marketing agreements and commercial contracts. If the transaction is with an organization located, identified or introduced by Newbridge Securities Corporation, the Company is required to pay Newbridge Securities Corporation a $75,000 fee at closing, plus 1% of the net revenues received by the Company, payable quarterly during the contract’s term. If the Company requested Newbridge Securities Corporation assist with closing the transaction, the Company is required to pay Newbridge Securities Corporation a $50,000 fee at closing, plus 0.25% of the net revenues received by the Company, payable quarterly for the lesser of five years or the contract’s term. Pursuant to the agreement, as of December 31, 2021, the Company has paid Newbridge Securities Corporation an aggregate of $609,472 in placement agent fees (not including expenses). In March 2021, effective as of December 31, 2020, the Company issued 10,000 shares to Newbridge Securities Corporation and its affiliates pursuant to the agreement, of which Newbridge Securities Corporation received 3,600 shares and Mr. Sokolow received 4,500 shares. In addition, on December 31, 2020, the Company issued three-year warrants to purchase an aggregate of up to 14,375 shares of common stock at an exercise price of $12.00 per share (subject to adjustment, including in the event of certain subsequent equity sales by the Company) (the “Newbridge Warrants”), including warrants to purchase up 5,674 shares and 4,469 shares issued to Newbridge Securities Corporation and Mr. Sokolow, respectively. The Newbridge Warrants may be exercised, in whole or in part, at any time on or prior to December 31, 2023. Among other terms, the Newbridge Warrants provide for cashless exercise of the Newbridge Warrants if, after December 31, 2021, there is no effective registration statement registering the shares of common stock issuable upon exercise of the Newbridge Warrants. In addition, the Newbridge Warrants contain certain piggyback registration rights, such that, if the Company registers any of its securities either for its own account or for the account of other security holders, the holders of the Newbridge Warrants are entitled to include their shares in the registration. Subject to certain exceptions, if the offering is being underwritten, the Company and the underwriters may limit the number of shares included in the underwritten offering if the underwriters believe that including such shares would adversely affect the offering. The Company entered into an investment banking engagement agreement with Newbridge Securities Corporation in May 2021, pursuant to which Newbridge Securities Corporation agreed to provide certain corporate advisory services. The agreement had a 12 month term, during which the Company agreed to pay Newbridge Securities Corporation’s pre-approved expenses. The Company agreed to pay a $500,000 corporate advisory fee, in the form of restricted common stock, upon successful listing of the Company’s common stock on a U.S. national securities exchange. The number of shares issued was to be determined based on the initial offering price in the offering, and such shares would have been subject to a six-month lock-up provision. The Company would have been required to pay such fee if it successfully listed on an exchange during the term of the agreement or within nine months following expiration of the term. The Company entered into a separate investment banking engagement agreement in May 2021 with Newbridge Securities Corporation relating to merger and acquisition services. The agreement has a 12 month term, which will be automatically extended on a month-to-month basis if negotiations or discussions are ongoing at the end of the term. The Company will pay Newbridge Securities Corporation’s pre-approved reasonable expenses during the term. Upon closing of a merger or acquisition transaction facilitated by Newbridge Securities Corporation, the Company will pay, in equity, a transaction fee equal to 2.0% of the aggregate consideration (as defined in the agreement) of such transaction. The equity received will be subject to a six-month leak-out provision. The Company will be required to pay the transaction fee after expiration of the agreement or if the Company terminates the agreement without cause (as defined in the agreement), if the Company (i) completes a merger or acquisition transaction with a party identified by Newbridge Securities Corporation within 12 months of such termination or (ii) enters into an agreement contemplating a merger or acquisition with a party identified by Newbridge Securities Corporation during the term of the agreement or the following 12 months, which agreement is ultimately consummated. F- 22 Bridge Line Ventures The Company and Bridge Line Ventures, LLC Series ST-1 (“Bridge Line Ventures”), the manager of which is Bridge Line Advisors, LLC, of which Leonard J. Sokolow, a member of the Company’s board of directors, is Chief Executive Officer and President, entered into the following stock purchase agreements during 2021(collectively, the “Bridge Line SPAs”): ● Stock Purchase Agreement, dated February 26, 2021, as amended March 30, 2021, June 30, 2021 and August 31, 2021, pursuant to which Bridge Line Ventures purchased 25,373 shares of common stock at a purchase price per share of $12.00. ● Stock Purchase Agreement, dated March 30, 2021, as amended April 30, 2021, June 30, 2021 and August 31, 2021, pursuant to which Bridge Line Ventures purchased 37,500 shares of common stock at a purchase price per share of $12.00. ● Stock Purchase Agreement, dated April 30, 2021, as amended June 30, 2021 and August 31, 2021, pursuant to which Bridge Line Ventures purchased 2,084 shares of common stock at a purchase price per share of $12.00. ● Stock Purchase Agreement, dated June 30, 2021, as amended August 31, 2021, pursuant to which Bridge Line Ventures purchased 150,000 shares of common stock at a purchase price per share of $12.00. ● Stock Purchase Agreement, dated August 31, 2021, pursuant to which Bridge Line Ventures purchased 16,667 shares of common stock at a purchase price per share of $12.00. Gross proceeds from Bridge Line Ventures amounted to $2,779,464 during 2021. Each of the Bridge Line SPAs contains substantially the same terms. Among other things, the Bridge Line SPAs contain anti-dilutive price protection measures, which apply for 24 months following the date of closing of the Bridge Line SPAs, subject to certain exceptions, and provide for certain piggyback registration rights, such that, subject to certain exceptions, including if the registration statement is for an initial public offering, if the Company registers any of its securities either for its own account or for the account of other security holders, Bridge Line Ventures is entitled to include its shares in the registration. Subject to certain exceptions, if the offering is being underwritten, the Company and the underwriters may limit the number of shares included in the underwritten offering if the underwriters believe that including such shares would adversely affect the offering. In addition, the Company may require Bridge Line Ventures agree to a six month lock-up of its shares following the effective date of the applicable registration statement. The Bridge Line SPAs also contain a standstill provision pursuant to which Bridge Line Ventures agreed to certain restrictions related to the Company for three years following the effective date of each of the Bridge Line SPAs, including, among other things, prohibitions on, either alone or together with any other person, acquiring additional shares of the Company’s common stock or any of its assets, soliciting proxies or seeking representation on our board of directors, unless the Company agrees to such actions in writing. In addition, on each of June 30, 2021 and August 31, 2021, pursuant to the Bridge Line SPAs, Bridge Line Ventures received a three-year warrant to purchase up to 214,957 and 16,667 shares of the Company’s common stock, respectively, at an exercise price of $12.00 per share (subject to adjustment, including in the event of certain subsequent equity sales by the Company) (the “Bridge Line Ventures Warrants”). The Bridge Line Ventures Warrants may be exercised, in whole or in part, at any time on or prior to June 30, 2024 or August 31, 2024, respectively. Among other terms, the Bridge Line Ventures Warrants provide for cashless exercise of the Bridge Line Ventures Warrants if, after June 30, 2022 or August 31, 2022, respectively, there is no effective registration statement registering the shares of common stock issuable upon exercise of the Bridge Line Ventures Warrants. In addition, the Bridge Line Ventures Warrants contain certain piggyback registration rights, which are substantially the same as those provided in by the Bridge Line SPAs. Other Options and Warrants In June 2020, the Company issued a three-year volume warrant to purchase up to 1,125,000 shares of common stock to Strul Associates Limited Partnership, pursuant to a May 2016 private placement. The exercise price was $3.00 if exercised prior to June 1, 2021, $3.25 if exercised on or after June 1, 2021 and prior to June 1, 2022 and $3.50 if exercised on or after June 1, 2022 through June 1, 2023 (in each case, subject to adjustment, including in the event of certain subsequent equity sales by the Company). The warrant was exercisable in whole or in part at any time prior to or on June 1, 2023. In December 2020, Strul Associates Limited Partnership exercised the warrant in full and acquired an aggregate of 1,012,500 shares of common stock, including 675,000 shares of common stock for an aggregate purchase price of $2,025,000 and a net total of 337,500 shares of common stock pursuant to a cashless exercise of the remainder of the warrant. F- 23 In December 2021, Mr. Sokolow exercised an option to purchase 75,000 shares, dated January 1, 2017, with an exercise price of $2.60 per share, and Mr. Shiff exercised an option to purchase 25,000 shares, dated January 1, 2017, with an exercise price of $2.60 per share . NOTE 10 STOCKHOLDERS’ DEFICIT (A) Common Stock For the years ended December 31, 2021 and 2020, the Company issued the following common stock: Transaction Type Qty Shares Issued Qty Shares to be Issued Valuation $ (Issued) Valuation $ (To be Issued) Range of Value Per Share 2020 Equity Transactions Common stock issued per PPM 8,334 — $ 100,009 $ — $ 12.00 Common stock issued per exercise of warrants 1,012,500 — 2,025,000 — 2.00 Common stock issued pursuant to director compensation policy — 156,000 — 468,000 3.00 Common stock issued pursuant to chairman agreement — 120,000 — 360,000 3.00 Common stock issued per employee agreement 214,000 30,000 642,000 90,000 3.00 Common stock issued per consulting agreement 6,834 90,158 72,508 270,474 3.54 Common stock issued to joint venture partner 333,333 — 999,999 — 3.00 Common stock issued per placement agreement, Newbridge — 3,600 — 43,200 12.00 Common stock issued per placement agreement, contractors — 6,400 — 76,800 12.00 Total 2020 Equity Transactions 1,575,001 406,158 $ 3,839,516 $ 1,308,474 $ 2.00 – 12.00 F- 24 Transaction Type Qty Shares Issued Qty Shares to be Issued Valuation $ (Issued) Valuation $ (To be Issued) Range of Value Per Share 2021 Equity Transactions Common stock issued per PPM 896,837 — $ 10,761,972 $ — $ 12.00 Common stock issued per PPM, Bridge Line Ventures 231,624 — 2,779,464 — 12.00 Common stock issued, exercise of options 50,000 — 130,000 — 2.60 Common stock issued, exercise of warrants 21,250 — 74,375 — 3.50 Common stock issued, pursuant to services provided 223,845 — 766,260 — 0.01-3.00 Common stock issued pursuant to director compensation policy 84,000 — 252,000 — 3.00 Conversion of preferred stock 200,000 — 50,000 — 0.25 Common stock issued for the cashless exercise of options 39,167 — — — — Stock issued to joint venture partner, interest expense 33,334 — 100,002 — 3.00 Total 2021 Equity Transactions 1,780,057 — $ 14,914,073 $ — $ 0.01 – 12.00 (B) Preferred Stock The following is a summary of the Company’s Preferred Stock activity: Transaction Type Quantity Valuation Value per Share Preferred Stock Balance at December 31, 2020 13,456,936 $ 3,364,233 $ 0.25 2021 Preferred Stock redemptions (200,000 ) (50,000 ) 0.25 Preferred Stock Balance at December 31, 2021 13,256,936 $ 3,314,233 $ 0.25 In accordance with the August 2016 Elections, the Company has issued 13,456,936 shares of 6% Preferred Stock in exchange for Notes having a principal balance of $3,364,233. The Preferred Stock will be convertible upon the election of the holder thereof. Shares of the Preferred Stock may be repurchased by the Company upon 30 days’ prior written notice, in whole or in part, for USD $3.50 per share, provided that during such notice period the holder will continue to have the option and right to convert its shares of Preferred Stock into shares of Common Stock. Holders also have a put option, allowing them to sell their shares of Preferred Stock back to the Company at $0.25 per share, the Note conversion price, and therefore the stock is classified as Mezzanine equity rather than permanent equity. For the years ended December 31, 2021 and 2020, the Company paid dividends in the amount of $129,456 and $130,206, respectively, to the Preferred Stock shareholders. Redeemable preferred stock subject to redemption: $0 par value; 20,000,000 shares authorized; 13,256,936 and 13,456,936 at December 31, 2021 and 2020, respectively. F- 25 (C) Stock Options The following is a summary of the Company’s stock option activity: Options Shares Weighted Average Exercise Price Weighted Average Remaining Contractual Life (In Years) Aggregate Intrinsic Value Balance, January 1, 2020 6,830,000 $ 2.02 5.81 $ 8,923,500 Exercised (450,000 ) 4.78 — (168,750 ) Granted 6,329,500 .38 4.20 — Forfeited (55,000 ) — — — Balance, December 31, 2020 12,654,500 $ 3.28 4.25 $ 8,754,750 Exercised (81,167 ) 2.60 Granted 1,278,849 9.16 4.36 Balance, December 31, 2021 13,852,182 3.87 4.17 5,990,800 Exercisable, December 31, 2021 12,597,658 $ 3.49 3.82 $ 5,979,200 The Company has issued, or the Company’s Board of Directors has authorized grants of, options, some of which have vested, to purchase shares of Common Stock through its 2015 Plan and/or 2018 Plan. The fair value of share options and similar instruments is estimated on the date of grant using a Black-Scholes. The range of inputs used by the Company are as follows: During 2021, the Black-Scholes model calculations included stock price on the date of measurement ranging from $3.00 - $3.00, exercise price with a range of $3.00 - $12.00, a term ranging from 1.3 years to 1.3 years, computed volatility with a range of 34% to 34%, and a discount rate ranging from .09% to 2.49%. During 2020, the Black-Scholes model calculations included stock price on the date of measurement ranging from $3.00 - $3.00, exercise price with a range of $3.00 - $12.00, a term ranging from 1.3 years to 7.5 years, computed volatility with a range of 34% to 82%, and a discount rate ranging from .09% to 2.49%. The Company recognized the following compensation expense related to the vesting of options during 2021 and 2020: Compensation expense related to vesting options 2021 2020 Options expense pursuant to chairman agreement $ 128,649 $ 897,063 Options expense pursuant to director compensation policy — 412,825 Option expense pursuant to executive compensation agreement 64,962 15,476 Option expense pursuant to employee and consulting agreement 151,160 840,083 $ 344,771 $ 2,165,447 F- 26 (D) Warrants Issued The following is a summary of the Company’s warrant activity: Number of Warrants Weighted Average Exercise Price Balance, December 31, 2019 1,618,040 $ 3.20 Issued 1,139,375 3.11 Exercised (1,125,000 ) — Forfeited (30,000 ) — Balance, December 31, 2020 1,602,415 $ 3.24 Issued 555,480 12.00 Exercised (30,000 ) — Forfeited — — Balance, December 31, 2021 2,127,895 $ 5.4 (E) 2015 Stock Plan On April 27, 2015, the Board approved the Company’s 2015 Stock Incentive Plan (the “2015 Plan”), and effective July 31, 2016, a majority of the Company’s shareholders approved the 2015 Plan. Under the 2015 Plan, the Board has the sole authority to implement, interpret, and/or administer the 2015 Plan unless the Board delegates all or any portion of its authority to implement, interpret, and/or administer the 2015 Plan to a committee of the Board, or (ii) the authority to grant and administer awards under the 2015 Plan to an officer of the Company. The 2015 Plan relates to the issuance of up to 5,000,000 shares of Common Stock, subject to adjustment, and shall be effective for ten (10) years, unless earlier terminated. Certain options to be granted to employees under the 2015 Plan are intended to qualify as Incentive Stock Options (“ISOs”) pursuant to Section 422 of the Internal Revenue Code of 1986, as amended, while other options granted under the 2015 Plan will be nonqualified options not intended to qualify as Incentive Stock Options ISOs (“Nonqualified Options”), either or both as provided in the agreements evidencing the options described. The 2015 Plan was replaced by the 2018 Plan (as defined below). (F) 2018 Stock Plan On April 26, 2018, the Board approved the Company’s 2018 Stock Incentive Plan, which was amended and restated on each of August 30, 2019 and November 12, 2021 (the “2018 Plan”). Under the 2018 Plan, the Board has the sole authority to implement, interpret, and/or administer the 2018 Plan unless the Board delegates all or any portion of its authority to implement, interpret, and/or administer the 2018 Plan to a committee of the Board, or (ii) the authority to grant and administer awards under the 2018 Plan to an officer of the Company. The 2018 Plan relates to the issuance of up to 10,000,000 shares of Common Stock, subject to adjustment, and shall be effective for ten (10) years, unless earlier terminated. As of December 31, 2021, 4,172,818 shares of Common Stock were available for issuance (not granted) under the 2018 Plan. The November 2021 amendment and restatement increased the shares available for issuance under the 2018 Plan to 10,000,000. NOTE 11 COMMITMENTS (A) Operating Lease In September 2020, the Company entered into a 12-month real property lease for office space at $2,175 per month. The Company expenses such payment as rent expense in the period incurred. In September 2021, the Company renewed its lease for another twelve months at $2,240 per month. F- 27 Minimum future rent obligations are approximately as follows: Year Minimum Obligation 2022 $ 20,162 Thereafter — $ 20,162 (B) Executive Employment Agreements John P. Campi (Chief Executive Officer) Effective September 1, 2019, the Company entered into an Executive Employment Agreement with John Campi, its Chief Executive Officer and then-Chief Financial Officer (the “Campi Agreement”), which superseded Mr. Campi’s previous employment agreement effective September 1, 2016. The Campi Agreement provided for an initial term of one year, which expired August 31, 2020. The term may be, and has been, renewed by the mutual agreement of Mr. Campi and the Company. Subject to other customary terms and conditions of such agreements, the Campi Agreement provides that Mr. Campi will receive: (i) a base salary of $150,000 per year, which may be adjusted each year at the discretion of the board; (ii) a sign-on bonus of a stock option to purchase 120,000 shares of common stock at an exercise price of $6.00 per share, which vested in its entirety on December 31, 2020; (iii) incentive compensation consisting of (a) a cash component, paid on an annual basis, equal to (x) 0.25% of the Company’s annual gross revenue and (y) 3.0% of the Company’s annual net income, and (b) a stock option component, consisting of five-year options to purchase shares of common stock in an amount equal to 0.5% of the Company’s quarterly net income, the exercise price of which will be determined at the time such options are granted. Mr. Campi is also entitled to receive expense reimbursement for reasonable expenses, including travel and entertainment, incurred in the performance of his duties. Pursuant to the Campi Agreement, Mr. Campi may be terminated for “cause,” which is defined as an act of fraud, embezzlement, theft or neglect of or refusal to substantially perform the duties of his employment that is materially injurious to the financial condition or business reputation of the Company; a material violation of the Campi Agreement by Mr. Campi that is not cured within 30 days of written notice; and Mr. Campi’s death, disability or incapacity. Following the expiration of the initial term, the Campi Agreement may be terminated by the board of directors at its discretion, in which case Mr. Campi will receive a payment equal to 50% of his then-applicable annual base salary. In addition, Mr. Campi may terminate the Campi Agreement at his discretion by providing at least 30 days’ prior written notice to the Company. In the event the Company is acquired, is the non-surviving entity in a merger or sells all or substantially all of its assets, the Campi Agreement will survive, and the Company will use its best efforts to ensure that the transferee or surviving company is bound by the provisions of the Campi Agreement. All shares granted will vest immediately. Rani R. Kohen (Executive Chairman) Effective September 1, 2019, the Company entered into an Executive Chairman Agreement with Rani R. Kohen (as amended, the “Chairman Agreement”) to serve as the Company’s Executive Chairman and Chairman of the board of directors, which superseded Mr. Kohen’s previous chairman agreement effective September 1, 2016 . The Chairman Agreement provides that Mr. Kohen will serve for an initial term of three years and that the Chairman Agreement will automatically renew unless Mr. Kohen or the board of directors decide otherwise. Subject to other customary terms and conditions of such agreements, the Chairman Agreement provides that Mr. Kohen will receive: (i) a base salary of $250,000 per year, which will be increased by the Company in the event the Company has a significant cash raise; (ii) annual equity compensation consisting of an option to purchase 340,000 shares of common stock at an exercise price of $6.00 per share, which will vest one year following the date of grant (subject to certain exceptions) and will have a five-year term; (iii) a sign-on bonus stock option to purchase 120,000 shares of common stock at an exercise price of $6.00 per share, which vested in its entirety on January 1, 2020 and has a five-year term; (iv) supplemental bonus compensation of stock options to purchase up to 6,000,000 shares of common stock at an exercise price ranging between $6.00 and $8.00 per share, determined based on the achievement of specified market capitalizations of the Company, as described further below, which will have a five-year term; (v) supplemental bonus compensation of stock options to purchase up to 4,000,000 shares of common stock at an exercise price ranging between $3.00 and $5.00 per share, determined based on the achievement of specified market capitalizations of the Company, as provided by the previous chairman agreement and described further below; and (vi) incentive compensation equal to 0.5% of the Company’s gross revenue, which will be paid in cash, stock and/or options on an annual basis. F- 28 Mr. Kohen is eligible for the following supplemental bonus compensation under the Chairman Agreement: (i) options to purchase 500,000 shares of common stock at an exercise price of $6.00 per share, upon the Company achieving each of the following market capitalizations: $500.0 million, $1.0 billion, $1.5 billion and $2.0 billion; (ii) options to purchase 500,000 shares of common stock at an exercise price of $7.00 per share, upon the Company achieving each of the following market capitalizations: $3.0 billion, $4.0 billion, $5.0 billion and $6.0 billion; and (iii) options to purchase 500,000 shares of common stock at an exercise price of $8.00 per share, upon the Company achieving each of the following market capitalizations: $7.0 billion, $8.0 billion, $9.0 billion and $10.0 billion. Mr. Kohen additionally remains eligible to receive the following supplemental bonus compensation, pursuant to the prior chairman agreement: (i) options to purchase 500,000 shares of common stock at $3.00 per share, upon the Company achieving each of the following market capitalizations: $300.0 million, $500.0 million and $750.0 million; (ii) options to purchase 500,000 shares of common stock at $4.00 per share, upon the Company achieving each of the following market capitalizations: $1.0 billion, $1.5 billion and $2.0 billion; and (iii) options to purchase 500,000 shares of common stock at $5.00 per share, upon the Company achieving each of the following market capitalizations: $2.5 billion and $3.0 billion. As of December 31, 2021, the following options have vested: (i) options to purchase 1.5 million shares at an exercise price of $3.00 per share, (ii) options to purchase 500,000 shares at an exercise price of $4.00 per share; and (iii) options to purchase 1.0 million shares at an exercise price of $6.00 per share. Mr. Kohen is also entitled to receive a car allowance of $1,000 per month, reimbursement for cell phone costs and expense reimbursement for reasonable expenses, including travel and entertainment, incurred in the performance of his duties. In addition, in the event Mr. Kohen invents additional new products and applications for the Company, including products based on the Company’s existing intellectual property, Mr. Kohen will be entitled to receive additional compensation, which will be determined by the board of directors. Pursuant to the Chairman Agreement, Mr. Kohen may be terminated for “cause,” which is defined as an act of fraud, embezzlement or theft; a material violation of the Chairman Agreement by Mr. Kohen that is not cured within 60 days of written notice; and Mr. Kohen’s death, disability or incapacity. During the initial term of the Chairman Agreement, if Mr. Kohen is terminated without cause, (i) the Company will pay Mr. Kohen an amount calculated by multiplying Mr. Kohen’s monthly salary at the time of such termination by the number of months remaining in the initial term; (ii) Mr. Kohen’s annual equity compensation will vest on a pro rata basis; and (iii) Mr. Kohen will receive full payment of all unpaid incentive compensation. Following the expiration of the initial term, the Chairman Agreement may be terminated by the board of directors at its discretion, in which case Mr. Kohen will receive full payment for all incentives and will be entitled to compensation for his invented products. Mr. Kohen may terminate the Chairman Agreement at his discretion by providing at least 90 days’ prior written notice to the Company. In the event Mr. Kohen’s employment is terminated by reason of his death, the Company will pay Mr. Kohen’s beneficiaries 12 months of Mr. Kohen’s base salary or Mr. Kohen’s base salary through the remainder of the year in which Mr. Kohen’s death occurs, whichever is greater, and all annual stock compensation, incentive compensation and supplemental bonus compensation due to Mr. Kohen will be bequeathed to his beneficiaries. In the event the Company is acquired, is the non-surviving party in a merger or sells all or substantially all of its assets, the Chairman Agreement will not be terminated, and the Company will ensure that the transferee or surviving company is bound by the provisions of the Chairman Agreement. All shares granted and any other compensation will vest and be paid immediately. Patricia Barron (Chief Operations Officer) Effective September 1, 2019, the Company entered into an Executive Employment Agreement with Patricia Barron, its Chief Operations Officer (the “Barron Agreement”), which superseded Ms. Barron’s previous employment agreement effective July 1, 2016. The Barron Agreement provided for an initial term of one year, which term may be, and has been, renewed by the mutual agreement of Ms. Barron and the Company. Subject to other customary terms and conditions of such agreements, the Barron Agreement provides that Ms. Barron will receive: (i) a base salary of $150,000 per year, which may be adjusted each year at the discretion of the board; (ii) a sign-on bonus of a stock option to purchase 100,000 shares of common stock at an exercise price of $6.00 per share, which vested in its entirety on December 31, 2020; and (iii) cash incentive compensation equal to 0.25% of the Company’s net revenue, payable on an annual or quarterly basis. Ms. Barron is also entitled to receive expense reimbursement for reasonable expenses, including travel and entertainment, incurred in the performance of her duties. F- 29 Pursuant to the Barron Agreement, Ms. Barron may be terminated for “cause,” which is defined as an act of fraud, embezzlement, theft or neglect of or refusal to substantially perform the duties of her employment that is materially injurious to the financial condition or business reputation of the Company; a material violation of the Barron Agreement by Ms. Barron that is not cured within 30 days of written notice; and Ms. Barron’s death, disability or incapacity. Following the expiration of the initial term, the Barron Agreement may be terminated by the board of directors at its discretion, in which case Ms. Barron will receive one month of her then-applicable annual base salary for every year of employment by the Company, as well as any unpaid incentive compensation. In addition, Ms. Barron may terminate the Barron Agreement at her discretion by providing at least 30 days’ prior written notice to the Company. In the event the Company is acquired, is the non-surviving entity in a merger or sells all or substantially all of its assets, the Barron Agreement will survive, and the Company will use its best efforts to ensure that the transferee or surviving company is bound by the provisions of the Barron Agreement. All shares granted will vest immediately. NOTE 12 CONCENTRATIONS OF RISKS Major Customers and Accounts Receivable The Company had certain customers whose revenue individually represented 10% or more of the Company’s total revenue, or whose accounts receivable balances individually represented 10% or more of the Company’s total accounts receivable, as follows: For the years ended December 31, 2021 and December 2020, two customers accounted for 100% and 88% of revenue, respectively. At December 31, 2021 and 2020, one customer accounted for 100% of accounts receivable. Although the Company is directly affected by the financial condition of its customers, management does not believe significant credit risks existed at December 31, 2021. Generally, the Company does not require collateral or other securities to support its accounts receivable. All amounts were deemed collectible at December 31, 2021 and December 31, 2020 and accordingly, the Company had not incurred any bad debt expense at December 31, 2021 and December 31, 2020. Major Vendors The Company had two major vendors that accounted for approximately 95% of cost of sales, or $149,286 and $503,033, respectively, of cost of sales for the years ended December 31, 2021 and 2020. The Company expects to maintain this relationship with the vendors. Liquidity The Company’s cash and cash equivalents are held primarily with two financial institutions. The Company has deposits which exceed the amount insured by the FDIC. The amount of uninsured deposits was $9,926,249 at December 31, 2021. To reduce the risk associated with the failure of such counterparties, the Company periodically evaluates the credit quality of the financial institutions in which it holds deposits. Product Risks The Company generates its income primarily from its proprietary-based technology and related products. F- 30 NOTE 13 LEGAL PROCEEDINGS From time to time, we may become party to litigation or other legal proceedings that we consider to be a part of the ordinary course of our business. We are not currently involved in legal proceedings that could reasonably be expected to have a material adverse effect on our business, prospects, financial condition, or results of operations. NOTE 14 SUBSEQUENT EVENTS The Company generated net proceeds of approximately $20.5 million pursuant to the issuance of 1,650,000 shares of its common stock during February 2022 in connection with its initial public offering. Additionally, the Company granted to the underwriter a 30-day over-allotment option to purchase up to 247,500 shares of common stock and a warrant to purchase up to 132,000 shares of common stock at an exercise price of $18.20 per share. The warrant is exercisable after August 8, 2022 and expires in February 2027. In connection with the initial public offering, holders of 8,200,000 shares of the Company’s Preferred Stock elected to convert their shares of Preferred Stock into common stock on a one-for-one basis. The Company issued 8,200,000 shares of common stock in exchange for the Preferred Stock in February 2022. In addition, the initial public offering triggered anti-dilution provisions contained in certain securities purchase agreements and warrants entered into or issued by the Company. The Company issued an aggregate of 287,367 shares of common stock to investors in 2021 private placements and the exercise price of warrants held by such investors was adjusted to $9.80 per share, as compared to the initial exercise price of $12.00 per share. F- 31