SKYX Platforms Corp. 10-Q

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2022 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number: 001-41276 SKYX Platforms Corp. (Exact name of registrant as specified in its charter) Florida 46-3645414 (State or other jurisdiction of incorporation or organization) (IRS Employer Identification No.) 2855 W. McNab Road Pompano Beach , Florida 33069 (Address, including zip code, of principal executive offices) (855) 759-7584 (Registrant’s telephone number, including area code) Securities registered pursuant to Section 12(b) of the Act: Title of each class Trading symbol(s) Name of each exchange on which registered Common Stock, no par value per share SKYX The Nasdaq Stock Market LLC Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐ Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐ Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. Large accelerated filer ☐ Accelerated filer ☐ Non-accelerated filer ☒ Smaller reporting company ☒ Emerging growth company ☐ If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐ Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒ As of [July 29, 2022], the registrant had [ 81,107,486 ] shares of common stock, no par value per share, issued and outstanding. SKYX PLATFORMS CORP. Form 10-Q TABLE OF CONTENTS PART I. FINANCIAL INFORMATION Cautionary Note Regarding Forward-Looking Statements 3 Item 1 Financial Statements 4 Consolidated Balance Sheets 4 Consolidated Statements of Operations 5 Consolidated Statements of Changes in Stockholders’ Equity (Deficit) 6 Consolidated Statements of Cash Flows 7 Notes to Consolidated Financial Statements 8 Item 2 Management’s Discussion and Analysis of Financial Condition and Results of Operations 18 Item 3 Quantitative and Qualitative Disclosures About Market Risk 23 Item 4 Controls and Procedures 23 PART II. OTHER INFORMATION Item 1 Legal Proceedings 23 Item 1A Risk Factors 24 Item 2 Unregistered Sales of Equity Securities and Use of Proceeds 24 Item 3 Defaults Upon Senior Securities 24 Item 4 Mine Safety Disclosures 24 Item 5 Other Information 24 Item 6 Exhibits 25 Signatures 26 2 CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS This Quarterly Report on Form 10-Q (this “Form 10-Q”) of SKYX Platforms Corp. (the “Company,” “we,” “us,” or “our”) contains forward-looking statements that are based on management’s beliefs and assumptions and on information currently available to management. All statements other than statements of historical facts contained in this Form 10-Q, including statements regarding our strategy, future financial condition, future operations, projected costs, prospects, plans, objectives of management, outlook, and expected market growth, are forward-looking statements. In some cases, you can identify forward-looking statements by the following words: “may,” “might,” “will,” “could,” “would,” “should,” “expect,” “intend,” “plan,” “aim,” “objective,” “anticipate,” “believe,” “estimate,” “predict,” “project,” “potential,” “continue,” “ongoing,” “target,” “seek” or the negative of these terms or other comparable terminology, although not all forward-looking statements contain these words. These statements involve risks, uncertainties and other factors, many of which have been, and may further be, exacerbated by the COVID-19 pandemic, that may cause actual results, levels of activity, performance or achievements to be materially different from the information expressed or implied by these forward-looking statements. Forward-looking statements in this Form 10-Q include, but are not limited to, statements about: ● our ability to successfully launch, develop additional features and achieve market acceptance of our smart products and technologies, access and integrate our products and technologies with third-party platforms or technologies, respond to rapidly changing technology and customer demands, and compete in our industry; ● our financial performance and liquidity, including our ability to successfully generate sufficient revenue to support our operations; ● our ability to expand, operate and successfully manage our operations, including managing our business transformation in connection with evolving our business strategy to focus on smart products and technologies; ● our ability to raise additional financing to support our operations as needed; ● our ability to comply with the terms of, and timely repay, our current debt financing; ● the impact of the COVID-19 pandemic on our business and operations, including the potential impact on manufacturing operations in China; ● our reliance on a limited number of third-party manufacturers and suppliers and our ability to successfully reduce our production costs; ● our potential dependence upon a limited number of customers and/or on contracts awarded through competitive bidding processes; ● any downturn in the cyclical industries in which our customers operate; ● our ability to acquire other businesses, license rights, form alliances or dispose of operations when desired; ● our ability to comply with regulations relating to applicable quality standards; ● our ability to maintain our license agreement with General Electric (“GE”); ● our ability to maintain, protect and enhance our intellectual property; ● the potential outcome of any legal proceedings; ● our ability to successfully sell and distribute our products and technologies; ● our ability to retain key executives and qualified personnel; ● our ability to successfully manage our planned development and expansion, including the additional costs of being a public company; ● our ability to maintain effective internal control over financial reporting and disclosure controls and procedures; ● the potential impact of unstable market and economic conditions on our business, financial condition and stock price, including the effects of the governmental regulations, geopolitical conflicts, inflation, supply chain constraints and shortages, including availability of affordable electronic microchips; ● the potential impact of cybersecurity breaches or disruptions to our information systems, including our cloud-based infrastructure; ● the potential impact of natural disasters and other catastrophic events, such as the COVID-19 pandemic; ● risks related to ownership of our common stock; and ● the potential impact of anti-takeover and director and officer liability provisions in our charter documents and under Florida law. These forward-looking statements represent our intentions, plans, expectations, assumptions, and beliefs about future events and are subject to risks, uncertainties, and other factors, including unpredictable or unanticipated factors that we have not discussed in this Form 10-Q. Investors should refer to the heading “Part I. Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2021 for a discussion of other important factors, many of which are out of our control, that may cause actual results to differ materially from those expressed or implied by the forward-looking statements. As a result of these factors, we cannot assure you that the forward-looking statements in this Form 10-Q will prove to be accurate. Furthermore, if the forward-looking statements prove to be inaccurate, the inaccuracy may be material. In light of the significant uncertainties in these forward-looking statements, you should not regard these statements as a representation or warranty by us or any other person that we will achieve our objectives and plans in any specified time frame, or at all. The forward-looking statements in this Form 10-Q represent our views as of the date of this Form 10-Q. We anticipate that subsequent events and developments will cause our views to change; however, we undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by U.S. federal securities laws. You should, therefore, not rely on these forward-looking statements as representing our views as of any date subsequent to the date of this Form 10-Q. 3 Part I. FINANCIAL STATEMENTS ITEM 1. FINANCIAL STATEMENTS SKYX Platforms Corp. Consolidated Balance Sheets (Unaudited) June 30, 2022 (Audited) December 31, 2021 Assets Current assets: Cash and cash equivalents $ 24,682,674 $ 10,426,249 Inventory 1,253,194 918,651 Prepaid expenses and other assets 1,020,624 41,018 Total current assets 26,956,492 11,385,918 Other assets: Furniture and equipment, net 266,260 25,710 Patents, net 597,850 540,033 Right-of-use asset 1,384,641 — Other assets 163,533 2,174 Total other assets 2,412,284 567,917 Total Assets $ 29,368,776 $ 11,953,835 Liabilities and Stockholders’ Equity (Deficit) Current liabilities: Accounts payable and accrued expenses $ 2,298,579 $ 1,029,336 Notes payable, current 403,567 404,648 Operating lease liabilities 241,362 — Royalty obligation 2,250,000 1,200,000 Total current liabilities 5,193,508 2,633,984 Long term liabilities: Notes payable 5,313,739 5,492,572 Operating lease liabilities 1,187,402 — Convertible notes 1,300,000 1,300,000 Royalty obligation 988,000 2,638,000 Total long-term liabilities 8,789,141 9,430,572 Total liabilities 13,982,649 12,064,556 Commitments and Contingent Liabilities: - Redeemable preferred stock - subject to redemption: $ 0 par value; 20,000,000 shares authorized; 1,880,400 and 13,256,936 shares issued and outstanding at June 30, 2022 and December 31, 2021, respectively 470,099 3,314,233 Stockholders’ Equity (Deficit): Common stock and additional paid-in-capital: $ 0 par value, 500,000,000 shares authorized; and 81,053,486 and 66,295,288 shares issued and outstanding at June 30, 2022 and December 31, 2021, respectively 110,444,367 70,880,386 Accumulated deficit ( 95,528,339 ) ( 74,269,898 ) Total stockholders’ equity (deficit) 14,916,028 ( 3,389,512 ) Non-controlling interest — ( 35,442 ) Total equity (deficit) 14,916,028 ( 3,424,954 ) Total Liabilities and Stockholders’ Equity (Deficit) $ 29,368,776 $ 11,953,835 The accompanying notes are an integral part of the consolidated financial statements. 4 SKYX Platforms Corp. Consolidated Statements of Operations (Unaudited) Three months ended June 30, Six months ended June 30, 2022 2021 2022 2021 Revenue $ 7,389 $ — $ 14,360 $ 100,185 Cost of revenues ( 6,122 ) — ( 11,762 ) ( 82,508 ) Gross income (loss) 1,267 — 2,598 17,677 Selling, general and administrative expenses 4,565,087 962,330 16,512,528 1,830,010 (Loss) from operations ( 4,563,820 ) ( 962,330 ) ( 16,509,930 ) ( 1,812,333 ) Other income / (expense) Interest expense, net ( 81,917 ) ( 144,171 ) ( 172,421 ) ( 281,107 ) Other income, Loan forgiveness — — 178,250 — Gain on debt forgiveness (license) — 7,886 — 7,886 Total other income (expense), net ( 81,917 ) ( 136,285 ) 5,829 ( 273,221 ) Net loss ( 4,645,737 ) ( 1,098,615 ) ( 16,504,101 ) ( 2,085,554 ) Common stock issued pursuant to antidilutive provisions — — 4,691,022 — Preferred dividends 6,645 32,552 27,876 65,103 Net loss attributed to common shareholders $ ( 4,652,382 ) $ ( 1,131,167 ) $ ( 21,222,999 ) $ ( 2,150,657 ) Net loss per share - basic and diluted $ ( 0.06 ) $ ( 0.02 ) $ ( 0.22 ) $ ( 0.03 ) Weighted average number of common shares outstanding – basic and diluted 80,575,955 64,848,938 76,718,462 64,705,049 The accompanying notes are an integral part of the consolidated financial statements 5 SKYX Platforms Corp. Consolidated Statements of Stockholders’ Equity (Deficit) (Unaudited) For the three months ended June 30, For the six months ended June 30, 2022 2021 2022 2021 Shares of common stock Balance, beginning of period 79,217,056 64,834,354 66,295,288 64,515,231 Common stock issued pursuant to offerings - 152,084 1,650,000 214,957 Common stock issued pursuant to services 94,540 20,000 542,949 55,000 Common stock issued pursuant to conversion of preferred stock 1,400,000 - 11,376,536 200,000 Common stock issued pursuant to exercise of options 236,890 - 436,890 - Common stock issued pursuant to cashless of warrants 105,000 - 416,750 21,250 Common stock issued pursuant to antidilutive provisions - - 335,073 - Balance, end of period 81,053,486 65,006,438 81,053,486 65,006,438 Common stock and paid-in capital Balance, beginning of period $ 107,595,436 $ 57,189,864 $ 70,880,386 $ 56,197,957 Common stock issued pursuant to offerings - 1,825,000 20,552,000 2,579,464 Common stock issued pursuant to services 450,216 63,750 6,167,226 165,000 Common stock issued pursuant to conversion of preferred stock 350,000 - 2,844,134 50,000 Stock-based compensation 1,976,090 86,193 5,026,974 172,386 Common stock issued pursuant to exercise of options 72,625 - 282,625 - Common stock issued pursuant to antidilutive provisions - - 4,691,022 - Balance, end of period $ 110,444,367 $ 59,164,807 $ 110,444,367 $ 59,164,807 Accumulated Deficit Balance, beginning of period $ ( 90,875,958 ) $ ( 69,429,519 ) $ ( 74,269,898 ) $ ( 68,410,028 ) Net loss ( 4,645,737 ) ( 1,098,615 ) ( 16,504,101 ) ( 2,085,554 ) Non-controlling interest - - ( 35,442 ) - Common stock issued pursuant to antidilutive provisions - - ( 4,691,022 ) - Preferred dividends ( 6,644 ) ( 32,551 ) ( 27,876 ) ( 65,103 ) Balance, end of period $ ( 95,528,339 ) $ ( 70,560,685 ) $ ( 95,528,339 ) $ ( 70,560,685 ) Beginning balance - - - - Net loss - - - - Total Stockholders’ Equity (Deficit) $ 14,916,028 $ ( 11,395,878 ) $ 14,916,028 $ ( 11,395,878 ) Ending balance $ 14,916,028 $ ( 11,395,878 ) $ 14,916,028 $ ( 11,395,878 ) The accompanying notes are an integral part of the consolidated financial statements 6 SKYX Platforms Corp. Consolidated Statements of Cash Flows (Unaudited) For the six months ended June 30, 2022 2021 Cash flows from operating activities: Net loss $ ( 16,504,101 ) ( 2,085,554 ) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 46,988 42,061 (Other income), loan forgiveness ( 178,250 ) — Non-cash equity-based compensation expense 11,194,200 337,386 Change in operating assets and liabilities: Inventory ( 334,543 ) — Prepaid expenses and other assets ( 979,607 ) ( 61,335 ) Right-to-use assets 44,124 — Other assets ( 161,358 ) — Royalty obligation ( 600,000 ) ( 250,000 ) Accounts payable and accrued expenses 1,269,243 212,553 Net cash used in operating activities ( 6,203,304 ) ( 1,804,889 ) Cash flows from investing activities: Purchase of property and equipment ( 262,748 ) — Payment of patent costs ( 82,608 ) ( 86,887 ) Net cash used in investing activities ( 345,356 ) ( 86,887 ) Cash flows from financing activities: Proceeds from common stock issuance 23,100,000 2,579,464 Placement cost ( 2,556,000 ) — Proceeds from exercise of options 290,625 — Proceeds from SBA - PPP notes payable — 178,235 Proceeds from issuance of convertible notes — 50,000 Dividends paid ( 27,876 ) ( 65,103 ) Principal repayments of notes payable ( 1,664 ) — Net cash provided by financing activities 20,805,085 2,742,596 Increase in cash and cash equivalents 14,256,425 850,820 Cash and cash equivalents at beginning of period 10,426,249 2,308,871 Cash and cash equivalents at end of period $ 24,682,674 3,159,691 Supplementary disclosure of non-cash financing activities: Preferred stock conversion to common $ 2,844,134 50,000 Common stock issued pursuant to antidilutive provisions 4,691,022 — Cashless exercise of warrants — 74,375 Cash paid during the year for: Interest $ 183,929 281,141 The accompanying notes are an integral part of the consolidated financial statements 7 SKYX Platforms Corp. Notes to Consolidated Financial Statements (Unaudited) NOTE 1 ORGANIZATION AND NATURE OF OPERATIONS SKYX Platforms Corp., a Florida corporation (the “Company”), was originally organized in May 2004. 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 National Electric Code (“NEC”) Code Book. The Company maintains offices in Johns Creek, Georgia, Pompano Beach, Florida, New York City, 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 to 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 generally accepted accounting principles in the United States (“GAAP”) for interim financial statements and with the instructions to Form 10-Q and Rule 8-03 of Regulation S-X. Accordingly, they do not include all of the information and disclosures required for annual financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. The consolidated financial statements as of June 30, 2022 and for the three and six months ended June 30, 2022 and 2021 are unaudited. The results of operations for the interim periods are not necessarily indicative of the results of operations for the respective fiscal years. The consolidated statement of financial condition at December 31, 2021 has been derived from the audited financial statements at that date but does not include all of the information and notes required by GAAP for complete financial statement presentation. The accompanying consolidated financial information should be read in conjunction with the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021 for additional disclosures and accounting policies. Reclassifications For comparability, reclassifications of certain prior-year balances were made in order to conform with current-year presentations, such as grouping of common stock and additional paid-in capital and certain expenses initially included in cost of revenues were reclassified to sales and general and administrative expenses. 8 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. SCHEDULE OF INVENTORY June 30, 2022 December 31, 2021 Inventory, component parts $ 1,253,194 $ 918,651 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 three and six months ended June 30, 2022 and 2021, 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. The Company had the following anti-dilutive common stock equivalents at June 30, 2022 and 2021: SCHEDULE OF EARNING (LOSS) PER SHARE June 30, 2022 June 30, 2021 Stock Warrants 939,895 1,796,122 Stock Options 33,124,982 20,752,182 Convertible Notes 86,668 86,668 Preferred stock 1,880,400 13,256,936 Total 36,031,945 35,891,908 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. NOTE 3 FURNITURE AND EQUIPMENT Furniture and equipment consisted of the following: SCHEDULE OF FURNITURE AND EQUIPMENT June 30, 2022 December 31, 2021 Machinery and equipment $ 67,419 $ 31,456 Computer equipment 6,846 6,846 Furniture and fixtures 36,059 36,059 Tooling and production 535,896 309,111 Leasehold improvements 30,553 30,553 Total 676,773 414,025 Less: accumulated depreciation ( 410,513 ) ( 388,315 ) Total, net $ 266,260 $ 25,710 Depreciation expense amounted to $ 22,198 and $ 22,504 for the six months ended June 30, 2022 and 2021, respectively, and $ 12,693 and $ 10,331 for the three months ended June 30, 2022 and 2021, respectively. 9 NOTE 4 INTANGIBLE ASSETS Intangible assets consisted of the following: SCHEDULE OF INTANGIBLE ASSETS June 30, 2022 December 31, 2021 Patents $ 732,577 $ 649,969 Trademark 45,450 45,450 Less: accumulated amortization ( 180,177 ) ( 155,386 ) Total, net $ 597,850 $ 540,033 Amortization expense on intangible assets was $ 24,791 and $ 19,557 for the six months ended June 30, 2022 and 2021, respectively, and $ 12,395 and $ 10,958 for the three months ended June 30, 2022 and 2021, respectively. The following table sets forth the estimated amortization expense for future periods: SCHEDULE OF INTANGIBLE ASSETS AMORTIZATION EXPENSE FOR FUTURE 2022 $ 25,296 2023 50,562 2024 49,605 2025 49,605 2026 49,605 2027 and thereafter 373,177 Total $ 597,850 NOTE 5 DEBT The following table presents the details of the principal outstanding: SCHEDULE OF DEBT TABLE June 30, 2022 December 31, 2021 a) PPP1 Loan $ 9,514 $ 11,193 b) PPP2 Loan — 178,235 c) EIDL 150,000 150,000 d) Note payable 5,557,792 5,557,792 e) Convertible Notes 1,300,000 1,300,000 Total $ 7,017,306 $ 7,197,220 Notes payable, current portion 403,567 404,648 Non-current term notes payable $ 6,613,739 $ 6,792,572 As of June 30, 2022, the expected future principal payments for the Company’s debt are due as follows: SCHEDULE OF FUTURE PRINCIPAL PAYMENTS 2022 –Remaining Period $ 403,567 2023 405,931 2024 1,735,587 2025 3,032,903 2026 1,300,376 2027 and thereafter 138,942 Total $ 7,017,306 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. 10 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. The note may be prepaid at any time prior to maturity with no prepayment penalties. The loan obligation was $ 9,514 and $ 11,193 as of June 30, 2022 and December 31, 2021, 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 approximately $ 178,000 , pursuant to the Paycheck Protection Program under the CARES Act. The Company recognized the forgiveness as Other Income during the six months ended June 30, 2022, the period during which it was forgiven in full. As of December 31, 2021, the loan balance was approximately $ 178,000 . 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. The principal amount of the EIDL Loan is $ 150,000 . The EIDL Loan bears interest at the annual rate of 3.75 % and matures in 2050 . Additionally, the EIDL Loan is collateralized by certain of the Company’s property as specified within the security agreement. 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. e) Convertible Notes SCHEDULE OF CONVERTIBLE DEBT June 30, 2022 December 31, 2021 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 50,000 Total $ 1,300,000 $ 1,300,000 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 Convertible Notes mature between September 2023 and January 2024 and bear interest at an annual rate of 6 %, 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 per share. Accrued interest on Convertible Notes was $ 132,708 and $ 92,919 as of June 30, 2022 and December 31, 2021, respectively. 11 NOTE 6 LEASE OBLIGATION The Company leases office and showroom space pursuant to a sublease that expires in February 2027. In April 2022, the Company entered into the sublease and as a result recognized a right-of-use asset and a liability of $ 1,428,764 . Because the rate implicit in each lease is not readily determinable, the Company uses its incremental borrowing rate of 5 % to determine the present value of the lease payments at the measurement date. Supplemental information related to the lease and future minimum lease payments as of June 30, 2022 are as follows: SCHEDULE OF FUTURE MINIMUM LEASE PAYMENTS June 30, 2022 Cash paid for operating lease liabilities $ 27,813 Right-of-use assets obtained in exchange for new operating lease obligations 1,428,764 Remaining lease term, months 58 Discount rate 5 % Fixed rent payment $ 26,893 Lease – Depreciation expense $ 44,124 2022 –Remaining Period $ 94,732 2023 279,809 2024 304,227 2025 330,198 2026 357,840 2027 61,958 Total $ 1,428,764 NOTE 7 GE ROYALTY OBLIGATIONS On June 15, 2011, we entered into a license agreement with GE, pursuant to which we have the right to market certain ceiling light and fan fixtures displaying the GE brand. The license agreement, as amended, 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. 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 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 million Initial Royalty Obligation that was due on November 30, 2018 was waived, and we agreed to pay GE an aggregate amount of $ 6 million, consisting of three annual installments of $ 2 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, and $ 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”). 12 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. 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: SCHEDULE OF GE ROYALTY OBLIGATIONS 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 $ 600,000 and $ 250,000 . As of June 30, 2022 and December 31, 2021, the outstanding balance of the aggregate Minimum Payment was $ 3,238,000 and $ 3,838,000 , respectively. Minimum future payment obligations are approximately as follows: SCHEDULE OF GE ROYALTY OBLIGATION MINIMUM FUTURE MINIMUM PAYMENT Year Minimum Obligation 2022, remaining period $ 2,250,000 2023 988,000 Total principal payments $ 3,238,000 NOTE 8 ACCRUED EXPENSES Accrued expenses consisted of the following: SCHEDULE OF ACCRUED EXPENSES June 30, 2022 December 31, 2021 Accrued interest, convertible notes $ 132,708 $ 92,919 Accrued wages 435,417 429,167 Total accrued expenses $ 568,125 $ 522,086 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. The outstanding principal on the Convertible Promissory Notes, associated with Related Party transactions was $ 1,250,000 as of June 30, 2022 and December 31, 2021 and accrued interest of $ 128,192 and $ 90,002 , respectively. 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 the six month period ended June 30, 2021 (collectively, the “Bridge Line SPAs”): ● Stock Purchase Agreements, as amended, pursuant to which Bridge Line Ventures purchased 214,957 shares of common stock and warrants at a purchase price per share of $ 12 during the six-months ended June 30, 2021. 13 Gross proceeds from Bridge Line Ventures amounted to $ 2,579,464 during the six-month period ended June 30, 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. 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. Initial Public Offering The Company issued 455,353 shares of its common stock to certain directors, officers and greater than 5% stockholders which generated gross proceeds of $ 6,374,942 during the six-month ended June 30, 2022. The Company issued 95,386 shares of its common stock to affiliates of certain directors and greater than 5% stockholders pursuant to certain anti-dilutive provisions during the six-month period ended June 30, 2022. The issuance of such shares was triggered based on the Company’s effective price of its initial public offering in February 2022. NOTE 10 STOCKHOLDERS’ EQUITY (DEFICIT) (A) Common Stock The Company issued the following common stock during the six months ended June 30, 2022 and 2021: SCHEDULE OF COMMON STOCK Transaction Type Shares Issued Valuation $ (Issued) Range of Value Per Share 2022 Equity Transactions Common stock issued per exercise of options 436,890 $ 282,625 $ 0.10 - 3.00 Common stock issued per exercise of warrants, cashless 416,750 — — Common stock issued, pursuant to services provided 542,949 6,167,226 2.00 – 14.00 Conversion of preferred stock 11,376,536 2,844,134 0.25 Issuance of common stock pursuant to offering, net 1,650,000 23,100,000 14.00 Issuance of common stock, pursuant to anti-dilutive provisions 335,073 4,691,022 14.00 14 Transaction Type Qty Shares Issued Valuation $ (Issued) Range of Value Per Share 2021 Equity Transactions Common stock issued per PPM, Bridge Line Ventures 214,957 2,579,464 12.00 Common stock issued, exercise of warrants 21,250 172,386 3.50 Common stock issued, pursuant to services provided 55,000 165,000 2.25 Conversion of preferred stock 200,000 50,000 0.25 The Company issued 335,073 shares of its common stock to certain stockholders pursuant to certain anti-dilutive provisions during the six-month period ended June 30, 2022. The issuance of such shares was triggered based on the Company’s effective price of its initial public offering in February 2022. The fair value of the shares at the date of issuance were recorded as an increase in common stock and additional paid-in capital and accumulated deficit during the period. (B) Preferred Stock The following is a summary of the Company’s Preferred Stock activity during the six months ended June 30, 2022 and 2021: SCHEDULE OF PREFERRED STOCK Transaction Type Quantity Carrying Value Value per Share Preferred Stock Balance at December 31, 2021 13,256,936 $ 3,314,233 $ 0.25 Preferred Stock redemptions ( 11,376,536 ) ( 2,844,134 ) 0.25 Preferred Stock Balance at June 30, 2022 1,880,400 470,099 $ 0.25 Transaction Type Quantity Carrying Value 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 June 30, 2021 13,256,936 $ 3,314,233 $ 0.25 The Preferred Stock is convertible at the holder’s option. Shares of the Preferred Stock may be repurchased by the Company upon 30 days’ prior written notice, for $ 3.50 per share. 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 six months ended June 30, 2022 and 2021, the Company paid dividends in the amount of $ 27,876 and $ 65,103 , respectively, to the Preferred Stock shareholders. 15 (C) Stock Options The following is a summary of the Company’s stock option activity during the six-month periods ended June 30, 2022 and 2021: SCHEDULE OF STOCK OPTION ACTIVITY Options Shares Weighted Average Exercise Price Weighted Average Remaining Contractual Life (In Years) Aggregate Intrinsic Value Outstanding, January 1, 2022 21,927,182 $ 3.36 4.07 $ 5,990,800 Exercised ( 481,250 ) 1.34 — — Granted 13,372,500 11.92 — — Forfeited ( 1,693,750 ) — — — Outstanding, June 30, 2022 33,124,982 $ 7.70 3.86 $ 2,802,488 Exercisable, June 30, 2022 23,313,995 $ 5.96 3.34 $ 2,952,013 Options Shares Weighted Average Exercise Price Weighted Average Remaining Contractual Life (In Years) Aggregate Intrinsic Value Outstanding, January 1, 2021 13,492,682 $ 3.28 4.25 $ 8,754,750 Granted 7,259,500 6.46 — — Forfeited — — — — Outstanding, June 30, 2021 20,752,182 $ 4.57 4.48 $ 636,912,928 Exercisable, June 30, 2021 16,242,658 $ 4.06 4.51 481,595,644 The range of inputs used by the Company to determine the fair value of options are as follows: During the six-month period ended June 30, 2022, the Black-Scholes model calculations included stock price on the date of measurement ranging from $ 2.00 - $ 14.00 , exercise price with a range of $ 0.10 - $ 14.00 , a term of 5 years, expected volatility range of 40 % - 54 %, and a discount rate ranging from 1.37 % to 1.96 %. During the six-month period ended June 30, 2021, the Black-Scholes model calculations included fair value of underlying shares at measurement date and exercise price ranging between $ 3.00 - $ 12.00 , a term ranging from 1.3 years to 5.0 years, expected volatility range of 25 %- 30 %, and a discount rate ranging from .09 % to 2.49 %. The Company cannot use its historical volatility as expected volatility because there is not enough liquidity in trades of common stock during a term comparable to the expected term of stock option issued. The Company relies on the expected volatility of comparable publicly traded companies within its industry sector, which is deemed more relevant, to compute its expected volatility. Unamortized future option expense was $ 3,193,133 (excluding certain market-based options which management cannot ascertain to have a probable outcome) at June 30, 2022 and it is expected to be recognized over a weighted-average period of 2.3 years. 16 (D) Warrants Issued The following is a summary of the Company’s warrant activity during the six-month periods ended June 30, 2022 and 2021: SCHEDULE OF WARRANT ACTIVITY Number of Warrants Weighted Average Exercise Price Balance, January 1, 2022 2,127,895 $ 5.4 Issued 132,000 18.20 Exercised ( 535,000 ) — Forfeited ( 785,000 ) — Balance, June 30, 2022 939,895 $ 9.66 Number of Warrants Weighted Average Exercise Price Balance, January 1, 2021 1,602,415 $ 3.23 Issued 214,957 12.00 Exercised ( 21,250 ) — Forfeited/Cancelled — — Balance, June 30, 2021 1,796,122 $ 3.24 NOTE 11 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 six months ended June 30, 2022 and 2021, one customer accounted for 100 % of revenues. At June 30, 2022 and December 31, 2021, one customer accounted for 100 % of the Company’s accounts receivable. Although the Company is directly affected by the financial condition of its customers, management does not believe significant credit risks existed at June 30, 2022. Generally, the Company does not require collateral or other securities to support its accounts receivable. Major Vendors The Company had two major vendors that accounted for 100 % of cost of sales for the six months ended June 30, 2022 and 2021. The Company expects to maintain its 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 $ 24,378,578 at June 30, 2022. 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. NOTE 12 SUBSEQUENT EVENTS Management has evaluated subsequent events through August 12, 2022, which is the date the consolidated financial statements were available to be issued. There were no subsequent events that required adjustment to or disclosure in the consolidated financial statements. 17 ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis should be read in conjunction with the unaudited consolidated financial statements and related notes included elsewhere in this Form 10-Q and our audited financial statements and related notes thereto for the year ended December 31, 2021 included in our Annual Report on Form 10-K for the year ended December 31, 2021. This discussion and analysis and other parts of this Form 10-Q contain forward-looking statements based upon current beliefs, plans and expectations that involve risks, uncertainties and assumptions, such as statements regarding our plans, objectives, strategy, expectations, outlook, intentions and projections. Our actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of several factors, including those set forth in “Part I. Item 1A. Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2021 and in other filings with the Securities and Exchange Commission (the “SEC”). Please also see the section entitled “Cautionary Note Regarding Forward-Looking Statements” contained in this Form 10-Q. Overview We have a series of advanced-safe-smart platform technologies. Our first-generation technologies enable light fixtures, ceiling fans and other electrically wired products to be installed safely and plugged-in to 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, we have expanded the capabilities of our 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, BLE and voice control. It allows scheduling, energy savings eco mode, dimming, back-up emergency light, night light, light color changing and much more. Our 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. Our products are designed to improve all around home and building safety and lifestyle. While we have developed and created working prototypes of our advanced and smart products, we are continuing to refine the product prototypes and expect to begin commercial manufacturing and marketing in the second half of 2022 for the advanced products and the smart universal power-plug, ceiling fans and lighting products and for the Smart Sky Platform. We hold over 60 U.S. and global patents and patent applications and have received a variety of final electrical code approvals, including UL, United Laboratories of Canada (cUL) and Conformité Européenne (CE), and 2017 and 2020 inclusion in the NEC Code Book. We believe our total addressable market in the United States exceeds $500 billion, based on the Company’s internal calculations derived from the estimation of the total target user pool, projected average selling price, and projected units per household. We believe there are billions of installations of light and other electrical fixtures globally. Our estimates of the addressable market for our products may prove to be incorrect. The projected demand for our products could materially differ from actual demand. Even if the total addressable market for our products is as large as we have estimated and even if we are able to gain market awareness and acceptance, we may not be able to penetrate the existing market to capture additional market share. On April 28, 2022, we entered into a sublease agreement, pursuant to which we agreed to sublease approximately 3,400 square feet of office space located on the 54th floor of Carnegie Hall Tower, located at 152 West 57th Street, New York, New York, at a fixed monthly base rent starting at $26,893 for the first year of the sublease. The New York office space supports our general and administrative functions, sales and marketing, and business development. Inflation and related risk of recession has increased during the periods covered by this Form 10-Q and is expected to continue to increase during the near future. Inflationary factors, such as increases in interest rates, government regulations, supply and overhead costs and transportation costs, may adversely affect our operating results and we may not be able to offset increased costs with increased sales price per unit, particularly as we work toward commercial manufacturing of our products. Although we do not believe that inflation has had a material impact on our financial position or results of operations to date, we may experience some effect in the foreseeable future (especially if inflation rates continue to rise) due to supply chain constraints, consequences associated with government regulations, and ongoing and potential geopolitical conflicts, employee availability and wage increases. 18 Results of Operations Comparison of the Three Months and Six Months Ended June 30, 2022 and 2021 Unaudited Consolidated Operating Results For the Three Months Ended For the Six Months Ended Increase/ Increase/ Increase/ Increase/ June 30, June 30, (Decrease) Decrease June 30, June 30, (Decrease) Decrease 2022 2021 $ % 2022 2021 $ % Revenues $ 7,389 $ - $ 7,389 NM $ 14,360 $ 100,185 $ (85,825 ) -86 % Cost of revenues 6,122 - 6,122 NM 11,762 82,508 (70,746 ) -86 % Gross income 1,267 - 1,267 NM 2,598 17,677 (15,079 ) 0 % Selling, general and administrative 4,565,087 962,330 3,602,757 374 % 16,512,528 1,830,010 14,682,518 NM Operating expenses 4,565,087 962,330 3,602,757 374 % 16,512,528 1,830,010 14,682,518 NM Operating loss (4,563,820 ) (962,330 ) (3,601,490 ) 374 % (16,509,930 ) (1,812,333 ) (14,697,597 ) NM Other income (expense) Interest expense, net (81,917 ) (144,171 ) (62,254 ) 43 % (172,421 ) (281,107 ) (108,686 ) 39 % Other income – loan and debt forgiveness - 7,886 (7,886 ) NM 178,250 7,886 170,364 NM Total other income (expense) (81,917 ) (136,285 ) (54,368 ) NM 5,829 (273,221 ) (279,050 ) NM Net loss $ (4,645,737 ) $ (1,098,615 ) $ 3,547,122 NM $ (16,504,101 ) $ (2,085,554 ) $ 14,418,547 NM (NM): not meaningful Revenue The decrease in revenues was directly related to the planned reduction of discontinued inventory as we continued to shift our focus to the development of our new patented “Smart” platforms and technologies. During 2022 and 2021, we opted to sell through our existing inventory of discontinued products to facilitate our planned transition into our new patented product lines. We believe that revenues earned during the second half of 2022 will be higher than those earned during the first half of 2022, following the anticipated launch of our products. Cost of Revenues Revenues are mostly derived from the sale of a small number of replacement parts and standard canopy kits. The inventory and related costs of such products are not significant and are not reflected on our balance sheet nor in the cost of revenues. The reduction in cost of revenues was related to the decrease in sales, which resulted from our decision to discontinue our old products and transition to our patented “Smart” platforms and technologies. We believe that cost of revenues during the second half of 2022 will be higher than those incurred during the first half of 2022, commensurate with an increase in revenues following the anticipated launch of our products. Selling, General and Administrative Expense Selling, general and administrative expenses consist primarily of an allocation of product development, sales, finance, legal, human resources, including salaries, wages, and benefits, and depreciation and amortization, including non-cash equity-based compensation. The increase in selling, general, and administrative expenses during the three and six months ended June 30, 2022 when compared to the prior year period was primarily due to the following: ● Increase of $2.3 million and $10.9 million related to stock-based compensation which is primarily due to a greater number of shares of common stock issued and options granted for services during the applicable periods during fiscal 2022, respectively, when compared to the prior year periods; ● Increase of $1.4 million related to marketing programs and product development in anticipation of the launch of our product offerings during the first quarter of 2022 and a lower increase in marketing programs and product development expenses during the second quarter of 2022; ● Increase in other spending related to support of planned increase in scope of operations. 19 We believe that our selling, general, and administrative expenses will be higher during fiscal 2022 when compared to fiscal 2021 as we invest to support our anticipated growth. Other Income (Expense) The decrease in interest expense, net in the three and six months ended June 30, 2022 when compared to the prior year period resulted from the lower interest-bearing rate associated from the conversion of the Company’s line of credit to secured notes payable at the end of fiscal 2021. The increase in other income loan forgiveness during the six months ended June 30, 2022 when compared to the prior year period was the forgiveness of a PPP loan during the first quarter of fiscal 2022, which did not occur during the same period in 2021 or the second quarter of 2022. We believe that interest expenses will increase during the second half of 2022 when compared to the first half of 2022, primarily as a result of increased operating lease liabilities. NON-GAAP INFORMATION Management considers selling, general, and administrative expenses, adjusted for non-cash stock compensation, an important indicator in consistently evaluating our business operations and the use of cash in our operating activities. We use such primary measure to analyze and evaluate our liquidity and capital resources and intend to continue using such measure until we generate revenues. Such measure eliminates significant items that do not involve cash outlay. This measure should be considered in addition to, rather than as a substitute, for selling, general and administrative expenses. This non-GAAP financial measures excludes significant expenses that are required by GAAP to be recorded in our financial statements and is subject to inherent limitations. Investors should review the reconciliation of this non-GAAP financial measure to the comparable GAAP financial measure included below. Investors should not rely on any single financial measure to evaluate our business. For the Three For the Three For the Six months ended months ended months ended June 30, June 30. March 31, March 31, June 30, June 30, 2022 2021 2022 2021 2022 2021 Sales, general and administrative expenses, as reported $ 4,565,087 $ 962,330 $ 11,947,441 $ 867,680 $ 16,512,528 $ 1,830,010 Non-cash compensation expense (2,426,307 ) (149,943 ) (8,767,893 ) (187,443 ) (11,194,200 ) (337,386 ) Sales, general, and administrative expenses, as adjusted $ 2,138,780 $ 812,387 $ 3,179,548 $ 680,237 $ 5,318,328 $ 1,492,624 Sales, general, and administrative expenses, as adjusted for non-cash compensation expense decreased to $2.1 million during the three months ended June 30, 2022 from $3.2 million during the three-month period ended March 31, 2022. For comparability, reclassifications of certain prior year balances and for the three-month period ended March 31, 2022 were made in order to conform with the June 30, 2022 presentations, such as certain expenses initially included in cost of revenues were reclassified to sales and general and administrative expenses. Liquidity and Capital Resources As we develop our revenue base, we have raised additional funds through the sale of our common stock and issuance of debt, including completing our initial public offering in February 2022 for gross proceeds of $23.1 million. We believe that our existing cash will be sufficient to support our working capital and capital expenditure requirements for at least the next 12 months. Our future capital requirements will depend on many factors, including our revenue growth rate, expenditures related to our headcount growth, the timing and the amount of cash received from customers, the expansion of sales and marketing activities, the timing and extent of spending to support development efforts, the price at which we are able to purchase parts to incorporate in our product offerings, the introduction of platform enhancements, and the continuing market adoption of our platforms. We may continue to enter into arrangements to acquire or invest in complementary businesses, products, and technologies. We may, as a result of those arrangements or the general expansion of our business, be required to seek additional equity or debt financing. In the event that we require additional financing, we may not be able to raise such financing on terms acceptable to us or at all. If we are unable to raise additional capital or generate cash flows necessary to expand our operations and invest in continued innovation, we may not be able to compete successfully, which would harm our business, results of operations, and financial condition. Six-months period ended June 30, 2022: We had $24.7 million in cash and cash equivalents as of June 30, 2022. We used $6.2 million in our operating activities which consists of a net loss of $16.5 million adjusted for the following: ● Stock-based compensation of $11.2 million. ● Increase in prepaid assets of $980,000, which will be substantially recognized and paid during fiscal 2022. and inventory of $335,000 and an increase of accounts payable and accrued expenses and royalty obligations of $670,000. 20 We used $345,000 in investing activities which were primarily capital expenditures. We generated $20.8 million in financing activities which were primarily related to proceeds we generated from the issuance of shares of common stock pursuant to our initial public offering. We believe we will continue to increase our investments in inventory in anticipation of our products launch. Six-months period ended June 30, 2021: We had $3.2 million in cash and cash equivalents as of June 30, 2021. We used $1.8 million in our operating activities which consists of a net loss of $2.1 million adjusted for the following: ● Stock-based compensation of $337,000. We used $87,000 in investing activities which were primarily capital expenditures. We generated $2.7 million in financing activities which were primarily related to proceeds we generated from the issuance of shares of common stock pursuant to private placements. Future Impact of COVID-19 We are currently unable to assess with certainty the broad effects of COVID-19 on our future business. As of June 30, 2022, we had no material assets that would be subject to impairment or change in valuation due to COVID-19. Critical Accounting Policies Our significant accounting policies are disclosed in Note 2 to our consolidated financial statements for the year ended December 31, 2021 contained in our Annual Report on Form 10-K for the year ended December 31, 2021. The following is a summary of those accounting policies that involve significant estimates and judgment of management. Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in our 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 non-conforming events. Accordingly, actual results could differ significantly from estimates. 21 Fair Value of Financial Instruments Disclosures about fair value of financial instruments require disclosure of the fair value information, whether or not recognized in the balance sheet, where it is practicable to estimate that value. As of June 30, 2022 and December 31, 2021, we believe the amounts reported for cash, prepaid expenses, accounts payable, accounts payable – related party, accrued expenses and other current liabilities, accrued interest, notes payable and convertible note payable approximate fair value because of their short maturities. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. ASC Topic 820 established a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurements) and the lowest priority to unobservable inputs (level 3 measurements). These tiers include: ● Level 1, defined as observable inputs such as quoted prices for identical instruments in active markets; ● Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable such as quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active; and ● Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions, such as valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable. Stock-Based Compensation Stock-based compensation is accounted for based on the requirements of ASC 718 – “Compensation–Stock Compensation ”, which requires recognition in the financial statements of the cost of employee, non-employee and director services received in exchange for an award of equity instruments over the period the employee or director is required to perform the services in exchange for the award (presumptively, the vesting period). The ASC also requires measurement of the cost of employee and director services received in exchange for an award based on the grant-date fair value of the award. Stock-based compensation is measured at the grant date based on the value of the award granted using the Black- Scholes option pricing model based on projections of various potential future outcomes and recognized over the period in which the award vests. For stock awards no longer expected to vest, any previously recognized stock compensation expense is reversed in the period of termination. The stock-based compensation expense is included in general and administrative expenses. Revenue Recognition We account for revenues in accordance with Accounting Standards Update No. 2014-09, “Revenue from Contracts with Customers” (Topic 606). Under Topic 606, revenue is recognized when control of the promised goods or services is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services. We determine revenue recognition through the following steps: ● identification of the contract, or contracts, with a customer; ● identification of the performance obligations in the contract; ● determination of the transaction price; ● allocation of the transaction price to the performance obligations in the contract; and ● recognition of revenue when, or as, we satisfy a performance obligation. 22 Recent Accounting Pronouncements Although there are several new accounting pronouncements issued or proposed by the Financial Accounting Standards Board, which we have adopted or will adopt, as applicable, we do not believe any of these accounting pronouncements has had or will have a material impact on our financial position or results of operations. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK As a “smaller reporting company”, we are not required to provide the information required by this Item. ITEM 4. 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 Securities Exchange Act of 1934, as amended (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 June 30, 2022. Changes in Internal Controls Over Financial Reporting: There were no changes in our internal control over financial reporting during the quarter ended June 30, 2022 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS There are no legal proceedings or arbitration proceedings currently pending against our Company. From time to time, we may become involved in legal proceedings arising in the ordinary course of our business. As of the date of this Form 10-Q, we were not a party to any material legal matters or claims. In the future, we may become party to legal matters and claims in the ordinary course of business, the resolution of which we do not anticipate would have a material adverse impact on our financial position, results of operations or cash flows. 23 ITEM 1A. RISK FACTORS There have been no material changes from the risk factors set forth in “Part I. Item 1A. Risk Factors” of our Annual Report on Form 10-K for the fiscal year ended December 31, 2021. Our business, operations and financial results are subject to various risks and uncertainties that could materially adversely affect our business, results of operations, financial condition, and the trading price of our common stock. You should carefully read and consider the risks and uncertainties included in the report referenced above, together with all of the other information in such report and this Form 10-Q, including the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and related notes, and other documents that we file with the SEC. The risks and uncertainties described in these reports may not be the only ones we face, and the disclosure of any risk factor should not be interpreted to imply that the risk has not already materialized. The factors discussed in these reports, among others, could cause our actual results to differ materially from historical results and those expressed in forward-looking statements made by us or on our behalf in filings with the SEC, press releases, communications with investors, and oral statements. ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS Recent Sales of Unregistered Securities The following is a summary of issuances of unregistered securities during the quarter ended June 30, 2022: 1,400,000 shares of common stock were issued pursuant to the conversion of 1,400,000 shares of Series A Convertible Preferred Stock, no par value and 105,000 shares of common stock were issued pursuant to exercise of warrants on a cashless basis. The sales or issuances of the securities described above were deemed to be exempt from registration pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended, including Regulation D and Rule 506 promulgated thereunder, as transactions by the Company not involving a public offering or Rule 701 promulgated under the Securities Act as transactions pursuant to compensatory benefit plans. Use of Proceeds On February 14, 2022, we completed our initial public offering. We received approximately $20.5 million in net proceeds after deducting underwriting discounts and commissions of $1.8 million and offering expenses of approximately $700,000. There has been no material change in the use of proceeds from our initial public offering as described in our final prospectus filed with the SEC pursuant to Rule 424(b) of the Securities Act of 1933, as amended, and other periodic reports previously filed with the SEC, which are used for general corporate purposes. Item 3. Defaults Upon Senior Securities None. ITEM 4. MINE SAFETY DISCLOSURES Not applicable. Item 5. Other Information Not applicable. 24 Item 6. Exhibits Exhibit No. Description of Exhibit 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 herein 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 Articles of Amendment to Articles of Incorporation (effective June 14, 2022) (incorporated herein by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed with the SEC on June 14, 2022). 3.5 Second Amended and Restated Bylaws of the Company (effective June 14, 2022) (incorporated herein by reference to Exhibit 3.2 to the Company’s Current Report on Form 8-K filed with the SEC on June 14, 2022). 10.1+† Sublease Agreement, executed as of April 28, 2022, by and between SQL Technologies Corp. and Sicart Associates LLC (incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on May 4, 2022). 10.2* Form of Nonqualified Stock Option Agreement (2021 Plan) (August 2022) (incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on August 5, 2022). 10.3* Form of Incentive Stock Option Agreement (2021 Plan) (August 2022) (incorporated herein by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed with the SEC on August 5, 2022). 10.4* Form of Restricted Shares Award Agreement (2021 Plan) (August 2022) (incorporated herein by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed with the SEC on August 5, 2022). 10.5* Form of Restricted Share Unit Award Agreement (2021 Plan) (August 2022) (incorporated herein by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K filed with the SEC on August 5, 2022). 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). 101 The following financial statements from the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2022, formatted in inline XBRL: (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Operations, (iii) Consolidated Statements of Stockholders’ Equity (Deficit), (iv) Consolidated Statements of Cash Flows, and (v) Notes to Consolidated Financial Statements. 104 Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101). * 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. 25 SIGNATURES Pursuant to the requirements 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. SKYX Platforms Corp. Date: August 12, 2022 By:  /s/ John P. Campi John P. Campi, Chief Executive Officer (Principal Executive Officer) Date: August 12, 2022 By:  /s/ Marc-Andre Boisseau Marc-Andre Boisseau, Chief Financial Officer (Principal Financial and Accounting Officer) 26