What changed in this filing

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Item 5. Market for Registrant’s Common Equity

2023-03-31 compared with 2022-03-08 · 20 added, 478 removed, 15 unchanged (97% of the section changed)

MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

February 10, 2022, our common stock began trading on Nasdaq under the symbol “SKYX”.

of February 25, 2022, there were approximately 218 holders of record of our common stock.

MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

common stock trades on Nasdaq under the symbol “SKYX”.

of March 20, 2023, there were approximately 178 holders of record of our common stock.

This number does not include beneficial owners

12 unchanged sentences

Use of Proceeds from Registered Securities

following is a summary of issuances of unregistered securities during 2021:

Stock Issuances (Excluding Option and Warrant Exercises)

February 2021, the Company issued 2,084 shares of common stock to a service provider.

March 2021, the Company issued an aggregate of 43,000 shares of common stock to Mr.

Sokolow as part of his director compensation.

March 2021, the Company issued 10,000 shares of common stock to four investors pursuant to the investment banking agreement with Newbridge

Securities Corporation, of which Mr.

Sokolow received 4,500 shares and Newbridge Securities Corporation received 3,600 shares.

a series of transactions from February 2021 to August 2021, Bridge Line Ventures, LLC Series ST-1 (“Bridge Line Ventures”)

purchased an aggregate of 231,624 shares of common stock for aggregate proceeds of approximately $2.8 million at a purchase price of

$12.00 per share.

The share purchases consisted of 25,373 shares purchased in February 2021;

37,500 shares purchased in March 2021;

shares purchased in April 2021;

150,000 shares purchased in June 2021;

and 16,667 shares purchased in August 2021.

Such shares have certain

piggyback registration and anti-dilution rights.

October 2021, in private placement transactions with four investors, the Company sold an aggregate of 37,502 shares of common stock,

at $12.00 per share, and warrants to purchase up to 37,502 shares of common stock at an exercise price of $12.00 per share for aggregate

gross proceeds of approximately $450,000.

Such shares and warrants have certain piggyback registration and anti-dilution rights.

November 2021, the Company issued 33,334 shares of common stock to a joint venture partner pursuant to a 2018 agreement.

November 2021, in a private placement transaction with two investors, the Company sold an aggregate of 125,001 shares of common stock,

at $12.00 per share, and warrants to purchase up to 125,001 shares of common stock at an exercise price of $12.00 per share for aggregate

gross proceeds of approximately $1,500,000.

Such shares and warrants have certain piggyback registration and anti-dilution rights.

December 2021, in a private placement transaction, the Company sold an aggregate of 41,668 shares of common stock, at $12.00 per share,

and warrants to purchase up to 41,668 shares of common stock at an exercise price of $12.00 per share for aggregate gross proceeds of

approximately $500,000.

Such shares and warrants have certain piggyback registration and anti-dilution rights.

in December 2021, the Company received gross proceeds in the aggregate amount of approximately $8.3 million from the sale of 692,667

shares of common stock at $12.00 per share to several investors, in a private placement.

Such shares have certain piggyback registration

and anti-dilution rights.

December 2021, the following shares of common stock were issued to the Company’s named executive officers, non-employee directors

and other employees, advisors and consultants:

1,140,000 shares of common stock issued to Mr.

Kohen, pursuant to his employment agreement;

55,000 shares of common stock issued to each of Mr.

Ridge and Mr.

Shiff as director compensation;

24,000 shares of common

stock issued to Mr.

Sokolow as director compensation;

25,000 shares issued to Mr.

Schmidt, pursuant to his consulting agreement;

455,000 shares of common stock issued pursuant to various employment, advisory and consulting agreements.

Grants and Exercises

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.

of common stock underlying the following option awards to the Company’s named executive officers, non-employee directors and other

employees and consultants have been issued:

five-year options to purchase 3.0 million shares of common stock, which vested on the effective

grant date and were granted to Rani Kohen, the Company’s Executive Chairman, pursuant to his employment agreement, of which 1.5

million have an exercise price of $3.00 per share, 500,000 have an exercise price of $4.00 per share and 1.0 million have an exercise

price of $6.00 per share, all of which expire November 21, 2024;

five-year options to purchase 1,140,000 shares of common stock, granted

Kohen pursuant to his 2019 employment agreement, which have an exercise price of $6.00 per share, vest as to 120,000 shares January

1, 2020 and as to 340,000 shares on each of September 1, 2020, 2021 and 2022, and expire September 1, 2024;

the Performance Options,

as described in “Executive Compensation—Agreements with Named Executive Officers”;

five-year options to purchase 1,140,000

shares of common stock, granted to Mr.

Kohen pursuant to his 2022 employment agreement, which have an exercise price of $12.00 per share,

vest as to 120,000 shares January 1, 2023 and as to 340,000 shares on each of January 1, 2023, 2024 and 2025, and expire January 1, 2027;

five-year options to purchase 120,000 shares of common stock, granted to John Campi, the Company’s Chief Executive Officer and

then-Chief Financial Officer, pursuant to his employment agreement, which have an exercise price of $6.00 per share, vest in full on

December 31, 2020 and expire September 1, 2024;

five-year options to purchase 100,000 shares of common stock, granted to Patricia Barron,

the Company’s Chief Operations Officer, pursuant to her employment agreement, which have an exercise price of $6.00 per share,

vest in full on December 31, 2020 and expire September 1, 2024;

five-year options to purchase 220,000 shares of common stock, granted

to Steven Schmidt, the Company’s President, pursuant to his consulting agreement, of which (i) 60,000 have an exercise price of

$0.10 per share, vest in three equal installments on each of October 1, 2020, 2021 and 2022, and expire October 1, 2024, (ii) 60,000

have an exercise price of $6.00 per share, vest in three equal installments on each of October 1, 2020, 2021 and 2022, and expire October

1, 2024, and (iii) 100,000 have an exercise price of $12.00 per share, vest in four equal installments on each of June 1, 2021, 2022,

2023 and 2024, and expire June 1, 2026;

three-year options to purchase 10,000 shares of common stock, granted to Marc-Andre Boisseau,

Chief Financial Officer, pursuant to his employment agreement, which have an exercise price of $12.00 per share, vest in four equal quarterly

installments at the end of each quarter in 2022;

five-year options to purchase an aggregate of 125,000 shares, granted to each of Phillips

Peter, Thomas Ridge and Dov Shiff as director compensation, all of which vested on the effective grant date and of which, for each director,

(i) 25,000 have an exercise price of $3.00 per share and expire January 1, 2023, (ii) 25,000 have an exercise price of $3.00 per share

and expire January 1, 2024, (iii) 25,000 have an exercise price of $12.00 per share and expire January 1, 2025, (iv) 25,000 have an exercise

price of $12.00 per share and expire December 31, 2025 and (v) 25,000 have an exercise price of $12.00 per share and expire December

five year options to purchase an aggregate of 500,000 options, granted to Leonard Sokolow as director compensation, all of

which vested on the effective grant date and of which (i) 100,000 have an exercise price of $3.00 per share and expire January 1, 2023,

(ii) 100,000 have an exercise price of $3.00 per share and expire January 1, 2024, (iii) 100,000 have an exercise price of $12.00 per

share and expire January 1, 2025, (iv) 100,000 have an exercise price of $12.00 per share and expire December 31, 2025 and (v) 100,000

have an exercise price of $12.00 per share and expire December 31, 2026;

and options to purchase an aggregate of 1,772,182 shares of

common stock, granted to various employees, advisors and consultants pursuant to their employment, advisory and consulting agreements,

which generally have five year terms and vest within three years of the effective grant date, have exercise prices ranging from $1.00

to $12.00 per share, and expire on dates ranging from December 1, 2022 to September 21, 2026.

A Preferred Stock Conversions

February 2021, a holder of Series A Preferred Stock converted 200,000 shares of the Series A Preferred Stock into 200,000 shares of common

Issuances and Exercises

June 2020, the Company issued a three-year volume warrant to purchase up to 1,125,000 shares of common stock to an existing stockholder.

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, the investor exercised the warrant in full, and in January 2021, the Company issued an aggregate of 1,012,500 shares

of common stock, including 675,000 shares of common stock for cash proceeds of approximately $2.0 million and a net total of 337,500

shares of common stock pursuant to a cashless exercise of the remainder of the warrant.

2021, the Company issued warrants to Newbridge Securities Corporation and its affiliations as compensation for their placement agent

services (the “2021 Newbridge Warrants”), which are three-year warrants to purchase an aggregate of up to 89,685 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), including (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.

The 2021 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 2021 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 2021 Newbridge Warrants, and for certain anti-dilution rights.

2021 Newbridge Warrants also provide for certain piggyback registration rights, subject to certain exceptions, including 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 2021 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.

May 2021, a warrant holder acquired an aggregate of 21,250 shares of common stock pursuant to a cashless exercise of 30,000 warrant shares.

The warrant had an exercise price of $3.50 per share.

each of June 2021 and August 2021, Bridge Line Ventures received three-year warrants 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 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.

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, and provide for certain anti-dilution rights.

In addition, the Bridge Line Ventures Warrants contain

certain piggyback registration rights.

October 2021 and November 2021, in private placement transactions with six investors, the Company sold an aggregate of 162,503 shares

of common stock and warrants to purchase up to 162,503 shares of common stock at an exercise price of $12.00 per share, for aggregate

gross proceeds of approximately $1,950,000.

The warrants have a three year term and an exercise price of $12.00 per share (subject to

adjustment, including in the event of certain subsequent equity sales by the Company).

In addition, the warrants provide for cashless

exercise if, after one year, there is no effective registration statement registering the shares of common stock issuable upon exercise

of the warrants, for certain anti-dilution rights and 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, the warrant holders are entitled to include their shares in the registration.

December 2021, in a private placement transaction, the Company sold an aggregate of 41,668 shares of common stock and warrants to purchase

up to 41,668 shares of common stock at an exercise price of $12.00 per share, for aggregate gross proceeds of approximately $500,000.

The warrants have substantially the same terms as those issued in the October and November 2021 offerings, as described above.

sold one three-year subordinated convertible promissory note to an investor in the principal face amount of $50,000.

Subject to other

customary terms, the note matures on January 13, 2024 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.

following is a summary of issuances of unregistered securities during the fourth quarter of 2022, to the extent not previously disclosed

in a Current Report on Form 8-K filed by the Company:

59,000 shares of restricted shares of common stock were granted pursuant to agreements

regarding services provided to the Company.

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 (the “Securities Act”), 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.

February 14, 2022, we completed our initial public offering, in which we sold 1,650,000 shares of our common stock at a price to the

public of $14.00 per share.

The offer and sale of the shares in the offering were registered under the Securities Act pursuant to a Registration

Statement on Form S-1 (File No.

333-261829), which was declared effective by the SEC on February 9, 2022.

We received $23.1 million in

gross proceeds (excluding proceeds from the sale of shares under the over-allotment option, which has not been exercised) and approximately

$20.5 million in net proceeds after deducting underwriting discounts and commissions of $1.8 million and offering expenses

of approximately $700,000.

No payments for such expenses were made directly or indirectly to (i) any of our officers or directors

or their associates, (ii) any persons owning 10% or more of any class of our equity securities or (iii) any of our affiliates.

The Benchmark

Company, LLC acted as the underwriter of our initial public offering.

There has been no material change in the use of proceeds from our

initial public offering as described in the prospectus included as part of our Registration Statement.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

should read the following discussion and analysis of our financial condition and results of operations together with our financial statements

and the related notes appearing elsewhere in this Form 10-K.

This discussion and other parts of this Form 10-K contain forward-looking

statements that involve risks and uncertainties, such as statements regarding our plans, objectives, strategy, expectations, outlook,

intentions and projections.

Our actual results could differ materially from those discussed in these forward-looking statements.

that could cause or contribute to such differences include, but are not limited to, those discussed in the “Risk Factors”

section of this Form 10-K.

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 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, 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.

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 first half of 2022 for the advanced products and the smart universal power-plug, ceiling

fans and lighting products and the second half of 2022 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.

ongoing COVID-19 pandemic has caused significant disruption in the international and United States economies and financial markets.

have been following the recommendations of local health authorities to minimize exposure risk for our employees, including the temporary

closures of our offices and having employees work remotely to the extent possible, which has to an extent adversely affected their efficiency.

In addition, the cancellation of in-person meetings and conferences has had an adverse impact on our business and financial condition

and has hampered our ability to meet with customers to promote products, generate revenue and access usual sources of liquidity on reasonable

terms, which in turn has negatively impacted our financial performance.

As the situation continues to evolve, we will continue to closely

monitor market conditions and respond accordingly.

March 2020, the CARES Act was enacted.

Among other things, the CARES Act established the 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.

We have applied

for and received certain financial assistance under the CARES Act, as described further below.

of Operations

of the Years Ended December 31, 2021 and 2020

the Year Ended

Cost of revenues

Selling, general and administrative expenses

Loss from operations

Other income / (expense)

Interest expense

Other income, loan forgiveness

Gain on exchange

Interest income

Total other expense, net

Net loss including noncontrolling interest

Less net loss attributable to noncontrolling interest

Preferred dividends

Net loss attributed to common shareholders

$ (5,859,870 )

$ (9,372,311 )

Not meaningful

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 2021 and 2020, we opted to sell through our existing

inventory of discontinued products to facilitate our planned transition into our new patented product lines.

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.

General and Administrative Expenses

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

decrease in selling, general, and administrative expenses during 2021 when compared to the prior period was primarily due to a decrease

in stock-based compensation of $3.6 million during 2021.

The decrease in stock-based compensation during 2021 was primarily due to fewer

options and shares of common stock granted during 2021.

Income (Expense)

increase in interest expense in 2021 when compared to the prior period was primarily due to higher weighted-average interest-bearing

obligations during 2021, resulting from the compounding of accrued interest.

decrease in other income loan forgiveness during 2021 when compared to 2020 was primarily due to a non-recurring forgiveness of a PPP

loan during 2020, which did not occur during 2021.

and Capital Resources

of December 31, 2021 and December 31, 2020, we had $10,426,249 and $2,308,871 in cash and cash equivalents, respectively.

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 sources of liquidity and capital will

be sufficient to finance our continued operations for at least the next 12 months.

Our debt previously included a $10,000,000 secured

loan, arranged in April 2016 pursuant to a promissory note between us and NBG, to support our working capital needs.

As of December 31,

2020, we had $5,458,642 outstanding under the note (exclusive of interest).

On December 14, 2021, we entered into a new secured promissory

note with NBG, in the amount of approximately $5.9 million, which amended and replaced the April 2016 promissory note.

The unpaid principal

accrues interest at the Wall Street Journal prime rate plus 1.75% per year.

The amended note will mature sixty months following the date

The Company agreed to make the following payments to NBG:

on the date of issuance, $243,000;

on December 30, 2021, an amount

equal to all accrued and unpaid interest as of such date, plus $100,000;

and on each of July 1, 2022, December 30, 2022, July 1, 2023

and December 30, 2023, an installment payment in an amount equal to all accrued and unpaid interest as of the respective date, plus $200,000.

Commencing January 15, 2024, the Company will begin paying equal monthly installments of $144,176 in principal, plus all accrued and

unpaid interest as of the payment date.

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.

The amended note is secured by the existing pledge and security agreement and by a first priority

security interest in substantially all of the Company’s assets.

addition, we have agreed to pay GE certain minimum royalty payments under the License Agreement.

In December 2020, we agreed to pay a

total of approximately $5.1 million to GE in quarterly installments through December 2023.

As of December 31, 2021, the outstanding balance

of such royalty payments was approximately $3.8 million.

following is a summary of our cash balances and cash flows as of and for the years ended December 31, 2021 and 2020:

Year Ended December 31,

Net Cash Flows

Cash Flows from Operating Activities

$ (4,627,755 )

$ (3,129,293 )

$ (1,498,462 )

Cash Flows from Investing Activities

Cash Flows from Financing Activities

Cash and Cash Equivalents, End of Year

2021, we used $4.6 million in our operating activities, which consisted of our net loss of $5.7 million adjusted for non-cash equity

compensation of $1.5 million and a decrease of accounts payable and other obligations of approximately $600,000.

We also incurred approximately

$179,000 in payments related to our patents pursuant to our investing activities.

There were no changes to our inventory carrying

values at December 31, 2021 when compared to the prior year measurement date.

Our inventory consists primarily of analog components that

we intend to use in the manufacturing of our products upon launch in 2022.

generated $12.9 million in financing activities, of which $13.2 million was generated from the issuance of our shares of common stock

and approximately $178,000 from the issuance of a note payable pursuant to the PPP, offset by principal repayments of a note payable

2020, we used $3.1 million in our operating activities, which consisted of our net loss of $9.2 million adjusted for non-cash equity

compensation of $5.1 million, as well as a decrease in accounts receivable and inventory of approximately $418,000 and $325,000, respectively,

and an increase of accounts payable and other obligations of approximately $376,000.

also incurred approximately $95,000 in payments related to our patents pursuant to our investing activities.

generated $3.7 million in financing activities, of which $2.1 million and $1.3 million were generated from the issuance of our shares

of common stock and convertible notes, respectively, and approximately $280,000 from the issuance of a note payable pursuant to the Paycheck

Protection Program.

Working capital:

Total current assets

Total current liabilities

Working capital

had working capital of $8,751,934 as of December 31, 2021, as compared to $1,018,361 as of December 31, 2020.

Working capital improved

by approximately $7.7 million, which was primarily attributable to an increase in cash proceeds from stock issuances, which was offset,

in part, by an increase in accrued expenses and the current portion of notes payable.

majority of our sales do not require us to take delivery of inventory.

Production of the Sky technology and products will be originated

upon receipt of FOB (free on board) purchase contracts from customers.

Upon the completion of each purchase contract, the finished products

will be transported from the manufacturer directly to the ports and loaded on vessels secured by the customer, upon which the products

become the property of the customer.

Our sales were impacted during the years ended December 31, 2021 and 2020 as we executed the liquidation

of discontinued inventory as we continued the development of our new patented “Smart”

platforms and technologies.

Financial Measures

supplement our consolidated financial statements, which are prepared and presented in accordance with generally accepted accounting principles

in the United States of America (“GAAP”), management uses adjusted net income (loss) to evaluate operating and financial

performance and believes the measure is useful to investors because it eliminates the impact of certain noncash and/or other items that

management does not consider to be indicative of our performance from period to period.

Management also believes this non-GAAP measure

is useful to investors to evaluate and compare our operating and financial performance across periods, as well as facilitating comparisons

to others in our industry, although other companies may calculate this non-GAAP measure differently, which may limit the usefulness of

this measures for comparative purposes.

use the non-GAAP financial measure of Adjusted EBITDA, which is defined as net income (loss), plus interest income;

interest expense;

depreciation and amortization;

unrealized derivative gains and losses;

non-recurring income and expenses;

and stock-based compensation

We believe that Adjusted EBITDA helps identify underlying trends in our business that could otherwise be masked by the effect

of the expenses that we exclude in Adjusted EBITDA.

non-GAAP measures should not be considered in isolation or as a substitute for, or superior to, financial measures calculated in accordance

These non-GAAP financial measures exclude significant expenses and income that are required by GAAP to be recorded in our

financial statements and are subject to inherent limitations.

Investors should review the reconciliations of these non-GAAP financial

measures to the comparable GAAP financial measures that are included below.

Investors should not rely on any single financial measure

to evaluate our business.

following table presents a reconciliation of Adjusted EBITDA to net loss, the most comparable GAAP financial measure, for each of the

periods presented:

Year Ended December 31,

Adjusted EBITDA reconciliation to Net Loss:

$ (5,730,414 )

$ (9,242,105 )

Other Income / (Expense)

Equity-based compensation

Depreciation and amortization

Interest expense

Other income, loan forgiveness

Gain on exchange

Interest income

Total adjustment

Adjusted EBITDA

$ (3,640,763 )

$ (3,811,240 )

Net loss per share –

basic and diluted

Adjusted EBITDA per share - basic and diluted

Balance Sheet Arrangements

do not have any off-balance sheet arrangements.

Impact of COVID-19

negative impact of the COVID-19 pandemic on companies continues and we are currently unable to assess with certainty the broad effects

of COVID-19 on our future business.

As of December 31, 2021, we had no material assets that would be subject to impairment or change

in valuation due to COVID-19.

Accounting Policies

significant accounting policies are disclosed in Note 2 to our consolidated financial statements for the year ended December 31, 2021.

The following is a summary of those accounting policies that involve significant estimates and judgment of management.

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.

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.

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.

Value of Financial Instruments

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 December 31, 2021 and 2020, 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.

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:

1, defined as observable inputs such as quoted prices for identical instruments in active markets;

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;

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.

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.

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.

account for revenues in accordance with Accounting Standards Update No.

2014-09, “Revenue from Contracts with Customers”

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.

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;

of the transaction price to the performance obligations in the contract;

of revenue when, or as, we satisfy a performance obligation.

Accounting Pronouncements

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.

the notes to the consolidated financial statements for the year ended December 31, 2021 included elsewhere in this Form 10-K for additional

discussion regarding recent accounting pronouncements.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

a “smaller reporting company”, we are not required to provide the information required by this Item.

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

financial statements required to be included in this report appear as indexed in the appendix to this report beginning on page F-1.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

Act of 1933, as amended (the “Securities Act”), including Regulation D and Rule 506 promulgated thereunder, as transactions

by the Company not involving a public offering.

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

Purchases of Equity Securities

December 31, 2022, the Company withheld 862 shares of common stock, at a price per share of $2.52, to satisfy tax withholding obligations

due upon the vesting of a restricted stock grant held by Mr.

We did not pay cash to repurchase these shares, nor was this repurchase

part of a publicly announced plan or program.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 5. Market for Registrant’s Common Equity