What changed in this filing

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Item 1. Financial Statements

2023-08-09 compared with 2023-05-12 · 459 added, 258 removed, 235 unchanged (75% of the section changed)

2 unchanged sentences

Balance Sheets

June 30, 2023

December 31, 2022

Current assets:

Cash and cash

Cash and cash equivalents

Restricted cash

Accounts receivable

Investments, available-for-sale

expenses and other assets

current assets

Deferred cost of revenues

Prepaid expenses and other assets

Total current assets

Other assets:

Furniture and equipment,

Furniture and equipment, net

Restricted cash

Restricted investments,

available-for-sale

Right of use assets, net

Intangible assets, definite

and Stockholders’ Equity (Deficit)

Intangible assets, definite life, net

Total other assets

Liabilities and Stockholders’ Equity

Current liabilities:

Accounts payable and accrued

Accounts payable and accrued expenses

Notes payable, current

Operating lease liabilities,

Operating lease liabilities, current

Royalty obligation

Convertible notes, current-related

notes, current

current liabilities

Consideration payable

Deferred revenues

Convertible notes, current

Total current liabilities

Long term liabilities:

2 unchanged sentences

Convertible notes, net

long-term liabilities

Commitments and Contingent

Total long-term liabilities

Total liabilities

Commitments and Contingent Liabilities:

Redeemable preferred stock - subject to redemption:

20,000,000 shares

880,400 shares

issued and outstanding at March 31, 2023 and December 31, 2022, respectively

$ 0 par value;

20,000,000 shares authorized;

none and 880,400 shares issued and outstanding at June 30, 2023 and December 31, 2022, respectively

Stockholders’ Equity:

Common stock and additional

paid-in-capital:

$ 0 par value, 500,000,000 shares authorized;

and 83,189,729 and 82,907,541 shares issued and outstanding at March

31, 2023 and December 31, 2022, respectively

Common stock and additional paid-in-capital:

$ 0 par value, 500,000,000 shares

and 90,660,148 and 82,907,541 shares issued and outstanding at June 30, 2023 and December 31, 2022, respectively

Accumulated deficit

1 unchanged sentence

( 106,070,358 )

other comprehensive loss

stockholders’ equity (deficit)

Non-controlling

equity (deficit)

Liabilities and Stockholders’ Equity (Deficit)

Accumulated other comprehensive loss

Total stockholders’ equity

Non-controlling interest

Total Liabilities and Stockholders’ Equity

accompanying notes are an integral part of the unaudited consolidated financial statements.

1 unchanged sentence

Statements of Operations and Comprehensive Loss

the three months ended March 31,

Cost of revenues

general and administrative expenses

the three months ended

the six months ended

( 10,288,643 )

( 10,290,111 )

general and administrative expenses

from operations

1 unchanged sentence

( 4,563,820 )

Other income / (expense)

Interest expense, net

Other income, loan forgiveness

( 19,490,988 )

( 16,509,930 )

income / (expense)

( 1,218,732 )

( 1,939,353 )

on extinguishment of debt

other income (expense), net

1 unchanged sentence

( 4,645,738 )

Common stock issued pursuant

to antidilutive provisions

( 20,228,484 )

Preferred dividends

( 16,504,101 )

stock issued pursuant to antidilutive provisions

Non-controlling

2 unchanged sentences

$ ( 4,652,382 )

Unrealized gain on debt

Net Comprehensive loss

attributed to common stockholders

( 20,228,484 )

( 21,222,999 )

comprehensive loss:

Comprehensive loss attributed to common stockholders

$ ( 12,263,562 )

$ ( 4,652,382 )

( 20,166,337 )

( 21,222,999 )

loss per share - basic and diluted

Weighted average number of common shares outstanding

during the period – basic and diluted

loss per share - basic

average number of common shares outstanding during the period – basic and diluted

average number of common shares outstanding during the period – basic

accompanying notes are an integral part of the unaudited consolidated financial statements.

1 unchanged sentence

Statements of Stockholders’ Equity (Deficit)

the three months ended

For the three months ended June 30,

For the six months ended June30,

Shares of Common stock

2 unchanged sentences

Common stock issued pursuant to services

Common stock issued pursuant to conversion

of preferred stock

Common stock issued pursuant to exercise of

Common stock issued pursuant to cashless exercise

Common stock issued

pursuant to antidilutive provisions

Balance, end of period

Common stock and paid-in

Common stock issued pursuant to conversion of preferred stock

Common stock issued pursuant to exercise of options and warrants

Common stock issued pursuant to acquisition

Common stock issued pursuant to antidilutive provisions

Common stock issued pursuant to extinguishment of debt

Balance, June 30

Common stock and paid-in capital

Balance, beginning of period

$ 122,573,318

Common stock issued pursuant to offerings

$ 107,595,436

$ 114,039,638

Common stock issued pursuant to stock offering

Common stock issued pursuant to services

Common stock issued pursuant to conversion

of preferred stock

Stock-based compensation

Common stock issued pursuant to exercise of

Common stock issued pursuant to conversion of preferred stock

Common stock issued pursuant to exercise of options and warrants

Debt discount

Common stock issued

pursuant to antidilutive provisions

Balance, end of period

Common stock issued pursuant to acquisition

Common stock issued pursuant to extinguishment of debt

Common stock issued pursuant to antidilutive provisions

Balance, June 30

$ 147,282,469

$ 110,444,367

$ 147,282,469

$ 110,444,367

Accumulated Deficit

4 unchanged sentences

$ ( 74,269,898 )

( 12,268,215 )

( 4,645,738 )

( 20,228,484 )

( 16,504,101 )

Non-controlling interest

Common stock issued pursuant to antidilutive

Common stock issued pursuant to antidilutive provisions

( 4,691,022 )

3 unchanged sentences

( 126,298,842 )

Accumulated other comprehensive

( 95,528,339 )

Accumulated other comprehensive loss

Balance, beginning of period

Unrealized gain on debt

Other comprehensive income

Balance, end of period

Beginning balance

Total stockholders’

Equity (Deficit)

Ending balance

Balance, beginning of period

( 12,268,215 )

( 4,645,738 )

( 20,228,484 )

( 16,504,101 )

Total stockholders’ equity

Balance, ending of period

accompanying notes are an integral part of the unaudited consolidated financial statements.

1 unchanged sentence

Statements of Cash Flows

the three months ended March 31,

Cash flows from operating

For the six months ended June 30,

Cash flows from operating activities:

$ ( 20,228,484 )

$ ( 16,504,101 )

to reconcile net loss to net cash used in operating activities:

Adjustments to reconcile net loss to net cash used in operating activities:

Depreciation and amortization

(Other income), loan forgiveness

Gain on forgiveness of debt

( 1,201,857 )

Amortization of debt discount

Non-cash equity-based compensation

in operating assets and liabilities:

Prepaid expenses and other

Share-based payments

Change in operating assets and liabilities:

( 1,114,063 )

Accounts receivable

Prepaid expenses and other assets

Deferred charges

Deferred revenues

Operating lease liabilities

Accretion operating lease

Accretion operating lease liabilities

Royalty obligation

payable and accrued expenses

cash used in operating activities

Accounts payable and accrued expenses

Net cash used in operating activities

( 6,644,075 )

( 6,203,304 )

Cash flows from investing

Investments, available-for-sale

Purchase of property and

of patent costs

cash used in investing activities

Cash flows from financing

Proceeds from common stock

Placement cost

Cash flows from investing activities:

Purchase of debt securities

Proceeds from disposition of debt securities

Acquisition, net of cash acquired

( 4,206,200 )

Proceeds from exercise of options

Proceeds from issuance

of convertible notes

Purchase of property and equipment

Payment of patent costs and other intangibles

Net cash provided by (used in) investing activities

Cash flows from financing activities:

Proceeds from issuance of common stock- offerings

Placement costs

( 2,556,000 )

Proceeds from exercise of options and warrants

Proceeds from line of credit

Proceeds from issuance of convertible notes

Dividends paid

repayments of notes payable

cash provided by financing activities

Increase in cash, cash equivalents

and restricted cash

Cash, cash equivalents,

and restricted cash at beginning of period

Cash, cash equivalents

and restricted cash at end of period

Supplementary disclosure

of non-cash financing activities:

Principal repayments of notes payable

( 2,147,900 )

Net cash provided by financing activities

Increase in cash, cash equivalents and restricted cash

Cash, cash equivalents, and restricted cash at beginning of period

Cash, cash equivalents and restricted cash at end of period

Supplementary disclosure of non-cash financing activities:

Preferred stock conversion to common

Common stock issued pursuant to antidilutive

Business acquisition:

Assets acquired excluding identifiable intangible assets and goodwill and cash

Liabilities assumed and consideration payable

Identifiable intangible assets and goodwill, net of cash outlay

Fair value of shares issued pursuant to acquisition

Debt discount

Cash paid during the period

Fair value of shares issued pursuant to antidilutive provisions

Fair value of shares issued pursuant to extinguishment of debt

Cash paid during the period for:

accompanying notes are an integral part of the unaudited consolidated financial statements.

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installation of light fixtures and ceiling fans in just seconds.

The plug and play power-plug technology eliminates the need of touching

The plug and play power-plug technology eliminates the need to touch

hazardous electrical wires while installing light fixtures, ceiling fans and other hard wired electrical products.

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of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included.

The consolidated financial statements as of March 31, 2023 and for the three months ended March 31, 2023 and 2022 are unaudited.

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, 2022 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, 2022 for additional disclosures and accounting policies.

The consolidated financial statements as of June 30, 2023 and for the three months ended June 30, 2023 and 2022 are unaudited.

of operations for the interim periods are not necessarily indicative of the results of operations for the respective fiscal years.

consolidated statement of financial condition at December 31, 2022 has been derived from the audited financial statements at that date

but does not include all 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, 2022 for additional disclosures and accounting policies.

Reclassifications

1 unchanged sentence

expenses previously included in cost of revenues and reclassified as sales, general, and administrative expenses in 2022.

of Consolidation

unaudited consolidated financial statements include the results of the Company and one of its subsidiaries, SQL Lighting and Fans LLC

from January 1, 2022 and the results from its remaining subsidiaries, Belami, Inc., BEC, CA 1, Inc., BEC CA 2, LLC, Luna BEC, Inc., and

Confero Group LLC from April 28 to June 30, 2023.

All intercompany balances and transactions have been eliminated in consolidation.

Company accounts for its business acquisitions under the acquisition method of accounting.

This method requires recording of acquired

assets and assumed liabilities at their acquisition date fair values.

The excess of the purchase price over the fair value of the assets

acquired and liabilities assumed is recorded as goodwill.

Results of operations related to the business combination are included prospectively

beginning with the date of acquisition and transaction costs and transaction costs related to business combinations are recorded within

selling, general, and administrative expenses.

Company acquired the outstanding units of Belami, Inc (“Belami”) and its subsidiaries on April 28, 2023.

Belami is an online

retailer and e-commerce provider specializing in home lighting, ceiling fans, and other home furnishings.

The initial allocation of purchase

price is subject to adjustment through April 2024.

The Company is in initial discussion with the sellers to determine certain assets

acquired and assumed liabilities which are the basis of adjustments to retained earnings and working capital.

The initial allocation

of the purchase price is as follows:

OF INITIAL ALLOCATION OF THE PURCHASE PRICE

Assets acquired excluding identifiable intangible assets and goodwill

Customer relationships

E-commerce technology platforms

Assumed liabilities

( 10,462,590 )

Total Assets Acquired

Consideration:

Cash outlay, net of cash acquired

Consideration payable

Shares of common stock issued at initial closing

Total purchase price

Consideration

payable primarily consists of the fair value of cash and shares of the Company’s stock amounting to $ 3.2 million and $ 5.5 million

payable in April 2024 and $ 750,000 cash, held in escrow, payable in July 2024.

The consideration payable is discounted using an effective

goodwill recognized, none of which is deductible for income tax purposes, is attributable to the assembled workforce of Belami and to

expected synergies and other benefits that the Company believes will result from combining its operations with Belami’s.

The intangible

assets recognized are primarily attributable to expected increased margins that the Company believes will result from Belami’s

existing customer relationships and increased margins from the e-commerce technology platforms Belami has developed over the years.

Cash Equivalents, and Restricted Cash

Company considers all highly liquid securities with original maturities of three months or less when acquired to be cash equivalents.

At March 31, 2023 and December 31, 2022, the Company’s cash composition was follows:

At June 30, 2023 and December 31, 2022, the Company’s cash composition was as follows:

OF CASH EQUIVALENTS AND RESTRICTED CASH

December 31, 2022

Cash and cash equivalents

Restricted cash

Total cash, cash

equivalents and restricted cash

Total cash, cash equivalents and restricted cash

Company issued a letter of credit of $ 2.7 million in September 2022 to use as collateral for certain obligations to one of its lessors.

The letter of credit was issued by a financial institution and was secured by debt securities of $ 3.7 million as of March 31, 2023 and

cash of $ 2.7 million as of December 31, 2022.

Additionally, pursuant to the Company’s acquisition of Belami, Inc., the Company

placed $ 1 million in an escrow account.

The letter of credit was issued by a financial institution and was secured by cash of $ 2.7 million as of June 30, 2023 and December 31,

Additionally, pursuant to the Company’s acquisition of Belami, Inc., the Company placed $ 750,000 in an escrow account.

the Company secured a line of credit of $ 2.0 million with cash of the equivalent amount.

Contracts Balances

receivable are recorded in the period when the right to receive payment or other consideration becomes unconditional.

Accounts receivable

are recorded at the invoiced amount and are not interest bearing.

The Company maintains an allowance for doubtful accounts based upon

an estimate of probable credit losses in existing accounts receivable.

The majority of the Company’s accounts receivable are from

third-party payers and are paid within a few days from the order date.

The Company determines the allowance based upon individual accounts

when information indicates the customers may have an inability to meet their financial obligations, historical experience, and currently

available evidence.

As of June 30, 2023, and December 31, 2022, the Company’s allowance for doubtful accounts was $ 37,088 and $ 0 ,

respectively.

The Company determines an allowance for sales returns based upon historical experience.

As of June 30, 2023 and December

31, 2022, the Company’s allowance for sales returns was $ 393,820 and $ 0 , respectively and is recorded as an accrued expenses in

the accompanying consolidated financial statements.

Company defers the revenue related to undelivered customer orders for which it was paid or has a right to be paid at each measurement

Such amounts are recognized as deferred revenues in the accompanying unaudited balance sheet.

As of June 30, 2023, the deferred

revenues amounted to $ 1,662,815 .

There were no deferred revenues as of December 31, 2022.

costs associated with such deferred revenues are recognized as deferred charges in the accompanying unaudited balance sheet.

include the carrying value of related inventory, freight, and sales charges.

The deferred charges amounted to $ 1,296,181 as of June 30,

There were no deferred charges as of December 31, 2022.

are stated at the lower of cost, determined on the first-in, first-out (FIFO) method.

3 unchanged sentences

potentially obsolete items and evaluates the impact of any anticipated changes in future demand.

December 31, 2022

Inventory, component parts

Inventory, finished goods

Total inventory

assets were recorded in connection with the acquisition of Belami.

Intangible assets with finite lives, which consist of customer relationships

and e-commerce technology platforms, are being amortized over their estimated useful lives on a straight-line basis.

Such intangible

assets are tested for recoverability whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.

The Company assesses the recoverability of its intangible assets by determining whether the unamortized balance can be recovered over

the assets’ remaining estimated useful life through undiscounted estimated future cash flows.

If undiscounted estimated future

cash flows indicate that the unamortized amounts will not be recovered, an adjustment will be made to reduce such amounts to fair value

based on estimated future cash flows discounted at a rate commensurate with the risk associated with achieving such cash flows.

future cash flows are based on trends of historical performance and the Company’s estimate of future performance, considering existing

and anticipated competitive and economic conditions.

which was recorded in connection with the acquisition of Belami, is not subject to amortization and is tested for impairment annually,

or more frequently if events or changes in circumstances indicate that the asset may be impaired.

Goodwill represents the excess of the

purchase price of Belami over the fair value of its identifiable net assets acquired.

Goodwill is tested for impairment at the reporting

Fair value is typically based upon estimated future cash flows discounted at a rate commensurate with the risk involved or

market-based comparables.

If the carrying amount of the reporting unit’s net assets exceeds its fair value, then an analysis will

be performed to compare the implied fair value of goodwill with the carrying amount of goodwill.

An impairment loss will be recognized

in an amount equal to the excess of the carrying amount over its implied fair value.

After an impairment loss is recognized, the adjusted

carrying amount of goodwill is its new accounting basis.

Accounting guidance on the testing of goodwill for impairment allows entities

testing goodwill for impairment the option of performing a qualitative assessment to determine the likelihood of goodwill impairment

and whether it is necessary to perform such two-step impairment test.

initial carrying value of goodwill associated with the Belami acquisition may vary during the first year of initial purchase (through

April 2024) if the carrying value of the assets acquired or assumed liabilities or the fair value of the shares issuable in April 2024

varies from the initial allocation of asset performed this quarter.

Company currently generates revenues substantially from home lighting and ceiling fans through its family of internet sites and marketplaces.

A substantial portion of the Company’s customers’ orders are made and paid contemporaneously by credit card and shipped through

third-party delivery providers.

The Company recognizes revenues once it concludes that the control of the product is transferred to the

customer, which is upon delivery.

Company records reductions to revenue for estimated customer sales returns and replacements, net of sales tax.

The Company receives rebate

and cooperative allowances based on a percentage of periodic purchases from certain vendors.

These vendor considerations are reflected

as a reduction of costs of revenues.

The vendor considerations, the rights of returns and replacements are based upon estimates that

are determined by historical experience, contractual terms, and current market conditions.

The primary factors affecting the Company’s

accrual for estimated customer rights of returns include estimated customer return rates as well as the number of units shipped that

have a right of return that have not expired as of the measurement date.

net earnings (loss) per share is computed by dividing net income (loss) for the period by the weighted average number of common stock

4 unchanged sentences

option, and warrant contracts.

For the three months ended March 31, 2023 and 2022, the Company recognized net loss and a dilutive net

For the three months ended June 30, 2023 and 2022, 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.

1 unchanged sentence

of diluted earnings (loss) per share is not presented for the periods presented.

Company had the following anti-dilutive common stock equivalents at March 31, 2023 and 2022:

Company had the following anti-dilutive common stock equivalents at June 30, 2023 and 2022:

OF EARNING (LOSS) PER SHARE

June 30, 2023

June 30, 2022

Stock warrants

5 unchanged sentences

on its consolidated financial statements.

3 DEBT SECURITIES

components of investments as of March 31, 2023 were as follows:

OF COMPONENTS OF INVESTMENTS

Corporate debt securities

State and local government debt securities

in Accounting Principles

Historically,

the Company recognized its revenues of products shipped by third-party providers upon shipment.

During the second quarter of 2023, the

Company believes that it is preferable to recognize the revenues of products shipped by such third-party providers upon delivery.

revenue recognition method is consistent with the method used by Belami.

The change in accounting principle does not significantly impact

on the revenues historically recorded by the Company.

3 FURNITURE AND EQUIPMENT

1 unchanged sentence

OF FURNITURE AND EQUIPMENT

June 30, 2023

December 31, 2022

Machinery and equipment

4 unchanged sentences

accumulated depreciation

expense amounted to $ 22,141 and $ 9,505 for the three months ended March 31, 2023 and 2022, respectively.

expense amounted to $ 64,494 and $ 9,505 for the six months ended June 30, 2023 and 2022, respectively.

4 INTANGIBLE ASSETS

assets consisted of the following:

Company’s definite-lived intangible assets were as follows:

OF INTANGIBLE ASSETS

Finite lived intangible assets, gross

June 30, 2023

December 31, 2022

Carrying Value

Accumulated Amortization

expense on intangible assets was $ 14,307 and $ 12,395 for the three months ended March 31, 2023 and 2022, respectively.

following table sets forth the estimated amortization expense for future periods:

OF INTANGIBLE ASSETS AMORTIZATION EXPENSE FOR FUTURE

Remainder of 2023

Net carrying value

Carrying Value

Accumulated Amortization

Net carrying value

Customer relationships

$ ( 107,143 )

E-commerce technology platforms

Patents and other

$ ( 490,570 )

$ ( 207,020 )

amortization expense of intangible assets was $ 283,550 and $ 12,395 for the six months ended June 30, 2023, and 2022, respectively.

following table sets forth the estimated amortization expense for the following five years:

OF INTANGIBLE ASSETS AMORTIZATION EXPENSE

Twelve months ended June 30,2024

following table presents the details of the principal outstanding:

OF DEBT TABLE

March 31, 2023

Substantially

all Company assets

2023-March 2026

Substantially

all Company assets

Impact Disaster loan

Substantially

all Company assets

debt discount

June 30, 2023

December 31, 2022

June 30, 2023 %

Notes payable

September 2026

Substantially all company assets

Line of credit (a)

Convertible Notes (b)

September 2023-March 2026

Substantially all company assets

PPP Loans (c)

Economic Impact Disaster loan

November 2022

Substantially all company assets

Unamortized debt discount

$ ( 5,148,220 )

net of Unamortized debt Discount

Debt, net of Unamortized debt Discount

OF INTEREST EXPENSE

the three-month period ended March 31,

Interest expense associated

of March 31, 2023, the expected future principal payments for the Company’s debt are due as follows:

For the six-month period ended June 30,

Interest expense associated with debt

of June 30, 2023, the expected future principal payments for the Company’s debt are due as follows:

OF FUTURE PRINCIPAL PAYMENTS

1 unchanged sentence

2028 and thereafter

unpaid principal bears annual interest at the Wall Street Journal prime rate plus 1.75 % per year.

unpaid principal bears annual interest at the Wall Street Journal prime rate.

in Convertible Notes are loans provided to the Company from two directors, an officer and two investors.

8 unchanged sentences

convertible notes are convertible at a price ranging between $ 3 and $ 15 per share.

the three-month period ended March 31, 2023, the Company issued convertible promissory notes for $ 10.4 million.

As an inducement

to enter into the transactions, the Company issued 1,391,667 warrants to the note holders at an initial exercise price of $ 3 per

The Company recorded a debt discount aggregating $ 5.6 million which was recognized as debt discount and

additional paid-in capital in the accompanying balance sheet.

The Company recognized $ 143,257 as amortized debt discount during the

three-month ended March 31, 2023 and it is reflected as interest expense in the accompanying unaudited consolidated statement of

Small Business Administration forgave approximately $ 178,000 of PPP loans during the three-month period ended March 31, 2022, which

the six-month period ended June 30, 2023, the Company issued convertible promissory notes for $ 10.4 million.

As an inducement to

enter the financing transactions, the Company issued 1,391,667 warrants to the note holders at an initial exercise price of $ 3 per

The Company recorded a debt discount aggregating $ 5.6 million which was recognized as debt discount and additional paid-in

capital in the accompanying balance sheet.

The Company recognized $ 278,499 as amortized debt discount during the three-month ended

June 30, 2023, and it is reflected as interest expense in the accompanying unaudited consolidated statement of operations.

Small Business Administration forgave approximately $ 178,000 of PPP loans during the six-month period ended June 30, 2022, which

was recognized as other income.

6 OPERATING LEASE LIABILITIES

April 2022, the Company entered into a 58-month lease related to certain office and showroom space pursuant to a sublease that expires

in February 2027.

April 2022, the Company entered a 58-month lease related to certain office and showroom space pursuant to a sublease that expires in

February 2027.

The Company recognized a right-of-use asset and a liability of $ 1,428,764 pursuant to this lease.

September 2022, the Company entered into a 124-month lease related to its future headquarters offices and showrooms space.

recognized a right-of-use asset and a liability of $ 22,192,503 pursuant to such lease.

In connection with the execution of lease, the

Company was required to provide the landlord with a letter of credit in the amount of $ 2.7 million, which is secured by $ 3.7 million

of debt securities.

September 2022, the Company entered a 124-month lease related to its future headquarters offices and showrooms space.

The Company recognized

a right-of-use asset and a liability of $ 22.2 million pursuant to such lease.

In connection with the execution of lease, the Company was

required to provide the landlord with a letter of credit in the amount of $ 2.7 million, which is secured with cash.

following table outlines the total lease cost for the Company’s operating leases as well as weighted average information for these

leases as of March 31, 2023:

leases as of June 30, 2023:

OF LEASE COST OPERATING LEASE

June 30, 2023

Cash paid for operating lease liabilities

Right-of-use assets obtained in exchange for

new operating lease obligations

Right-of-use assets obtained in exchange for new operating lease obligations

Fixed rent payment

Lease – Depreciation expense

June 30, 2023

Other information:

3 unchanged sentences

Minimum Lease obligation

Remainder of 2023

2028 and thereafter

8 GE ROYALTY OBLIGATIONS

7 ROYALTY OBLIGATIONS

Company has a license agreement with General Electric (“GE”) which provides, among other things, for rights to market certain

10 unchanged sentences

OF ROYALTY OBLIGATIONS

in Contract Year

of Contract Year Net Sales owed to GE

Net Sales in Contract Year

Percentage of Contract Year Net Sales owed to GE

$ 0 to $ 50,000,000

1 unchanged sentence

$ 100,000,000 +

of March 31, 2023 and December 31, 2022, the outstanding balance of the aggregate Minimum Payment was $ 2,638,000 and it is payable by December 31, 2023.

9 ACCRUED EXPENSES

of June 30, 2023 and December 31, 2022, the outstanding balance of the aggregate Minimum Payment was $ 2,638,000 and it is payable by

December 31, 2023.

8 ACCOUNTS PAYABLE AND ACCRUED EXPENSES

expenses consisted of the following:

OF ACCRUED EXPENSES

OF ACCOUNTS PAYABLE AND ACCRUED EXPENSES

June 30, 2023

December 31, 2022

Accrued interest, convertible notes

4 unchanged sentences

notes due to related parties represent amounts provided to the Company from two directors and the Chief Executive Officer of the Company.

The outstanding principal on the convertible promissory notes, associated with related parties was $ 950,000 as of March 31, 2023 and

December 31, 2022 and accrued interest of $ 219,972 and $ 104,375 , respectively.

The outstanding principal on the convertible promissory notes, associated with related parties was $ 950,000 as of June 30, 2023 and December

31, 2022 and accrued interest of $ 219,972 and $ 104,375 , respectively.

Public Offering

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 three-month period ended March 31, 2022.

proceeds of $ 6,374,942 during the six-month period ended June 30, 2022.

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 three-month period ended March 31, 2022.

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.

11 STOCKHOLDERS’ EQUITY (DEFICIT)

Company issued the following common stock during the three months ended March 31, 2023 and 2022:

10 STOCKHOLDERS’ EQUITY

Company issued the following common stock during the six months ended June 30, 2023 and 2022:

OF COMMON STOCK

Transaction Type

Shares Issued

Range of Value

2023 Equity Transactions

Common stock issued, pursuant to

services provided

Common stock issued, pursuant to services provided

$ 2.67 - 3.49

Common stock issued pursuant to stock at the market offering, gross

Common stock issued pursuant to conversion of preferred stock

Common stock issued pursuant to acquisition

Common stock issued pursuant to extinguishment of debt

Transaction Type

Shares Issued

Range of Value

2022 Equity Transactions

Common stock issued per exercise

of options and warrants

Common stock issued per exercise of warrants,

Common stock issued per exercise of options

$ 0.10 – 14.0

Common stock issued per exercise of warrants, cashless

Common stock issued, pursuant to services provided

Conversion of preferred stock

Issuance of common stock pursuant to offering,

Issuance of common stock,

pursuant to anti-dilutive provisions

Company issued 335,073 shares of its common stock to certain stockholders during the three-month period ended March 31, 2022.

Issuance of common stock pursuant to offering, net

Issuance of common stock, pursuant to anti-dilutive provisions

Company issued 335,073 shares of its common stock to certain stockholders during the six-month period ended June 30, 2022.

of such shares was triggered based on the Company’s effective price of its initial public offering.

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at the date of issuance.

following is a summary of the Company’s Preferred Stock activity during the three months ended March 31, 2023 and 2022 respectively:

OF PREFERRED STOCK ACTIVITY

Stock Balance at January 1, 2023

Preferred Stock redemptions

Stock Balance at March 31, 2023

Stock Balance at January 1, 2022

Preferred Stock redemptions

( 9,976,536 )

Company satisfied its obligations under a note payable, initially maturing in September 2026, amounting to $ 6.2 million during April 2023.

The Company paid $ 2 million and issued

574,713 shares of its common stock to satisfy such obligations, which generated a gain on extinguishment of debt of $ 1,201,857 .

Series A Preferred Stock was convertible at the holder’s option.

The Company could repurchase shares of the Preferred Stock 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, and therefore the stock is classified as Mezzanine equity rather than permanent equity.

The Company paid dividends in the amount

of $ 27,876 to the Preferred Stock shareholders during the six-month period ended June 30, 2022.

of preferred stock converted 880,400 shares and 9,976,536 shares of preferred stock in the shares of common stock during the six-month

ended June 30, 2023 and 2022, respectively.

There were no shares of Series A Preferred Stock outstanding at June 30, 2023 and the Company

terminated its designation of the Series A Preferred Stock.

The Company has not designated any other preferred stock as of June 30, 2023.

summary of the Company’s non-vested restricted stock units during the six-month ended June 30, 2023 and 2022 are as follows :

SCHEDULE OF NON-VESTED RESTRICTED STOCK

Weighted Average Grant Due Fair Value

Non-vested restricted stock units, January 1, 2023

( 1,689,901 )

Stock Balance at March 31, 2022

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 USD $ 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, and therefore the stock is classified as Mezzanine equity rather

than permanent equity.

The Company paid dividends in the amount of $ 21,232 to the Preferred Stock shareholders during the three-month

period ended March 31, 2022.

following is a summary of the Company’s stock option activity during the three month periods ended March 31, 2023 and 2022:

OF STOCK OPTION ACTIVITY

January 1, 2023

Awards Canceled

Outstanding, March

Exercisable, March

January 1, 2022

Outstanding, March

Non-Vested restricted stock units, June 30, 2023

Non-vested restricted stock units, January 1, 2022

Non-vested restricted stock units on June 30, 2022

RSU and RSA gives the right to one share of the Company’s common stock.

RSU and RSAs that vest based on service and performance

are measured based on the fair values of the underlying stock on the date of grant.

The Company used a Lattice model to determine the

fair value of the RSU with a market condition.

Compensation with respect to RSU and RSA awards is expensed on a straight-line basis over

the vesting period.

following is a summary of the Company’s stock option activity during the six-month periods ended June 30, 2023 and 2022:

SCHEDULE OF STOCK OPTION ACTIVITY

Exercise Price

Outstanding, January 1, 2023

Awards Granted in Period

( 1,693,750 )

Exercisable, March

Awards expired

Outstanding, June 30, 2023

Exercisable, June 30, 2023

Exercise Price

Outstanding, January 1, 2022

( 1,693,750 )

following is a summary of the Company’s warrant activity during the three month periods ended March 31, 2023 and 2022:

Outstanding, June 30, 2022

Exercisable, June 30, 2022

following is a summary of the Company’s warrant activity during the three-month periods ended June 30, 2023 and 2022:

OF WARRANT ACTIVITY

January 1, 2023

Balance, March 31,

January 1, 2022

Balance, March 31,

Weighted Average

Exercise Price

Balance, January 1, 2023

Balance, June 30, 2023

Weighted Average

Exercise Price

Balance, January 1, 2022

Balance, June 30, 2022

Fair Value of Warrants and Options

Company issued options in connection for services during the three-month period ended March 31, 2022 and none during the three-month

period ended March 31, 2023.

The Company issued warrants in connection with certain convertible promissory notes during the three-month

period ended March 31, 2023, which are considered inducements to enter into debt transactions and are recognized as debt discount at

The following table summarizes the range of the Black Scholes pricing model assumptions used by the Company to value certain

warrants issued during the three-month period ended March 31, 2023 and options granted the three-month period ended March 31, 2022:

Company issued options in connection for services during the six-month period ended June 30, 2023 and June 30, 2022.

The Company issued

warrants in connection with certain convertible promissory notes during the six-month period ended June 30, 2023, which are considered

inducements to enter in debt transactions and are recognized as debt discount at fair value.

The following table summarizes the range

of the Black Scholes pricing model assumptions used by the Company to value certain warrants issued during the six-month period ended

June 30, 2023 and options granted during the six-month period ended June 30, 2023 and 2022:

OF OPTIONS GRANTED UNDER BLACK SCHOLES PRICING MODEL ASSUMPTIONS

March 31, 2023

March 31, 2022

$ 3.74 - 3.84

Exercise price

Expected life (in years)

Risk-fee interest rate

Dividend yield

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.

future option expense was $ 10.1 million (excluding certain market-based options which management cannot ascertain to have a probable

outcome amounting to $ 61 million) at March 31, 2023 and it is expected to be recognized over a weighted-average period of 1.6 years.

life (in years)

interest rate

Company cannot use its historical volatility as expected volatility because there is not enough liquidity in the 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.

future option expense was $ 39.1 million at June 30, 2023 and it is expected to be recognized over a weighted-average period of 3.6 years.

payments amounted to $ 10,638,534 and $ 11,194,200 during the six-month periods ended June 30, 2023 and 2022, respectively.

11 CONCENTRATIONS OF RISKS

Company had no 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.

Company had two major vendors that accounted for 100 % of cost of purchases for the three months ended March 31, 2023 and 2022.

expects to maintain its relationship with the vendors.

Company had no customers whose revenue individually represented 10% or more of the Company’s total revenue.

The Company had one

third-party payor accounts receivable balance representing 24 % of the Company’s total accounts receivable at June 30, 2023.

Company’s cash and cash equivalents are held primarily with two financial institutions.

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and Geographic Markets

Company generates its income primarily from its proprietary-based technology and related products sold in the United States.

Company generates its income primarily from its lighting and heating products sold primarily in the United States.

12 PROFORMA FINANCIAL STATEMENTS (unaudited)

following pro forma consolidated results of operations have been prepared as if the acquisition occurred on January 1, 2022:

OF PROFORMA CONSOLIDATED RESULTS OF OPERATION

Three-month period ended

Six-month period ended

$ ( 10,362,183 )

$ ( 4,984,413 )

$ ( 18,802,429 )

$ ( 16,852,888 )

Basic and diluted loss per share

Weighted average number of shares outstanding- basic and diluted

pro forma amounts have been calculated after applying the Company’s accounting policies and adjusting the results to reflect, among

other things, 1) additional amortization that would have been charged assuming the fair value adjustments to amortizable intangible assets

had been applied, 2) the shares issued and issuable by the Company to acquire Belami, 3) fair value of the initial grant and options

to Belami employees, and 4) the increase in interest expense related to the issuance of convertible notes payable, including amortization

of debt discount.

Furthermore, it excludes transaction costs related to the Belami acquisition.

These pro forma results of operations

have been prepared for comparative purposes only, and they do not purport to be indicative of the results of operations that would have

resulted had the acquisition occurred on the date indicated or that may result in the future.

13 SUBSEQUENT EVENTS

has evaluated subsequent events through May 9, 2023, 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 with the exception

of the following:

Company completed its acquisition of Belami, Inc.

and subsidiaries in April 2023.

The Company paid $ 7.0 million in cash (which excluded,

among other things, $ 1.0 million released to the sellers from escrow) and 1,923,285 shares of its common stock.

Prior to the closing,

issued promissory notes in an aggregate amount of $ 1.5 million which are guaranteed by the Company.

In April 2024, as deferred

consideration, the Company will pay $ 3.2 million and issue approximately 1,879,816 shares, assuming the minimum price per share of $ 3.00 .

Company satisfied its obligations under a note payable amounting to $ 6.2 million as of March 31, 2023.

The Company paid $ 2 million and

issued 574,713 shares of its common stock to satisfy such obligations in April 2023.

May 2023, the Company entered into a $ 2 million secured revolving line of credit with First-Citizens Bank & Trust Company, which

bears interest at a variable rate equal to The Wall Street Journal Prime Rate plus 0.250%, subject to a floor of 5.0% and ceiling of

the lesser of 18.0% or the maximum rate allowed under applicable law, payable monthly, and matures in May 2024.

The line of credit is

subject to customary default and acceleration provisions .

has evaluated subsequent events through August 9, 2023, which is the date the consolidated financial statements were available to be

There were no subsequent events that required adjustment to or disclosure in the consolidated financial statements.

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-Q

Item 1. Financial Statements