What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2023-08-09 compared with 2023-05-12 · 169 added, 131 removed, 125 unchanged (71% of the section changed)

13 unchanged sentences

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.

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

manufacturing during 2023 for the advanced products and the smart universal power-plug, ceiling fans and lighting products and for the

Smart Sky Platform.

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.

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.

We are continuing to refine our products and began manufacturing certain advanced and

smart products during the first half of 2023.

We expect to manufacture the additional product offerings in the second half of 2023.

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.

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.

believe our total addressable market in the United States exceeds $500 billion, based on the Company’s internal calculations derived

4 unchanged sentences

may prove to be incorrect.

The projected demand for our products could materially differ from actual demand.

The projected demand for our products could differ materially from actual demand.

Even if the total addressable

7 unchanged sentences

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).

In addition, we may

be negatively impacted as a result of supply chain constraints, consequences associated with government regulations, ongoing and potential

geopolitical conflicts, instability in the global banking system, employee availability and wage increases.

April 2023, we completed the previously-announced acquisition of all of the issued and outstanding shares of Belami, a strategic

e-commerce lighting and home décor conglomerate.

The Company paid cash and issued an aggregate of 1,923,285 shares of common stock

as consideration for the acquisition.

The Company expects that Belami will serve as a marketing and growth platform and should provide

several distribution channels, including to retail customers, builders and professionals.

to date, we may experience some effect in the near future (especially if inflation rates continue to rise).

In addition, we may be negatively

impacted because of supply chain constraints, consequences associated with government regulations, ongoing and potential geopolitical

conflicts, instability in the global banking system, employee availability and wage increases.

April 2023, we completed the previously announced acquisition of all the issued and outstanding shares of Belami, a strategic e-commerce

lighting and home décor conglomerate.

The Company paid cash and issued an aggregate of 1,923,285 shares of common stock as consideration

for the acquisition.

The Company expects that Belami will serve as a marketing and growth platform and should provide several distribution

channels, including to retail customers, builders, and professionals.

connection with the acquisition, the Company engaged in private placements of its securities during the first quarter of 2023, pursuant

2 unchanged sentences

The proceeds were used

to fund the cash component of the Belami acquisition and to pay certain transaction expenses in connection with the acquisition

and the private placements.

to fund the cash component of the Belami acquisition and to pay certain transaction expenses in connection with the acquisition and the

private placements.

addition, in March 2023, the Company acquired 50% of the equity of a strategic e-commerce private label lighting website, for $225,000,

8 unchanged sentences

of the Company’s common stock and paying $2 million.

The Company also entered into a $2 million secured revolving line of credit

with First-Citizens Bank & Trust Company, which matures May 1, 2024.

The Company also entered a $2,0 million secured revolving line of credit with

First-Citizens Bank & Trust Company, which matures May 1, 2024.

the second quarter of 2023, we began our at the market offering (“ATM”) pursuant to which we may sell up to $20 million of

shares of our common stock.

of Operations

of the Three Months Ended March 31, 2023 and 2022

For the Three Months Ended

Change Between the Months Ended

of the Three Months Ended June 30, 2023 and 2022

Consolidated Operating Results

For the Three Months Ended June 30,

For the Nine Months Ended June 30,

Cost of revenues

Selling, general and administrative expenses

Selling, general and administrative

Operating loss

(12,251,340 )

Loss from operations

(19,490,988 )

(16,509,930 )

Other income (expense)

Interest expense

Other income, loan forgiveness

Total other income (expense), net

Interest expense, net

Gain on extinguishment of debt

Total other income (expense)

$ (12,268,215 )

$ (4,645,737 )

$ (20,228,484 )

$ (16,504,101 )

Not meaningful

revenues are at comparable levels during the three-month period ended March 31, 2023 and 2022.

are 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 the first quarter of 2023, we continued to sell through our existing

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

increase in revenues during the three and six-month periods ended June 30, 2023 when compared to the prior year periods, is primarily

due to revenues from products marketed by Belami which was acquired on April 28, 2023.

believe that revenues will be higher in 2023 than in 2022, since we launched the marketing of our advanced and smart products in late

2022 and expect to begin commercial sales in 2023.

We also expect our revenues to increase following the closing of the Belami acquisition.

cost of revenues consists primarily of inspection fees related to certain certifications.

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.

cost of revenues consists primarily of costs associated with selling the products marketed by Belami.

The increase in cost of

revenues during the three and six-month periods ended June 30, 2023 when compared to the prior year periods, is primarily due to

costs associated with revenues from products marketed by Belami which was acquired on April 28, 2023.

believe that cost of revenues will increase in 2023 compared to 2022, commensurate with an anticipated increase in revenues.

1 unchanged sentence

general and administrative expenses consist primarily of an allocation of product development, sales and marketing, 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 the three months ended March 31, 2023 when compared to the prior year

resources, including salaries, wages, and benefits, and depreciation and amortization, including share-based payments.

increase in selling, general, and administrative expenses during the three months ended June 30, 2023 when compared to the prior year

period was primarily due to the following:

of $5.8 million related to share-based payments which is primarily due to a greater number of shares of common stock issued and options

granted for services during the three-month ended March 31, 2022 at a higher price per share when compared to the first quarter of

by increased expenses related to product development of $527,000 incurred during the first quarter of 2023;

by an increase in other spending related to the support of planned scope of operations and

the acquisition of Belami, Inc.

of share-based payments of $5.2 million.

The increase is primarily related to grants of share-based payments to new employees following

the Acquisition of Belami in May 2023;

in sales and marketing and general and administrative expenses following the acquisition of Belami aggregating $2.8 million and $2.2

million, respectively;

of depreciation and amortization expenses of $500,000 primarily related to increase in intangibles and right-of-use assets acquired after

June 30, 2022.

increase in selling, general, and administrative expense during the six-months ended June 30, 2023 is primarily due to the absorption

of the operating expenses of Belami amounting to $5 million, increased depreciation of amortization expense of $1 million, transaction

costs associated with the Belami acquisition of $520,000 which were not incurred during the comparable prior year period.

believe that our selling, general, and administrative expenses will be higher during 2023 when compared to 2022 as we continue to invest

to support our anticipated growth and following the closing of the Belami acquisition.

to support our anticipated growth and now includes such expenses related to Belami’s operations following

its acquisition.

Income (Expense)

increase in interest expense in the three months ended March 31, 2023 when compared to the prior year period resulted primarily from

interest charges related to operating lease liabilities which were entered into the latter part of 2022, and, to a lesser extent, amortization

of debt discount resulting from inducements granted to holders of convertible promissory notes

issued in the first quarter of 2023.

decrease in other income loan forgiveness during the three months ended March 31, 2023 when compared to the prior year period was the

forgiveness of a PPP loan during the three months ended March 31, 2022, which did not occur during the same period in 2023.

increase in interest expense in the three and six-month period ended June 30, 2023 when compared to the prior year period resulted primarily

from interest charges related to operating lease liabilities debt which were entered into the latter part of 2022 and convertible debt

(including amortization of debt discount, which were entered into the first quarter of 2023.

The debt discount is related to inducements

the Company granted to holders of convertible debt.

variations in gain on extinguishment debt is due to two separate transactions:

the forgiveness of the PPP loan recognized

in the six-month period ended June 30, 2022 and a gain on forgiveness of debt in April 2023 as

the debt forgiven to a lender exceeded the consideration we paid.

and Capital Resources

we develop our revenue base, we have raised additional funds through the sale of our common stock and securities convertible into

our common stock and issuance of debt, including completing our initial public offering in February 2022 for gross proceeds of $23.1

million and the private placements in February and March 2023 for gross proceeds of $10.35 million, pursuant to which we issued

convertible notes and warrants.

We believe that our existing cash and debt securities 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 Belami acquisition and integration of operations, our revenue growth rate, expenditures related to our headcount

growth and manufacturing, 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 market adoption of our platforms.

We may continue to enter in

arrangements to acquire or invest in complementary businesses, products, and technologies.

We may, because of those arrangements, or the general expansion of our business, be required to seek additional equity or debt

If we require additional financing, we may not be able to raise such financing on terms acceptable to us or at all.

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

April and May 2023, the Company repaid in full approximately $6.2 million in principal and interest due under the Company’s five-year

secured promissory note, dated December 14, 2021, previously issued to Nielsen & Bainbridge, LLC, by issuing 574,713 shares of the

Company’s common stock and paying $2.0 million in cash.

The Company also entered into a $2.0 million secured revolving line of

credit with First-Citizens Bank & Trust Company.

The line of credit 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 May 1, 2024.

period ended March 31, 2023:

had $23.1 million in cash, cash equivalents, restricted cash and marketable debt securities as of March 31, 2023.

have raised additional funds through the sale of our common stock and securities convertible into our common stock and issuance of debt,

including completing our initial public offering in February 2022 for gross proceeds of $23.1 million and placements and offerings during

the six-month period ended June 30, 2023 in a combination of convertible notes payable and shares of our common stock aggregating $18

offerings included shares sold pursuant to our ATM offering program which provides us with additional access to capital, as needed,

subject to market conditions.

During the three months ended June 30, 2023, and from inception, we issued 2,984,208 shares of common

stock under such program for net proceeds of $7.4 million, net of brokerage fees and legal expenses of approximately $380,000.

August 9, 2023, we had the remaining capacity to issue shares of common stock up to $12.0 million under the offering

believe that our existing cash, cash equivalents and restricted 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 the Belami acquisition

and integration of operations, our revenue growth rate, expenditures related to our headcount growth and manufacturing, 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 market adoption of our platforms.

We may continue to enter into arrangements to acquire or invest in complementary

businesses, products, and technologies.

We may, because of those arrangements, or the general expansion of our business, be required

to seek additional equity or debt financing.

If 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.

April and May 2023, the Company repaid in full approximately $6.2 million due to a lender by issuing 574,713 shares of the Company’s

common stock and paying $2.0 million in cash.

The Company also obtained $2.0 million secured revolving line of credit with First-Citizens

Bank & Trust Company.

The line of credit 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 May 1, 2024.

period ended June 30, 2023:

had $23.7 million in cash, cash equivalents, and restricted cash as of June 30, 2023.

Our working capital amounts to $1.9 million as

of June 30, 2023, adjusted for consideration payable in shares of the Company’s common stock valued at $5.6 million.

used $ 6.6 million in our operating activities which consists of a net loss of $21.2 million adjusted for the following:

compensation of $10.7 million.

and amortization of $500,000.

generated $10.3 million in financing activities which were primarily related to proceeds we generated from the issuance of convertible

promissory notes.

period ended March 31, 2022:

had $27.6 million in cash and cash equivalents as of March 31, 2022.

used $3.4 in our operating activities which consists of a net loss of $12 million adjusted for the following:

and amortization of $1.0 million;

by a gain on extinguishment of debt of $1.2 million;

Additionally,

accounts payable and accrued expenses increased by $2.7 million.

generated cash from investing activities of $3.2 million which primarily consisted of proceeds from disposition

of investments in debt securities of $7.6 million offset by the cash acquisition price of Belami, net of cash acquired of $4.2

generated cash from financing activities of $17.6 million which were primarily related to proceeds we

generated from the issuance of convertible promissory notes and shares of common stock, and to a lesser extent, proceeds from a line

of credit of $2.0 million, offset by principal repayments of notes payable of $2.1 million.

period ended June 30, 2022:

had $24.7 million in cash, cash equivalents, and restricted cash as of June 30, 2022.

used $6.2 million in our operating activities which consists of a net loss of $17.0 million adjusted for the following:

compensation of $11 million.

generated $20.7 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.

generated cash from financing activities of $21.0 million which were primarily related to proceeds generated from the issuance of shares of common stock pursuant to our initial public offering.

Financial Measures

considers selling, general, and administrative expenses, adjusted for non-cash stock compensation depreciation and amortization and transaction

costs, an important indicator in consistently evaluating our business operations and the use of cash in our operating activities.

use such measure to analyze and evaluate our liquidity and capital resources and intend to continue using such measure until we generate

Such a measure eliminates significant items that do not involve cash outlay or non-recurring transactions.

This measure should

be considered in addition to, rather than as a substitute, for selling, general and administrative expenses.

This non-GAAP financial

measure excludes significant expenses that are required by GAAP to be recorded in our financial statements and is subject to inherent

Investors should review the reconciliation of this non-GAAP financial measure to the comparable GAAP financial measure included

Investors should not rely on any single financial measure to evaluate our business.

For the three-month period ended March 31,

Sales, general, and administrative expenses, as reported

Depreciation and amortization

considers earnings (loss) before interest, taxes, depreciation and amortization, or EBITDA, as adjusted, an important indicator in evaluating

our business on a consistent basis across various periods.

Due to the significance of non-recurring items, EBITDA, as adjusted, enables

our management to monitor and evaluate our business on a consistent basis.

We use EBITDA, as adjusted, as a primary measure, among others,

to analyze and evaluate financial and strategic planning decisions regarding future operating investments and potential acquisitions.

We believe that EBITDA, as adjusted, eliminates items that are not part of our core operations, such as interest expense and amortization

expense associated with intangible assets, or items that do not involve a cash outlay, such as share-based payments and non-recurring

items, such as transaction costs.

EBITDA, as adjusted, should be considered in addition to, rather than as a substitute for, pre-tax

income (loss), net income (loss) and cash flows used in operating activities.

This non-GAAP financial measure 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-months ended

For the six-months ended

$ (12,263,562 )

$ (4,645,737 )

$ 20,228,484 )

$ (16,504,101 )

Share-based payments

Interest expense

Depreciation, amortization

Transaction costs

Non-cash share-based payments

Sales, general, and administrative expenses, as adjusted

EBITDA, as adjusted

$ (2,712,639 )

$ (2,115,614 )

$ (6,102,264 )

$ (5,090,492 )

Accounting Policies

17 unchanged sentences

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 March 31, 2023 and December 31, 2022, we believe the amounts reported for

cash, prepaid expenses, accounts payable and accrued expenses and other current liabilities, accrued interest, notes payable and convertible

about fair value of financial instruments require disclosure of the fair value information, whether recognized in the balance sheet,

where it is practicable to estimate that value.

As of June 30, 2023 and December 31, 2022, we believe the amounts reported for cash,

prepaid expenses, accounts payable and accrued expenses and other current liabilities, accrued interest, notes payable and convertible

note payable approximate fair value because of their short maturities.

37 unchanged sentences

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.

there are 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.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

1 unchanged sentence

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 2. Management’s Discussion and Analysis