What changed in this filing

/stocks — the workspaceLOADING

Item 7. Management’s Discussion and Analysis

2024-04-01 compared with 2023-03-31 · 176 added, 162 removed, 117 unchanged (74% of the section changed)

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have a series of advanced-safe-smart platform technologies.

Our first-generation technologies enable light fixtures, ceiling fans

Our first-and second-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

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night light, light color changing and much more.

Our second-generation technology is an all-in-one safe and smart-advanced platform

Our third-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.

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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.

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

smart products in 2023, and expect additional products, including the Sky Smart Platform, to be available in 2024.

We hold over 96 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

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

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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

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be able to penetrate the existing market to capture additional market share.

April 2022, we entered into a sublease agreement, pursuant to which we agreed to sublease approximately 3,400 square feet of office space

located on the 54th floor of Carnegie Hall Tower, located at 152 West 57th Street, New York, New York, at a fixed monthly base rent starting

at $26,893 for the first year of the sublease.

The New York office space supports our general and administrative functions, sales and

marketing, and business development.

September 2022, we entered into a lease agreement, pursuant to which we agreed to lease approximately 32,200 square feet located at 400

Biscayne Boulevard, Miami Florida.

The fixed minimum monthly base rent amounts to $214,480 during the first full year.

The lease provides

for rent abatements of a minimum of 10 months.

The lease also provides for the lessor’s leasehold improvements of up to $2.3 million.

The Miami office space will support our headquarters, general and administrative functions, sales and marketing, and business development.

and related risk of recession has increased during 2022 and is expected to continue to increase during 2023.

Inflationary factors, such

as increases in interest rates, supply and overhead costs and transportation costs, may adversely affect our operating results and we

may not be able to offset increased costs with increased sales price per unit, particularly as we work toward commercial manufacturing

of our products.

Although we do not believe that inflation has had a material impact on our financial position or results of operations

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

In addition, we may

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

potential geopolitical conflicts, employee availability and wage increases.

February 2023, we announced the Acquisition, pursuant to which we agreed to acquire all of the issued and outstanding shares of Belami,

a strategic e-commerce lighting and home décor conglomerate.

The Company will pay both cash and common stock as consideration

for the Acquisition.

The Acquisition is expected to close during the second quarter of 2023.

The Company expects that Belami will serve

as a marketing and growth platform and will provide several distribution channels, including to retail customers, builders and professionals.

continued to increase during 2023 and is expected to continue to increase during 2024.

Inflationary factors, such as increases in

interest rates, supply and overhead costs and transportation costs, may adversely affect our operating results and we may not be

able to offset increased costs with increased sales price per unit, particularly as we continue to work toward commercial

manufacturing and sale of our products.

Although we do not believe that inflation has had a material impact on our financial position or

results of operations to date, we may experience some effect in the foreseeable future (especially if inflation rates continue to

In addition, we may be negatively impacted because of supply chain constraints, consequences associated with government

regulations, ongoing and potential geopolitical conflicts, employee availability and wage increases.

In addition, the Israel-Hamas war may adversely impact our operations in the near future.

We have a number of developers working in Israel.

If such individuals are called for service or this war escalates regionally, it may create work interruptions leading to longer periods between releases of offering improvements and increased costs.

April 28, 2023, we completed our acquisition (the “Closing”) of all of the issued and outstanding shares of Belami, an

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

We expect these 60

websites will serve as a marketing and growth platform for our smart products and should provide several distribution channels,

including to retail customers, builders, and professionals.

For additional information regarding the Acquisition, see “Item 1.

Business—Recent Developments.”

connection with the Acquisition, the Company closed the Private Placements, pursuant to which the Company issued and sold (i) subordinated

secured convertible promissory notes in the aggregate principal amount of $10.35 million and (ii) warrants to purchase an aggregate of

up to 1,391,667 shares of the Company’s common stock for investors.

The proceeds will be used for the cash component of the Acquisition consideration 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.

The other 50% of the equity is owned by Belami.

The Company expects that this acquisition will serve as another marketing and growth

platform for the Company and will provide additional distribution to both professional and retail channels for the Company’s products.

Business—Overview-E-Commerce.”

of Operations

Ended December 31, 2023 and 2022

/ (Decrease) ($)

/ (Decrease) (%)

For the year ended December 31,

Cost of revenues

Selling, general and

administrative expenses

Selling and marketing expenses

General and administrative expenses

Total expenses

Operating loss

(37,825,206 )

(26,625,182 )

Other income / (expense)

Interest expense, net

Other income - loan forgiveness

Gain on extinguishment of debt

Total other income (expense), net

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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 2022 and 2021, we opted to sell through our existing

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

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 the pending Acquisition to increase our revenues, assuming the Company

successfully consummates the Acquisition.

2022 and 2021, revenues were 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.

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

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.

increase in selling, general, and administrative expenses during 2022 when compared to the prior year was primarily due to the following:

of $12.5 million related to share-based payments during 2022 when compared to 2021, which

was primarily due to a greater number of shares of common stock issued and options granted

for services during 2022;

investments in marketing programs and product development of approximately $2.4 and $1.9 million,

respectively, in anticipation of the launch of our product offerings during 2022 compared

in other spending amounting to $3.8 million related to support of planned increase in scope

of operations.

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.

increase in revenues during 2023, when compared to 2022, is primarily due to revenues from products marketed by Belami which was acquired

on April 28, 2023.

believe that revenues will be higher in 2024 than in 2023, primarily resulting from revenues from Belami, which was acquired in April

2023, and the sale of our advanced and smart products.

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

The increase in cost of revenues

during 2023 when compared to 2022, 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 2024 compared to 2023, commensurate with an anticipated increase in revenues.

and Marketing Expenses

and marketing expenses consist primarily of sales and marketing compensation as well as sales and marketing programs.

increase in selling and marketing expenses during 2023 when compared to 2022 is primarily due to such expenses following the acquisition

of Belami aggregating $11.1 million during 2023.

believe that our selling and marketing expenses will be higher during 2024 when compared to 2023 as we continue to invest to support

our anticipated growth and now includes such expenses related to Belami’s operations following its acquisition.

and Administrative Expenses

and administrative expenses consist primarily of an allocation of product development, finance, legal, human resources, including salaries,

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

increase in general, and administrative expenses during 2023 when compared to 2022 was primarily due to the following:

in general and administrative expenses following the acquisition of Belami aggregating $8 million

of depreciation and amortization expenses of $2.0 million primarily related to increase in intangibles acquired during the second

quarter of 2023 and right-of-use assets acquired during the third quarter of 2022.

Increase in consideration due to General Electric of $1.4 million, pursuant to agreements negotiated in November 2023.

Loss from subsequent measurement of inventory of $1.3 million recognized during 2023.

believe that our operating expenses may be higher during 2024 when compared to 2023 as we continue to invest 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 2022 when compared to the prior year was primarily due to higher weighted-average interest-bearing obligations

during 2022, resulting from the compounding of accrued interest.

increase in other income - loan forgiveness during 2022 when compared to the prior year was due the forgiveness of a PPP loan during

the first quarter of fiscal 2022, which did not occur during 2021.

believe that interest expenses will increase during fiscal 2023 when compared to 2022, primarily as a result of increased operating lease

increase in interest expense during 2023 when compared to 2022 is primarily due to interest imputed pursuant to operating lease liabilities

and 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 non-recurring transactions:

the forgiveness of the PPP loan recognized

during 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

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in debt securities, respectively.

As 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 consummation of the Acquisition, our revenue growth rate, expenditures related

to our headcount growth, the timing and the amount of cash received from customers, the expansion of sales and marketing activities,

the timing and extent of spending to support development efforts, the price at which we are able to purchase parts to incorporate in

our product offerings, the introduction of platform enhancements, and the 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,

including the pending Acquisition, 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

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 engaging in

private placements and offerings during, 2023 of a combination of convertible notes payable and shares of our common stock

aggregating $19.6 million.

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 December 31, 2023, we issued 783,374 shares of common stock under such program for

net proceeds of $1,228,000, net of brokerage fees and legal expenses of approximately $25,000.

In aggregate, from the start of the ATM

offering program through December 31, 2023, we sold 4,359,832 shares of common stock, generating approximately $9.4 million of proceeds,

net of brokerage fees and legal expenses of $604,000.

As of March 21, 2024, we had the remaining capacity to issue shares of common stock

with a consideration of up to $6.5 million under the offering program.

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 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

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 an aggregate $6.5 million in revolving lines of credits and a

term loan with two financial institutions during 2023.

The lines of credit mature in 2024 and the term loan matures in 2026.

2022, we entered into certain lease and sublease agreements, including (i) a sublease agreement entered into during April 2022, pursuant

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related to the lease.

owe approximately $5.5 million under fixed rate obligations and $1.3 million under convertible notes as of December 31, 2022.

an additional $8.1 million in convertible notes during the first quarter of 2023.

In addition, we owe GE certain minimum royalty payments

under the License Agreement which amounted to $2.6 million as of December 31, 2022.

February 10, 2023, we entered into a Managed Client Agreement and, as subsequently amended (as amended, the “Office Management

Agreement”) with RGN-MCA Miami II, LLC (“Spaces”), having a term commensurate with the Miami lease, pursuant to which

Spaces will manage one floor of the Miami office for the Company, renting co-working office spaces and providing support services, following

completion of the office construction.

The Office Management Agreement is subject to final approval by the landlord under the Miami lease.

The Company will receive net revenues from the rentals, after deducting up to 16% in platform and management fees and certain operating

The Company projects to receive net revenues to offset a significant portion of the costs of the Miami lease.

owe approximately $11.5 million under fixed rate obligations as of December 31, 2023.

In addition, we owe GE certain minimum royalty

payments under a license agreement which amounted to $3.9 million as of December 31, 2023.

2023, we used $13.0 million in our operating activities, which consisted of our net loss of $38.0 million adjusted for non-cash equity

compensation of $14.0 million and an increase of inventory of $1.0 million.

We have recently increased our inventory in preparation for

the anticipated launch of commercial sales of our advanced and smart products during 2023.

net cash used in investing activities amounted to $8.1 million and consisted primarily of purchases of debt securities of $7.4 million.

generated $20.9 million in financing activities, of which $20.6 million was generated from our initial public offering.

compensation of $18.0 million as well as an increase of accounts payable and accrued expenses

of $5.5 million.

We are managing our accounts payable based on vendor terms.

net cash provided by investing activities amounted to $3.2 million and consisted primarily of disposition of debt securities of $7.6

million offset by cash used to acquire Belami, net of acquired cash of $4.2 million.

generated $22.7 million in financing activities, of which $19.6 million was generated from a combination of issuance of convertible

notes and proceeds from issuance of shares of common stock at the market.and $6.5 million proceeds from lines of credit lines term

loan and offsetting term loan repayment of debt of $3.4 million.

2022, we used $13.8 million in our operating activities, which consisted of our net loss of $527.0 million adjusted for non-cash equity

compensation of $13.9 million.

generated $12.9 million in financing activities, which consisted primarily of proceeds from issuance of our shares of common stock of

$13.0 million.

used $8.1 million in our investing activities, which primarily consisted of purchase of debt securities of $7.4 million.

generated $20.9 million in financing activities, which consisted primarily of proceeds from the issuance of our shares of common

stock of $23.1 million.

Company’s liquidity’s sources include $22.4 million in cash and cash equivalents and $3.1 million of working capital.

the Company has a history of recurring operating losses and its net cash used in operating activities amounted to $13.0 million and $13.8

million during 2023 and 2022, respectively.

The Company has also generated net cash provided by financing activities of $22.7 million

and $20.9 million during 2023 and 2022, respectively.

Accordingly, the Company’s management cannot ascertain that there is no substantial

doubt that it will be able to meet its obligations as they become due within one year after the date that its financial statements are

intends to mitigate such conditions by continuing to support its continued growth by decreasing its cash used in operating

activities through increased revenues and increased margins from products sold to large retailers and its internet portals, and to

the extent necessary, generating cash provided by financing activities through it’s at the market offering or other equity or

debt financing means.

Financial Measures

considers selling, general, and administrative expenses, adjusted for non-cash stock compensation, an important indicator in consistently

evaluating our business operations and the use of cash in our operating activities.

We use such measure to analyze and evaluate our liquidity

and capital resources and intend to continue using such measure until we generate revenues.

Such measure eliminates significant items

that do not involve cash outlay.

This measure should be considered in addition to, rather than as a substitute, for selling, general

and administrative expenses.

This non-GAAP financial 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.

the year ended December 31,

Sales, general, and administrative

expenses, as reported

Non-cash share-based

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 year ended

$ (39,732,656 )

Non-cash, sales, general,

and administrative expenses, as adjusted

$ (27,035,941 )

Share-based payments

Interest expense

Depreciation, amortization

Transaction costs

EBITDA, as adjusted

$ (15,283,640 )

$ (11,603,906 )

Balance Sheet Arrangements

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Accounting Policies

significant accounting policies are disclosed in Note 2 to our 2022 consolidated financial statements.

The following is a summary of

those accounting policies that involve significant estimates and judgment of management.

significant accounting policies are disclosed in Note 2 to our consolidated financial statements for the year ended December 31, 2023,

contained in our Annual Report on Form 10-K for the year ended December 31, 2023.

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

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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, 2022 and 2021, we believe the amounts reported for cash, prepaid

expenses, accounts payable, accounts payable – related party, accrued expenses and other current liabilities, accrued interest,

notes payable and convertible note payable approximate fair value because of their short maturities.

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 December 31, 2023 and 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.

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

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These tiers include:

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

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.

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 ”,

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for an award based on the grant-date fair value of the award.

compensation is measured at the grant date of options 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.

Expected volatility

is the assumption having the greatest impact on the fair value of options.

Our expected volatility is based on the historical volatility

of comparable companies.

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.

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.

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

● recognition

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.

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

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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 7. Management’s Discussion and Analysis