SKYX Platforms Corp. 10-K

ITEM 9A. CONTROLS AND PROCEDURES Evaluation of Disclosure Controls and Procedures Our management is responsible for establishing and maintaining a system of disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) that is designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer’s management, including its principal executive officer and principal financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Management recognizes that there are inherent limitations to the effectiveness of any system of disclosure controls and procedures and any controls and procedures, no matter how well designed and operated, can only provide reasonable assurance of achieving their control objectives. As of the end of the period covered by this report, management, including our Principal Executive Officers and Principal Financial Officer, evaluated the effectiveness of our disclosure controls and procedures. Based upon the evaluation, our Principal Executive Officers and Principal Financial Officer concluded that our disclosure controls and procedures were effective as of December 31, 2023. 52 Management’s Annual Report on Internal Control over Financial Reporting Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rule 13a-15(f) promulgated under the Exchange Act. Internal control over financial reporting is a process designed by, or under the supervision of, our Principal Executive Officers and Principal Financial Officer and effected by our board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of our financial statements for external purposes in accordance with GAAP. Internal control over financial reporting includes policies and procedures that: (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of an issuer’s assets; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that an issuer’s receipts and expenditures are being made only in accordance with authorizations of its management and directors; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of an issuer’s assets that could have a material effect on the consolidated financial statements. A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, the application of any evaluation of effectiveness to future periods is subject to the risk that controls may become inadequate because of changes in conditions, or that compliance with the policies or procedures may deteriorate. As required by Rule 13a-15(c) promulgated under the Exchange Act, our management, with the participation of our Principal Executive Officers and Principal Financial Officer, evaluated the effectiveness of our internal control over financial reporting as of December 31, 2023. Management’s assessment was based on criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control - Integrated Framework (2013 Framework) (the COSO Framework). Based on management’s assessment, management has concluded that our internal control over financial reporting was effective as of December 31, 2023. This Form 10-K does not include an attestation report of our independent registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our independent registered public accounting firm pursuant to the rules of the SEC that permit us to provide only management’s report in this Form 10-K. Changes in Internal Controls Over Financial Reporting There were no changes in our internal control over financial reporting during the quarter ended December 31, 2023 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. ITEM 9B. OTHER INFORMATION Rule 10b5-1 Trading Plans During the quarter ended December 31, 2023, none of the Company’s directors or executive officers adopted , modified or terminated any contract, instruction or written plan for the purchase or sale of Company securities that was intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) of the Exchange Act or any “non-Rule 10b5-1 trading arrangement” (as defined in Item 408(c) of Regulation S-K). 2024 Annual Meeting of Stockholders The Company’s 2024 Annual Meeting of Stockholders is scheduled to be held on July 10 2024. Stockholders of record as of May 15, 2024 will be entitled to receive notice of, and vote at, the annual meeting. Note Extensions On March 31, 2024, the Company entered into an amendment to three of its previously issued subordinated convertible balloon promissory notes (the “promissory notes”) aggregating $575,000 with certain holders of such promissory notes. The amendment extends the maturity date of each respective promissory note to May 16, 2025, increases the interest rate to ten percent (10%) per year starting January 1, 2024 and adjusts the conversion price to $3.00 per share. No other terms of the promissory notes were changed. Each of Leonard J. Sokolow, Co-Chief Executive Officer and a director of the Company, John P. Campi, Co-Chief Executive Officer of the Company, and an investor entered into an amendment to his or its respective promissory note. The amendment is effective as of the original maturity date of the respective note. The Company’s Board of Directors approved the amendment. The issuance of the notes was deemed to be exempt from registration pursuant to Section 4(a)(2) of the Securities Act, including Regulation D and Rule 506 promulgated thereunder, as transactions by the Company not involving a public offering. Convertible Notes Issued to Belami Sellers On March 29, 2024, the Company and the Sellers entered into a letter agreement modifying certain obligations under the Stock Purchase Agreement, dated February 6, 2023, between the Company and the Sellers of Belami. In connection with the letter agreement, the Company issued convertible promissory notes to each of the Sellers (the “Seller Note(s)”) in substitution of an aggregate of $3,117,408 in cash due to the Sellers on the first anniversary of the Closing, or April 28, 2024. Each Seller received a Seller Note in an amount of $1,039,303 on the same date. In addition to other customary terms, the Seller Notes bear annual interest at 10%, with interest and principal becoming due on May 16, 2025, and can be converted by the Sellers at any time at $3.00 per share of our common stock. The Seller Notes include customary events of default accelerating maturity, including a breach of the Company’s covenants, representations and warranties under the Stock Purchase Agreement and a change of control of Belami. The letter agreement further provides that the Company will perform all other obligations arising on the first anniversary of the Closing, including issuance of shares of common stock due to Sellers, and that on such date the non-fundamental representations and warranties expire, and the Company will release $750,000 held in escrow. The issuance of the notes was deemed to be exempt from registration pursuant to Section 4(a)(2) of the Securities Act, including Regulation D and Rule 506 promulgated thereunder, as transactions by the Company not involving a public offering. Commission Termination Agreement On March 29, 2024, Mr. Campi and Ms. Barron each entered into a commission termination agreement with the Company, terminating the incentive compensation-related provisions in their employment agreements and agreeing no amounts would be paid pursuant to such provisions for prior periods. ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS Not applicable. 53 PART III ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE The following table sets forth the name and position of each of our executive officers and directors, and each such person’s age as of March 21, 2024. Name Age Position(s) Rani R. Kohen 58 Executive Chairman, Director John P. Campi 79 Co-Chief Executive Officer Leonard J. Sokolow 67 Co-Chief Executive Officer, Director Marc-Andre Boisseau 59 Chief Financial Officer Steven M. Schmidt 70 President Patricia Barron 63 Chief Operations Officer Nancy DiMattia 63 Director Gary N. Golden 69 Director Efrat L. Greenstein Brayer 61 Director Thomas J. Ridge 78 Director Dov Shiff 76 Director The following information provides a brief description of the business experience of each executive officer and director. Rani R. Kohen founded the Company and invented our technologies. He has served as Executive Chairman of the Board since 2016 and as Chairman of our Board of Directors since November 2012. Mr. Kohen also previously served as our Chief Executive Officer from 2004 through 2012. Mr. Kohen is a businessman, entrepreneur and inventor of our technologies. He brings strategic acumen with over 20 years of experience in business, as well as in advanced smart home technologies, product design, lighting, and other related businesses. Since founding the Company, he has succeeded in attracting and engaging accomplished board members, talented management and leading executives from various industries. He has led every major milestone achieved by the Company to date, including securing substantial financing to support the Company’s growth. The board of directors believes that with Mr. Kohen’s leadership and qualifications, and the continuity that he brings with his advanced business strategies, he will continue to move us forward towards achieving our goals. John P. Campi has served as our Co-Chief Executive Officer since September 2023. He previously served as our Chief Executive Officer from November 2014 to September 2023 and as our Chief Financial Officer through December 31, 2021. Mr. Campi founded Genesis Management, LLC in 2009, and retired in 2014 upon accepting the role of our Chief Executive Officer. Mr. Campi has extensive experience in the field of cost management, is recognized as a founder of the strategic cost-management discipline known as Activity-Based Cost Management and has extensive experience in the field of supply chain management. From December 2007 to December 2008, Mr. Campi served as the Chief Procurement Officer and an Executive Vice President for Chrysler, where he was responsible for all worldwide purchasing and supplier quality activities. From September 2003 to January 2007, Mr. Campi served as the Senior Vice President of Sourcing and Vendor Management for The Home Depot, Inc., where he led the drive for standardization and optimization of The Home Depot, Inc.’s global supply chain. From April 2002 to September 2003, Mr. Campi served as the Chief Procurement Officer and Vice President for DuPont Global Sourcing and Logistics. Prior to 2002, Mr. Campi led the Global Sourcing activities for GE Power Energy and held a variety of positions with Federal Mogul, Parker-Hannifin Corporation and PricewaterhouseCoopers. Mr. Campi previously served on the board of Trustees of Case Western Reserve University and has been appointed an Emeriti Trustee. Mr. Campi also has served as a member of the advisory board of directors for three startup companies and has served as a Member of the Financial Executives Institute and the Institute of Management Accountants. Mr. Campi received his MBA from Case Western Reserve University. Mr. Campi has extensive executive and advisory experience with established and startup companies, as well as in cost-management and supply chain management. 54 Leonard J. Sokolow has served as Co-Chief Executive Officer of the Company since September 2023 and as a director of the Company since November 2015. Mr. Sokolow previously served in various roles at Newbridge Financial, Inc. and its subsidiaries, including as Chief Executive Officer and President of Newbridge Financial, Inc. from January 2015 through August 2023; as Chief Executive Officer of Newbridge Financial Inc.’s broker-dealer subsidiary, Newbridge Securities Corporation, and Chief Executive Officer of Newbridge Financial, Inc.’s registered investment adviser subsidiary, Newbridge Financial Services Group, Inc., from July 2022 through August 2023; and as Chairman of Newbridge Securities Corporation from January 2015 through July 2022. Mr. Sokolow previously served in a variety of roles at vFinance, Inc., a publicly traded financial services company, including as Chairman of the board of directors from January 2007, a member of the board of directors from November 1997 and Chief Executive Officer from January 2007 through July 2008, when it merged into National Holdings Corporation, a publicly traded financial services company. Mr. Sokolow also served as President of vFinance, Inc. from January 2001 through December 2006. From July 2008 until July 2012, Mr. Sokolow was President of National Holdings Corporation, and from July 2008 until July 2014, he was Vice Chairman of the board of directors of National Holdings Corporation. From July 2012 until December 2014, Mr. Sokolow was a consultant and partner at Caribou LLC, a strategic advisory services firm. Mr. Sokolow was Founder, Chairman and Chief Executive Officer of the Americas Growth Fund Inc., a closed-end management investment company, from 1994 to 1998. From 1988 until 1993, Mr. Sokolow was an Executive Vice President and the General Counsel of Applica Inc., a publicly traded appliance marketing and distribution company. From 1982 until 1988, Mr. Sokolow practiced corporate, securities and tax law and was one of the founding attorneys and a partner of an international boutique law firm. From 1980 until 1982, he worked as a Certified Public Accountant for Ernst & Young and KPMG Peat Marwick. Mr. Sokolow has served on the board of directors of Consolidated Water Co. Ltd., a publicly traded developer and operator of advanced water supply and treatment plants and water distribution systems, since June 2006, where he currently serves as Chairman of the Audit Committee and as a member of the Nominations and Corporate Governance Committee. In addition, Mr. Sokolow has served on the board of directors of Vivos Therapeutics, Inc., a publicly traded medical technology company focused on developing and commercializing innovative diagnostic and treatment methods for patients suffering from breathing and sleep issues arising from certain dentofacial abnormalities, since June 2020, where he currently serves as Chairman of the Audit Committee and as a member of the Nominating and Corporate Governance Committee, and on the board of directors of Agrify Corporation, a publicly traded provider of innovative cultivation and extraction solutions for the cannabis industry, since December 2021, where he currently serves as a member of the Audit Committee and the Compensation Committee. Mr. Sokolow previously served on the board of directors of, and as Chairman of the Audit Committee for, Marquee Energy Ltd. (formerly Alberta Oilsands Inc.), a then publicly traded energy company. Our board believes Mr. Sokolow’s qualifications to serve as a member of our board include his extensive experience in the financial industry and in strategic planning, mergers, acquisitions, securities, and corporate development advisory services, his service on other public company boards and his history of executive leadership in developing and operating businesses. Marc-Andre Boisseau has served as our Chief Financial Officer and as our principal financial officer and principal accounting officer since January 1, 2022. Mr. Boisseau is a partner of Boisseau, Felicione & Associates Inc., which provides advisory and tax services for public and private companies in a variety of industries and which he founded in February 2002. Among other positions, Mr. Boisseau served at Citrix Systems, Inc., a publicly-traded software development company, as Corporate Controller from 1995 to December 1999 and as Principal Accounting Officer from March 1997 to December 1999, and as a senior auditor at Ernst & Young. Mr. Boisseau is a Certified Public Accountant. Steven M. Schmidt has served as our President since June 2021 and has served as a consultant to the Company since August 2019. Mr. Schmidt formed Schmidt Family Investments LLC, which invests in early stage companies, in May 2017, of which he is the sole principal. Mr. Schmidt previously served in a variety of roles at Office Depot, Inc., an office supply retailer, from July 2007 through May 2016, including as Executive Vice President and President, International from November 2011 to May 2016, Executive Vice President, Corporate Strategy and New Business Development from July 2011 until November 2011 and President, North American Business Solutions from July 2007 until November 2011. Prior to joining Office Depot, Inc., Mr. Schmidt spent 11 years with the ACNielsen Corporation, a marketing research firm, most recently serving as President and Chief Executive Officer. Prior to joining ACNielsen, Mr. Schmidt spent eight years at the Pillsbury Food Company, serving as President of its Canadian and Southeast Asian operations. He has also held management positions at PepsiCo and Procter & Gamble. 55 Patricia Barron has served as our Chief Operations Officer since June 2007. Prior to joining the Company, Ms. Barron was the President and owner of LTG Services, Inc., which focused on safety consulting services, specializing in the review and compliance of electrical products requiring UL, CSA, and CE certifications, since 1989. Prior to that, Ms. Barron worked as a consultant and engineer in the lighting, safety and approval industry and, from June 1977 to August 1984, worked as an engineering assistant for Underwriters Laboratories, Inc. (n/k/a UL) in the ceiling fan category. Ms. Barron received her MBA from Georgia State University. Ms. Barron has extensive industry and executive experience. Nancy DiMattia has served as a director of the Company since February 2022. Ms. DiMattia has served as Chief Financial Officer of Island Stone North America, a manufacturer and supplier of natural stone and man-made tiles, since October 2022. Ms. DiMattia previously served as Senior Vice President and Chief Financial Officer of Tile Shop Holdings, Inc., a publicly traded specialty retailer of natural stone and man-made tiles, setting and maintenance materials, and related accessories, from September 2019 until January 2022, where she continued to serve in an advisory capacity through March 2022. She also previously provided consulting services to Tile Shop Holdings, Inc. from July 2019 until September 2019. Before joining Tile Shop Holdings, Inc., Ms. DiMattia gained over twenty-five years of experience in financial reporting and accounting processes in positions of increasing responsibility at Virginia Tile Company, a provider of ceramic, porcelain, glass and natural stone tiles, most recently serving as the Corporate Controller from 2005 until March 2019. During her tenure at Virginia Tile Company, she was responsible for establishing sound financial management, promoting effective internal accounting controls, developing and leading highly competent accounting teams, and maintaining a documented system of accounting policies and procedures. Our board believes Ms. DiMattia’s qualifications to serve as a member of our board include her retail industry experience, including her experience overseeing retail-related information technology measures and working with a customer base that includes architects and designers, and financial expertise, including managing audits, internal controls and mergers and acquisitions. Gary N. Golden has served as a director of the Company since February 2022. Since June 2023, Mr. Golden has served as the Chief Financial Officer of Media Culture, a brand response media agency. Mr. Golden was previously employed at vcfo, which offers fractional CFO and human resources services to clients who require advisors they could trust to guide them through major changes, from April 2022 through May 2023. During 2021, Mr. Golden served as interim Chief Financial Officer of ADB Companies, which provides strategy, design, execution and program management services for the communication, utility, and technology industries. Prior to that, during 2021, Mr. Golden served as a project manager and professional services contractor for MMC Group, Inc., which offers full-service workforce solutions, and as interim controller at SportClips Haircuts. During 2020, he served as a special project auditor for WebsterRogers LLP, a South Carolina-based accounting and consulting firm that provides a broad spectrum of assurance, tax and advisory services. From 2013 to 2019, Mr. Golden served as Chief Financial Officer at NBG Home, an affiliate of Nielsen & Bainbridge, LLC and one of the largest home decor manufacturing companies and importers globally. From 2008 to 2013, Mr. Golden served as Chief Financial Officer and Professional Services Contractor for MMC Group, Inc. Mr. Golden has served in a variety of other financial and operational roles, including as Vice President, Controller of Kinko’s Inc., Senior Vice President and Corporate Controller of Blockbuster, Inc., and in controller and internal audit roles at Fuqua Industries and Qualex, Inc. Mr. Golden is a licensed Certified Public Accountant and began his career at Arthur Andersen & Inc. Our board believes Mr. Golden’s qualifications to serve as a member of our board include his financial expertise, including his status as an “audit committee financial expert,” and his experience in the home goods and lighting industry. Efrat L. Greenstein Brayer has served as a director of the Company since February 2022. Ms. Greenstein Brayer currently serves as Co-Founder and Chief Executive Officer of Merkavah Inc. (d/b/a Ezzree), which provides online emotional and spiritual support care services, and has been principal attorney of the law office of Laura Greenstein since 2000, where she provides services as a corporate finance attorney. Ms. Greenstein Brayer previously served as a contract attorney with Holland & Knight LLP from 2006 through 2012, as associate counsel at Bank Hapoalim B.M. from 1996 through 2000, as an associate at Rogers & Wells (later acquired by Clifford Chance LLP) from 1993 through 1996, and as an associate at Haight, Gardner, Poor & Havens (later acquired by Holland & Knight LLP) from 1988 through 1993. Ms. Greenstein Brayer has also served as an officer or director of several private companies. Our board believes Ms. Greenstein Brayer’s qualifications to serve as a member of our board include her corporate law expertise and her experience founding and serving as Chief Executive Officer of a private company, including her experience with customer service and technology innovation. 56 Governor Thomas J. Ridge has served as a director of the Company since June 2013. Mr. Ridge founded and has served at Ridge Global, LLC, a global strategic consulting company and provider of insurance and risk transfer solutions, since July 2006, where he currently serves as Chairman of the board and Chief Executive Officer and previously served as President. In 2014, Mr. Ridge co-founded Ridge Schmidt Cyber, an executive services firm addressing the increasing demands of cybersecurity. In April 2010, Mr. Ridge became a partner of Ridge Policy Group, a bipartisan, full-service government affairs and issue management group. From January 2003 to January 2005, Mr. Ridge served as the Secretary of the United States Department of Homeland Security, and from September 2001 through January 2003, Mr. Ridge served as the Special Assistant to the President for Homeland Security. Mr. Ridge served two terms as Governor of the Commonwealth of Pennsylvania, from 1995 to 2001, and served as a member of the U.S. House of Representatives from January 1983 until January 1995. Mr. Ridge previously served as a member of the board of directors of The Hershey Company, a global confectionery leader, from November 2007 to May 2018, Advaxis, Inc., a then publicly traded clinical-stage biotechnology company, from August 2015 to March 2018, and LifeLock, Inc., a then publicly traded provider of identity theft protection, from March 2010 to February 2017, until its merger with a subsidiary of Symantec Corporation, as well as several other public companies. Mr. Ridge serves as Co-Chair of the Bipartisan Commission on Biodefense, as Chairman Emeritus of the board of the National Organization on Disability, and as a member of board of trustees of the Center for the Study of the Presidency, among other private organizations. Our board believes Mr. Ridge’s qualifications to serve as a member of our board include his vast experience in both government and industry, his service on other public and private company boards and his expertise in risk management and cybersecurity. Dov Shiff has served as a director of the Company since February 2014. Mr. Shiff is presently President and Chief Executive Officer of the Shiff Group of Companies. The Shiff Group owns and operates hotels and other real estate in Israel, including Hayozem Resorts & Hotels Ltd., Marina Hotel Tel Aviv Ltd. and Zvidan Investments Ltd. Our board believes Mr. Shiff’s qualifications to serve as a member of our board include his experience in developing and operating new businesses. Family Relationships There are no family relationships among any of our directors or executive officers. Composition of our Board of Directors Our business and affairs are managed under the direction of our board of directors, which currently consists of seven directors. The number of directors is determined by our board of directors or our stockholders, but will not be less than five persons, subject to the terms of our articles of incorporation and our bylaws. Each director is elected to a one-year term and holds office until his or her successor is duly elected and qualified or until his or her earlier death, resignation or removal. Vacancies and newly created directorships on the board of directors may be filled at any time by the remaining directors. Board Committees Our board of directors has three standing committees: an audit committee, a compensation committee and a nominating and corporate governance committee. Each member of each standing committee of our board of directors qualifies as an independent director in accordance with the listing standards of Nasdaq. Our board of directors may from time to time establish other committees; for example, the board of directors has established a business strategy and development committee, which consists of Rani R. Kohen, Leonard J. Sokolow, and Nancy DiMattia. Each standing committee operates pursuant to a charter adopted by our board of directors. The full text of our audit committee charter, compensation committee charter and nominating and corporate governance committee charter are posted on the investor relations section of our website at www.skyplug.com. 57 Audit Committee Our audit committee consists of Ms. Greenstein Brayer, Ms. DiMattia and Mr. Golden, who is the chair of the audit committee. The functions of the audit committee include: ● appointing, approving the compensation of and assessing the independence of our independent registered public accounting firm; ● pre-approving audit and permissible non-audit services, and the terms of such services, to be provided by our independent registered public accounting firm; ● reviewing the overall audit plan with our independent registered public accounting firm and members of management responsible for preparing our financial statements; ● reviewing and discussing with management and our independent registered public accounting firm our annual and quarterly financial statements and related disclosures; ● reviewing our disclosure controls and procedures, as well as reviewing disclosures regarding our internal control over financial reporting; ● establishing policies and procedures for the receipt, retention and treatment of accounting-related complaints and concerns; ● recommending to the board of directors, based upon the audit committee’s review and discussions with management and our independent registered public accounting firm, whether our audited financial statements will be included in our annual reports on Form 10-K; ● discussing with management our policies with respect to risk assessment and risk management and our significant financial risk exposures, as well as information security and technology risks (including cybersecurity); ● preparing the audit committee report required by SEC rules to be included in our annual proxy statement; ● reviewing and overseeing all related person transactions for potential conflict of interest situations, as well as annually reviewing the related party transactions policy; ● overseeing compliance with, and annually reviewing, the Code of Business Conduct and Ethics; and ● reviewing quarterly earnings releases. All members of our audit committee meet the requirements for financial literacy under the applicable rules and regulations of the SEC and Nasdaq listing rules. Our board of directors has determined that Mr. Golden qualifies as an “audit committee financial expert” within the meaning of applicable SEC regulations and meets the financial sophistication requirements of Nasdaq listing standards. In making this determination, our board of directors considered Mr. Golden’s prior experience, business acumen and independence. Both our independent registered public accounting firm and management periodically meet privately with our audit committee. 58 Compensation Committee Our compensation committee consists of Ms. Greenstein Brayer, Ms. DiMattia, and Mr. Golden, who is the chair of the compensation committee. The functions of the compensation committee include: ● annually reviewing our overall compensation policy as it applies to our employees generally, and the corporate goals and objectives relevant to compensation of the Executive Chairman, Chief Executive Officer and our other executive officers; ● reviewing and approving or recommending to the board of directors the compensation of our executive officers; ● reviewing and approving or recommending to the board of directors our incentive compensation plans and equity-based plans; ● reviewing and recommending to the board of directors the compensation of our non-management directors; ● reviewing the executive compensation disclosures and, if and when required, preparing the compensation committee report required by SEC rules to be included in our annual proxy statement or Form 10-K, as applicable; ● overseeing risks relating to our compensation policies, practices and procedures; ● reviewing and overseeing the application of the Company’s policy for clawback, or recoupment, of incentive compensation; ● reviewing our strategies related to human capital management, including talent acquisition, development and retention, diversity and inclusion and corporate culture; and ● reviewing and approving the retention, termination or compensation of any consulting firm or outside advisor to assist in the evaluation of compensation matters. Each member of our compensation committee is a non-employee director, as defined in Rule 16b-3 promulgated under the Exchange Act. Nominating and Corporate Governance Committee Our nominating and corporate governance committee consists of Ms. DiMattia, Mr. Golden and Ms. Greenstein Brayer, who is the chair of the nominating and corporate governance committee. The functions of the nominating and corporate governance committee include: ● identifying and evaluating individuals qualified to become members of the board of directors; ● recommending to the board of directors the persons to be nominated for election as directors and to each of the board’s committees; ● considering, developing and recommending to the board of directors policies and procedures with respect to the nomination of directors or other corporate governance matters; ● reviewing disclosures relating to our corporate governance practices to be included in our annual proxy statement or Form 10-K, as applicable; ● reviewing our policies and practices regarding corporate social responsibility and ESG matters and related risks; ● reviewing proposals submitted by stockholders for inclusion in our proxy materials; and ● overseeing the evaluation of our board of directors and board committees. Each member of our nominating and governance committee is a non-employee director, as defined in Rule 16b-3 promulgated under the Exchange Act. 59 Code of Business Conduct and Ethics Our board of directors has adopted a Code of Business Conduct and Ethics, which applies to all of our directors, employees, and officers (including our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions). The full text of our Code of Business Conduct and Ethics is posted on the investor relations section of our website at www.skyplug.com. We intend to satisfy the disclosure requirement under Item 5.05 of Form 8-K regarding an amendment to, or waiver from, a provision of our Code of Business Conduct and Ethics by posting such information on our website within four business days following the date of the amendment or waiver. Involvement in Certain Legal Proceedings To the best of our knowledge, none of our directors or executive officers were involved in any legal proceedings described in Item 401(f) of Regulation S-K in the past 10 years. Delinquent Section 16(a) Reports Section 16(a) of the Exchange Act requires all persons subject to such reporting requirements to file initial reports of ownership and reports of changes in ownership of our common stock and other equity securities with the SEC. To our knowledge, based solely on a review of these reports filed with the SEC and certain written representations furnished to us that no other reports were required, we believe that all Section 16 filing requirements applicable to our executive officers, directors and greater than 10% shareholders were complied with during the fiscal year ended December 31, 2023, except as follows: a Form 4 filed by Patricia Barron on August 9, 2023, reporting the August 4, 2023 grant of restricted stock units, and related withholding of shares for taxes, and grant of stock options; a Form 4 filed by Dov Shiff on October 10, 2023, reporting the September 30, 2023 issuance of restricted stock paid in lieu of the cash retainer payable for service on the board, pursuant to the non-employee director compensation program; and a Form 4 to be filed by Thomas J. Ridge reporting the conversion of preferred stock into common stock on May 1, 2023 and the June 30, 2023, September 30, 2023 and December 31, 2023 issuances of restricted stock paid in lieu of the cash retainer payable for his service on the Board, pursuant to the non-employee director compensation program. 60 ITEM 11. EXECUTIVE COMPENSATION EXECUTIVE COMPENSATION Compensation Overview Our “named executive officers” for the year ended December 31, 2023 were: ● John P. Campi, Co-Chief Executive Officer (since September 12, 2023; previously, Chief Executive Officer); ● Leonard J. Sokolow, Co-Chief Executive Officer (since September 12, 2023; previously a non-employe director of the Company) ● Rani R. Kohen, Executive Chairman; ● Marc-Andre Boisseau, Chief Financial Officer; ● Steven M. Schmidt, President; and ● Patricia Barron, Chief Operations Officer. Our executive compensation program reflects our continued growth and development-oriented focus. We recognize that our ability to excel depends on the knowledge, skill and teamwork of our employees. To this end, we strive to create an environment of mutual respect, encouragement, and teamwork that rewards commitment and performance and is responsive to the needs of our employees. The principles and objectives of our compensation and benefits programs for our employees generally, and for our named executive officers specifically, include to align our compensation program with our corporate strategies, financial objectives and the long-term interests of our stockholders; retain and reward executives whose knowledge, skills and performance ensure our continued success; and ensure that total compensation is fair, reasonable and competitive. The compensation received by our named executive officers is based primarily on their experience and knowledge as well as their responsibilities and individual contributions to the Company. The compensation committee of our board of directors evaluates our executive compensation values and philosophy and executive compensation plans and arrangements as circumstances require. As part of this review process, we expect the compensation committee to apply our values and philosophy, while considering the compensation levels needed to ensure our executive compensation program remains competitive. We will also review whether we are meeting our retention objectives and the potential cost of replacing a key employee. Executive Compensation Program Components Base Salary Executive officer base salaries are based on job responsibilities and individual contributions and are designed to attract and retain employees over time. Each of our named executive officers (other than Mr. Schmidt) receives a base salary set forth in an employment agreement entered into with the Company, and the board has the discretion to review and adjust each applicable named executive officer’s base salary. Mr. Campi, Mr. Kohen, Ms. Barron and Mr. Boisseau received an annual base salary of $150,000, $300,000, $150,000, and $144,000, respectively, during 2023. Pursuant to the employment agreement that the Company entered into with Mr. Sokolow at the time of his appointment as Co-Chief Executive Officer on September 12, 2023, Mr. Sokolow receives a base salary of $160,000 per year. For his services on the board of directors during the portion of 2023 prior to his appointment as Co-Chief Executive Officer, Mr. Sokolow was paid pursuant to the Company’s non-employee Director Compensation Program (defined below), which is described below under the heading “Director Compensation.” 61 Incentive and Bonus Compensation Each named executive officer’s employment agreement also provides for the receipt of incentive and/or bonus compensation, which may be paid annually in cash and/or stock. These incentive compensation and bonus awards are designed to focus our executive officers on our business objectives of growing our business, including increasing our revenue and income. Mr. Sokolow will receive a minimum bonus every six months during the term of his employment agreement equal to $40,000 in cash or stock, as elected by Mr. Sokolow, and is eligible to receive a performance-based bonus, payable in equity and/or cash, subject to the achievement of performance metrics and other criteria as determined by the Executive Chairman and approved by the compensation committee. Mr. Kohen is eligible to receive annual incentive compensation based on our annual gross revenue, which may be paid in cash, stock and/or options, as well as supplemental bonus compensation of performance-based stock options to purchase up to 17,000,000 shares of common stock at an exercise price ranging between $4.00 and $12.00 per share, determined based on the achievement of specified market capitalizations of the Company, and the potential to receive further options based on the achievement of additional specific market capitalizations of the Company, as described further below under “Agreements with Named Executive Officers.”. Mr. Schmidt is eligible to receive a stock bonus of 20,000 shares that will be payable upon achievement of certain sales program goals, and he may be eligible to receive additional bonus compensation as determined by the Company. Mr. Boisseau is eligible to receive performance-based compensation in the form of a bonus, payable in equity and/or cash, as determined by the compensation committee, subject to the achievement of performance metrics and other criteria as determined by the Executive Chairman and approved by the compensation committee. The actual incentive and/or bonus compensation earned by each of our named executive officers during our most recent fiscal year is set forth in the “Summary Compensation Table” below. Other Equity Compensation and Awards Our executive officers may also receive equity awards under our 2021 Stock Incentive Plan (the “2021 Plan”). We use equity awards to align the interests of our named executive officers with those of our stockholders. We believe that equity awards, such as stock options, restricted share units (“RSUs”) and non-vested restricted stock, encourage our named executive officers to focus on our long-term success as reflected in increases to our stock prices over a period of several years, growth in our profitability and other elements. Pursuant to his employment agreement, on September 12, 2023, Mr. Sokolow received (i) 450,000 RSUs, 120,000 of which vested on the date of grant, 300,000 of which will vest in six semi-annual installments of 50,000, beginning on March 12, 2024, and 30,000 of which will vest on March 12, 2027; and (ii) five-year stock options to purchase up to 450,000 shares of the Company’s common stock at an exercise price of $1.58 per share, 120,000 of which vested on the date of grant, 300,000 of which will vest in six semi-annual installments of 50,000, beginning on March 12, 2024, and 30,000 of which will vest on March 12, 2027, in each case subject to continuous employment through the applicable vesting date. During 2023, the compensation committee granted certain equity awards and a cash bonus award to Mr. Boisseau. On April 5, 2023, Mr. Boisseau received 120,000 RSUs and five-year stock options to purchase up to 120,000 shares of the Company’s common stock at an exercise price of $3.28 per share, in each case vesting in three equal annual installments beginning on the grant date, subject to continued employment through the applicable vesting date. In addition, on October 19, 2023, Mr. Boisseau received 7,993 RSUs that vested in full on November 15, 2023, and 25,000 RSUs that vest in two equal installments on February 15, 2024 and May 15, 2024, subject to Mr. Boisseau’s continuous employment through the applicable vesting date. In October 2023, the compensation committee also approved the payment of a discretionary cash bonus of $50,000 to Mr. Boisseau, of which $25,000 was immediately payable and $12,500 will be payable on each of February 15, 2024 and May 15, 2024. Mr. Boisseau additionally elected to receive certain equity awards in cash, resulting in an additional $25,000 cash bonus payment to Mr. Boisseau, which was paid in November 2023. 62 On August 4, 2023, the compensation committee granted to Ms. Barron 100,000 RSUs and five-year stock options to purchase up to 100,000 shares of the Company’s common stock at an exercise price of $2.08 per share, in each case vesting in four equal annual installments beginning on the grant date, subject to continued employment through the applicable vesting date. In addition to the equity incentive and supplemental bonus awards granted during fiscal 2023 as described above, pursuant to the Chairman Agreement (as defined below), effective January 1, 2022, Mr. Kohen was granted five-year options to purchase 1,020,000 shares of common stock, which have an exercise price of $12.00 per share, vest as to 340,000 shares on each of January 1, 2023, 2024 and 2025, and expire January 1, 2027. Pursuant to his employment agreement, Mr. Schmidt received the following equity grants: a five-year option to purchase 60,000 shares of common stock at an exercise price of $0.10 per share, which vested in three equal annual installments on each of October 1, 2020, 2021 and 2022; a five-year option to purchase 60,000 shares of common stock at an exercise price of $6.00 per share, which vested in three equal annual installments on each of October 1, 2020, 2021 and 2022; and a five-year option to purchase 100,000 shares of common stock at an exercise price of $12.00 per share, which vests in four equal annual installments on each of June 1, 2021, 2022, 2023 and 2024 (which includes a signing bonus of options to purchase 25,000 shares). Mr. Schmidt’s employment agreement also provides for an annual grant of 25,000 shares of common stock on each of June 1, 2022, 2023 and 2024. We also grant equity-based sign-on bonuses when necessary and appropriate to advance our and our stockholders’ interests, including to attract or retain top executive-level talent. Mr. Kohen’s Chairman Agreement provided for a sign-on bonus of a stock option to purchase 120,000 shares of common stock at an exercise price of $12.00 per share, which was granted effective January 1, 2022 and vested in full on January 1, 2023. Mr. Boisseau’s agreement provided for a signing bonus consisting of (1) 10,000 shares of restricted common stock, which vested in four equal installments as of the end of each quarter in 2022, and (2) a three-year stock option to purchase 10,000 shares of common stock, which vested in four equal installments at the end of each quarter in 2022, and which were both granted effective March 11, 2022. Those options have an exercise price of $12.34 per share. Benefits and Perquisites We offer health insurance to our full-time employees, including our named executive officers. We generally do not provide perquisites or personal benefits to our named executive officers, except in limited circumstances. For instance, Mr. Kohen is eligible to receive a $1,000 per month vehicle allowance, pursuant to the Chairman Agreement. On occasion, the Company pays travel expenses for family members and guests of named executive officers, to accompany named executive officers on trips for business purposes such as trade shows and other events. 63 Summary Compensation Table The following table sets forth summary compensation information for the named executive officers and includes all compensation earned by the named executive officers for the respective period, regardless of whether such amounts were actually paid during the period. Name and Principal Position Year Salary ($) Bonus ($) Stock Awards ($) (1)(2) Option Awards ($) (1)(2) Non- Equity Incentive Plan Compensation ($) (3) All Other Compensation ($) (4) Total ($) John P. Campi 2023 150,000 — — — — — 150,000 Co-Chief Executive Officer 2022 150,000 — — — 90 — 150,090 Leonard J. Sokolow 2023 49,129 — 269,170 22,396 — 112,126 452,821 Co-Chief Executive Officer Rani R. Kohen 2023 300,000 — — 293,962 62,436 656,398 Executive Chairman 2022 300,000 — — 2,419,539 90 28,496 2,748,125 Marc-Andre Boisseau 2023 144,000 50,000 249,117 81,706 — — 524,823 Chief Financial Officer 2022 144,000 — 123,400 6,611 — — 274,011 Patricia Barron 2023 150,000 — 73,429 23,617 — 11,633 258,679 Chief Operations Officer 2022 150,000 — — — 90 17,409 167,499 Steven M. Schmidt (5) 2023 — — — — — — — President 2022 — — — — — — — (1) The value of stock awards and options in this table represents the fair value of such awards granted or modified during the fiscal year, as computed in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718 (“Topic 718”). The assumptions used to determine the valuation of the awards are discussed in Note 2 and Note 12 to our consolidated financial statements for the year ended December 31, 2023. (2) During 2023: (i) Mr. Boisseau received 152,993 RSUs and options to purchase 120,000 shares of common stock at an exercise price of $3.28 per share; (ii) Ms. Barron received 100,000 RSUs and options to purchase 100,000 shares of common stock at an exercise price of $2.08 per share; and (iii) Mr. Sokolow received 450,000 RSUs and a stock option to purchase 450,000 shares common stock at an exercise price of $1.58 per share, in addition to 26,615 shares of common stock and stock options to purchase up to 17,500 shares of common stock at an exercise price of $3.28 per share, granted pursuant to our Director Compensation Program for his service as a non-employee director prior to his appointment as our Co-Chief Executive Officer, which are also reported in this table. For more information regarding equity awards granted to our named executive officers during fiscal 2023 and 2022, see “Executive Compensation Program Components—Other Equity Compensation and Awards” above. (3) Non-Equity Incentive Plan Compensation reflects incentive compensation and commission payable pursuant to each individual’s respective employment agreement, typically as a percent of the Company’s net revenue or sales earned, and in each case as described below under “Agreements with Named Executive Officers.” In March 2024, Mr. Campi and Ms. Barron each entered into a commission termination agreement, terminating the incentive compensation-related provisions in their employment agreements and agreeing no amounts would be paid pursuant to such provisions for prior periods. (4) On occasion, the Company pays travel and lodging expenses for family members and guests of named executive officers, to accompany named executive officers on trips for business purposes such as road shows and other events. There was no incremental cost associated with family member travel that required disclosure in the Summary Compensation Table. (5) Pursuant to the Schmidt Agreement (as defined below), Mr. Schmidt’s receives equity compensation for his services to the Company and is eligible to receive additional bonus compensation as determined by the Company, as described below under “Agreements with Named Executive Officers.” 64 Outstanding Equity Awards at Fiscal Year End The following table sets forth certain information regarding outstanding equity awards held by the named executive officers as of December 31, 2023: Option Awards Stock Awards Name Number of securities underlying unexercised options (#) exercisable Number of securities underlying unexercised options (#) Not exercisable Equity incentive plan awards: Number of securities underlying unexercised unearned options (#) Option exercise price ($) Option expiration date Number of shares or units of stock that have not vested (#) Market value of shares or units of stock that have not vested ($)* Equity incentive plan awards: Number of unearned shares, units or other rights that have not vested (#) Equity incentive plan awards: Market or payout value of unearned shares, units or other rights that have not vested ($) John P. Campi 120,000 — — $ 6.00 9/1/2024 — — — — Leonard Sokolow 150,000 — — $ 0.60 11/15/2025 — — — — 150,000 — — $ 3.00 4/19/2027 — — — — 150,000 — — $ 4.00 4/19/2027 — — — — 100,000 — — $ 3.00 1/1/2024 — — — — 100,000 — — $ 12.00 1/1/2025 — — — — 100,000 — — $ 12.00 12/31/2025 — — — — 100,000 — — $ 12.00 12/31/2026 — — — — 17,500 — — $ 12.34 3/11/2027 — — — — 13,124 4,376 (1) — $ 3.28 4/5/2028 — — — — 120,000 330,000 (2) — $ 1.58 9/12/2028 — — — — — — — — — 10,084 (3) $ 16,134 — — — — — — — 330,000 (2) $ 528,000 — — Rani R. Kohen (5) 1,000,000 (4) — — $ 0.60 11/15/2025 — — — — 1,140,000 (4) — — $ 6.00 9/1/2024 — — — — 1,500,000 (4)(5) — — $ 3.00 (5) 11/21/2024 — — — — 500,000 (4)(5) — — $ 4.00 (5) 11/21/2024 — — — — 1,000,000 (4)(5) — — $ 6.00 (5) 11/21/2024 — — — — 460,000 (4)(6) 680,000 (6) — $ 12.00 (6) 1/1/2027 — — — — Marc-Andre Boisseau 10,000 — — $ 12.34 3/11/2025 — — — — 40,000 80,000 (7) — $ 3.28 4/5/2028 — — — — — — — — — 105,000 (8) $ 168,000 — — Patricia Barron 200,000 — — $ 0.60 11/15/2025 — — — — 150,000 — — $ 1.20 11/15/2025 — — — — 150,000 — — $ 1.80 11/15/2025 — — — — 50,000 — — $ 3.00 4/19/2027 — — — — 50,000 — — $ 4.00 4/19/2027 — — — — 100,000 — — $ 6.00 9/1/2024 — — — — 25,000 75,000 (9) — $ 2.08 8/4/2028 — — — — — — — — — 75,000 (9) $ 120,000 — — Steven M. Schmidt 60,000 — $0.10 (10) 10/1/2024 — — — — 60,000 — — $ 6.00 (10) 10/1/2024 — — — — 75,000 25,000 (11) — $ 12.00 (11) 6/1/2026 25,000 (12) $ 40,000 — — * Based on the closing stock price of our common stock of $1.60 on December 29, 2023, the last trading day of the 2023 fiscal year. 65 (1) These options were granted pursuant to the Director Compensation Program and vest in twelve equal monthly installments beginning on April 30, 2023. (2) These options and RSUs vest as follows: 300,000 will vest in six semi-annual installments of 50,000, beginning on March 12, 2024, and 30,000 will vest on March 12, 2027. (3) On November 9, 2022, the Company entered into the Advisory Agreement (as defined below) with Newbridge Securities Corporation, pursuant to which Newbridge Securities Corporation agreed to provide financial and general corporate advisory services to the Company. Pursuant to the Advisory Agreement, the Company agreed to issue to affiliates of Newbridge Securities Corporation an aggregate of 200,000 restricted shares of the Company’s common stock, which vest on the following schedule: 50,000 shares on November 9, 2022 and 50,000 shares on each of the six-, 12- and 18-month anniversaries of such date. Mr. Sokolow received 40,333 of the restricted shares, of which 10,084 were unvested as of December 31, 2023 and will vest on May 9, 2024. In the event the Advisory Agreement is terminated prior to its expiration, any shares that have not vested as of such date will be forfeited. (4) These options were granted pursuant to executive chairman agreements entered into with Mr. Kohen. (5) Pursuant to Mr. Kohen’s chairman agreement, Mr. Kohen was granted the following supplemental bonus options as it was determined that the applicable performance conditions had been satisfied: (i) options to purchase 1,500,000 shares of common stock at an exercise price of $3.00 per share; (ii) options to purchase 500,000 shares of common stock at an exercise price of $4.00 per share; and (iii) options to purchase 1,000,000 shares of common stock at an exercise price of $6.00 per share. These options were exercisable as of the date of grant and expire November 21, 2024. Pursuant to the chairman agreement, Mr. Kohen has the following options as supplemental bonus compensation, subject to the Company achieving the specified market capitalization: (i) options to purchase 500,000 shares of common stock at $4.00 per share, upon the Company achieving each of the following market capitalizations: $1.5 billion and $2.0 billion; (ii) options to purchase 500,000 shares of common stock at $5.00 per share, upon the Company achieving each of the following market capitalizations: $2.5 billion and $3.0 billion; (iii) options to purchase 500,000 shares of common stock at an exercise price of $6.00 per share, upon the Company achieving each of the following market capitalizations: $1.5 billion and $2.0 billion; (iv) options to purchase 500,000 shares of common stock at an exercise price of $7.00 per share, upon the Company achieving each of the following market capitalizations: $3.0 billion, $4.0 billion, $5.0 billion and $6.0 billion; and (v) options to purchase 500,000 shares of common stock at an exercise price of $8.00 per share, upon the Company achieving each of the following market capitalizations: $7.0 billion, $8.0 billion, $9.0 billion and $10.0 billion. Mr. Kohen also received supplemental bonus compensation such that, in the event the Company achieves a $10.0 billion valuation, for each valuation increase of $1.0 billion up to $30.0 billion Company valuation, Mr. Kohen will receive an option to purchase 500,000 shares at an exercise price of $12.00 per share. (6) These options vest as follows: 460,000 vested on January 1, 2023 and 340,000 will vest on each of January 1, 2024 and 2025. (7) These options vest in equal annual installments on each of April 5, 2024 and 2025. (8) Of these RSUs, 80,000 vest in in equal annual installments on each of April 5, 2024 and 2025 and 25,000 vest in equal installments on February 15, 2024 and May 15, 2024. (9) These options and RSUs vest in three equal annual installments on each of August 4, 2024, 2025 and 2026. (10) Options to purchase 60,000 shares have an exercise price of $0.10 per share and options to purchase an additional 60,000 shares have an exercise price of $6.00 per share. (11) These options vest on June 1, 2024 and have an exercise price of $12.00 per share. (12) Mr. Schmidt’s employment agreement provides for an annual grant of 25,000 shares of common stock with the last installment vesting on June 1, 2024. 66 Agreements with Named Executive Officers John P. Campi (Co-Chief Executive Officer) Effective September 1, 2019, the Company entered into an Executive Employment Agreement with John Campi, then its Chief Executive Officer and Chief Financial Officer (the “Campi Agreement”), which superseded Mr. Campi’s previous employment agreement effective September 1, 2016. Effective September 2023, Mr. Campi began serving under the Campi Agreement as Co-Chief Executive Officer. The Campi Agreement provided for an initial term of one year, which expired August 31, 2020. The term may be, and has been, renewed by the mutual agreement of Mr. Campi and the Company. Subject to other customary terms and conditions of such agreements, the Campi Agreement provides that Mr. Campi will receive: (i) a base salary of $150,000 per year, which may be adjusted each year at the discretion of the board; and (ii) a sign-on bonus of a stock option to purchase 120,000 shares of common stock at an exercise price of $6.00 per share, which vested in its entirety on December 31, 2020;. Mr. Campi was previously eligible to receive an incentive compensation consisting of (a) a cash component, paid on an annual basis, equal to (x) 0.25% of the Company’s annual gross revenue and (y) 3.0% of the Company’s annual net income, and (b) a stock option component, consisting of five-year options to purchase shares of common stock in an amount equal to 0.5% of the Company’s quarterly net income, the exercise price of which will be determined at the time such options are granted. In March 2024, Mr. Campi entered into a commission termination agreement, terminating the incentive compensation-related provisions in his employment agreements and agreeing no amounts would be paid pursuant to such provisions for prior periods Mr. Campi is also entitled to receive expense reimbursement for reasonable expenses, including travel and entertainment, incurred in the performance of his duties. Pursuant to the Campi Agreement, Mr. Campi may be terminated for “cause,” which is defined as an act of fraud, embezzlement, theft or neglect of or refusal to substantially perform the duties of his employment that is materially injurious to the financial condition or business reputation of the Company; a material violation of the Campi Agreement by Mr. Campi that is not cured within 30 days of written notice; and Mr. Campi’s death, disability or incapacity. Following the expiration of the initial term, the Campi Agreement may be terminated by the board of directors at its discretion, in which case Mr. Campi will receive a payment equal to 50% of his then-applicable annual base salary. In addition, Mr. Campi may terminate the Campi Agreement at his discretion by providing at least 30 days’ prior written notice to the Company. In the event the Company is acquired, is the non-surviving entity in a merger or sells all or substantially all of its assets, the Campi Agreement will survive, and the Company will use its best efforts to ensure that the transferee or surviving company is bound by the provisions of the Campi Agreement. All shares granted will vest immediately. Leonard J. Sokolow (Co-Chief Executive Officer) In connection with his employment as Co-Chief Executive Officer, the Company and Mr. Sokolow entered into an employment agreement, effective as of September 12, 2023 (the “Sokolow Agreement”). Pursuant to the Sokolow Agreement, Mr. Sokolow will receive a base salary of $160,000 per year, subject to annual review and adjustment by the compensation committee, and a minimum bonus every six months during the term of the Sokolow Agreement equal to $40,000 in cash or stock, as elected by Mr. Sokolow. In addition, Mr. Sokolow will be eligible to receive a performance-based bonus, payable in equity and/or cash, subject to the achievement of performance metrics and other criteria as determined by the Executive Chairman and approved by the compensation committee. Subject to the compensation committee’s approval, the Company and Mr. Sokolow may agree on an annual bonus structure (in addition to the minimum bonus described above) based on performance metrics and other criteria, and such bonus payments could be a combination of stock, stock options, and cash. Pursuant to the Sokolow Agreement, on September 12, 2023, the compensation committee granted to Mr. Sokolow (i) 450,000 RSUs, 120,000 of which vested on the date of grant, 300,000 of which will vest in six semi-annual installments of 50,000, beginning on March 12, 2024, and 30,000 of which will vest on March 12, 2027; and (ii) five-year stock options to purchase up to 450,000 shares of the Company’s common stock at an exercise price of $1.58 per share, 120,000 of which vested on the date of grant, 300,000 of which will vest in six semi-annual installments of 50,000, beginning on March 12, 2024, and 30,000 of which will vest on March 12, 2027, in each case subject to continuous employment through the applicable vesting date. The awards were granted pursuant to the terms and conditions of the 2021 Plan and applicable equity award agreements. 67 Mr. Sokolow is also entitled to receive expense reimbursement for reasonable expenses, approved in writing by the Company, incurred in the performance of his duties. He is entitled up to four weeks of vacation per year and to participate in the Company’s benefit programs for executive employees. The Sokolow Agreement also contains non-competition and non-solicitation covenants and provides for severance under certain circumstances as described in the Sokolow Agreement. In particular, in the event the Company terminates Mr. Sokolow’s employment for any reason other than for Disability or Cause (as such terms are defined in the Sokolow Agreement), the Company gives notice of nonrenewal of the Sokolow Agreement, or if Mr. Sokolow terminates his employment for Good Reason (as defined in the Sokolow Agreement), the Company will provide the following benefits: (i) severance pay equal to six months of Mr. Sokolow’s ending annual base salary, minus withholdings, (ii) a gross amount equal to six months of the cost of Mr. Sokolow’s monthly health insurance premium for him and his eligible dependents (if any), conditioned on Mr. Sokolow electing to continue health insurance coverage through COBRA, and (iii) the portions of Mr. Sokolow’s RSU and stock option awards that are due to vest during six months following his termination date will vest on their respective vesting dates. The Sokolow Agreement has a three-year term, with automatic renewal annually following the initial three-year term for an additional one year unless terminated by either party by providing at least 30-days’ written notice prior to the end of the then term. Rani R. Kohen (Executive Chairman) Effective September 1, 2019, the Company entered into an Executive Chairman Agreement with Rani R. Kohen (as amended, the “2019 Chairman Agreement”) to serve as the Company’s Executive Chairman and Chairman of the board of directors, which superseded Mr. Kohen’s previous chairman agreement effective September 1, 2016. Effective as of January 1, 2022, the Company entered into a new Executive Chairman Agreement with Mr. Kohen (the “Chairman Agreement”), which superseded the 2019 Chairman Agreement and contains substantially the same terms. The Chairman Agreement provides that Mr. Kohen will serve for an initial term of three years and that the Chairman Agreement will automatically renew unless Mr. Kohen or the board of directors decide otherwise. Subject to other customary terms and conditions of such agreements, the Chairman Agreement provides that Mr. Kohen will receive: (i) a base salary of $300,000 per year commencing January 1, 2022 (an increase from $250,000 per year under the 2019 Chairman Agreement), which will be increased by the Company in the event the Company has a significant cash raise; (ii) annual equity compensation consisting of options to purchase 1,020,000 shares of common stock at an exercise price of $12.00 per share, which vest in three equal annual installments on each of January 1, 2023, 2024 and 2025 (subject to certain exceptions) and have a five-year term; (iii) a sign-on bonus stock option to purchase 120,000 shares of common stock at an exercise price of $12.00 per share, which vested in its entirety on January 1, 2023 and has a five-year term; (iv) supplemental bonus compensation of stock options to purchase up to 6,000,000 shares of common stock at an exercise price ranging between $6.00 and $8.00 per share, determined based on the achievement of specified market capitalizations of the Company, as described further below, which have a five-year term; (v) supplemental bonus compensation such that, in the event the Company achieves a $10.0 billion valuation, for each valuation increase of $1.0 billion up to $30.0 billion Company valuation, Mr. Kohen will receive an option to purchase 500,000 shares at an exercise price of $12.00 per share; (vi) supplemental bonus compensation of stock options to purchase up to 4,000,000 shares of common stock at an exercise price ranging between $3.00 and $5.00 per share, determined based on the achievement of specified market capitalizations of the Company, as provided by the previous chairman agreement and described further below; and (vii) incentive compensation equal to 0.5% of the Company’s gross revenue, which will be paid in cash, stock and/or options on an annual basis. In the event the Company exceeds a $30.0 billion valuation, the Company and Mr. Kohen will negotiate a mutually acceptable amendment to the Chairman Agreement. 68 Mr. Kohen is eligible for the following supplemental bonus compensation under the Chairman Agreement (in addition to the supplemental bonus compensation described in clause (v) above): (i) options to purchase 500,000 shares of common stock at an exercise price of $6.00 per share, upon the Company achieving each of the following market capitalizations: $500.0 million, $1.0 billion, $1.5 billion and $2.0 billion; (ii) options to purchase 500,000 shares of common stock at an exercise price of $7.00 per share, upon the Company achieving each of the following market capitalizations: $3.0 billion, $4.0 billion, $5.0 billion and $6.0 billion; and (iii) options to purchase 500,000 shares of common stock at an exercise price of $8.00 per share, upon the Company achieving each of the following market capitalizations: $7.0 billion, $8.0 billion, $9.0 billion and $10.0 billion. Mr. Kohen additionally remains eligible to receive the following supplemental bonus compensation, pursuant to the prior chairman agreement: (i) options to purchase 500,000 shares of common stock at $3.00 per share, upon the Company achieving each of the following market capitalizations: $300.0 million, $500.0 million and $750.0 million; (ii) options to purchase 500,000 shares of common stock at $4.00 per share, upon the Company achieving each of the following market capitalizations: $1.0 billion, $1.5 billion and $2.0 billion; and (iii) options to purchase 500,000 shares of common stock at $5.00 per share, upon the Company achieving each of the following market capitalizations: $2.5 billion and $3.0 billion. Of these, as of December 31, 2023, the following have vested: (i) options to purchase 1.5 million shares at an exercise price of $3.00 per share, (ii) options to purchase 500,000 shares at an exercise price of $4.00 per share; and (iii) options to purchase 1.0 million shares at an exercise price of $6.00 per share. Mr. Kohen is also entitled to receive a car allowance of $1,000 per month, reimbursement for cell phone costs and expense reimbursement for reasonable expenses, including travel and entertainment, incurred in the performance of his duties. In addition, in the event Mr. Kohen invents additional new products and applications for the Company, including products based on the Company’s existing intellectual property, Mr. Kohen will be entitled to receive additional compensation, which will be determined by the board of directors. Pursuant to the Chairman Agreement, Mr. Kohen may be terminated for “cause,” which is defined as an act of fraud, embezzlement or theft; a material violation of the Chairman Agreement by Mr. Kohen that is not cured within 60 days of written notice; and Mr. Kohen’s death, disability or incapacity. During the initial term of the Chairman Agreement, if Mr. Kohen is terminated without cause, (i) the Company will pay Mr. Kohen an amount calculated by multiplying Mr. Kohen’s monthly salary at the time of such termination by the number of months remaining in the initial term; (ii) Mr. Kohen’s annual equity compensation will vest on a pro rata basis; and (iii) Mr. Kohen will receive full payment of all unpaid incentive compensation. Following the expiration of the initial term, the Chairman Agreement may be terminated by the board of directors at its discretion, in which case Mr. Kohen will receive full payment for all incentives and will be entitled to compensation for his invented products. Mr. Kohen may terminate the Chairman Agreement at his discretion by providing at least 90 days’ prior written notice to the Company. In the event Mr. Kohen’s employment is terminated by reason of his death, the Company will pay Mr. Kohen’s beneficiaries 12 months of Mr. Kohen’s base salary or Mr. Kohen’s base salary through the remainder of the year in which Mr. Kohen’s death occurs, whichever is greater, and all annual stock compensation, incentive compensation and supplemental bonus compensation due to Mr. Kohen will be bequeathed to his beneficiaries. In the event the Company is acquired, is the non-surviving party in a merger or sells all or substantially all of its assets, the Chairman Agreement will not be terminated, and the Company will ensure that the transferee or surviving company is bound by the provisions of the Chairman Agreement. All shares granted and any other compensation will vest and be paid immediately. Patricia Barron (Chief Operations Officer) Effective September 1, 2019, the Company entered into an Executive Employment Agreement with Patricia Barron, its Chief Operations Officer (the “Barron Agreement”), which superseded Ms. Barron’s previous employment agreement effective July 1, 2016. The Barron Agreement provided for an initial term of one year, which term may be, and has been, renewed by the mutual agreement of Ms. Barron and the Company. Subject to other customary terms and conditions of such agreements, the Barron Agreement provides that Ms. Barron will receive: (i) a base salary of $150,000 per year, which may be adjusted each year at the discretion of the board; (ii) a sign-on bonus of a stock option to purchase 100,000 shares of common stock at an exercise price of $6.00 per share, which vested in its entirety on December 31, 2020. Ms Barron was previously eligible to receive cash incentive compensation equal to 0.25% of the Company’s net revenue, payable on an annual or quarterly basis. In March 2024, Ms. Barron entered into a commission termination agreement, terminating the incentive compensation-related provisions in her employment agreements and agreeing no amounts would be paid pursuant to such provisions for prior periods. Ms. Barron is also entitled to receive expense reimbursement for reasonable expenses, including travel and entertainment, incurred in the performance of her duties. 69 Pursuant to the Barron Agreement, Ms. Barron may be terminated for “cause,” which is defined as an act of fraud, embezzlement, theft or neglect of or refusal to substantially perform the duties of her employment that is materially injurious to the financial condition or business reputation of the Company; a material violation of the Barron Agreement by Ms. Barron that is not cured within 30 days of written notice; and Ms. Barron’s death, disability or incapacity. Following the expiration of the initial term, the Barron Agreement may be terminated by the board of directors at its discretion, in which case Ms. Barron will receive one month of her then-applicable annual base salary for every year of employment by the Company, as well as any unpaid incentive compensation. In addition, Ms. Barron may terminate the Barron Agreement at her discretion by providing at least 30 days’ prior written notice to the Company. In the event the Company is acquired, is the non-surviving entity in a merger or sells all or substantially all of its assets, the Barron Agreement will survive, and the Company will use its best efforts to ensure that the transferee or surviving company is bound by the provisions of the Barron Agreement. All shares granted will vest immediately. Steven M. Schmidt (President) The Company initially entered into a consultant agreement with Steven M. Schmidt on August 20, 2019, as amended June 1, 2021 (as amended, the “Schmidt Agreement”), pursuant to which amendment Mr. Schmidt agreed to serve as the Company’s President. The Schmidt Agreement provides for a three-year term, which may be renewed upon the signed written consent of the Company and Mr. Schmidt. Subject to other customary terms and conditions of such agreement, the Schmidt Agreement provides that Mr. Schmidt will receive: (i) a five-year option to purchase 60,000 shares of common stock at an exercise price of $0.10 per share, which vested in three equal annual installments on each of October 1, 2020, 2021 and 2022; (ii) a five-year option to purchase 60,000 shares of common stock at an exercise price of $6.00 per share, which vested in three equal annual installments on each of October 1, 2020, 2021 and 2022; (iii) a stock bonus of 20,000 shares, payable upon achievement of certain sales program goals; (iv) a signing bonus of 25,000 shares of common stock; (v) a five-year option to purchase 100,000 shares of common stock at an exercise price of $12.00 per share, which vests in four equal annual installments on each of June 1, 2021, 2022, 2023 and 2024 (which includes a signing bonus of options to purchase 25,000 shares); and (vi) an annual grant of 25,000 shares of common stock on each of June 1, 2022, 2023 and 2024. Mr. Schmidt may be eligible to receive additional bonus compensation as determined by the Company. Pursuant to the Schmidt Agreement, Mr. Schmidt may be terminated for “cause,” which is defined as an act of fraud, embezzlement, theft or neglect of or refusal to substantially perform his duties that is materially injurious to the financial condition or business reputation of the Company; a material violation of the Schmidt Agreement by Mr. Schmidt that is not cured within 30 days of written notice; Mr. Schmidt’s death, disability or incapacity; willful misconduct that damages the Company, its reputation, products, services or customers; and being charged with a felony or misdemeanor involving moral turpitude. The Company may terminate the Schmidt Agreement at any time, in which case Mr. Schmidt will immediately receive all shares of common stock provided for under the Schmidt Agreement and all options provided for will immediately vest. Mr. Schmidt may terminate the Schmidt Agreement at his discretion by providing at least 30 days’ prior written notice to the Company. In the event the Company is acquired, is the non-surviving entity in a merger or sells all or substantially all of its assets, the provisions and rights provided for in the Schmidt Agreement will survive, and the Company will use its best efforts to ensure that the transferee or surviving company is bound by the provisions of the Schmidt Agreement. All shares granted will vest immediately. 70 Marc-Andre Boisseau (Chief Financial Officer) Effective January 1, 2022, the Company entered into an employment agreement with Marc-Andre Boisseau, pursuant to which Mr. Boisseau agreed to serve as the Company’s Chief Financial Officer (the “Boisseau Agreement”). Subject to other customary terms and conditions of such agreement, the Boisseau Agreement provides that Mr. Boisseau will: (i) receive a base salary of $144,000 per year, subject to annual review and adjustment; (ii) receive a signing bonus consisting of (1) 10,000 shares of common stock, which vested in four equal installments at the end of each quarter in 2022 and (2) a three-year stock option to purchase 10,000 shares of common stock, which vested in four equal installments at the end of each quarter in 2022; and (iii) be eligible to receive performance-based compensation in the form of a bonus, payable in equity and/or cash, as determined by the compensation committee, subject to the achievement of performance metrics and other criteria as determined by the Executive Chairman and approved by the compensation committee. Mr. Boisseau is also entitled to receive expense reimbursement for reasonable expenses, approved in writing by the Executive Chairman and Chief Executive Officer, incurred in the performance of his duties. The Boisseau Agreement also contains customary non-competition and non-solicitation covenants and does not provide for any specified severance benefits. The Boisseau Agreement provides that Mr. Boisseau’s employment is “at will,” and either party may terminate his employment at any time and for any reason, without cause, upon 90 days’ advance written notice. Stock Incentive Plans 2021 Stock Incentive Plan The 2021 Plan was adopted by our board of directors in December 2021 and approved by our stockholders in February 2022 and became effective February 9, 2022 (the “Effective Date”). The 2021 Plan is the successor to the Company’s 2018 Stock Incentive Plan (as amended and restated, the “2018 Plan”), and no further awards may be granted under the 2018 Plan after the Effective Date. The following provides a summary of the 2021 Plan. Eligibility and Types of Awards The 2021 Plan authorizes the grant of equity-based compensation awards to those employees of, and consultants to, the Company and its subsidiaries who are selected by the compensation committee, and the 2021 Plan also authorizes the compensation committee to grant awards to non-employee directors of the Company. Awards under the 2021 Plan may be granted in the form of stock options, stock appreciation rights (sometimes referred to as “SARs”), restricted shares, RSUs, and other share-based awards. Administration The compensation committee, which is comprised of non-employee directors, will administer awards granted under the 2021 Plan. To the extent permitted by applicable law, the compensation committee may delegate its authority to one or more officers or directors of the Company. Further, the board of directors may reserve to itself any of the compensation committee’s authority and may act as the administrator of the 2021 Plan. Shares Available Subject to adjustments as described below, the total number of shares that may be delivered under the 2021 Plan will not exceed 20,000,000 shares (all of which potentially may be issued pursuant to awards of incentive stock options). Shares tendered or withheld to pay the exercise price of a stock option or to cover tax withholding, and shares repurchased by the Company with stock option proceeds, will not be added back to the number of shares available under the 2021 Plan. Upon exercise of any stock appreciation right that may be settled in shares, the full number of shares subject to that award will be counted against the number of shares available under the 2021 Plan, regardless of the number of shares used to settle the stock appreciation right upon exercise. To the extent that any award under the 2021 Plan or any award granted under the 2018 Plan prior to the effectiveness of the 2021 Plan is forfeited, canceled, surrendered, or terminated without the issuance of shares or an award is settled only in cash, the shares subject to such awards granted but not delivered will be added to the number of shares available for awards under the 2021 Plan. Shares available for awards under the 2021 Plan may consist of authorized and unissued shares, treasury shares (including shares purchased by the Company in the open market) or a combination of the foregoing. 71 Stock Options Subject to the terms and provisions of the 2021 Plan, options to purchase shares may be granted to eligible individuals at any time and from time to time as determined by the compensation committee. Options may be granted as incentive stock options (to employees only) or as nonqualified stock options. The compensation committee will determine the number of options granted to each recipient. Each option grant will be evidenced by an award agreement that specifies whether the options are intended to be incentive stock options or nonqualified stock options and such additional limitations, terms and conditions as the compensation committee may determine, consistent with the provisions of the 2021 Plan. The exercise price for each stock option may not be less than 100% of the fair market value of a share of common stock on the date of grant, and each stock option shall have a term no longer than 10 years. Stock options granted under the 2021 Plan may be exercised by such methods and procedures as determined by the compensation committee from time to time. Stock Appreciation Rights The compensation committee in its discretion may grant SARs under the 2021 Plan. A SAR entitles the holder to receive from the Company upon exercise an amount equal to the excess, if any, of the aggregate fair market value of a specified number of shares that are the subject of such SAR over the aggregate exercise price for the underlying shares. The exercise price for each SAR may not be less than 100% of the fair market value of a share on the date of grant, and each SAR shall have a term no longer than 10 years. The Company may make payment in settlement of the exercise of a SAR by delivering shares, cash or a combination of shares and cash as set forth in the applicable award agreement. Each SAR will be evidenced by an award agreement that specifies the date and terms of the award and such additional limitations, terms and conditions as the compensation committee may determine, consistent with the provisions of the 2021 Plan. Restricted Shares Under the 2021 Plan, the compensation committee may grant or sell restricted shares to participants (i.e., shares that are subject to a substantial risk of forfeiture based on continued service and/or the achievement of performance objectives and that are subject to restrictions on transferability) under the 2021 Plan. Except for these restrictions and any others imposed by the compensation committee, upon the grant of restricted shares, the recipient generally will have rights of a stockholder with respect to the restricted shares, including the right to vote the restricted stock and to receive dividends and other distributions paid or made with respect to the restricted shares. However, any dividends payable with respect to unvested restricted shares will be accumulated or reinvested in additional restricted shares until the vesting of the award. During the applicable restriction period, the recipient may not sell, transfer, pledge, exchange or otherwise encumber the restricted shares. Each award of restricted shares will be evidenced by an award agreement that specifies the terms of the award and such additional limitations, terms and conditions, which may include restrictions based upon the achievement of performance objectives, as the compensation committee may determine. Restricted Share Units The compensation committee may grant or sell RSUs to participants under the 2021 Plan. RSUs constitute an agreement to deliver shares (or an equivalent value in cash) to the participant at the end of a specified restriction period and/or upon the achievement of specified performance objectives, subject to such other terms and conditions as the compensation committee may specify, consistent with the provisions of the 2021 Plan. RSUs are not common shares and do not entitle the recipients to any of the rights of a stockholder. RSUs will be settled in cash, shares or a combination of cash and shares. Each RSU award will be evidenced by an award agreement that specifies the terms of the award and such additional limitations, terms and conditions as the compensation committee may determine, which may include restrictions based upon the achievement of performance objectives. 72 Other Share-Based Awards The compensation committee may grant other share-based awards to participants under the 2021 Plan. Other share-based awards are awards that are valued in whole or in part by reference to shares of common stock, or are otherwise based on the value of the common stock, such as unrestricted shares or time-based or performance-based units that are settled in shares and/or cash. Each other share-based award will be evidenced by an award agreement that specifies the terms of the award and such additional limitations, terms and conditions as the compensation committee may determine, consistent with the provisions of the 2021 Plan. Dividend Equivalents As determined by the compensation committee in its discretion, RSUs and other share-based awards may provide the participant with a deferred and contingent right to receive dividend equivalents, either in cash or in additional shares. Any such dividend equivalents will be accumulated or deemed reinvested until such time as the underlying award becomes vested (including, where applicable, vesting based on the achievement of performance objectives). No dividend equivalents may be granted with respect to shares underlying any stock option or SAR. Change in Control If a participant is a party to an employment, retention, change in control, severance or similar agreement with the Company or a subsidiary that addresses the effect of a change in control on the participant’s awards, then that agreement will control the treatment of the participant’s awards under the 2021 Plan in the event of a change in control. In all other cases, the compensation committee retains the discretion to determine the treatment of awards granted under the 2021 Plan in the event of a change in control. For example, the compensation committee may determine (without the consent of any participant) to accelerate the vesting of any award (in whole or in part), to make cash payments in cancellation of vested awards, or to cancel any stock options or SARs without consideration if the price per share in the change of control transaction does not exceed the exercise price per share of the applicable award. The 2021 Plan generally defines a change in control to include the acquisition of more than 50% of the Company’s then-outstanding common stock, other than acquisitions directly from, or by, the Company or by any employee benefit plan sponsored or maintained by the Company, and the consummation of a reorganization, merger, consolidation, sale or other disposition of all or substantially all of the Company’s assets, unless, following such transaction, the Company’s stockholders own more than 50% of the common stock of the resulting entity in substantially the same proportions as their ownership of the Company’s common stock prior to the transaction, no stockholder beneficially owns, directly or indirectly, 50% or more of the outstanding common stock of the entity resulting from such transaction (except to the extent that such ownership existed prior to the transaction), and at least a majority of the members of the board of directors of the resulting entity were members of the Company’s board of directors at the time of the transaction. The 2021 Plan contains the complete, detailed definition of change in control. Adjustments In the event of any equity restructuring, such as a stock dividend, stock split, spin-off, rights offering or recapitalization through a large, nonrecurring cash dividend, the compensation committee will adjust the number and kind of shares that may be delivered under the 2021 Plan, the number and kind of shares subject to outstanding awards and the exercise price or other price of shares subject to outstanding awards, to prevent dilution or enlargement of rights. In the event of any other change in corporate capitalization, or in the event of a merger, consolidation, liquidation or similar transaction, the compensation committee may, in its discretion, make such an equitable adjustment, to prevent dilution or enlargement of rights. However, unless otherwise determined by the compensation committee, the number of shares subject to any award will always be rounded down to a whole number. Moreover, in the event of any such transaction or event, the compensation committee, in its discretion, may provide in substitution for any or all outstanding awards such alternative consideration (including cash) as it, in good faith, may determine to be equitable in the circumstances and may require in connection therewith the surrender of all awards so replaced. T he compensation committee, in its sole discretion, may also provide at any time for the exercisability of outstanding stock options and SARs, the lapse of time-based vesting restrictions and the satisfaction of performance objectives applicable to outstanding awards, or the waiver of any other limitation or requirement under any awards. 73 Transferability Except as the compensation committee otherwise determines, awards granted under the 2021 Plan will not be transferable by a participant other than by will or the laws of descent and distribution. Except as otherwise determined by the compensation committee, stock options and SARs will be exercisable during a participant’s lifetime only by him or her or, in the event of the participant’s incapacity, by his or her guardian or legal representative. Any award made under the 2021 Plan may provide that any shares issued as a result of the award will be subject to further restrictions on transfer. No Repricing of Stock Options or Stock Appreciation Rights Except in connection with an adjustment involving a change in capitalization or other corporate transaction or event as provided for in the 2021 Plan, the compensation committee may not authorize the amendment of any outstanding stock option or stock appreciation right to reduce the exercise price, and no outstanding stock option or stock appreciation right may be cancelled in exchange for stock options or stock appreciation rights having a lower exercise price, or for another award or for cash, without the approval of the Company’s stockholders. Compensation Recovery Policy Awards granted under the 2021 Plan are subject to forfeiture or recoupment pursuant to the Company’s Compensation Recovery Policy. Term of the 2021 Plan; Amendment and Termination No awards may be granted under the 2021 Plan after the date that is 10 years from the Effective Date, or such earlier date as the 2021 Plan may be terminated by the board of directors. The board of directors may, without stockholder approval, amend or terminate the 2021 Plan, except in any respect as to which stockholder approval is required by the 2021 Plan, by law, regulation or the rules of an applicable stock exchange. 2018 Stock Incentive Plan (as Amended and Restated) The board of directors initially approved the 2018 Plan on April 26, 2018, and in each of August 2019 and November 2021, the board of directors approved the amendment and restatement of the 2018 Plan. Prior to the effectiveness of the 2021 Plan, the Company, acting through the board, or the applicable committee, was authorized to grant stock options, restricted stock awards, deferred bonus awards, deferred stock awards and performance share awards. In connection with the effectiveness of our 2021 Plan, no further awards will be granted under the 2018 Plan. However, all outstanding awards under the 2018 Plan will continue to be governed by their existing terms. If the Company is merged or consolidated with another entity or sells or otherwise disposes of substantially all of its assets to another company while options or stock awards remain outstanding under the 2018 Plan, unless provisions are made in connection with such transaction for the continuance of the 2018 Plan and/or the assumption or substitution of such options or stock awards with new options or stock awards covering the stock of the successor company, or parent or subsidiary thereof, with appropriate adjustments as to the number and kind of shares and prices, then all outstanding options and stock awards that have not been continued or assumed, or for which a substituted award has not been granted, will, whether or not vested or then exercisable, unless otherwise specified in the stock option or stock award agreement, terminate immediately as of the effective date of any such merger, consolidation or sale. 74 2015 Stock Incentive Plan The Company previously granted equity awards under the 2015 Plan, which contained substantially the same terms as the 2018 Plan, described above. The Company no longer grants awards under the 2015 Plan as it was replaced by the 2018 Plan. Termination or Change in Control Benefits Our named executive officers may become entitled to certain benefits or enhanced benefits in connection with a qualifying termination and/or a change in control of our Company. Our named executive officers’ employment agreements entitle them to certain benefits upon certain terminations or in connection with a change in control of the Company. For additional discussion, see “Agreements with Named Executive Officers” above. Each of our named executive officers holds equity awards that were granted subject to the general terms and termination and change in control provisions of our stock incentive plans. The forms of agreements governing outstanding awards granted under the plans contain additional such provisions. For additional discussion, please see “2018 Stock Incentive Plan (as Amended and Restated)” and “2021 Stock Incentive Plan” above. Compensation Recovery Policy During 2023, the board of directors adopted the Company’s Compensation Recovery Policy to comply with SEC and Nasdaq Stock Market rules for the clawback of certain executive compensation in the event that we are required to prepare a restatement of our financial statements due to material noncompliance with any financial reporting requirement under the securities laws. In the event of such a restatement, the Compensation Recovery Policy provides that the compensation committee will cause the Company to promptly recover any erroneously awarded incentive-based compensation received by any covered executive officer during the three completed fiscal years immediately preceding the date on which the Company is required to prepare the accounting restatement. Covered executive officers include both current and former executive officers, and incentive-based compensation includes any compensation that is granted, earned, or vested based wholly or in part on the attainment of a financial reporting measure. Financial reporting measures are those that are determined and presented in accordance with the accounting principles used in preparing our financial statements, and any measures that are derived wholly or in part from such measures. The amount required to be recovered under the Compensation Recovery Policy in the event of an accounting restatement generally will equal the amount of incentive-based compensation received by the covered executive officer that exceeds the amount of such compensation that otherwise would have been received had it been determined based on the restated amounts, computed without regard to any taxes paid. The Compensation Recovery Policy is effective with respect to covered incentive-based compensation received by a covered executive officer on or after October 2, 2023. The full text of the Compensation Recovery Policy is attached to this Annual Report as Exhibit 97. DIRECTOR COMPENSATION Director Compensation Our board of directors approved a program for non-employee director compensation (the “Director Compensation Program”) in March 2022, and the board of directors amended the Director Compensation Program in March 2023. Under the Director Compensation Program, for service on our board, non-employee directors receive an annual cash retainer of $30,000, paid in quarterly installments. Directors may elect to have the cash retainer paid in the form of shares of common stock.,. For 2023, shares were granted on the last day of each quarter, with the number of shares granted determined based on the opening price per share of common stock on Nasdaq on the last day of the quarter. For 2024, all shares will be granted on December 31, 2024, with the number of shares granted to be determined based on the opening price per share of common stock on Nasdaq on such date. In addition, on the third trading day after the earlier of the date of the earnings release or the date the annual report is filed on Form 10-K (the “Program Grant Date”), non-employee directors receive an annual grant of (i) 5,000 shares of restricted stock, which vest immediately on the Program Grant Date, and (ii) options to purchase up to 5,000 shares of common stock with an exercise price equal to the closing price of common stock on Nasdaq on Program Grant Date, which will vest in twelve equal monthly installments beginning on the last day of the month in which the options were granted and expire five years from the Program Grant Date. 75 For service as a member of the Audit Committee, Compensation Committee and/or Nominating and Corporate Governance Committee, non-employee directors each receive an additional annual grant of (i) 3,000 shares of restricted stock, which vest immediately on the Program Grant Date, and (ii) options to purchase up to 3,000 shares of common stock with an exercise price equal to the closing price of common stock on Nasdaq on the Program Grant Date, which will vest in twelve equal monthly installments beginning on the last day of the month in which the options were granted and expire five years from the Program Grant Date. For service as the Chair of the Audit Committee, Compensation Committee and/or Nominating and Corporate Governance Committee, non-employee directors each receive an additional annual grant of (i) 2,000 shares of restricted stock, which vest immediately on the Program Grant Date, and (ii) options to purchase up to 2,000 shares of common stock with an exercise price equal to the closing price of common stock on Nasdaq on the Program Grant Date, which will vest in twelve equal monthly installments beginning on the last day of the month in which the options were granted and expire five years from the Program Grant Date. For non-employee members of the Business Strategy and Development Committee of the Board, non-employee directors each receive an additional annual grant of (i) 12,500 shares of restricted stock, which vest immediately on the Program Grant Date, and (ii) options to purchase up to 12,500 shares of common stock with an exercise price equal to the closing price of common stock on Nasdaq on the Program Grant Date, which will vest in twelve equal monthly installments beginning on the last day of the month in which the options were granted and expire five years from the Program Grant Date. Non-employee directors also receive reimbursement of reasonable out-of-pocket expenses for attending meetings and carrying out duties as board members. Director Compensation Table The following table summarizes the compensation paid to each non-employee director who served during the fiscal year ended December 31, 2023. All compensation earned by Messrs. Kohen and Sokolow during 2023 has been reported in the “Summary Compensation Table” above under “Executive Compensation.” Name Fees earned or paid in cash ($) Stock awards ($) (1) Option awards ($) (1) Non-equity incentive plan compensation ($) Nonqualified deferred compensation earnings ($) All other compensation ($) Total ($) Nancy DiMattia — 116,531 25,902 — — — 142,433 Gary N. Golden 30,000 59,040 19,572 — — — 108,612 Efrat L. Greenstein Brayer 30,000 52,480 17,443 — — — 99,923 Thomas J. Ridge — 46,010 6,400 — — — 52,410 Dov Shiff — 46,010 6,400 — — — 52,410 (1) The table reflects the grant date fair value, as computed in accordance with Topic 718, of the restricted share awards and options granted to directors in 2023. The assumptions used to determine the valuation of the awards are discussed in Note 2 and Note 12 to our consolidated financial statements for the 2023 fiscal year. All stock options reported in the table above were granted with an exercise price of $3.28 per share and vest in twelve equal monthly installments beginning on April 30, 2023. There were no unvested stock awards held by non-employee directors as of December 31, 2023. The total number of unexercised option awards (vested and unvested) held by our non-employee directors as of December 31, 2023 was as follows: Ms. DiMattia, 34,500 options; Mr. Golden, 28,000 options; Ms. Greenstein Brayer, 25,000 options; Mr. Ridge, 610,000 options; and Mr. Shiff, 110,000 options. 76 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS The following table sets forth certain information known to us regarding beneficial ownership of our issued and outstanding common stock as of March 21, 2024 for: ● each of our named executive officers; ● each of our directors; ● all of our executive officers and directors as a group; and ● each person or group of affiliated persons known by us to be the beneficial owner of more than 5% of our common stock. Beneficial ownership is determined in accordance with the rules of the SEC and generally includes voting or investment power with respect to securities. Under those rules, beneficial ownership includes any shares as to which the individual or entity has sole or shared voting power or investment power and includes securities that the individual or entity has the right to acquire, such as through the exercise of issued stock options or warrants, vesting of RSUs or conversion of convertible notes, within 60 days of March 21, 2024. Except as noted by footnote, and subject to community property laws where applicable, we believe, based on the information provided to us, that the persons and entities named in the table below have sole voting and investment power with respect to all common stock shown as beneficially owned by them. The percentage of beneficial ownership is based on 96,870,902 shares of common stock issued and outstanding as of March 21, 2024. Shares of our common stock that are subject to options or warrants exercisable, RSUs vesting, or notes convertible within 60 days of March 21, 2024 are deemed to be outstanding for computing the percentage ownership of the person holding such options, warrants, RSUs and/or notes and the percentage ownership of any group in which the holder is a member, but are not deemed outstanding for computing the percentage of any other person. Except as otherwise indicated below, the address of each beneficial owner is c/o SKYX Platforms Corp., 2855 W. McNab Road, Pompano Beach, Florida 33069. Common Stock Beneficially Owned Name and Address of Beneficial Owner[ Number of Shares and Nature of Beneficial Ownership Percentage of Total Common Stock Greater than 5% Stockholders Dov Shiff, Director (1) 15,133,859 15.6 % Rani R. Kohen, Executive Chairman and Director (2) 15,199,970 14.8 % Motek 7 SQL LLC (3) 6,118,004 6.3 % Strul Associates Limited Partnership (4) 6,023,534 6.1 % Directors and Named Executive Officers (not otherwise included above) John P. Campi, Co-Chief Executive Officer (5) 924,352 * Leonard J. Sokolow, Co-Chief Executive Officer, Director (6) 1,475,177 1.5 % Marc-Andre Boisseau (7) 182,970 * Steven M. Schmidt, President (8) 298,843 * Patricia Barron, Chief Operations Officer (9) 837,841 * Nancy DiMattia, Director (10) 92,770 * Gary N. Golden, Director (11) 56,000 * Efrat L. Greenstein Brayer, Director (12) 50,000 * Thomas J. Ridge, Director (136) 1,598,770 1.6 % All directors and current executive officers as a group (11 persons) (15) 35,850,552 33.8 % * Represents beneficial ownership of less than one percent. 77 (1) Based on a Form 4 and Schedule 13D/A filed by Mr. Shiff on January 3, 2024 and October 10, 2023, respectively. Includes 13,274,618 shares of common stock held by DZDLUX s.a.r.l., of which Mr. Shiff is a controlling person; 235,712 shares of common stock held by Shiff Group Assets Ltd., of which Mr. Shiff is a controlling person; 1,458,529 shares of common stock held directly by Mr. Shiff; and 40,000 shares held by Mr. Shiff’s spouse. Also includes 85,000 shares of common stock underlying stock options that are exercisable within 60 days of March 21, 2024 and 40,000 shares of common stock issuable upon conversion of the principal amount of an outstanding convertible note held by Shiff Group Investments Ltd., of which Mr. Shiff is the President and Chief Executive Officer. As a result of his positions at DZDLUX s.a.r.l, Shiff Group Assets Ltd. and Shiff Group Investments Ltd., Mr. Shiff may be deemed to be the beneficial owner of the shares held by such entities and have voting and dispositive power over such shares. (2) Based on a Form 4 and Schedule 13D/A filed by Mr. Kohen on June 13, 2022 and July 7, 2023, respectively. Includes 16,001 shares of common stock held directly by Mr. Kohen, 9,143,969 shares of common stock held by KRNB Holdings LLC and 100,000 shares of common stock held by Mr. Kohen’s family member, as well 5,940,000 shares of common stock underlying stock options that are exercisable within 60 days of March 21, 2024. As manager of KRNB Holdings LLC, Mr. Kohen may be deemed to be the beneficial owner of the shares held by KRNB Holdings LLC and have voting and dispositive power over such shares. (3) Based on a Schedule 13G filed by Motek 7 SQL LLC on February 16, 2022. As manager of Motek 7 SQL LLC, Hillel Bronstein may be deemed to be the beneficial owner of the shares held by Motek 7 SQL LLC and have voting and dispositive power over such shares. The business address of Motek 7 SQL LLC is c/o Mansfield Bronstein, PA, 500 Broward Blvd., Suite 1450, Fort Lauderdale, Florida 33394. (4) Includes 4,855,015 shares of common stock, 125,000 shares of common stock issuable upon exercise of an outstanding warrant, 1,018,519 shares of common stock underlying convertible promissory notes that are exercisable within 60 days of March 21, 2024 held by Strul Associates Limited Partnership., and 25,000 shares of common stock underlying stock options that are exercisable within 60 days of March 21, 2024 As President of Strul Associates Limited Partnership, Aubrey Strul may be deemed to be the beneficial owner of the shares held by Strul Associates Limited Partnership and have voting and dispositive power over such shares. The business address of Strul Associates Limited Partnership is 20320 Fairway Oaks Drive, #362, Boca Raton, Florida 33434. (5) Includes 797,685 shares of common stock, 120,000 shares of common stock underlying stock options that are exercisable within 60 days of March 21, 2024 and 6,667 shares of common stock issuable upon conversion of the principal amount of an outstanding convertible note held by Mr. Campi. (6) Includes 469,136 shares of common stock held by Mr. Sokolow, 10,084 shares of unvested restricted stock, 955,000 shares of common stock underlying stock options held by Mr. Sokolow that are exercisable within 60 days of March 21, 2024, 16,667 shares of common stock issuable upon conversion of the principal amount of an outstanding convertible note held by Mr. Sokolow, and 24,290 shares of common stock issuable upon exercise of warrants held by Mr. Sokolow. (7) Includes 40,470 shares of common stock, 90,000 shares of common stock underlying stock options that are exercisable within 60 days of March 21, 2024 and 52,500 RSUs that vest within 60 days of March 21, 2024 held by Mr. Boisseau. (8) Includes 103,843 shares of common stock, including, and 195,000 shares of common stock underlying stock options that are exercisable within 60 days of March 21, 2024 held by Mr. Schmidt. (9) Includes 112,841 shares of common stock and 725,000 shares of common stock underlying stock options that are exercisable within 60 days of March 21, 2024 held by Ms. Barron. (10) Includes 58,270 shares of common stock and 34,500 shares of common stock underlying stock options that are exercisable within 60 days of March 21, 2024 held by Ms. DiMattia. (11) Includes 28,000 shares of common stock and 28,000 shares of common stock underlying stock options that are exercisable within 60 days of March 21, 2024 held by Mr. Golden. (12) Includes 25,000 shares of common stock and 25,000 shares of common stock underlying stock options that are exercisable within 60 days of March 21, 2024 held by Ms. Greenstein Brayer. (13) Includes 1,013,770 shares of common stock and 585,000 shares of common stock underlying stock options that are exercisable within 60 days of March 21, 2024 held by Mr. Ridge. (14) Includes 26,917,844 shares of common stock,; 8,782,500 shares of common stock underlying stock options that are exercisable within 60 days of March 21, 2024; 62,584 shares of restricted stock that vest within 60 days of March 21, 2024; 24,290 shares of common stock issuable upon the exercise of warrants; and 63,334 shares of common stock issuable upon the conversion of the principal amount of outstanding convertible notes. 78 Changes in Control We are unaware of any contract, or other arrangement or provision, the operation of which may at any subsequent date result in a change in control of our Company. Stock Incentive Plan Information The following table sets forth equity compensation plan information as of December 31, 2023: Plan category (a) Number of securities to be issued upon exercise of outstanding options, warrants and rights (b) Weighted-average exercise price of outstanding options, warrants and rights (3) (c) Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) Equity compensation plans approved by security holders (1)(2) 40,654,237 $ 6.45 7,494,553 Equity compensation plans not approved by security holders 71,441 — Total 40,725,678 $ 6.45 7,494,553 (1) Includes 40,654,237 shares of common stock issuable upon exercise of stock options and RSUs granted pursuant to our stock incentive plans and to our Executive Chairman under his employment agreement, all of which were approved by our security holders, at a weighted average exercise price of $6.45 per share, which includes: (a) 4,330,000 shares of common stock issuable upon exercise of stock options granted under the 2015 Stock Incentive Plan; (b) 5,725,500 shares of common stock issuable upon exercise of stock options granted under the 2018 Plan; (c) 366,000 shares of common stock issuable upon vesting of restricted stock granted under the 2018 Plan; (d) 5,750,476 shares of common stock issuable upon exercise of stock options granted under the 2021 Plan; (d) 4,482,261 shares of common stock issuable upon vesting of RSUs granted under the 2021 Plan; and (f) 20,000,000 shares of common stock issuable to our Executive Chairman upon vesting and exercise of performance-based stock options granted to our Executive Chairman pursuant to his employment agreement, of which 3,000,000 had vested as of December 31, 2023. (2) The 2015 Stock Incentive Plan and 2018 Plan were previously replaced and terminated by the 2018 Plan and the 2021 Plan, respectively, and, as such, no securities remained available for issuance under such plans as of December 31, 2023 and no further awards will be granted under such plans. However, all outstanding awards will continue to be governed by their existing terms. All shares available for future issuance are under the 2021 Plan. (3) Excludes the RSUs referred to in footnote 1 because they have no exercise price. (4) Includes 71,441 shares of common stock issuable vesting of shares of restricted stock granted by the Company’s board of directors in connection with services agreements. 79 Item 13. CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS, and Director Independence Director Independence As required under Nasdaq rules and regulations, a majority of the members of a listed company’s board of directors must qualify as “independent,” as affirmatively determined by the board of directors. Based upon information requested from and provided by each director concerning his or her background, employment, and affiliations, including family relationships, our board of directors has determined that all members of the board of directors, except Rani R. Kohen, Dov Shiff and Leonard J. Sokolow, are “independent” as that term is defined under applicable SEC rules and regulations and Nasdaq listing requirements and rules. In making such independence determinations, our board of directors considered the relationships that each non-employee director has with us and all other facts and circumstances that our board of directors deemed relevant in determining their independence, including the transactions described below under “Certain Relationships and Related Party Transactions” and beneficial ownership of our capital stock by each non-employee director. The composition of our board of directors and each of our committees complies with all applicable requirements of Nasdaq and the rules and regulations of the SEC. Certain Relationships and Related Party Transactions The following is a description of transactions or series of transactions since January 1, 2022, to which we were or will be a party, in which: ● the amount involved in the transaction exceeds the lesser of (i) $120,000 or (ii) 1% of the average of our total assets at year-end for the last two completed fiscal years; and ● in which any of our executive officers, directors, director nominees or holders of 5% or more of any class of our voting capital stock, or any immediate family member of any of the foregoing, had or will have a direct or indirect material interest. Notes Payable During 2020, certain related parties entered into securities purchase agreements with the Company, pursuant to which each agreed to purchase a three-year subordinated convertible promissory note. In March 2024, certain of these related parties entered into an amendment to the note, effective as of the original maturity date of the respective note, which, among other things, extended the maturity date of the note to May 16, 2025. Subject to other customary terms, the note accrues interest at a rate of 6% per annum, or, as amended, 10% per annum effective as of January 1, 2024, which is payable annually in cash or common stock, at the holder’s discretion. At any time after issuance and prior to or on the maturity date, the note is convertible at the option of the holder into shares of common stock at a conversion price of $15.00 per share, or, as amended, $3.00 per share. Upon notice to the holder, the Company may prepay, in whole or in part, the outstanding balance of the note at any time prior to the maturity date; provided, that the holder has the right to convert the note into shares of common stock in lieu of prepayment. Upon the occurrence of certain events of default and written notice from the holder, the note will become immediately due and payable and, until paid in full, will bear interest at a rate of 12% per annum. The following table lists the related parties, the principal amount of the note purchased, and the maturity date of the note. The Company has not paid any of the principal on the notes, except for $125,000 in principal paid in December 2023 to Sky Technology Partners, LLC . Name of Related Party Principal Amount Purchased Maturity Date Leonard J. Sokolow – Co-Chief Executive Officer and director of the Company $ 250,000 May 16, 2025 Sky Technology Partners, LLC – Steven Siegelaub, a former greater than 5% holder with his affiliates, is the managing member $ 300,000 May 16, 2025 Shiff Group Investments Ltd. – Dov Shiff, a director and greater than 5% holder, is the President and Chief Executive Officer $ 600,000 November 3, 2023 John P. Campi – Co-Chief Executive Officer of the Company $ 100,000 May 16, 2025 On each of February 6, 2023 and March 29, 2023, the Company closed the Private Placements, pursuant to which the Company issued and sold subordinated secured convertible promissory notes and warrants to purchase shares of the Company’s common stock to certain investors. Strul Associates Limited Partnership, a greater than 5% holder of the Company, purchased notes in the principal amount of $2.0 million and $750,000, respectively, and was issued warrants to purchase 125,000 shares of common stock, dated March 29, 2023. The investors in the private placement have certain registration rights. The notes mature on the fourth anniversary of the closing date and contain customary acceleration events. The principal amount of the notes is convertible at any time after the closing date, in whole or in part, at the option of the holder, into shares of common stock at an adjusted conversion price of $2.70 per share,. Interest on the notes accrues at a rate of 10% per annum. For the February 2023 note, 7% of the interest is payable quarterly in arrears in cash and 3% is payable quarterly in arrears in cash or in shares of the Company’s common stock at the note conversion price on the date the principal balance of the note is paid in full or fully converted, at the holder’s election. For the March 2023 note, all of the interest is payable quarterly in arrears in cash or in shares of the Company’s common stock at the note conversion price on the date the principal balance of the note is paid in full or fully converted, at the holder’s election. The notes are secured by substantially all of the Company’s accounts, instruments, and tangible and intangible property, which secured interest is subordinated to interests held by other parties in such collateral as of the closing date and certain future debt. The Company may prepay the entire then-outstanding principal amount of the notes at any time, plus a prepayment premium; if the Company exercises such right, the note holder may instead elect to convert the note. After the third anniversary of the closing date, the holder may require the Company to repay the outstanding principal balance and accrued interest on the notes with 30 days’ prior written notice. The warrants are exercisable for five years after the closing date and are exercisable immediately after their issuance, in whole or in part. The warrants have an adjusted exercise price of $2.70 per share. In addition, the notes and warrants contain conversion limitations providing that a holder thereof may not convert the note or exercise the warrant to the extent that, if after giving effect to such conversion or exercise, the holder or any of its affiliates would beneficially own in excess of 9.99%, as elected by the holder. The holder may increase or decrease its beneficial ownership limitation upon notice to the Company, provided that in no event such limitation exceeds 9.99%, and that any increase shall not be effective until the 61st day after such notice. 80 Newbridge Securities Corporation Leonard J. Sokolow, our Co-Chief Executive Officer and director, previously served in various executive roles at Newbridge Financial, Inc. and its subsidiaries, including Newbridge Securities Corporation, until September 2023. In January 2022, the Company and Newbridge Securities Corporation entered into a termination agreement, pursuant to which three investment banking agreements previously entered into during October 2018, May 2021, and May 2021, respectively, were terminated, and the parties agreed that there are no continuing rights or obligations under such agreements, and that Newbridge Securities Corporation is not entitled to any fees or payments, in cash or otherwise, pursuant to such agreements. On November 9, 2022, the Company entered into a corporate advisory engagement agreement (the “Advisory Agreement”) with Newbridge Securities Corporation, pursuant to which Newbridge Securities Corporation agreed to provide financial and general corporate advisory services to the Company in connection with certain investment banking matters, such as assisting with investor presentations and investor conferences, providing advice related to capital structures, capital market opportunities and asset allocation or exit strategies, and assisting with the preparation of a due diligence package for use in potential merger and acquisition, joint venture and capital raising transactions. The Advisory Agreement has a 24-month term and may be terminated by either party, at any time, upon 15 days’ prior written notice. Pursuant to the Advisory Agreement, the Company issued to affiliates of Newbridge Securities Corporation an aggregate of 200,000 restricted shares of the Company’s common stock, which vest on the following schedule: 50,000 shares of common stock on November 9, 2022 and 50,000 shares on each of the six-, 12- and 18-month anniversaries of such date. Mr. Sokolow received 40,333 of the restricted shares. In the event the Advisory Agreement is terminated prior to its expiration, any shares that have not vested as of such date will be forfeited. The common stock is subject to a six-month lock up restriction from the date the shares vest. Bridge Line Ventures The Company and Bridge Line Ventures, LLC Series ST-1 (“Bridge Line Ventures”), the manager of which is Bridge Line Advisors, LLC, of which Leonard J. Sokolow, our Co-Chief Executive Officer and a member of our board of directors, previously served as Chief Executive Officer and President, entered into stock purchase agreements during 2021, pursuant to which the Company issued an aggregate of 317,656 shares of common stock (including shares issued pursuant to anti-dilution provisions) and warrants to purchase 231,624 shares of common stock to Bridge Line Ventures. On September 12, 2022, Bridge Line Ventures distributed its shares of common stock and warrants to purchase common stock to its investors, pursuant to a pro rata distribution for no consideration. Initial Public Offering In the initial public offering completed in February 2022, 455,353 shares were purchased by our directors, officers and greater than 5% stockholders at the public offering price. Policies and Procedures for Related Party Transactions Our board of directors has adopted a written related party transactions policy, which sets forth the policies and procedures for the review and approval or ratification of related person transactions. Pursuant to this policy, the audit committee has the primary responsibility for reviewing and approving or disapproving “related party transactions,” which are transactions, arrangements or relationships between us and related persons in which the aggregate amount involved in any fiscal year exceeds or may be expected to exceed the lesser of $120,000 or 1% of the average of our total assets at year-end for the last two completed fiscal years and in which a related person has or will have a direct or indirect material interest. For purposes of this policy, a related person is defined as an executive officer, director, nominee for director or greater than 5% beneficial owner of our common stock, in each case since the beginning of the most recently completed fiscal year, and their immediate family members. 81 ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES The following table sets forth the aggregate fees billed to us for the years ended December 31, 2023 and December 31, 2022 by our independent auditors, M&K CPAs, PLLC: 2023 2022 Audit Fees (1) $ 96,000 $ 72,500 Audit-Related Fees - — Tax Fees - — All Other Fees - — Total Fees $ 96,000 $ 72,500 (1) Audit fees represent amounts billed for professional services rendered for the audit and/or review of our consolidated financial statements. For 2023, includes fees related to professional services rendered in connection with the issuance of consents related to Registration Statements on Form S-3 and the audit of the financial statements of Belami, Inc. For 2022, includes audit fees for professional services rendered in relation to the review of our registration statement and other documents filed with the SEC in connection with our initial public offering and fees related to professional services rendered in connection with the issuance of a consent related to a Registration Statement on Form S-8. Pre-Approval Policy Pursuant to the Audit Committee Charter, the audit committee is required to pre-approve the audit and non-audit services performed by our independent auditors. Notwithstanding the foregoing, separate audit committee pre-approval is not required (a) if the engagement for services is entered into pursuant to pre-approval policies and procedures established by the audit committee regarding our engagement of the independent auditor (the “Pre-Approval Policy”) as to matters within the scope of the Pre-Approval Policy or (b) for de minimis non-audit services that are approved in accordance with applicable SEC rules. For fiscal year 2023, all services performed by our independent auditors were pre-approved by the audit committee. 82 PART IV ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES (a)(1) Financial Statements Report of Independent Registered Public Accounting Firm F-2 Audited Consolidated Balance Sheets as of December 31, 2023 and December 31, 2022 F-3 Audited Consolidated Statements of Operations and Comprehensive Loss for the Years ended December 31, 2023 and 2022 F-4 Audited Consolidated Statements of Stockholders’ Equity (Deficit) for the Years Ended December 31, 2023 and 2022 F-5 Audited Consolidated Statements of Cash Flows for the Years ended December 31, 2023 and 2022 F-6 Notes to Audited Financial Statements F-7 (a)(2) Financial Statement Schedules Schedules have been omitted because the information required to be set forth therein is not applicable or is shown in the financial statements or notes thereto. (a)(3) Exhibit Index Exhibit No. Description of Exhibit 2.1+ Stock Purchase Agreement, dated February 6, 2023, by and among the Company and Mihran Berejikian, Nancy Berejikian, and Michael Lack (incorporated herein by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K filed with the SEC on February 7, 2023). 2.2 First Amendment to Stock Purchase Agreement, dated April 28, 2023, by and among SKYX Platforms Corp. and Mihran Berejikian, Nancy Berejikian, and Michael Lack (incorporated herein by reference to Exhibit 2.2 to the Company’s Current Report on Form 8-K filed with the SEC on May 1, 2023). 3.1 Articles of Incorporation of the Company (incorporated herein by reference to Exhibit 3.1 to the Company’s Registration Statement on Form S-1 (File No. 333-261829) filed with the SEC on December 22, 2021). 3.2 Articles of Amendment to Articles of Incorporation, including the Certificate of Designation of Rights, Preferences and Privileges of Series A Convertible Preferred Stock (effective August 12, 2016) (incorporated herein by reference to Exhibit 3.2 to the Company’s Registration Statement on Form S-1 (File No. 333-261829) filed with the SEC on December 22, 2021). 3.3 Articles of Amendment to Articles of Incorporation (effective February 7, 2022) (incorporated by reference to Exhibit 3.3 to the Company’s Current Report on Form 8-K filed with the SEC on February 14, 2022). 3.4 Articles of Amendment to Articles of Incorporation (effective June 14, 2022) (incorporated herein by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed with the SEC on June 14, 2022). 3.5 Articles of Amendment to Articles of Incorporation (effective May 2, 2023) (incorporated herein by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed with the SEC on May 5, 2023). 3.6 Second Amended and Restated Bylaws of the Company (effective June 14, 2022) (incorporated herein by reference to Exhibit 3.2 to the Company’s Current Report on Form 8-K filed with the SEC on June 14, 2022). 4.1 Description of the Company’s Registered Securities (filed herewith). 4.2 Specimen Common Stock Certificate (filed herewith). 10.1+ Form of Securities Subscription Agreement and Warrant used in 2021 Private Placements (incorporated herein by reference to Exhibit 10.13 to Amendment No. 1 to the Company’s Registration Statement on Form S-1 (File No. 333-261829) filed with the SEC on January 10, 2022). 10.2* 2015 Stock Incentive Plan (incorporated herein by reference to Exhibit 10.14 to the Company’s Registration Statement on Form S-1 (File No. 333-261829) filed with the SEC on December 22, 2021). 10.3* Form of Stock Option Agreement (2015 Plan) (incorporated herein by reference to Exhibit 10.15 to the Company’s Registration Statement on Form S-1 (File No. 333-261829) filed with the SEC on December 22, 2021). 10.4* Form of Stock Award Agreement (2015 Plan) (incorporated herein by reference to Exhibit 10.16 to the Company’s Registration Statement on Form S-1 (File No. 333-261829) filed with the SEC on December 22, 2021). 10.5* 2018 Stock Incentive Plan, as amended and restated (incorporated herein by reference to Exhibit 10.17 to the Company’s Registration Statement on Form S-1 (File No. 333-261829) filed with the SEC on December 22, 2021). 10.6* Form of Stock Option Agreement (2018 Plan) (incorporated herein by reference to Exhibit 10.18 to the Company’s Registration Statement on Form S-1 (File No. 333-261829) filed with the SEC on December 22, 2021). 10.7* Form of Stock Award Agreement (2018 Plan) (incorporated herein by reference to Exhibit 10.19 to the Company’s Registration Statement on Form S-1 (File No. 333-261829) filed with the SEC on December 22, 2021). 10.8* Executive Employment Agreement, dated September 1, 2019, between the Company and John P. Campi (incorporated herein by reference to Exhibit 10.22 to the Company’s Registration Statement on Form S-1 (File No. 333-261829) filed with the SEC on December 22, 2021). 10.9* Consultant Agreement, dated August 20, 2019, between the Company and Steven M. Schmidt (incorporated herein by reference to Exhibit 10.23 to the Company’s Registration Statement on Form S-1 (File No. 333-261829) filed with the SEC on December 22, 2021). 10.10* First Amendment to Consulting Agreement, dated June 1, 2021, between the Company and Steven M. Schmidt (incorporated herein by reference to Exhibit 10.24 to the Company’s Registration Statement on Form S-1 (File No. 333-261829) filed with the SEC on December 22, 2021). 10.11* Executive Employment Agreement, dated September 1, 2019, between the Company and Patricia Barron (incorporated herein by reference to Exhibit 10.25 to the Company’s Registration Statement on Form S-1 (File No. 333-261829) filed with the SEC on December 22, 2021). 10.12 Form of Placement Agent Warrant (incorporated herein by reference to Exhibit 10.29 to the Company’s Registration Statement on Form S-1 (File No. 333-261829) filed with the SEC on December 22, 2021). 10.13+ Form of Stock Purchase Agreement between the Company and Bridge Line Ventures, LLC Series ST-1 (incorporated herein by reference to Exhibit 10.32 to the Company’s Registration Statement on Form S-1 (File No. 333-261829) filed with the SEC on December 22, 2021). 10.14 Form of Common Stock Purchase Warrant issued by the Company to Bridge Line Ventures, LLC Series ST-1 (incorporated herein by reference to Exhibit 10.33 to the Company’s Registration Statement on Form S-1 (File No. 333-261829) filed with the SEC on December 22, 2021). 10.15 Form of Securities Purchase Agreement related to Purchase of Subordinated Convertible Balloon Promissory Note, including form of Subordinated Convertible Balloon Promissory Note (incorporated herein by reference to Exhibit 10.34 to the Company’s Registration Statement on Form S-1 (File No. 333-261829) filed with the SEC on December 22, 2021). 10.16+ Paycheck Protection Program Term Note, entered into by the Company, as Borrower, for the benefit of PNC Bank, National Association, as Lender, as of April 13, 2020 (incorporated herein by reference to Exhibit 10.35 to the Company’s Registration Statement on Form S-1 (File No. 333-261829) filed with the SEC on December 22, 2021). 10.17 Amendment to the Paycheck Protection Term Note, effective June 5, 2020 (incorporated herein by reference to Exhibit 10.36 to the Company’s Registration Statement on Form S-1 (File No. 333-261829) filed with the SEC on December 22, 2021). 83 10.18+ Second Draw Paycheck Protection Program Term Note, entered into by the Company, as Borrower, for the benefit of PNC Bank, National Association, as Lender, as of February 3, 2021 (incorporated herein by reference to Exhibit 10.37 to the Company’s Registration Statement on Form S-1 (File No. 333-261829) filed with the SEC on December 22, 2021). 10.19+ Loan Authorization and Agreement (Economic Injury Disaster Loan), dated June 24, 2020, between the U.S. Small Business Administration and the Company (incorporated herein by reference to Exhibit 10.38 to the Company’s Registration Statement on Form S-1 (File No. 333-261829) filed with the SEC on December 22, 2021). 10.20 Note (Secured Disaster Loans), entered into by the Company, as Borrower, for the benefit of the U.S. Small Business Administration, as of June 24, 2020 (incorporated herein by reference to Exhibit 10.39 to the Company’s Registration Statement on Form S-1 (File No. 333-261829) filed with the SEC on December 22, 2021). 10.21 Security Agreement, dated June 24, 2020, between the U.S. Small Business Administration and the Company (incorporated herein by reference to Exhibit 10.40 to the Company’s Registration Statement on Form S-1 (File No. 333-261829) filed with the SEC on December 22, 2021). 10.22* 2021 Stock Incentive Plan (effective February 9, 2022) (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on February 14, 2022). 10.23* Form of Nonqualified Stock Option Agreement (2021 Plan) (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed with the SEC on February 14, 2022). 10.24* Form of Incentive Stock Option Agreement (2021 Plan) (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed with the SEC on February 14, 2022). 10.25* Form of Restricted Shares Award Agreement (2021 Plan) (incorporated by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K filed with the SEC on February 14, 2022). 10.26* Form of Nonqualified Stock Option Agreement (2021 Plan) (August 2022) (incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on August 5, 2022). 10.27* Form of Incentive Stock Option Agreement (2021 Plan) (August 2022) (incorporated herein by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed with the SEC on August 5, 2022). 10.28* Form of Restricted Shares Award Agreement (2021 Plan) (August 2022) (incorporated herein by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed with the SEC on August 5, 2022). 10.29* Form of Restricted Share Unit Award Agreement (2021 Plan) (August 2022) (incorporated herein by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K filed with the SEC on August 5, 2022). 10.30* Form of Nonqualified Stock Option Agreement (2021 Plan) (April 2023) (incorporated herein by reference to Exhibit 10.12 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2023). 10.31* Form of Restricted Share Unit Award Agreement (three-year vesting) (2021 Plan) (April 2023) (incorporated herein by reference to Exhibit 10.13 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2023). 10.32* Form of Restricted Share Unit Award Agreement (one year vesting) (2021 Plan) (April 2023) (incorporated herein by reference to Exhibit 10.14 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2023). 10.33* Form of Restricted Shares Award Agreement (2021 Plan) (April 2023) (incorporated herein by reference to Exhibit 10.15 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2023). 10.34* Form of Cash Retention Incentive Agreement (April 2023) (incorporated herein by reference to Exhibit 10.11 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2023). 10.35* Executive Chairman Agreement, effective as of January 1, 2022, between the Company and Rani R. Kohen (incorporated herein by reference to Exhibit 10.45 to the Company’s Registration Statement on Form S-1 (File No. 333-261829) filed with the SEC on December 22, 2021). 10.36* Chief Financial Officer Agreement, effective as of January 1, 2022, between the Company and Marc-Andre Boisseau (incorporated herein by reference to Exhibit 10.46 to Amendment No. 1 to the Company’s Registration Statement on Form S-1 (File No. 333-261829) filed with the SEC on January 10, 2022). 10.37 Representative’s Warrant, dated February 9, 2022 (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed with the SEC on February 14, 2022). 10.38+† Sublease Agreement, executed as of April 28, 2022, by and between the Company and Sicart Associates LLC (incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on May 4, 2022). 10.39+ Lease Agreement, by and between 400 Biscayne Commercial Owner, L.P., as Landlord and the Company, as Tenant (incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on September 29, 2022). 10.40 Corporate Advisory Engagement Agreement, dated November 9, 2022, between the Company and Newbridge Securities Corporation (incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on November 10, 2022). 84 10.41+ Form of Securities Purchase Agreement, dated February 6, 2023 (incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on February 7, 2023). 10.42 Form of Subordinated Secured Convertible Promissory Note, dated February 6, 2023 (incorporated herein by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed with the SEC on February 7, 2023). 10.43 Form of Common Stock Purchase Warrant, dated February 6, 2023 (incorporated herein by reference to Exhibit 4.2 to the Company’s Current Report on Form 8-K filed with the SEC on February 7, 2023). 10.44+ Form of Securities Purchase Agreement, dated March 29, 2023 (incorporated herein by reference to Exhibit 10.49 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2022). 10.45 Form of Subordinated Secured Convertible Promissory Note, dated March 29, 2023 (filed herewith) (incorporated herein by reference to Exhibit 10.50 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2022). 10.46 Form of Common Stock Purchase Warrant, dated March 29, 2023 (incorporated herein by reference to Exhibit 10.51 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2022). 10.47 Letter Agreement, effective as of April 27, 2023, between SKYX Platforms Corp. and Nielsen & Bainbridge, LLC (incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on April 28, 2023). 10.48 Form of Closing Promissory Note, dated April 26, 2023 (incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on May 1, 2023). 10.49 Form of Retained Earnings Promissory Note, dated April 26, 2023 (incorporated herein by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed with the SEC on May 1, 2023). 10.50+ Promissory Note and Business Loan Agreement, dated May 1, 2023, between SKYX Platforms Corp. and First-Citizens Bank & Trust Company (incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on May 5, 2023). 10.51 Sales Agreement by and between SKYX Platforms Corp. and The Benchmark Company, LLC, dated May 26, 2023 (incorporated herein by reference to Exhibit 1.1 to the Company’s Current Report on Form 8-K filed with the SEC on May 26, 2023). 10.52* Executive Employment Agreement, dated September 12, 2023, by and between SKYX Platforms Corp. and Leonard J. Sokolow (incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on September 13, 2023). 10.53+ Line of Credit Promissory Note, Business Loan Agreement (Asset Based), and Commercial Security Agreement, signed September 18, 2023, by and between Belami, Inc., as borrower and grantor, and Farmers & Merchants Bank of Central California, as lender (incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on September 22, 2023). 10.54+ Term Loan Promissory Note and Business Loan Agreement, signed September 18, 2023, by and between Belami, Inc., as borrower, and Farmers & Merchants Bank of Central California, as lender (incorporated herein by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed with the SEC on September 22, 2023). 10.55 Commercial Guaranty, signed September 18, 2023, by and among Belami, Inc., as borrower, SKYX Platforms Corp., as guarantor, and Farmers & Merchants Bank of Central California, as lender (incorporated herein by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed with the SEC on September 22, 2023). 10.56† Licensing Master Services Agreement, signed December 4, 2023, between SKYX Platforms Corp. and GE Technology Development, Inc., and Letter Agreement relating to Trademark License Agreement, between SQL Lighting & Fans, LLC and GE Trademark Licensing, Inc (incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on December 8, 2023. 10.57* Commission Termination Agreement, dated March 29, 2024, by and between SKYX Platforms Corp and John Campi ( filed herewith) 10.58* Commission Termination Agreement, dated March 29, 2024, by and between SKYX Platforms Corp and Patricia Baron ( filed herewith) 10.59 Form of Amendment No. 1 to Subordinated Convertible Balloon Promissory Note, dated March 29, 2024 (filed herewith). 10.6 Letter Agreement to the Stock Purchase Agreement, as amended, dated March 29, 2024, by and among SKYX Platforms Corp., Mihran Berejikian, Nancy Berejikian and Michael Lack, and form of Convertible Promissory Note (filed herewith). 18.1 Preferability Letter from M&K CPAS, PLLC (incorporated herein by reference to Exhibit 18.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2023). 19.1 SKYX Platforms Corp. Insider Trading Policy (last revised March 2023) (filed herewith). 21.1 List of Subsidiaries (filed herewith). 23.1 Consent of Independent Registered Public Accounting Firm (filed herewith). 24.1 Power of Attorney (included on signature page). 31.1 Certification by Co-Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith). 31.2 Certification by Co-Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith). 31.3 Certification by Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith). 32.1 Certification by Co-Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith). 32.2 Certification by Co-Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith). 32.3 Certification by Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith). 97 SKYX Platforms Corp. Compensation Recovery Policy (adopted August 2023) (filed herewith). 101 The following financial statements from the Annual Report on Form 10-K for the year ended December 31, 2023 are formatted in iXBRL (Inline eXtensible Business Reporting Language): (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Operations and Comprehensive Loss, (iii) Consolidated Statements of Stockholders’ Equity (Deficit), (iv) Consolidated Statements of Cash Flows, and (v) the Notes to Consolidated Financial Statements (filed herewith). 104 Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) (filed herewith). * Indicates management contract or any compensatory plan, contract or arrangement. + Certain of the exhibits and schedules to this exhibit have been omitted in accordance with Regulation S-K Item 601(a)(5). The Company agrees to furnish a copy of all omitted exhibits and schedules to the SEC upon its request. † Portions of this exhibit (indicated by bracketed asterisks) are omitted in accordance with the rules of the SEC because they are both not material and the Company customarily and actually treats such information as private or confidential. ITEM 16. FORM 10-K SUMMARY None. 85 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. SKYX PLATFORMS CORP. By:  /s/ John P. Campi John P. Campi, Co-Chief Executive Officer Date: April 1, 2024 By: /s/ Leonard J. Sokolow Leonard J. Sokolow, Co-Chief Executive Officer and Director Date: April 1, 2024 POWER OF ATTORNEY Each individual whose signature appears below constitutes and appoints John P. Campi, Co-Chief Executive Officer, Leonard J. Sokolow, Co-Chief Executive Officer, and Marc-Andre Boisseau, Chief Financial Officer, and each of them singly, his or her true and lawful attorneys-in-fact and agents with full power of substitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign any and all amendments to this Annual Report on Form 10-K and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all the said attorneys-in-fact and agents or any of them or their or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Signature Title Date /s/ John P. Campi Co-Chief Executive Officer April 1, 2024 John P. Campi (Principal Executive Officer) /s/ Leonard J. Sokolow Co-Chief Executive Officer and Director April 1, 2024 Leonard J. Sokolow (Principal Executive Officer) /s/ Marc-Andre Boisseau Chief Financial Officer April 1, 2024 Marc-Andre Boisseau (Principal Financial and Accounting Officer) /s/ Rani R. Kohen Director, Executive Chairman of the Board April 1, 2024 Rani R. Kohen /s/ Nancy DiMattia Director April 1, 2024 Nancy DiMattia /s/ Gary N. Golden Director April 1, 2024 Gary N. Golden /s/ Efrat L. Greenstein Brayer Director April 1, 2024 Efrat L. Greenstein Brayer 86 FINANCIAL STATEMENTS SKYX PLATFORMS CORP. CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2022 Index to Consolidated Financial Statements Pages Report of Independent Registered Public Accounting Firm (PCAOB ID: 2738 ) F-2 Consolidated Balance Sheets – December 31, 2023 and 2022 F-3 Consolidated Statements of Operations and Comprehensive Loss – December 31, 2023 and 2022 F-4 Consolidated Statements of Stockholders’ Equity (Deficit) – December 31, 2023 and 2022 F-5 Consolidated Statements of Cash Flows – December 31, 2023 and 2022 F-6 Notes to Consolidated Financial Statements F-7 F- 1 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Stockholders of SKYX Platforms Corp. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of SKYX Platforms Corp. (the Company) as of December 31, 2023 and 2022, and the related consolidated statements of operations and comprehensive loss, stockholders’ equity (deficit), and cash flows for each of the years in the two-year period ended December 31, 2023 and the related notes (collectively referred to as the “financial statements”). In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America. Going Concern The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the consolidated financial statements, the Company has an accumulated deficit, negative cash flows from operations and recurring net losses, which raises substantial doubt about its ability to continue as a going concern. Management’s plans regarding those matters are also described in Note 1. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. Basis for Opinion These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and the significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe our audits provide a reasonable basis for our opinion. Critical Audit Matters The critical audit matter communicated below is a matter arising from the current period audits of the consolidated financial statements that were communicated, or required to be communicated, to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinion on the critical audit matter or on the accounts or disclosures to which they relate. Revenue Recognition As discussed in Note 2 to the consolidated financial statements, the Company recognizes revenue upon the transfer of control of promised goods to the customer upon delivery in an amount that reflects the consideration the Company expects to receive in exchange for the products. Auditing management’s evaluation of agreements with customers involves significant judgement, given the fact that some agreements require managements evaluation and allocation of the transaction price and transfer of goods to the customer. To evaluate the appropriateness and accuracy of the assessment by management, we evaluated management’s assessment in relationship to the relevant agreements and management’s disclosure in the consolidated financial statements. /s/ M&K CPAS, PLLC We have served as the Company’s auditor since 2018 The Woodlands, TX April 1, 2024 PCAOB ID #2738 F- 2 SKYX Platforms Corp. Consolidated Balance Sheets December 31, 2023 December 31, 2022 Assets Current assets: Cash and cash equivalents $ 16,810,983 $ 6,720,543 Restricted cash 2,750,000 — Account receivable, net 3,384,976 — Investments, available-for-sale — 7,373,956 Inventory 3,425,734 1,923,540 Deferred cost of revenues 224,445 — Prepaid expenses and other assets 721,717 311,618 Total current assets 27,317,855 16,329,657 Long-term assets: Furniture and equipment, net 436,587 215,998 Restricted cash 2,869,270 2,741,054 Right of use assets 21,214,652 23,045,293 Intangibles, definite life 8,141,032 662,802 Goodwill 16,157,000 — Other assets 204,807 182,306 Total long-term assets 49,023,348 26,847,453 Total Assets $ 76,341,203 $ 43,177,110 Liabilities and Stockholders’ Equity (Deficit) Current liabilities: Accounts payable and accrued expenses $ 12,388,475 $ 1,949,823 Notes payable, current 5,724,129 405,931 Operating lease liabilities, current 1,898,428 1,130,624 Royalty obligations, current 800,000 2,638,000 Consideration payable 730,999 — Deferred revenues 1,475,519 — Convertible notes, current related parties 825,000 950,000 Convertible notes, current 350,000 350,000 Convertible notes 350,000 350,000 Total current liabilities 24,192,550 7,424,378 Long term liabilities: Long term accrued expenses 744,953 — Notes payable 1,016,924 4,867,004 Consideration payable 3,038,430 — Operating lease liabilities 22,267,558 22,758,496 Convertible notes 5,758,778 — Royalty obligations 3,100,000 — Total long-term liabilities 35,926,643 27,625,500 Total liabilities 60,119,193 35,049,878 Commitments and Contingent Liabilities: — — Redeemable preferred stock - subject to redemption: $ 0 par value; 0 and 20,000,000 shares authorized; 0 and 880,400 and 12,376,536 shares issued and outstanding at December 31, 2023 and December 31, 2022, respectively — 220,099 Stockholders’ Equity (Deficit): Common stock and additional paid-in capital: $ 0 par value, 500,000,000 shares authorized; 93,473,433 and 82,907,541 shares issued and outstanding at December 31, 2023 and December 31, 2022, respectively 162,025,024 114,039,638 Accumulated deficit ( 145,803,014 ) ( 106,070,358 ) Accumulated other comprehensive loss — ( 62,147 ) Total stockholders’ equity (deficit) 16,222,010 7,907,133 Non-controlling interest — — Total equity (deficit) 16,222,010 7,907,133 Total Liabilities and Stockholders’ Equity (Deficit) $ 76,341,203 $ 43,177,110 The accompanying notes are an integral part of the consolidated financial statements. F- 3 SKYX Platforms Corp. Consolidated Statements of Operations and Comprehensive Loss Year ended December 31, 2023 2022 Revenue $ 58,785,762 $ 32,022 Cost of revenues 40,749,913 18,913 Gross profit (loss) 18,035,849 13,109 Selling and marketing expenses 18,805,069 7,991,487 General and administrative expenses-related party — 248,215 General and administrative expenses 37,055,986 18,398,589 Total expenses, net 55,861,055 26,638,291 Loss from operations ( 37,825,206 ) ( 26,625,182 ) Other income / (expense) Interest expense, net ( 3,109,307 ) ( 589,009 ) Gain on extinguishment of debt 1,201,857 178,250 Other income - Total other expense, net ( 1,907,450 ) ( 410,759 ) Net loss ( 39,732,656 ) ( 27,035,941 ) Common stock issued pursuant to antidilutive provisions — 4,691,022 Non-controlling interest — 35,442 Preferred dividends — 38,055 Net loss attributed to common stockholders $ ( 39,732,656 ) $ ( 31,800,460 ) Other comprehensive loss: Unrealized loss on debt securities 62,147 ( 62,147 ) Net comprehensive loss attributed to common stockholders $ ( 39,670,509 ) $ ( 31,862,607 ) Net loss per share - basic and diluted $ ( 0.45 ) $ ( 0.40 ) Weighted average number of common shares outstanding – basic and diluted 88,370,852 79,492,181 The accompanying notes are an integral part of the consolidated financial statements. F- 4 SKYX Platforms Corp. Consolidated Statements of Stockholders’ Equity (Deficit) 2023 2022 For the year ended December 31, 2023 2022 Shares of common stock Balance, beginning of year $ 114,039,638 $ 70,880,386 Balance, beginning of year 82,907,541 66,295,288 Common stock issued pursuant to offerings 4,359,832 1,650,000 Common stock issued pursuant to services 2,827,662 1,057,293 Common stock issued pursuant to conversion of preferred stock 880,400 12,376,536 Common stock issued pursuant to exercise of options and warrants — 1,193,351 Common stock issued pursuant to acquisition 1,923,285 — Common stock issued pursuant to extinguishment of debt 574,713 — Common stock issued pursuant to antidilutive provisions — 335,073 Balance, end of year $ 162,025,024 $ 114,039,638 Balance, end of year 93,473,433 82,907,541 Common stock and paid-in capital Balance, beginning of year $ 114,039,638 $ 70,880,386 Common stock issued pursuant to offerings 9,289,857 20,552,000 Common stock issued pursuant to services 17,977,252 13,959,795 Common stock issued pursuant to conversion of preferred stock 220,100 3,094,134 Debt discount 5,569,978 — Common stock issued pursuant to acquisition 12,887,968 — Common stock issued pursuant to extinguishment of debt 2,040,231 — Common stock issued pursuant to exercise of options and warrants — 862,301 Common stock issued pursuant to antidilutive provisions — 4,691,022 Balance, end of year $ 162,025,024 $ 114,039,638 Accumulated deficit Balance, beginning of year $ ( 106,070,358 ) $ ( 74,269,898 ) Net loss ( 39,732,656 ) ( 27,035,941 ) Non-controlling interest — ( 35,442 ) Common stock issued pursuant to antidilutive provisions — ( 4,691,022 ) Preferred dividends — ( 38,055 ) Balance, end of year $ ( 145,803,014 ) $ ( 106,070,358 ) Accumulated other comprehensive loss Balance, beginning of year $ ( 62,147 ) $ — Other comprehensive loss 62,147 ( 62,147 ) Balance, end of period $ — $ ( 62,147 ) Balance 7,907,133 ( 3,389,512 ) Net loss ( 39,732,656 ) ( 27,035,941 ) Total Stockholders’ Equity (Deficit) $ 16,222,010 $ 7,907,133 Balance $ 16,222,010 $ 7,907,133 The accompanying notes are an integral part of the consolidated financial statements. F- 5 SKYX Platforms Corp. Consolidated Statements of Cash Flows 2023 2022 For the twelve months ended December 31, 2023 2022 Cash flows from operating activities: Net loss $ ( 39,732,656 ) $ ( 27,035,941 ) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 2,885,856 883,231 Amortization of debt discount 1,365,789 — Gain on forgiveness of debt ( 1,201,857 ) ( 178,250 ) Share-based payments 17,977,252 13,959,796 Change in operating assets and liabilities: Inventory 283,911 ( 1,004,889 ) Accounts receivable ( 863,217 ) — Prepaid expenses and other assets ( 218,127 ) ( 270,600 ) Deferred charges 1,258,636 — Deferred revenues ( 453,514 ) — Operating lease liabilities ( 687,849 ) ( 109,895 ) Accretion operating lease liabilities 890,474 377,748 Other assets — ( 180,132 ) Royalty obligation 1,262,000 ( 1,200,000 ) Consideration payable — — Accounts payable and accrued expenses 4,235,229 920,486 Net cash used in operating activities ( 12,998,073 ) ( 13,838,446 ) Cash flows from investing activities: Purchase of debt securities ( 136,033 ) ( 7,436,103 ) Proceeds from disposition of debt securities 7,572,136 — Acquisition, net of cash acquired ( 4,206,200 ) — Purchase of property and equipment 10,194 ( 312,689 ) Payment of patent costs and other intangibles — ( 307,625 ) Net cash provided by (used in) investing activities 3,240,097 ( 8,056,417 ) Cash flows from financing activities: Proceeds from issuance of common stock- offerings 9,820,846 23,100,000 Placement cost ( 530,989 ) ( 2,548,000 ) Proceeds from exercise of options and warrants — 862,301 Proceeds from line of credit 6,500,000 — Proceeds from issuance of convertible notes 10,350,000 — Dividends paid — ( 38,055 ) Principal repayments of notes payable ( 3,413,225 ) ( 446,035 ) Net cash provided by financing activities 22,726,632 20,930,211 Change in cash and cash equivalents, and restricted cash 12,968,656 ( 964,652 ) Cash, cash equivalents and restricted cash at beginning of year 9,461,597 10,426,249 Cash, cash equivalents and restricted cash at end of year $ 22,430,253 $ 9,461,597 Supplementary disclosure of non-cash financing activities: Preferred stock conversion to common $ 220,100 $ 3,094,134 Business acquisition: Assets acquiring excluding identifiable intangible assets and goodwill and cash 7,090,094 — Liabilities assumed and consideration payable 19,755,903 — Identifiable intangible assets and goodwill 19,993,525 — Debt discount 5,569,978 Common stock issued pursuant to antidilutive provisions — 4,691,022 Fair value of shares issued pursuant to acquisition 7,327,716 Common stock pursuant to extinguishment of debt 2,040,231 — Right-of-use assets and operating lease liabilities — 23,621,267 Cash paid during period for: Interest $ 1,094,458 $ 303,957 Taxes $ — $ — The accompanying notes are an integral part of the consolidated financial statements. F- 6 SKYX Platforms Corp. Notes to Consolidated Financial Statements NOTE 1 ORGANIZATION AND NATURE OF OPERATIONS SKYX Platforms Corp., a corporation (the “Company”), was incorporated in Florida in May 2004. The Company maintains offices in Sacramento, California, Johns Creek, Georgia, Miami and Pompano Beach, Florida, New York City, and Guangdong Province, China. The Company has a series of advanced-safe-smart platform technologies. The Company’s first-generation technologies enable light fixtures, ceiling fans and other electrically wired products to be installed safely and plugged-in to a ceiling’s electrical outlet box within seconds, and without the need to touch hazardous wires. The plug and play technology method is a universal power-plug device that has a matching receptacle that is simply connected to the electrical outlet box on the ceiling, enabling a safe and quick plug and play installation of light fixtures and ceiling fans in just seconds. The plug and play power-plug technology, eliminates the need of touching hazardous electrical wires while installing light fixtures, ceiling fans and other hard wired electrical products. In recent years the Company has expanded the capabilities of its power-plug product, to include its second generation advanced-safe and quick universal installation methods, as well as advanced-smart capabilities. The smart features include control of light fixtures and ceiling fans by the SkyHome App, through WIFI, Bluetooth Low Energy and voice control. It allows scheduling, energy savings eco mode, dimming, back-up emergency light, night light, light color changing and much more. The Company’s 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. Since April 2023, the Company also markets home lighting, ceiling fans and other home furnishings from third parties. Going Concern The Company’s liquidity’s sources include $ 22.4 million in cash and cash equivalents, including restricted cash of $ 5.6 million, and $ 3.1 million of working capital. However, 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 issued. Management 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 fr om products sold to large retailers and its internet portals, and to the extent necessary, generate cash provided by financing activities through it’s at the market offering or other equity or debt financing means. NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The following is a summary of the Company’s significant accounting policies: Basis of Presentation The accompanying consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP) under the accrual basis of accounting. Non-controlling Interest The Company owns 98.8 % of SQL Lighting & Fans LLC, which was formed in Florida on April 27, 2011. The subsidiary had no activity during 2022 and 2021 . Use of Estimates The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Such estimates and assumptions impact both assets and liabilities, including but not limited to: net realizable value of accounts receivable and inventory, estimated useful lives and potential impairment of property and equipment, the valuation of intangible assets, estimate of fair value of share based payments and derivative liabilities, estimates of fair value of warrants issued and recorded as debt discount, estimates of tax liabilities and estimates of the probability and potential magnitude of contingent liabilities. Making estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the financial statements, which management considered in formulating its estimate could change in the near term due to one or more future nonconforming events. Accordingly, actual results could differ significantly from estimates. F- 7 Reclassifications For comparability, reclassifications of certain prior-year balances were made to conform with current-year presentations, such as certain expenses previously included in cost of revenues and reclassified as general, and administrative expenses in 2022 and sales and marketing expenses which were previously included in selling, general, and administrative expenses in 2022. Basis of Consolidation The 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 December 31, 2023. All intercompany balances and transactions have been eliminated in consolidation. Business Combination The 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. The 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 allocation of purchase price may vary based on the number and fair value of the shares to be issued in April 2024. The initial allocation of the purchase price is as follows: SCHEDULE OF INITIAL ALLOCATION OF PURCHASE PRICE Assets acquired excluding identifiable intangible assets and goodwill $ 6,863,011 Customer relationships 4,500,000 E-commerce technology platforms 3,900,000 Goodwill 16,157,000 Assumed liabilities ( 10,943,450 ) Total Assets Acquired $ 20,476,561 Consideration: Cash outlay, net of cash acquired $ 4,206,200 Consideration payable 3,382,393 Shares of common stock 12,887,968 Total purchase price $ 20,476,561 F- 8 Consideration payable primarily consists of the fair value of cash and amounting to $ 3.1 million payable in April 2024 and $ 750,000 cash, held in escrow, payable in July 2024. The consideration payable is discounted using an effective rate of 6 %. The 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, Cash Equivalents, and restricted cash. The Company considers all highly liquid securities with original maturities of three months or less when acquired, to be cash equivalents. At December 31, 2023 and December 31, 2022, the Company’s cash composition was follows: SCHEDULE OF CASH EQUIVALENTS AND RESTRICTED CASH December 31, 2023 December 31, 2022 Cash and cash equivalents $ 16,810,983 $ 6,720,543 Restricted cash 5,619,270 2,741,054 Total cash, cash equivalents and restricted cash $ 22,430,253 $ 9,461,597 Restricted Cash The Company issued a letter of credit of $ 2.8 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 cash of $ 2.8 million as of December 31, 2023 and 2022. Additionally, pursuant to the Company’s acquisition of Belami, Inc., the Company placed $ 750,000 in an escrow account. Furthermore, the Company secured a line of credit of $ 2.0 million with cash of the equivalent amount. Customer Contracts Balances Accounts receivables are recorded in the period when the right to receive payment or other consideration becomes unconditional. Accounts receivables 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 December 31, 2023, and December 31, 2022, the Company’s allowance for doubtful accounts was $ 54,987 and $ 0 , respectively. The Company determines an allowance for sales returns based upon historical experience. As of December 31, 2023, and December 31, 2022, the Company’s allowance for sales returns was $ 182,584 and $ 0 , respectively and is recorded as an accrued expenses in the accompanying consolidated financial statements. The Company defers the revenue related to undelivered customer orders for which it was paid or has a right to be paid at each measurement date. Such amounts are recognized as deferred revenues in the accompanying balance sheet. As of December 31, 2023, the deferred revenues amounted to $ 1,475,519 . There were no deferred revenues as of December 31, 2022. The costs associated with such deferred revenues are recognized as deferred charges in the accompanying balance sheet. Such charges include the carrying value of related inventory, freight, and sales charges. The deferred charges amounted to $ 224,445 as of December 31, 2023. There were no deferred charges as of December 31, 2022. F- 9 Furniture and Equipment Furniture and equipment is stated at cost, less accumulated depreciation, and is reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Depreciation of property and equipment is provided utilizing the straight-line method over the estimated useful lives, ranging from 3 to 7 years of the respective assets. Expenditures for maintenance and repairs are charged to expense as incurred. Upon sale or retirement of property and equipment, the related cost and accumulated depreciation are removed from the accounts and any gain or loss is reflected in the statements of operations. Inventory Inventories are stated at the lower of cost, determined on the first-in, first-out (FIFO) method. Cost principally consists of the purchase price (adjusted for lower of cost or market), customs, duties, and freight. The Company periodically reviews historical sales activity to determine potentially obsolete items and evaluates the impact of any anticipated changes in future demand. SCHEDULE OF INVENTORY December 31, 2023 December 31, 2022 Inventory, component parts $ 930,252 $ 1,923,540 Inventory, finished goods 2,495,482 - Inventory- total $ 3,425,734 1,923,540 The Company will maintain an allowance based on specific inventory items that are obsolete. The Company tracks inventory as it is repurposed ,disposed, scrapped, or sold at below cost to determine whether additional items on hand should be reduced in value through an allowance method. Losses from subsequent measurement of inventory amounted to $ 1.3 million and $ 0 as of December 31, 2023 and 2022, respectively. As of December 31, 2023, and 2022, the Company has determined that no additional allowance is required. Securities Debt securities are classified as available-for-sale when they might be sold before maturity. Securities available for sale are carried at fair value, with unrealized holding gains and losses included in accumulated other comprehensive income. Available-for-sale debt securities are recorded at fair value with the net unrealized gains and losses (that are not deemed to be other-than—temporary) reported as a component of other comprehensive income (loss). Realized gains and losses and charges for other-than-temporary impairments are included in determining net income, with related purchase costs based on the first-in, first-out method. The Company evaluates its available-for-sale-investments for possible other-than-temporary impairments by reviewing factors such as the extent to which, and length of time, an investment’s fair value has been below the Company’s cost basis, the issuer’s financial condition, and the Company’s ability and intent to hold the investment for sufficient time for its market value to recover. For impairments that are other-than-temporary, an impairment loss is recognized in earnings equal to the difference between the investment’s cost and its fair value at the balance sheet date of the reporting period for which the assessment is made. The fair value of the investment then becomes the new amortized cost basis of the investment, and it is not adjusted for subsequent recoveries in fair value. F- 10 Corporate, state and local government debt securities consist of debt from relatively large corporate organizations and certain state and local governmental agencies. The Company reviews trading activity and pricing for each of the debt securities in its portfolio as of the measurement date and determines if pricing data of sufficient frequency and volume in an active market exists to support Level I classification of these securities. When sufficient quoted pricing for identical securities is not available, the Company obtains market pricing and other observable market inputs at dates other than the measurement dates. As a result, the Company classifies its debt securities as Level I and Level II of the fair value hierarchy. Management does not believe that its investment in debt securities were impaired as of December 31, 2022. Intangible Assets Intangible 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. Estimated 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. The Company developed various patents for an installation device used in light fixtures and ceiling fans. Costs incurred for submitting the applications to the United States Patent and Trademark Office for these patents have been capitalized. Patent costs are amortized using the straight-line method over the related 15 -year lives. The Company begins amortizing patent costs once a filing receipt is received stating the patent serial number and filing date from the Patent Office. The Company incurs certain legal and related costs in connection with patent applications. The Company capitalizes such costs to be amortized over the expected life of the patent to the extent that an economic benefit is anticipated from the resulting patent or alternative future use is available to the Company. The Company also capitalizes legal costs incurred in the defense of the Company’s patents when it is believed that the future economic benefit of the patent will be maintained or increased, and a successful defense is probable. Capitalized patent defense costs are amortized over the remaining expected life of the related patent. The Company’s assessment of future economic benefit or a successful defense of its patents involves considerable management judgment, and an unfavorable outcome of litigation could result in a material impairment charge up to the carrying value of these assets. Management has determined that there was no impairment of the Company’s intangible assets during 2023 and 2022. Goodwill Goodwill, 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 unit level. 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. The 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 assets previously performed or based on the number of shares the Company has to issue in April 2024. Management has determined that there was no impairment of the Company’s goodwill 2023 and 2022. F- 11 GE Agreements The Company has two U.S. and global agreements with General Electric (“GE”) related to the Company’s products. A U.S. and Global Licensing and Master Service Agreement dated December 4, 2023, which replaced a prior agreement under similar terms. The agreement expires on December 4, 2028 and includes automatic renewal provisions. Pursuant to such agreement, GE’s licensing team has the rights to exclusively license certain of Sky’s Standard and Smart plug-and-play products set forth in a statement of work in the U.S. and worldwide. Pursuant to the agreement, the Company expects that GE’s licensing team will seek and arrange licensee partners for our products in the U.S. and globally, including negotiating agreement terms, managing contracts, collecting payments, auditing partners, assisting with patent strategy and protection, and assisting in auditing product quality control under the “Six Sigma” guidelines. For products licensed to third parties, the Company and GE will each receive a specified percentage of the earned revenue realized from such licensing, unless otherwise provided in the applicable statement of work. A letter agreement dated November 28, 2023. The agreement expires on December 15, 2027 and includes a Repayment Plan Under U.S. and Global Trademark Agreement dated June 15, 2011 (as later amended), which expired November 30, 2023, between SQL Lighting & Fans, LLC and GE Trademark Licensing, Inc. Under this new payment arrangement, SQL’s revised royalty payment obligation is $ 2.7 million in the aggregate (the “Royalty Payment”) payable in quarterly installments beginning on December 15, 2023 and ending on December 15, 2026 and $ 1.4 million payable in 2027. Fair Value of Financial Instruments The Company measures assets and liabilities at fair value based on an expected exit price as defined by the authoritative guidance on fair value measurements, which represents the amount that would be received on the sale of an asset or paid to transfer a liability, as the case may be, in an orderly transaction between market participants. As such, fair value may be based on assumptions that market participants would use in pricing an asset or liability. The authoritative guidance on fair value measurements establishes a consistent framework for measuring fair value on either a recurring or nonrecurring basis whereby inputs, used in valuation techniques, are assigned a hierarchical level. The following are the hierarchical levels of inputs to measure fair value: ● Level 1 – Observable inputs that reflect quoted market prices in active markets for identical assets or liabilities. ● Level 2 – Inputs reflect quoted prices for identical assets or liabilities in markets that are not active; quoted prices for similar assets or liabilities in active markets; inputs other than quoted prices that are observable for the assets or liabilities; or inputs that are derived principally from or corroborated by observable market data by correlation or other means. ● Level 3 – Unobservable inputs reflecting the Company’s assumptions incorporated in valuation techniques used to determine fair value. These assumptions are required to be consistent with market participant assumptions that are reasonably available. The carrying amounts of the Company’s financial assets and liabilities, such as cash and cash equivalents, accounts receivable, inventory, prepaid expenses, other current assets, accounts payable, accrued interest payable, certain notes payable and notes payable – related party, and GE royalty obligation, approximate their fair values because of the short maturity of these instruments. Embedded Conversion Features The Company evaluates embedded conversion features within convertible debt under ASC 815 “Derivatives and Hedging” to determine whether the embedded conversion feature(s) should be bifurcated from the host instrument and accounted for as a derivative at fair value with changes in fair value recorded in earnings. If the conversion feature does not require derivative treatment under ASC 815, the instrument is evaluated under ASC 470-20 “Debt with Conversion and Other Options” for consideration of any beneficial conversion features. Derivative Financial Instruments The Company does not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks. The Company evaluates all of its financial instruments, including stock purchase warrants, to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then revalued at each reporting date, with changes in the fair value reported as charges or credits to income. As of December 31, 2023, the Company had a sufficient number of authorized shares of common stock to accommodate the conversion features on warrants, options, estricted stock units, and convertible notes. These shares have been reserved for issuance by the Company’s stock transfer agent, and accordingly, no derivative liability has been calculated on these shares. F- 12 Extinguishments of Liabilities The Company accounts for extinguishments of liabilities in accordance with ASC 405-20 (formerly SFAS 140) “Accounting for Transfers and Servicing of Financial Assets and Extinguishment of Liabilities”. When the conditions are met for extinguishment accounting, the liabilities are derecognized and the gain or loss on the sale is recognized. Stock-based Compensation The Company periodically issues common stock, RSUs and stock options to officers, directors, employees and consultants for services rendered. The Company accounts for stock incentive awards issued to employees and non-employees in accordance with FASB ASC 718, Stock Compensation. Accordingly, stock-based compensation is measured at the grant date, based on the fair value of the award. Stock-based awards to employees are recognized as an expense over the requisite service period, or upon the occurrence of certain vesting events. Additionally, stock-based awards to non-employees are expensed over the period in which the related services are rendered. In June 2018, the FASB issued ASU 2018-07—Compensation—Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting, which simplifies the accounting for share-based payments to nonemployees by aligning it with the accounting for share-based payments to employees subject to certain exceptions. The Company adopted ASU 2018-07 with respect to grants of shares of common stock of the Company made in January 2019. The adoption of ASU 2018-07 did not have a material impact on the consolidated financial statements. Prior to the adoption of ASU 2018-07 in January 2019, stock-based awards granted to non-employees were accounted for in accordance with ASU 505-50 – Equity-Based Payments to Non-Employees (“ASU 505-50”). ASU 505-50 measures stock-based compensation at either the fair value of the consideration received, or the fair value of the equity instruments issued, whichever is more reliably measurable. If the fair value of the equity instruments issued is used, it is measured using the stock price and other measurement assumptions as of the earlier of (1) the date at which a commitment for performance by the counterparty to earn the equity instruments is reached, or (2) the date at which the counterparty’s performance is completed. The expense resulting from share-based payments is recorded in operating expenses in the statements of operations. Revenue Recognition The Company currently generates revenues substantially from home lighting, ceiling fans, and smart products 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. The 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. Cost of Revenues Cost of revenues represents costs directly related to produce, acquire and source inventory for sale, and provisions for inventory shrinkage and obsolescence. These costs include the costs of purchased products, inbound freight, and custom duties. Selling, General and Administrative Expenses Shipping and handling costs incurred by the Company to deliver finished goods are expensed and recorded in selling, general and administrative expenses. Additionally, selling, general and administrative expenses include marketing, professional fees, distribution, warehouse costs, and other related selling costs. Selling expenses include costs incurred in the selling of merchandise. General and administrative expenses include costs incurred in the administration or general operations of the business. Stock compensation expense consists of non-cash charges resulting from the issuance of stock units and stock options that are disclosed in the selling, general and administrative expenses and included as operating expenses. F- 13 Income Tax Provision The Company accounts for income taxes under Section 740-10-30 of the FASB Accounting Standards Codification, which requires recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax assets and liabilities are based on the differences between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Deferred tax assets are reduced by a valuation allowance to the extent management concludes it is more likely than not that the assets will not be realized. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the Consolidated Statements of Operations in the period that includes the enactment date. The Company adopted section 740-10-25 of the FASB Accounting Standards Codification (Section 740-10-25). Section 740-10-25 addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements. Under Section 740-10-25, the Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position should be measured based on the largest benefit that has a greater than fifty (50) percent likelihood of being realized upon ultimate settlement. Section 740-10-25 also provides guidance on derecognition, classification, interest and penalties on income taxes, accounting in interim periods and requires increased disclosures. The estimated future tax effects of temporary differences between the tax basis of assets and liabilities are reported in the accompanying consolidated balance sheets, as well as tax credit carrybacks and carryforwards. The Company periodically reviews the recoverability of deferred tax assets recorded on its consolidated balance sheets and provides valuation allowances as management deems necessary. Management makes judgments as to the interpretation of the tax laws that might be challenged upon an audit and cause changes to previous estimates of tax liability. In addition, the Company operates within multiple taxing jurisdictions and is subject to audit in these jurisdictions. In the management’s opinion, adequate provisions for income taxes have been made for all years. If actual taxable income by tax jurisdiction varies from estimates, additional allowances or reversals of reserves may be necessary. Uncertain Tax Positions The Company did not take any uncertain tax positions and had no adjustments to its income tax liabilities or benefits pursuant to the provisions of Section 740-10-25 for the reporting periods ended December 31, 2023, and 2022. Contingencies The Company follows subtopic 450-20 of the FASB Accounting Standards Codification to report accounting for contingencies. Certain conditions may exist as of the date the consolidated financial statements are issued, which may result in a loss to the Company, but which will only be resolved when one or more future events occur or fail to occur. The Company assesses such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company or un-asserted claims that may result in such proceedings, the Company evaluates the perceived merits of any legal proceedings or un-asserted claims as well as the perceived merits of the amount of relief sought or expected to be sought therein. F- 14 If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in the Company’s financial statements. If the assessment indicates that a potentially material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, and an estimate of the range of possible losses, if determinable and material, would be disclosed. Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the guarantees would be disclosed. However, there is no assurance that such matters will not materially and adversely affect the Company’s business, consolidated financial position, and consolidated results of operations or consolidated cash flows. Comprehensive Income or loss Accounting principles generally require that recognized revenue, expenses, gains and losses be included in net income. Certain changes in assets and liabilities, such as unrealized gains and losses on available-for-sale securities, are reported as a separate component of the stockholders’ equity section of the statements of financial condition. Such items along with net income are components of comprehensive income. Loss Per Share Basic net earnings (loss) per share is computed by dividing net income (loss) for the period by the weighted average number of common stock outstanding during each period. Diluted earnings (loss) per share is computed by dividing net income (loss) for the period by the weighted average number of common stock, common stock equivalents and potentially dilutive securities outstanding during each period. The Company uses the “treasury stock” method to determine whether there is a dilutive effect of outstanding convertible debt, option and warrant contracts. For the years ended December 31, 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. Therefore, a separate computation of diluted earnings (loss) per share is not presented for the periods presented. The Company had the following anti-dilutive common stock equivalents at December, 2023 and 2022: SCHEDULE OF EARNING (LOSS) PER SHARE December 31, 2023 December 31, 2022 Stock warrants 2,063,522 1,928,211 Stock options 35,807,476 33,289,250 Convertible notes 3,920,005 86,668 Preferred stock - 880,400 Total 41,791,003 36,164,529 Anti-dilutive common stock equivalents at December 31, 2023 excludes shares issuable in April 2024 pursuant to the business combination of Belami which range between 1,390,065 and 1,853,421 shares of common stock. Recently Issued Accounting Pronouncements Management does not believe that any recently issued, but not yet effective accounting pronouncements, if adopted, would have a material effect on its consolidated financial statements. Change 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 changed its revenue recognition policy as it believes that it is preferable to recognize the revenues of products shipped by such third-party providers upon delivery. This 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. F- 15 NOTE 3 DEBT SECURITIES The components of investments as of December 31, 2022, were as follows: SCHEDULE OF COMPONENTS OF INVESTMENTS Fair value level Cost Unrealized loss Carrying value Corporate debt securities Level 1 $ 3,537,556 $ ( 56,710 ) $ 3,480,846 State and local government debt securities Level 1 908,354 ( 5,437 ) 902,917 State and local government debt securities Level 2 2,945,648 – 2,945,648 Accrued interest Level 1 44,545 - 44,545 Total $ 7,436,103 $ ( 62,147 ) $ 7,373,956 The Company disposed of its portfolio of debt securities during 2023. NOTE 4 FURNITURE AND EQUIPMENT Furniture and equipment consisted of the following: SCHEDULE OF FURNITURE AND EQUIPMENT December 31, 2023 December 31, 2022 Machinery and equipment $ 282,799 $ 67,419 Computer equipment 6,846 6,846 Furniture and fixtures 36,059 36,059 Tooling and production 642,509 534,204 Software development costs 109,096 – Leasehold improvements 30,553 30,553 Total 1,107,862 675,081 Less: accumulated depreciation ( 671,275 ) ( 459,083 ) Total, net $ 436,587 $ 215,998 Depreciation expenses amounted to $ 93,693 and $ 70,767 for the years ended December 2023 and 2022, respectively. NOTE 5 INTANGIBLE ASSETS AND GOODWILL Intangible assets consisted of the following: SCHEDULE OF INTANGIBLE ASSETS December 31, 2023 December 31, 2022 Patents and trademarks (useful life 15 years) $ 1,040,927 $ 869,822 Customer relationships (useful life 7 years) 4,500,000 – E-commerce technology platforms (useful life 4 years) 3,900,000 – Total 3,900,000 – Less: accumulated amortization ( 1,299,895 ) ( 207,020 ) Total, net $ 8,141,032 $ 662,802 F- 16 Amortization expense on intangible assets was $ 1,092,876 and $ 51,634 during 2023 and 2022, respectively. The following table sets forth the estimated amortization expense for the next five years: SCHEDULE OF INTANGIBLE ASSETS AMORTIZATION EXPENSE FOR FUTURE Twelve months ended December 31, 2024 $ 1,673,613 2025 1,673,613 2026 1,673,613 2027 1,511,113 2028 698,613 2029 698,613 Goodwill increased by $ 16.2 million during 2023 resulting from the business combination with Belami in April 2023 NOTE 6 DEBTS The following table presents the details of the principal outstanding: SCHEDULE OF DEBT TABLE December 31, 2023 December 31, 2022 APR at December 31, 2023 Maturity Collateral Notes payable $ – $ 5,115,000 8.00 % Satisfied prior to maturity Substantially all Company assets Convertible Notes (b) 11,525,000 1,300,000 6.00 – 10.00 % September 2023-March 2026 Substantially all company assets Notes payable to financial institutions a) 6,348,104 – 7.93 - 8.5 August 2024-August 2026 Inventory, accounts receivable, cash ,Notes payable to Belami sellers 247,927 – 7.93 % April 2024 – SBA-related loans (c) 145,022 157,835 3.75 % April 2025-November 2052 Substantially all Company assets Total $ 18,266,053 $ 6,572,835 Unamortized debt discount ( 4,591,222 ) – Debt, net of Unamortized debt Discount 13,674,831 6,572,835 F- 17 SCHEDULE OF INTEREST EXPENSE For the year period ended December 31, 2023 December 31, 2022 Interest expense, net 3,109,307 589,009 Interest expense is recognized as net of interest income which amounted to $ 451,703 and $ 188,132 during 2023 and 2022, respectively. As of December 31, 2023, the expected future principal payments for the Company’s debt are due as follows: SCHEDULE OF FUTURE PRINCIPAL PAYMENTS 2024 6,899,129 2025 642,648 2026 10,583,359 2027 3,040 2028 and thereafter 137,877 Total $ 18,266,053 (a) The unpaid principal bears annual interest at the Wall Street Journal prime rate. (b) Included in Convertible Notes are loans provided to the Company from one director, two officers and two investors. The notes each have the following terms: three-year subordinated convertible promissory note of principal face amounts. Subject to other customary terms, the Convertible Notes mature between September 2023 and January 2024 and bear interest at an annual rate of 6 %, which is payable annually in cash or common stock, at the holder’s discretion. At any time after issuance and prior to or on the maturity date, the note is convertible at the option of the holder into shares of common stock at a conversion price ranging from $ 15 per share. All convertible notes are convertible at a price ranging between $ 2.70 and $ 15 per share. During 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 noteholders at an adjusted exercise price of $ 2.70 per warrant. 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 $ 700,000 as amortized debt discount during 2023, and it is reflected as interest expense in the accompanying unaudited consolidated statement of operations. Only the convertible promissory notes issued during fiscal 2023 are secured by substantially all of the assets of the Company. (c) The Small Business Administration forgave approximately $ 178,000 of PPP loans during the year ended December 31, 2022, which was recognized as other income. F- 18 NOTE 7 OPERATING LEASE LIABILITIES In 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. The Company recognized a right-of-use asset and a liability of $ 1,428,764 pursuant to this lease. In September 2022, the Company entered in 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 $ 22,192,503 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 the same amount of cash. The following table outlines the total lease cost for the Company’s operating leases as well as weighted average information for these leases as of December 31, 2023: SCHEDULE OF LEASE COST OPERATING LEASE December 31, 2023 Lease costs: Cash paid for operating lease liabilities $ 687,849 Right-of-use assets obtained in exchange for new operating lease obligations 21,214,652 Fixed rent payment $ 280,218 Lease – Depreciation expense $ 1,870,393 years ended December 31, 2023 Other information: Weighted-average discount rate 6.41 % Weighted-average remaining lease term (in months) 102 SCHEDULE OF MINIMUM LEASE OBLIGATION Minimum Lease obligation 2024 1,898,428 2025 2,119,073 2026 2,357,033 2027 2,288,363 2028 and thereafter 15,503,089 Total $ 24,165,986 NOTE 8 ROYALTY OBLIGATIONS The Company had a license agreement with General Electric (“GE”) which provided, among other things, for rights to market certain of the Company’s products displaying the GE brand in consideration of royalty payments to GE. The agreement expired in 2023. F- 19 The Company owes $ 2.5 million to GE pursuant to the license agreement. The payments associated with this debt are payable in quarterly tranches aggregating $ 0.8 million during 2024 and 2025 and $ 0.9 million in 2026. Additionally, the Company owes an additional $ 1.4 million pursuant to its agreements with GE which is payable in 2027 which is recorded as an accounts payable in the accompanying balance sheet as of December 31, 2023. NOTE 9 ACCOUNTS PAYABLE AND ACCRUED EXPENSES Accounts payable and accrued expenses consisted of the following: SCHEDULE OF ACCRUED EXPENSES December 31, 2023 December 31, 2022 Accrued interest, convertible notes $ 744,953 $ 104,735 Trade payables 11,513,918 1,369,702 Accrued compensation 874,557 475,417 Total $ 13,133,428 $ 1,949,823 NOTE 10 INCOME TAXES Income taxes are provided for the tax effects of transactions reported in the financial statements and consist of taxes currently due. Deferred taxes relate to differences between the basis of assets and liabilities for financial and income tax reporting which will be either taxable or deductible when the assets or liabilities are recovered or settled. On December 31, 2023, the Company had a net operating loss carryforward of approximately $ 37,502,020 available to offset future taxable income indefinitely. Utilization of future net operating losses may be limited due to potential ownership changes under Section 382 of the Internal Revenue Code. On December 31, 2022, the Company had a net operating loss carryforward of approximately $ 27,035,941 available to offset future taxable income indefinitely. Utilization of future net operating losses may be limited due to potential ownership changes under Section 382 of the Internal Revenue Code. In assessing the realization of deferred tax assets, management considers whether it is more likely than not that some portion or all the deferred income tax assets will not be realized. The ultimate realization of deferred income tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred income tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. Based on consideration of these items, management has determined that enough uncertainty exists relative to the realization of the deferred income tax asset balances to warrant the application of a full valuation allowance as of December 31, 2023, and 2022. The effects of temporary differences that gave rise to significant portions of deferred tax assets at December 31, 2023 and December 31, 2022 were approximately as follows: SCHEDULE OF DEFERRED TAX ASSETS December 31 2023 2022 Net operating loss carryforward $ 28,012,804 $ 17,293,894 Stock-based compensation 5,018,041 2,392,262 Rights of use assets ( 6,135,853 ) ( 5,886,344 ) Operating lease liabilities 6,989,458 6,101,878 Less Valuation Allowance  ( 33,884,451 ) ( 19,901,690 ) Total Deferred Tax Assets – Net $ — $ — The Company’s tax expense differs from the statutory tax expense for the years ended December 31, 2023 and December 31, 2022 and the reconciliation is as follows. SCHEDULE OF INCOME TAX RATE RECONCILIATION 2023 2022 Computed statutory tax benefit – Federal $ ( 10,885,333 ) $ ( 5,977,363 ) Computed statutory tax benefit – State ( 1,775,915 ) ( 1,292,961 ) Permanent difference ( 1,321,512 ) - Change in valuation allowance 13,982,761 7,270,323 $ –– $ –– F- 20 NOTE 11 RELATED PARTY TRANSACTIONS Convertible Notes Due to Related Parties Convertible notes due to related parties represent amounts provided to the Company from a director and the Company’s Co-Chief Executive Officers. The outstanding principal on the convertible promissory notes, associated with related parties was $ 825,000 as of December 31, 2023, and $ 1,300,000 December 31, 2022 and accrued interest of $ 151,081 and $ 104,735 , respectively. Initial Public Offering The Company issued 455,353 shares of its common stock to certain directors, officers and greater than 5% stockholders which generated gross proceeds of $ 6,374,942 during 2022. The Company issued 95,386 shares of its common stock to affiliates of certain directors and greater than 5% stockholders pursuant to certain anti-dilutive provisions during 2022. The issuance of such shares was triggered based on the Company’s effective price of its initial public offering in February 2022. NOTE 12 STOCKHOLDERS’ EQUITY (A) Common Stock The Company issued the following common stock during 2023, and 2022: SCHEDULE OF COMMON STOCK Transaction Type Shares Issued Valuation $ (Issued) Range of Value Per Share 2023 Equity Transactions Common stock issued pursuant to acquisition 1,923,285 12,887,968 $ 6.7 Common stock issued, pursuant to services provided 2,827,662 17,977,252 1.22 - 3.82 Conversion of preferred stock 880,400 220,100 0.25 Issuance of common stock pursuant to offering, net 4,359,832 9,289,857 1.45 - 3.25 Common stock issued pursuant to extinguishment of debt 574,713 2,040,231 3.55 Transaction Type Shares Issued Valuation $(Issued) Range of Value Per Share 2022 Equity Transactions Common stock issued per exercise of options and warrants 599,651 $ 862,301 $ 0.10 – 14.0 Common stock issued per exercise of warrants, cashless 437,711 — — Common stock issued, pursuant to services provided 1,057,293 8,235,880 2.0 – 14.0 Conversion of preferred stock 12,376,536 3,094,134 0.25 Issuance of common stock pursuant to offering, net 1,650,000 23,100,000 14.0 Issuance of common stock, pursuant to anti-dilutive provisions 335,073 4,691,022 14.0 F- 21 The Company issued 335,073 shares of its common stock to certain stockholders during 2022. The issuance of such shares was triggered based on the Company’s effective price of its initial public offering. The shares were recorded as an increase in common stock and additional paid-in capital and accumulated deficit during the period, using the fair value of the shares at the date of issuance. The 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 . Valuation of the common stock issued pursuant to acquisition includes the carrying value of shares issuable in April 2024. The Company anticipates that the number of shares of its common stock issuable in April 2024 will range between 1,390,066 and 1,853,421 with a carrying value of $ 5,560,262 . (B) Preferred Stock The following is a summary of the Company’s Preferred Stock activity during the years 2023 and 2022: SCHEDULE OF PREFERRED STOCK ACTIVITY Transaction Type Quantity Carrying Value Value per Share Preferred Stock Balance at December 31, 2022 880,400 $ 220,100 $ 0.25 Preferred Stock conversions 880,400 220,100 0.25 Preferred Stock Balance at December 31, 2023 — $ — $ 0.25 Transaction Type Quantity Carrying Value Value per Share Preferred Stock Balance at December 31, 2021 13,256,936 $ 3,314,233 $ 0.25 2022 Preferred Stock conversions ( 12,376,536 ) ( 3,094,133 ) 0.25 Preferred Stock Balance at December 31, 2022 880,400 $ 220,100 $ 0.25 The 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. Holders of preferred stock converted 880,400 shares and 12,376,536 shares of preferred stock in the shares of common stock during 2023 and 2022, respectively. There were no shares of Series A Preferred Stock outstanding at December 31, 2023 and the Company terminated its designation of the Series A Preferred Stock. The Company has not designated any other preferred stock as of December 31, 2023. F- 22 (C) Stock Options The following is a summary of the Company’s stock option activity during 2023 and 2022: SCHEDULE OF STOCK OPTION ACTIVITY Options Shares Weighted Average Exercise Price Weighted Average Remaining Contractual Life (In Years) Aggregate Intrinsic Value Outstanding, January 1, 2023 33,289,250 $ 7.73 –– $ –– Exercised – 1.49 –– –– Granted 3,264,728 2.47 –– –– Forfeited ( 746,502 ) 4.23 –– Outstanding, December 31, 2023 35,807,476 $ 7.33 2.7788 $ 2,998,980 Exercisable, December 31, 2023 13,242,119 $ 4.3 2.1793 $ 2,938,370 Options Shares Weighted Average Exercise Price Weighted Average Remaining Contractual Life (In Years) Aggregate Intrinsic Value Outstanding, January 1, 2022 21,927,182 $ 3.36 –– $ –– Exercised ( 635,640 ) 1.49 –– $ –– Granted 13,832,500 11.74 –– –– Forfeited ( 1,834,792 ) 3.81 –– –– Outstanding, December 31, 2022 33,289,250 $ 7.73 3.43 $ 5,994,300 Exercisable, December 31, 2022 12,236,672 $ 3.92 2.7 $ 5,994,300 The following table summarizes the range of the Black Scholes pricing model assumptions used by the Company during 2023 and 2022: SCHEDULE OF BLACK SCHOLES PRICING MODEL December 31, 2023 December 31, 2022 Range Range Stock price $ 3.81 $ 6.5 - 12.34 Exercise price $ 0 - 14 $ 0.1 - 14 Expected life (in years) 5.00 yrs 1.5 – 5.8 yrs Volatility 55.23 % 10 - 31 % Risk-fee interest rate 4.91 % 1.37 - 2.97 % Dividend yield — — F- 23 The Company cannot use its historical volatility as expected volatility because there is not enough liquidity in trades of common stock during a term comparable to the expected term of stock option issued. The Company relies on the expected volatility of comparable publicly traded companies within its industry sector, which is deemed more relevant, to compute its expected volatility. Unamortized future option expense was $ 13.0 million (excluding certain market-based options which management cannot ascertain to have a probable outcome amounting to $ 61 million) at December 31, 2023 and it is expected to be recognized over a weighted-average period of 1.4 years. (D) Warrants Issued The following is a summary of the Company’s warrant activity during 2023 and 2022: SCHEDULE OF WARRANT ACTIVITY Number of Warrants Weighted Average Exercise Price Balance, January 1, 2023 1,908,211 $ 5.45 Issued 1,391,667 3.0 Exercised — — Forfeited 1,236,356 2.80 Balance, December 31, 2023 2,063,522 $ 5.76 Number of Warrants Weighted Average Exercise Price Balance, January 1, 2022 2,127,895 $ 5.4 Issued 608,961 3.3 Exercised ( 597,021 ) 3.3 Forfeited/Cancelled ( 231,624 ) 9.8 Balance, December 31, 2022 1,908,211 $ 5.45 During 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 3 - year warrants to the noteholders at an adjusted exercise price of $ 2.70 per warrant. 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. During 2022, the Company issued 608,961 3 -year warrants at exercise prices ranging between $ 9.80 and $ 18.2 in connection with the issuance of common shares. (E) Restricted stock units A summary of the Company’s non-vested restricted stock units during 2023 and 2022 are as follows SCHEDULE OF NON-VESTED RESTRICTED STOCK Shares Weighted Average Grant Due Fair Value Non-vested restricted stock units, January 1, 2023 2,516,461 $ 8.39 Granted 5,895,095 1.54 Vested ( 3,168,053 ) 3.24 Forfeited ( 307,681 ) 8.92 Non-Vested restricted stock units, December 31, 2023 4,935,822 7.99 Non-vested restricted stock units, January 1, 2022 770,500 3.3 Granted 2,659,109 9.2 Vested ( 912,548 ) 6.5 Forfeited ( 600 ) 2.5 Non-vested restricted stock units December 31, 2022 2,516,461 8.39 The weighted-average remaining contractual life of the restricted units as of December 31, 2023 is 1.85 years. F- 24 One 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. For the years ended December 31, 2023, and 2022, the Company recognized compensation expense of $ 18.0 million, and $ 14.0 million , respectively, related to RSUs, RSAs and stock options NOTE 13 CONCENTRATIONS OF RISKS Major Customers and Accounts Receivable The 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 December 31, 2023 and none at December 31, 2022. Liquidity The Company’s cash and cash equivalents are held primarily with two financial institutions. The Company has deposits which exceed the amount insured by the FDIC. To reduce the risk associated with the failure of such counterparties, the Company periodically evaluates the credit quality of the financial institutions in which it holds deposits. Product and Geographic Markets The Company generates its income primarily from lighting and heating products sold primarily in the United States. NOTE 14 PROFORMA FINANCIAL STATEMENTS (unaudited) The following pro forma consolidated results of operations have been prepared as if the acquisition occurred on January 1, 2022: SCHEDULE OF PROFORMA CONSOLIDATED RESULTS OF OPERATION 2023 2022 Twelve-month period ended December 31, 2023 2022 Revenues $ 82,823,223 $ 88,824,119 Net loss $ ( 39,495,552 ) $ ( 27,001,995 ) Basic and diluted loss per share $ ( 0.43 ) $ ( 0.32 ) Weighted average number of shares outstanding- basic and diluted 92,768,792 84,064,095 These 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. NOTE 15 SUBSEQUENT EVENTS Management has evaluated subsequent events through April 1, 2024, which is the date the consolidated financial statements were available to be issued. There were no significant subsequent events that required adjustment to or disclosure in the consolidated financial statements with the exception of the following: The Company generated proceeds of $ 3.6 million in consideration for the issuance of 2,733,361 shares of common stock pursuant to its at-the market offering, The selling shareholders of Belami agreed to extend the payment of the Company’s consideration payable of $ 3.1 million from April 2024 to May 2025, under convertible promissory notes. The notes bear annual interest at 10 % and are convertible at $ 3 per share. F- 25