424B4 1 form-424b4.htm

 

Filed Pursuant to Rule 424(b)(4)

Registration No. 333-261829

Registration No. 333-262612

 

PROSPECTUS

 

1,650,000 Shares of Common Stock

 

SQL TECHNOLOGIES CORP.

 

(d/b/a Sky Technologies)

 

 

We are offering 1,650,000 shares of our common stock. This is our initial public offering. Prior to the offering, there has been no established public market for our common stock. The initial public offering price is $14.00 per share. Our common stock has been approved for listing on The Nasdaq Stock Market LLC under the symbol “SKYX.”

 

Investing in our common stock involves a high degree of risk. See the “Risk Factors” section beginning on page 19 of this prospectus for a discussion of information that should be considered in connection with an investment in our securities.

 

   Per Share   Total 
Public offering price  $14.00   $23,100,000 
Underwriting discounts and commissions (1)(2)  $0.98   $1,617,000 
Proceeds to us, before expenses  $13.02   $21,483,000 

 

(1)Excludes warrants to be issued to the underwriters upon the closing of this offering, which entitle them to purchase up to a total of 8% of the total number of shares of common stock sold in this offering at an exercise price equal to 130% of the offering price of the common stock offered hereby. See “Underwriting” beginning on page 108 of this prospectus for additional information regarding the compensation payable to the underwriters.

 

(2)See “Underwriting” for a description of all compensation payable to the underwriters.

 

We have granted the underwriters an option to purchase up to 247,500 additional shares of common stock from us at the public offering price less underwriting discounts and commissions to cover over-allotments, if any. The underwriters can exercise this option within 30 days after the date of this prospectus.

 

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities, or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

 

The underwriters are offering the shares for sale on a firm commitment basis. The underwriters expect to deliver the shares of common stock to purchasers on or about February 14, 2022.

 

The Benchmark Company

 

The date of this prospectus is February 10, 2022

 

 
 

 

 

 
 

 

TABLE OF CONTENTS

 

PROSPECTUS SUMMARY 1
SUMMARY FINANCIAL DATA 18
RISK FACTORS 19
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS 44
USE OF PROCEEDS 46
DIVIDEND POLICY 47
CAPITALIZATION 48
DILUTION 49
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 51
BUSINESS 61
MANAGEMENT 73
EXECUTIVE COMPENSATION 79
DIRECTOR COMPENSATION 91
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS 92
PRINCIPAL STOCKHOLDERS 97
DESCRIPTION OF CAPITAL STOCK 98
SHARES ELIGIBLE FOR FUTURE SALE 102
MATERIAL U.S. FEDERAL INCOME TAX CONSIDERATIONS FOR NON-U.S. HOLDERS OF COMMON STOCK 104
UNDERWRITING 108
LEGAL MATTERS 113
EXPERTS 113
WHERE YOU CAN FIND MORE INFORMATION 113
INDEX TO FINANCIAL STATEMENTS F-1

 

We are responsible for the information contained in this prospectus. We have not, and the underwriters have not, authorized anyone to provide you with any other information other than in this prospectus, and we take no responsibility for, and the underwriters have not taken responsibility for, any other information others may give you. We are not, and the underwriters are not, making an offer to sell these securities in any jurisdiction where the offer or sale is not permitted. You should not assume that the information contained in this prospectus is accurate as of any date other than its date. Our business, financial condition, results of operations and prospects may have changed since that date.

 

For investors outside the United States: Neither we nor any of the underwriters have done anything that would permit this offering or possession or distribution of this prospectus in any jurisdiction where action for that purpose is required, other than in the United States. You are required to inform yourselves about, and to observe any restrictions relating to, this offering and the distribution of this prospectus outside of the United States.

 

This prospectus contains references to our trademarks and to trademarks belonging to other entities. Solely for convenience, trademarks and trade names referred to in this prospectus, including logos, artwork and other visual displays, may appear without the ® or TM symbols, but such references are not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights or the rights of the applicable licensor to these trademarks and trade names. We do not intend our use or display of other companies’ trade names or trademarks to imply a relationship with, or endorsement or sponsorship of us by, any other companies.

 

We obtained the statistical data, market data and other industry data and forecasts described in this prospectus from publicly available information, including industry publications. Industry publications generally state that they obtain their information from sources that they believe to be reliable, but they do not guarantee the accuracy and completeness of the information. Similarly, while we believe that the statistical data, industry data and forecasts are reliable, we have not independently verified the data. We have not sought the consent of the sources to refer to their reports appearing or incorporated by reference in this prospectus. We did not commission any third party for collecting or providing data used in this prospectus.

 

Numerical figures included in this prospectus have been subject to rounding adjustments. Accordingly, numerical figures shown as totals in various tables may not be arithmetic aggregations of the figures that precede them.

 

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PROSPECTUS SUMMARY

 

This summary highlights certain information appearing elsewhere in this prospectus. This summary is not complete and does not contain all of the information you should consider prior to investing in the securities offered hereby. After you read this summary, you should read and consider carefully the more detailed information and financial statements and related notes that we include in this prospectus, especially the sections entitled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” If you invest in our securities, you are assuming a high degree of risk.

 

Unless we have indicated otherwise or the context otherwise requires, references in this prospectus to the “Company,” “we,” “us” and “our” or similar terms are to SQL Technologies Corp. (d/b/a Sky Technologies) and, where appropriate, our subsidiaries.

 

Our Mission

 

As electricity is a standard in every home and building, our mission is to make homes and buildings become safe-advanced and smart as the standard.

 

Overview

 

Sky Technologies has a series of highly disruptive advanced-safe-smart platform technologies, with over 60 U.S. and global patents and patent pending applications. Our technologies place an emphasis on high quality and ease of use, while significantly enhancing both safety and lifestyle in homes and buildings. We believe that our products are a necessity in every room in both homes and other buildings in the U.S. and globally.

 

Our first-generation technologies enable light fixtures, ceiling fans and other electrically wired products to be installed safely and plugged-in, into a ceiling’s electrical outlet box within seconds, and without the need to touch hazardous wires. The plug and play technology method is a universal power-plug device that has a matching receptacle that is simply connected to the electrical outlet box on the ceiling, enabling a safe and quick plug and play installation of light fixtures and ceiling fans in just seconds. The plug and play power-plug technology, eliminates the need of touching hazardous electrical wires while installing light fixtures, ceiling fans and other hard wired electrical products. In recent years we have developed prototypes that expand the capabilities of our power-plug product, to include advanced safe and quick universal installation methods, as well as advanced smart capabilities, which are currently in the third and final prototype stage prior to launching. The smart features contained in the final prototype include control of light fixtures and ceiling fans by the SkyHome App, through WIFI, Bluetooth Low Energy (“BLE”) and voice control connections. The SkyHome App will allow scheduling, energy savings eco mode, dimming, back-up emergency light, night light, light color changing and much more.

 

We believe that due to safety, convenience, cost, and time that all hard-wired electrical products, such as light fixtures, ceiling fans and other products, should become plug and play and smart, as the standard, enabling consumers to plug their fixtures and control them through their smart phones at any time.

 

Our second-generation technology, which is in the second stage prototype, is an all-in-one safe and smart advanced platform (the “Smart Sky Platform”) that is designed to enhance all-around safety and lifestyle of homes and other buildings.

 

We believe that our patented advanced, safe and smart home platform technologies will make homes and buildings safer and smart as a standard, in a fraction of the time and cost, as compared to other market products.

 

We believe that our smart home products will enable builders to deliver smart homes as a standard, in the same way they deliver electricity and appliances as a standard.

 

As our products, including our prototype advanced, safe and smart products, can be easily implemented and installed in both existing and new homes and buildings in just minutes, it will save a major part of the cost and time associated with installation of smart home products. As many people spend the majority of time at their homes, we believe that they should have an affordable, easily installed, standard solution to make their homes safe, secured and smart. Similarly to how smartphones serve people as an all-in-one personal smart platform, we believe that our all-in-one Smart Sky Platform will enable every room in homes and other buildings to include a smart platform as a standard.

 

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The all-in-one safe-smart-advanced platform technology is an open system that can integrate with both existing and new smart home features, devices, and systems. The advanced platform prototype is designed and built in a way that it can accommodate additional smart home features, enabling the platform to serve as a gateway for safe and smart technologies into rooms/homes, buildings, and that it can act like a “Panama-Canal” that can accommodate other type of software systems, wireless systems, electronic chips and more.

 

Since 2015, we have generated over $29 million in sales from our standard products, which include ceiling fans and light fixtures with our standard “plug and play” feature built in and are described further below under “Products—Our First Product: The Weight Bearing Power-Plug”. We have decided to wind down the sales of our standard products by discontinuing production of light fixtures and ceiling fans that include the older version of our standard Sky Plug & Receptacle in favor of launching our new line of products, which are in the third and final prototype stage prior to launching and include a universal “plug and play” adapter kit, our smart products, which will include smart light fixtures and ceiling fans with our smart “plug and play” features, and our advanced universal Sky Plug & Receptacle. Additional information regarding our new line of products is described below under “Products—Advanced Products” and “—Smart Products.” We elected to do so since we believe that the market has great demand for smart advanced products, and that we will be able to generate significant sales from our new line of advanced and smart products from direct sales as well as from licensing. Our first generation of advanced and smart products are in the third and final prototype stage prior to launching. We expect to launch our universal “plug and play” adapter kit and our smart universal adapter kit, light fixtures, and ceiling fans, as well as the SkyHome App to control the smart features, in the first half of 2022. We expect to launch the all-in-one Smart Sky Platform in the second half of 2022.

 

Safety

 

We believe that safety is a necessity and the top priority in all aspects of life. Therefore, our technologies and products emphasize human safety, home, building and property safety and security, while combining safety features with high demand smart home features. We believe our products should contribute to the elimination of many cases of hazardous incidents, including ladder falls, electric shock/electrocutions, fires, carbon monoxide poisonings, injuries and deaths, as management believes that our products will result in easier installment processes and enhance the use of life saving products such as smoke detectors, carbon monoxide detectors, and emergency lights, among other products. The Smart Platforms second generation prototype incorporates “plug and play” technology, which eliminates the need to touch wires during the later plug-in install, replacement and maintenance, and cleaning and, accordingly, could result in reduced incidents of electrical shocks and fires resulting from faulty wiring. The installation of our Smart Platforms, and retrofitting of electrical services does not require the services of a licensed electrician, but does not preclude the services of a licensed electrician. As more individuals engage in do-it-yourself (DIY) lighting projects, using our products rather than traditional lighting products could reduce incidents of incorrect wiring, shocks, injury and even death. In addition, we believe installing our products will allow installers to spend less time on a ladder during initial installation. Installers often wire light fixtures and fans while also holding such fixture or fan; with our products, including the Smart Platforms, the initial receptacle installation will be completed on the ladder and, afterwards, the fixture can simply be plugged into place, resulting in a faster and, we believe, much safer process, as installers can focus on wiring without also holding potentially heavy or breakable fixtures. Further, the Smart Platforms will incorporate a hard-wired smoke detector with battery back-up and a carbon monoxide monitor, which we believe could reduce injuries and deaths from fire and carbon monoxide poisoning.

 

Products

 

Our products are designed to improve all around home and building safety and lifestyle. While we have developed and created working prototypes of our advanced and smart products, as described below, we are continuing to refine the product prototypes and expect to begin commercial manufacturing and marketing in the first half of 2022 for the advanced products and the smart universal power-plug, ceiling fans and lighting products and the second half of 2022 for the Smart Sky Platform.

 

Our First Product: The Weight Bearing Power-Plug

 

Our first patented technology was the Power-Plug, a weight bearing power plug that acts as a safe and quick installation device, designed for “plug and play” installation of weight bearing electronics, such as light fixtures, ceiling fans and other electrical products, into ceiling electrical outlet boxes.

 

Our patented technology consists of a fixable socket and a revolving plug (the Power-Plug) for conducting electric power and supporting an electrical appliance attached to a wall or ceiling. The socket is comprised of a non-conductive body that houses conductive rings connectable to an electric power supply through terminals in its side exterior. The Power-Plug, which is comprised of a non-conductive body that houses corresponding conductive rings, attaches to the socket via a male post and can feed electric power to an appliance. The Power-Plug also includes a second structural element allowing it to revolve with a releasable latch that, when engaged, provides a retention force between the socket and the Power-Plug to prevent disengagement. The socket and Power-Plug can be detached by releasing the latch, disengaging the electric power from the Power-Plug. The socket is designed to replace the support bar incorporated in electric junction boxes, and the Power-Plug can be installed in light fixtures, ceiling fans, wall sconce fixtures and other electrical devices and products. Once installed, the socket can remain affixed to the junction box, enabling any electronic fixture installed with the Power-Plug to be connected and/or removed in seconds. The combined socket and Power-Plug technology are referred to throughout this prospectus as the “Sky Plug & Receptacle”.

 

We have previously sold products with the Sky Plug & Receptacle built in, including ceiling fans and light fixtures. We have decided to wind down the sales of our standard products by discontinuing production of light fixtures and ceiling fans that include the older version of our standard Sky Plug & Receptacle in favor of launching our new line of products, which are in the prototype stage and are described below.

 

Advanced Products

 

Sky – Universal Power-Plug & Receptacle: Our universal “plug and play” Sky Plug & Receptacle technology is comprised of two devices. The first device is a male Power-Plug Retrofit Kit, which can be easily embedded in the base of light fixtures and ceiling fans. The second device is a Ceiling Receptacle, which can be connected to a ceiling outlet box. After a one-time installation of the Ceiling Receptacle to a ceiling outlet box, a light fixture or ceiling fan that includes the Power-Plug Retrofit Kit can be plugged into the Ceiling Receptacle within seconds. The Universal Power-Plug & Receptacle should contribute to the elimination of hazardous incidents in homes and buildings including ladder falls, electric shock/electrocutions, fires, injuries, and deaths, etc. We expect to begin manufacturing and marketing, and to commercially launch, our new universal power plug in the first half of 2022.

 

Smart Products

 

SkyHome App: Our proprietary SkyHome Application works with both iPhones and Android phones. The SkyHome App controls products through WIFI and BLE, and is designed to control its products through additional communication methods as needed. The SkyHome App controls various products, features and specifications that include, scheduling, controlling, voice control, safety features, security features, lifestyle features, sound, lights, dimming, emergency back-up battery and much more. We expect to launch products that will be controlled by our SkyHome App in the first half of 2022, as described below.

 

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Sky Smart - Universal Power-Plug & Receptacle: Our Sky Smart Plug & Receptacle system contains two devices. The male Power-Plug Device which includes a smart electronic board. The male Smart Power-Plug comes as a Retrofit Kit, that can be simply embedded to the base of light fixtures and ceiling fans, enabling them to become both Plug and Play and Smart. The second device is a Ceiling Receptacle that can be simply connected on to a ceiling outlet box. After a one-time simple installation of the Ceiling Receptacle to a ceiling outlet box, a light fixture or ceiling fan that includes the male Smart Plug Retrofit Kit can be plugged into the Ceiling Outlet Receptacle within seconds. Our Smart Power-Plug is controlled by our proprietary SkyHome App or through voice control, it is an open system that can integrate with other smart home devices and systems. Our Smart Power-Plug is connected through WIFI and BLE, includes numerous smart features, including scheduling, energy saving-eco mode, dimming, back-up emergency light, night light, light color changing and more. We believe that, due to safety, convenience, cost and time, all hard-wired electrical products, such as light fixtures and ceiling fans should become plug and play and smart, as the standard, enabling consumers to plug their fixture and control them through their smart phones at any time. The Smart Universal Power-Plug & Receptacle should contribute to the elimination of hazardous incidents in homes and buildings including ladder falls, electric shock/electrocutions, fires, injuries, and deaths, etc. This product is in the third and final prototype stage prior to launching, and we expect to begin manufacturing and marketing, and to commercially launch, our universal plug in the first half of 2022.

 

Sky - Smart Plug and Play Ceiling Fans: Our line of high-end smart plug and play ceiling fans can be installed to our matching ceiling receptacle within seconds. Our smart ceiling fans incorporate advanced technologies, have unique modern designs, and are controlled by our proprietary SkyHome App or through voice control, it is an open system that can integrate with other smart home devices and systems. Our Smart Power-Plug is connected through WIFI and BLE, includes numerous smart features, including scheduling, energy saving-eco mode, dimming, back-up emergency light, night light, light color changing and more. We believe that, due to safety, convenience, cost and time, all hard-wired electrical products, such as ceiling fans should become plug and play and smart, as the standard, enabling consumers to plug their fixture and control them through their smart phones at any time. The Smart Plug and Play Ceiling Fan should contribute to the elimination of hazardous incidents in homes and buildings including ladder falls, electric shock/electrocutions, fires, injuries, and deaths, etc. This product is in the prototype stage, and we expect to begin manufacturing and marketing, and to commercially launch, our smart ceiling fans in the first half of 2022.

 

Sky - Smart Plug and Play Lighting: Our line of high-end Smart Plug and Play light fixtures can be installed to our matching ceiling receptacle within seconds. Our smart light fixtures incorporate advanced technologies, have unique modern designs, and are controlled by our proprietary SkyHome App or through voice control, it is an open system that can integrate with other smart home devices and systems. Our Smart Power-Plug is connected through WIFI and BLE, includes numerous smart features, including scheduling, energy saving-eco mode, dimming, back-up emergency light, night light, light color changing and more. We believe that, due to safety, convenience, cost and time, all hard-wired electrical products, such as light fixtures should become plug and play and smart, as the standard, enabling consumers to plug their fixture and control them through their smart phones at any time. The Smart Plug and Play Lighting should contribute to the elimination of hazardous incidents in homes and buildings including ladder falls, electric shock/electrocutions, fires, injuries, and deaths, etc. This product is in the third and final prototype stage prior to launching, and we expect to begin manufacturing and marketing, and to commercially launch, our smart lighting in the first half of 2022.

 

Sky – All-In-One Smart Platform: As most people spend a majority of time in their homes, we believe that they should have an easy solution to make their homes safe, secured, and smart in a simple way and as the standard. We believe that our patented advanced-safe-smart home platform technologies will make homes and buildings safe, have numerous technology features, and smart as a standard, instantly, in a fraction of time and cost, compared to other market products. Our all-in-one Advanced-Safe-Smart Platform is designed to enhance the all-around safety and lifestyle of homes and buildings and can be easily implemented and installed to the ceiling receptacle in both existing and new homes and buildings within minutes. Our smart platform includes distinctive advanced smart and safety technologies, have unique modern designs and are controlled by our proprietary Sky-Home App or through voice control. It is an open system that can integrate with other smart home devices and systems.

 

As smart phones serve people as an all-in-one personal smart platform, we believe that our all-in-one smart platform technology enables every room in homes and buildings to have a smart platform as a standard. Our smart platform is connected through WIFI and BLE, includes numerous of smart and safety features, including a smart smoke detector, a smart CO detector, time scheduling, temperature sensor, humidity sensor, WIFI extender, energy saving-eco mode, high quality speakers, back-up battery that can power back-up internet and an emergency light, as well as dimming, night light, light color changing and more. The platform’s electrical power and transformer combined with the size of our platform which represents vast electronic “Real-Estate” in terms of today’s technology driven by microchips, enables the platform to accommodate a significant amount of software as well as electronic microchips, while the unique ceiling location of the platform significantly enhances the performance of all platform’s features, including WIFI and BLE.

 

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The Smart Platform is inconspicuous to the décor. It is designed to install over existing ceiling electrical outlet boxes while allowing any pre-existing fixture to reconnect to the same box utilizing our Retrofit Kits. This innovation gives us access to the best location for the gathering and distribution of electronic signals, virtually unlimited power for our low-voltage safety and smart features, and a vast amount of electronic real estate.

 

This open-system Smart Platform will seamlessly integrate unrelated safe and smart products into a single, spatially designed unit whose functionality is controlled by an all-in-one app, the SkyHome App. The Smart Platform will eliminate the need for installation of numerous stand-alone devices and their integration into a working unit.

 

The Smart Platform’s location on the ceiling significantly advances smart home products’ performance, including the speed and range of both Wi-Fi and Bluetooth, as well as the performance of sensors and alarms.

 

The adoption of the Smart Platform should contribute to the elimination of hazardous incidents in homes and buildings including ladder falls, electric shock/electrocutions, fires, carbon monoxide poisonings, injuries, and deaths, etc.

 

Installation takes only minutes and fixtures previously hung from that location can still be plugged into the Smart Platform.

 

This product is in the second generation stage prototype, and we expect to begin manufacturing and marketing, and to commercially launch, our all-in-one Smart Platform in the second half of 2022.

 

 

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Sustainability

 

We aim to provide safe and sustainable solutions to consumers, who increasingly consider sustainability and energy efficiency when purchasing products. We believe that creating sustainable products and streamlining our operations drives efficiency, innovation and, ultimately, long-term value-creation. In designing and improving our products, we consider and apply sustainability strategies, as appropriate. For example, our products’ features include an energy savings eco mode, which can help users reduce their energy consumption, and we generally use LED lighting in our ceiling fans and light fixtures, which is more energy-efficient than traditional lighting products.

 

Cyber Security

 

We have implemented measures and protocols in order to ensure that our users’ information is safe and fully protected. We use high level of cyber security measures and protocols to ensure that our software, technologies, servers, products, platform, and devices are all protected to prevent from any type unauthorized, or illegal access or interference to our software, technologies, servers, products, platforms, and devices.

 

Our products, platforms and devices communicate over MQTT and are encrypted over Transport Layer Security, with each individual product, platform and device having its own set of certificates, keys, and universally unique identifiers, which ensures that each device can only communicate with its own topic. This ensures that even in extreme cases of illegally gaining control over a specific device, it will not affect any other devices.

 

Each login to the platform generates the user a temporary token that grants access to the services for a limited amount of time, this ensures that there is no permanent access token that can be used by hackers for unauthorized access. Each token has permissions to access only the user’s resources.

 

Our solutions are designed in a way that the user will need to conduct a restricted set of permissions, thus minimizing the risk of unwanted users gaining control over other locations.

 

Sky Plug & Receptacle NEC Code

 

The NEC (National Electrical Code) is the U.S. electrical safety building code, and is the benchmark for safe electrical design, installation, and inspection to protect people and property from electrical hazards. It has been adopted in some form in all 50 states in the United States and is intended to improve safety in U.S. homes and buildings.

 

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Based on the safety aspects of the Sky Plug & Receptacle, it was voted into the NEC and is represented by 10 different segments in the NEC Code Book. The Company has provided data relating to safety aspects of its receptacle as to electrocutions, fires and ladder falls to NEC.

 

One of the key votes and segments relating to our technologies in the NEC Code Book was the change of the definition of “receptacle” in the Code Book, which we believe is one of the most significant additions to the NEC Code in the past 120 years. The NEC leads the United States and globally with respect to electrical safety standards; as such, we believe the reputable standards of the NEC can assist with the adoption of our technology in additional countries.

 

Pursuant to these new NEC provisions, the Sky Plug & Receptacle enables builders to expedite and obtain a Certificate of Occupancy without the need to install a light fixture to the ceiling.

 

Intellectual Property

 

Developing and maintaining a strong intellectual property position is one of the most important elements of our business. We rely on a combination of patents, copyright, trademarks and trade secret laws, as well as confidential procedures and contractual provisions, to protect our proprietary technology and our brands. We enter into confidentiality and proprietary rights agreements with our employees, consultants and other third parties. We have sought, and will continue to seek, patent protection for our technology and for improvements to our technology, as well as for any of our other technologies where we believe such protection will be advantageous.

 

We protect the Sky Technologies intellectual property through various aspects and strategies including broad and particular intellectual property claims. We have over 60 U.S. and global patents and patent applications, including in China, India, Europe as well in other countries around the world. Fifteen patents have been issued. These patents and patent applications protect different aspects of our technologies. We sought intellectual property protection of the Sky Technology in China due to our current manufacturing operations and prospective sales in China’s market, and we sought protection in India in anticipation of future growth into India’s developing market, both with respect to the sales of the Sky Technology and our potential operations. As of December 31, 2021, in the U.S., we owned seven issued patents, which expire from 2036 to 2038, and six pending or published but not yet issued patents. Outside of the U.S., we own eight issued patents, which expire from 2026 to 2039, and 46 pending or published but not yet issued patents. We intend to diligently maintain and vigorously defend the intellectual property of Sky Technologies, and to actively and continuously enhance our patent protections in the U.S. and globally.

 

The issued patents are directed to various aspects our platform technologies, including our smart and standard plug and play products, as well as our safety and smart platform technologies. As further innovations are developed, we intend to seek additional patent protection to enhance and maintain our competitive advantage. Additionally, we have submitted 10 trademark applications, seven of which have been issued and three of which are pending.

 

GE - General Electric Agreements

 

We have two U.S. and global agreements with General Electric (“GE”) related to our products.

 

The first agreement is a U.S. and Global Trademark Agreement dated June 15, 2011 (as later amended), which expires November 30, 2023 and is generally renewed for five-year periods. Pursuant to such agreement, the Company may use the GE brand logo on certain products, including plug and play smart and standard ceiling fans and Sky’s SQL standard and smart plug and play devices. We have exclusive U.S. and global rights, including Canada, Asia, Europe, China, Australia, New Zealand and India, subject to a mutually agreed to commercialization plan, to market plug and play smart and standard ceiling fans and Sky’s SQL standard and smart plug and play devices under the GE brand. GE will assist us with manufacturing standards, audit of factories, audit of materials, and quality control under “Six Sigma” guidelines, as well as with public relations for products and other.

 

The second agreement is a U.S. and Global Licensing and Master Service Agreement dated June 14, 2019. The agreement expires on June 14, 2024 and includes automatic renewal provisions. Pursuant to such agreement, GE’s licensing team has the rights to exclusively license Sky’s Standard and Smart plug-and-play products in the U.S. and worldwide. Pursuant to the agreement, we expect 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, we 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.

 

For additional information regarding these agreements, see “Business—GE - General Electric Agreements.”

 

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Leadership and Talent

 

Our management members include leading executive from various industries and have joined us as they believe in our vision, technology, and strategy. Many of our key personnel are employed pursuant to an employment agreement or a consulting agreement, pursuant to which many of them, including board members have invested in the Company and agreed to be compensated primarily in stock and stock options.

 

As of December 31, 2021, we had 31 total employees and consultants, 26 of which are full time. We also employ independent contractors to support our operations. We have never had a work stoppage, and none of our employees are represented by a labor union. We have not experienced any work stoppages and consider our relations with our employees to be good. We expect to continue to expand our staff and team of engineers to develop the Sky smart technologies.

 

Key Management Members

 

  Rani R. Kohen, Executive Chairman. Rani R. Kohen has founded the Company and invented our technologies. Mr. Kohen is a businessman, entrepreneur, and inventor. 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, the continuity that he brings with his advanced business strategies, he will continue to move us forward towards achieving our goals.
     
  Steven M. Schmidt, President. Steven M. Schmidt is the former Chief Executive Officer of ACNielsen Corporation and former President, International of Office Depot International, Inc.
     
  John P. Campi, Chief Executive Officer. John P. Campi is the former Chief Procurement Officer and Executive Vice President of Chrysler, Senior Vice President of Procurement and Vendor Management for The Home Depot, Inc. and Chief Procurement Officer and Vice President of DuPont Global Sourcing and Logistics.
     
  Marc-Andre Boisseau, Chief Financial Officer. Marc-Andre Boisseau serves as our Chief Financial Officer. Marc-Andre Boisseau has served in finance roles for several public and private companies, including as Corporate Controller and Principal Accounting Officer of Citrix Systems, Inc. Mr. Boisseau serves as the Company’s full-time Chief Financial Officer since January 1, 2022. Mr. Boisseau is a certified public accountant.
     
  Patricia Barron, Chief Operations Officer and Code Team Senior Member. Patricia Barron was previously President and owner of LTG Services, Inc., an electrical safety consulting company. LTG managed technical review of lighting and ceiling fan projects for Underwriters Laboratories (“UL”) and managed UL safety testing for world fans.
     
  Mark Earley, President of the Code Team. Mark Earley joined the Company, as President of the Code Team. Mr. Earley is a world leading electrical engineer and former head of the NEC (National Electrical Code) and Chief Electrical Engineer. After leading the NEC for 35 years, he retired in 2019 and joined Sky to lead its U.S. and Global code team. Mr. Earley is still a leading member of the IEC (International Electrical Commission), the Canadian Electrical Code, the UL Electrical Council and the U.S. National Committee.
     
  Chuck Mello, SVP of the Code Team. Chuck Mello joined the Company in 2019 as SVP of the Code Team. Mr. Mello is the former International President of the IAEI (International Association of Electrical Inspectors), where he is still an instructor and author. He was formerly with UL as a Global Field Evaluation Program Manager.
     
  Amy Cronin, Executive Director Codes and Standards. Ms. Cronin is a former NFPA (NEC) Executive Leader, managing the Department of Codes and Standards, and she was responsible for more than 300 code decisions including the NEC (National Electrical Codes).
     
  Mark Wells, President of Lighting. Mark Wells, former General Manager of Consumer Lighting for GE, joined the Company in August 2016 and currently serves as our President of Lighting.

 

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  John Poole, Vice President of Sales. John Poole joined the Company in 2017 as Vice President of Sales. He formerly served in a variety of sales management roles at GE, including as General Manager of Business Development for European Retail and General Manager for GE Lighting’s Target and Home Depot accounts.
     
  Steve Briggs, Senior Advisor and President of Product Development. Steve Briggs joined the Company is 2017 as Senior Advisor and President of Product Development. He previously served in a variety of roles for GE Lighting, including as General Manager of Global Product Lighting.
     
  Eliran Ben-Zikri, Chief Technology Officer and GM of Sky’s Israeli Office. Eliran Ben-Zikri joined the Company in 2019 as Chief Technology Officer and GM of Sky’s Israeli Office. He served in one of the most elite computer units of the Israeli Defense Force and has over 10 years of experience in the technology and cloud technology industry, previously holding senior positions in leading Israeli tech companies, including eToro and SimilarWeb. He has a vast experience in the Internet of Things, data collection, data processing, analytics, security, cloud, and production.
     
  Michael Perrillo, Vice President Global Sales. Michael Perrillo is the former Chief Executive Officer of Design Solutions International. He joined the Company as a full-time consultant to enhance and expand our sales objectives, particularly toward construction/home builders, hotels and other sales channels that we are targeting.
     
  Jonathan Globerson, Vice President Design and Marketing. In 2016, Jonathan Globerson, Vice President Design and Marketing, joined the Company. He served in the most elite counter terrorism unit in the Israeli Defense Force (Sayeret Matkal) as head of the technology department, is an international award-winning product developer, former lead product designer of augmented reality and virtual reality for the 5G team for Verizon and founder of GloberDesign, a global product design and engineering firm.
     
  David Usha, General Manager China. David Usha has over 25 years of experience managing production operations in China, Poland, West Africa, Russia and Taipei, including as General Manager of Omegaplast Polska, a Polish plastic devices company, and General Manager of L’Oréal (Tel Aviv).
     
  Julio Plutt, CPA, Controller. Julio Plutt, CPA, a consultant and business strategist with OneTHinc, serves as our Controller and is a former auditor with KPMG.

 

Our human capital resources objectives include, as applicable, identifying, recruiting, retaining, incentivizing and integrating our current and future employees. We encourage and support the growth and development of our employees. Continual learning and career development is advanced through ongoing performance and development conversations with employees, and reimbursement is available to employees for seminars, conferences, formal education and other training events employees attend in connection with their job duties.

 

Our core values of accountability, openness and integrity underscore everything we do and drive our day-to-day interactions. The safety, health and wellness of our employees is a top priority. The COVID-19 pandemic has presented a unique challenge with regard to maintaining employee safety while continuing successful operations. Through teamwork and the adaptability of our management and staff, we were able to transition, over a short period of time, a majority of our corporate office employees to effectively working from remote locations on a full-time basis, with others working both remotely and in the office on a hybrid basis, and also to ensure a safely-distanced working environment for employees who remain in our facilities.

 

Business Strategy

 

Our business strategy is to enhance all around safety and advance smart living lifestyle in homes and other buildings.

 

Following commercial launch of our advanced and smart products, we plan to educate retail and commercial consumers about our products through a coordinated public relation campaign that will cover the safety aspects of our products and all the related hazardous incidents and property damage that our products can prevent, including ladder falls, electric shock/electrocutions, fires, carbon monoxide poisonings, injuries, deaths and more.

 

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We will also educate on all our advanced smart technology features.

 

Lead and Seed Strategy: We expect to lead by selling our highly disruptive line of products through a variety of channels as well as seed our products through licensing to various industries.

 

  Lead Through Direct Sales: We expect to sell our products through various representatives to online customers, builders, rental properties, hotels, big box retail, OEM customers and more. We expect to sell our products to personal consumers primarily through direct sales via our website, to large retailers, distributors and dealers, and through warehouse programs. We plan to rely primarily on product distribution arrangements with third parties and expect that our multi-channel sales strategy will evolve and expand in the future. We expect our primary customers to be retail consumers, retail showrooms, builders residential/commercial, hotels, OEM and licensing.
     
  Seed Through Licensing: After our public relation campaign and our official product launch, we expect to license a variety of our standard and smart products to companies in various industries, including electrical companies, lighting and ceiling fan companies, as well as smart home companies.

 

We intend to expand our sales and marketing operations and activities and intend to build strong customer relationships and expand our brand awareness. We can provide no assurance that we will be able to successfully expand our operations or activities, gain market awareness or acceptance of our products, or achieve our expectations described above.

 

Product Usage

 

Our products and technologies can be used in new and existing homes and buildings, including by builders, rental properties, hotels, cruise ships, elder living facilities, schools, hospitals, offices, commercial, and retail. We provide a one-year full performance warranty on all of our products, as well as part replacements. We intend to provide extended warranty coverage plans in the future.

 

Our Opportunity

 

Based on the significance of the safety aspects and lifestyle features of our products, we believe that our products are a necessity in most rooms, homes, and other buildings, both in the U.S. and globally, and that they can help prevent most of related hazardous incidents in homes and buildings, including ladder falls, electric shock/electrocutions, fires, carbon monoxide poisonings, injuries, and deaths. Therefore, we believe our product is a necessity in rooms, homes and other buildings.

 

We believe that our series of highly disruptive advanced-safe-smart platform technologies are a necessity as they are expected to disrupt and positively influence various industries, both in the U.S. and globally.

 

  Lighting Industry: We believe that due to ease of the installation, time savings, cost savings on installations and the safety aspect of our product, our product provides a competitive advantage within the light fixture, ceiling fan and smart home industries.      
     
    We believe that all light fixtures should become plug and play, smart and controlled by an app as a standard, and that light fixtures should be installed to the ceiling within seconds, safely and without the need to touch dangerous electrical wires. Our product is intended to help prevent most of related ladder falls, electric shock/electrocutions, fires, carbon monoxide poisonings, injuries, and deaths.
     
  Ceiling Fan Industry: We believe that due to the ease of installation, time savings, cost savings on installations and the safety aspect of our product, our product is a necessity for the ceiling fan industry.     
     
    We believe that all ceiling fans should become plug and play, smart and controlled by an app as a standard, and that ceiling fans should be installed to the ceiling within seconds, safely and without the need to touch dangerous electrical wires. Our product is intended to help prevent most of related ladder falls, electric shock/electrocutions, fires, carbon monoxide poisonings, injuries, and deaths.
     
  Smart Home Industry: We believe that due to ease of the installation, time savings, cost savings on installations and the safety aspect of our product, our product is a necessity for the smart home industry.     
     
    We believe that homes and buildings should become safe and smart as a standard. Our Advanced All-In-One Safe-Smart Platform enables rooms, homes, and buildings to become safe and smart instantly.
     
    Our Advanced Smart Platform significantly enhances smart home products’ performance, including the speed and range of both Wi-Fi and Bluetooth, as well as the performance of sensors and alarms. We believe that widespread adoption of the Smart Platform should contribute to the elimination of most related hazardous incidents in homes and buildings including ladder falls, electric shock/electrocutions, fires, carbon monoxide poisonings, injuries, and deaths. Therefore, we believe our product is a necessity in rooms, homes, and buildings.   
     
    Our Advanced All-In-One Safe-Smart Platform can be used in existing homes and buildings, by builders, rental properties, hotels, cruise ships, elder living facilities, schools, hospitals, offices, commercial, retail and other.   

 

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We intend to launch our new universal power plug, our SkyHome App, and our smart universal plug, as well as the smart ceiling fans and lighting fixtures containing such plug, in the first half of 2022 and our all-in-one Smart Platform in the second half of 2022. Bringing our products to market will require us to take certain steps, including, but not limited to, the following:

 

  Manufacturing: While we have manufactured and sold our prior products, and intend to continue to use the third-party manufacturers with which we have an ongoing relationship, we have not yet begun manufacturing our new advanced or smart products. We expect it may take approximately 90 days to complete manufacturing of our new universal power plug and/or our smart universal plug after we place an order. However, it may take longer than expected due to, among other things, difficulties finding suppliers, shipping delays resulting in late deliveries of necessary supplies and materials, and chip shortages.
     
  Marketing and Public Relations: We will need to gain brand awareness and attract customers. In connection with our product launch, we plan to educate retail and commercial consumers about our products through a coordinated public relation campaign that will cover the safety aspects of our products and all the related hazardous incidents and property damage that our products can contribute to preventing, as well as our advanced smart technology features. We currently rely, and plan to rely primarily, on product distribution arrangements with third parties. We expect to enter into additional sales, distribution and/or licensing agreements in the future, and we may not be able to enter into these agreements on terms that are favorable to us, if at all. We may also need to hire additional sales personnel.
     
  Government Approval: While we have received a variety of final electrical code approvals, including UL, United Laboratories for Canada (cUL) and Conformité Européenne (CE), and 2017 and 2020 inclusion in the NEC Code Book, we may need or desire to obtain additional UL, cUL or CE certifications for new product configurations, which may increase the time and costs to complete our product launches. In addition, we may be unable to obtain new certifications within a reasonable time, or at all.

 

Expected Revenue Stream

 

We believe our products will enable us to access a global market with multiple revenue streams, including:

 

Global market with numerous potential product applications

 

Product sales

 

Royalties/Licensing

 

Subscription model

 

Monitoring services

 

Sale of product and licensing rights to additional countries

 

Royalties from the Sky Plug & Receptacle. Management has agreed to license products in the U.S. and globally through the efforts of its GE licensing and trademark agreements. We anticipate we will also license our smart technologies products currently in development.

 

Selling/Licensing Country Rights. Management is considering selling and licensing marketing rights to certain countries in exchange for payment and on-going royalties.

 

Product Sales. We currently generate revenue from our product sales, and management will strive to achieve strong market penetration worldwide for our current products and products in development. We have previously sold our standard products in the United States, Canada and Mexico, and expect to begin selling our new smart products in these markets in 2022. We intend to expand our sales footprint in certain countries in Latin America, Europe and Asia. We may be unable to gain market acceptance in such markets and cannot provide any assurance that we will be successful in our efforts to expand our market reach.

 

Subscription & Monitoring Services. Our future plans include offering subscription services as part of our Smart Sky Platform, including, among other services, communications, fire alarms, home intrusion alerts, emergency response services and monitoring services. Our smart platform will include, among other features, a smart smoke detector, a smart carbon monoxide detector, and a WIFI extender. We intend to expand our operations to enable us to provide services relating to these functions, including high-speed internet services, monitoring systems designed to sense movement, smoke, fire, carbon monoxide, temperature, and other environmental conditions and hazards, monitor home access and visitors and address personal emergencies such as injuries and other medical emergencies. We intend to market such services to homeowners and other types of facilities, including rental properties, hotels, cruise ships, elder living facilities, schools, hospitals, offices, commercial, and retail. Our ability to provide such services will depend on a variety of factors, including, but not limited to, subscriber interest and financial resources, any applicable licensing and regulatory compliance, our ability to manage our anticipated expansion and to hire, train and retain personnel, and general economic conditions. We may partner with other businesses to provide such services. We expect to begin providing such services in 2023, but cannot provide any assurance that we will be able to do so.

 

Our History

 

We began as Safety Quick Light LLC in 2004 and started developing the Sky Plug & Receptacle technology in 2007 for installation of light fixtures and ceiling fans during manufacturing and as a Retrofit Kit for installing the Sky Technology in existing light fixtures and ceiling fans. Historically, we have sold over hundreds of thousands of units of the Sky Plug & Receptacle technology through original equipment manufacturing and through other channels to lighting manufacturers and retailers who installed the Sky Plug & Receptacle technology into their lighting fixtures for sale at retail stores. We also sold, directly to retailers, approximately hundreds of thousands of Sky Plugs & Receptacles embedded with ceiling fans.

 

Since our inception, we have sold hundreds of thousands of units of our standard Sky Plug & Receptacle. Since 2015 we generated over $29 million in sales. We have wound down our standard product sales by discontinuing production of light fixtures and ceiling fans that include the older version of our standard Sky Plug & Receptacle, in favor of licensing our product and developing our Smart Power-Plug and Smart Sky Platform technologies.

 

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We hold over 60 U.S. and global patents and patent applications and have received a variety of final electrical code approvals, including UL, United Laboratories for Canada (cUL) and Conformité Européenne (CE), and 2017 and 2020 inclusion in the NEC Code Book.

 

Third-Party Manufacturing and Suppliers

 

Our business model entails the use of third-party manufacturers to produce the Sky Technology product. The manufacturers currently used by us are located in China and, with respect to products that bear the GE logo, as required by the Licensing Agreement with GE, such manufacturers must be approved by GE to ensure certain quality standards are met. To further ensure that quality specifications are maintained, we maintain an office in the Guangdong province in China that is staffed with GE trained auditors who regularly inspect the products that are being produced by third-party manufacturers.

 

Raw materials used in our products include copper, aluminum, zinc, steel, acrylonitrile butadiene styrene (ABS) plastic and wood. We also purchase integrated circuit chip sets or other electronic components from third-party suppliers or rely on third-party independent contractors, some of which are customized or custom made for us. While we have experienced shortages in obtaining necessary materials, including zinc, copper and steel, as well as integrated circuit chips to be used in our products, we have been able to make other arrangements and find additional suppliers as necessary. With respect to circuit chips, we believe we have obtained a sufficient number to manufacture our products by the anticipated launch date. Going forward, we believe we can obtain more chips and other materials as needed within a reasonable time period and may be able to replace difficult to acquire components with different products or modify our design if necessary

 

Our principal suppliers are Mei Pin Metal & Electrical Co., Ltd (Guangdong, China), Siterwell Electronics Co., Ltd (Zhejiang, China), Zhongshan Paragon Source Lighting Co., Ltd. (Noble) (Zhongshan, Guangdong, China), Artisan Industrial Co., Ltd. (Jiangmen, Guangdong, China) and Youngo Limited (Aircool) (Huizhou City, Guangdong, China).

 

Competition

 

We believe our technologies are highly disruptive and with an edge compared to other market technologies. Our competitors vary based on our products, market, and industry.

 

Our main competitors for our Universal Power Plug and Play, Sky Plug & Receptacle product are: To the best of our knowledge we do not have direct competition at this point to Universal Power Plug and Play, Sky Plug & Receptacle product, although all lighting and ceiling fan manufacturers are potential competitors.

 

Our main competitors for our Smart Universal Power Plug and Play Sky Plug & Receptacle product are: To the best of our knowledge we do not have direct competition at this point to Smart Universal Power Plug and Play Sky Plug & Receptacle product, although all lighting and ceiling fan manufacturers are potential competitors.

 

Our main competitors for our Smart Plug and Play Light Fixture products are: To the best of our knowledge we do not have direct competition at this point to our Smart Plug and Play Light Fixtures, although there are lighting manufacturers that have smart lights that are controlled through smart wall switches/app or other, including companies such as Casainc, Global Electric, Designers, Minca, Fountain, Enbrighten, NBG, Minka, Hampton Bay and other. To the best of our knowledge there are no other light fixtures that have an all-in-one combination of light fixtures that have both plug and play and smart.

 

Our main competitors for our Smart Plug and Play Ceiling Fan Products: To the best of our knowledge we do not have direct competition at this point to our Smart Plug and Play Ceiling Fan products, although there are ceiling fan manufacturers that have smart fans that are controlled through smart wall switches/app or other, including companies such as Hunter, Minka, Home Decorators, Fanomation, Modern Homes, Hampton Bay and others.

 

Our main competitors for our Plug and Play All-In-One Safe-Smart Platform product: To the best of our knowledge we do not have direct competition at this point to our Plug and Play All-In-One Safe-Smart Platform product, although there are many smart home companies that can be our competitors, including companies such as, Control 4, Vivent, Apple, Google, Microsoft, Amazon, ADT, Blue, Cove and many others and many other smart home companies that have a variety of smart home products. As to the best of our knowledge there are no other Plug and Play All-In-One Safe-Smart Platform products.

 

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Risks Associated with our Business

 

Our ability to implement our business strategy is subject to numerous risks that you should be aware of before making an investment decision. Below is a summary of material factors that make an investment in our common stock speculative or risky. This summary does not address all of the risks that we face. Additional discussion of the risks summarized in this risk factor summary, and other risks that we face, can be found below in the section entitled “Risk Factors” and should be carefully considered, together with other information included in this prospectus.

 

We have a history of operating losses, will likely incur losses in the future and may be unable to generate sufficient revenue to support our operations.

 

If we are unable to successfully launch our smart products and technologies, integrate them with third-party products and technologies, further develop them to include new features and to respond to customer demands, or otherwise are unable to realize our product strategy or compete in our industry, our business, results of operations and financial condition would be adversely affected.

 

Our success depends on our ability to develop, expand and manage our operations and effectively and timely develop and implement our strategic business initiatives, which may include engaging in strategic transactions, including acquisitions, which involves substantial risks.

 

We may need to raise additional financing to support our operations, and any inability to do so may adversely affect or terminate our operations. We also face risks related to our current debt financing.

 

Our business has been, and could continue to be, negatively impacted by the COVID-19 pandemic.

 

We depend on a limited number of third-party manufacturers and suppliers.

 

The loss of any significant customers, or the loss of our License Agreement with GE, could materially adversely affect us.

 

We face substantial risks relating to our intellectual property, including any inability to protect our intellectual property, potential litigation and the expiration or loss of patent protection and licenses.

 

We could face significant liabilities or may be subject to legal claims that could adversely affect our business and financial condition.

 

We have limited product distribution experience and expect to rely on third parties, who may not successfully sell our products.

 

We will incur increased costs as a result of operating as a public company.

 

Our future success depends on our ability to retain key executives and qualified personnel.

 

Any failure to maintain effective internal control over financial reporting or disclosure controls and procedures could negatively impact us.

 

Unstable market and economic conditions, as well as natural disasters, geopolitical events and other highly disruptive events, such as the COVID-19 pandemic, could materially adversely affect us.

 

Unauthorized breaches or failures in cybersecurity measures adopted by us or third parties on which we rely and/or are included in our products and technologies, or any disruption to our cloud-based infrastructure, could have a material adverse effect on our business.

 

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There is currently no established public trading market for our common stock, and we cannot provide any assurance that an active, liquid market for our common stock will develop or be sustained.

 

If our stock price fluctuates after the offering, you could lose a significant part of your investment.

 

If you purchase our common stock in this offering, you will incur immediate and substantial dilution in the book value of your shares. In addition, the conversion of outstanding convertible notes and Series A Preferred Stock and exercise of warrants into shares of common stock could materially dilute our stockholders.

 

Our executive officers, directors, principal stockholders and their affiliates will continue to exercise significant influence after this offering.

 

We have broad discretion in how we use the proceeds of this offering and may not use these proceeds effectively.

 

We are a smaller reporting company, and we cannot be certain whether the reduced reporting requirements applicable to smaller reporting companies will make our common stock less attractive to investors.

 

Anti-takeover provisions in our charter documents and under Florida law could discourage, delay or prevent a change in control of us and may affect the trading price of our common stock.

 

Corporate Information

 

We were originally organized in May 2004 as a Florida limited liability company under the name of Safety Quick Light, LLC. We converted to a Florida corporation on November 6, 2012 and, effective August 12, 2016, we changed our name from “Safety Quick Lighting & Fans Corp.” to “SQL Technologies Corp.” We currently do business as “Sky Technologies.” Our principal executive offices are located at 11030 Jones Bridge Road, Suite 206, Johns Creek, Georgia 30022, and our telephone number is (770) 754-4711. Our website can be found at www.skyplug.com. The information contained in or accessible from our website is not incorporated into this prospectus, and you should not consider it part of this prospectus. We have included our website address in this prospectus solely as an inactive textual reference.

 

Recent Developments

 

In late December 2021, the Company received gross proceeds of approximately $8.3 million from the sale of 692,667 shares of common stock at $12.00 per share to several investors, in a private placement.

 


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The Offering

 

The summary below describes the principal terms of this offering. The “Description of Capital Stock” section of this prospectus contains a more detailed description of our common stock.

 

Common stock offered by us   1,650,000 shares of our common stock (or 1,897,500 shares if the underwriters exercise their option in full)
     
Initial public offering price   $14.00
     
Underwriters’ over-allotment option   We have granted the underwriters an option for a period of 30 days from the date of this prospectus to purchase up to an additional 247,500 shares of our common stock from us at the initial public offering price less underwriting discounts and commissions to cover over-allotments, if any.
     
Common stock to be outstanding immediately after this offering   76,509,944 shares (or 76,757,444 shares if the underwriters’ option to purchase additional shares of our common stock from us is exercised in full)(1)
     
Use of proceeds   We estimate that the net proceeds from the sale of shares of our common stock in this offering will be approximately $20.4 million (or approximately $23.6 million if the underwriters’ option to purchase additional shares of our common stock from us is exercised in full), based on the initial public offering price of $14.00 per share, after deducting underwriting discounts and commissions and estimated offering expenses payable by us.
     
    We intend to use the net proceeds of this offering for general corporate purposes. See “Use of Proceeds.”
     
Dividend policy   We have never declared or paid any cash dividends on our common stock. Holders of our Series A Preferred Stock (as defined below) receive interest payments quarterly, at a rate of 6% per year, and rank senior with respect to interest on junior securities, dividends, distributions or liquidation preference. We anticipate that we will retain any earnings to support operations and to finance the growth and development of our business. Accordingly, we do not expect to pay cash dividends on our common stock in the foreseeable future.
     
Risk factors   Investing in our common stock involves a high degree of risk. See “Risk Factors” and other information included in this prospectus for a discussion of factors you should carefully consider before deciding to invest in shares of our common stock.
     
Listing   Our common stock has been approved for listing on The Nasdaq Stock Market LLC (“Nasdaq”).
     
Trading symbol   “SKYX”
     
(1)In this prospectus, except as otherwise indicated, the number of shares of our common stock that will be outstanding immediately after this offering and the other information based thereon is based on 74,859,944 shares of our common stock outstanding as of September 30, 2021 (after giving effect to the Preferred Stock Conversion (as defined below) and the Subsequent Issuances (as defined below)), and:

 

assumes the conversion of our Series A Convertible Preferred Stock, no par value (“Series A Preferred Stock”), into 8,200,000 shares of common stock in connection with this offering (the “Preferred Stock Conversion”);

 

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 includes the issuance of 1,501,839 shares of common stock after September 30, 2021 (the “Subsequent Issuances”);

 

assumes no exercise by the underwriters of their option to purchase up to an additional 247,500 shares of our common stock from us in this offering to cover over-allotments, if any;
   
 gives effect to the filing and effectiveness of the certificate of amendment to the articles of incorporation (as amended, the “articles of incorporation”) in Florida, which was filed and became effective February 7, 2022, and the effectiveness of our amended and restated bylaws (the “bylaws”), which became effective immediately prior to the effectiveness of the registration statement of which this prospectus forms a part;
   
 assumes no exercise of the outstanding options or warrants, or conversion of the outstanding convertible notes, as described below;

 

assumes no exercise of the underwriters’ warrant to be issued in connection with this offering; and

 

excludes:

 

  1,834,039 shares of common stock issuable upon the exercise of warrants to purchase common stock that were exercisable and outstanding as of September 30, 2021 at a weighted average exercise price of $4.34 per share (without giving effect to any of the anti-dilution adjustment provisions thereof);
     
  293,856 shares of common stock issuable upon the exercise of exercisable and outstanding warrants to purchase common stock issued after September 30, 2021 at an exercise price of $12.00 per share;
     
  86,668 shares of common stock issuable upon the conversion of $1,300,000 of convertible notes outstanding as of September 30, 2021 that convert at $15.00 per share (which does not include shares that would be issuable if holders elect to receive interest payments on the notes in shares of common stock);
     
 

287,363 shares of common stock to be issued to stockholders who purchased common stock in private placement transactions during 2021, based on the initial public offering price of $14.00 per share, as a result of anti-dilution provisions (the “Anti-Dilution Shares”);

     
  10,337,182 shares of common stock issuable upon the exercise of stock options outstanding as of September 30, 2021 under our 2015 Stock Incentive Plan (the “2015 Plan”) and the 2018 Stock Incentive Plan, as amended and restated (the “2018 Plan”), at a weighted average exercise price of $3.65 per share;
     
  1,340,000 shares of common stock issuable upon the exercise of outstanding stock options granted after September 30, 2021, with an exercise price of $12.00 per share, pursuant to our 2018 Plan;
     
  20,000,000 shares of common stock available for future issuance under the 2021 Stock Incentive Plan (the “2021 Plan” and, collectively with the 2015 Plan and the 2018 Plan, the “Incentive Plans”), which became effective immediately prior to the effectiveness of the registration statement of which this prospectus forms a part (such amount excludes the IPO Option Grants and IPO Restricted Stock Grants described below);
     
  17,000,000 shares of common stock issuable upon exercise of stock options pursuant to the Chairman Agreement that may be earned if the Company achieves certain market valuations, as described under “Executive Compensation—Agreements with Named Executive Officers” (the “Performance Options”), with a weighted average exercise price of $9.71;
     
  3,315,000 shares of common stock issuable upon exercise of stock options outstanding as of September 30, 2021 issued outside of the Incentive Plans, at a weighted average exercise price of $4.06 per share;
     
  265,000 shares of common stock issuable upon the exercise of stock options granted under the 2021 Plan upon the pricing of this offering with an exercise price per share equal to the initial public offering price per share (the “IPO Option Grants”); and
     
  265,000 shares of restricted common stock to be granted under the 2021 Plan immediately following the effectiveness of the applicable Form S-8 registration statement (the “IPO Restricted Stock Awards”).

 

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SUMMARY FINANCIAL DATA

 

You should read the following summary financial data together with our financial statements and the related notes appearing elsewhere in this prospectus and the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section of this prospectus. We have derived the statement of operations data for the years ended December 31, 2020 and 2019 from our audited financial statements appearing elsewhere in this prospectus. We have derived the condensed statement of operations data for the nine months ended September 30, 2021 and 2020 and the condensed balance sheet data as of September 30, 2021 from our unaudited condensed interim financial statements appearing elsewhere in this prospectus. The unaudited interim condensed financial statements have been prepared on the same basis as our audited financial statements and reflect, in the opinion of management, all adjustments of a normal, recurring nature that are necessary for a fair statement of the financial information included in those unaudited interim condensed financial statements. Our historical results are not necessarily indicative of the results that may be expected the future, and our results for any interim period are not necessarily indicative of results that may be expected for any full year.

 

       (unaudited) 
   Year Ended December 31,  

Nine Months Ended

September 30,

 
Consolidated Statements of Operations Data  2020   2019   2021   2020 
Revenue  $258,376   $3,809,752   $106,577   $249,175 
Cost of Sales   (503,033)   (3,549,030)   (130,599)   (490,538)
Gross Profit (Loss)   (244,657)   260,722    (24,022)   (241,363)
Selling, general and administrative expenses   8,635,011    16,483,480    3,153,897    4,726,224 
Depreciation and amortization   106,309    107,241    63,325    69,772 
Total operating expenses   8,741,320    16,590,721    3,217,222    4,795,996 
Loss from Operations   (8,985,977)   (16,329,999)   (3,241,244)   (5,037,359)
Other Income / (Expense)                    
Interest expense   (515,515)   (490,626)   (425,323)   (370,524)
Other income, loan forgiveness   257,468        10,000     
Gain (loss) on exchange   408    726    7,886    (542)
Gain on debt forgiveness (license)       49,706         
Interest income   1,511    17,494    36    1,433 
Total other expense, net   (256,128)   (422,700)   (407,401)   (369,633)
                     
Net loss including noncontrolling interest   (9,242,105)   (16,752,699)   (3,648,645)   (5,406,992)
Less net loss attributable to noncontrolling interest                
Preferred dividends   130,206    130,206    97,655    97,655 
Net loss attributed to common shareholders  $(9,372,311)  $(16,882,905)  $(3,746,300)  $(5,504,647)
                     
Net loss per share - basic and diluted  $(0.14)  $(0.29)  $(0.05)  $(0.08)
                     
Weighted average number of common shares outstanding during the year – basic and diluted   62,880,875    57,964,073    64,810,157    62,808,921 

 

  

(unaudited)

As of September 30, 2021

 
Consolidated Balance Sheet Data  Actual   Pro Forma(2)   Pro Forma As Adjusted(3) 
Cash  $2,234,653   $15,784,166   $36,286,166 
Working capital(1)   (89,506)   13,460,007    33,962,007 
Total assets   3,747,858    17,297,371    37,799,371 
Total liabilities   12,769,396    12,769,396    12,769,396 
Total redeemable convertible preferred stock   3,314,233    1,264,234    1,264,234 
Accumulated deficit   (72,156,328)   (72,156,328)   (72,156,328)
Total (deficit) equity   (12,335,771)   3,263,741    23,765,741 

 

(1)We define working capital as current assets less current liabilities. See our financial statements appearing elsewhere in this prospectus for further details regarding our current assets and current liabilities.

 

(2)Pro forma balance sheet data give effect to (i) the Preferred Stock Conversion into an aggregate of 8,200,000 shares of common stock in connection with this offering and (ii) the Subsequent Issuances.

 

(3)The pro forma as adjusted balance sheet data give further effect to (i) the issuance and sale of 1,650,000 shares of common stock in this offering at the initial public offering price of $14.00 per share, after deducting underwriting discounts and commissions and estimated offering expenses payable by us, and (ii) the issuance of the Anti-Dilution Shares.

 

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RISK FACTORS

 

Investment in our common stock involves a high degree of risk and uncertainty. You should carefully consider each of the risks and uncertainties described below before you decide to buy our common stock. You should also refer to the other information in this prospectus, including our financial statements and related notes. If any of the following risks and uncertainties materializes, our business, financial condition, liquidity and results of operations could be materially and adversely affected. This could cause the trading price of our common stock to decline, and you could lose all or part of your investment. You should not interpret the disclosure of any risk factor to imply that the risk has not already materialized.

 

Risks Related to Our Business

 

We have incurred net losses since inception, and we cannot assure you that we will ever generate sustainable revenue; in addition, our business has evolved, which makes it difficult to predict our future operating results.

 

We have incurred net losses since inception; in addition, in recent years, we shifted our business strategy to transition to smart products and technologies; accordingly, our revenue has decreased since 2018 as we sell through our existing inventory of discontinued products to facilitate our business transition. As a result of these recent changes to our business strategy, our ability to forecast our future operating results is limited and subject to a number of uncertainties, including our ability to plan for and model our future growth. It is difficult to predict our future revenues and appropriately budget for our expenses, and we may have limited insight into trends that may emerge and affect our business. Rather than relying on historical information, financial or otherwise, to evaluate us, you should evaluate us in light of your assessment of the growth potential of our business and the expenses, delays, uncertainties and complications typically encountered by businesses in the early stage of their product development and launch, many of which will be beyond our control. We are subject to the substantial risk of failure facing businesses seeking to develop and commercialize new products and technologies, as well as the following risks, among others:

 

unanticipated problems, delays and expenses relating to the development and implementation of our business plans, such as potential manufacturing delays resulting from, among other things, difficulties finding suppliers, shipping delays resulting in late deliveries of necessary supplies and materials, and chip shortages, or delays resulting from a need or desire to obtain additional UL, cUL or CE certifications for new product configurations;

 

operational difficulties;

 

lack of sufficient capital;

 

competition from more advanced enterprises, including our need to gain brand awareness and attract customers, areas where our competitors may have an advantage; and

 

uncertain revenue generation.

 

In addition, the duration and extent of the impact of the COVID-19 pandemic on our business and industry are uncertain and introduce additional uncertainty to our forecasts of future operating results. If our assumptions regarding these risks and uncertainties are incorrect or change due to changes in our industry, or if we do not address these risks successfully, our operating and financial results could differ materially from our expectations and our business could suffer.

 

We have a history of operating losses and will likely incur losses in the future as we continue our efforts to transition our product lines, achieve our strategic initiatives, grow our business and streamline our operations at a profitable level.

 

We have incurred substantial losses in the past and reported net losses from operations of approximately $3.3 million for the nine months ended September 30, 2021, and approximately $9.0 million and $16.3 million for the years ended December 31, 2020 and 2019, respectively. As of September 30, 2021, we had an accumulated deficit of approximately $72.2 million and cash and cash equivalents of approximately $2.2 million, compared to an accumulated deficit of approximately $68.4 million and cash and cash equivalents of approximately $2.3 million as of December 31, 2020.

 

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We cannot assure you that we can achieve or sustain profitability in the future. In order for us to operate our business profitably, we need to successfully launch and market our new products and technologies, grow our sales, maintain cost control discipline while balancing development of our enhanced “all-in-one” smart platform and potential long-term revenue growth, continue our efforts to reduce product cost, drive operating efficiencies and develop and execute our key strategic initiatives. Our planned expense levels are, and will continue to be, based in part on our expectations, which are difficult to forecast accurately based on our stage of development and factors outside of our control. Developing and marketing our products and technologies is costly, and we anticipate our costs will increase in the future as we continue to invest in our research and development efforts and make additional expenditures to develop and market our products and technologies, including new features, integrations, capabilities and enhancements. Our expenditures may not result in improved business results or profitability over the long term, and our expenses may be greater than we anticipate, including due to, among other things, an increase in legal risk from the use of our products and technologies due to evolving laws, regulations or standards, an inability to timely and cost-effectively introduce successful smart products and other products and technologies, a security incident or our failure, for any reason, to continue to capitalize on growth opportunities. In addition, we may be unable to adjust spending in a timely manner to compensate for any unexpected developments. There is a risk that our strategy to operate profitably may not be as successful as we envision or occur as quickly as we expect. We may not achieve our business objectives, and the failure to achieve such goals would have an adverse impact on us. To the extent that our revenues do not increase commensurately with our costs, our business, operating results and financial condition will be materially and adversely affected.

 

We anticipate that we will require additional financing in the near-term, and if our operations do not achieve, or we experience an unanticipated delay in achieving, our intended level and pace of profitability, we will continue to need additional funding, which may not be available on favorable terms, or at all, and could require us to sell certain assets or discontinue or curtail our operations.

 

We expect to derive substantially all of our revenue from a portfolio of related products and technologies; if we cannot successfully launch our products or further develop them to include additional features, or our products and technologies fail to satisfy customer demands or achieve widespread market acceptance, our business, operating results, financial condition, and growth prospects would be adversely affected.

 

We expect to derive substantially all of our revenue from smart products incorporating our “plug and play” technologies. Our ability to launch our smart products and obtain market acceptance of, and grow market demand for, our products and technologies is critical to our success. We may not be able to launch or manufacture our products and technologies in a timely manner, within budget or in a manner that gains market acceptance. The failure to successfully produce an all-in-one smart platform would result in the loss of a substantial amount of investment dollars. In addition, we are developing an enhanced smart platform, which will take management’s time and attention away from other opportunities. A failure to successfully develop this enhanced platform could result in a material adverse impact on our business.

 

In addition, we have no experience in manufacturing our smart products. We may be unable to develop efficient, cost-efficient manufacturing capability and processes or obtain reliable sources of component supplies that will enable us to meet our quality, price, design and production standards, as well as the production volumes, required to successfully mass market our products and technologies. These are complex processes that may be subject to delays, cost overruns and other unforeseen issues. Any failure to develop such manufacturing capabilities and processes within our projected costs and timelines could stunt our growth and impair our ability to produce, market, service and sell our products and technologies successfully.

 

Even if we are able to bring our smart products and technologies to market on our projected timeline and on budget, there can be no assurance that consumers will embrace our smart products and technologies in significant numbers. Until the time that the smart products are commercially available for purchase and we are able to scale up our marketing function to support sales, there will be uncertainty as to customer demand for our smart products and technologies. There is significant uncertainty regarding demand for our smart products and technologies and the sales that we will be able to achieve. Further, demand for our products and technologies will be affected by a number of factors, many of which are beyond our control, such as our ability to obtain market acceptance; the development and acceptance of new features, integrations and capabilities for our products and technologies; the timing of development and release of competing new products and technologies; consumer preferences; the perception of ease of use, reliability and security of our products and technologies; price or product changes by us or our competitors; technological changes and developments within the markets we serve; developments in data privacy regulations; growth, contraction and rapid evolution of our market; and general economic conditions and trends.

 

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If we are unable to successfully release our smart products and technologies, enhance their capabilities, meet demands of our customers or trends in preferences or achieve widespread market acceptance of our products and technologies, our business, results of operations and financial condition could be harmed. Changes in preferences of users may have a disproportionately greater impact on us than if we offered a wider variety of products. In addition, competitors may develop or acquire their own products or technologies, and people may continue to rely on traditional products and technologies or existing smart home products, which would reduce or eliminate the demand for our products. If demand declines for any of these or other reasons, our business could be adversely affected.

 

We invest significantly in research and development, and to the extent our research and development investments are not directed efficiently or do not result in material enhancements to our products and technologies, our business and results of operations would be harmed.

 

A key element of our strategy is to invest significantly in our research and development efforts to enhance the features, functionality, performance and ease of use of our products and technologies to address additional applications that will broaden the appeal of our products and technologies and facilitate their broad use. Our ability to conduct research and development activities as planned may also be negatively impacted by our remote work environment adopted as a result of the COVID-19 pandemic. Moreover, research and development projects can be technically challenging and expensive. As a result of the nature of research and development cycles, there will be delays between the time we incur expenses associated with research and development activities and the time we are able to offer compelling enhancements to our products and technologies and generate revenue, if any, from those activities.

 

Our research and development efforts remain subject to all of the risks associated with the development of new products and technologies based on emerging and innovative technologies, including, for example, unexpected technical problems or the possible insufficiency of funds for completing development. If we expend a significant amount of resources on research and development efforts that do not lead to the successful introduction of new products, functionality or improvements that are competitive in our current or future markets, our business and results of operations will suffer. If technical problems or delays arise, further improvements in our products and technologies and the introduction of future products or technologies could be adversely impacted, we could incur significant additional expenses, and the business may fail.

 

If we are unable to introduce new features or services successfully, make enhancements to our products and technologies or fail to integrate our products and technologies with a variety of third-party technologies, our business and results of operations could be adversely affected.

 

Our ability to attract customers and increase revenue depends in part on our ability to enhance and improve our products and technologies and to introduce new features and services. To grow our business and remain competitive, we must continue to enhance our products and technologies with features that reflect the constantly evolving nature of technology and our customers’ evolving needs. The success of new products, technologies, enhancements and developments depends on several factors, including, but not limited to: our anticipation of market changes and demands for product features, adequate quality testing, integration of our products and technologies with existing technologies and applications and updates to integrate new technologies and applications, sufficient customer demand, cost effectiveness in our product development efforts and the proliferation of new technologies that are able to deliver competitive products, technologies and services at lower prices, more efficiently, more conveniently or more securely.

 

21
  

 

In addition, because we intend for our smart products to operate with a variety of systems, applications, data and devices, we will need to continuously modify and further upgrade our products and technologies to keep pace with changes in such systems. We may not be successful in developing these modifications and enhancements. Furthermore, the addition of features and solutions to our products and technologies will increase our research and development expenses. Any new features that we develop may not be introduced in a timely or cost-effective manner or may not achieve the market acceptance necessary to generate sufficient revenue to justify the related expenses. It is difficult to predict customer adoption of new features. Such uncertainty limits our ability to forecast our future results of operations and subjects us to a number of challenges, including our ability to plan for and model future growth. If we cannot address such uncertainties and successfully develop new features, enhance our products and technologies or otherwise overcome technological challenges and competing technologies, our business and results of operations could be adversely affected.

 

We have experienced, and may in the future experience, delays in the planned release dates of our products and technologies and enhancements to our products and technologies. Delays could result in adverse publicity, loss of sales or delay in market acceptance of our products and technologies, any of which could cause us to lose existing customers or impair our ability to attract new customers. In addition, the introduction of new products and services by competitors or the development of entirely new technologies to replace existing offerings could make our products and technologies obsolete or adversely affect our ability to compete. Any delay or failure in the introduction of enhancements, functionality or infrastructure developments could harm our business, results of operations and financial condition.

 

Some of our products and technologies are intended to be integrated with a variety of third-party technologies and applications, and we will need to continuously modify and improve such products and technologies to adapt to changes in such integrated technologies and applications. Third-party services and products are constantly evolving, and we may not be able to modify our products and technologies to be compatible with that of other third parties. In addition, some of our competitors may be able to disrupt the operations or compatibility of our products and technologies with their products or services. Should any of our competitors modify their products, technologies or standards in a manner that degrades the functionality of our products and technologies or gives preferential treatment to competitive products, technologies or services, whether to enhance their competitive position or for any other reason, the interoperability of our products and technologies with these products and/or technologies could decrease, and our business, results of operations and financial condition would be harmed. If we are not permitted or able to integrate with these and other third-party products, technologies and applications in the future, our business, results of operations and financial condition would be harmed. Further, any undetected errors or defects in third-party technologies or applications, or cybersecurity threats or attacks related to such technologies or applications, could impair the functionality of our products and technologies, result in increased costs and injure our reputation. Any failure of our products and technologies to operate effectively with existing or future technologies, or any failure of a third-party cloud infrastructure partner to support one or more of the features of our products and technologies, could cause customer dissatisfaction and reduce the demand for our products and technologies, resulting in harm to our business. In addition, because some of products and technologies will be cloud-based, we need to continually enhance and improve our products and technologies to keep pace with changes in internet-related hardware, software, communications and database technologies and standards. Any failure of our products and technologies to operate effectively with future hardware or software technologies, or to comply with new industry standards, could reduce the demand for our products and technologies and harm our business, results of operations, and financial condition.

 

Our smart products and technologies will depend in part on access to third-party platforms or technologies, and if any such access is withdrawn, denied, or is not available on terms acceptable, or if the platforms or technologies change without notice, our business and operating results could be adversely affected.

 

With the growth of mobile devices and personal voice assistants, cloud services and artificial intelligence, the number of supporting platforms has grown, and with it the complexity and increased need for us to have business and contractual relationships with the platform owners in order to produce products and technologies compatible with these platforms and enable access to and use of these platforms with our products and technologies. Our products strategy includes the sale of smart products and technologies controlled by a mobile application and designed for use with third-party platforms or software, such as iPhone, Android phones, Google Assistant and Amazon Alexa. The SkyHome mobile application is compatible with, and has been granted full access by, each of the foregoing platforms. Our ability to market such products and technologies will rely on our access to the platforms of third parties, some of which may be our competitors. Platform owners that are competitors may limit or decline access to their platforms, and in any case have a competitive advantage in designing products and technologies for their own platforms and may produce products and technologies that work better, or are perceived to work better, than our products and technologies in connection with those platforms. As we expand the number of platforms and software applications with which our products and technologies are compatible, we may not be successful in fully integrating the capabilities of those platforms or software applications and/or we may not be successful in establishing strong relationships with the new platform or software owners, which could negatively impact our ability to develop and produce our products and technologies. We may otherwise fail to navigate various new relationships, which could adversely affect our relationships with existing platform or software owners.

 

22
  

 

Any access to third-party platforms may also require paying a royalty or licensing fee, which would lower our product margins, or may otherwise be on terms that are not acceptable to us. In addition, the third-party platforms or technologies used to interact with our products and technologies can be delayed in production or can change without prior notice to us, which could result in our having bugs or defects in our products and technologies.

 

If we are unable to access third-party platforms or technologies, or if our access is withdrawn, denied or is not available on terms acceptable to us, or if the platforms or technologies are delayed or change without notice to us, our business and operating results could be adversely affected.

 

If we fail to maintain and improve our methods and technologies, or anticipate new methods or technologies, for data collection, organization and cleansing, competing products and services could surpass ours in depth, breadth or accuracy of our insights or in other respects.

 

Current or future competitors may seek to develop new methods and technologies for more efficiently gathering, cataloging or updating business information, which could allow a competitor to create a product comparable or superior to ours, or that takes substantial market share from us or that creates or maintains databases to produce insights at a lower cost than we experience. We can expect continuous improvements in computer hardware, network operating systems, programming tools, programming languages, operating systems, data matching, data filtering, data analysis tools and other technologies and the use of the internet. These improvements, as well as changes in customer preferences or regulatory requirements, may require changes in the technology used to gather and process our data. Our future success will depend, in part, upon our ability to:

 

internally develop and implement new and competitive technologies;

 

use leading third-party technologies effectively; and

 

respond to advances in data collection and cataloging and creating insights.

 

If we fail to respond to changes in data technology and analysis to create insights, competitors may be able to develop solutions that will take market share from us, and the demand for our solutions, the delivery of our solutions or our market reputation could be adversely affected.

 

If our smart products and technologies are not compatible with some or all leading third-party internet of things (“IoT”) products and protocols, we could be materially adversely affected.

 

A core part of our product strategy is the creation of products and technologies with interoperability with third-party IoT products and protocols. Our products and technologies are intended to seamlessly integrate with third-party IoT products and protocols. If these third parties were to alter their products, we could be adversely impacted if we fail to timely create compatible versions of our products and technologies, and such incompatibility could negatively impact the adoption of our products and technologies. A lack of interoperability could also result in significant redesign costs, and harm relations with our customers. Further, the mere announcement of an incompatibility problem relating to our products and technologies could materially adversely affect our business, results of operations and financial condition.

 

23
  

 

In addition, to the extent our competitors supply products and technologies that compete with our own, it is possible these competitors could design their technologies to be closed or proprietary systems that are incompatible with our products and technologies or work less effectively with our products and technologies than their own. As a result, end-users may have an incentive to purchase products that are compatible with the products and technologies of our competitors over our products and technologies.

 

The success of our business, and our ability to achieve our desired revenue and profitability goals, depends on our ability to develop, expand and successfully manage our operations and effectively and timely develop and implement our strategic business initiatives.

 

Our success depends on our ability to design products and technologies popular with customers and consumers, effectively market our products and technologies, effectively manufacture our products and successfully manage our operations, as well as our ability to develop and execute our strategic business initiatives. Our ability to successfully accomplish these objectives will depend upon a number of factors, including the following:

 

signing with strategic distribution partners with established retail and wholesale relationships;

 

the continued development of our business;

 

the hiring, training and retention of competent personnel;

 

the ability to generate customer demand;

 

the ability to enhance our operational, financial and management systems;

 

the availability of adequate financing;

 

competitive factors; and

 

general economic and business conditions.

 

In addition, our ability to achieve our desired revenue and profitability goals depends on how effectively and timely we execute on our key strategic initiatives, including development of an enhanced smart platform, and develop and implement new strategic business initiatives. Our current key strategic initiatives include the following:

 

successfully launching our smart products and technologies;

 

executing and marketing our products and technologies to both industry and retail customers, such as real estate developers and individuals who desire safer lighting fixtures and smart home capabilities;

 

continuing our product innovation;

 

leveraging our products and technologies to support IoT applications, including integrations with third-party applications; and

 

improving our distribution sales channels.

 

We also may identify and pursue strategic acquisition candidates that would help support these initiatives.

 

Developing and implementing various strategic business initiatives requires us to incur additional expenses and capital expenditures and also requires management to divert a portion of its time from day-to-day operations. These expenses and diversions could have a significant impact on our operations and profitability and could lead to weaknesses in our infrastructure, operational mistakes, loss of business opportunities, loss of employees and reduced productivity among remaining employees. There can be no assurance that we will be able to successfully implement these or future initiatives or, even if implemented, that they will result in the anticipated benefits to our business. Moreover, if we are unable to implement an initiative in a timely manner, or if any initiatives are ineffective or are executed improperly, our business and operating results would be adversely affected.

 

24
  

 

As we evolve our business strategy to focus on our smart products and technologies, our results of operations, financial condition and cash flows may be materially adversely affected.

 

Our future growth and profitability are tied in part to our ability to successfully bring to market new and innovative smart products and technologies. We have evolved our business strategy to focus on producing smart products and technologies using our “plug and play” technologies. This expansion of our products and technologies also includes pursuing projects to develop recurring revenue streams, such as subscription services. We have invested, and plan to continue to invest, significant time, resources and capital into expanding our products and technologies with no expectation that they will provide material revenue in the near term and without any assurance they will succeed or be profitable. In fact, these efforts have reduced our profitability, and will likely continue to do so, at least in the near term. We may also be unable to launch or manufacture our products and technologies or develop recurring revenue streams, such as anticipated subscription services, in a timely manner, which would further negatively impact our ability to become profitable. Moreover, as we continue to explore, develop and refine our smart products and technologies, we expect that market preferences will continue to evolve, and, accordingly, our products and technologies may not generate sufficient interest by end-user customers, and we may be unable to compete effectively with existing or new competitors, generate significant revenues or achieve or maintain acceptable levels of profitability.

 

Additionally, our experience providing smart technology is limited. If we do not successfully execute our strategy or anticipate the needs of our customers, our credibility as a provider of smart home solutions could be questioned, and our prospects for future revenue growth and profitability may never materialize.

 

If we fail to successfully launch our smart products and technologies or manage and maintain our evolving business strategy, our future revenue growth and profitability would likely be limited and our results of operations, financial condition and cash flows would likely be materially adversely affected.

 

We may need to raise additional financing to support our operations, but we cannot provide any assurance that we will be able to obtain additional financing on terms favorable to us, or at all. If we are unable to obtain additional financing to meet our needs, our operations may be adversely affected or terminated.

 

We have limited financial resources, and we expect that our evolving strategy and expansion of business activities will require additional working capital, as we likely will not generate sufficient cash flows from our operations to sustain our operations or to allow us to effectively develop our smart products and technologies or pursue our strategic initiatives. We are currently generating revenue partially from sales of our discontinued inventory. We expect that the release of our new smart products and technologies will require working capital to finish product development and manufacturing, and support market release and provide technical customer support upon its commercial release.

 

In the future, we will likely need to seek additional equity or debt financing to provide for our working capital needs. There can be no assurance that we will obtain funding on acceptable terms, in a timely fashion or at all. Obtaining additional financing contains risks, including:

 

additional equity financing may not be available to us on satisfactory terms, and any equity we are able to issue could lead to dilution for current stockholders and have rights, preferences and privileges senior to our common stock;

 

loans or other debt instruments may have terms and/or conditions, such as interest rates, restrictive covenants and control or revocation provisions, that are not acceptable to management or our board of directors;

 

debt financing increases expenses, and we must repay the debt regardless of our operating results; and

 

our ability to obtain additional capital may be adversely impacted by factors beyond our control, such as the market demand for our securities, the state of financial markets generally and other relevant factors, including potential worsening global economic conditions resulting from the ongoing COVID-19 pandemic and any disruptions to, or volatility in, the credit and financial markets in the United States and worldwide that arise from the pandemic.

 

25
  

 

As of September 30, 2021 and December 31, 2020, we had approximately $2.2 million and $2.3 million in cash and cash equivalents, respectively. As we develop our revenue base, we have raised additional funds through the sale of our common stock and warrants and issuance of debt. We believe that our sources of liquidity and capital will be sufficient to finance our continued operations for at least the next 12 months. For additional information regarding our financing arrangements, see the “Liquidity and Capital Resources” heading in the “Management’s Discussion and Analysis” section of this prospectus. In addition, a significant stockholder of the Company has provided a letter of financial support to the Company.

 

If we fail to obtain required additional financing to sustain our business before we are able to produce levels of revenue to meet our financial needs, we may be unable to continue to develop our business activities to achieve our objectives or may need to delay, scale back or eliminate our business plan and further reduce our operating costs, each of which would have a material adverse effect on our business, future prospects and financial condition. A lack of additional financing could also result in our inability to continue as a going concern and force us to sell certain assets or discontinue or curtail our operations and, as a result, our investors could lose their entire investment.

 

We face risks associated with financing our operations related to our debt financing.

 

We are subject to the normal risks associated with debt financing, including the risk that our cash flow will be insufficient to meet required payments of principal and interest and the risk that we will not be able to renew, repay or refinance our debt when it matures or that the terms of any renewal or refinancing will not be as favorable as the existing terms of that debt. In addition, to the extent that we are unable to pay our obligations under our secured promissory note with Nielsen & Bainbridge, LLC (“NBG”) or the U.S. Small Business Administration (the “SBA”), or any other outstanding secured debt, the creditor could proceed against any or all of the collateral securing our indebtedness to it.

 

We also have received loan proceeds under the Paycheck Protection Program (the “PPP”). A portion of the PPP1 Loan (as defined below) was forgiven. While we have requested forgiveness of the PPP2 Loan (as defined below), we have not yet received a reply to our request. We can provide no assurances that we will be able to obtain forgiveness of all or any portion of the PPP2 loan. In addition, the U.S. Small Business Administration may audit our loan forgiveness applications and further examine our eligibility for forgiveness, including the facts and circumstances existing at the time the loans were made. We can provide no assurances that any loan forgiven will not require repayment following an audit by the SBA.

 

The success of our business depends on the market acceptance of products with our proprietary technology and our ability to respond to rapidly changing technology and customer demands.

 

Our future success depends on the market acceptance of our proprietary safe and smart products and technologies. If we are unable to convince current and potential customers of the advantages of our products and technologies, or we are unable to adapt to technological advances, anticipate customer demands and develop new capabilities for our products and technologies, then our ability to market and sell our products and technologies will be limited. If the market for our products and technologies does not develop, if we are unable to adapt new or enhanced products and technologies to emerging industry standards, or if the market does not accept our products and technologies, then our ability to grow our business could be limited. In addition, we may experience technical or other difficulties that could delay or prevent the development, introduction or marketing of our products and technologies.

 

We are subject to risks related to health epidemics and pandemics, including the ongoing COVID-19 pandemic, which could adversely affect our business, prospects, financial condition, and results of operations.

 

We face various risks related to public health issues, including epidemics, pandemics and other outbreaks, such as the ongoing COVID-19 pandemic. The effects and potential effects of the COVID-19 pandemic, including, but not limited to, its impact on general economic conditions, trade and financing markets, changes in customer behavior and continuity in business operations creates significant uncertainty. In addition, the COVID-19 crisis may cause an increase in costs resulting from our efforts to mitigate the effects of COVID-19, delays in our schedule to develop and release products of our smart products and technologies and disruptions to our supply chain and difficulties in procuring required components or manufacturing capability, among other negative effects.

 

26
  

 

The pandemic has resulted in government authorities implementing many measures to contain the spread of COVID-19, including travel bans and restrictions, quarantines, shelter-in-place and stay-at-home orders, and business shutdowns. These measures may be in place for a significant period of time and may be reinstituted if conditions deteriorate, which could adversely affect our product development and launch plans. Measures that have been relaxed may be re-implemented if COVID-19 continues to spread. For instance, we temporarily closed our offices and had personnel work remotely to the extent possible and may be required to do so again in the future, which could cause further delay in the development and/or release of our smart products and technologies. In addition, employees and contractors working remotely may not have the resources available to enable them to maintain the same level of productivity and efficiency, and increased reliance on remote access to our information systems increases our exposure to potential cybersecurity threats. Further, our sales and marketing activities have been, and may continue to be, adversely affected by the inability to conduct in-person sales activities, meetings, events and conferences, which has, and may in the future, negatively impacted our financial performance. If our workforce is unable to work effectively, including due to illness, quarantines, government actions or other restrictions in connection with COVID-19, our operations will be adversely affected.

 

The extent to which the COVID-19 pandemic may affect our business will depend on continued developments, including the duration of the pandemic and the extent of any resurgences in cases across the United States, the timing and availability of effective medical treatments and vaccines, the impact on capital and financial markets and the related impact on consumer confidence and spending, all of which are uncertain and cannot be predicted. Even if the COVID-19 pandemic subsides, we may continue to suffer an adverse impact on our business due to the global economic effect of the pandemic, including any economic recession that has occurred or may occur in the future. Additionally, many of the risk factors disclosed in this prospectus have been, and we anticipate will continue to be further, heightened or exacerbated by the impact of the COVID-19 pandemic.

 

We operate in a highly competitive industry, and if we are unable to compete successfully, our business may be adversely affected.

 

Our products and technologies face strong competition from manufacturers and distributors of lighting and ceiling fan manufacturers, as well as, with respect to our smart products and technologies, from manufacturers and distributors of products addressing certain smart technologies, features or markets for the home and office worldwide. In order to remain competitive, we need to invest in research and development and marketing. Many of our competitors have stronger capitalization than we do, strong existing customer relationships and more extensive engineering, manufacturing, sales and marketing capabilities. Competitors’ products and technologies may be more effective, more effectively marketed or sold or have lower prices or superior performance features than our products and technologies. Competitors could focus their substantial resources on developing competing products and technologies that may be potentially more attractive to customers than our products and technologies or offer competitive products and technologies at reduced prices in order to improve their competitive positions. We may also face competition from other products with existing technologies and from other smart home devices, and consumers may prefer individual device solutions that provide more narrowly targeted functionality instead of a more comprehensive integrated smart home solution. Any of these competitive factors could make it more difficult for us to attract and retain customers, require us to lower our prices in order to remain competitive or reduce our revenue and profitability, any of which could have a material adverse effect on our results of operations and financial condition. We may not have available sufficient financial or other resources to continue to make investments necessary to maintain our competitive position.

 

We depend on third parties to provide integrated circuit chip sets and other critical components for use in our products.

 

We do not manufacture the integrated circuit chip sets or other electronic components used in our products. Instead, we purchase them from third-party suppliers or rely on third-party independent contractors for these integrated circuit chip sets and other critical components, some of which are customized or custom made for us. We also use third parties to assemble all or portions of our products. Some of these third-party contractors and suppliers are small companies with limited financial resources. If any of these third-party contractors or suppliers were unable or unwilling to supply these components, our ability to manufacture our products may decrease. As the availability of components decreases, the cost of acquiring those components ordinarily increases. High growth product categories such as the consumer electronics and mobile phone markets have experienced chronic shortages of components during periods of exceptionally high demand. COVID-19 has also negatively impacted the availability of certain electronic components. While we experienced shortages in obtaining necessary integrated circuit chips to be used in our products, we have been able to find additional suppliers for such components and believe we have obtained a sufficient number to manufacture our products by the anticipated launch date. Going forward, we believe we can obtain more chips as needed within a reasonable time period and may be able to replace difficult to acquire components with different products or modify our design if necessary. If we do not properly anticipate the need for or procure critical components, we may pay higher prices for those components, our gross margins may decrease and we may be unable to meet the demands of our customers, which could reduce our competitiveness, cause a decline in our market share and have a material adverse effect on our results of operations.

 

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We rely on a limited number of third-party manufacturers to produce our products. We may be unable to achieve our growth and profitability objectives if we cannot secure acceptable third-party manufacturers or existing third-party manufacturer relationships dissolve. In addition, our financial results could be adversely affected if we fail to successfully reduce our current or future production costs.

 

We depend on certain key manufacturers for our current products and plan to continue to rely on such manufacturers as we transition to sales of our smart products. If these relationships become strained, our results of operations and financial condition could be materially adversely affected. We also cannot predict whether our current or future manufacturing arrangements will be able to develop efficient, low-cost manufacturing capabilities and processes that will enable us to meet the quality, price, engineering, design and production standards or production volumes required to successfully mass market our products. Even if we are successful in developing manufacturing capabilities and processes, we cannot provide any assurance that we will do so in time to meet market demand. Our failure to develop such manufacturing processes and capabilities, if necessary, in a timely manner could prevent us from achieving our growth and profitability objectives. In addition, our results of operations, financial condition and cash flows could be materially adversely affected if our third-party manufacturers were to experience problems with product quality, credit or liquidity issues, or disruptions or delays in their manufacturing process or delivery of the finished products and components or the raw materials used to make such products and components.

 

We may also need to hire and train a significant number of employees to engage in full-scale commercial manufacturing operations. There are various risks and challenges associated with hiring, training and managing a large workforce in time for us to commence our planned commercial production and sale of our smart products and technologies, including that the workforce will not have experience with manufacturing our smart products and therefore will require significant training.

 

Additionally, a significant portion of our strategy will rely upon our ability to successfully rationalize and improve the efficiency of our operations. In particular, our strategy relies on our ability to reduce our production costs in order to remain competitive. As there is no historical basis for estimating the demand for our smart products and technologies, or our ability to develop, manufacture and deliver our smart products, we may be unable to accurately estimate our inventory and production requirements, which would affect our ability to successfully implement cost reduction measures. If we overestimate our requirements, we may have excess inventory, which would increase our costs. If we underestimate our requirements, our suppliers may have inadequate inventory, which could interrupt the manufacture of the smart products and result in delays in shipments and revenues. We may also rely on a limited number of suppliers; during the nine months ended September 30, 2021, we had two major vendors that accounted for approximately 100% of cost of sales and, for the years ended December 31, 2020 and 2019, we had two major vendors that accounted for approximately 95% of cost of sales. For additional information regarding our suppliers, see “Business – Third-Party Manufacturing and Suppliers.” In addition, lead times for materials and components may vary significantly and depend on factors such as the specific supplier, contract terms and demand for each component at a given time. If we are unable to successfully implement cost reduction measures, if these efforts do not generate the level of cost savings that we expect going forward or result in higher than expected costs, or if we fail to order sufficient quantities of components in a timely manner, our business, financial condition, results of operations or cash flows could be materially adversely affected.

 

Our third-party manufacturers are located in China, which exposes us to additional risks.

 

Our third-party manufacturers are located in China, which exposes us to additional risks that could negatively impact our business and operations. We are subject to risks associated with shipping products across borders, including shipping delays, customs duties, export quotas and other trade restrictions that could have a significant impact on our revenue and profitability. The U.S. administration has imposed tariffs on certain products imported into the United States with China as the country of origin. While these tariffs have not had a significant impact on the shipment of our products to international markets to date, as we are transitioning our business, we cannot predict the impact of future tariffs on our products and technologies, and the costs of supplies and manufacturing may increase. If we cannot deliver our products on a competitive and timely basis, our relationships with customers will be damaged and our financial condition could also be harmed. The future imposition of, or significant increases in, the level of tariffs, custom duties, export quotas and other barriers and restrictions by the U.S. on China or other countries could disrupt our supply chain, increase the cost of our raw materials and therefore our pricing, and impose the burdens of compliance with foreign trade laws, any of which could potentially affect our bottom line and sales. We cannot assure you that we will not be adversely affected by changes in the trade laws of foreign jurisdictions where we sell and seek to sell our products.

 

In addition, the prosecution of intellectual property infringement and trade secret theft in China is more difficult than in the United States. Although we take precautions to protect our intellectual property, using Chinese manufacturers could subject us to an increased risk that unauthorized parties will be able to copy or otherwise obtain or use our intellectual property, and we may be unsuccessful in monitoring and enforcing our intellectual property rights against them, which could harm our business. We may also have limited legal recourse in the event we encounter patent or trademark infringers, which could adversely affect our business, results of operations, and financial condition.

 

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Further, such manufacturers may be subject to disruption by natural disasters, public health crises, and political, social or economic instability. The temporary or permanent loss of the services of any of our contract manufacturers could cause a significant disruption in our product supply chain and operations and delays in product shipments. For example, the continued impact of the COVID-19 pandemic and related quarantines and work and travel restrictions in could disrupt product and impair our ability to manufacture and launch our products and technologies on our anticipated timelines.

 

Additional risks may include, but are not limited to, the potential impact of fluctuations in foreign currency exchange rates, the increased global focus on environmental and social issues and China’s potential adoption of more stringent standards in these areas, other rules and regulations adopted by the Chinese government or provincial or local governments, and the potential impact of global market and economic conditions on the financial stability of our manufacturers.

 

We may acquire other businesses, license rights to technologies or products, form alliances, or dispose of assets or operations, which could cause us to incur significant expenses and could negatively affect profitability.

 

We may pursue acquisitions, technology-licensing arrangements and strategic alliances, or dispose of some of our assets or operations, as part of our business strategy. We may not complete these transactions in a timely manner, on a cost-effective basis, or at all, and if such transactions are completed, we may not realize the expected benefits. If we are successful in completing an acquisition, the products and technologies that are acquired may not be successful or may require significantly greater resources and investments than originally anticipated. We may not be able to integrate acquisitions successfully into our existing business and could incur or assume significant debt and unknown or contingent liabilities. In addition, we may experience diversion of our management’s attention from our existing business and initiatives in pursuing such a strategic transaction and could also experience negative effects on our reported results of operations from acquisition or disposition-related charges, amortization of expenses related to intangibles and charges for impairment of long-term assets.

 

In addition, if we undertake acquisitions, we may issue dilutive securities, assume or incur debt obligations, incur large one-time expenses and acquire intangible assets that could result in significant future amortization expense. Moreover, we may not be able to locate suitable acquisition opportunities, and this inability could impair our ability to grow or obtain access to technologies or products that may be important to the development of our business. Any of the foregoing may materially harm our business, financial condition, results of operations, stock price and prospects.

 

We may depend upon a limited number of customers in any given period to generate a substantial portion of our revenue.

 

Our industry does not lend to long-term customer contracts, and our dependence on individual key customers can vary from period to period as a result of consumer demands, among other variables. As a result, we may experience more customer concentration in any given future period. At both September 30, 2021 and December 31, 2020, one customer accounted for 100% of our accounts receivable. The loss of, or substantial reduction in sales to, any of our significant customers could have a material adverse effect on our results of operations in any given future period.

 

Our business may become substantially dependent on contracts that are awarded through competitive bidding processes.

 

We may obtain a significant portion of our revenues pursuant to contracts that are subject to competitive bidding, including contracts with municipal authorities. Competition for, and negotiation and award of, contracts present varied risks, including, but not limited to:

 

investment of substantial time and resources by management for the preparation of bids and proposals with no assurance that a contract will be awarded to us;

 

the requirement to certify as to compliance with numerous laws (for example, socio-economic, small business and domestic preference) for which a false or incorrect certification can lead to civil and criminal penalties;

 

the need to estimate accurately the resources and cost structure required to service a contract; and

 

the expenses and delays that we might suffer if our competitors protest a contract awarded to us, including the potential that the contract may be terminated and a new bid competition may be conducted.

 

If we are unable to win contracts awarded through the competitive bidding process, we may not be able to operate in the market for products and services that are provided under those contracts for a number of years. If we are unable to consistently win new contract awards over any extended period, or if we fail to anticipate all of the costs and resources that will be required to secure and perform such contract awards, our growth strategy and our business, financial condition and results of operations could be materially and adversely affected.

 

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If we fail to develop our brand, our business may suffer.

 

We believe that developing and maintaining awareness of our brand is critical to achieving widespread acceptance of our products and technologies and is an important element in attracting and retaining customers. Efforts to build our brand may involve significant expense and may not generate customer awareness or increase revenue at all, or in an amount sufficient to offset expenses we incur in building our brand. Promotion and enhancement of our brand will depend largely on our success in being able to provide high quality, reliable and cost-effective products and technologies. If customers do not perceive our products and technologies as meeting their needs, or if we fail to market our products and technologies effectively, we will likely be unsuccessful in creating the brand awareness that is critical for broad customer adoption of our products and technologies.

 

We sell, or will sell, products and technologies to companies in industries that tend to be extremely cyclical; downturns in those industries would adversely affect our results of operations.

 

The growth and profitability of our business will depend on sales to industries that are subject to cyclical downturns. Slowdowns in these industries may adversely affect our sales, which in turn would adversely affect our revenues and results of operations.

 

Our inability to protect our intellectual property, or our involvement in damaging and disruptive intellectual property litigation, could adversely affect our business, results of operations and financial condition or result in the loss of use of the related product or service.

 

We attempt to protect our intellectual property rights through a combination of patent, trademark, copyright and trade secret laws, as well as third-party nondisclosure and assignment agreements. Our failure to obtain or maintain adequate protection of our intellectual property rights for any reason could have a material adverse effect on our business, results of operations and financial condition.

 

We own United States and international patents and patent applications for some of our products, systems, business methods and technologies. We offer no assurance about the degree of protection which existing or future patents may afford us. Likewise, we offer no assurance that our patent applications will result in issued patents, that our patents will be upheld if challenged, that competitors will not develop similar or superior business methods or products outside the protection of our patents, that competitors will not infringe our patents, or that we will have adequate resources to enforce our patents. Effective protection of our United States patents may be unavailable or limited in jurisdictions outside the United States, as the intellectual property laws of foreign countries sometimes offer less protection or have onerous filing requirements. In addition, because some patent applications are maintained in secrecy for a period of time, we could adopt a technology without knowledge of a pending patent application, and such technology could infringe a third party’s patent.

 

We also rely on unpatented proprietary technology. It is possible that others will independently develop the same or similar technology or otherwise learn of our unpatented technology. To protect our trade secrets and other proprietary information, we generally require employees, consultants, advisors and collaborators to enter into confidentiality agreements. We cannot provide any assurance that these agreements will provide meaningful protection for our trade secrets, know-how or other proprietary information in the event of any unauthorized use, misappropriation or disclosure of such trade secrets, know-how or other proprietary information. If we are unable to maintain the proprietary nature of our technologies, our business could be materially adversely affected.

 

We rely on our trademarks, trade names, and brand names to distinguish us and our products and services from our competitors. Some of our trademarks may conflict with trademarks of other companies. Failure to obtain trademark registrations could limit our ability to protect our trademarks and impede our sales and marketing efforts. Further, competitors may infringe our trademarks, and we may not have adequate resources to enforce our trademarks.

 

In addition, third parties may bring infringement and other claims that could be time-consuming and expensive to defend. Parties making infringement and other claims against us may be able to obtain injunctive or other equitable relief that could effectively block our ability to provide our products, technologies, services or business methods and could cause us to pay substantial damages. In the event of a successful claim of infringement, we may need to obtain one or more licenses from third parties, which may not be available at a reasonable cost, or at all. It is possible that our intellectual property rights may not be valid or that we may infringe existing or future proprietary rights of others. Any successful infringement claims could subject us to significant liabilities, require us to seek licenses on unfavorable terms, prevent us from manufacturing or selling products, technologies, services and business methods and require us to redesign or, in the case of trademark claims, rebrand our business or products, any of which could have a material adverse effect on our business, financial condition or results of operations.

 

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The expiration or loss of patent protection and licenses may affect our future revenues and operating income.

 

Much of our business relies on patent and trademark and other intellectual property protection. Although most of the challenges to our intellectual property would likely come from other businesses, governments may also challenge intellectual property protections. To the extent our intellectual property is successfully challenged, invalidated or circumvented, or to the extent it does not allow us to compete effectively, our business will suffer. To the extent that countries do not enforce our intellectual property rights or to the extent that countries require compulsory licensing of our intellectual property, our future revenues and operating income will be reduced.

 

The loss of our license arrangements with GE could negatively affect our results of operations.

 

We currently have two U.S. and global agreements with GE, whereby we may use the GE brand logo on some of our products and GE’s licensing team may license some of our products to both U.S. and global manufacturers. The loss or termination of our arrangements with GE could, among other things: limit our ability to secure additional customers and thereby could have a material adverse effect on our profitability and financial condition; negatively impact our manufacturing capabilities, as our products are produced by third-party manufacturers, mainly in the People’s Republic of China, under the strict guidance of GE, and the loss of GE’s supervision might adversely affect our relationship with the third-party manufacturers and/or require us to increase our quality control staff in China to assume the guidance role administered by GE, if we are to maintain a similarly high level of quality for our products; cause us to materially revise our marketing plans for new and existing products, which could delay product introductions and have a negative impact on our revenue; and impact relationships with third-party suppliers of electronics and/or services currently or planned to be incorporated in our products and technologies, which could delay or forestall such collaborations and, as a result, negatively impact our products and technologies and potential revenue from such products and technologies.

 

We are, or in the future may be, subject to substantial regulation related to quality and safety standards applicable to our products and technologies. Our failure to comply with applicable quality or safety standards could have an adverse effect on our business, financial condition or results of operations.

 

We are subject to regulation related to quality and safety standards, including safety certification and evaluation to specific safety standards depending on the product type, region and country. Products certified by a Nationally Recognized Testing Laboratory (“NRTL”), such as UL, Intertek Testing Lab (ETL) or Canadian Standards (CSA), bear a certification mark signifying that the product complies with the requirements of the product safety standard. UL Standards are used for evaluation of USA products, CSA Standards for Canada and IEC (International Electrotechnical Commission) Standards for European countries. We use UL as our main third-party NRTL safety laboratory. While we have received a variety of safety certifications on our products, including UL, United Laboratories for Canada (cUL), Conformité Européenne (CE) and International Electrotechnical Commission for Electrical Equipment (“IECEE”) Certification Body (CB) scheme, we may need or desire to obtain additional certifications for new product configurations, which will increase the time and costs to complete our product launches and which we may be unable to obtain within a reasonable time, or at all. In addition, certain electronic products require Federal Communications Commission (“FCC”) certification, and we have obtained FCC certification on applicable products to ensure electromagnetic interference compliance. Compliance with applicable regulatory requirements is subject to continual review and is monitored through periodic inspections and other review and reporting mechanisms. Although we believe that our broad knowledge and experience with electrical codes and safety standards have facilitated certification approvals, we cannot provide any assurance that we will be able to obtain any such certifications for our new products or that, if certification standards are amended, we will be able to maintain such certifications for our existing products.

 

While we endeavor to take all the steps necessary to comply with applicable laws and regulations, there can be no assurance that we can maintain compliance on a continuing basis. Failure by us or our partners to comply with current or future governmental regulations and quality and safety assurance guidelines could lead to product recalls or related field actions, or product shortages. Efficacy or safety concerns with respect to our products or those of our partners could lead to product recalls, fines, withdrawals, declining sales and/or our failure to successfully commercialize new products or otherwise achieve revenue growth.

 

We could face significant liabilities in connection with our products, technologies and business operations, which, if incurred beyond any insurance limits, would adversely affect our business and financial condition.

 

We are subject to a variety of potential liabilities connected to our product and technology development and business operations, such as potential liabilities related to environmental risks. As a business that markets products for use by consumers and institutions, we may become liable for any damage caused by our products, whether used in the manner intended or not. Any such claim of liability, whether meritorious or not, could be time-consuming and/or result in costly litigation. Although we have obtained insurance against certain of these risks, no assurance can be given that such insurance will be adequate to cover related liabilities or will be available in the future or, if available, that premiums will be commercially justifiable. If we were to incur any substantial liability and related damages were not covered by our insurance or exceeded policy limits, or if we were to incur such liability at a time when we are not able to obtain liability insurance, our business, financial conditions and results of operations could be materially adversely affected.

 

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We may be subject to legal claims against us or claims by us that could have a significant impact on our resulting financial performance.

 

At any given time, we may be subject to litigation or claims related to our products, intellectual property, customers, employees, stockholders, distributors and sales of our assets, among other things, the disposition of which may have an adverse effect upon our business, financial condition or results of operations. The outcome of litigation is difficult to assess or quantify. Lawsuits can result in the payment of substantial damages by defendants. If we are required to pay substantial damages and expenses as a result of these or other types of lawsuits, our business and results of operations would be adversely affected. Regardless of whether any claims against us are valid or whether we are liable, claims may be expensive to defend and may divert time and money away from our operations. We may not have adequate resources in the event of a successful claim against us, and insurance may not be available in sufficient amounts or at all to cover any liabilities with respect to these or other matters. A judgment or other liability in excess of our insurance coverage for any claims could adversely affect our business and the results of our operations.

 

We have limited product distribution experience and we expect to rely on third parties, who may not successfully sell our products and technologies.

 

Our ability to increase our customer base, achieve broader market acceptance of our products and technologies, grow our revenue and achieve and sustain profitability will depend, to a significant extent, on our ability to effectively expand our sales and marketing operations and activities. We have limited product distribution experience and currently rely, and plan to rely primarily, on product distribution arrangements with third parties. As a result, our future revenues from sales of our products and technologies, if any, will depend on the success of the efforts of these third parties. We may also license our technology to certain third parties for commercialization of certain applications. We expect to enter into additional distribution agreements and/or licensing agreements in the future, and we may not be able to enter into these agreements on terms that are favorable to us, if at all. In addition, we may have limited or no control over the distribution activities of these third parties. These third parties could sell competing products and technologies and may devote insufficient sales efforts to our products and technologies. We are also subject to the risks of distributor and resellers encountering financial difficulties, which could impede their effectiveness and also expose us to financial risk, for example, if they are unable to pay for their purchases, or ongoing disruptions in business, such as from natural disasters or the effects of the COVID-19 pandemic.

 

We will rely on third parties maintaining open marketplaces to distribute our mobile application. If such third parties interfere with the distribution of our application, our business would be adversely affected.

 

We will rely on third parties maintaining open marketplaces, including the Apple App Store and Google Play, to make the mobile application controlling our products and technologies available for download. We cannot assure you that the marketplaces through which we distribute our mobile application will maintain their current structures or that such marketplaces will not charge us fees to list our application for download. We will also depend on these third-party marketplaces to enable us and our users to timely update our mobile application, and to incorporate new features, integrations and capabilities. We will be subject to requirements imposed by marketplaces such as Apple and Google, which may change their technical requirements or policies in a manner that adversely impacts the way in which we or third parties collect, use and share data from users through our mobile application. If we do not comply with these requirements, we could lose access to the mobile application marketplace and users, and our business, results of operations, and financial condition may be harmed.

 

In addition, Apple and Google, among others, for competitive or other reasons, could stop allowing or supporting access to our mobile application through their products, could allow access for us only at an unsustainable cost, or could make changes to the terms of access in order to make our mobile application less desirable or harder to access. If it becomes more difficult for our users to access and use the mobile application controlling our smart products on their mobile devices, if our users choose not to access or use the application on their mobile devices, or if our users choose to use mobile products that do not offer access to the application, our user growth, retention and engagement could be seriously harmed.

 

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Our net sales, and ability to market and sell our new products and technologies, might be adversely impacted if our products and technologies do not meet certain certification and compliance standards.

 

Although not legally required to do so, we strive to obtain certifications for substantially all our products, both in the United States, and, where appropriate, in jurisdictions outside the United States. For instance, we may seek certification of our products from UL, United Laboratories for Canada (cUL) and Conformité Européenne (CE). Although we believe that our broad knowledge and experience with electrical codes and safety standards have facilitated certification approvals, we cannot ensure that we will be able to obtain any such certifications for our new products and technologies or that, if certification standards are amended, we will be able to maintain such certifications for our existing products. Moreover, although we are not aware of any effort to amend any existing certification standard or implement a new certification standard in a manner that would render us unable to maintain certification for our existing products or obtain ratification for new products and technologies, our net sales might be adversely affected if such an amendment or implementation were to occur.

 

Defects in our mobile application and the technology powering it may adversely affect our business.

 

Tools, code, subroutines and processes contained within our mobile application may contain defects not yet discovered or contained in updates and new versions. Our introduction of updates and new versions with defects or quality problems may result in adverse publicity, reduced downloads and use, product redevelopment costs, loss of or delay in market acceptance of our products and technologies or claims by customers or others against us. Such problems or claims may have a material and adverse effect on our business, prospects, financial condition and results of operations.

 

Our ability to use our net operating loss carryforwards and certain other tax attributes may be limited.

 

We have significant U.S. net operating loss (“NOL”) and tax credit carryforwards. Under Section 382 and Section 383 of the Internal Revenue Code of 1986, as amended (the “Code”), if a corporation undergoes an “ownership change,” the corporation’s ability to use its pre-change NOLs and certain other tax attributes to offset its post-change income may be limited. In general, an “ownership change” will occur if there is a cumulative change in our ownership by “five percent stockholders” that exceeds 50 percentage points over a rolling three-year period. Similar rules may apply under state tax laws. Our ability to use NOLs and other tax attributes to reduce future taxable income and liabilities may be subject to annual limitations as a result of prior ownership changes and ownership changes that may occur in the future, including as a result of this offering.

 

Under the Tax Cuts and Jobs Act of 2017 (the “TCJA”), as amended by the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”), NOLs arising in taxable years beginning after December 31, 2017 and before January 1, 2021 may be carried back to each of the five taxable years preceding the tax year of such loss, but NOLs arising in taxable years beginning after December 31, 2020 may not be carried back. Additionally, under the TCJA, as modified by the CARES Act, NOLs from tax years that began after December 31, 2017 may offset no more than 80% of current taxable income annually for taxable years beginning after December 31, 2020, but the 80% limitation on the use of NOLs from tax years that began after December 31, 2017 does not apply for taxable income in tax years beginning before January 1, 2021. NOLs arising in tax years beginning after December 31, 2017 can be carried forward indefinitely, but NOLs generated in tax years beginning before January 1, 2018 will continue to have a two-year carryback and twenty-year carryforward period. In addition, for state income tax purposes, the extent to which states will conform to the federal laws is uncertain and there may be periods during which the use of NOL carryforwards is suspended or otherwise limited, which could accelerate or permanently increase state taxes owed.

 

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The elimination of monetary liability against our directors, officers, and employees under Florida law and the existence of indemnification rights to our directors, officers and employees may result in substantial expenditures by us and may discourage lawsuits against our directors, officers and employees.

 

Our articles of incorporation (as defined below) contain a provision permitting us to eliminate the personal liability of our directors and officers to our Company and stockholders for damages for breach of fiduciary duty as a director or officer to the extent provided by Florida law. Our bylaws also contain provisions regarding indemnification of our directors, officers and employees, including, under certain circumstances, against attorneys’ fees and other expenses incurred by them in any litigation to which they become a party arising from their association with or activities on our behalf. We will also bear the expenses of such litigation for any of our directors, officers, employees or agents, upon such person’s promise to repay us therefore if it is ultimately determined that any such person shall not have been entitled to indemnification. The foregoing obligations could result in our incurring substantial expenditures to cover the cost of settlement or damage awards against directors and officers, which we may be unable to recoup. These provisions and resultant costs may also discourage us from bringing a lawsuit against directors and officers for breaches of their fiduciary duties and may similarly discourage the filing of derivative litigation by our stockholders against our directors and officers even though such actions, if successful, might otherwise benefit us and stockholders.

 

Other factors could have a material adverse effect on our future profitability and financial condition.

 

Many other factors can affect our profitability and financial condition, including:

 

changes in, or interpretations of, laws and regulations, including changes in accounting standards and taxation requirements;

 

changes in the rate of inflation, interest rates and the performance of investments held by us;

 

changes in the creditworthiness of counterparties that transact business with us;

 

changes in business, economic and political conditions, including: war, political instability, terrorist attacks in the U.S. and other parts of the world, the threat of future terrorist activity in the U.S. and other parts of the world and related military action; natural disasters; public health crises, including epidemics and pandemics, such as the ongoing COVID-19 pandemic; the cost and availability of insurance due to any of the foregoing events or other unforeseen events; labor disputes, strikes, slow-downs or other forms of labor or union activity; and pressure from third-party interest groups;

 

changes in our business and investments and changes in the relative and absolute contribution of each to earnings and cash flow resulting from evolving business strategies, changing product mix, changes in tax rates and opportunities existing now or in the future;

 

difficulties related to our information technology systems, any of which could adversely affect business operations, including any significant breakdown, invasion, destruction or interruption of these systems;

 

changes in credit markets impacting our ability to obtain financing for our business operations; or

 

legal difficulties, any of which could preclude or delay commercialization of products or technologies or adversely affect profitability, including claims asserting statutory or regulatory violations, adverse litigation decisions and issues regarding compliance with any governmental consent decree.

 

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Risks Related to Our Operations

 

We will incur increased costs as a result of operating as a public company, and our management will be required to devote substantial time to compliance initiatives.

 

As a public company, we will incur significant legal, accounting and other expenses that we did not incur as a private company. We will be subject to the reporting requirements of the Exchange Act, which will require, among other things, that we file annual, quarterly and current reports with respect to our business and financial condition with the Securities and Exchange Commission (the “SEC”). In addition, the Sarbanes-Oxley Act of 2002, as amended (the “Sarbanes-Oxley Act”), as well as rules adopted by the SEC and Nasdaq to implement provisions of the Sarbanes-Oxley Act, impose significant requirements on public companies, including requiring establishment and maintenance of effective disclosure and financial controls and changes in corporate governance practices. Further, in July 2010, the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”), was enacted. There are significant corporate governance and executive compensation related provisions in the Dodd-Frank Act that required the SEC to adopt additional rules and regulations in these areas, such as “say on pay” and proxy access. Stockholder activism, the current political and economic environment and the high levels of government intervention and regulatory reform may lead to substantial new regulations and disclosure obligations, which may lead to additional compliance costs and impact the manner in which we operate our business in ways we cannot currently anticipate.

 

We expect the rules and regulations applicable to public companies to substantially increase our legal and financial compliance costs and to make some activities more time-consuming and costly. If these requirements divert the attention of our management and personnel from other business concerns, our business, financial condition and results of operations could be materially adversely affected. The increased costs will increase our expenses and may require us to reduce costs in other areas of our business. We cannot predict or estimate the amount or timing of additional costs we may incur to respond to these requirements. The impact of these requirements could also make it more difficult for us to attract and retain qualified persons to serve on our board of directors or as executive officers.

 

Our future success depends on our ability to retain key employees and to attract, retain and motivate qualified personnel.

 

Our success depends substantially on the efforts and abilities of our officers and other key employees and agents. Although we have entered into employment agreements with our executive officers, each of them may terminate their employment with us at any time. If we are unable to continue to attract and retain high quality personnel, our ability to pursue our growth strategy will be limited.

 

Recruiting and retaining qualified personnel will also be critical to our success. The loss of the services of our executive officers or other key employees or contractors could impede the achievement of our research and development objectives and seriously harm our ability to successfully implement our business strategy. Furthermore, replacing executive officers and key personnel may be difficult and may take an extended period of time, as competition for experienced personnel in our industry is substantial. In addition, if any of our officers or other key personnel join a competitor or form a competing company, we may lose some of our customers.

 

Our culture has contributed to our success, and if we cannot maintain this culture as we grow, we could lose the innovation, creativity and teamwork fostered by our culture, and our business may be harmed.

 

We believe that our culture has been and will continue to be a key contributor to our success. We expect to continue to hire additional personnel as we expand our business. If we do not continue to develop our company culture or maintain our core values as we grow and evolve, we may be unable to foster the innovation, creativity and teamwork we believe we need to support our growth.

 

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As a result of being a public company, we are obligated to develop and maintain proper and effective internal control over financial reporting, and any failure to maintain the adequacy of these internal controls may adversely affect investor confidence in us and, as a result, the value of our common stock.

 

As a public company, we will be required to comply with the Sarbanes-Oxley Act and other rules that govern public companies. In particular, we will be required to certify our compliance with Section 404 of the Sarbanes-Oxley Act beginning with our second annual report on Form 10-K (subject to any change in applicable SEC rules), which will require us to furnish annually a report by management on the effectiveness of our internal control over financial reporting. In addition, unless we remain a non-accelerated filer, our independent registered public accounting firm may be required to report on the effectiveness of our internal control over financial reporting beginning as of that second annual report on Form 10-K. We will also be required to design our disclosure controls and procedures to reasonably assure that information required to be disclosed in reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC and that such information is accumulated and communicated to management as appropriate to allow timely decisions regarding required disclosure.

 

We may, in the future, identify control deficiencies of varying degrees of severity under applicable SEC and PCAOB rules and regulations that remain unremediated. As a public company, we will be required to report, among other things, control deficiencies that constitute a “material weakness” or changes in internal controls that, or that are reasonably likely to, materially affect internal controls over financial reporting. A “material weakness” is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. A “significant deficiency” is a deficiency, or a combination of deficiencies, in internal control over financial reporting that is less severe than a material weakness, yet important enough to merit attention by those responsible for oversight of our financial reporting.

 

If we are not able to comply with the requirements of Section 404 of the Sarbanes-Oxley Act in a timely manner, if our independent registered public accounting firm determines that we have a material weakness or a significant deficiency in our internal control over financial reporting, or if we are unable to maintain proper and effective internal control over financial reporting, we may not be able to produce timely and accurate financial statements. As a result, our investors could lose confidence in our reported financial information, the market price of our stock could decline and we could be subject to sanctions or investigations by the SEC or other regulatory authorities.

 

We believe that any internal controls and procedures, no matter how well-conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. We may discover weaknesses in our system of internal financial and accounting controls and procedures that could result in a material misstatement of our financial statements. Our internal control over financial reporting will not prevent or detect all errors and all fraud. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud will be detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. For example, our directors or executive officers could inadvertently fail to disclose a new relationship or arrangement, causing us to fail to disclose a required related party transaction. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by an unauthorized override of the controls. Accordingly, because of the inherent limitations in our control system, misstatements due to error or fraud may occur and not be detected.

 

Unstable market and economic conditions may have serious adverse consequences on our business, financial condition and stock price.

 

Global financial markets have recently experienced, as a result of the COVID-19 pandemic, and have in the past experienced, extreme volatility and disruptions, declines in consumer confidence, declines in economic growth, increases in unemployment rates and uncertainty about economic stability. There can be no assurance that further deterioration in credit and financial markets and confidence in economic conditions will not occur. Our general business strategy and ability to raise capital may be adversely affected by any such economic downturn, volatile business environment or continued unpredictable and unstable market conditions. If the current equity and credit markets deteriorate, it may make any necessary debt or equity financing more difficult, more costly and more dilutive. Failure to secure any necessary financing in a timely manner and on favorable terms could have a material adverse effect on our growth strategy, financial performance and stock price and could require us to delay or abandon our strategic plans. In addition, there is a risk that one or more of our current service providers and other partners may not survive these difficult economic times, which could directly affect our ability to attain our operating goals on schedule and on budget.

 

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In addition, the stock markets have experienced extreme price and volume fluctuations that have affected and continue to affect the market prices of equity securities of many companies, including in connection with the ongoing COVID-19 pandemic, which has resulted in decreased or volatile stock prices for many companies, notwithstanding the lack of a fundamental change in their underlying business models or prospects. These fluctuations have often been unrelated or disproportionate to the operating performance of those companies. Broad market and industry factors, including potentially worsening economic conditions and other adverse effects or developments relating to the ongoing COVID-19 pandemic and political, regulatory and other market conditions, may negatively affect the market price of shares of our common stock, regardless of our actual operating performance.

 

As of September 30, 2021, our cash and cash equivalents were approximately $2.2 million. While we are not aware of any downgrades, material losses, or other significant deterioration in the fair value of our cash equivalents since December 31, 2020, no assurance can be given that further deterioration of the global credit and financial markets would not negatively impact our current portfolio of cash equivalents or our ability to meet our financing objectives. Furthermore, our stock price may decline due in part to the volatility of the stock market and any general economic downturn.

 

Our internal computer systems, or those of our third-party manufacturers or other contractors or consultants, may fail or suffer security breaches. If our information technology systems security measures are breached or fail, our products and technologies may be perceived as not being secure, customers may curtail or stop buying our products and technologies, we may incur significant legal and financial exposure, and our reputation, results of operations, financial condition and cash flows could be materially adversely affected.

 

The efficient operation of our business is dependent on our information technology systems, some of which may be in need of enhancement, updating and replacement. We rely on these systems generally to manage day-to-day operations, manage relationships with our customers and maintain our research and development data and our financial and accounting records. Despite our implementation of security measures, our internal computer systems, and those of our third-party manufacturers, information technology suppliers and other contractors and consultants are vulnerable to damage from computer viruses, cyberattacks and other unauthorized access, natural disasters, terrorism, war and telecommunication and electrical failures. The failure of our information technology systems, our inability to successfully maintain, enhance and/or replace our information technology systems as needed, or any compromise of the integrity or security of the data we generate from our information technology systems could have a material adverse effect on our results of operations, disrupt our business and product and technology development and make us unable, or severely limit our ability, to respond to customer demands. Any interruption of our information technology systems could result in decreased revenue, increased expenses, increased capital expenditures, customer dissatisfaction and potential lawsuits, any of which could have a material adverse effect on our results of operations, financial condition and cash flows.

 

Our information technology systems involve the storage of our confidential information and trade secrets, as well as our customers’ personal and proprietary information, in our equipment, networks and corporate systems. Security breaches expose us to a risk of loss of this information, litigation and increased costs for security measures, loss of revenue, damage to our reputation and potential liability. Security breaches or unauthorized access may result in a combination of significant legal and financial exposure, increased remediation and other costs, theft and/or unauthorized use or publication of our trade secrets and other confidential business information, loss of funds, damage to our reputation and a loss of confidence in the security of our products, technologies, services and networks that could have an adverse effect upon our business. While we take steps to prevent unauthorized access to our corporate systems, because the techniques used to obtain unauthorized access, disable or sabotage systems change frequently or may be designed to remain dormant until a triggering event, we may be unable to anticipate these techniques or implement adequate preventative measures. Further, the risk of a security breach or disruption, particularly through cyberattacks or cyber intrusion, including by computer hackers, foreign governments and cyber terrorists, has generally increased as cyberattacks have become more prevalent and harder to detect and fight against. In addition, hardware, software or applications we procure from third parties may contain defects in design or manufacture or other problems that could unexpectedly compromise network and data security. Any breach or failure of our information technology systems could result in decreased revenue, increased expenses, increased capital expenditures, customer dissatisfaction and potential lawsuits, any of which could have a material adverse effect on our results of operations, financial condition and cash flows.

 

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If we are unable to prevent or mitigate the impact of security or data privacy breaches, we could be exposed to litigation and governmental investigations, which could lead to a potential disruption to our business. In addition, we may not have adequate insurance coverage for security incidents or breaches. The successful assertion of one or more large claims against us that exceeds our available insurance coverage, or results in changes to our insurance policies (including premium increases or the imposition of large deductible or co-insurance requirements), could have an adverse effect on our business. In addition, we cannot be sure that our existing insurance coverage and coverage for errors and omissions will continue to be available on acceptable terms or that our insurers will not deny coverage as to any future claim.

 

Further, if a high profile security breach occurs with respect to another provider of smart home solutions, the public may lose trust in the security of our smart products and technologies or in the smart home space generally, which could adversely impact our ability to sell such products and technologies. Even in the absence of any security breach, concerns about security, privacy or data protection may deter consumers from using our smart products and technologies.

 

Intentional or accidental actions or inactions by employees or other third parties with authorized access to our networks may result in the exposure of vulnerabilities that may be exploited or expose us to liability. Third parties may also conduct attacks designed to temporarily deny customers access to our cloud services.

 

Because there are many different security breach techniques and such techniques continue to evolve, we may be unable to anticipate attempted security breaches, react in a timely manner or implement adequate preventative measures. Third parties may also conduct attacks designed to temporarily deny users access to our cloud services. Any security breach or other security incident, or the perception that one has occurred, could result in a loss of user confidence in the security of our platform and damage to our brand, reduce the demand for our solutions, disrupt normal business operations, require us to spend material resources to investigate or correct the breach and to prevent future security breaches and incidents, expose us to legal liabilities, including litigation, regulatory enforcement and indemnity obligations, and adversely affect our business, financial condition and results of operations.

 

We use third-party technology and systems in a variety of contexts, including, without limitation, employee email, content delivery to customers, back-office support, credit card processing, and other functions. Although we have developed systems and processes that are designed to protect customer data and prevent data loss and other security breaches, including systems and processes designed to reduce the impact of a security breach at a third-party service provider, such measures cannot provide absolute security.

 

We rely upon third-party providers of cloud-based infrastructure to host our solutions. Any disruption in the operations of these third-party providers, limitations on capacity or interference with our use could adversely affect our business, financial condition, revenues, results of operations or cash flows.

 

We outsource substantially all of the infrastructure relating to our cloud solution to third-party hosting services, such as Amazon Web Services (“AWS”). Customers of our cloud-based solutions need to be able to access our platform at any time, without interruption or degradation of performance, and, in some cases, we need to provide them with service-level commitments with respect to uptime. Our cloud-based solutions depend on protecting the virtual cloud infrastructure hosted by third-party hosting services by maintaining its configuration, architecture, features and interconnection specifications, as well as the information stored in these virtual data centers, which is transmitted by third-party internet service providers. Any limitation on the capacity of our third-party hosting services could impede our ability to onboard new customers or expand the usage of our existing customers, which could adversely affect our business, financial condition, revenues, results of operations or cash flows. In addition, any incident affecting our third-party hosting services’ infrastructure that may be caused by cyberattacks, natural disasters, fire, flood, severe storm, earthquake, power loss, telecommunications failures, terrorist or other attacks, regional epidemics or global pandemics such as COVID-19 and other similar events beyond our control could negatively affect our cloud-based solutions. A prolonged service disruption affecting our cloud-based solution for any of the foregoing reasons would negatively impact our ability to serve our customers and could damage our reputation with current and potential customers, expose us to liability, cause us to lose customers or otherwise harm our business. We may also incur significant costs for using alternative equipment or taking other actions in preparation for, or in reaction to, events that damage the third-party hosting services we use.

 

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AWS provides the cloud computing infrastructure that we use to host our platform, manage data, mobile application and many of the internal tools we use to operate our business. Our platform, mobile application and internal tools use computing, storage capabilities, bandwidth and other services provided by AWS. Any significant disruption of, limitation of our access to or other interference with our use of AWS would negatively impact our operations and could seriously harm our business. In addition, any transition of the cloud services currently provided by AWS to another cloud services provider would require significant time and expense and could disrupt or degrade delivery of our platform. Our business relies on the availability of our platform for our customers, and we may lose customers if they are not able to access our platform or encounter difficulties in doing so. The level of service provided by AWS could affect the availability or speed of our platform, which may also impact the usage of, and our customers’ satisfaction with, our platform and could seriously harm our business and reputation. If AWS increases pricing terms, terminates or seeks to terminate our contractual relationship, establishes more favorable relationships with our competitors or changes or interprets its terms of service or policies in a manner that is unfavorable with respect to us, our business, financial condition, revenues, results of operations or cash flows may be harmed.

 

We may collect, store, process and use our customers’ personally identifiable information and other data, which subjects us to governmental regulation and other legal obligations related to data privacy, information security and data protection. Any cybersecurity breaches or our actual or perceived failure to comply with such legal obligations by us, or by our third-party service providers or partners, could harm our business.

 

We may collect, store, process and use our customers’ personally identifiable information and other data in our transactions with them, and we may rely on third parties that are not directly under our control to do so as well. While we take reasonable measures intended to protect the security, integrity and confidentiality of the personal information and other sensitive information we collect, store or transmit, we cannot guarantee that inadvertent or unauthorized use or disclosure will not occur, or that third parties will not gain unauthorized access to this information. If we or our third-party service providers were to experience a breach, disruption or failure of systems compromising our customers’ data, or if one of our third-party service providers or partners were to access our customers’ personal data without our authorization, our brand and reputation could be adversely affected, use of our products and technologies could decrease and we could be exposed to a risk of loss, litigation and regulatory proceedings.

 

Regulatory scrutiny of privacy, data collection, use of data and data protection is intensifying globally, and the personal information and other data we collect, store, process and use is increasingly subject to legislation and regulations in numerous jurisdictions around the world, especially in Europe. These laws often develop in ways we cannot predict and may materially increase our cost of doing business, particularly as we expand the nature and types of products and technologies we offer. For example, the General Data Protection Regulation (the “GDPR”), which came into effect in the European Union in May 2018 and superseded prior European Union data protection legislation, imposes more stringent data protection requirements and provides for greater penalties for noncompliance.

 

Further, data protection legislation is also becoming increasingly common in the United States at both the federal and state level. For example, in June 2018, the State of California enacted the California Consumer Privacy Act of 2018 (the “CCPA”), which went into effect on January 1, 2020. The CCPA requires companies that process information on California residents to make new disclosures to consumers about their data collection, use and sharing practices, allows consumers to opt out of certain data sharing with third parties and provides a new cause of action for data breaches. In November 2020, California voters passed the California Privacy Rights and Enforcement Act of 2020, which generally becomes effective in 2023 and amended and expanded the CCPA with additional data privacy compliance requirements and established a regulatory agency dedicated to enforcing these requirements. Additionally, the Federal Trade Commission and many state attorneys general are interpreting federal and state consumer protection laws to impose standards for the online collection, use, dissemination and security of data. The burdens imposed by the CCPA and other similar laws that may be enacted at the federal and state level may require us to modify our data processing practices and policies and/or to incur substantial expenditures in order to comply.

 

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Despite our compliance efforts, we may fail to achieve compliance with applicable privacy or data protection laws and regulations as they evolve, or adhere to contractual obligations regarding the collection, processing, storage and transfer of data (including data from our customers, prospective customers, partners and employees), either due to internal or external factors such as resource limitations or a lack of vendor cooperation. Any actual or perceived failure to comply with these laws or obligations could result in enforcement action against us, including fines, claims for damages by customers and other affected individuals, damage to our reputation and loss of goodwill (both in relation to any existing customers and prospective customers), any of which could harm our business, results of operations, and financial condition. Further, privacy concerns may inhibit market adoption of our smart products and technologies, particularly in certain industries and foreign countries.

 

Natural disasters, geopolitical events and other highly disruptive events, such as the COVID-19 pandemic, could materially and adversely affect our business, financial condition and results of operations.

 

Natural disasters, public health crises, such as epidemics and pandemics (including the COVID-19 pandemic), climate change, acts or threats of war or terrorism, international conflicts, power outages, fires, explosions, equipment failures, sabotage, political instability and the actions taken by governments could cause damage to or disrupt our business operations, or those of our manufacturers or our customers, and could create economic instability. Disruptions to our information technology infrastructure from system failures, shutdowns, power outages, telecommunication or utility failures, and other events, including disruptions at third party information technology and other service providers, could also interfere with or disrupt our operations. In addition, new regulations relating to climate change may negatively affect us, our manufacturers, our suppliers or our customers. As a result, we may incur additional costs or obligations in complying with any new environmental and reporting requirements, as well as increased indirect costs resulting from our manufacturers, suppliers or customers that get passed on to us. Although it is not possible to predict such events or their consequences, these events could increase our costs, result in physical damage to or destruction or disruption of properties used in connection with the manufacture of our products, the lack of an adequate workforce in part or all of our operations, supply chain disruptions and data, utility and communications disruptions. In addition, these events could indirectly result in increases in the costs of our insurance if they result in significant loss of property or other insurable damage. Any of these developments could have a material and adverse effect on our business, financial condition and results of operations.

 

Risks Related to Our Common Stock and This Offering

 

There is currently no established public trading market for our common stock. An active, liquid market for our common stock may not develop or be sustained upon completion of this offering, which may impair your ability to sell your shares.

 

Our common stock is not currently traded on an established public trading market. Although our common stock has been approved for listing on Nasdaq, an active trading market for our shares may never develop or be sustained following this offering. The initial public offering price of our common stock was determined through negotiations between us and the underwriters. This initial public offering price may not be indicative of the market price of our common stock after this offering. In the absence of an active trading market for our common stock, investors may not be able to sell their common stock at or above the initial public offering price or at the time that they would like to sell. Moreover, the lack of an established market could materially and adversely affect the value of our common stock. In addition, the market price of our common stock could decline significantly due to actual or anticipated issuances or sales of our common stock in the future.

 

In addition, Nasdaq has rules for continued listing, including, without limitation, minimum market capitalization and other requirements. Failure to maintain our listing, or delisting from Nasdaq, would make it more difficult for stockholders to dispose of our securities and more difficult to obtain accurate price quotations on our securities. This could have an adverse effect on the price of our common stock. Our ability to issue additional securities for financing or other purposes, or otherwise to arrange for any financing we may need in the future, may also be materially and adversely affected if our common stock and/or other securities are not traded on a national securities exchange.

 

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The price of our common stock may be volatile and fluctuate substantially, which could result in substantial losses for purchasers of our common stock in this offering.

 

Our stock price is likely to be volatile. The stock market has experienced extreme volatility that has often been unrelated to the operating performance of particular companies. As a result of this volatility, you may not be able to sell your common stock at or above the initial public offering price. The market price for our common stock may be influenced by many factors, including:

 

our ability to successfully launch, and gain market acceptance of, our smart products and technologies;

 

developments or disputes concerning patent applications, issued patents or other proprietary rights;

 

the recruitment or departure of key personnel;

 

the level of expenses related to our research and development, marketing efforts, strategic initiatives or other areas;

 

actual or anticipated changes in governmental regulation, including taxation and tariff policies;

 

actual or anticipated changes in estimates as to financial results or recommendations by securities analysts;

 

variations in our financial results or those of companies that are perceived to be similar to us;

 

market conditions in the lighting and smart home sectors;

 

conditions in the financial markets in general or changes in general economic conditions, including government efforts to mitigate the economic downturn resulting from the COVID-19 pandemic;

 

novel and unforeseen market forces and trading strategies, such as the massive short squeeze rally caused by retail investors and social media activity affecting companies such as GameStop Corp.; and

 

the other factors described in this “Risk Factors” section.

 

In addition, due to one or more of the foregoing factors in one or more future quarters, our results of operations may fall below the expectations of securities analysts and investors. In the event any of the foregoing occur, the market price of our common stock could be highly volatile and may materially decline. Further, in the past, when the market price of a stock has been volatile, holders of that stock have sometimes instituted securities class action litigation against the company that issued the stock. If any of our stockholders brought a lawsuit against us, we could incur substantial costs defending the lawsuit. Such a lawsuit could also divert the time and attention of our management from our business, which could significantly harm our profitability and reputation.

 

Participation in this offering by our existing stockholders or their affiliated entities may reduce the public float for our common stock.

 

To the extent certain of our existing stockholders and their affiliated entities participate in this offering, such purchases would reduce the non-affiliate public float of our shares, meaning the number of shares of our common stock that are not held by officers, directors and principal stockholders. A reduction in the public float could reduce the number of shares that are available to be traded at any given time, thereby adversely impacting the liquidity of our common stock and depressing the price at which you may be able to sell shares of common stock purchased in this offering.

 

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If you purchase our common stock in this offering, you will incur immediate and substantial dilution in the book value of your shares.

 

You will suffer immediate and substantial dilution in the net tangible book value of the common stock you purchase in this offering. Based on the initial public offering price of $14.00 per share, purchasers of common stock in this offering will experience immediate dilution of approximately $13.70 per share in net tangible book value of the common stock. In the past, we issued options and other securities to acquire common stock at prices significantly below the initial public offering price. To the extent these outstanding securities are ultimately exercised, new investors purchasing common stock in this offering will sustain further dilution. See “Dilution” for a more detailed description of the dilution to new investors in the offering.

 

The conversion of outstanding convertible notes or Series A Preferred Stock or exercise of outstanding warrants into shares of common stock could materially dilute our stockholders.

 

As of February 9, 2022, we had $1,300,000 aggregate principal amount of convertible notes outstanding, convertible into shares of our common stock at $15.00 per share, 13,256,936 shares of Series A Preferred Stock outstanding, of which 5,056,936 shares will remain outstanding after the consummation of this offering, and warrants to purchase 1,377,895 shares of our common stock outstanding at an exercise price ranging from $3.30 to $12.00 per share. The conversion price of the notes or exercise price of the warrants may be less than the market price of our common stock at the time of conversion or exercise and may be subject to future adjustment due to certain events, including our issuance of common stock or common stock equivalents at an effective price per share lower than the conversion rate or exercise rate then in effect. If the entire principal amount of all the outstanding convertible notes is converted into shares of common stock, we would be required to issue an aggregate of no less than approximately 86,668 shares of common stock. If all of the outstanding warrants are exercised for shares of common stock, we would be required to issue an aggregate of 1,377,895 shares of common stock. If all of the Series A Preferred Stock remaining outstanding following this offering are converted into shares of common stock, we would be required to issue an aggregate of 5,056,936 shares of common stock. If we issue any or all of these shares, the ownership of our stockholders will be diluted.

 

If securities analysts do not publish research or reports about our business, or if they publish negative evaluations of our stock, the price of our stock could decline.

 

The trading market for our common stock will rely in part on the research and reports that industry or financial analysts publish about us or our business. We may never obtain research coverage by industry or financial analysts. If no or few analysts commence coverage of us, the trading price of our stock would likely decrease. Even if we do obtain analyst coverage, if one or more of the analysts covering our business downgrade their evaluations of our stock, the price of our stock could decline. If one or more of these analysts cease to cover our stock, we could lose visibility in the market for our stock, which in turn could cause our stock price to decline.

 

Our executive officers, directors, principal stockholders and their affiliates will continue to exercise significant influence over us after this offering, which will limit your ability to influence corporate matters and could delay or prevent a change in corporate control.

 

Immediately following the completion of this offering, and disregarding any shares of common stock that they purchase in this offering, the existing holdings of our executive officers, directors, 5% holders and their affiliates will represent beneficial ownership, in the aggregate, of approximately 53% of our outstanding common stock, assuming no exercise of the underwriters’ option to acquire additional shares of common stock in this offering and assuming we issue the number of shares of common stock as set forth on the cover page of this prospectus. As a result, these stockholders, if they act together, will be able to influence our management and affairs and the outcome of matters submitted to our stockholders for approval, including the election of directors and any merger, consolidation or sale of all or substantially all of our assets. These stockholders may have acquired their shares of common stock for substantially less than the price of the shares of common stock being acquired in this offering. These stockholders may have interests, with respect to their common stock, that are different from those of investors in this offering, and the concentration of voting power among these stockholders may have an adverse effect on the price of our common stock. In addition, this concentration of ownership might adversely affect the market price of our common stock by:

 

delaying, deferring or preventing a change of control of us;

 

impeding a merger, consolidation, takeover or other business combination involving us; or

 

discouraging a potential acquirer from making a tender offer or otherwise attempting to obtain control of us.

 

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See “Principal Stockholders” in this prospectus for more information regarding the ownership of our outstanding common stock by our executive officers, directors, principal stockholders and their affiliates.

 

Sales of a substantial number of shares of our common stock in the public market by our existing stockholders could cause our share price to fall.

 

Sales of a substantial number of shares of our common stock in the public market, or the perception that these sales might occur, could depress the market price of our common stock and could impair our ability to raise capital through the sale of additional equity securities. We are unable to predict the effect that sales may have on the prevailing market price of our common stock.

 

We have broad discretion in how we use the proceeds of this offering and may not use these proceeds effectively, which could affect our results of operations and cause our stock price to decline.

 

We will have considerable discretion in the application of the net proceeds of this offering, including for any of the purposes described in the section entitled “Use of Proceeds,” and you will not have the opportunity as part of your investment decision to assess whether the net proceeds are being used appropriately. As a result, investors will be relying upon management’s judgment with only limited information about our specific intentions for the use of the balance of the net proceeds of this offering. We may use the net proceeds for purposes that do not yield a significant return or any return at all for our stockholders. In addition, pending their use, we may invest the net proceeds from this offering in a manner that does not produce income or that loses value.

 

We are a smaller reporting company, and the reduced reporting requirements applicable to smaller reporting companies may make our common stock less attractive to investors.

 

We currently qualify as a “smaller reporting company,” which allows us to take advantage of exemptions from various reporting requirements that are applicable to other public companies that are not smaller reporting companies, including reduced disclosure obligations regarding executive compensation in this prospectus and our periodic reports and proxy statements. Decreased disclosures in our SEC filings due to our status as a smaller reporting company may make it harder for investors to analyze our results of operations and financial prospects. We cannot predict if investors will find our common stock less attractive because we may rely on these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock, and our stock price may be more volatile.

 

Market and economic conditions may negatively impact our business, financial condition and share price.

 

Concerns over inflation, energy costs, geopolitical issues, the U.S. mortgage market and a declining real estate market, unstable global credit markets and financial conditions, and volatile oil prices have led to periods of significant economic instability, diminished liquidity and credit availability, declines in consumer confidence and discretionary spending, diminished expectations for the global economy and expectations of slower global economic growth going forward, increased unemployment rates, and increased credit defaults in recent years. Our general business strategy may be adversely affected by any such economic downturns, volatile business environments and continued unstable or unpredictable economic and market conditions. If these conditions continue to deteriorate or do not improve, it may make any necessary debt or equity financing more difficult to complete, more costly, and more dilutive. Failure to secure any necessary financing in a timely manner and on favorable terms could have a material adverse effect on our growth strategy, financial performance, and share price and could require us to delay or abandon development or commercialization plans.

 

Because we do not anticipate paying any cash dividends on our common stock in the foreseeable future, capital appreciation, if any, will be your sole source of gain.

 

We have never declared or paid cash dividends on our common stock. Holders of our Series A Preferred Stock receive interest payments quarterly, at a rate of 6% per year, and rank senior with respect to interest on junior securities, dividends, distributions or liquidation preference. We currently anticipate that we will retain all of our future earnings, if any, to support operations and to finance the growth and development of our business. As a result, capital appreciation, if any, of our common stock will be your sole source of gain for the foreseeable future.

 

Anti-takeover provisions in our charter documents and under Florida law could discourage, delay or prevent a change in control of us and may affect the trading price of our common stock.

 

As a Florida corporation, we are subject to certain provisions of the Florida Business Corporation Act (the “FBCA”) that have anti-takeover effects and may inhibit a non-negotiated merger or other business combination. Our articles of incorporation and bylaws also contain other provisions which could have anti-takeover effects. These provisions include, without limitation, the authority of our board of directors to issue additional shares of preferred stock and, to the extent there is any undesignated preferred stock, to fix the relative rights and preferences of the preferred stock without the need for any stockholder vote or approval; the requirement of a majority stockholder vote to remove directors from office or, if for cause, by a majority of the board of directors; and limitations on who may call special meetings of stockholders. For more information regarding these and other provisions, see the section below entitled “Description of Capital Stock—Anti-Takeover Provisions.”

 

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

 

This prospectus contains forward-looking statements that are based on management’s beliefs and assumptions and on information currently available to management. Some of the statements in the section captioned “Prospectus Summary,” “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Business” and elsewhere in this prospectus contain forward-looking statements. In some cases, you can identify forward-looking statements by the following words: “may,” “might,” “will,” “could,” “would,” “should,” “expect,” “intend,” “plan,” “aim,” “objective,” “anticipate,” “believe,” “estimate,” “predict,” “project,” “potential,” “continue,” “ongoing,” “target,” “seek” or the negative of these terms or other comparable terminology, although not all forward-looking statements contain these words.

 

These statements involve risks, uncertainties and other factors, many of which have been, and may further be, exacerbated by the COVID-19 pandemic, that may cause actual results, levels of activity, performance or achievements to be materially different from the information expressed or implied by these forward-looking statements. Although we believe that we have a reasonable basis for each forward-looking statement contained in this prospectus, we caution you that these statements are based on a combination of facts and factors currently known by us and our projections of the future, about which we cannot be certain. Forward-looking statements in this prospectus include, but are not limited to, statements about:

 

our ability to successfully launch, develop additional features and achieve market acceptance of our smart products and technologies, access and integrate our products and technologies with third-party platforms or technologies, respond to rapidly changing technology and customer demands, and compete in our industry;

 

our financial performance and liquidity, including our ability to successfully generate sufficient revenue to support our operations;

 

our ability to expand, operate and successfully manage our operations, including managing our business transformation in connection with evolving our business strategy to focus on smart products and technologies;

 

our ability to raise additional financing to support our operations as needed;

 

our ability to comply with the terms of, and timely repay, our current debt financing;

 

the impact of the COVID-19 pandemic on our business and operations;

 

our reliance on a limited number of third-party manufacturers and suppliers and our ability to successfully reduce our production costs;

 

our potential dependence upon a limited number of customers and/or on contracts awarded through competitive bidding processes;

 

any downturn in the cyclical industries in which our customers operate;

 

our ability to acquire other businesses, license rights, form alliances or dispose of operations when desired;

 

our ability to comply with regulations relating to applicable quality standards;

 

our ability to maintain our License Agreement with GE;

 

our ability to maintain, protect and enhance our intellectual property;

 

the potential outcome of any legal proceedings;

 

44
  

 

our ability to successfully sell and distribute our products and technologies;

 

our ability to retain key executives and qualified personnel;

 

our ability to successfully manage our planned development and expansion, including the additional costs of being a public company;

 

our ability to maintain effective internal control over financial reporting and disclosure controls and procedures;

 

the potential impact of unstable market and economic conditions on our business, financial condition and stock price;

 

the potential impact of cybersecurity breaches or disruptions to our information systems, including our cloud-based infrastructure;

 

the potential impact of natural disasters and other catastrophic events, such as the COVID-19 pandemic;

 

risks related to ownership of our common stock;

 

our ability to use the proceeds of this offering effectively;

 

the potential impact of anti-takeover and director and officer liability provisions in our charter documents and under Florida law; and

 

other risks and uncertainties, including those listed under the section titled “Risk Factors.”

 

In addition, you should refer to the “Risk Factors” section of this prospectus for a discussion of other important factors that may cause actual results to differ materially from those expressed or implied by the forward-looking statements. As a result of these factors, we cannot assure you that the forward-looking statements in this prospectus will prove to be accurate. Furthermore, if the forward-looking statements prove to be inaccurate, the inaccuracy may be material. In light of the significant uncertainties in these forward-looking statements, you should not regard these statements as a representation or warranty by us or any other person that we will achieve our objectives and plans in any specified time frame, or at all. The forward-looking statements in this prospectus represent our views as of the date of this prospectus. We anticipate that subsequent events and developments will cause our views to change; however, we undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by U.S. federal securities laws. You should, therefore, not rely on these forward-looking statements as representing our views as of any date subsequent to the date of this prospectus.

 

In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this prospectus, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain, and investors are cautioned not to unduly rely upon these statements.

 

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USE OF PROCEEDS

 

We estimate that the net proceeds to us from the sale of the shares of our common stock in this offering will be approximately $20.4 million, or approximately $23.4 million if the underwriters exercise their option to purchase additional shares in full, based upon the initial public offering price of $14.00 per share, after deducting underwriting discounts and commissions and estimated offering expenses payable by us. 

 

We intend to use the net proceeds from this offering, including any net proceeds from the underwriters’ exercise of the over-allotment option to purchase additional shares from us, for general corporate purposes.

 

Based on our current plans and business conditions, we believe our existing cash, cash equivalents and short-term investments and available lines of credit, together with the net proceeds from this offering, will be sufficient to fund our operating expenses and capital expenditure requirements through at least the next twelve months, although there can be no assurance in that regard. Given the volatility in U.S. equity markets and our normal working capital fluctuations, and depending on the actual level of net proceeds raised in this offering, we may seek to raise additional capital following this offering to supplement our operating cash flows to the extent we can do so on competitive market terms. In such event, an equity financing may dilute the ownership interests of our stockholders and investors in this offering. In all events, there can be no assurance that additional financing would be available to us when desired or needed and, if available, on terms acceptable to us.

 

We may also use a portion of our net proceeds to co-develop, acquire or invest in products, technologies or businesses that are complementary to our business and to engage in public relations and marketing activities. However, we currently have no agreements or commitments to complete any such transaction.

 

The intended use of net proceeds from this offering represents our expectations based upon our present plans and business conditions. We cannot predict with certainty all of the particular uses for the proceeds of this offering or the amounts that we will actually spend on the uses described in this prospectus. Accordingly, our management will have significant flexibility in applying the net proceeds of this offering. The timing and amount of our actual expenditures will be based on many factors, including cash flows from operations, if any, the anticipated growth of our business and those factors set forth above under “Risk Factors” and elsewhere in this prospectus. Pending such uses, we intend to invest the net proceeds of this offering in a variety of capital-preservation investments, including short- and immediate-term, interest-bearing obligations, investment-grade instruments, certificates of deposit or direct or guaranteed obligations of the U.S. government.

 

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DIVIDEND POLICY

 

We have never declared or paid any cash dividends on our common stock. Holders of our Series A Preferred Stock receive interest payments quarterly, at a rate of 6% per year, and rank senior with respect to interest on junior securities, dividends, distributions or liquidation preference. We anticipate that we will retain all available funds and future earnings, if any, for use in the operation of our business and do not anticipate paying cash dividends in the foreseeable future. In addition, future debt instruments may materially restrict our ability to pay dividends on our common stock. Payment of future cash dividends, if any, will be at the discretion of the board of directors after taking into account various factors, including our financial condition, operating results, current and anticipated cash needs, the requirements of then-existing senior equity and debt instruments and other factors the board of directors deems relevant.

 

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CAPITALIZATION

 

The following table sets forth our cash and cash equivalents and our capitalization as of September 30, 2021:

 

on an actual basis; and

 

on a pro forma basis to give effect to the Preferred Stock Conversion and the Subsequent Issuances; and

 

on a pro forma as adjusted basis to give further effect to (i) our issuance and sale of 1,650,000 shares of common stock in this offering at the initial public offering price of $14.00 per share, after deducting underwriting discounts and commissions and estimated offering expenses payable by us, and (ii) the issuance of the Anti-Dilution Shares.

 

You should read the information in this table together with our financial statements and the related notes appearing elsewhere in this prospectus and the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section of this prospectus.

 

   As of September 30, 2021 
(in thousands, except share and per share data)  Actual   Pro Forma   Pro Forma As Adjusted 
   (unaudited)   (unaudited)   (unaudited) 
Cash and cash equivalents  $2,234,653   $15,784,166   $36,286,166 
                
Debt (including current portion of long-term debt and royalty obligation)   9,761,909    9,761,909    9,761,909 
Convertible notes, conversion rate $15.00; 86,668 shares   1,300,000    1,300,000    1,300,000 
                
Redeemable preferred stock – subject to redemption: $0 par value; 20,000,000 shares authorized; 13,256,936 shares issued and outstanding on an actual basis; 20,000,000 shares authorized and 5,056,936 shares issued and outstanding on a pro forma and pro forma as adjusted basis   3,314,233    1,264,234    1,264,234 
Stockholders’ (deficit) equity:               
Common stock: $0 par value, 500,000,000 shares authorized; 65,158,105 shares issued and outstanding on an actual basis; 500,000,000 shares authorized and 74,859,944 shares issued and outstanding on a pro forma basis; 500,000,000 shares authorized and 76,797,307 shares issued and outstanding on a pro forma as adjusted basis   45,915,905    61,515,417    82,017,417 
Additional paid-in capital   13,940,094    13,940,094    13,940,094 
Accumulated deficit   (72,156,328)   (72,156,328)   (72,156,328)
Total stockholders’ (deficit) equity   (12,335,771)   3,263,741    23,765,741 
Total capitalization  $2,040,371   $15,589,884   $36,091,884 

 

The table above does not include:

 

  1,834,039 shares of common stock issuable upon the exercise of warrants to purchase common stock that were exercisable and outstanding as of September 30, 2021 at a weighted average exercise price of $4.34 per share (without giving effect to any of the anti-dilution adjustment provisions thereof);
     
  293,856 shares of common stock issuable upon the exercise of exercisable and outstanding warrants to purchase common stock issued after September 30, 2021 at an exercise price of $12.00 per share;
     
  86,668 shares of common stock issuable upon the conversion of $1,300,000 of convertible notes outstanding as of September 30, 2021 that convert at $15.00 per share (which does not include shares that would be issuable if holders elect to receive interest payments on the notes in shares of common stock);
     
  10,337,182 shares of common stock issuable upon the exercise of stock options outstanding as of September 30, 2021 under our Incentive Plans, at a weighted average exercise price of $3.65 per share;
     
  1,340,000 shares of common stock issuable upon the exercise of outstanding stock options granted after September 30, 2021, with an exercise price of $12.00 per share, pursuant to our 2018 Plan;
     
  20,000,000 shares of common stock available for future issuance under the 2021 Plan, which became effective immediately prior to the effectiveness of the registration statement of which this prospectus forms a part (which amount excludes the IPO Option Grants and IPO Restricted Stock Grants described below);
     
  17,000,000 shares of common stock issuable upon exercise of the Performance Options, at a weighted average exercise price of $9.71;
     
  3,315,000 shares of common stock issuable upon exercise of stock options outstanding as of September 30, 2021 issued outside of the Incentive Plans, at a weighted average exercise price of $4.06 per share;
     
  265,000 shares of common stock issuable upon the exercise of the IPO Option Grants granted under the 2021 Plan upon the pricing of this offering with an exercise price per share equal to the initial public offering price per share; and
     
  265,000 shares of restricted common stock to be issued pursuant to the IPO Restricted Stock Awards to be granted under the 2021 Plan immediately following the effectiveness of the applicable Form S-8 registration statement.

 

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DILUTION

 

If you invest in our common stock in this offering, your ownership interest will be diluted immediately to the extent of the difference between the initial public offering price per share of our common stock and the pro forma as adjusted net tangible book value per share of our common stock immediately after this offering.

 

Our historical net tangible book value (deficit) as of September 30, 2021 was $(12,859,355), or $(0.20) per share of our common stock. Our historical net tangible book value (deficit) is the amount of our total tangible assets less our total liabilities. Our historical net tangible book value (deficit) per share represents historical net tangible book value (deficit) divided by the number of shares of our common stock outstanding as of September 30, 2021.

 

Our pro forma net tangible book value as of September 30, 2021 was $2,740,157, or $0.04 per share of common stock. Pro forma net tangible book value per share represents our net tangible book value divided by the number of shares of our common stock outstanding as of September 30, 2021, after giving effect to the Preferred Stock Conversion and the Subsequent Issuances.

 

After giving further effect to our sale of 1,650,000 shares of our common stock in this offering at the initial public offering price of $14.00 per share, after deducting underwriting discounts and commissions and estimated offering expenses payable by us, and the issuance of the Anti-Dilution Shares, our pro forma as adjusted net tangible book value as of September 30, 2021 would have been approximately $23,242,157, or approximately $0.30 per share. This amount represents an immediate increase in pro forma as adjusted net tangible book value of $0.50 per share to our existing stockholders and an immediate dilution of approximately $13.70 per share to new investors purchasing shares of our common stock in this offering.

 

Dilution per share to new investors is determined by subtracting pro forma as adjusted net tangible book value per share after this offering from the initial public offering price per share paid by new investors. The following table illustrates this dilution on a per share basis (without giving effect to any exercise by the underwriters of their option to purchase additional shares):

 

Initial public offering price per share      $14.00 
Historical net tangible book value (deficit) per share as of September 30, 2021  $(0.20)    
Increase (decrease) per share attributable to the pro forma adjustments described above  $0.24     
Pro forma net tangible book value (deficit) per share as of September 30, 2021 before giving effect to this offering  $0.04     
Increase in pro forma as adjusted net tangible book value (deficit) per share attributable to new investors purchasing common stock in this offering  $0.26     
Decrease in pro forma net tangible book value per share attributable to the issuance of the Anti-Dilution Shares  $     
Pro forma as adjusted net tangible book value (deficit) per share after giving effect to this offering      $0.30 
Dilution in pro forma as adjusted net tangible book value (deficit) per share to new investors purchasing common stock in this offering      $13.70 

 

 

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If the underwriters exercise their option to purchase additional shares in full, our pro forma as adjusted net tangible book value after this offering would be approximately $26,429,957, or $0.34 per share, representing an immediate increase in pro forma as adjusted net tangible book value per share of $0.04 to existing stockholders and immediate dilution in pro forma as adjusted net tangible book value per share of $0.04 to new investors in this offering, based on the initial public offering price and after deducting underwriting discounts and commissions and estimated offering expenses payable by us.

 

The following table summarizes, on the pro forma as adjusted basis described above (but not including the issuance of the Anti-Dilution Shares), the total number of shares of common stock purchased from us, the total consideration paid or to be paid and the average price per share paid or to be paid by existing stockholders and by new investors in this offering at the initial public offering price of $14.00 per share, before deducting underwriting discounts and commissions and estimated offering expenses payable by us. As the table shows, new investors purchasing common stock in this offering will pay an average price per share substantially higher than our existing stockholders paid.

 

   Shares Purchased   Total Consideration   Average Price 
   Number   Percent   Amount   Percent   Per Share 
Existing stockholders   74,859,944    97.8%  $63,070,206    73.2%  $0.84 
New investors participating in this offering   1,650,000    2.2    23,100,000    26.8    14.00 
Total   76,509,944    100%  $86,170,206    100%  $1.17 

 

The table above assumes no exercise of the underwriters’ option to purchase additional shares in this offering. If the underwriters’ option to purchase additional shares is exercised in full, the number of shares of our common stock held by existing stockholders would be reduced to 97.5% of the total number of shares of our common stock outstanding after this offering, and the number of shares of common stock held by new investors purchasing in this offering would be increased to 2.5% of the total number of shares of our common stock outstanding after this offering.

 

The discussion and tables (other than the historical net tangible book value calculation) above are based on the number of shares of our common stock outstanding as of September 30, 2021, plus the shares issuable upon the Preferred Stock Conversion and the Subsequent Issuances, and excludes:

 

  1,834,039 shares of common stock issuable upon the exercise of warrants to purchase common stock that were exercisable and outstanding as of September 30, 2021 at a weighted average exercise price of $4.34 per share (without giving effect to any of the anti-dilution adjustment provisions thereof);
     
  293,856 shares of common stock issuable upon the exercise of exercisable and outstanding warrants to purchase common stock issued after September 30, 2021 at an exercise price of $12.00 per share;
     
  86,668 shares of common stock issuable upon the conversion of $1,300,000 of convertible notes outstanding as of September 30, 2021 that convert at $15.00 per share (which does not include shares that would be issuable if holders elect to receive interest payments on the notes in shares of common stock);
     
  10,337,182 shares of common stock issuable upon the exercise of stock options outstanding as of September 30, 2021 under our Incentive Plans, at a weighted average exercise price of $3.65 per share;
     
  1,340,000 shares of common stock issuable upon the exercise of outstanding stock options granted after September 30, 2021, with an exercise price of $12.00 per share, pursuant to our 2018 Plan;
     
  20,000,000 shares of common stock available for future issuance under the 2021 Plan, which became effective immediately prior to the effectiveness of the registration statement of which this prospectus forms a part (which amount excludes the IPO Option Grants and IPO Restricted Stock Grants described below);
     
  17,000,000 shares of common stock issuable upon exercise of the Performance Options, at a weighted average exercise price of $9.71;
     
  3,315,000 shares of common stock issuable upon exercise of stock options outstanding as of September 30, 2021 issued outside of the Incentive Plans, at a weighted average exercise price of $4.06 per share;
     
  265,000 shares of common stock issuable upon the exercise of the IPO Option Grants granted under the 2021 Plan upon the pricing of this offering with an exercise price per share equal to the initial public offering price per share; and
     
  265,000 shares of restricted common stock to be issued pursuant to the IPO Restricted Stock Awards to be granted under the 2021 Plan immediately following the effectiveness of the applicable Form S-8 registration statement.

 

To the extent that new stock options are issued or any outstanding stock options are exercised, or we issue additional shares of common stock in the future, there will be further dilution to new investors. In addition, we may choose to raise additional capital because of market conditions or strategic considerations, even if we believe that we have sufficient funds for our current or future operating plans. If we raise additional capital through the sale of equity or convertible debt securities, the issuance of these securities could result in further dilution to our stockholders.

 

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

 

You should read the following discussion and analysis of our financial condition and results of operations together with our financial statements and the related notes appearing elsewhere in this prospectus. This discussion and other parts of this prospectus contain forward-looking statements that involve risks and uncertainties, such as statements regarding our plans, objectives, expectations, intentions and projections. Our actual results could differ materially from those discussed in these forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed in the “Risk Factors” section of this prospectus.

 

U.S. Dollars are denoted herein by “USD”, “$” and “dollars”.

 

Overview

 

We have a series of highly disruptive advanced-safe-smart platform technologies. Our first-generation technologies enable light fixtures, ceiling fans and other electrically wired products to be installed safely and plugged-in, into a ceiling’s electrical outlet box within seconds, and without the need to touch hazardous wires. The plug and play technology method is a universal power-plug device that has a matching receptacle that is simply connected to the electrical outlet box on the ceiling, enabling a safe and quick plug and play installation of light fixtures and ceiling fans in just seconds. The plug and play power-plug technology, eliminates the need of touching hazardous electrical wires while installing light fixtures, ceiling fans and other hard wired electrical products. In recent years we have expanded the capabilities of our power-plug product, to include advanced safe and quick universal installation methods, as well as advanced smart capabilities. The smart features include control of light fixtures and ceiling fans by the SkyHome App, through WIFI, BLE and voice control. It allows scheduling, energy savings eco mode, dimming, back-up emergency light, night light, light color changing and much more. Our second-generation technology is an all-in-one safe and smart advanced platform that is designed to enhance all-around safety and lifestyle of homes and other buildings. We hold over 60 U.S. and global patents and patent applications and have received a variety of final electrical code approvals, including UL, United Laboratories for Canada (cUL) and Conformité Européenne (CE), and 2017 and 2020 inclusion in the NEC Code Book.

 

The ongoing COVID-19 global and national health emergency has caused significant disruption in the international and United States economies and financial markets. In March 2020, the World Health Organization declared the COVID-19 outbreak a pandemic. The spread of COVID-19 has caused illness, quarantines, cancellation of events and travel, business and school shutdowns, reduction in business activity and financial transactions, labor shortages, supply chain interruptions and overall economic and financial market instability. All 50 states in the United States and the District of Columbia have reported cases of individuals infected with COVID-19. All states declared states of emergency during the course of the pandemic, some of which remain in effect. Similar impacts have been experienced in every country in which we do business. Impacts to our business could be widespread and global, and material negative impacts on us may be possible.

 

Furthermore, we have been following the recommendations of local health authorities to minimize exposure risk for our employees, including the temporary closures of our offices and having employees work remotely to the extent possible, which has to an extent adversely affected their efficiency. In addition, the cancellation of in-person meetings and conferences has had an adverse impact on our business and financial condition and has hampered our ability to meet with customers to promote products, generate revenue and access usual sources of liquidity on reasonable terms, which in turn has negatively impacted our financial performance. As the situation continues to evolve, we will continue to closely monitor market conditions and respond accordingly.

 

In March 2020, the CARES Act was enacted. Among other things, the CARES Act established the PPP, which funded eligible businesses through federally guaranteed loans. Under the PPP, companies are eligible for forgiveness of principal and accrued interest if the proceeds are used for eligible costs, which include, but are not limited to, payroll, benefits, mortgage, lease, and utility expenses. We have applied for and received certain financial assistance under the CARES Act enacted in March 2020 by the U.S. Government in response to COVID-19, as described further below.

 

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Results of Operations

 

Comparison of the Nine Months Ended September 30, 2021 and 2020

 

  

For the Nine Months Ended

September 30,

   Change 
   2021   2020  

Nine Months Ended

2021 vs. 2020

 
Revenue  $106,577   $249,175   $(142,598)   (57.2)%
Cost of Sales   (130,599)   (490,538)   359,939    (73.4)%
Gross Profit (Loss)   (24,022)   (241,363)   217,341    (90.0)%
Selling, general and administrative expenses   3,153,897    4,726,224    (1,572,327)   (33.3)%
Depreciation and amortization   63,325    69,772    (6,447)   (9.2)%
Total operating expenses   3,217,222    4,795,996    (1,578,774)   (32.9)%
Loss from Operations   (3,241,244)   (5,037,359)   1,796,115    (35.7)%
Other Income / (Expense)                    
Interest expense   (425,323)   (370,524)   (54,799)   14.8%
Other income, loan forgiveness   10,000        10,000    N/A 
Gain (loss) on exchange   7,886    (542)   8,428    (1,555.0)%
Interest income   36    1,433    (1,397)   (97.5)%
Total other expense – net   (407,401)   (369,633)   (37,768)   10.2%
                     
Net loss including noncontrolling interest   (3,648,645)   (5,406,992)   1,758,347    (32.5)%
Less net loss attributable to noncontrolling interest                
Preferred dividends   97,655    97,655         
Net loss attributed to common shareholders  $(3,746,300)  $(5,504,647)  $1,758,347    (31.9)%
                     
Net loss per share – basic and diluted  $(0.05)  $(0.08)  $0.03    35.2%

 

Revenue

 

Total net sales for the nine months ended September 30, 2021 decreased approximately 57% or $142,598 from the prior year period. In 2020 and throughout 2021, we opted to sell through our existing inventory of discontinued products to facilitate our planned transition into our new patented product lines. As such, the decrease in revenues was directly related to the planned reduction of discontinued inventory as we continued to shift our focus to the development of our new patented “Smart” platforms and technologies.

 

Cost of Sales

 

We had a cost of sales of $130,599 for the nine months ended September 30, 2021, as compared to a cost of sales of $490,538 for the same period in 2020. The reduction in cost of sales was a result of our decrease in sales due to our decision to discontinue our old products and transition to our patented “Smart” platforms and technologies.

 

Gross Profit

 

Product gross margin and product gross margin percentage increased during the nine months ended September 30, 2021 compared to the same period in 2020, primarily due to the decrease in cost of sales. As referred to in the Revenue section above, our objective in 2021 was to liquidate inventory of our discontinued product lines. As such, we offered our customers aggressive discounts.

 

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Selling, General and Administrative Expenses

 

   For the Nine Months Ended September 30,   Change 
Selling, General and Administrative Expense Schedule  2021   2020  

Nine Months Ended

2021 vs. 2020

 
Product Development  $800,135   $890,095   $(89,960)   (10.1)%
Payroll Expenses   532,221    902,783    (370,562)   (41.0)%
Selling Expense, Direct   35,861    83,622    (47,761)   (57.1)%
General and Administrative Expense   92,199    218,038    (125,839)   (57.7)%
Professional Fees   506,844    441,919    64,925    14.7%
China Operations   212,351    265,282    (52,931)   (20.0)%
Sales and Marketing Expense   297    51,381    (51,084)   (99.4)%
Warehouse and Logistic Expense   9,270    11,548    (2,278)   (19.7)%
Insurance Expense   78,491    135,534    (57,043)   (42.1)%
Software and IT Expense   57,650    36,523    21,127    57.8%
Total Operating Selling, General and Administrative Expense  $2,325,319   $3,036,725   $(711,406)   (23.4)%
Stock Compensation   570,000    1,689,499    (1,119,499)   (66.3)%
Option Compensation   258,578        258,578    N/A 
Depreciation and Amortization   63,325    69,772    (6,447)   (9.2)%
Non-Cash Selling, General and Administrative Expense  $891,903   $1,759,271   $(867,368)   (49.3)%
Total Selling, General and Administrative Expense  $3,217,222   $4,795,996   $(1,578,774)   (32.9)%

 

Selling, general and administrative expense, net of depreciation and amortization and equity compensation, decreased approximately 23% or $711,406 to $2,325,319 during the nine months ended September 30, 2021, from $3,036,725 for the same period ended 2020. This decrease in selling, general and administrative expense was consistent with the decrease of revenue resulting from our inventory transition referred to above, and the reduction of operating expenses resulting from the COVID-19 pandemic. The decrease in selling, general and administrative expense was related to the discontinued use of a third-party logistics center, the reduction and discontinuation of certain office leases, reduction of travel expenses and the reduction of management salaries. These reductions were in part related to our planned transition and COVID-19.

 

Other changes in operating expenses included the following:

 

Stock compensation decreased $1,119,499 to $570,000 for the nine months ended September 30, 2021.

 

Stock option compensation increased to $258,578 from $0 for the nine months ended September 30, 2021 and 2020, respectively. The increase was primarily related to $96,487 pursuant to the chairman incentive agreement and $162,091 pursuant to employee and contractor agreements.

 

Loss from Operations

 

Loss from operations decreased $1,796,115 to $3,241,244 during the nine months ended September 30, 2021, from $5,037,359 for the same period in 2020. The decrease in operating loss was directly related to the reduction of total operating expenses by approximately 33%. The loss from operations was primarily due to the liquidation of our discontinued product line as we continued to develop and transition to our new patented “Smart” platforms and technologies.

 

Other Income (Expense)

 

Total other expenses for the nine months ended September 30, 2021 increased about 10% or $37,768 compared to the nine months ended September 30, 2020. The increase was primarily due to an increase in interest expense of $54,799 and a decrease in interest income of $1,397, partially offset by an increase in gain on exchange of $8,428 and income from loan forgiveness of $10,000.

 

Net Loss and Net Loss per Share

 

We incurred a net loss for the nine months ended September 30, 2021 of $3,648,645 or $0.05 per share, as compared to the prior year period net loss of $5,406,992 or $0.08 per share. Non-GAAP EBITDA to account for non-cash items resulted in an adjusted net loss of $2,349,341 or $0.04 per share and $3,278,088 or $0.05 per share for the nine months ended September 30, 2021 and 2020, respectively.

 

Comparison of the Years Ended December 31, 2020 and 2019

 

   For the Year Ended
December 31,
   Change 
   2020   2019   2020 vs. 2019 
Revenue  $258,376   $3,809,752   $(3,551,376)   (93.2)%
Cost of Sales   (503,033)   (3,549,030)   3,045,997    (85.8)%
Gross Profit (Loss)   (244,657)   260,722    (505,379)   (193.8)%
Selling, general and administrative expenses   8,635,011    16,483,480    (7,848,469)   (20.6)%
Depreciation and amortization   106,309    107,241    (932)   (0.9)%
Total operating expenses   8,741,320    16,590,721    (7,849,401)   (47.3)%
Loss from Operations   (8,985,977)   (16,329,999)   7,344,022    (45.0)%
Other Income / (Expense)                    
Interest expense   (515,515)   (490,626)   (24,889)   5.1%
Other income, loan forgiveness   257,468        257,468    N/A 
Gain on exchange   408    726    (318)   (43.8)%
Gain on debt forgiveness (license)       49,706    (49,706)   (100.0)%
Interest income   1,511    17,494    (15,983)   (91.4)%
Total other expense - net   (256,128)   (422,700)   166,572    (39.4)%
                     
Net loss including noncontrolling interest   (9,242,105)   (16,752,699)   7,510,594    (44.8)%
Less net loss attributable to noncontrolling interest                
Preferred dividends   130,206    130,206        0.0%
Net loss attributed to common shareholders  $(9,372,311)  $(16,882,905)  $7,510,594   (44.5)%
                     
Net loss per share - basic and diluted  $(0.14)  $(0.29)  $0.15   (52.3)%

 

Revenue

 

Total net sales decreased approximately 93% or $3,551,000. In 2019 and throughout 2020, we opted to sell through our existing inventory of discontinued products to facilitate our planned transition into our new patented product lines. As such, the decrease in revenues was directly related to the planned reduction of discontinued inventory as we continued to shift our focus to the development of our new patented “Smart” platforms and technologies.

 

Cost of Sales

 

We had a cost of sales of $503,033 for the year ended December 31, 2020, as compared to a cost of sales of $3,549,030 for the year ended December 31, 2019. The reduction in cost of sales was a result of our decrease in sales due to our decision to discontinue our old products and transition to our patented “Smart” platforms and technologies.

 

Gross Profit

 

Product gross margin and product gross margin percentage decreased during 2020 compared to 2019. As referred to in the Revenue section above, our objective in 2020 was to liquidate inventory of our discontinued product lines. As such, we offered our customers aggressive discounts, resulting in decreased profit margin.

 

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Selling, General and Administrative Expenses

 

   Year Ended December 31,   Change 
Selling, General and Administrative Expense Schedule  2020   2019   2020 vs. 2019 
Product Development  $1,065,048   $2,234,229   $(1,169,182)   (52.3)%
Payroll Expenses   1,085,708    1,585,478    (499,770)   (31.5)%
Selling Expense, Direct   63,708    798,594    (734,886)   (92.0)%
General and Administrative Expense   256,921    662,476    (405,555)   (61.2)%
Professional Fees   533,596    669,698    (136,102)   (20.3)%
China Operations   315,268    522,609    (207,341)   (39.7)%
Sales and Marketing Expense   45,524    224,255    (178,730)   (79.7)%
Warehouse and Logistic Expense   13,013    100,404    (87,391)   (87.0)%
Insurance Expense   142,466    114,205    28,261    24.7%
Software and IT Expense   45,331    54,406    (9,075)   (16.7)%
Total Operating Selling, General and Administrative Expense  $3,566,583   $6,966,354   $(3,399,771)   (48.8)%
Equity Compensation   5,068,428    9,517,126    (4,448,698)   (46.7)%
Depreciation and Amortization   106,309    107,241    (932)   (0.9)%
Non-Cash Selling, General and Administrative Expense  $5,174,737   $9,624,367   $(4,449,630)   (46.2)%
Total Selling, General and Administrative Expense  $8,741,320   $16,590,721   $(7,849,401)   (47.3)%

 

Selling, general and administrative expense, net of depreciation and amortization and equity compensation, decreased approximately 49% or $3,399,771 to $3,566,583 during the year ended December 31, 2020, from $6,966,354 for the year ended December 31, 2019. This decrease in selling, general and administrative expense was consistent with the decrease of revenue resulting from our inventory transition referred to above, and the reduction of operating expenses resulting from the COVID-19 pandemic. The decrease in selling, general and administrative expense was related to the discontinued use of a third-party logistics center, the reduction and discontinuation of certain office leases, reduction of travel expenses and the reduction of management salaries. These reductions were in part related to our planned transition and COVID-19.

 

Other changes in operating expenses included the following:

 

Stock compensation decreased $6,375,638 to $2,902,981 for the year ended December 31, 2020. Stock option compensation increased $1,926,940 to $2,165,447 for the year ended December 31, 2020. The increase was primarily related to executive management incentives.

 

Loss from Operations

 

Loss from operations decreased $7,344,022 to $8,985,977 during the year ended December 31, 2020, from $16,329,999 for the year ended December 31, 2019. The decrease in operating loss was directly related to the reduction of selling, general and administrative expenses. The loss from operations was primarily due to the liquidation of our discontinued product line as we continued to develop and transition to our new patented “Smart” platforms and technologies.

 

Other Income (Expense)

 

Total other expenses decreased $166,572 to $256,128 from $422,700 for the year ended December 31, 2020 and 2019, respectively. In 2020, we recognized other income of $257,468 related to debt forgiveness of the PPP1 Loan (as defined below). Refer below for additional information on the COVID-19 pandemic impact and related CARES Act loans.

 

Net Loss and Net Loss per Share

 

We incurred a net loss for the year ended December 31, 2020 of $9,242,105 or $0.14 per share, as compared to the year ended December 31, 2019, when the net loss was $16,752,699 or $0.29 per share. Non-GAAP EBITDA to account for non-cash items resulted in an adjusted net loss of $3,811,240 or $0.06 per share and $6,705,632 or $0.12 per share for the years ended 2020 and 2019, respectively.

 

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Liquidity and Capital Resources

 

As of September 30, 2021 and December 31, 2020, we had $2,234,653 and $2,308,871 in cash and cash equivalents, respectively. As we develop our revenue base, we have raised additional funds through the sale of our common stock and issuance of debt. We believe that our sources of liquidity and capital will be sufficient to finance our continued operations for at least the next 12 months. Our debt included a $10,000,000 secured loan, arranged in April 2016 pursuant to a promissory note between us and NBG, to support our working capital needs. As of both September 30, 2021 and December 31, 2020, we had $5,458,642 outstanding under the note (exclusive of interest). On December 14, 2021, we entered into a new secured promissory note with NBG, in the amount of approximately $5.9 million, which amended and replaced the April 2016 promissory note. The unpaid principal accrues interest at the Wall Street Journal prime rate plus 1.75% per year. The amended note will mature sixty months following the date of issuance. The Company has or will make the following payments to NBG: on the date of issuance, $243,000; on December 30, 2021, an amount equal to all accrued and unpaid interest as of such date, plus $100,000; and on each of July 1, 2022, December 30, 2022, July 1, 2023 and December 30, 2023, an installment payment in an amount equal to all accrued and unpaid interest as of the respective date, plus $200,000. Commencing January 15, 2024, the Company will begin paying equal monthly installments of $144,175.53 in principal, plus all accrued and unpaid interest as of the payment date. The Company may prepay the amounts due under the amended note at any time and from time to time. The note contains customary events of default and, in the event that an event of default occurs, the amended note and all accrued interest will become immediately due and payable. The amended note is secured by the existing pledge and security agreement and by a first priority security interest in substantially all of the Company’s assets.

 

We also received two loans granted under the PPP and a loan (the “EIDL Loan”) from the SBA under its Economic Injury Disaster Loan (“EIDL”) assistance program in light of the impact of the COVID-19 pandemic on the Company’s business. The PPP loans consist of a $269,500 loan granted on April 13, 2020 (the “PPP1 Loan”), which matures on April 13, 2025 and of which $257,468 was forgiven during 2021, and a $178,235 loan granted under the PPP Second Draw program on February 3, 2021 (the “PPP2 Loan”), which matures on February 3, 2026 and for which we have requested forgiveness in accordance with the application requirements. As of the date of this filing, the Company has not received a reply to its request and there can be no assurance that such PPP2 Loan will be forgiven, in whole or in part. The EIDL Loan, which has a principal amount of $150,000, was granted pursuant to a promissory note and security agreement with the SBA, dated June 24, 2020, and matures June 24, 2050. As of September 30, 2021, the loan balance under (i) the PPP1 Loan was $12,032, net of loan forgiveness of a $10,000 EIDL (as defined below) advancement, (ii) the PPP2 Loan was $178,235, and (iii) the EIDL Loan was $150,000. In addition, we have $1.3 million outstanding in subordinated convertible promissory notes sold between September 2020 and January 2021, which mature in three years from the date of issuance. For additional information regarding our debt and our equity issuances, see Note 5, Debt, and Note 10, Stockholders’ Deficit, to the unaudited consolidated financial statements for the nine months ended September 30, 2021 and Note 6, Debt, and Note 11, Stockholders’ Deficit, to the consolidated financial statements for the year ended December 31, 2020. Following September 30, 2021, in October and November 2021, we sold an aggregate of 162,503 shares of common stock and 162,503 warrants to various investors, for aggregate gross proceeds of approximately $2.0 million, and in December 2021, we sold an aggregate of 734,335 shares of common stock and 41,668 warrants to various investors, for aggregate gross proceeds of approximately $8.8 million. In addition, a significant stockholder of the Company provided a letter of financial support to the Company. We are continuing to raise funds, and we intend to raise additional capital towards our upcoming product launch, which may include equity or debt arrangements in addition to the completion of this initial public offering.

 

In addition, we have agreed to pay GE certain minimum royalty payments under the License Agreement. In December 2020, we agreed to pay a total of approximately $5.1 million to GE in quarterly installments through December 2023. As of September 30, 2021, the outstanding balance of such royalty payments was approximately $4.0 million. For additional information regarding the royalty payments, see Note 6, GE Royalty Obligations, to the unaudited consolidated financial statements for the nine months ended September 30, 2021 and Note 7, GE Royalty Obligations, to the consolidated financial statements for the year ended December 31, 2020.

 

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The following is a summary of our cash balances and cash flows as of and for the nine months ended September 30, 2021 and 2020 and the years ended December 31, 2020 and 2019:

 

   Nine Months Ended
September 30,
   Year Ended
December 31,
   Change 
Net Cash Flows  2021   2020   2020   2019   Nine Months Ended
2021 vs. 2020
   Year Ended
2020 vs. 2019
 
Cash Flows from Operating Activities  $(2,833,094)  $(2,281,003)  $(3,129,293)  $(6,186,889)  $(552,091)   24%  $3,057,596    (49)%
Cash Flows from Investing Activities  $(151,169)  $(65,804)  $(109,876)  $(232,566)  $(85,365)   130%  $122,690    (53)%
Cash Flows from Financing Activities  $2,910,044   $781,853   $3,674,303   $3,418,686   $2,128,191    272%  $255,617    7%
Cash and Cash Equivalents, including Restricted Cash, End of Year  $2,234,653   $308,782   $2,308,871   $1,873,737   $1,925,871    624%  $435,134    23%

 

For the nine months ended September 30, 2021, we used $2,833,094 of cash for operations as compared with $2,281,003 used for the same period in 2020. The increase in cash used for operations was primarily due to the increased payments of GE Royalty obligations which was offset by a decrease of operating expenses, net of depreciation, amortization, and equity-related expenses, of about 23%. The reduction of operating expenses related to the decrease in revenue and operating shutdown resulting from the COVID-19 pandemic.

 

For the nine months ended September 30, 2021, we used $151,169 of cash for investing activities as compared with $65,804 for the same period in 2020. The investments during the nine months ended September 30, 2021 were for patents costs of $151,169. In the same period of 2020, the investments were $62,494 for patents and $3,310 for equipment.

 

Net cash flows provided from financing activities amounted to $2,910,044 for the nine months ended September 30, 2021 as compared with $781,853 during the same period in 2020. In the nine months ended September 30, 2021, we had net proceeds from the issuance of common stock of $2,779,464, proceeds from the PPP2 Loan of $178,235, proceeds from convertible notes of $50,000 and paid dividends to our preferred shareholders of $97,655. This compares with the same period in 2020 when we had proceeds from stock issuances of $100,008, proceeds from the PPP1 Loan of $279,500 and from the EIDL Loan of $150,000, proceeds from convertible notes of $350,000 and paid dividends of $97,655 to our preferred shareholders.

 

As a result of the above operating, investing and financing activities, our cash position decreased by $74,218 at September 30, 2021 as compared to a decrease of $1,564,954 in cash for the same period in 2020. We had $2,234,653 in cash and cash equivalents at September 30, 2021, as compared to $308,782 at September 30, 2020.

 

For the year ended December 31, 2020, we used $3,129,293 of cash for operations as compared with $6,186,889 used for the same period in 2019. The decrease in cash used for operations was primarily due to the decrease of about 49% of operating expenses, net of depreciation, amortization and equity compensation. The reduction of operating expenses related to the decrease in revenue and operating shutdown resulting from the COVID-19 pandemic.

 

For the year ended December 31, 2020, we used $109,876 of cash for investing activities as compared with $232,566 for the same period in 2019. The investments in 2020 were for patents costs of $94,540 and equipment of $15,336. In 2019, the investments were $145,807 for patents and $86,759 for equipment.

 

Net cash flows provided from financing activities amounted to $3,674,303 for the year ended December 31, 2020 as compared with $3,418,686 during the same period in 2019. In 2020, we had net proceeds from the issuance of common stock of $100,008, proceeds from the exercise of warrants of $2,025,000, proceeds from convertible notes of $1,250,000, proceeds from the PPP1 Loan and EIDL Loan of $429,500 and paid dividends to our preferred shareholders of $130,206. This compares with the same period in 2019 when we had proceeds from stock issuances of $2,950,004 and proceeds from the exercise of warrants of $1,136,550 and had net payments on the NBG promissory note of $537,662 and paid dividends of $130,206 to our preferred shareholders. During 2021, we requested forgiveness of the PPP1 Loan in accordance with the application requirements. In September 2021, we received confirmation for loan forgiveness of $257,468 which was recognized as Other Income. At December 31, 2020, the PPP1 Loan and EIDL Loan balances were $22,032 and $150,000, respectively.

 

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As a result of the above operating, investing and financing activities, we increased our cash position by $435,134 at December 31, 2020 as compared to the net use of $3,000,768 in cash for the same period in 2019. We had $2,308,871 in cash and cash equivalents at December 31, 2020, as compared to $1,873,737 at December 31, 2019.

 

   September 30,   December 31,   Change 
   2021   2020   2020   2019  

September 30,

2021 vs. 2020

  

December 31,

2020 vs. 2019

 
Working capital:                                        
Total current assets  $3,187,013   $1,278,949   $3,229,065   $3,542,911   $1,908,064    149%  $(313,846)   (9)%
Total current liabilities  $3,276,519   $1,945,586   $2,210,704   $1,018,956   $1,330,933    68%  $1,191,748    117%
Working capital  $(89,506)  $(666,637)  $1,018,361   $2,523,955   $577,131    (87)%  $(1,505,594)   (60)%

 

We had a working capital deficit of $89,506 as of September 30, 2021, as compared to a deficit of $666,637 as of September 30, 2020. Working capital improved by about $577,131 or 87% which was primarily attributable to an increase in cash proceeds from stock issuances, which was offset, in part, by an increase in accrued expenses and the current portion of notes payable.

 

The decrease in working capital at December 31, 2020 as compared to December 31, 2019 was primarily attributable to a decrease in current assets of $313,846 and an increase in current liabilities of $1,191,748. The net decrease in working capital was primarily related to the decrease in accounts receivable and inventory and an increase in accrued expenses and the current portion of notes payable.

 

A majority of our sales do not require us to take delivery of inventory. Production of the Sky technology and products will be originated upon receipt of FOB (free on board) purchase contracts from customers. Upon the completion of each purchase contract, the finished products will be transported from the manufacturer directly to the ports and loaded on vessels secured by the customer, upon which the products become the property of the customer. Our sales were impacted during the nine months ended September 30, 2021 and 2020 and the years ended December 31, 2020 and 2019 as we executed the liquidation of discontinued inventory as we continued the development of our new patented “Smart” platforms and technologies.

 

Non-GAAP Financial Measures

 

To supplement our consolidated financial statements, which are prepared and presented in accordance with generally accepted accounting principles in the United States of America (“GAAP”), management uses adjusted net income (loss) to evaluate operating and financial performance and believes the measure is useful to investors because it eliminates the impact of certain noncash and/or other items that management does not consider to be indicative of our performance from period to period. Management also believes this non-GAAP measure is useful to investors to evaluate and compare our operating and financial performance across periods, as well as facilitating comparisons to others in our industry, although other companies may calculate this non-GAAP measure differently, which may limit the usefulness of this measures for comparative purposes.

 

We use the non-GAAP financial measure of Adjusted EBITDA, which is defined as net income (loss), plus interest income; interest expense; depreciation and amortization; unrealized derivative gains and losses; non-recurring income and expenses; and stock-based compensation expense. We believe that Adjusted EBITDA helps identify underlying trends in our business that could otherwise be masked by the effect of the expenses that we exclude in Adjusted EBITDA.

 

These non-GAAP measures should not be considered in isolation or as a substitute for, or superior to, financial measures calculated in accordance with GAAP. These non-GAAP financial measures exclude significant expenses and income that are required by GAAP to be recorded in our financial statements and are subject to inherent limitations. Investors should review the reconciliations of these non-GAAP financial measures to the comparable GAAP financial measures that are included below. Investors should not rely on any single financial measure to evaluate our business.

 

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

 

   Nine Months Ended September 30,   Year Ended December 31, 
   2021   2020   2020   2019 
Adjusted EBITDA reconciliation to Net Loss:                    
Net loss   $(3,648,645)  $(5,406,992)  $(9,242,105)  $(16,752,699)
                     
Other Income / (Expense)                    
Stock compensation, common   (570,000)   (1,689,499)   (2,902,981)   (9,278,619)
Stock compensation, options   (258,578)       (2,165,447)   (238,507)
Depreciation and amortization   (63,325)   (69,772)   (106,309)   (107,241)
Interest expense   (425,323)   (370,524)   (515,515)   (490,626)
Other income, loan forgiveness   10,000        257,468     
Gain on exchange   7,886    (542)   408    726 
Gain on debt forgiveness (license)               49,706 
Interest income   36    1,433    1,511    17,494 
Total adjustment   (1,299,304)   (2,128,904)   (5,430,865)   (10,047,067)
                     
Adjusted EBITDA  $(2,349,341)  $(3,278,088)  $(3,811,240)  $(6,705,632)
                     
Net loss per share - basic and diluted  $(0.04)  $(0.05)  $(0.06)  $(0.12)

 

Off Balance Sheet Arrangements

 

We do not have any off-balance sheet arrangements

 

Future Impact of COVID-19

 

The negative impact of the COVID-19 pandemic on companies continues and we are currently unable to assess with certainty the broad effects of COVID-19 on our future business. As of September 30, 2021 and December 31, 2020, we had no material assets that would be subject to impairment or change in valuation due to COVID-19.

 

Critical Accounting Policies

 

Our significant accounting policies are disclosed in Note 2 to our consolidated financial statements for the year ended December 31, 2020. The following is a summary of those accounting policies that involve significant estimates and judgment of management.

 

Use of Estimates

 

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in our financial statements and accompanying notes.

 

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.

 

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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 non-conforming events. Accordingly, actual results could differ significantly from estimates.

 

Fair Value of Financial Instruments

 

Disclosures about fair value of financial instruments require disclosure of the fair value information, whether or not recognized in the balance sheet, where it is practicable to estimate that value. As of September 30, 2021 and December 31, 2020 and 2019, we believe the amounts reported for cash, prepaid expenses, accounts payable, accounts payable – related party, accrued expenses and other current liabilities, accrued interest, notes payable and convertible note payable approximate fair value because of their short maturities.

 

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. ASC Topic 820 established a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurements) and the lowest priority to unobservable inputs (level 3 measurements). These tiers include:

 

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

 

Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable such as quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active; and

 

Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions, such as valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.

 

Stock-Based Compensation

 

Stock-based compensation is accounted for based on the requirements of ASC 718 – “Compensation–Stock Compensation”, which requires recognition in the financial statements of the cost of employee, non-employee and director services received in exchange for an award of equity instruments over the period the employee or director is required to perform the services in exchange for the award (presumptively, the vesting period). The ASC also requires measurement of the cost of employee and director services received in exchange for an award based on the grant-date fair value of the award.

 

Stock-based compensation is measured at the grant date based on the value of the award granted using the Black-Scholes option pricing model based on projections of various potential future outcomes and recognized over the period in which the award vests. For stock awards no longer expected to vest, any previously recognized stock compensation expense is reversed in the period of termination. The stock-based compensation expense is included in general and administrative expenses.

 

Revenue Recognition

 

We account for revenues in accordance with Accounting Standards Update No. 2014-09, “Revenue from Contracts with Customers” (Topic 606).

 

Under Topic 606, revenue is recognized when control of the promised goods or services is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services.

 

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We determine revenue recognition through the following steps:

 

identification of the contract, or contracts, with a customer;

 

identification of the performance obligations in the contract;

 

determination of the transaction price;

 

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

 

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

 

Income Taxes

 

We account for income taxes using the asset and liability method. Under the asset and liability method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. 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 income in the period that includes the enactment date.

 

Recent Accounting Pronouncements

 

Although there are several new accounting pronouncements issued or proposed by the Financial Accounting Standards Board, which we have adopted or will adopt, as applicable, we do not believe any of these accounting pronouncements has had or will have a material impact on our financial position or results of operations.

 

See the notes to the unaudited consolidated financial statements for the nine months ended September 30, 2021 and notes to the consolidated financial statements for the year ended December 31, 2020 included elsewhere in this prospectus for additional discussion regarding recent accounting pronouncements.

 

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BUSINESS

 

Our Mission

 

As electricity is a standard in every home and building, our mission is to make homes and buildings become safe-advanced and smart as the standard.

 

Overview

 

Sky Technologies has a series of highly disruptive advanced-safe-smart platform technologies, with over 60 U.S. and global patents and patent pending applications. Our technologies place an emphasis on high quality and ease of use, while significantly enhancing both safety and lifestyle in homes and buildings. We believe that our products are a necessity in every room in both homes and other buildings in the U.S. and globally.

 

Our first-generation technologies enable light fixtures, ceiling fans and other electrically wired products to be installed safely and plugged-in, into a ceiling’s electrical outlet box within seconds, and without the need to touch hazardous wires. The plug and play technology method is a universal power-plug device that has a matching receptacle that is simply connected to the electrical outlet box on the ceiling, enabling a safe and quick plug and play installation of light fixtures and ceiling fans in just seconds. The plug and play power-plug technology, eliminates the need of touching hazardous electrical wires while installing light fixtures, ceiling fans and other hard wired electrical products. In recent years we have developed prototypes that expand the capabilities of our power-plug product, to include advanced safe and quick universal installation methods, as well as advanced smart capabilities, which are currently in the third and final prototype stage prior to launching. The smart features contained in the final prototype include control of light fixtures and ceiling fans by the SkyHome App, through WIFI, BLE and voice control connections. The SkyHome App will allow scheduling, energy savings eco mode, dimming, back-up emergency light, night light, light color changing and much more.

 

We believe that due to safety, convenience, cost, and time that all hard-wired electrical products, such as light fixtures, ceiling fans and other products, should become plug and play and smart, as the standard, enabling consumers to plug their fixtures and control them through their smart phones at any time.

 

Our second-generation technology, which is in the second stage prototype, is an all-in-one safe and smart advanced platform (the “Smart Sky Platform”) that is designed to enhance all-around safety and lifestyle of homes and other buildings.

 

We believe that our patented advanced, safe and smart home platform technologies will make homes and buildings safer and smart as a standard, in a fraction of the time and cost, as compared to other market products.

 

We believe that our smart home products will enable builders to deliver smart homes as a standard, in the same way they deliver electricity and appliances as a standard.

 

As our products, including our prototype advanced, safe and smart products, can be easily implemented and installed in both existing and new homes and buildings in just minutes, it will save a major part of the cost and time associated with installation of smart home products. As many people spend the majority of time at their homes, we believe that they should have an affordable, easily installed, standard solution to make their homes safe, secured and smart. Similarly to how smartphones serve people as an all-in-one personal smart platform, we believe that our all-in-one Smart Sky Platform will enable every room in homes and other buildings to include a smart platform as a standard.

 

The all-in-one safe-smart-advanced platform technology is an open system that can integrate with both existing and new smart home features, devices, and systems. The advanced platform prototype is designed and built in a way that it can accommodate additional smart home features, enabling the platform to serve as a gateway for safe and smart technologies into rooms/homes, buildings, and that it can act like a “Panama-Canal” that can accommodate other type of software systems, wireless systems, electronic chips and more.

 

Since 2015, we have generated over $29 million in sales from our standard products, which include ceiling fans and light fixtures with our standard “plug and play” feature built in and are described further below under “Products—Our First Product: The Weight Bearing Power-Plug”. We have decided to wind down the sales of our standard products by discontinuing production of light fixtures and ceiling fans that include the older version of our standard Sky Plug & Receptacle in favor of launching our new line of products, which are in the third and final prototype stage prior to launching and include a universal “plug and play” adapter kit, our smart products, which will include smart light fixtures and ceiling fans with our smart “plug and play” features, and our advanced universal Sky Plug & Receptacle. Additional information regarding our new line of products is described below under “Products—Advanced Products” and “—Smart Products.” We elected to do so since we believe that the market has great demand for smart advanced products, and that we will be able to generate significant sales from our new line of advanced and smart products from direct sales as well as from licensing. Our first generation of advanced and smart products are in the third and final prototype stage prior to launching. We expect to launch our universal “plug and play” adapter kit and our smart universal adapter kit, light fixtures, and ceiling fans, as well as the SkyHome App to control the smart features, in the first half of 2022. We expect to launch the all-in-one Smart Sky Platform in the second half of 2022. 

 

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Safety

 

We believe that safety is a necessity and the top priority in all aspects of life. Therefore, our technologies and products emphasize human safety, home, building and property safety and security, while combining safety features with high demand smart home features. We believe our products should contribute to the elimination of many cases of hazardous incidents, including ladder falls, electric shock/electrocutions, fires, carbon monoxide poisonings, injuries and deaths, as management believes that our products will result in easier installment processes and enhance the use of life saving products such as smoke detectors, carbon monoxide detectors, and emergency lights, among other products. The Smart Platforms second generation prototype incorporates “plug and play” technology, which eliminates the need to touch wires during the later plug-in install, replacement and maintenance, and cleaning and, accordingly, could result in reduced incidents of electrical shocks and fires resulting from faulty wiring. The installation of our Smart Platforms, and retrofitting of electrical services does not require the services of a licensed electrician, but does not preclude the services of a licensed electrician. As more individuals engage in do-it-yourself (DIY) lighting projects, using our products rather than traditional lighting products could reduce incidents of incorrect wiring, shocks, injury and even death. In addition, we believe installing our products will allow installers to spend less time on a ladder during initial installation. Installers often wire light fixtures and fans while also holding such fixture or fan; with our products, including the Smart Platforms, the initial receptacle installation will be completed on the ladder and, afterwards, the fixture can simply be plugged into place, resulting in a faster and, we believe, much safer process, as installers can focus on wiring without also holding potentially heavy or breakable fixtures. Further, the Smart Platforms will incorporate a hard-wired smoke detector with battery back-up and a carbon monoxide monitor, which we believe could reduce injuries and deaths from fire and carbon monoxide poisoning.

 

Products

 

Our products are designed to improve all around home and building safety and lifestyle. While we have developed and created working prototypes of our advanced and smart products, as described below, we are continuing to refine the product prototypes and expect to begin commercial manufacturing and marketing in the first half of 2022 for the advanced products and the smart universal power-plug, ceiling fans and lighting products and the second half of 2022 for the Smart Sky Platform.

 

Our First Product: The Weight Bearing Power-Plug

 

Our first patented technology was the Power-Plug, a weight bearing power plug that acts as a safe and quick installation device, designed for “plug and play” installation of weight bearing electronics, such as light fixtures, ceiling fans and other electrical products, into ceiling electrical outlet boxes.

 

Our patented technology consists of a fixable socket and a revolving plug (the Power-Plug) for conducting electric power and supporting an electrical appliance attached to a wall or ceiling. The socket is comprised of a non-conductive body that houses conductive rings connectable to an electric power supply through terminals in its side exterior. The Power-Plug, which is comprised of a non-conductive body that houses corresponding conductive rings, attaches to the socket via a male post and can feed electric power to an appliance. The Power-Plug also includes a second structural element allowing it to revolve with a releasable latch that, when engaged, provides a retention force between the socket and the Power-Plug to prevent disengagement. The socket and Power-Plug can be detached by releasing the latch, disengaging the electric power from the Power-Plug. The socket is designed to replace the support bar incorporated in electric junction boxes, and the Power-Plug can be installed in light fixtures, ceiling fans, wall sconce fixtures and other electrical devices and products. Once installed, the socket can remain affixed to the junction box, enabling any electronic fixture installed with the Power-Plug to be connected and/or removed in seconds. The combined socket and Power-Plug technology are referred to throughout this prospectus as the “Sky Plug & Receptacle”.

 

We have previously sold products with the Sky Plug & Receptacle built in, including ceiling fans and light fixtures. We have decided to wind down the sales of our standard products by discontinuing production of light fixtures and ceiling fans that include the older version of our standard Sky Plug & Receptacle in favor of launching our new line of products, which are in the prototype stage and are described below. 

 

Advanced Products

 

Sky – Universal Power-Plug & Receptacle: Our universal “plug and play” Sky Plug & Receptacle technology is comprised of two devices. The first device is a male Power-Plug Retrofit Kit, which can be easily embedded in the base of light fixtures and ceiling fans. The second device is a Ceiling Receptacle, which can be connected to a ceiling outlet box. After a one-time installation of the Ceiling Receptacle to a ceiling outlet box, a light fixture or ceiling fan that includes the Power-Plug Retrofit Kit can be plugged into the Ceiling Receptacle within seconds. The Universal Power-Plug & Receptacle should contribute to the elimination of hazardous incidents in homes and buildings including ladder falls, electric shock/electrocutions, fires, injuries, and deaths, etc. We expect to begin manufacturing and marketing, and to commercially launch, our new universal power plug in the first half of 2022.

 

Smart Products

 

SkyHome App: Our proprietary SkyHome Application works with both iPhones and Android phones. The SkyHome App controls products through WIFI and BLE, and is designed to control its products through additional communication methods as needed. The SkyHome App controls various products, features and specifications that include, scheduling, controlling, voice control, safety features, security features, lifestyle features, sound, lights, dimming, emergency back-up battery and much more. We expect to launch products that will be controlled by our SkyHome App in the first half of 2022, as described below.

 

Sky Smart - Universal Power-Plug & Receptacle: Our Sky Smart Plug & Receptacle system contains two devices. The male Power-Plug Device which includes a smart electronic board. The male Smart Power-Plug comes as a Retrofit Kit, that can be simply embedded to the base of light fixtures and ceiling fans, enabling them to become both Plug and Play and Smart. The second device is a Ceiling Receptacle that can be simply connected on to a ceiling outlet box. After a one-time simple installation of the Ceiling Receptacle to a ceiling outlet box, a light fixture or ceiling fan that includes the male Smart Plug Retrofit Kit can be plugged into the Ceiling Outlet Receptacle within seconds. Our Smart Power-Plug is controlled by our proprietary SkyHome App or through voice control, it is an open system that can integrate with other smart home devices and systems. Our Smart Power-Plug is connected through WIFI and BLE, includes numerous smart features, including scheduling, energy saving-eco mode, dimming, back-up emergency light, night light, light color changing and more. We believe that, due to safety, convenience, cost and time, all hard-wired electrical products, such as light fixtures and ceiling fans should become plug and play and smart, as the standard, enabling consumers to plug their fixture and control them through their smart phones at any time. The Smart Universal Power-Plug & Receptacle should contribute to the elimination of hazardous incidents in homes and buildings including ladder falls, electric shock/electrocutions, fires, injuries, and deaths, etc. This product is in the third and final prototype stage prior to launching, and we expect to begin manufacturing and marketing, and to commercially launch, our universal plug in the first half of 2022.

 

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Sky - Smart Plug and Play Ceiling Fans: Our line of high-end smart plug and play ceiling fans can be installed to our matching ceiling receptacle within seconds. Our smart ceiling fans incorporate advanced technologies, have unique modern designs, and are controlled by our proprietary SkyHome App or through voice control, it is an open system that can integrate with other smart home devices and systems. Our Smart Power-Plug is connected through WIFI and BLE, includes numerous smart features, including scheduling, energy saving-eco mode, dimming, back-up emergency light, night light, light color changing and more. We believe that, due to safety, convenience, cost and time, all hard-wired electrical products, such as ceiling fans should become plug and play and smart, as the standard, enabling consumers to plug their fixture and control them through their smart phones at any time. The Smart Plug and Play Ceiling Fan should contribute to the elimination of hazardous incidents in homes and buildings including ladder falls, electric shock/electrocutions, fires, injuries, and deaths, etc. This product is in the prototype stage, and we expect to begin manufacturing and marketing, and to commercially launch, our smart ceiling fans in the first half of 2022.

 

Sky - Smart Plug and Play Lighting: Our line of high-end Smart Plug and Play light fixtures can be installed to our matching ceiling receptacle within seconds. Our smart light fixtures incorporate advanced technologies, have unique modern designs, and are controlled by our proprietary SkyHome App or through voice control, it is an open system that can integrate with other smart home devices and systems. Our Smart Power-Plug is connected through WIFI and BLE, includes numerous smart features, including scheduling, energy saving-eco mode, dimming, back-up emergency light, night light, light color changing and more. We believe that, due to safety, convenience, cost and time, all hard-wired electrical products, such as light fixtures should become plug and play and smart, as the standard, enabling consumers to plug their fixture and control them through their smart phones at any time. The Smart Plug and Play Lighting should contribute to the elimination of hazardous incidents in homes and buildings including ladder falls, electric shock/electrocutions, fires, injuries, and deaths, etc. This product is in the third and final prototype stage prior to launching, and we expect to begin manufacturing and marketing, and to commercially launch, our smart lighting in the first half of 2022.

 

Sky – All-In-One Smart Platform: As most people spend a majority of time in their homes, we believe that they should have an easy solution to make their homes safe, secured, and smart in a simple way and as the standard. We believe that our patented advanced-safe-smart home platform technologies will make homes and buildings safe, have numerous technology features, and smart as a standard, instantly, in a fraction of time and cost, compared to other market products. Our all-in-one Advanced-Safe-Smart Platform is designed to enhance the all-around safety and lifestyle of homes and buildings and can be easily implemented and installed to the ceiling receptacle in both existing and new homes and buildings within minutes. Our smart platform includes distinctive advanced smart and safety technologies, have unique modern designs and are controlled by our proprietary Sky-Home App or through voice control. It is an open system that can integrate with other smart home devices and systems.

 

As smart phones serve people as an all-in-one personal smart platform, we believe that our all-in-one smart platform technology enables every room in homes and buildings to have a smart platform as a standard. Our smart platform is connected through WIFI and BLE, includes numerous of smart and safety features, including a smart smoke detector, a smart CO detector, time scheduling, temperature sensor, humidity sensor, WIFI extender, energy saving-eco mode, high quality speakers, back-up battery that can power back-up internet and an emergency light, as well as dimming, night light, light color changing and more. The platform’s electrical power and transformer combined with the size of our platform which represents vast electronic “Real-Estate” in terms of today’s technology driven by microchips, enables the platform to accommodate a significant amount of software as well as electronic microchips, while the unique ceiling location of the platform significantly enhances the performance of all platform’s features, including WIFI and BLE.

 

The Smart Platform is inconspicuous to the décor. It is designed to install over existing ceiling electrical outlet boxes while allowing any pre-existing fixture to reconnect to the same box utilizing our Retrofit Kits. This innovation gives us access to the best location for the gathering and distribution of electronic signals, virtually unlimited power for our low-voltage safety and smart features, and a vast amount of electronic real estate.

 

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This open-system Smart Platform will seamlessly integrate unrelated safe and smart products into a single, spatially designed unit whose functionality is controlled by an all-in-one app, the SkyHome App. The Smart Platform will eliminate the need for installation of numerous stand-alone devices and their integration into a working unit. 

 

The Smart Platform’s location on the ceiling significantly advances smart home products’ performance, including the speed and range of both Wi-Fi and Bluetooth, as well as the performance of sensors and alarms.

 

The adoption of the Smart Platform should contribute to the elimination of hazardous incidents in homes and buildings including ladder falls, electric shock/electrocutions, fires, carbon monoxide poisonings, injuries, and deaths, etc.

 

Installation takes only minutes and fixtures previously hung from that location can still be plugged into the Smart Platform.

 

This product is in the second generation stage prototype, and we expect to begin manufacturing and marketing, and to commercially launch, our all-in-one Smart Platform in the second half of 2022. 

 

Sustainability

 

We aim to provide safe and sustainable solutions to consumers, who increasingly consider sustainability and energy efficiency when purchasing products. We believe that creating sustainable products and streamlining our operations drives efficiency, innovation and, ultimately, long-term value-creation. In designing and improving our products, we consider and apply sustainability strategies, as appropriate. For example, our products’ features include an energy savings eco mode, which can help users reduce their energy consumption, and we generally use LED lighting in our ceiling fans and light fixtures, which is more energy-efficient than traditional lighting products.

 

Cyber Security

 

We have implemented measures and protocols in order to ensure that our users’ information is safe and fully protected. We use high level of cyber security measures and protocols to ensure that our software, technologies, servers, products, platform, and devices are all protected to prevent from any type unauthorized, or illegal access or interference to our software, technologies, servers, products, platforms, and devices.

 

Our products, platforms and devices communicate over MQTT and are encrypted over Transport Layer Security, with each individual product, platform and device having its own set of certificates, keys, and universally unique identifiers, which ensures that each device can only communicate with its own topic. This ensures that even in extreme cases of illegally gaining control over a specific device, it will not affect any other devices.

 

Each login to the platform generates the user a temporary token that grants access to the services for a limited amount of time, this ensures that there is no permanent access token that can be used by hackers for unauthorized access. Each token has permissions to access only the user’s resources.

 

Our solutions are designed in a way that the user will need to conduct a restricted set of permissions, thus minimizing the risk of unwanted users gaining control over other locations.

 

Sky Plug & Receptacle NEC Code

 

The NEC (National Electrical Code) is the U.S. electrical safety building code, and is the benchmark for safe electrical design, installation, and inspection to protect people and property from electrical hazards. It has been adopted in some form in all 50 states in the United States and is intended to improve safety in U.S. homes and buildings.

 

Based on the safety aspects of the Sky Plug & Receptacle, it was voted into the NEC and is represented by 10 different segments in the NEC Code Book. The Company has provided data relating to safety aspects of its receptacle as to electrocutions, fires and ladder falls to NEC.

 

One of the key votes and segments relating to our technologies in the NEC Code Book was the change of the definition of “receptacle” in the Code Book, which we believe is one of the most significant additions to the NEC Code in the past 120 years. The NEC leads the United States and globally with respect to electrical safety standards; as such, we believe the reputable standards of the NEC can assist with the adoption of our technology in additional countries.

 

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Pursuant to these new NEC provisions, the Sky Plug & Receptacle enables builders to expedite and obtain a Certificate of Occupancy without the need to install a light fixture to the ceiling.

 

Intellectual Property

 

Developing and maintaining a strong intellectual property position is one of the most important elements of our business. We rely on a combination of patents, copyright, trademarks and trade secret laws, as well as confidential procedures and contractual provisions, to protect our proprietary technology and our brands. We enter into confidentiality and proprietary rights agreements with our employees, consultants and other third parties. We have sought, and will continue to seek, patent protection for our technology and for improvements to our technology, as well as for any of our other technologies where we believe such protection will be advantageous.

 

We protect the Sky Technologies intellectual property through various aspects and strategies including broad and particular intellectual property claims. We have over 60 U.S. and global patents and patent applications, including in China, India, Europe as well in other countries around the world. Fifteen patents have been issued. These patents and patent applications protect different aspects of our technologies. We sought intellectual property protection of the Sky Technology in China due to our current manufacturing operations and prospective sales in China’s market, and we sought protection in India in anticipation of future growth into India’s developing market, both with respect to the sales of the Sky Technology and our potential operations. As of December 31, 2021, in the U.S., we owned seven issued patents, which expire from 2036 to 2038, and six pending or published but not yet issued patents. Outside of the U.S., we own eight issued patents, which expire from 2026 to 2039, and 46 pending or published but not yet issued patents. We intend to diligently maintain and vigorously defend the intellectual property of Sky Technologies, and to actively and continuously enhance our patent protections in the U.S. and globally.

 

The issued patents are directed to various aspects our platform technologies, including our smart and standard plug and play products, as well as our safety and smart platform technologies. As further innovations are developed, we intend to seek additional patent protection to enhance and maintain our competitive advantage. Additionally, we have submitted 10 trademark applications, seven of which have been issued and three of which are pending.

 

GE - General Electric Agreements

 

We have two U.S. and global agreements with GE related to our products.

 

The first agreement is a U.S. and Global Trademark Agreement dated June 15, 2011 (as later amended), which expires November 30, 2023 and is generally renewed for five-year periods. Pursuant to such agreement, the Company may use the GE brand logo on certain products, including plug and play smart and standard ceiling fans and Sky’s SQL standard and smart plug and play devices. We have exclusive U.S. and global rights, including Canada, Asia, Europe, China, Australia, New Zealand and India, subject to a mutually agreed to commercialization plan, to market plug and play smart and standard ceiling fans and Sky’s SQL standard and smart plug and play devices under the GE brand. GE will assist us with manufacturing standards, audit of factories, audit of materials, and quality control under “Six Sigma” guidelines, as well as with public relations for products and other.

 

The second agreement is a U.S. and Global Licensing and Master Service Agreement dated June 14, 2019. The agreement expires on June 14, 2024 and includes automatic renewal provisions. Pursuant to such agreement, GE’s licensing team has the rights to exclusively license Sky’s Standard and Smart plug-and-play products in the U.S. and worldwide. Pursuant to the agreement, we expect 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, we 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.

 

On June 15, 2011, we entered into the License Agreement with GE, pursuant to which we have the right to market certain ceiling light and fan fixtures displaying the GE brand. We and GE subsequently amended the License Agreement, including on April 17, 2013, August 13, 2014, September 25, 2018, May 2019 and December 1, 2020. The License Agreement imposes certain manufacturing and quality control conditions that we must maintain in order to continue to use the GE brand. The License Agreement is nontransferable and cannot be sublicensed. Various termination clauses are applicable to the License Agreement; however, none were applicable as of September 30, 2021 and December 31, 2020.

 

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On August 13, 2014, we entered into a second amendment to the License Agreement pertaining to our royalty obligations. Under the initial terms of the amendment, we agreed to pay to GE a minimum trademark license fee of $12.0 million by November 30, 2018 (the “Initial Royalty Obligation”) for the rights assigned in the original contract. The amendment provided that, if we did not pay to GE royalties equal to the Initial Royalty Obligation over the term of the License Agreement, we would owe the difference to GE in December 2018.

 

We are expanding our relationship with GE to collaborate on mutual capabilities, and in December 2020, we entered into the current amendment to the License Agreement. The amendments following the second amendment expanded our product range, including smart, and added additional global territory rights. The License Agreement has been extended for an additional five years and expires on November 30, 2023. Pursuant to the third amendment, entered into September 2018, the approximate remaining $10.0 million Initial Royalty Obligation that was due on November 30, 2018 was waived, and we agreed to pay GE an aggregate amount of $6.0 million, consisting of three annual installments of $2.0 million to be paid to GE in each of December 2018, 2019 and 2020. In December 2020, we entered into the current amendment, which restructured the royalty payment obligations due of approximately $4.4 million, plus $0.7 million in interest. We agreed to pay a total of $5.1 million to GE in quarterly installments through December 2023, including $100,000 due December 2020, an aggregate of $500,000 due in four equal installments in 2021, an aggregate of $1.2 million due in four equal installments in 2022 and an aggregate of $3.3 million due in four equal installments in 2023 (the “Minimum Payments”). In the event the Company receives significant funding rounds of at least $50.0 million in funding, it is required to use a portion of such funding to pay certain amounts to GE. The Minimum Payments will be in addition to the royalty payments made to GE during the respective year, as set forth below.

 

Royalty payments are due quarterly, using a December 1 – November 30 contract year and based upon the prior quarter’s sales. Royalty payments will be paid from sales of GE branded product subject to the following repayment schedule:

 

Net Sales in Contract Year  Percentage of Contract Year Net Sales owed to GE 
$0 to $50,000,000   7%
$50,000,001 to $100,000,000   6%
$100,000,000+   5%

 

We made principal payments of $375,000 plus royalty payments of $5,619 for the nine months ended September 30, 2021. As of September 30, 2021 and December 31, 2020, the outstanding balance was $3,963,000 and $4,338,000, respectively. Minimum future payment obligations are approximately as follows:

 

Year  Minimum Obligation 
2021  $125,000 
2022   1,200,000 
2023   2,638,000 
Thereafter    
Total principal payments  $3,963,000 

 

Leadership and Talent

 

Our management members include leading executive from various industries and have joined us as they believe in our vision, technology, and strategy. Many of our key personnel are employed pursuant to an employment agreement or a consulting agreement, pursuant to which many of them, including board members have invested in the Company and agreed to be compensated primarily in stock and stock options.

 

As of December 31, 2021, we had 31 total employees and consultants, 26 of which are full time. We also employ independent contractors to support our operations. We have never had a work stoppage, and none of our employees are represented by a labor union. We have not experienced any work stoppages and consider our relations with our employees to be good. We expect to continue to expand our staff and team of engineers to develop the Sky smart technologies.

 

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Key Management Members

 

Rani R. Kohen, Executive Chairman. Rani R. Kohen has founded the Company and invented our technologies. Mr. Kohen is a businessman, entrepreneur, and inventor. 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, the continuity that he brings with his advanced business strategies, he will continue to move us forward towards achieving our goals.

 

Steven M. Schmidt, President. Steven M. Schmidt is the former Chief Executive Officer of ACNielsen Corporation and former President, International of Office Depot International, Inc.

 

John P. Campi, Chief Executive Officer. John P. Campi is the former Chief Procurement Officer and Executive Vice President of Chrysler, Senior Vice President of Procurement and Vendor Management for The Home Depot, Inc. and Chief Procurement Officer and Vice President of DuPont Global Sourcing and Logistics.
   
 Marc-Andre Boisseau, Chief Financial Officer. Marc-Andre Boisseau serves as our Chief Financial Officer. Marc-Andre Boisseau has served in finance roles for several public and private companies, including as Corporate Controller and Principal Accounting Officer of Citrix Systems, Inc. Mr. Boisseau serves as the Company’s full-time Chief Financial Officer since January 1, 2022. Mr. Boisseau is a certified public accountant.

 

Patricia Barron, Chief Operations Officer and Code Team Senior Member. Patricia Barron was previously President and owner of LTG Services, Inc., an electrical safety consulting company. LTG managed technical review of lighting and ceiling fan projects for Underwriters Laboratories (“UL”) and managed UL safety testing for world fans.

 

Mark Earley, President of the Code Team. Mark Earley joined the Company, as President of the Code Team. Mr. Earley is a world leading electrical engineer and former head of the NEC (National Electrical Code) and Chief Electrical Engineer. After leading the NEC for 35 years, he retired in 2019 and joined Sky to lead its U.S. and Global code team. Mr. Earley is still a leading member of the IEC (International Electrical Commission), the Canadian Electrical Code, the UL Electrical Council and the U.S. National Committee.

 

Chuck Mello, SVP of the Code Team. Chuck Mello joined the Company in 2019 as SVP of the Code Team. Mr. Mello is the former International President of the IAEI (International Association of Electrical Inspectors), where he is still an instructor and author. He was formerly with UL as a Global Field Evaluation Program Manager.

 

Amy Cronin, Executive Director Codes and Standards. Ms. Cronin is a former NFPA (NEC) Executive Leader, managing the Department of Codes and Standards, and she was responsible for more than 300 code decisions including the NEC (National Electrical Codes).

 

Mark Wells, President of Lighting. Mark Wells, former General Manager of Consumer Lighting for GE, joined the Company in August 2016 and currently serves as our President of Lighting.

 

John Poole, Vice President of Sales. John Poole joined the Company in 2017 as Vice President of Sales. He formerly served in a variety of sales management roles at GE, including as General Manager of Business Development for European Retail and General Manager for GE Lighting’s Target and Home Depot accounts.

 

Steve Briggs, Senior Advisor and President of Product Development. Steve Briggs joined the Company is 2017 as Senior Advisor and President of Product Development. He previously served in a variety of roles for GE Lighting, including as General Manager of Global Product Lighting.

 

Eliran Ben-Zikri, Chief Technology Officer and GM of Sky’s Israeli Office. Eliran Ben-Zikri joined the Company in 2019 as Chief Technology Officer and GM of Sky’s Israeli Office. He served in one of the most elite computer units of the Israeli Defense Force and has over 10 years of experience in the technology and cloud technology industry, previously holding senior positions in leading Israeli tech companies, including eToro and SimilarWeb. He has a vast experience in the Internet of Things, data collection, data processing, analytics, security, cloud, and production.

 

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Michael Perrillo, Vice President Global Sales. Michael Perrillo is the former Chief Executive Officer of Design Solutions International. He joined the Company as a full-time consultant to enhance and expand our sales objectives, particularly toward construction/home builders, hotels and other sales channels that we are targeting.

 

Jonathan Globerson, Vice President Design and Marketing. In 2016, Jonathan Globerson, Vice President Design and Marketing, joined the Company. He served in the most elite counter terrorism unit in the Israeli Defense Force (Sayeret Matkal) as head of the technology department, is an international award-winning product developer, former lead product designer of augmented reality and virtual reality for the 5G team for Verizon and founder of GloberDesign, a global product design and engineering firm.

 

David Usha, General Manager China. David Usha has over 25 years of experience managing production operations in China, Poland, West Africa, Russia and Taipei, including as General Manager of Omegaplast Polska, a Polish plastic devices company, and General Manager of L’Oréal (Tel Aviv).

 

Julio Plutt, CPA, Controller. Julio Plutt, CPA, a consultant and business strategist with OneTHinc, serves as our Controller and is a former auditor with KPMG.

 

Our human capital resources objectives include, as applicable, identifying, recruiting, retaining, incentivizing and integrating our current and future employees. We encourage and support the growth and development of our employees. Continual learning and career development is advanced through ongoing performance and development conversations with employees, and reimbursement is available to employees for seminars, conferences, formal education and other training events employees attend in connection with their job duties.

 

Our core values of accountability, openness and integrity underscore everything we do and drive our day-to-day interactions. The safety, health and wellness of our employees is a top priority. The COVID-19 pandemic has presented a unique challenge with regard to maintaining employee safety while continuing successful operations. Through teamwork and the adaptability of our management and staff, we were able to transition, over a short period of time, a majority of our corporate office employees to effectively working from remote locations on a full-time basis, with others working both remotely and in the office on a hybrid basis, and also to ensure a safely-distanced working environment for employees who remain in our facilities.

 

Business Strategy

 

Our business strategy is to enhance all around safety and advance smart living lifestyle in homes and other buildings.

 

Following commercial launch of our advanced and smart products, we plan to educate retail and commercial consumers about our products through a coordinated public relation campaign that will cover the safety aspects of our products and all the related hazardous incidents and property damage that our products can prevent, including ladder falls, electric shock/electrocutions, fires, carbon monoxide poisonings, injuries, deaths and more.

 

We will also educate on all our advanced smart technology features.

 

Lead and Seed Strategy: We expect to lead by selling our highly disruptive line of products through a variety of channels as well as seed our products through licensing to various industries.

 

  Lead Through Direct Sales: We expect to sell our products through various representatives to online customers, builders, rental properties, hotels, big box retail, OEM customers and more. We expect to sell our products to personal consumers primarily through direct sales via our website, to large retailers, distributors and dealers, and through warehouse programs. We plan to rely primarily on product distribution arrangements with third parties and expect that our multi-channel sales strategy will evolve and expand in the future. We expect our primary customers to be retail consumers, retail showrooms, builders residential/commercial, hotels, OEM and licensing.
     
  Seed Through Licensing: After our public relation campaign and our official product launch, we expect to license a variety of our standard and smart products to companies in various industries, including electrical companies, lighting and ceiling fan companies, as well as smart home companies.

 

We intend to expand our sales and marketing operations and activities and intend to build strong customer relationships and expand our brand awareness. We can provide no assurance that we will be able to successfully expand our operations or activities, gain market awareness or acceptance of our products, or achieve our expectations described above.

 

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Product Usage

 

Our products and technologies can be used in new and existing homes and buildings, including by builders, rental properties, hotels, cruise ships, elder living facilities, schools, hospitals, offices, commercial, and retail. We provide a one-year full performance warranty on all of our products, as well as part replacements. We intend to provide extended warranty coverage plans in the future.

 

Our Opportunity

 

Based on the significance of the safety aspects and lifestyle features of our products, we believe that our products are a necessity in most rooms, homes, and other buildings, both in the U.S. and globally, and that they can help prevent most of related hazardous incidents in homes and buildings, including ladder falls, electric shock/electrocutions, fires, carbon monoxide poisonings, injuries, and deaths. Therefore, we believe our product is a necessity in rooms, homes and other buildings.

 

We believe that our series of highly disruptive advanced-safe-smart platform technologies are a necessity as they are expected to disrupt and positively influence various industries, both in the U.S. and globally.

 

  Lighting Industry: We believe that due to ease of the installation, time savings, cost savings on installations and the safety aspect of our product, our product provides a competitive advantage within the light fixture, ceiling fan and smart home industries.      
     
    We believe that all light fixtures should become plug and play, smart and controlled by an app as a standard, and that light fixtures should be installed to the ceiling within seconds, safely and without the need to touch dangerous electrical wires. Our product is intended to help prevent most of related ladder falls, electric shock/electrocutions, fires, carbon monoxide poisonings, injuries, and deaths.
     
  Ceiling Fan Industry: We believe that due to the ease of installation, time savings, cost savings on installations and the safety aspect of our product, our product is a necessity for the ceiling fan industry.     
     
    We believe that all ceiling fans should become plug and play, smart and controlled by an app as a standard, and that ceiling fans should be installed to the ceiling within seconds, safely and without the need to touch dangerous electrical wires. Our product is intended to help prevent most of related ladder falls, electric shock/electrocutions, fires, carbon monoxide poisonings, injuries, and deaths.
     
  Smart Home Industry: We believe that due to ease of the installation, time savings, cost savings on installations and the safety aspect of our product, our product is a necessity for the smart home industry.     
     
    We believe that homes and buildings should become safe and smart as a standard. Our Advanced All-In-One Safe-Smart Platform enables rooms, homes, and buildings to become safe and smart instantly.
     
    Our Advanced Smart Platform significantly enhances smart home products’ performance, including the speed and range of both Wi-Fi and Bluetooth, as well as the performance of sensors and alarms. We believe that widespread adoption of the Smart Platform should contribute to the elimination of most related hazardous incidents in homes and buildings including ladder falls, electric shock/electrocutions, fires, carbon monoxide poisonings, injuries, and deaths. Therefore, we believe our product is a necessity in rooms, homes, and buildings.   
     
    Our Advanced All-In-One Safe-Smart Platform can be used in existing homes and buildings, by builders, rental properties, hotels, cruise ships, elder living facilities, schools, hospitals, offices, commercial, retail and other.   

 

We intend to launch our new universal power plug, our SkyHome App, and our smart universal plug, as well as the smart ceiling fans and lighting fixtures containing such plug, in the first half of 2022 and our all-in-one Smart Platform in the second half of 2022. Bringing our products to market will require us to take certain steps, including, but not limited to, the following:

 

  Manufacturing: While we have manufactured and sold our prior products, and intend to continue to use the third-party manufacturers with which we have an ongoing relationship, we have not yet begun manufacturing our new advanced or smart products. We expect it may take approximately 90 days to complete manufacturing of our new universal power plug and/or our smart universal plug after we place an order. However, it may take longer than expected due to, among other things, difficulties finding suppliers, shipping delays resulting in late deliveries of necessary supplies and materials, and chip shortages.
     
  Marketing and Public Relations: We will need to gain brand awareness and attract customers. In connection with our product launch, we plan to educate retail and commercial consumers about our products through a coordinated public relation campaign that will cover the safety aspects of our products and all the related hazardous incidents and property damage that our products can contribute to preventing, as well as our advanced smart technology features. We currently rely, and plan to rely primarily, on product distribution arrangements with third parties. We expect to enter into additional sales, distribution and/or licensing agreements in the future, and we may not be able to enter into these agreements on terms that are favorable to us, if at all. We may also need to hire additional sales personnel.
     
  Government Approval: While we have received a variety of final electrical code approvals, including UL, United Laboratories for Canada (cUL) and Conformité Européenne (CE), and 2017 and 2020 inclusion in the NEC Code Book, we may need or desire to obtain additional UL, cUL or CE certifications for new product configurations, which may increase the time and costs to complete our product launches. In addition, we may be unable to obtain new certifications within a reasonable time, or at all.

 

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Expected Revenue Stream

 

We believe our products will enable us to access a global market with multiple revenue streams, including:

 

Global market with numerous potential product applications

 

Product sales

 

Royalties/Licensing

 

Subscription model

 

Monitoring services

 

Sale of product and licensing rights to additional countries

 

Royalties from the Sky Plug & Receptacle. Management has agreed to license products in the U.S. and globally through the efforts of its GE licensing and trademark agreements. We anticipate we will also license our smart technologies products currently in development.

 

Selling/Licensing Country Rights. Management is considering selling and licensing marketing rights to certain countries in exchange for payment and on-going royalties.

 

Product Sales. We currently generate revenue from our product sales, and management will strive to achieve strong market penetration worldwide for our current products and products in development. We have previously sold our standard products in the United States, Canada and Mexico, and expect to begin selling our new smart products in these markets in 2022. We intend to expand our sales footprint in certain countries in Latin America, Europe and Asia. We may be unable to gain market acceptance in such markets and cannot provide any assurance that we will be successful in our efforts to expand our market reach.

 

Subscription & Monitoring Services. Our future plans include offering subscription services as part of our Smart Sky Platform, including, among other services, communications, fire alarms, home intrusion alerts, emergency response services and monitoring services. Our smart platform will include, among other features, a smart smoke detector, a smart carbon monoxide detector, and a WIFI extender. We intend to expand our operations to enable us to provide services relating to these functions, including high-speed internet services, monitoring systems designed to sense movement, smoke, fire, carbon monoxide, temperature, and other environmental conditions and hazards, monitor home access and visitors and address personal emergencies such as injuries and other medical emergencies. We intend to market such services to homeowners and other types of facilities, including rental properties, hotels, cruise ships, elder living facilities, schools, hospitals, offices, commercial, and retail. Our ability to provide such services will depend on a variety of factors, including, but not limited to, subscriber interest and financial resources, any applicable licensing and regulatory compliance, our ability to manage our anticipated expansion and to hire, train and retain personnel, and general economic conditions. We may partner with other businesses to provide such services. We expect to begin providing such services in 2023, but cannot provide any assurance that we will be able to do so.

 

Our History

 

We began as Safety Quick Light LLC in 2004 and started developing the Sky Plug & Receptacle technology in 2007 for installation of light fixtures and ceiling fans during manufacturing and as a Retrofit Kit for installing the Sky Technology in existing light fixtures and ceiling fans. Historically, we have sold over hundreds of thousands of units of the Sky Plug & Receptacle technology through original equipment manufacturing and through other channels to lighting manufacturers and retailers who installed the Sky Plug & Receptacle technology into their lighting fixtures for sale at retail stores. We also sold, directly to retailers, approximately hundreds of thousands of Sky Plugs & Receptacles embedded with ceiling fans.

 

Since our inception, we have sold hundreds of thousands of units of our standard Sky Plug & Receptacle. Since 2015 we generated over $29 million in sales. We have wound down our standard product sales by discontinuing production of light fixtures and ceiling fans that include the older version of our standard Sky Plug & Receptacle, in favor of licensing our product and developing our Smart Power-Plug and Smart Sky Platform technologies.

 

We hold over 60 U.S. and global patents and patent applications and have received a variety of final electrical code approvals, including UL, United Laboratories for Canada (cUL) and Conformité Européenne (CE), and 2017 and 2020 inclusion in the NEC Code Book.

 

Third-Party Manufacturing and Suppliers

 

Our business model entails the use of third-party manufacturers to produce the Sky Technology product. The manufacturers currently used by us are located in China and, with respect to products that bear the GE logo, as required by the Licensing Agreement with GE, such manufacturers must be approved by GE to ensure certain quality standards are met. To further ensure that quality specifications are maintained, we maintain an office in the Guangdong province in China that is staffed with GE trained auditors who regularly inspect the products that are being produced by third-party manufacturers.

 

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Raw materials used in our products include copper, aluminum, zinc, steel, acrylonitrile butadiene styrene (ABS) plastic and wood. We also purchase integrated circuit chip sets or other electronic components from third-party suppliers or rely on third-party independent contractors, some of which are customized or custom made for us. While we have experienced shortages in obtaining necessary materials, including zinc, copper and steel, as well as integrated circuit chips to be used in our products, we have been able to make other arrangements and find additional suppliers as necessary. With respect to circuit chips, we believe we have obtained a sufficient number to manufacture our products by the anticipated launch date. Going forward, we believe we can obtain more chips and other materials as needed within a reasonable time period and may be able to replace difficult to acquire components with different products or modify our design if necessary

 

Our principal suppliers are Mei Pin Metal & Electrical Co., Ltd (Guangdong, China), Siterwell Electronics Co., Ltd (Zhejiang, China), Zhongshan Paragon Source Lighting Co., Ltd. (Noble) (Zhongshan, Guangdong, China), Artisan Industrial Co., Ltd. (Jiangmen, Guangdong, China) and Youngo Limited (Aircool) (Huizhou City, Guangdong, China).

 

Competition

 

We believe our technologies are highly disruptive and with an edge compared to other market technologies. Our competitors vary based on our products, market, and industry.

 

Our main competitors for our Universal Power Plug and Play, Sky Plug & Receptacle product are: To the best of our knowledge we do not have direct competition at this point to Universal Power Plug and Play, Sky Plug & Receptacle product, although all lighting and ceiling fan manufacturers are potential competitors.

 

Our main competitors for our Smart Universal Power Plug and Play Sky Plug & Receptacle product are: To the best of our knowledge we do not have direct competition at this point to Smart Universal Power Plug and Play Sky Plug & Receptacle product, although all lighting and ceiling fan manufacturers are potential competitors.

 

Our main competitors for our Smart Plug and Play Light Fixture products are: To the best of our knowledge we do not have direct competition at this point to our Smart Plug and Play Light Fixtures, although there are lighting manufacturers that have smart lights that are controlled through smart wall switches/app or other, including companies such as Casainc, Global Electric, Designers, Minca, Fountain, Enbrighten, NBG, Minka, Hampton Bay and other. To the best of our knowledge there are no other light fixtures that have an all-in-one combination of light fixtures that have both plug and play and smart.

 

Our main competitors for our Smart Plug and Play Ceiling Fan Products: To the best of our knowledge we do not have direct competition at this point to our Smart Plug and Play Ceiling Fan products, although there are ceiling fan manufacturers that have smart fans that are controlled through smart wall switches/app or other, including companies such as Hunter, Minka, Home Decorators, Fanomation, Modern Homes, Hampton Bay and others.

 

Our main competitors for our Plug and Play All-In-One Safe-Smart Platform product: To the best of our knowledge we do not have direct competition at this point to our Plug and Play All-In-One Safe-Smart Platform product, although there are many smart home companies that can be our competitors, including companies such as, Control 4, Vivent, Apple, Google, Microsoft, Amazon, ADT, Blue, Cove and many others and many other smart home companies that have a variety of smart home products. As to the best of our knowledge there are no other Plug and Play All-In-One Safe-Smart Platform products.

 

Government and Environmental Regulation

 

Although not legally required to do so, we strive to obtain certifications for substantially all our products, both in the United States, and, where appropriate, in jurisdictions outside the United States. Products certified by a NRTL, such as UL, Intertek Testing Lab (ETL) or Canadian Standards (CSA), bear a certification mark signifying that the product complies with the requirements of the product safety standard. UL Standards are used for evaluation of USA products, CSA Standards for Canada and IEC (International Electrotechnical Commission) Standards for European countries. We use UL as our main third-party NRTL safety laboratory. While we have received a variety of safety certifications on our products, including UL, United Laboratories for Canada (cUL), Conformité Européenne (CE) and IECEE Certification Body (CB) scheme, we may need or desire to obtain additional certifications for new product configurations, which will increase the time and costs to complete our product launches and which we may be unable to obtain within a reasonable time, or at all. In addition, certain electronic products require FCC certification, and we have obtained FCC certification on applicable products to ensure electromagnetic interference compliance. Although we believe that our broad knowledge and experience with electrical codes and safety standards have facilitated certification approvals, we cannot provide any assurance that we will be able to obtain any such certifications for our new products or that, if certification standards are amended, we will be able to maintain such certifications for our existing products.

 

Our facilities and operations are subject to federal, state and local laws and regulations relating to environmental protection and human health and safety. Some of these laws and regulations may impose strict, joint and several liabilities on certain persons for the cost of investigation or remediation of contaminated properties. These persons may include former, current or future owners or operators of properties and persons who arranged for the disposal of hazardous substances. Our leased real property may give rise to such investigation, remediation and monitoring liabilities under environmental laws. In addition, anyone disposing of certain products we distribute, such as fluorescent lighting, must comply with environmental laws that regulate certain materials in these products. We believe that we are in compliance, in all material respects, with applicable environmental laws. As a result, we do not anticipate making significant capital expenditures for environmental control matters either in the current year or in the near future.

 

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Facilities

 

We maintain offices in Johns Creek, Georgia, Pompano Beach, Florida, and Guangdong Province, China. We believe that our facilities are adequate to meet our current needs and that suitable additional or substitute space at commercially reasonable terms will be available as needed to accommodate any future expansion of our operations.

 

Legal Proceedings

 

There are no legal proceedings or arbitration proceedings currently pending against our Company. From time to time, we may become involved in legal proceedings arising in the ordinary course of our business. As of the date of this prospectus, we were not a party to any material legal matters or claims. In the future, we may become party to legal matters and claims in the ordinary course of business, the resolution of which we do not anticipate would have a material adverse impact on our financial position, results of operations or cash flows.

 

Corporate History and Information

 

We were originally organized in May 2004 as a Florida limited liability company under the name of Safety Quick Light, LLC. We converted to a Florida corporation on November 6, 2012 and, effective August 12, 2016, we changed our name from “Safety Quick Lighting & Fans Corp.” to “SQL Technologies Corp.” We currently do business as “Sky Technologies.” Our principal executive offices are located at 11030 Jones Bridge Road, Suite 206, Johns Creek, Georgia 30022, and our telephone number is (770) 754-4711. Our website can be found at www.skyplug.com. The information contained in or accessible from our website is not incorporated into this prospectus, and you should not consider it part of this prospectus. We have included our website address in this prospectus solely as an inactive textual reference.

 

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MANAGEMENT

 

Executive Officers, Directors and Director Nominees

 

The following table sets forth the name and position of each of our executive officers, directors and director nominees, and each such person’s age as of January 1, 2022:

 

Name   Age   Position(s)
Rani R. Kohen   56   Director, Executive Chairman
John P. Campi   77   Chief Executive Officer
Steven M. Schmidt   67   President
Marc-Andre Boisseau   57   Chief Financial Officer
Patricia Barron   61   Chief Operations Officer
Phillips S. Peter   89   Director
Thomas J. Ridge   76   Director
Dov Shiff   74   Director
Leonard J. Sokolow   65   Director
Gary N. Golden   67   Director
Efrat L. Greenstein Brayer   59   Director
Nancy DiMattia   61   Director

 

The following information provides a brief description of the business experience of each executive officer and director.

 

Rani R. Kohen has 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. Mr. Kohen is a businessman, entrepreneur, and inventor. 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, 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 Chief Executive Officer since November 2014 and served 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.

 

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. 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, 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.

 

Marc-Andre Boisseau serves 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 assurance, advisory and tax services for public and private companies in a variety of industries and which he founded in February 2002. Among other things, 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.

 

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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., a company 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.

 

Phillips S. Peter has served as a director of the Company since November 2012. Since December 2014, Mr. Peter has served as a Senior Vice President of Ridge Global, LLC. From 1994 to 2014, Mr. Peter practiced law at Reed Smith LLP, where he focused his practice on legislative and regulatory matters before U.S. Congress, the executive branch of the federal government, and other administrative agencies. Prior to that, Mr. Peter was an officer at GE, where he held executive positions from 1973 to 1994. He is also a veteran of the U.S. Army. Our board believes Mr. Peter’s qualifications to serve as a member of our board include his extensive experience in regulatory affairs, his past industry experience and his demonstrated leadership ability.

 

Governor Thomas J. Ridge has served as a director of the Company since June 2013. Mr. Ridge has served as President and Chief Executive Officer of Ridge Global, LLC, a global strategic consulting company and provider of insurance and risk transfer solutions, since July 2006, where he also currently serves as Chairman of the board. 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 in 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 (NYSE: HSY), a global confectionery leader, from November 2007 to May 2018, Advaxis, Inc. (Nasdaq: ADXS), a clinical-stage biotechnology company, from August 2015 to March 2018, and LifeLock, Inc. (then NYSE: LOCK), a 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 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 retail, 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.

 

Leonard J. Sokolow has served as a director of the Company since November 2015. Mr. Sokolow has served as Chief Executive Officer and President of Newbridge Financial, Inc. and Chairman of its broker dealer subsidiary, Newbridge Securities Corporation, since January 2015. 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 November 1999 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. (Nasdaq: CWCO), a 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. (Nasdaq: VVOS), a medical technology company focused on developing and commercializing innovative treatments for adult patients suffering from sleep-disordered breathing, since June 2020, where he currently serves as Chair of the Audit Committee and as a member of the Nominating and Corporate Governance Committee, and on the board of directors of Agrify Corporation (Nasdaq:AGFY), a developer of precision hardware and software grow solutions for the indoor agriculture marketplace, as well as providing associated consulting, engineering, and construction services, 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.) (then TSXV: MQX), an 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, his service on other public company boards and his history of executive leadership in developing and operating businesses.

 

Gary N. Golden has served as a director of the Company since February 9, 2022, upon the effectiveness of the registration statement of which this prospectus forms a part. Mr. Golden is currently with Tatum CFO Partners, a company that provides interim executive resources across the C-suite. During his time with Tatum CFO Partners, 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 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 who began his career at Arthur Andersen & Company. 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.   

 

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Efrat L. Greenstein Brayer has served as a director of the Company since February 9, 2022, upon the effectiveness of the registration statement of which this prospectus forms a part. 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 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) from 1993-1996, and as an associate at Haight, Gardner, Poor & Havens (later acquired by Holland & Knight) 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.

 

Nancy DiMattia has served as a director of the Company since February 9, 2022, upon the effectiveness of the registration statement of which this prospectus forms a part. 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 continues 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. She most recently served 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 and financial expertise.

 

Family Relationships

 

There are no family relationships among any of our directors or executive officers or any person nominated to become a director or executive officer.

 

Composition of our Board of Directors

 

Our business and affairs are managed under the direction of our board of directors, which, following the effectiveness of the registration statement of which this prospectus forms a part, consists of eight 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 will be elected to one-year terms and will hold 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.

 

Diversity

 

As of the effectiveness of the registration statement of which this prospectus forms a part, two of our directors are women, representing approximately 25% of our board of directors. We believe that having a diverse board of directors can offer a breadth and depth of perspectives that enhance our performance. The nominating and corporate governance committee will, when evaluating candidates for service on the board, consider the manner in which a candidate’s appointment to the board would impact the overall composition of the board with regard to diversity of viewpoint, professional experience, education, skill, age, gender identity, nationality, race, ethnicity and sexual orientation.

 

Director Independence

 

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 directors, including for purposes of the rules of Nasdaq and the SEC. In making such independence determination, 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. As of the effectiveness of the registration statement of which this prospectus forms a part, the composition and functioning 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.

 

Board Leadership Structure and Board’s Role in Risk Oversight

 

We have chosen to separate the Chief Executive Officer and Board Chairman positions, as our board of directors believes that having separate positions is the appropriate leadership structure for us at this time and demonstrates our commitment to good corporate governance. We believe that separating the positions of Chief Executive Officer and chairperson of the board of directors allows our Chief Executive Officer to focus on our day-to-day business, while allowing a chairperson of the board to lead the board of directors in its fundamental role of providing advice to and independent oversight of management.

 

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One of the key functions of our board of directors is informed oversight of our risk management process. In particular, our board of directors is responsible for monitoring and assessing strategic risk exposure. Our executive officers are responsible for the day-to-day management of the material risks we face. Our board of directors administers its oversight function directly as a whole. Our board of directors will also administer its oversight through various standing committees, which address risks inherent in their respective areas of oversight. For example, our audit committee is responsible for overseeing the management of risks associated with financial reporting, accounting and auditing matters; our compensation committee oversees the management of risks associated with our compensation policies and programs; and our nominating and corporate governance committee oversees the management of risks associated with director independence, conflicts of interest, composition and organization of our board of directors and director succession planning.

 

Board Committees

 

As of the effectiveness of the registration statement of which this prospectus forms a part, 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 committee of our board of directors qualifies as an independent director in accordance with the listing standards of Nasdaq.

 

Each committee operates pursuant to a charter adopted by our board of directors, which became effective immediately upon effectiveness of the registration statement of which this prospectus forms a part. The full text of our audit committee charter, compensation committee charter and nominating and corporate governance committee charter has been posted on the investor relations portion of our website at www.skyplug.com. We do not incorporate the information contained on, or accessible through, our corporate website into this prospectus, and you should not consider it a part of this prospectus.

 

Audit Committee

 

Effective immediately upon effectiveness of the registration statement of which this prospectus forms a part, 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;