10-K
1
form10-k.htm
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
FORM
10-K
☒
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For
the fiscal year ended December 31, 2021
OR
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For
the transition period from to
Commission
File Number: 001-41276
SQL
TECHNOLOGIES CORP.
(Exact
name of registrant as specified in its charter)
2855
W. McNab Road
Pompano
Beach, Florida 33069
(Address, including zip code, of principal executive offices)
(855)759-7584
(Registrant’s telephone number, including
area code)
Securities
registered pursuant to Section 12(b) of the Act:
Title of each class Trading symbol(s) Name of each exchange on which registered
Common Stock, no par value per share SKYX The Nasdaq Stock Market LLC
Securities
registered pursuant to Section 12(g) of the Act:
None
Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒
Indicate
by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes ☐
No ☒
Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. Yes ☐ No ☒
Indicate
by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule
405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant
was required to submit such files). Yes ☒ No ☐
Indicate
by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting
company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,”
“smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☐ Accelerated filer ☐
Non-accelerated filer ☒ Smaller reporting company ☒
Emerging growth company ☐
If
an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate
by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness
of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered
public accounting firm that prepared or issued its audit report. ☐
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒
The
registrant was not a public company as of the last business day of its most recently completed second fiscal quarter, and therefore,
cannot calculate the aggregate market value of its voting and non-voting common equity held by non-affiliates as of such date. The registrant’s
common stock began trading on The Nasdaq Stock Market LLC on February 10, 2022.
As
of February 25, 2022, the registrant had 77,092,905 shares of common stock, no par value per share, issued and outstanding.
TABLE
OF CONTENTS
Page
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS 1
RISK FACTORS SUMMARY 2
PART I
Item 1. Business 3
Item 1A. Risk Factors 15
Item 1B. Unresolved Staff Comments 41
Item 2. Properties 41
Item 3. Legal Proceedings 41
Item 4. Mine Safety Disclosures 41
PART II
Item 6. [Reserved] 46
Item 7A. Quantitative and Qualitative Disclosures About Market Risk 52
Item 8. Financial Statements and Supplementary Data 52
Item 9A. Controls and Procedures 52
Item 9B. Other Information 52
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections 52
PART III
Item 10. Directors, Executive Officers and Corporate Governance 53
Item 11. Executive Compensation 60
Item 14. Principal Accountant Fees and Services 83
PART IV
Item 15. Exhibits and Financial Statement Schedules 84
SIGNATURES 88
FINANCIAL STATEMENTS F-1
i
CAUTIONARY
NOTE REGARDING FORWARD-LOOKING STATEMENTS
This
Annual Report on Form 10-K (this “Form 10-K”) of SQL Technologies Corp. (the “Company,” “we,” “us,”
or “our”) contains forward-looking statements that are based on management’s beliefs and assumptions and on information
currently available to management. All statements other than statements of historical facts contained in this Form 10-K, including statements
regarding our strategy, future financial condition, future operations, projected costs, prospects, plans, objectives of management, outlook,
and expected market growth, are 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. Forward-looking statements in this Form 10-K
include, but are not limited to, statements about:
● our ability to raise additional financing to support our operations as needed;
● the impact of the COVID-19 pandemic on our business and operations;
● any downturn in the cyclical industries in which our customers operate;
● our ability to maintain, protect and enhance our intellectual property;
● the potential outcome of any legal proceedings;
● our ability to successfully sell and distribute our products and technologies;
● our ability to retain key executives and qualified personnel;
● risks related to ownership of our common stock;
You
should refer to the “Risk Factors” section of this Form 10-K 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 Form 10-K 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 Form 10-K represent our views as of the date
of this Form 10-K. 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 Form 10-K.
RISK
FACTORS SUMMARY
The
following is a summary of the principal risks that could materially adversely affect our business, results of operations and financial
condition, all of which are more fully described in the section titled “Risk Factors.” This summary should be read in conjunction
with the “Risk Factors” section and should not be relied upon as an exhaustive summary of the material risks facing our business,
as it does not address all of the risks that we face.
● We depend on a limited number of third-party manufacturers and suppliers.
● We will incur increased costs as a result of operating as a public company.
PART
I
ITEM
1. 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, 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.
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. As part of the launch of certain products,
we may allow customers to pre-order prior to general availability.
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 Form 10-K 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, and is an open system that
can integrate with other smart home devices and systems. Our Smart Power-Plug is connected through WIFI and BLE, and 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, and is an open system that can integrate with other smart home devices and systems.
Our Smart Power-Plug is connected through WIFI and BLE, and 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, and is an open system that can integrate with other smart home devices and systems.
Our Smart Power-Plug is connected through WIFI and BLE, and 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,
has unique modern designs and is 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 carbon monoxide 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.
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, which 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 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, and 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.
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 December 31, 2021.
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
As
of December 31, 2021, the remaining royalty obligations amounted to $3,838,000. Minimum future payment obligations are approximately
as follows:
Year Minimum Obligation
Thereafter —
Total principal payments $ 3,838,000
Employees
Our
management members include leading executives 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.
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.
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.
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.
We believe our total addressable market in the
United States exceeds 500 billion dollars, based on the Company’s internal calculations derived from the estimation of the total
target user pool, projected average selling price, and projected units per household. We believe there are billions of installations
of light and other electrical fixtures globally. Our estimates of the addressable market for our products may prove to be incorrect.
The projected demand for our products could materially differ from actual demand. Even if the total addressable market for our products
is as large as we have estimated and even if we are able to gain market awareness and acceptance, we may not be able to penetrate the
existing market to capture additional market share.
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.
As part of our sales campaign, we intend to use
online channels and also may also utilize social media influencers. As part of the launch of certain products, we may allow customers
to pre-order prior to general availability. Our future revenue streams may also include data aggregation and subscriptions. 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 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.
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 Sky 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:
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.
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. Geopolitical
matters may also impact our manufacturing.
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.