| SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | NOTE
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The
following is a summary of the Company’s significant accounting policies: Basis
of Presentation The
accompanying consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted
in the United States of America (U.S. GAAP) under the accrual basis of accounting. Principles
of Consolidation The
consolidated financial statements include the accounts of SQL Technologies Corp. (f/k/a Safety Quick Lighting & Fans Corp.) and its
subsidiary, SQL Lighting & Fans LLC. All intercompany accounts and transactions have been eliminated in consolidation. Non-controlling
Interest The
Company owns 98.8 . Use
of Estimates The
preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial statements and accompanying notes. Such
estimates and assumptions impact both assets and liabilities, including but not limited to: net realizable value of accounts receivable
and inventory, estimated useful lives and potential impairment of property and equipment, the valuation of intangible assets, estimate
of fair value of share based payments and derivative liabilities, estimates of fair value of warrants issued and recorded as debt discount,
estimates of tax liabilities and estimates of the probability and potential magnitude of contingent liabilities. Making
estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of
a condition, situation or set of circumstances that existed at the date of the financial statements, which management considered in formulating
its estimate could change in the near term due to one or more future nonconforming events. Accordingly, actual results could differ significantly
from estimates. Reclassifications For
comparability, reclassifications of certain prior-year balances were made in order to conform with current-year presentations, such as
grouping of common stock and additional paid-in capital and certain expenses initially included in cost of revenues were reclassified
to sales and general and administrative expenses. Cash,
Cash Equivalents, and Restricted Cash The
Company considers all highly liquid securities with original maturities of three months or less when acquired, to be cash equivalents.
At December 31, 2022 and December 31, 2021, the Company’s cash composition was follows: SCHEDULE OF CASH EQUIVALENTS AND RESTRICTED CASH
December
31, 2022 December
31, 2021
Cash and cash equivalents $ 6,720,543 $ 10,426,249
Restricted cash 2,741,054 —
Total
cash, cash equivalents and restricted cash $ 9,461,597 $ 10,426,249 Restricted
Cash The
Company issued a letter of credit of $ 2.7 Inventory Inventories
are stated at the lower of cost, determined on the first-in, first-out (FIFO) method. Cost principally consists of the purchase price
(adjusted for lower of cost or market), customs, duties, and freight. The Company periodically reviews historical sales activity to determine
potentially obsolete items and evaluates the impact of any anticipated changes in future demand. SCHEDULE OF INVENTORY
December
31, 2022 December
31, 2021
Inventory, component parts $ 1,923,540 $ 918,651 The
Company will maintain an allowance based on specific inventory items that have shown no activity over a 24-month period. The Company
tracks inventory as it is disposed, scrapped or sold at below cost to determine whether additional items on hand should be reduced in
value through an allowance method. As of December 31, 2022, and December 31, 2021, the Company has determined that no allowance is required. Furniture
and Equipment Furniture
and equipment is stated at cost, less accumulated depreciation, and is reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable. Depreciation
of property and equipment is provided utilizing the straight-line method over the estimated useful lives, ranging from 3 7 Upon
sale or retirement of property and equipment, the related cost and accumulated depreciation are removed from the accounts and any gain
or loss is reflected in the statements of operations. Operating
Leases The
Company leases certain office space and equipment under various leases. In addition to rent, the leases require the Company to pay for
taxes, insurance, maintenance and other operating expenses. The Company determines if an arrangement is a lease at inception. Operating
leases are included in operating lease right-of-use assets, and operating lease liabilities in the Company’s consolidated balance
sheets. Right-of-use
(“ROU”) assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent
its obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement
date. The lease liability is based on the present value of lease payments over the lease term (or the remaining term in the case of existing
leases at time the Company adopted ASC 842). The Company uses the implicit rate when readily determinable. As most of the Company’s
leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at the commencement
date in determining the present value of lease payments. The operating lease ROU asset is based on the lease liability, subject to adjustment,
such as for initial direct costs, and excludes lease incentives. The Company’s lease terms include options to extend or terminate
the lease when it is reasonably certain that it will exercise that option. For most operating leases, expense for lease payments is recognized
on a straight-line basis over the lease term. Leases with an initial term of 12 Securities Debt
securities are classified as available-for-sale when they might be sold before maturity. Securities available for sale are carried at
fair value, with unrealized holding gains and losses included in accumulated other comprehensive income. Available-for-sale
debt securities are recorded at fair value with the net unrealized gains and losses (that are not deemed to be other-than—temporary)
reported as a component of other comprehensive income (loss). Realized gains and losses and charges for other-than-temporary impairments
are included in determining net income, with related purchase costs based on the first-in, first-out method. The Company evaluates its
available-for-sale-investments for possible other-than-temporary impairments by reviewing factors such as the extent to which, and length
of time, an investment’s fair value has been below the Company’s cost basis, the issuer’s financial condition, and
the Company’s ability and intent to hold the investment for sufficient time for its market value to recover. For impairments that
are other-than-temporary, an impairment loss is recognized in earnings equal to the difference between the investment’s cost and
its fair value at the balance sheet date of the reporting period for which the assessment is made. The fair value of the investment then
becomes the new amortized cost basis of the investment, and it is not adjusted for subsequent recoveries in fair value. Management does
not believe that its investment in debt securities are impaired as of December 31, 2022. Corporate
and state and local government debt securities consist of debt from relatively large corporate organizations and certain state and local
governmental agencies. The Company reviews trading activity and pricing for each of the debt securities in its portfolio as of the measurement
date and determines if pricing data of sufficient frequency and volume in an active market exists to support Level I classification of
these securities. When sufficient quoted pricing for identical securities is not available, the Company obtains market pricing and other
observable market inputs at dates other than the measurement dates. As a result, the Company classifies its debt securities as Level
I and Level II of the fair value hierarchy. Intangible
Asset Patent The
Company developed various patents for an installation device used in light fixtures and ceiling fans. Costs incurred for submitting the
applications to the United States Patent and Trademark Office for these patents have been capitalized. Patent costs are amortized using
the straight-line method over the related 15 The
Company incurs certain legal and related costs in connection with patent applications. The Company capitalizes such costs to be amortized
over the expected life of the patent to the extent that an economic benefit is anticipated from the resulting patent or alternative future
use is available to the Company. The Company also capitalizes legal costs incurred in the defense of the Company’s patents when
it is believed that the future economic benefit of the patent will be maintained or increased, and a successful defense is probable.
Capitalized patent defense costs are amortized over the remaining expected life of the related patent. The Company’s assessment
of future economic benefit or a successful defense of its patents involves considerable management judgment, and an unfavorable outcome
of litigation could result in a material impairment charge up to the carrying value of these assets. GE
Agreements The
Company has two U.S. and global agreements with General Electric (“GE”) related to the Company’s 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 the Company’s standard and smart plug and
play devices. The Company has 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 the Company’s standard
and smart plug and play devices under the GE brand. GE will assist the Company 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,
the Company expects that GE’s licensing team will seek and arrange licensee partners
for our products in the U.S. and globally, including negotiating agreement terms, managing
contracts, collecting payments, auditing partners, assisting with patent strategy and protection,
and assisting in auditing product quality control under the “Six Sigma” guidelines.
For products licensed to third parties, the Company and GE will each receive a specified
percentage of the earned revenue realized from such licensing, unless otherwise provided
in the applicable statement of work. Fair
Value of Financial Instruments The
Company measures assets and liabilities at fair value based on an expected exit price as defined by the authoritative guidance on fair
value measurements, which represents the amount that would be received on the sale of an asset or paid to transfer a liability, as the
case may be, in an orderly transaction between market participants. As such, fair value may be based on assumptions that market participants
would use in pricing an asset or liability. The authoritative guidance on fair value measurements establishes a consistent framework
for measuring fair value on either a recurring or nonrecurring basis whereby inputs, used in valuation techniques, are assigned a hierarchical
level. The
following are the hierarchical levels of inputs to measure fair value:
● Level
1 – Observable inputs that reflect quoted market prices in active markets for identical
assets or liabilities.
● Level
2 – Inputs reflect quoted prices for identical assets or liabilities in markets that
are not active; quoted prices for similar assets or liabilities in active markets;
inputs other than quoted prices that are observable for the assets or liabilities; or
inputs that are derived principally from or corroborated by observable market data by correlation
or other means.
● Level
3 – Unobservable inputs reflecting the Company’s assumptions incorporated in
valuation techniques used to determine fair value. These assumptions are required to be consistent
with market participant assumptions that are reasonably available. The
carrying amounts of the Company’s financial assets and liabilities, such as cash and cash equivalents, accounts receivable, inventory,
prepaid expenses, other current assets, accounts payable, accrued interest payable, certain notes payable and notes payable – related
party, and GE royalty obligation, approximate their fair values because of the short maturity of these instruments. The
Company’s cash, cash equivalents and restricted cash are classified as level 1 financial instruments. The Company’s investment
securities are classified as Level 1 and 2, depending on liquidity of the markets in which they are trading. Embedded
Conversion Features The
Company evaluates embedded conversion features within convertible debt under ASC 815 “Derivatives and Hedging” to determine
whether the embedded conversion feature(s) should be bifurcated from the host instrument and accounted for as a derivative at fair value
with changes in fair value recorded in earnings. If the conversion feature does not require derivative treatment under ASC 815, the instrument
is evaluated under ASC 470-20 “Debt with Conversion and Other Options” for consideration of any beneficial conversion features. Derivative
Financial Instruments The
Company does not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks. The Company evaluates
all of its financial instruments, including stock purchase warrants, to determine if such instruments are derivatives or contain features
that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument
is initially recorded at its fair value and is then revalued at each reporting date, with changes in the fair value reported as charges
or credits to income. As
of December 31, 2022, the Company had a sufficient number of authorized shares of common stock to accommodate the conversion features
on Series A Preferred Stock, warrants, options, and convertible notes. These shares have been reserved for issuance by the Company’s
stock transfer agent, and accordingly, no derivative liability has been calculated on these shares. Extinguishments
of Liabilities The
Company accounts for extinguishments of liabilities in accordance with ASC 405-20 (formerly SFAS 140) “Accounting for Transfers
and Servicing of Financial Assets and Extinguishment of Liabilities”. When the conditions are met for extinguishment accounting,
the liabilities are derecognized and the gain or loss on the sale is recognized. Stock-based
Compensation The
Company periodically issues common stock and stock options to officers, directors, employees and consultants for services rendered. The
Company accounts for stock incentive awards issued to employees and non-employees in accordance with FASB ASC 718, Stock Compensation.
Accordingly, stock-based compensation is measured at the grant date, based on the fair value of the award. Stock-based awards to employees
are recognized as an expense over the requisite service period, or upon the occurrence of certain vesting events. Additionally, stock-based
awards to non-employees are expensed over the period in which the related services are rendered. In
June 2018, the FASB issued ASU 2018-07—Compensation—Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based
Payment Accounting, which simplifies the accounting for share-based payments to nonemployees by aligning it with the accounting for share-based
payments to employees subject to certain exceptions. The Company adopted ASU 2018-07 with respect to grants of shares of common stock
of the Company made in January 2019. The adoption of ASU 2018-07 did not have a material impact on the consolidated financial statements. Prior
to the adoption of ASU 2018-07 in January 2019, stock-based awards granted to non-employees were accounted for in accordance with ASU
505-50 – Equity-Based Payments to Non-Employees (“ASU 505-50”). ASU 505-50 measures stock-based compensation at either
the fair value of the consideration received, or the fair value of the equity instruments issued, whichever is more reliably measurable.
If the fair value of the equity instruments issued is used, it is measured using the stock price and other measurement assumptions as
of the earlier of (1) the date at which a commitment for performance by the counterparty to earn the equity instruments is reached, or
(2) the date at which the counterparty’s performance is completed. The
expense resulting from share-based payments is recorded in operating expenses in the statements of operations. Revenue
Recognition During
2022 and 2021, the Company derived revenues from the sale of GE branded fans and lighting fixtures to large retailers through retail
and online sales. The
Company determines the correct revenue recognition using the following steps: Step
1: Identify the contract with a customer Step
2: Identify the performance obligations in the contract. Step
3: Determine the transaction price. Step
4: Allocate the transaction price to the performance obligations in the contract. Step
5: Recognize revenue when (or as) the Company satisfies a performance obligation. Trade
allowances and a provision for estimated returns and other allowances are recorded at the time sales are made, considering historical
and anticipated trends. A
majority of our sales revenue is recognized when products are shipped from our manufacturing facilities and from our third-party logistics
facility. Cost
of Revenues Cost
of revenues represents costs directly related to produce, acquire and source inventory for sale, and provisions for inventory shrinkage
and obsolescence. These costs include costs of purchased products, inbound freight, and custom duties. Selling,
General and Administrative Expenses Shipping
and handling costs incurred by the Company to deliver finished goods are expensed and recorded in selling, general and administrative
expenses. Additionally,
selling, general and administrative expenses include marketing, professional fees, distribution, warehouse costs, and other related selling
costs. Selling expenses include costs incurred in the selling of merchandise. General and administrative expenses include costs incurred
in the administration or general operations of the business. Stock
compensation expense consists of non-cash charges resulting from the issuance of stock units and stock options that are disclosed in
the selling, general and administrative expenses and included as operating expenses. Income
Tax Provision The
Company accounts for income taxes under Section 740-10-30 of the FASB Accounting Standards Codification, which requires recognition of
deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements
or tax returns. Under this method, deferred tax assets and liabilities are based on the differences between the financial statement and
tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse.
Deferred tax assets are reduced by a valuation allowance to the extent management concludes it is more likely than not that the assets
will not be realized. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in
the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities
of a change in tax rates is recognized in the Consolidated Statements of Operations in the period that includes the enactment date. The
Company adopted section 740-10-25 of the FASB Accounting Standards Codification (Section 740-10-25). Section 740-10-25 addresses the
determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements.
Under Section 740-10-25, the Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not
that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The
tax benefits recognized in the financial statements from such a position should be measured based on the largest benefit that has a greater
than fifty (50) percent likelihood of being realized upon ultimate settlement. Section 740-10-25 also provides guidance on derecognition,
classification, interest and penalties on income taxes, accounting in interim periods and requires increased disclosures. The
estimated future tax effects of temporary differences between the tax basis of assets and liabilities are reported in the accompanying
consolidated balance sheets, as well as tax credit carrybacks and carryforwards. The Company periodically reviews the recoverability
of deferred tax assets recorded on its consolidated balance sheets and provides valuation allowances as management deems necessary. Management
makes judgments as to the interpretation of the tax laws that might be challenged upon an audit and cause changes to previous estimates
of tax liability. In addition, the Company operates within multiple taxing jurisdictions and is subject to audit in these jurisdictions.
In management’s opinion, adequate provisions for income taxes have been made for all years. If actual taxable income by tax jurisdiction
varies from estimates, additional allowances or reversals of reserves may be necessary. Uncertain
Tax Positions The
Company did not take any uncertain tax positions and had no adjustments to its income tax liabilities or benefits pursuant to the provisions
of Section 740-10-25 for the reporting periods ended December 31, 2022, and 2021. Contingencies The
Company follows subtopic 450-20 of the FASB Accounting Standards Codification to report accounting for contingencies. Certain conditions
may exist as of the date the consolidated financial statements are issued, which may result in a loss to the Company, but which will
only be resolved when one or more future events occur or fail to occur. The Company assesses such contingent liabilities, and such assessment
inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the
Company or un-asserted claims that may result in such proceedings, the Company evaluates the perceived merits of any legal proceedings
or un-asserted claims as well as the perceived merits of the amount of relief sought or expected to be sought therein. If
the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability
can be estimated, then the estimated liability would be accrued in the Company’s financial statements. If the assessment indicates
that a potentially material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then
the nature of the contingent liability, and an estimate of the range of possible losses, if determinable and material, would be disclosed. Loss
contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the guarantees would be disclosed.
However, there is no assurance that such matters will not materially and adversely affect the Company’s business, consolidated
financial position, and consolidated results of operations or consolidated cash flows. Comprehensive
Income or loss Accounting
principles generally require that recognized revenue, expenses, gains and losses be included in net income. Certain changes in assets
and liabilities, such as unrealized gains and losses on available-for-sale securities, are reported as a separate component of the stockholders’
equity section of the statements of financial condition. Such items along with net income are components of comprehensive income. Loss
Per Share Basic
net earnings (loss) per share is computed by dividing net income (loss) for the period by the weighted average number of common stock
outstanding during each period. Diluted earnings (loss) per share is computed by dividing net income (loss) for the period by the weighted
average number of common stock, common stock equivalents and potentially dilutive securities outstanding during each period. The
Company uses the “treasury stock” method to determine whether there is a dilutive effect of outstanding convertible debt,
option and warrant contracts. For 2022 and 2021, the Company recognized net loss and a dilutive net loss, and the effect of considering
any common stock equivalents would have been antidilutive for the period. Therefore, separate computation of diluted earnings (loss)
per share is not presented for the periods presented. The
Company had the following anti-dilutive common stock equivalents at December, 2022 and 2021 SCHEDULE OF EARNING (LOSS) PER SHARE
December
31, 2022 December
31, 2021
Stock warrants 1,908,211 2,127,895
Stock options 33,289,250 21,927,182
Convertible notes 86,668 86,668
Preferred stock 880,400 13,256,936
Total 36,164,529 29,323,681 Recently
Issued Accounting Pronouncements Management
does not believe that any recently issued, but not yet effective accounting pronouncements, if adopted, would have a material effect
on its consolidated financial statements. |
