| SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | NOTE
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis
of Presentation The
accompanying consolidated financial statements of the Company have been prepared in accordance with generally accepted accounting principles
in the United States (“GAAP”) for interim financial statements and with the instructions to Form 10-Q and Rule 8-03 of Regulation
S-X. Accordingly, they do not include all of the information and disclosures required for annual financial statements. In the opinion
of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included.
The consolidated financial statements as of March 31, 2024 and for the three months ended March 31, 2024 and 2023 are unaudited. The
results of operations for the interim periods are not necessarily indicative of the results of operations for the respective fiscal years.
The consolidated statement of financial condition at December 31, 2023 has been derived from the audited financial statements at that
date but does not include all of the information and notes required by GAAP for complete financial statement presentation. The accompanying
consolidated financial information should be read in conjunction with the Company’s Annual Report on Form 10-K for the fiscal year
ended December 31, 2023 for additional disclosures and accounting policies. 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 prior-year balances were made to conform with current-year presentations, such as sales and marketing
expenses which were previously included in selling, general, and administrative expenses in the 2023 comparable period. Basis
of Consolidation The
consolidated financial statements include the results of the Company and one of its subsidiaries, SQL Lighting and Fans LLC from January
1, 2023 and the results from its remaining subsidiaries, Belami, Inc., BEC, CA 1, Inc., BEC CA 2, LLC, Luna BEC, Inc., and Confero Group
LLC from April 28 2023. All intercompany balances and transactions have been eliminated in consolidation. 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. The Company’s cash composition was as follows: SCHEDULE
OF CASH EQUIVALENTS AND RESTRICTED CASH
March 31, December 31,
Cash and cash equivalents $ 14,146,785 $ 16,810,983
Restricted cash 5,642,878 5,619,270
Total cash, cash equivalents and restricted cash $ 19,789,663 $ 22,430,253 Restricted
Cash The
Company issued a letter of credit of $ 2.8 2.8 750,000 2.0 Customer
Contracts Balances Accounts
receivables are recorded in the period when the right to receive payment or other consideration becomes unconditional. Accounts receivables
are recorded at the invoiced amount and are not interest bearing. The Company maintains an allowance for doubtful accounts based upon
an estimate of probable credit losses in existing accounts receivable. The majority of the Company’s accounts receivable are from
third-party payers and are paid within a few days from the order date. The Company determines the allowance based upon individual accounts
when information indicates the customers may have an inability to meet their financial obligations, historical experience, and currently
available evidence. As of March 31, 2024, and December 31, 2023, the Company’s allowance for doubtful accounts was $ 54,987 54,987 185,501 182,584 The
Company defers the revenue related to undelivered customer orders for which it was paid or has a right to be paid at each measurement
date. Such amounts are recognized as deferred revenues in the accompanying balance sheet. Deferred revenues amounted to $ 1,616,038 1,475,519 The
costs associated with such deferred revenues are recognized as deferred charges in the accompanying balance sheet. Such charges include
the carrying value of related inventory, freight, and sales charges. The deferred charges amounted to $ 245,734 224,445 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
Match 31, December 31,
Inventory, component parts $ 2,944,213 $ 2,230,252
Inventory, finished goods 2,133,511 2,495,482
Allowance (1,300,000 ) (1,300,000 )
Inventory-total 3,777,724 3,425,734 The
Company will maintain an allowance based on specific inventory items that have shown no activity over a reasonable period of time.
The Company tracks inventory as it is repurposed, disposed, scrapped or sold at below cost to determine whether additional items on
hand should be reduced in value through an allowance method. The Company has recorded an allowance of $ 1.3 GE
Agreements The
Company has two U.S. and global agreements with General Electric (“GE”) related to the Company’s products.
● A
U.S. and Global Licensing and Master Service Agreement dated December 4, 2023, which replaced
a prior agreement under similar terms. The agreement expires on December 4, 2028 and includes
automatic renewal provisions. Pursuant to such agreement, GE’s licensing team has the
rights to exclusively license certain of the Company’s Standard and Smart plug-and-play products
set forth in a statement of work in the U.S. and worldwide. Pursuant to the agreement, the
Company expects that GE’s licensing team will seek and arrange licensee partners for
our products in the U.S. and globally, including negotiating agreement terms, managing contracts,
collecting payments, auditing partners, assisting with patent strategy and protection, and
assisting in auditing product quality control under the “Six Sigma” guidelines.
For products licensed to third parties, the Company and GE will each receive a specified
percentage of the earned revenue realized from such licensing, unless otherwise provided
in the applicable statement of work.
● A
letter agreement dated November 28, 2023. The agreement expires on December 15, 2027 and
includes a repayment plan relating to certain amounts due under the U.S. and Global Trademark
Agreement dated June 15, 2011 (as later amended), which expired November 30, 2023, between
SQL Lighting & Fans, LLC and GE Trademark Licensing, Inc. Under this new payment arrangement,
the Company was required to pay a revised royalty payment obligation of $ 2.7 1 1.4 3.7 ” ) 400,000
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 stocks, common stock equivalents and potentially dilutive securities outstanding during each period. The
Company uses the “treasury stock” method to determine whether there is a dilutive effect of outstanding convertible debt,
option and warrant contracts. For the three-month ended March 31, 2024, and 2023, the Company recognized net loss and a dilutive net
loss, and the effect of considering any common stock equivalents would have been antidilutive for the period. Therefore, a separate computation
of diluted earnings (loss) per share is not presented for the periods presented. The
Company had the following anti-dilutive common stock equivalents as of March 31, 2024, and March 31, 2023: SCHEDULE
OF ANTI-DILUTIVE COMMON STOCK EQUIVALENTS
March 31, March 31,
Stock warrants 2,049,147 2,063,522
Stock options 36,156,476 33,114,250
Convertible notes 5,487,260 3,536,668
Preferred stock – 880,400
Total 43,692,883 39,594,840 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. |
