NASDAQ: SKYX

Royalty
obligations
-
900,000

Convertible
notes
14,236,769
7,872,773

Total
long-term liabilities
32,725,598
30,698,108

Total
liabilities
57,303,620
56,833,619

Mezzanine
equity

Series
A Preferred Stock-shares authorized 400,000, outstanding 200,000 and 200,000
5,000,000
5,000,000

Stockholders’
Equity (deficit)

Series
A-1 Preferred Stock-shares authorized 480,000, outstanding 292,000 and 240,000
7,124,167
6,000,000

Series
A-2 Preferred Stock-shares authorized 160,000,
outstanding 60,000
and -

1,500,000
-

Preferred stock
1,500,000
-

Common
stock and additional paid-in-capital: shares authorized 500,000,000 outstanding 117,666,800 and 103,358,975
203,046,051
179,837,253

Accumulated
deficit
(216,258,604 )
(181,783,825 )

Total
stockholders’ equity (deficit)
(4,588,386 )
4,053,428

Total
Liabilities and Stockholders’ Equity (deficit)
$ 57,715,234
$ 65,887,047

The
accompanying notes are an integral part of the consolidated financial statements.

F-3

SKYX
PLATFORMS CORP.

CONSOLIDATED
STATEMENTS OF OPERATIONS

(AUDITED)

2025
2024

For the year ended December 31,

2025
2024

Revenue
$ 92,009,949
$ 86,276,876

Operating expenses

Cost of revenues
64,173,870
61,682,934

Selling and marketing expenses
25,701,665
25,353,172

General and administrative expenses
31,246,804
31,353,009

Total expenses, net
121,122,339
118,389,115

Loss from operations
(29,112,390 )
(32,112,239 )

Other expenses

Interest expense - related party
119,486
151,900

Interest expense, net
4,183,728
3,904,005

Gain on extinguishment of debt
-
(400,000 )

Total other expenses, net
4,303,214
3,655,905

Net loss
(33,415,604 )
(35,768,144 )

Preferred dividends - related party
80,000
20,000

Preferred dividends
979,175
192,667

Net loss attributed to common stockholders
$ (34,474,779 )
$ (35,980,811 )

Net loss per share - basic and diluted
$ (0.32 )
$ (0.36 )

Weighted average number of common shares outstanding – basic and diluted
108,757,074
99,766,866

The accompanying notes are
an integral part of the consolidated financial statements.

F-4

SKYX
PLATFORMS CORP.

CONSOLIDATED
STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)

(AUDITED)

2025
2024

For the year ended December 31,

2025
2024

Shares of preferred stock ( Series A-1)

Balance, beginning of year
240,000
-

Preferred stock Conversion to common
(102,000 )
-

Preferred stock issued pursuant to offerings
154,000
240,000

Balance, end of year
292,000
240,000

Preferred stock ( Series A-1)

Balance, beginning of year
$ 6,000,000
$ -

Preferred stock Conversion to common
(2,550,000 )
-

Preferred stock issued pursuant to offerings
3,674,167
6,000,000

Balance, end of year
$ 7,124,167
$ 6,000,000

Shares of preferred stock ( Series A-2)

Balance, beginning of year
-
-

Preferred stock Conversion to common
-
-

Preferred stock issued pursuant to offerings
60,000
-

Balance, end of year
60,000
-

Preferred stock ( Series A-2)

Balance, beginning of year
$ -
$ -

Preferred stock Conversion to common
-
-

Preferred stock issued pursuant to offerings
1,500,000
-

Balance, end of year
$ 1,500,000
$ -

Shares of common stock

Balance, beginning of year
103,358,975
93,473,433

Common stock issued pursuant to offerings
4,243,123
3,535,067

Common stock issued pursuant to acquisition
-
1,853,421

Common stock issued pursuant to conversion of preferred stock
1,958,336
-

Common stock issued pursuant to preferred dividends
30,842
-

Common stock issued pursuant to conversion of notes
272,728
-

Common stock issued pursuant to conversion of accrued interest
433,073
-

Common stock issued pursuant to exercise of options
1,001,492
128,023

Common stock issued pursuant to services
6,368,231
4,369,031

Balance, end of year
117,666,800
103,358,975

Common stock and paid-in capital

Balance, beginning of year
$ 179,837,253
$ 162,025,024

Common stock issued pursuant to offerings
5,424,368
4,330,295

Common stock issued pursuant to conversion of preferred stock
2,550,000
-

Common stock issued pursuant to preferred dividends
38,559
-

Common stock issued pursuant to conversion of notes
600,000
-

Common stock issued pursuant to conversion of accrued interest
615,291
-

Common stock issued pursuant to exercise of options
420,000
7,501

Common stock issued pursuant to services
13,560,580
13,474,433

Balance, end of year
$ 203,046,051
$ 179,837,253

Accumulated Deficit

Balance, beginning of year
$ (181,783,825 )
$ (145,803,014 )

Preferred dividends
(1,059,175 )
(212,667 )

Net loss
(33,415,604 )
(35,768,144 )

Balance, end of year
$ (216,258,604 )
$ (181,783,825 )

Total Stockholders’ Equity (deficit)
$ (4,588,386 )
$ 4,053,428

The
accompanying notes are an integral part of the consolidated financial statements.

F-5

SKYX
PLATFORMS CORP.

CONSOLIDATED
STATEMENTS OF CASH FLOWS

(AUDITED)

2025
2024

For the year ended December 31,

2025
2024

Operations:

Net loss
$ (33,415,604 )
$ (35,768,144 )

Adjustments to reconcile net loss to net cash used in operating activities

Depreciation and amortization
4,320,338
4,066,957

Amortization of debt discount
1,113,996
1,211,974

Impairment of intangible assets
-
1,118,750

Non-cash equity-based compensation expense
13,560,580
13,474,433

Gain on forgiveness of debt
-
(400,000 )

Equity-based payment of interest
615,291
-

Change in operating assets and liabilities

Inventory
(464,823 )
(359,612 )

Accounts receivable
523,826
969,662

Prepaid expenses and other assets
104,256
(628,461 )

Deferred charges
223,214
1,231

Deferred revenues
586,776
20,327

Operating lease liabilities
(2,345,919 )
(2,101,316 )

Royalty obligation
(400,000 )
(800,000 )

Accounts payable and accrued expenses
2,287,010
933,829

Net cash used in operating activities
(13,291,059 )
(18,260,370 )

Investing:

Purchase of property and equipment
(1,932,873 )
(981,428 )

Acquisition, net of cash acquired
-
(750,000 )

Net cash used in investing activities
(1,932,873 )
(1,731,428 )

Financing:

Proceeds from issuance of common stock - offerings
5,584,390
4,426,222

Placement cost
(335,855 )
(88,426 )

Dividends paid
(1,020,616 )
-

Proceeds from line of credit
-
500,000

Proceeds from issuance of preferred stock-related parties
-
1,000,000

Proceeds from issuance of preferred stocks
5,350,000
10,000,000

Proceeds from issuance of preferred stocks
5,350,000
10,000,000

Proceeds from exercise of options
420,000
-

Proceeds from issuance of convertible notes
5,250,000
-

Principal repayments of notes payable
(5,421,861 )
(2,775,756 )

Net cash provided by financing activities
9,826,058
13,062,040

Change in cash and cash equivalents, and restricted cash
(5,397,874 )
(6,929,758 )

Cash, cash equivalents and restricted cash at beginning of the year
15,500,495
22,430,253

Cash, cash equivalents and restricted cash at end of year
$ 10,102,621
$ 15,500,495

Cash paid during the year for:

Interest
$ 3,872,214
$ 3,281,597

Taxes
-
-

Supplementary disclosure of non-cash financing activities:

Preferred stock conversion to common
$ 2,550,000
$ -

Substitution of royalty payable to convertible note
-
1,000,000

Substitution of consideration payable to convertible note
600,000
3,117,408

Right-of-use assets and operating lease liabilities
-
662,698

Accrued dividends payable
$ 36,444
$ 212,667

The
accompanying notes are an integral part of the consolidated financial statements.

F-6

SKYX
Platforms Corp.

Notes
to Consolidated Financial Statements

NOTE
1 ORGANIZATION AND NATURE OF OPERATIONS

SKYX
Platforms Corp., a corporation (the “Company”), was incorporated in Florida in May 2004.

The
Company maintains offices in Sacramento, California, Johns Creek, Georgia, Miami and Pompano Beach, Florida, New York City, and Guangdong
Province, China.

The
Company has a series of advanced-safe-smart platform technologies. The Company’s first-generation technologies enable light fixtures,
ceiling fans and other electrically wired products to be installed safely and plugged-in to a ceiling’s electrical outlet box within
seconds, and without the need to touch hazardous wires. The plug and play technology method is a universal power-plug device that has
a matching receptacle that is simply connected to the electrical outlet box on the ceiling, enabling a safe and quick plug and play installation
of light fixtures and ceiling fans in just seconds. The plug and play power-plug technology eliminates the need of touching hazardous
electrical wires while installing light fixtures, ceiling fans and other hardwired electrical products. In recent years, the Company
has expanded the capabilities of its power-plug product, to include its second generation advanced-safe and quick universal installation
methods, as well as advanced-smart capabilities. The smart features include control of light fixtures and ceiling fans by the SkyHome
App, through WIFI, Bluetooth Low Energy and voice control. It allows scheduling, energy savings eco mode, dimming, back-up emergency
light, night light, light color changing and much more. The Company’s third-generation technology is an all-in-one safe and smart-advanced
platform that is designed to enhance all-around safety and lifestyle of homes and other buildings.

Since
April 2023, the Company also markets home lighting, ceiling fans and other home furnishings from third parties.

Going
Concern

The
Company’s liquidity sources include $10.10 million in cash and cash equivalents, including restricted cash of $2.05 million held
for long-term purposes. The Company also generated net proceeds of $29.3 million from the issuance of shares of its common stock during
January 2026. While the Company has a history of operating losses, it has enough liquidity sources as of December 31, 2025, together with
net proceeds generated in January 2026, to alleviate substantial doubt about its ability to continue as a going concern.

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.

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.

F-7

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
costs of internal-use software reclassified as intangible assets which were previously included in property and equipment.

Basis
of Consolidation

The
consolidated financial statements include the results of the Company and all its subsidiaries, including SQL Lighting and Fans LLC, Belami,
Inc., BEC, CA 1, Inc. (through December 31, 2024), BEC CA 2, LLC, Luna BEC (through December 31, 2024), Inc., and Confero Group LLC.
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, CASH EQUIVALENTS AND RESTRICTED CASH

December 31, 2025
December 31, 2024

Cash and cash equivalents
$ 8,052,621
$ 12,639,441

Restricted cash
2,050,000
2,861,054

Total cash, cash equivalents and restricted cash
$ 10,102,621
$ 15,500,495

Restricted
Cash

The
Company issued a letter of credit of $2.8 million in September 2022 to use as collateral for certain obligations to one of its lessors
which was further reduced to $2.0 million during 2025. The letter of credit was issued by a financial institution and was secured by
cash of $2.05 million and $2.8 million as of December 31, 2025, and December 2024, respectively.

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. The Company’s allowance for doubtful accounts was $22,668 and $12,147 as of December 31, 2025, and 2024, respectively.
The Company determines an allowance for sales returns based upon historical experience.

F-8

The
Company’s allowance for sales returns was $284,469 and $242,515 as of December 31, 2025, and 2024, respectively, and is recorded
as an accrued expenses in the accompanying consolidated financial statements.

The
Company defers the revenue related to undelivered customer orders for which it was paid or has a right to be paid at each measurement
date. Such amounts are recognized as deferred revenues in the accompanying balance sheet. The deferred revenues amounted to $2,082,622,
and $1,495,846 as of December 31, 2025, and 2024, respectively.

The
costs associated with such deferred revenues are recognized as deferred charges in the accompanying balance sheet. Such charges include
the carrying value of freight, and sales charges. Deferred charges are included in prepaid costs and other assets in the accompanying
balance sheet.

Inventory

Inventories
are stated at the lower of cost, determined on the first-in, first-out 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, 2025
December 31, 2024

Inventory, component parts
$ 2,413,821
$ 1,901,922

Inventory, finished goods
3,136,347
3,183,424

Allowance
(1,300,000 )
(1,300,000 )

Inventory-total
$ 4,250,168
$ 3,785,346

The
Company maintains an allowance based on specific inventory items that have shown no activity over a reasonable period. 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.

Furniture
and Equipment

Furniture
and equipment are stated at cost, less accumulated depreciation, and is reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable.

Depreciation
of property and equipment is provided utilizing the straight-line method over the estimated useful lives, ranging from 3 to 7 years of
the respective assets. Expenditures for maintenance and repairs are charged to expense as incurred.

Upon
sale or retirement of property and equipment, the related cost and accumulated depreciation are removed from the accounts and any gain
or loss is reflected in the statements of operations.

Intangible
Asset

Intangible
assets were recorded in connection with the acquisition of Belami. Intangible assets with finite lives, which consist of customer relationships
and e-commerce technology platforms, are being amortized over their estimated useful lives on a straight-line basis. Such intangible
assets are tested for recoverability whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.
The Company assesses the recoverability of its intangible assets by determining whether the unamortized balance can be recovered over
the assets’ remaining estimated useful life through undiscounted estimated future cash flows. If undiscounted estimated future
cash flows indicate that the unamortized amounts will not be recovered, an adjustment will be made to reduce such amounts to fair value
based on estimated future cash flows discounted at a rate commensurate with the risk associated with achieving such cash flows. Estimated
future cash flows are based on trends of historical performance and the Company’s estimate of future performance, considering existing
and anticipated competitive and economic conditions.

F-9

The
Company developed various patents for an installation device used in light fixtures and ceiling fans. Costs incurred for submitting the
applications to the United States Patent and Trademark Office for these patents have been capitalized. Patent costs are amortized using
the straight-line method over the related 15-year lives. The Company begins amortizing patent costs once a filing receipt is received
stating the patent serial number and filing date from the Patent Office.

The
Company incurs certain legal and related costs in connection with patent applications. The Company capitalizes such costs to be amortized
over the expected life of the patent to the extent that an economic benefit is anticipated from the resulting patent or alternative future
use is available to the Company. The Company also capitalizes legal costs incurred in the defense of the Company’s patents when
it is believed that the future economic benefit of the patent will be maintained or increased, and a successful defense is probable.
Capitalized patent defense costs are amortized over the remaining expected life of the related patent. The Company’s assessment
of future economic benefit or a successful defense of its patents involves considerable management judgment, and an unfavorable outcome
of litigation could result in a material impairment charge up to the carrying value of these assets.

Management
determined that there was no impairment of the Company’s intangible assets as of December 31, 2025.

Goodwill

Goodwill,
which was recorded in connection with the acquisition of Belami, is not subject to amortization and is tested for impairment annually,
or more frequently if events or changes in circumstances indicate that the asset may be impaired. Goodwill represents the excess of the
purchase price of Belami over the fair value of its identifiable net assets acquired. Goodwill is tested for impairment at the reporting
unit level. Fair value is typically based upon estimated future cash flows discounted at a rate commensurate with the risk involved or
market-based comparables. If the carrying amount of the reporting unit’s net assets exceeds its fair value, then an analysis will
be performed to compare the implied fair value of goodwill with the carrying amount of goodwill. An impairment loss will be recognized
in an amount equal to the excess of the carrying amount over its implied fair value. After an impairment loss is recognized, the adjusted
carrying amount of goodwill is its new accounting basis. Accounting guidance on the testing of goodwill for impairment allows entities
testing goodwill for impairment the option of performing a qualitative assessment to determine the likelihood of goodwill impairment
and whether it is necessary to perform such two-step impairment test.

Management
determined that there was no impairment of the Company’s goodwill as of December 31, 2025.

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 to 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.

F-10

The
carrying amounts of the Company’s financial assets and liabilities, such as cash and cash equivalents, accounts receivable, inventory,
prepaid expenses, other current assets, accounts payable, accrued interest payable, certain notes payable and notes payable – related
party, and GE royalty obligation, approximate their fair values because of the short maturity of these instruments.

Embedded
Conversion Features

The
Company evaluates embedded conversion features within convertible debt under ASC 815 “Derivatives and Hedging” to determine
whether the embedded conversion feature(s) should be bifurcated from the host instrument and accounted for as a derivative at fair value
with changes in fair value recorded in earnings. If the conversion feature does not require derivative treatment under ASC 815, the instrument
is evaluated under ASC 470-20 “Debt with Conversion and Other Options” for consideration of any beneficial conversion features.

Derivative
Financial Instruments

The
Company does not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks. The Company evaluates
all of its financial instruments, including stock purchase warrants, to determine if such instruments are derivatives or contain features
that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument
is initially recorded at its fair value and is then revalued at each reporting date, with changes in the fair value reported as charges
or credits to income.

As
of December 31, 2025, the Company had a sufficient number of authorized shares of common stock to accommodate the conversion features
on Series A, A-1 and A-2 Preferred Stock, warrants, options, and convertible notes. These shares have been reserved for issuance by the
Company, and accordingly, no derivative liability has been recognized.

Distinguishing
Liabilities from Equity

The
Company evaluates at each measurement date the proper classification of its liabilities and equity accounts. The Company has evaluated
how it should classify its Series A, A-1 and A-2 Preferred Stock issued in the year 2025. The Company has determined that the Series A,
A-1 and A-2 Preferred Stock should not be classified as liabilities as of December 31, 2025. The designation of Series A includes provisions
that under certain contingent circumstances outside of liquidation, the holders of the Series A Preferred Stock control whether they
could receive cash consideration. Management determined that based on these provisions, the Series A Preferred Stock should be classified
as temporary equity. Management determined the Company controls the contingent circumstances under which the holders of Series A-1 and
A-2 would be granted cash consideration outside of liquidation, and , accordingly, classified Series A-1 and A-2 Preferred Stock as permanent
equity.

Extinguishments
of Liabilities

The
Company accounts for extinguishments of liabilities in accordance with ASC 405-20 (formerly SFAS 140) “Accounting for Transfers
and Servicing of Financial Assets and Extinguishment of Liabilities”. When the conditions are met for extinguishment accounting,
the liabilities are derecognized and the gain or loss on the sale is recognized.

Stock-based
Compensation

The
Company periodically issues common stock, RSUs and stock options to officers, directors, employees and consultants for services rendered.

F-11

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.

The
expense resulting from share-based payments is recorded in operating expenses in the statements of operations.

Revenue
Recognition

The
Company currently generates revenues substantially from home lighting, ceiling fans, and smart products through its family of internet
sites and marketplaces. A substantial portion of the Company’s customers’ orders are made and paid contemporaneously by credit
card and shipped through third-party delivery providers. The Company recognizes revenues once it concludes that the control of the product
is transferred to the customer, which is upon delivery.

The
Company records reductions to revenue for estimated customer sales returns and replacements, net of sales tax. The Company receives rebate
and cooperative allowances based on a percentage of periodic purchases from certain vendors. These vendor considerations are reflected
as a reduction of cost of revenues. The vendor considerations, the rights of returns and replacements are based upon estimates that
are determined by historical experience, contractual terms, and current market conditions. The primary factors affecting the Company’s
accrual for estimated customer return rights include estimated customer return rates as well as the number of units shipped that have
a right of return that have not expired as of the measurement date.

Cost
of Revenues

Cost
of revenues represents costs directly related to produce, acquiring and source inventory for sale, and provisions for inventory shrinkage
and obsolescence. These costs include the costs of purchased products, inbound freight, and custom duties.

Selling,
General and Administrative Expenses

Shipping
and handling costs incurred by the Company to deliver finished goods are expensed and recorded in selling, general and administrative
expenses.

Additionally,
selling, general and administrative expenses include marketing, professional fees, distribution, warehouse costs, and other related selling
costs. Selling expenses include costs incurred in the selling of merchandise. General and administrative expenses include costs incurred
in the administration or general operations of the business.

Stock
compensation expense consists of non-cash charges resulting from the issuance of stock units and stock options that are disclosed in
the selling, general and administrative expenses and included as operating expenses.

F-12

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 be reversed.
Deferred tax assets are reduced by a valuation allowance to the extent management concludes it is more likely than not that the assets
will not be realized. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in
the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities
of a change in tax rates is recognized in the Consolidated Statements of Operations in the period that includes the enactment date.

The
Company adopted section 740-10-25 of the FASB Accounting Standards Codification (Section 740-10-25). Section 740-10-25 addresses the
determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements.
Under Section 740-10-25, the Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not
that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The
tax benefits recognized in the financial statements from such a position should be measured based on the largest benefit that has a greater
than fifty (50) percent likelihood of being realized upon ultimate settlement. Section 740-10-25 also provides guidance on derecognition,
classification, interest and penalties on income taxes, accounting in interim periods and requires increased disclosures.

The
estimated future tax effects of temporary differences between the tax basis of assets and liabilities are reported in the accompanying
consolidated balance sheets, as well as tax credit carrybacks and carryforwards. The Company periodically reviews the recoverability
of deferred tax assets recorded on its consolidated balance sheets and provides valuation allowances as management deems necessary.

Management
makes judgments as to the interpretation of the tax laws that might be challenged upon an audit and cause changes to previous estimates
of tax liability. In addition, the Company operates within multiple taxing jurisdictions and is subject to audit in these jurisdictions.
In the management’s opinion, adequate provisions for income taxes have been made for all years. If actual taxable income by tax
jurisdiction varies from estimates, additional allowances or reversals of reserves may be necessary.

Uncertain
Tax Positions

The
Company did not take any uncertain tax positions and had no adjustments to its income tax liabilities or benefits pursuant to the provisions
of Section 740-10-25 for fiscal 2025.

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.

F-13

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. The Company recognized net loss and a dilutive net loss during 2025 and 2024, and the effect of considering
any common stock equivalents would have been antidilutive for the period. Therefore, a separate computation of diluted earnings (loss)
per share is not presented for the periods presented.

The
Company had the following anti-dilutive common stock equivalents at December, 2025 and 2024:

SCHEDULE
OF ANTI-DILUTIVE COMMON STOCK EQUIVALENTS

December 31, 2025
December 31, 2024

Stock warrants
1,588,417
1,523,667

Stock options
31,838,322
32,493,392

Unvested restricted stock
4,988,817
6,278,370

Convertible notes
14,863,205
6,063,890

Preferred stock
10,999,997
5,500,000

Anti-dilutive securities
64,278,758
51,859,319

Recently
Issued Accounting Pronouncements

Segment
Reporting – Improvements to Reportable Segment Disclosures

In
November 2023, the Financial Accounting Standards Board (“FASB”) issued a new standard to improve reportable segment disclosures.
The guidance expands the disclosures required for reportable segments in our annual and interim consolidated financial statements, primarily
through enhanced disclosures about significant segment expenses. We adopted this standard in 2024. The impact of this standard is only on the Company’s segment disclosures.

F-14

Comprehensive
Income- Improvements to Expense Disaggregation Disclosures

In
November 2024, the Financial Accounting Standards Board (“FASB”) issued a new standard to improve expense disaggregation
disclosures. The guidance expands the disclosures required for certain costs and expenses in our annual and interim consolidated financial
statements, primarily through enhanced disclosures about significant expenses. The standard is effective as of March 31, 2026 and interim
and annual periods thereafter. The impact of this standard is only on the Company’s expenses disclosures.

NOTE
3 PROPERTY AND EQUIPMENT

Property
and equipment consisted of the following:

SCHEDULE
OF PROPERTY AND EQUIPMENT

December 31, 2025
December 31, 2024

Equipment and furniture
$ 924,266
$ 924,627

Leasehold improvements
1,400,859
360,003

Total
2,325,125
1,284,630

Less: accumulated depreciation
(977,485 )
(739,297 )

Total, net
$ 1,347,640
$ 545,333

Depreciation
expenses amounted to $238,188 and $68,022 during 2025 and 2024, respectively.

NOTE
4 INTANGIBLE ASSETS AND GOODWILL

Intangible
assets consisted of the following:

SCHEDULE
OF INTANGIBLE ASSETS

December 31, 2025
December 31, 2024

Useful life

Carrying

Value

Accumulated

Amortization

Net carrying value

Carrying

Value

Accumulated

Amortization

Net carrying value

Customer relationships
7
$ 4,500,000
$ (1,607,143 )
$ 2,892,857
$ 4,500,000
$ (1,071,428 )
$ 3,428,572

E-commerce technology platforms
1 - 4
3,097,040
(1,482,974 )
1,614,066
2,204,660
(243,744 )
1,960,916

Patents and other
15
931,831
(386,805 )
545,026
931,831
(326,946 )
604,885

$ 8,528,871
$ (3,476,922 )
$ 5,051,949
$ 7,636,491
$ (1,642,118 )
$ 5,994,373

Amortization
expense on intangible assets was $1,834,804 and $1,832,568 during 2025 and 2024, respectively.

During
the quarter ended September 30, 2024, the Company evaluated the effectiveness of the E-commerce technology platforms it acquired in 2023.
Management determined that revenues could increase without increasing its operating expenses (and potentially decrease its general and
administrative expenses) using a different E-commerce technology platform. Management believes it will discontinue using its legacy platforms by October 1, 2025. Accordingly, the estimated useful life of its legacy platforms decreased
from 4 to 1 year. The reduced estimated useful life of the intangible asset indicated a possible impairment of the carrying value of
such intangible. Management prepared, with a third-party firm, an analysis of the future cash flows related to the legacy platform and
determined that, as of September 30, 2024, such future cash flows were lower than the carrying value of the related intangible asset.
Accordingly, management believes that its legacy platforms’ carrying value was impaired. Based on the future estimated discounted
cash flows, Management believes that the carrying value of the legacy platforms should be $1.4 million. Accordingly, management recorded
an impairment expense of $1.1 million and adjusted the carrying value of its legacy platform to $1.4 million as of and during the quarter
ended September 30, 2024.

F-15

The
following table sets forth the estimated amortization expenses for the next five years:

SCHEDULE
OF INTANGIBLE ASSETS AMORTIZATION EXPENSE FOR FUTURE

Twelve months ended December 31:

2026
1,381,516

2027
1,372,060

2028
864,363

2029
701,983

2030
271,305

Total amortization expenses
271,305

NOTE
5 DEBTS

The
following table presents the details of the principal outstanding:

SCHEDULE
OF DEBT

December 31, 2025
December 31, 2024
APR on December 31, 2025
Maturity
Collateral

Convertible Notes

(b,c,)
$ 18,834,348
$ 15,592,408
0.00 – 10.00%

September 2023-
October 2030

Substantially all Company assets

Notes payable to financial institutions and

others (a)
501,495
4,515,297
3.75-8.5%
August 2025- November 2052
Substantially all Company assets

Total
$ 19,335,843
$ 20,107,705

Unamortized debt discount
(2,363,231 )
(3,477,227 )

Debt, net of Unamortized debt Discount
$ 16,972,612
$ 16,630,478

SCHEDULE
OF INTEREST EXPENSE DEBT

For the year ended December 31,

2025
2024

Interest expense
$ 1,747,055
$ 4,055,905

As
of December 31, 2025, the expected future principal payments for the Company’s debt are due as follows:

SCHEDULE
OF FUTURE PRINCIPAL PAYMENTS

Twelve months ended December 31, 2026
$ 2,594,529

Twelve months ended December 31, 2027
1,703,847

Twelve months ended December 31, 2028
3,994

Twelve months ended December 31, 2029
4,146

Twelve months ended December 31, 2030 and thereafter
15,029,327

Total
$ 19,335,843

a) Included
in Convertible Notes are loans provided to the Company from two directors and an officer.
The notes each have the following terms: three-year subordinated convertible promissory note
of principal face amounts. Subject to other customary terms, a convertible promissory note
with a principal amount of $600,000 payable to a director, together with accrued interest
of $235,900, was converted into 379,955 shares of the Company’s common stock. The other
remaining convertible promissory notes matured in May 2025, bear interest at an annual rate
of 10% thereafter, which is payable annually in cash or common stock, at the holder’s
discretion. At any time after issuance and prior to or on the maturity date, the notes are
convertible at the option of the holder into shares of common stock at a conversion price
of $3 per share.

During
2023, the Company issued convertible promissory notes. As an inducement to enter the financing transactions, the Company issued 1,391,667
warrants to the noteholders at an adjusted exercise price of $2.7 per warrant. The Company recorded a debt discount aggregating $5.6
million which was recognized as debt discount and additional paid-in capital in the accompanying balance sheet. The Company recognized
$1,113,996 and $835,496 as amortized debt discount during the year ended December 31, 2025, and 2024, respectively, and it is reflected
as interest expense in the accompanying unaudited consolidated statement of operations.

b) In
March 2024, and as amended in June 2025, the Company and the Belami sellers entered into
a letter agreement modifying certain obligations under the Belami stock purchase agreement.
In connection with the letter agreement, the Company issued convertible promissory notes
to each of the sellers (the “Seller Note(s)”) in substitution of an aggregate
of $3,117,909 in cash due to the sellers in monthly principal and interest payments of $300,000
beginning in July 2025 until fully paid in January 2026. The notes are convertible at $3
per share of common stock.

Additionally,
the convertible promissory notes include a $1 million note payable to GE issued in April 2024. The convertible note is due in April 2027,
does not bear interest and is convertible at a price of $1.07 per share.

c) During
2025, the Company consolidated convertible notes aggregating $9.1 million with convertible
notes generating proceeds of $5.2 million. The terms are substantially the same with the
exception of the convertible rate which is $1.20 per share of the Company’s common
stock.

F-16

NOTE
6 OPERATING LEASE LIABILITIES

In
April 2022, the Company entered into a 58-month lease related to certain office and showroom space pursuant to a sublease that expires
in February 2027. The Company recognized a right-of-use asset and a liability of $1,428,764 pursuant to this lease.

In
September 2022, the Company entered a 124-month lease related to its future headquarters offices and showrooms space. The Company recognized
a right-of-use asset and a liability of $22,192,503 pursuant to such lease. In connection with the execution of lease, the Company was
required to provide the landlord with a letter of credit in the amount of $2.7 million, which is secured by the same amount of cash.
In January 2024, the Company entered into a 35-month lease related to its Sacramento office. The Company recognized a right-of-use asset
and a liability of $ 662,696 pursuant to such lease.

The
following table outlines the total lease cost for the Company’s operating leases as well as weighted average information for these
leases as of December 31, 2025, and 2024 respectively:

SCHEDULE
OF LEASE COST OPERATING LEASE

For the year ended December 31,

2025
2024

Cash paid for operating lease liabilities
$ 2,345,919
$ 2,101,316

Rights-of-use obtained in exchange for new operating lease liabilities
-
662,696

Fixed rent payments
3,136,161
2,703,789

Lease - Depreciation expense
$ 2,020,500
$ 2,127,319

Weighted-average discount rate
6.48 %
6.45 %

Weighted-average remaining lease term (in months)
84
95

SCHEDULE
OF MINIMUM LEASE OBLIGATION

Minimum Lease obligation

Twelve months ended December 31, 2026
$ 2,589,994

Twelve months ended December 31, 2027
2,288,363

Twelve months ended December 31, 2028
2,471,537

Twelve months ended December 31, 2029
2,736,000

Twelve months ended December 31, 2030, and thereafter
10,295,553

Total
$ 20,381,447

NOTE
7 ROYALTY OBLIGATIONS

The
Company had a license agreement with General Electric (“GE”) which provided, among other things, for rights to market certain
of the Company’s products displaying the GE brand in consideration of royalty payments to GE. The agreement expired in 2023.

The
Company owes $1.3 million to GE pursuant to the license agreement as of December 31, 2025. The payments associated with this debt are
payable in quarterly tranches aggregating $1.3 million during the year 2026.

F-17

The
Company owed an additional amount of $1.4 million pursuant to its agreements with GE. During April 2024, GE and the Company agreed to
reduce such additional amount by $400,000 in exchange for the issuance of a convertible promissory note of $1 million.

NOTE
8 ACCOUNTS PAYABLE AND ACCRUED EXPENSES

Accounts
payable and accrued expenses consisted of the following:

SCHEDULE
OF ACCRUED EXPENSES

December 31, 2025
December 31, 2024

Accrued interest, convertible notes
$ 552,354
$ 1,044,708

Accrued dividends
249,111
212,667

Trade payables
14,533,064
10,043,423

Accrued compensation
1,232,410
2,979,131

Total
$ 16,566,939
$ 14,279,929

NOTE
9 INCOME TAXES

The
Company has not paid or incurred any income taxes liabilities during 2025 and 2024 due to its net operating losses. State taxes are apportioned
through 47 states. The states in which the apportionment are greatest are California and Florida, which comprise 22% of the effective
state and local effective tax rate.

The
effects of temporary differences that gave rise to significant portions of deferred tax assets at December 31, 2025, and December 31,
2024 were approximately as follows:

SCHEDULE
OF DEFERRED TAX ASSETS

2025
2024

For the year ended December 31,

2025
2024

Net operating loss carryforward
34,436,504
$ 28,458,816

Stock-based compensation
3,930,195
2,707,630

Rights of use assets
(4,429,142 )
(5,023,531 )

Operating lease liabilities
5,157,627
5,634,917

Other
933,102
487,722

Less Valuation Allowance
(40,028,287 )
(32,265,553 )

Total Deferred Tax Assets - Net
$ -
$ -

The
change in valuation allowance is as follows:

SCHEDULE
OF CHANGE IN VALUATION ALLOWANCE

2025
2024

For the year ended December 31,

2025
2024

Net operating loss
$ 5,977,689
$ 7,141,156 )

Fair value of options
1,222,565
1,603,333

Other, mostly amortization of intangible assets
696,875 )
915,218

Change in valuation allowance
7,897,129
9,659,709

$ -
$ -

The
Company’s tax expense differs from the statutory tax expense for the years ended December 31, 2025, and December 31, 2024 and the
reconciliation is as follows.

SCHEDULE
OF INCOME TAX RATE RECONCILIATION

2025

Amount

2025

Percent

2024

Amount

2024

Percent

U.S. Federal Statutory tax rate
$ 7,017,227
21 %
$ 7,498,169
21 %

States and local income taxes, net of federal income tax effect
1,438,709
4.3
1,535,339
4.3 %

Changes in valuation allowance
(7,897,129 )
(23.6 )%
(9,659,709 )
(27.1 )%

Other
(558,807 )
(1.7 )%
626,201
1.8 %

Effective tax rate
$ -
- %
$ -
- %

NOTE
10 RELATED PARTY TRANSACTIONS

Convertible
Notes Due to Related Parties

Convertible
notes due to related parties represent amounts provided to the Company from a director and the Company’s Chief Executive
Officer as well as the Company’s former Co-Chief Executive Officer. The outstanding principal on the convertible promissory notes, associated with related parties was $350,000
and $950,000
as of December 31, 2025, and December 31, 2024, respectively and accrued interest of $35,486
and $242,803,
respectively. Also, the interest expense associated with these notes during 2025 and 2024 was $119,486
and $151,900,
respectively.

Preferred
dividends

The
Company paid and declared dividends to related parties (a director and officer and two officers) amounting to $80,000 and $20,000 during
2025.

F-18

NOTE
11 STOCKHOLDERS’ EQUITY

(A)
Common Stock

The
Company issued the following common stock during 2025 and 2024:

SCHEDULE
OF COMMON STOCK

Average
Value

Transaction
Type
Shares
Issued
Valuation
$
Per
Share

2025 Equity
Transactions

Common stock issued,
pursuant to services provided
6,368,231
$ 13,560,580
$ 2.13

Common stock issued pursuant
to stock at the market offering, net
4,243,123
5,424,368
1.28

Common stock issued pursuant
to preferred dividends
30,842
38,559
1.25

Common stock issued pursuant
to conversion of notes
272,728
600,000
2.20

Common stock issued pursuant
to conversion of accrued interest
433,073
615,291
1.42

Common stock issued pursuant
to exercise of options
1,001,492
420,000
0.42

Common stock issued pursuant
to conversion of preferred stock
1,958,336
2,550,000
1.30

2024 Equity
Transactions

Common stock issued, pursuant
to services provided
4,369,031
$ 13,474,433
0.82-1.78

Common stock issued pursuant
to stock at the market offering, net
3,535,067
4,330,295
0.9
– 1.64

Common stock issued pursuant
to exercise of options, net
128,023
7,501
-

Common stock issued pursuant
to acquisition
1,853,421
-
-

(B)
Preferred Stock

During
October 2024, the Company completed its authorization of the issuance of 440,000 shares of newly authorized Series A Preferred Stock
and Series A-1 Preferred Stock. The designations of each class of preferred stock are as follows:

SCHEDULE
OF PREFERRED STOCK ACTIVITY

Transaction Type
Quantity
Carrying Value
Value per Share, gross

Preferred Stock Balance at January 1, 2024
-
$ -
$ -

Preferred Stock Series A
200,000
5,000,000
25

Preferred Stock Series A-1
240,000
6,000,000
25

Preferred Stock Balance at December 31, 2024
440,000
$ 11,000,000
$ 25

During
the year ended December 31, 2025, the Company authorized the issuance of 60,000 shares of a new series of preferred stock Series A-2.
Details of activity in Preferred Stock Series A-1 and Series A-2 are as follows:

Transaction Type
Quantity
Carrying Value
Value per Share, gross

Preferred Stock Series A-1 Balance at January 1, 2025
240,000
$ 6,000,000
$ 25

Issuance
154,000
3,674,167
25

Conversion to common stock
(102,000 )
(2,550,000 )
25

Preferred Stock Series A-1 Balance at December 31, 2025
292,000
$ 7,124,167
$ 25

Preferred Stock Series A-2 Balance at January 1, 2025
-
$ -
$ -

Issuance
60,000
1,500,000
25

Conversion to common stock
-
-
-

Preferred Stock Series A-2 Balance at December 31, 2025
60,000
$ 1,500,000
$ 25

The
designations of each class of preferred stock are as follows:

Series
A Preferred Stock (temporary equity):

●
Cumulative
dividend of 8% annually, 12% if paid after dividend date;

●
Original
issue price of $25 per share;

●
Conversion
option at the holder’s option at $1.20
per share;

●
Redemption
at the price of $25 per share at the Company’s option after 5 years or upon change of control (substantially within the control
of the holder);

●
Voting
rights on as converted basis.

F-19

Series
A-1 and A-2 Preferred Stock (permanent equity):

●
Cumulative
dividend of 8% annually, 12% if paid after dividend date;

●
Original
issue price of $25 per share;

●
Conversion
option at the holder’s option at $1.20
per share for Series A and A-1 and $2 per share for Series A-2;

●
Redemption
at the price of $25 per share at the Company’s option after 3 years or upon change of control (substantially outside the control
of the holder);

●
Voting
rights on as converted basis.

(C)
Stock Options

The
following is a summary of the Company’s stock option activity during 2025 and 2024:

SCHEDULE
OF STOCK OPTION ACTIVITY

Weighted

Average

Remaining

Weighted
Contractual
Aggregate

Average
Life
Intrinsic

Options
Shares
Exercise Price
(In Years)
Value

Outstanding, January 1, 2025
32,493,392
$ 7.31
2.45
$ 1,727,080

Exercised
1,113,000
$ 0.70

Granted
5,633,030
1.65
-
-

Forfeited
(7,401,100 )
(5.24 )
-
-

Outstanding, December 31, 2025
31,838,322
$ 6.81
2.12
$ 7,382,321

Exercisable, December 31, 2025
10,991,168
$ 4.56
2.51
$ 3,689,773

Outstanding, January 1, 2024
35,807,476
$ 7.33
-
-

Exercised
135,000
$ 0.10
-
$ -

Granted
3,673,500
1.17
-
-

Forfeited
(6,851,084 )
4.25
-
6,112,000

Outstanding, December 31, 2024
32,493,392
$ 7.31
2.45
$ 1,727,080

Exercisable, December 31, 2024
10,977,431
$ 4.40
2.25
$ 1,409,651

The
following table summarizes the range of the Black Scholes pricing model assumptions used by the Company during 2025 and 2024.

SCHEDULE
OF BLACK SCHOLES PRICING MODEL

December 31, 2025
December 31, 2024

Range

Stock price
1.11 - 2.42
4.4

Exercise price
0 - 14
0 - 14

Expected life (in years)
2.50- 3.47 yrs.
2.50- 4.00 yrs.

Volatility
101 – 110%
36.7 – 96.5%

Risk-fee interest rate
3.56 - 4.02%
3.50 - 4.62%

Dividend yield
-
-

Prior to the second quarter of 2025, the Company
did not have historical stock prices that could be reliably determined for a period that is at least equal to the expected terms of its
options. The expected options terms, which were calculated using the plain vanilla method, are 3.5 years, and its historical period was
3 years. The Company relied on the expected volatility of comparable peer-group publicly traded companies within its industry sector,
to supplement the Company’s historical data for the period of the expected terms of the options that exceeded the period of the
Company’s historical volatility data. As of May 1, 2025, the Company uses its historical stock prices to determine its expected
volatility.

F-20

(D)
Warrants Issued

The
following is a summary of the Company’s warrant activity during 2025 and 2024:

SCHEDULE
OF WARRANT ACTIVITY

Number of Warrants
Weighted Average

Exercise Price

Balance, January 1, 2025
1,523,667
$ 4.30

Issued
64,750
1.2

Exercised
-
-

Forfeited
-
-

Balance, December 31, 2025
1,588,417
$ 4.19

Balance, January 1, 2024
2,063,522
$ 5.76

Issued
—
—

Exercised
—
—

Forfeited
(539,885 )
9.8

Balance, December 31, 2024
1,523,667
$ 4.30

During
year ended December 31, 2025 and 2024, the Company did not issue any warrants except for warrants issued to a placement agent in connection
with its Series A -1 Preferred offerings in the second quarter of 2025.

(E)
Restricted stock units

A
summary of the Company’s non-vested restricted stock units during 2025 and 2024 are as follows.

SCHEDULE
OF NON-VESTED RESTRICTED STOCK

Weighted

Average Grant

Shares
Due Fair Value

Non-vested restricted stock units, January 1, 2025
6,278,370
$ 2.65

Granted
6,537,012
1.39

Vested
(6,655,463 )
1.60

Forfeited
(1,171,102 )
5.36

Non-vested restricted stock units, December 31, 2025
4,988,817
$ 1.76

Non-vested restricted stock units, January 1, 2024
4,935,822
$ 7.99

Granted
6,168,980
1.12

Vested
(4,513,527 )
2.27

Forfeited
(312,905 )
2.58

Non-vested restricted stock units on December 31, 2024
6,278,370
$ 2.65

The
weighted-average remaining contractual life of the restricted units as of December 31, 2025, is 1.32 years.

RSUA
give the right to receive one share of the Company’s common stock. RSUAs that are vest based on service and performance are measured
based on the fair values of the underlying stock on the date of grant. The Company used a Lattice model to determine the fair value of
the RSU with a market condition. Compensation with respect to RSUA awards is expensed on a straight-line basis over the vesting period.

The
Company recognized compensation expenses of $ 10,420,491, and $10,078,955, respectively, related to RSUs and RSAs during the year ended
December 31, 2025 and 2024, respectively. The Company recognized compensation expenses of $ 3,139,881 and $3,395,479, respectively, related
to stock options during the year ended December 31, 2025 and 2024, respectively.

The
options and RSUAs are granted to the Company’s employees, board members, and certain consultants. There is no difference in characteristics
of the awards other than the stock options have to be exercised and restricted awards and units do not. The vesting of the options, restricted
stock units or awards is based on the requisite service period of the employees and the non-employee’s vesting period is generally
based on a period of up to six years. The maximum contractual term of the options is up to 5 years. The number of shares available for
grant of options, and restricted stock units or awards amounts to 19,717,706 at December 31, 2025.

F-21

Unamortized
future stock-based compensation expense was $9.25 million as of December 31, 2025.

NOTE
12 CONCENTRATIONS OF RISKS

Major
Customers and Accounts Receivable

The
Company had no customers whose revenue individually represented 10% or more of the Company’s total revenue. The Company had two
and three third-party payor accounts receivable balance representing 59% and 24% of the Company’s total accounts receivable at
December 31, 2025 and 2024, respectively.

Liquidity

The
Company’s cash and cash equivalents are held primarily with two financial institutions. The Company has deposits which exceed the
amount insured by the FDIC. To reduce the risk associated with the failure of such counterparties, the Company periodically evaluates
the credit quality of the financial institutions in which it holds deposits.

Product
and Geographic Markets

The
Company generates its income primarily from lighting and heating products sold primarily in the United States.

Segment and Expense Disaggregation

The
Company operates in one segment: advanced-safe-smart technologies and related products. The Company used the following factors to identify
includes the basis of organization, the relative similarities in types of product offerings. The chief operating decision maker consists
of a team comprised of the Company’s Executive Chairman and its Chief Executive Officer. The total assets of the segments
amount to the Company’s consolidated assets. Long-lived assets, which consists of property and equipment and right of use assets
are located in the United States.

The
Company has concluded that consolidated net income or loss is the measure of segment profitability. The following is a reconciliation
of the Company’s revenues from external customers and consolidated revenues and the consolidated and segment loss, including significant
disaggregated segment expenses.

SCHEDULE
OF CONSOLIDATED REVENUES AND SEGMENT LOSS

2025
2024

For the year ended December 31,

2025
2024

Revenues from external customers and consolidated revenues
$ 92,009,949
$ 86,276,876

Cost of revenues
(64,173,870 )
(61,682,934 )

Compensation costs, excluding share-based payments
(10,180,474 )
(9,730,111 )

Share-based payments
(13,560,580 )
(13,474,433 )

Marketing programs
(20,800,181 )
(18,800,142 )

Professional fees, excluding share-based payments
(6,795,654 )
(7,149,168 )

Depreciation, amortization, and impairment of intangibles
(4,176,466 )
(5,185,706 )

Other operating expenses
(1,866,114 )
(2,366,621 )

Total operating expenses, net
$ (121,553,339 )
$ (118,389,115 )

Other expenses

Amortization of debt discount
(1,113,996 )
(1,211,974 )

Interest expense, net
(2,758,218 )
(2,843,931 )

Gain on extinguishment of debt
-
400,000

Net loss
$ (33,415,604 )
$ (35,768,144 )

NOTE
13 SUBSEQUENT EVENTS

Management
has evaluated subsequent events through March 26 2026, which is the date the consolidated financial statements were available to be
issued. There were no significant subsequent events that required adjustment to or disclosure in the consolidated financial
statements with the exception of the following:

The
Company generated proceeds of $29.3 million in consideration for the issuance of shares of common stock pursuant to two offerings and
exercise of warrants.

F-22