SKYX Platforms Corp. (SKYX)

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

The
following discussion and analysis should be read in conjunction with the unaudited consolidated financial statements and related notes
included elsewhere in this Form 10-Q and our audited financial statements and related notes thereto for the year ended December 31, 2025
included in our Annual Report on Form 10-K for the year ended December 31, 2025. This discussion and analysis and other parts of this
Form 10-Q contain forward-looking statements based upon current beliefs, plans and expectations that involve risks, uncertainties, and
assumptions, such as statements regarding our plans, objectives, strategy, expectations, outlook, intentions, and projections. Our actual
results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of several
factors, including those set forth in “Part I. Item 1A. Risk Factors” of our Annual Report on Form 10-K for the year ended
December 31, 2025, in this Form 10-Q, and in other filings with the Securities and Exchange Commission (the “SEC”). Please
also see the section entitled “Cautionary Note Regarding Forward-Looking Statements” contained in this Form 10-Q.

Overview

We
have a series of advanced-safe-smart platform technologies. Our first and second-generation technologies enable light fixtures, ceiling
fans and other electrically wired products to be installed safely and plugged into a ceiling’s electrical outlet box within seconds,
and without the need to touch hazardous wires. The plug and play technology method is a universal power-plug device that has a matching
receptacle that is simply connected to the electrical outlet box on the ceiling, enabling a safe and quick plug and play installation
of light fixtures and ceiling fans in just seconds. The plug and play power-plug technology eliminates the need of touching hazardous
electrical wires while installing light fixtures, ceiling fans and other hardwired electrical products. In recent years, we have expanded
the capabilities of our power-plug product to include advanced-safe and quick universal installation methods, as well as advanced-smart
capabilities. The smart features include control of light fixtures and ceiling fans by the SkyHome App, through WIFI, 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. Our 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. Our products are designed to improve all around home and building safety and lifestyle.
We are continuing to refine our products and began manufacturing certain advanced and smart products in 2023 and expect additional products,
including the third-generation smart-advanced platform to be available in 2026. We expect to manufacture the additional product offerings
within the next six months. We hold over 100 U.S. and global patents and patent applications and have received a variety of final electrical
code approvals, including UL, Underwriters Laboratories of Canada (cUL) and Conformité Europeenne (CE), and 2017 and 2020 inclusion in the
NEC Code Book.

We
believe our total addressable market in the United States exceeds $500 billion, based on the Company’s internal calculations derived
from the estimation of the total target user pool, projected average selling price, and projected units per household. We believe there
are billions of installations of light and other electrical fixtures globally. Our estimates of the addressable market for our products
may prove to be incorrect. The projected demand for our products could differ materially from actual demand. Even if the total addressable
market for our products is as large as we have estimated and even if we are able to gain market awareness and acceptance, we may not
be able to penetrate the existing market to capture additional market share.

Recent
Developments

During
2025 and January 2026, we generated proceeds of $5.6 million pursuant to our ATM, $29.3 million pursuant to the issuance of shares of
our common stock, $5.4 million pursuant to the issuance of our preferred stock, and $5.3 million pursuant to the issuance of convertible
notes.

We
have expanded our product lines to include an all-in-one plug and play combined heater, fan, and lighting product which will eventually
accommodate the integration of our smart and advanced products.

18

Results
of Operations

Comparison
of the Six months ended June 30, 2026, and 2025

Revenue

The
increase in revenues is primarily due to an increased number of units of lighting and heating products sold.

We
believe that our revenues will be higher in 2026 than in 2025 primarily resulting from revenues from the sale of our advanced and smart
products.

Cost
of Revenues

The
increase in cost of revenue is proportionate to the increase in revenues.

We
believe that the cost of revenues will increase in 2026 compared to 2025, commensurate with an anticipated increase in revenues.

Selling
and Marketing Expenses

Selling
and marketing expenses consist primarily of sales and marketing compensation as well as sales and marketing programs.

The
increase in selling and marketing expenses is primarily due to increased marketing programs costs.

We
believe that our selling and marketing expenses in 2026 will increase slightly but at a lower rate than the revenue growth when
compared to 2025.

General
and Administrative Expenses

General
and administrative expenses consist primarily of an allocation of product development, finance, legal, human resources, including salaries,
wages, and benefits, and depreciation and amortization, including share-based payments.

The
decrease in general and administrative expenses during the second quarter of 2026 was primarily attributable to lower share-based
compensation during the second quarter of 2026 offset by an increase in costs of supporting our operations during the first quarter of 2026.

Interest Expenses, Net

Interest expenses consist of interest on interest-bearing
obligations and amortization of debt discount offset by interest income.

The decrease in interest expenses, net is primarily
due to higher interest income earned on greater interest-bearing cash accounts.

Liquidity
and Capital Resources

As
of June 30, 2026, and December 31, 2025, we had $27.7 million and $10.1 million in cash, cash equivalents, and restricted cash, respectively.

During
the six months ended June 30, 2026, the Company issued approximately 12 million shares of common stock pursuant to offerings, for aggregate
net proceeds of approximately $27.4 million.

The
Company received proceeds of approximately $1.9 million from the exercise of warrants.

Our
future capital requirements will depend on many factors, including our revenue growth rate, expenditures related to our headcount growth,
the timing and the amount of cash received from customers, the expansion of sales and marketing activities, the timing and extent of
spending to support development efforts, the introduction of platform enhancements, and the market adoption of our platforms. We may
continue to enter into arrangements to acquire or invest in complementary businesses, products, and technologies. We may, because of those
arrangements, or the general expansion of our business, be required to seek additional equity or debt financing. If we require additional
financing, we may not be able to raise such financing on terms acceptable to us or at all. If we are unable to raise additional capital
or generate cash flows necessary to expand our operations and invest in continued innovation, we may not be able to compete successfully,
which would harm our business, results of operations, and financial condition.

We
owe approximately $17.3 million under fixed rate obligations as of June 30, 2026.

As
common with companies having a similar cash conversion cycle as ours, when sales are converted into cash rapidly, often referred to as
the “Dell Working Capital Model,” we leverage our trades payable to finance our operations to lower our cost of capital,
and accordingly, we may have negative working capital. This negative working capital is partly inherent to the relatively quick turnaround
of finished goods inventory, quicker collection of accounts receivables, and longer payment cycle of trades payable. Our negative working
capital, which consists of accounts receivable, inventory, net of trades and compensation payable, amounted to $9.9 million as of June 30, 2026.

19

Please
see below a summary of the primary components of our cash used in or provided by operating investing and financing activities during
the six-month periods ended June 30, 2026, and 2025:

[Excerpt truncated for page length; source filing is linked above.]

ITEM
7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You
should read the following discussion and analysis of our financial condition and results of operations together with our financial statements
and the related notes appearing elsewhere in this Form 10-K. This discussion and other parts of this Form 10-K contain forward-looking
statements that involve risks and uncertainties, such as statements regarding our plans, objectives, strategy, expectations, outlook,
intentions, and projections. Our actual results could differ materially from those discussed in these forward-looking statements. Factors
that could cause or contribute to such differences include, but are not limited to, those discussed in the “Risk Factors”
section of this Form 10-K. Please also see the section entitled “Cautionary Note Regarding Forward-Looking Statements” contained
in this Form 10-K.

Overview

We
have a series of advanced-safe-smart platform technologies. Our first and second-generation technologies enable light fixtures, ceiling
fans and other electrically wired products to be installed safely and plugged into a ceiling’s electrical outlet box within seconds,
and without the need to touch hazardous wires. The plug and play technology method is a universal power-plug device that has a matching
receptacle that is simply connected to the electrical outlet box on the ceiling, enabling a safe and quick plug and play installation
of light fixtures and ceiling fans in just seconds. The plug and play power-plug technology eliminates the need of touching hazardous
electrical wires while installing light fixtures, ceiling fans and other hardwired electrical products. In recent years, we have expanded
the capabilities of our power-plug product to include advanced-safe and quick universal installation methods, as well as advanced-smart
capabilities. The smart features include control of light fixtures and ceiling fans by the SkyHome App, through WIFI, 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. Our 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. Our products are designed to improve all around home and building safety and lifestyle.
We are continuing to refine our products and began manufacturing certain advanced and smart products in 2023 and expect additional products,
including the third-generation smart-advanced platform to be available in 2026. We expect to manufacture the additional product offerings
within the next six months. We hold over 100 U.S. and global patents and patent applications and have received a variety of final electrical
code approvals, including UL, United Laboratories of Canada (cUL) and Conformite Europeenne (CE), and 2017 and 2020 inclusion in the
NEC Code Book.

We
believe our total addressable market in the United States exceeds $500 billion, based on the Company’s internal calculations derived
from the estimation of the total target user pool, projected average selling price, and projected units per household. We believe there
are billions of installations of light and other electrical fixtures globally. Our estimates of the addressable market for our products
may prove to be incorrect. The projected demand for our products could differ materially from actual demand. Even if the total addressable
market for our products is as large as we have estimated and even if we are able to gain market awareness and acceptance, we may not
be able to penetrate the existing market to capture additional market share.

40

Monetary
and trade policies impact in varying degrees our industry market participants (from manufacturer to user). The reaction(s) by the market
participants to such policies or changes in policies may have an impact on our operations. Those policies, such as tariffs, increases
in interest rates, supply and overhead costs and transportation costs, may adversely affect our operating results, and we may not be
able to offset increased costs with increased sales price per unit, particularly as we work toward commercial manufacturing of our products.
Although we do not believe that monetary and trade policies have had a material impact on our financial position or results of operations
to date, we may experience some effect in the near future as we continue to navigate changes in such policies. In addition, we may be
negatively impacted because of supply chain constraints, consequences associated with government regulations, ongoing and potential geopolitical
conflicts, instability in the global banking system, employee availability and wage increases.

Recent
Developments

During
2025 and January 2026, we generated proceeds of $5.6 million pursuant to our ATM, $29.3 million pursuant to issuance of shares of our
common stock, $5.4 million pursuant to issuance of our preferred stock, and $5.3 million pursuant
to the issuance of convertible notes.

We
have expanded our product lines to include an all-in-one plug and play combined heater, fan, and lighting product which will eventually
accommodate the integration of our smart and advanced products.

Results
of Operations

Years
Ended December 31, 2025 and 2024

Revenue

The
increase in revenues is primarily due to an increased number of units of lighting and heating products sold.

We
believe that our revenues will be higher in 2026 than in 2025 primarily resulting from revenues from the sale of our advanced and smart
products.

Cost
of Revenues

41

The
increase in cost of revenue is proportionate to the increase in revenues.

We
believe that the cost of revenues will increase in 2026 compared to 2025, commensurate with an anticipated increase in revenues.

Selling
and Marketing Expenses

Selling
and marketing expenses consist primarily of sales and marketing compensation as well as sales and marketing programs.

The
selling and marketing expenses are relatively unchanged.

We
believe that our selling and marketing expenses in 2026 will remain relatively unchanged compared to 2025.

General
and Administrative Expenses

General
and administrative expenses consist primarily of an allocation of product development, finance, legal, human resources, including salaries,
wages, and benefits, and depreciation and amortization, including share-based payments.

The
increase in general and administrative expenses is primarily due to increased share-based payments of approximately $1.6 million during
the second quarter of 2025.

We
believe that our general and administrative expenses in 2026 will remain relatively unchanged compared to 2025.

Other
Expense (Income)

The
interest expense is relatively unchanged. We recognized a non-recurring gain on extinguishment of debt related to our royalty obligations
during 2024, none of which occurred during 2025.

42

Liquidity
and Capital Resources

We
had $10.1 million and $15.5 million in cash and cash equivalents, and restricted cash, as of December 31, 2025 and 2024,
respectively.

Historically,
we have raised funds through the issuances of common stock, preferred stock, securities convertible into common stock and notes payable.
We have raised funds through the sale of our common stock and preferred stocks for gross proceeds of $10.9 million pursuant to placements
and offerings during 2025. We also generated gross proceeds of $29.3 million pursuant to the issuance of shares of our common stock during January 2026.

These
offerings included shares sold pursuant to our ATM offering program which provides us with additional access to capital, as needed, subject
to market conditions. During the fourth quarter of 2025, we issued 368,110 shares of common stock under such program. From inception
through December 31, 2025, we issued 12,138,022 shares of common stock under such a program for net proceeds of $19,219,347, net of brokerage
fees and legal fees of $779,508. As of March 2, 2026, there are no significant remaining amount to be used under the ATM offering program.

During
the year 2025, we sold an aggregate of 214,000 shares of two series of preferred stock, resulting in total gross proceeds of $5.1 million,
pursuant to (i) a Securities Purchase Agreement entered into with an accredited investor, pursuant to which such investor purchased an
aggregate of 154,000 shares of Series A-1 Preferred Stock, at a purchase price of $25.00 per share, and (ii) a Securities Purchase Agreement
entered into with certain accredited investors, pursuant to which such investors purchased an aggregate of 60,000 shares of Series A-2
Preferred Stock, at a purchase price of $25.00 per share.

Our
future capital requirements will depend on many factors, including the Belami integration of operations, our revenue growth rate, expenditures
related to our headcount growth and manufacturing, the timing and the amount of cash received from customers, the expansion of sales
and marketing activities, the timing

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