Business Context and Reporting Period
Company: SKYX Platforms Corp. (d/b/a Sky Technologies)
Filing Type: Form 8-K (Current Report)
Date of Report: February 6, 2023
Reporting Period: Immediate event reporting for transactions closed on February 6, 2023.
SKYX Platforms Corp. announced the entry into a definitive agreement to acquire Belami, Inc., a California corporation, and the simultaneous closing of a private placement offering to fund the transaction.
Key Financial Metrics and Transaction Details
Acquisition Consideration (Belami, Inc.):
- Cash Component (Closing): $7.0 million (net of indebtedness, expenses, bonuses, and escrow release).
- Stock Component (Closing): 2,018,692 shares of common stock (valued at approximately $6.48 million based on a $3.21 average price).
- Deferred Payment (1st Anniversary): $3.22 million in cash plus shares valued at approximately $6.4 million (subject to price floors/ceilings of $3.00-$4.00 and working capital adjustments).
- Assumed Debt: A $2.0 million revolving line of credit and a term loan of approximately $2.5 million with PNC Bank.
- Employee Retention: Cash bonuses, 498,445 restricted stock units (RSUs), 473,523 restricted shares, and options for 300,000 shares.
Private Placement Financing:
- Proceeds: $8.1 million in aggregate principal amount of subordinated secured convertible promissory notes.
- Interest Rate: 10% per annum (7% cash, 3% cash or stock).
- Warrants: Issued to purchase up to 1,016,667 shares of common stock.
- Conversion/Exercise Price: Initial price of $3.00 per share (minimum $2.70).
- Use of Proceeds: Cash component of acquisition and transaction expenses; restricted from debt repayment or stock redemption.
Material Changes and Agreements
The filing details a material change in the Company's capital structure and operations through the acquisition of Belami. Key contractual terms include:
- Termination Fee: SKYX is obligated to pay a $1.0 million termination fee to Sellers under specific circumstances, excluding termination due to material misstatements in EBITDA ($1.0 million+ discrepancy), material adverse effects, mutual consent, or governmental prohibition.
- Board Composition: Until the deferred payment date, Belami's board will consist of six members, with SKYX and Sellers each designating three directors.
- Ownership Cap: The aggregate issuance of shares from the acquisition and private placement (including conversions) is capped at 19.99% of outstanding common stock unless shareholder approval is obtained.
- Retained Earnings: Belami's retained earnings must be distributed to Sellers prior to closing; any shortfall will be covered by a one-year promissory note.
Guidance, Risks, and Contingencies
Management Commentary and Outlook: The Company intends to use the acquisition to expand its operations. Operational priorities for Belami have been jointly established for the 12-month period following closing.
Risks and Contingencies:
- Acquisition Completion: Risks include failure to satisfy closing conditions, regulatory approval delays, or termination of the agreement.
- Financial Impact: Potential increase in costs, fees, and expenses; diversion of management attention; and disruption to ongoing business operations.
- Market Risk: Decline in stock price if the acquisition is not completed; volatility in the deferred stock payment value.
- Debt Covenants: The Notes are secured by substantially all of the Company's assets and contain acceleration events. Holders may demand repayment if the acquisition does not close by June 30, 2023.
- Financial Data Reliability: Financial information regarding Belami is unaudited and preliminary; audited figures may differ materially.
Investor Verification Checklist
- Acquisition Closing Conditions: Verify if all conditions for the Belami acquisition have been met or waived.
- Debt Service Capacity: Assess the Company's ability to service the new $8.1 million convertible notes (10% interest) and assumed Belami debt ($4.5 million).
- Dilution Impact: Calculate the potential dilution from the issuance of ~2 million shares at closing, deferred shares, and warrant exercises, noting the 19.99% cap.
- Working Capital Adjustment: Monitor the post-closing working capital adjustment which will affect the deferred payment amount.
- Termination Fee Exposure: Review the specific triggers for the $1.0 million termination fee liability.
- Unaudited Financials: Await audited financial statements for Belami to confirm EBITDA and retained earnings figures.