SKYX Platforms Corp. — Q1 2023 Form 10-Q
Reporting period: Three months ended March 31, 2023; unaudited. SKYX develops safety-focused plug-and-play and smart-home lighting and ceiling-fan technologies. The company reported very limited revenue while transitioning from discontinued products toward new platforms and commercial manufacturing.
Financial results and position
| Metric | Q1 2023 | Q1 2022 |
|---|---|---|
| Revenue | $10,025 | $6,971 |
| Gross income | $8,557 | $1,331 |
| Operating loss | $7.24 million | $11.95 million |
| Net loss | $7.97 million | $11.86 million |
| Net loss per share, basic and diluted | $0.10 | $0.23 |
| Operating cash used | $4.12 million | $3.36 million |
- Revenue rose about 44%, but remained minimal. Gross margin was approximately 85% on the small revenue base.
- SG&A declined 39% to $7.25 million. Management attributed the reduction mainly to $5.8 million less share-based compensation, partly offset by $527,000 more product-development spending and other costs. Adjusted SG&A, a company-defined non-GAAP measure, was $3.39 million versus $3.16 million.
- Interest expense increased to $731,000 from $91,000, largely reflecting lease-related interest and amortization of debt discounts on new convertible notes.
- At March 31, cash and cash equivalents were $14.52 million; restricted cash was $1.00 million; and available-for-sale investments were $7.57 million, including $3.70 million pledged to secure a landlord letter of credit. Together, cash and investments were approximately $23.1 million.
- Debt principal was $16.96 million, compared with $6.57 million at year-end 2022; the balance-sheet carrying value was $11.54 million after unamortized discounts. The company also had approximately $23.96 million of operating lease liabilities, current and long-term combined.
- Total assets were $49.19 million, total liabilities $40.44 million, and stockholders’ equity $8.53 million. Common shares outstanding at quarter-end were 83.19 million; 87.07 million were outstanding as of May 3, 2023.
Material changes and notable events
- SKYX issued $10.35 million of convertible notes in Q1 and granted noteholders 1,391,667 warrants with a $3 initial exercise price. The warrants generated a $5.6 million debt discount.
- In April 2023, the company completed its Belami acquisition, paying $7.0 million in cash and issuing 1,923,285 shares; the filing notes that $1.0 million was released from escrow to sellers. Deferred consideration includes $3.2 million cash and approximately 1,879,816 shares in April 2024, assuming a $3 minimum share price. Belami had also issued $1.5 million of notes guaranteed by SKYX.
- In April 2023, SKYX repaid a secured note using $2.0 million cash and 574,713 shares. The filing describes the amount due as approximately $6.2 million in one section and approximately $5.2 million in another; investors should verify the final settlement amount.
- In May 2023, SKYX entered a $2.0 million secured revolving credit facility maturing May 2024, with a variable rate based on prime plus 0.25%, subject to a 5% floor and specified cap.
- At March 31, the company had a $2.638 million GE minimum royalty obligation payable by December 31, 2023; the GE license expires in November 2023.
Outlook, risks and other disclosures
- Management expected 2023 revenue to exceed 2022 levels, citing marketing of advanced and smart products, anticipated commercial sales and the Belami acquisition. It expected higher SG&A and cost of revenues as it invests in growth. The filing provides no numerical revenue or earnings guidance and describes manufacturing as expected to begin during 2023.
- Management stated existing cash and debt securities should support working capital and capital needs for at least 12 months, while noting that further financing may be needed depending on acquisition integration, manufacturing, growth spending and product adoption.
- Key risks include execution and market acceptance of new products, Belami integration and e-commerce demand, dependence on two vendors for all purchases, financing needs, debt repayment, supply-chain and inflation pressures, and maintaining the GE license and required quality controls.
- The company reported no material pending legal proceedings and no material change to its previously disclosed risk factors other than additional Belami-related risks. Management concluded disclosure controls were effective as of March 31, 2023.
Investor facts to verify
- Commercial launch and manufacturing progress, and whether sales grow materially from the very low Q1 base.
- Belami’s acquired financial contribution, integration costs, deferred consideration and guaranteed notes.
- Liquidity after acquisition spending and note repayment, and the timing and terms of any additional financing.
- Convertible-note maturities and conversion terms, warrant dilution, and the reported 39.6 million anti-dilutive common-stock equivalents.
- The amount and settlement details of the secured note repaid after quarter-end, given differing amounts in the filing.
- GE license renewal or replacement, and payment of the $2.638 million royalty obligation.