SKYX Platforms Corp. — Q3 2022 Form 10-Q
Business context and reporting period. This unaudited quarterly report covers the three and nine months ended September 30, 2022. SKYX develops safe-installation and smart-home electrical products, including plug-and-play lighting and ceiling-fan technologies. The company said it was transitioning away from discontinued products and preparing to launch new platforms; it reported holding more than 60 U.S. and global patents and patent applications.
Financial performance and position
| Metric | Q3 2022 / September 30, 2022 | Comparable period / prior year-end |
|---|---|---|
| Revenue | $8,556 | $0 in Q3 2021; $22,916 for nine months 2022 versus $100,185 for nine months 2021 |
| Gross income and margin | $2,642; approximately 30.9% | Nine months: $5,240 and approximately 22.9%, versus $17,677 and approximately 17.6% |
| SG&A | $5.61 million | Q3 2021: $1.43 million; nine months 2022: $22.12 million versus $3.26 million |
| Net loss | $5.66 million; basic and diluted loss per share $0.07 | Q3 2021: $1.56 million; nine months 2022: $22.16 million versus $3.65 million. Nine-month loss per share was $0.28 |
| Cash flow, nine months | Operations used $9.73 million; investing used $7.84 million; financing provided $20.71 million | 2021: operations used $2.83 million; investing used $0.15 million; financing provided $2.91 million |
| Liquidity | $10.83 million cash and equivalents, $2.74 million restricted cash, and $7.33 million available-for-sale investments | Cash and equivalents were $10.43 million at December 31, 2021 |
| Debt and leases | $6.82 million debt principal and $23.59 million operating lease liabilities | Debt principal was $7.20 million at December 31, 2021; no operating lease liability was reported then |
Q3 and nine-month gross margins are calculated from reported revenue and gross income. Revenue was very small relative to operating expenses, so these margins should be viewed in that context. Nine-month SG&A included $13.96 million of non-cash stock-based compensation; management attributed the expense increase principally to equity compensation, marketing and product development, and expanded operations. The nine-month common-shareholder loss was $26.89 million, including a $4.69 million charge related to anti-dilutive provisions and preferred dividends.
Material changes and management commentary
- Nine-month revenue fell 77% year over year as SKYX ran down discontinued-product inventory while shifting focus to new products. Management expected revenue to be higher following anticipated product launches, but the filing provides no quantified revenue guidance.
- The company completed its February 2022 IPO, receiving $23.1 million gross and approximately $20.5 million net. Nine-month financing cash flow was primarily from the offering.
- New leases substantially increased reported assets and liabilities. The September Miami headquarters/showroom lease covers approximately 32,200 square feet; the company reported $23.62 million of right-of-use assets obtained for new lease obligations. It also reported a $2.7 million cash-secured letter of credit for a lessor.
- Management said existing cash and debt securities should fund working capital and capital expenditures for at least 12 months, while noting that future requirements depend on growth, product development, inventory, and market adoption. Management expected SG&A to be higher in fiscal 2022 and 2023 and interest expense to rise as lease liabilities increase.
- Risks include dependence on a limited supplier base, product-launch and market-acceptance uncertainty, financing needs, supply-chain and inflation pressures, and reliance on the GE license, which expires in November 2023. Two vendors accounted for 100% of cost of sales; one customer represented 100% of accounts receivable at September 30. Deposits exceeding FDIC insurance totaled $13.32 million.
Other notable items
Debt includes $5.36 million of notes payable, generally bearing 8% interest and secured by substantially all company assets, and $1.30 million of convertible notes bearing 6% interest. GE royalty obligations totaled $2.94 million, including $2.64 million of minimum payments due in 2023. Common shares outstanding were 82.56 million at September 30; 33.39 million stock options were outstanding, a potential dilution consideration. Management reported effective disclosure controls as of September 30. The company reported no pending material legal proceedings and no material changes to the risk factors in its 2021 Form 10-K.
Key facts for investors to verify
- Whether planned product launches occurred and generated meaningful commercial sales after the reporting period.
- Whether the stated 12-month liquidity expectation remains supported after operating cash use, inventory investment, and lease commitments.
- The scale and timing of rent, rent abatements, lessor improvements, and the $2.7 million restricted-cash collateral requirement.
- The potential effects of stock options, preferred shares, convertible notes, and anti-dilution provisions on future share count and per-share results.
- The 10-Q’s MD&A lists nine-month 2022 net interest expense as $244,610, while the statement of operations reports $224,610; investors should verify the correct figure.