SKYX Platforms Corp. — FY2022 Form 10-K
Reporting period: Fiscal year ended December 31, 2022. The filing was signed March 31, 2023. Amounts are in U.S. dollars unless stated otherwise.
Business context and reporting period
SKYX develops patented plug-and-play electrical installation products and smart-home technologies, including connected lighting and fans and an all-in-one home safety and smart platform. The company was transitioning away from sales of older products while developing its new product line. New products were marketed or launched in late 2022, but manufacturing and commercial sales were expected to begin in 2023; 2022 revenue remained minimal.
In February 2023, SKYX agreed to acquire Belami, an e-commerce lighting and home-décor business, subject to closing conditions. Management expected the acquisition to add distribution and marketing channels. The filing also reports a March 2023 purchase of 50% of an e-commerce private-label lighting website.
Key financial metrics
| Metric | FY2022 | FY2021 |
|---|---|---|
| Revenue | $32,022 | $43,109 |
| Gross profit (loss) | $13,109 | $(45,352) |
| Gross margin | Approximately 41% | Approximately (105%) |
| Selling, general and administrative expenses | $26.64 million | $5.14 million |
| Operating loss | $(26.63) million | $(5.19) million |
| Net loss | $(27.04) million | $(5.73) million |
| Net loss per share, basic and diluted | $(0.40) | $(0.09) |
| Net cash used in operating activities | $(13.84) million | $(4.63) million |
The gross-margin percentages reflect very small revenue bases and are not necessarily indicative of future product economics. The reported 2022 net loss included $13.96 million of non-cash share-based compensation; management’s adjusted SG&A measure, excluding that compensation, was $12.68 million, versus $3.68 million in 2021.
Liquidity and obligations: At year-end, cash and cash equivalents were $6.72 million, available-for-sale investments were $7.37 million, and restricted cash was $2.74 million, for total cash, equivalents, restricted cash and investments of about $16.84 million. Current assets were $16.33 million and current liabilities $7.42 million. The restricted cash secured a $2.7 million letter of credit and was not freely available. Year-end debt principal was $6.57 million; scheduled principal payments included $1.81 million in 2023. Operating lease liabilities were $23.89 million, largely associated with the new Miami headquarters lease. GE royalty obligations of $2.64 million were current and expected to be paid in 2023.
Cash flow and financing: Investing activities used $8.06 million, primarily for purchases of available-for-sale securities. Financing activities provided $20.93 million, including $23.1 million of IPO proceeds before $2.55 million of placement costs and other financing items. In February and March 2023, the company issued $10.35 million aggregate principal amount of secured convertible notes in private placements; the notes bear 10% interest and are convertible at an initial $3.00 per share, subject to adjustment. Management stated that available liquidity, including financing, was expected to support operations for at least 12 months.
Material changes versus the prior comparable period
- Revenue fell 26%, which management attributed to selling through discontinued-product inventory while shifting resources toward new smart products.
- SG&A increased by $21.50 million. The company cited approximately $12.5 million of additional share-based compensation, increased marketing and product-development spending, and other spending to support planned expansion.
- Net loss widened to $27.04 million from $5.73 million. Operating cash use also increased, to $13.84 million from $4.63 million.
- Cash and cash equivalents declined from $10.43 million to $6.72 million, while the company added $7.37 million of available-for-sale investments and $2.74 million of restricted cash.
- Common shares outstanding increased from 66.30 million at year-end 2021 to 82.91 million at year-end 2022. The company also recorded $4.69 million of common stock issued under anti-dilution provisions; this was presented as a deduction in arriving at net loss attributable to common stockholders, rather than as an increase to reported net loss.
Outlook, risks and unusual items
- Management expected 2023 revenue to exceed 2022 levels, citing anticipated commercial sales of new products and the proposed Belami acquisition. It also expected higher operating expenses and interest expense. These are expectations, not guarantees; the filing gives no numerical revenue or profit guidance.
- Product execution remains a central risk: SKYX had not begun manufacturing its new advanced or smart products, and commercial launch depended on manufacturing readiness, suppliers, certifications, distribution, customer acceptance and successful product integration.
- The business relies on third-party manufacturers and suppliers, primarily in China. Two vendors accounted for 100% of cost of sales in both 2022 and 2021. The company cited component shortages, shipping and geopolitical risks, and limited supply-chain visibility as concerns.
- The GE trademark license was scheduled to expire in November 2023, subject to renewal provisions. The company had $2.64 million of remaining minimum royalty obligations at year-end. Confirming renewal and payment terms is important.
- Belami’s acquisition was not completed as of the filing date. The proposed consideration includes cash, SKYX shares and deferred payments; the company also planned to assume Belami’s approximately $2.5 million term loan and $2.0 million revolving credit facility. Completion, integration and the expected benefits were uncertain.
- The company reported a history of losses and an accumulated deficit of $106.1 million. Additional financing may be needed; the 2023 convertible notes carry material interest and potential dilution. The filing also identifies dilution from outstanding options, warrants, preferred stock and convertible notes.
- Other material risks include competition, market adoption, cybersecurity and privacy, public-company costs, economic and housing-market conditions, and the possibility of further supply disruptions. The filing reports no material legal proceedings pending as of its date.
- The auditor issued an unqualified opinion on the financial statements. Management reported effective disclosure controls and internal control over financial reporting as of December 31, 2022; the auditor did not provide an ICFR attestation.
Important facts for investors to verify
- Whether new products entered commercial production and generated meaningful sales in 2023, and whether demand, margins and returns support the company’s stated growth plans.
- Whether the Belami acquisition closed on the disclosed terms, including total cash and share consideration, assumed debt, working-capital adjustments and integration costs.
- Cash availability and burn after year-end, including the use of the 2023 private-placement proceeds, note interest and conversion terms, and any additional financing needs.
- The status and renewal terms of the GE agreements, and the timing and source of funds for the $2.64 million royalty obligation.
- Whether manufacturing capacity, supplier diversification, component availability and required product certifications support launch schedules and expected costs.
- The full potential dilution from equity awards, warrants, convertible securities, acquisition shares and anti-dilution provisions.
- The obligations and flexibility associated with the $23.89 million of operating lease liabilities, including the Miami headquarters lease and restricted letter-of-credit cash.