SKYX Platforms Corp. — Q3 2023 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2023. Financial statements are unaudited. SKYX develops safe-installation and smart-home electrical products and, since acquiring Belami in April 2023, also sells third-party home lighting, ceiling fans and furnishings online.
Financial performance
| Metric | Q3 2023 | Q3 2022 | Nine months 2023 | Nine months 2022 |
|---|---|---|---|---|
| Revenue | $21.62 million | $8,556 | $36.61 million | $22,916 |
| Gross profit / margin | $6.70 million / 31.0% | $2,642 | $11.40 million / 31.1% | $5,240 |
| Operating loss | $6.52 million | $5.61 million | $26.01 million | $22.12 million |
| Net loss | $7.18 million | $5.66 million | $27.41 million | $22.16 million |
| Loss per share, basic and diluted | $0.08 | $0.07 | $0.31 | $0.34 |
| Adjusted EBITDA, non-GAAP | $(2.45) million | $(2.82) million | $(9.09) million | $(7.79) million |
Revenue growth primarily reflects Belami’s results, consolidated from April 28, 2023; comparisons with 2022 are not meaningful as reported revenue in that period was minimal. Q3 operating expenses rose 136% to $13.22 million, including Belami-related costs, while nine-month operating expenses rose 69% to $37.42 million. Interest expense increased substantially, reflecting debt, lease obligations and amortization of debt discount. Nine-month net loss included a $1.20 million gain on extinguishment of debt.
Cash flow, liquidity and debt
- At September 30, cash and cash equivalents were $16.48 million; restricted cash was $5.63 million, for combined cash and restricted cash of $22.11 million. A further $2.3 million of unused credit lines was cited in management’s liquidity discussion.
- For the first nine months, operating cash use was $10.09 million, investing activities provided $3.11 million, and financing activities provided $19.63 million. Financing included convertible-note and equity proceeds; investing included $7.57 million from debt-security dispositions and $4.21 million net cash paid for Belami.
- Reported working capital was $2.6 million after adjustment for $5.6 million of acquisition consideration payable in shares. Based on the balance sheet, current assets of $28.34 million less current liabilities of $31.33 million imply unadjusted negative working capital of approximately $3.0 million.
- Debt principal was $16.24 million, or $11.55 million net of $4.69 million unamortized debt discount. This excludes operating lease liabilities, which totaled approximately $25.03 million. Scheduled debt principal includes $1.57 million for the remainder of 2023, $3.42 million in 2024 and $10.58 million in 2026.
- Management stated that cash, cash equivalents and restricted cash were expected to fund working capital and capital expenditure needs for at least 12 months. It also said additional financing may be required depending on growth, integration, manufacturing and other spending needs.
Material changes, outlook and risks
- Belami’s acquisition had an initial purchase price of $20.34 million, including $4.21 million net cash paid, $7.33 million of shares issued and $8.81 million of consideration payable. Purchase-price allocation remains subject to adjustment through April 2024.
- Management expected 2023 revenue to exceed 2022, primarily due to Belami and sales of SKYX advanced and smart products; it expected cost of revenue and operating expenses to increase as well. The filing provides no quantified revenue or earnings guidance.
- The company issued $10.35 million of convertible notes in 2023 and related warrants, recording a $5.6 million debt discount. Its ATM program had generated approximately $8.2 million net proceeds through November 13, 2023, with up to $11.3 million remaining capacity.
- The $2.64 million minimum GE royalty obligation was payable by December 31, 2023; the GE brand license was due to expire in November 2023. Continued rights depend on contractual conditions, including manufacturing and quality requirements.
- Risks highlighted include Belami integration and acquisition estimates, dependence on additional financing, debt repayment, consumer demand and discretionary spending, online-market competition, supply-chain and manufacturing constraints, inflation and interest rates, and potential disruption to product development staff in Israel amid the Israel-Hamas war. The company’s application for mandatory safety standardization with the National Electrical Code is not assured of approval.
- No material legal proceedings were reported. Management concluded disclosure controls were effective at September 30, 2023; it adopted and supplemented Belami’s internal-control procedures following the acquisition.
Important facts for investors to verify
- Belami’s contribution to revenue, profitability and cash generation, and whether integration delivers the expected benefits.
- Liquidity and refinancing needs, including near-term debt maturities, restricted-cash availability, and the distinction between reported and adjusted working capital.
- Terms, timing and final amount of Belami acquisition consideration, including the shares and cash payable in 2024.
- Status of the GE license and payment of the royalty obligation due by year-end 2023.
- Potential dilution: 91.85 million shares were outstanding at September 30 (92.17 million at October 31), with 41.07 million anti-dilutive common-stock equivalents disclosed at September 30.
- Progress toward commercial adoption of SKYX products, manufacturing scale-up, and approval of the company’s NEC standardization application.