Filing summary
Issuer discrepancy: The supplied filing is for SQL Technologies Corp. (formerly Safety Quick Lighting & Fans Corp.), not SKYX Platforms Corp. The filing covers the quarter ended March 31, 2018. Verify that this is the intended filing before relying on the figures below.
Business context and reporting period
SQL Technologies developed patented quick-connect technology for installing electrical fixtures and sold GE-branded fans and lighting through large retailers. It reported results for the three months ended March 31, 2018, compared with the same quarter in 2017. The company said it was transitioning its product portfolio and sales and marketing approach toward “Smart SQL” technologies.
Key financial metrics
| Metric | Q1 2018 | Q1 2017 / comparison |
|---|---|---|
| Revenue | $3.14 million | $2.61 million; up 20.1% |
| Gross profit and margin | $708,759; 22.6% | $608,975; 23.3% |
| Operating expenses | $2.47 million | $1.76 million; up 40.6% |
| Operating loss | $1.77 million | $1.15 million |
| Net loss | $1.60 million | $17.41 million |
| Basic and diluted loss per share | $0.031 | $0.45 |
| Operating cash flow | $(495,947) | $(893,854) |
| Cash and cash equivalents | $4.76 million at March 31 | $4.88 million at December 31, 2017 |
The net loss improved substantially year over year primarily because Q1 2017 included large noncash derivative-related charges. The 2018 quarter included $244,515 of income from the fair-value change in embedded derivative liabilities and $2.06 million of derivative expense. Adjusted EBITDA, as defined by the company, was a loss of $394,802, compared with a loss of $539,685 in Q1 2017.
Liquidity, debt, and material changes
- Working capital deficit was $27.01 million at March 31, 2018, compared with $23.27 million at December 31, 2017. Current liabilities included $18.93 million of derivative liabilities and a $10.58 million GE royalty obligation.
- Notes payable totaled approximately $4.16 million: $3.92 million outstanding under a secured line of credit bearing 9% interest and maturing January 10, 2019; a $200,000 related-party demand note bearing 12%; and a $40,642 bank note. The filing reports $6.08 million available under the $10 million line of credit.
- The GE license agreement requires a total of $12 million in royalties, with any unpaid balance due in December 2018. The outstanding obligation was $10.58 million. The GE trademark license was due to expire in November 2018.
- Cash declined by $117,858 during the quarter. Financing provided $403,218, primarily from net line-of-credit proceeds; investing used $25,128, mainly for patent costs.
- Stock-based compensation of $901,068, including $720,000 for executive share grants and $181,068 for options, contributed to higher operating expenses. Accounts receivable rose to $1.82 million from $1.05 million at year-end.
Outlook, risks, and unusual items
Management gave no quantified revenue, earnings, or cash-flow guidance. It said additional capital or alternative financing may be needed to replace the line of credit as it approaches expiry and to fund working capital, and that no replacement financing commitment was in place. The company cited uncertainty around commercialization and product acceptance, competition at large retailers, economic conditions, and cost-of-sales volatility. It also reported $4.26 million of uninsured bank deposits at March 31, 2018.
Other notable items include a $600,000 impairment of the GE license recorded in 2017; the substantial derivative liabilities, whose fair-value estimates use Level 3 inputs; and subsequent approval of a new stock incentive plan authorizing up to 5 million shares. Management reported effective disclosure controls and no material quarterly change in internal control over financial reporting. The filing states there were no pending legal proceedings.
Important facts for investors to verify
- Confirm issuer identity: the provided metadata names SKYX Platforms Corp., but the filing names SQL Technologies Corp.
- Verify share counts: the filing reports 54,414,900 common shares issued and outstanding at March 31, while its cover page reports 53,414,901 common shares as of May 11, 2018. Preferred-share counts also differ slightly in separate portions of the filing.
- Assess the timing and funding of the $10.58 million GE royalty obligation and the November 2018 license expiry.
- Determine whether the company secured replacement financing before the $10 million line of credit matured in January 2019.
- Review the assumptions and potential dilution associated with $18.93 million of derivative liabilities, redeemable preferred stock, warrants, and options.