Business context and reporting period
This filing covers the quarter and nine months ended September 30, 2016. The filing identifies the registrant as SQL Technologies Corp. (formerly Safety Quick Lighting & Fans Corp.), not SKYX Platforms Corp.; investors should verify the entity and filing-period match before relying on this summary. The company develops patented quick-installation technology for electrical fixtures and sells GE-branded lighting fixtures and ceiling fans.
Financial performance and position
| Metric | Q3 2016 | Q3 2015 | Nine months 2016 | Nine months 2015 |
|---|---|---|---|---|
| Revenue | $1.93 million | $0.26 million | $5.53 million | $2.48 million |
| Gross profit and margin | $0.34 million; 17.5% | $0.01 million; 5.4% | $0.69 million; 12.4% | $0.29 million; 11.5% |
| Operating loss | $1.28 million | $1.21 million | $3.86 million | $3.45 million |
| Net loss | $29.16 million | $10.08 million | $72.93 million | $13.09 million |
| Net loss per share, basic and diluted | $0.624 | $0.25 | $1.634 | $0.34 |
For the nine-month period, operating cash outflow was $5.34 million, investing cash outflow $0.03 million, and financing cash inflow $9.92 million. Cash rose to $5.00 million from $0.45 million at year-end 2015. Inventory was $2.97 million and accounts receivable $1.67 million at September 30.
Current assets were $9.74 million against current liabilities of $32.46 million, a working-capital deficit of $22.73 million. Total liabilities were $43.98 million, compared with assets of $15.37 million. Current derivative liabilities were $25.02 million; the company also reported $3.12 million of current notes payable, $0.20 million of related-party notes, and a $11.41 million long-term GE royalty obligation. The $10 million secured credit line had $3.01 million drawn and $6.99 million available at quarter-end. A separate $500,000 related-party loan was on demand and bore 12% interest; $200,000 remained outstanding.
Changes versus prior comparable periods
- Q3 revenue increased 635% year over year; nine-month revenue increased 123%. Management attributed growth to existing and new customers. Gross margins improved, which management linked to online-sales mix and pricing.
- Operating losses widened modestly: 5.7% in Q3 and 11.8% for the nine months, as higher gross profit was outweighed by increased general and administrative expenses.
- Net losses rose sharply, driven chiefly by non-cash financing-related items. The nine-month loss included a $38.64 million derivative fair-value charge, $7.41 million derivative expense, and a $22.30 million debt-extinguishment loss. These items materially distinguish reported net loss from operating performance.
- Cash increased through financing, including $7.54 million from stock issuance and proceeds from notes, partly offset by repayments. The company issued 7.08 million preferred shares during the quarter in connection with convertible-note conversions; common shares outstanding were 47.08 million at quarter-end.
Outlook, risks, contingencies and unusual items
- Management stated that stock-sale proceeds and the available credit line provided sufficient liquidity for the next 12 months, despite ongoing negative operating cash flow. This is management’s assessment, not a guarantee.
- The $10 million credit facility was intended to support manufacturing, purchase orders, inventory and working capital; it carried 8% interest, with principal and unpaid interest due December 31, 2017.
- Convertible-note holders were offered repayment, common-stock conversion, or conversion into preferred stock. Preferred stock was convertible at $0.25 per common share and carried 6% quarterly interest; further conversions and issuances remained pending after quarter-end. The filing reports that two investors holding $100,000 principal had not responded as of November 14, 2016.
- The company’s GE license requires a minimum cumulative $12 million royalty payment by November 2018, with any unpaid balance due later under the agreement. The company paid $319,170 in royalties during the first nine months of 2016.
- Management cited commercialization and sales variability, competition at large retailers, economic conditions and cost-of-sales volatility as risks. Inventory obsolescence, receivable collection, patent valuation and Level 3 derivative valuations also rely on estimates. The filing reports no pending legal proceedings and no off-balance-sheet arrangements.
- No quantified revenue or earnings guidance is provided. Management’s forward-looking statements are subject to risks and the company disclaims an obligation to update them.
Important facts for investors to verify
- Whether this SQL Technologies Corp. 2016 filing is the intended filing for SKYX Platforms Corp.; the names and reporting period in the supplied filing do not match the request metadata.
- The status, terms and remaining availability of the secured credit line, and the company’s ability to meet near-term obligations given its working-capital deficit and negative operating cash flow.
- The final disposition of outstanding convertible notes, subsequent preferred-stock issuances, and the preferred shares’ conversion, dividend and repurchase terms.
- The assumptions and sensitivity behind the $25.02 million derivative liability and the unusually large non-cash debt-extinguishment and derivative charges.
- The company’s progress toward sales growth and profitability, its inventory and receivables conversion to cash, and its ability to satisfy the GE royalty minimum by the contractual deadline.