SKYX Platforms Corp. — Q2 2022 Form 10-Q
Reporting period: Three and six months ended June 30, 2022; filed August 12, 2022. SKYX develops patented safe-installation and smart-home technologies for lighting, ceiling fans, and other electrical products. The interim financial statements are unaudited.
Financial performance and liquidity
| Metric | Q2 2022 | Six months 2022 | Comparable 2021 period |
|---|---|---|---|
| Revenue | $7,389 | $14,360 | $0 in Q2; $100,185 in six months |
| Gross income | $1,267 | $2,598 | $0 in Q2; $17,677 in six months |
| Gross margin | About 17% | About 18% | Not meaningful in Q2; about 18% in six months |
| SG&A | $4.57 million | $16.51 million | $0.96 million in Q2; $1.83 million in six months |
| Operating loss | $4.56 million | $16.51 million | $0.96 million in Q2; $1.81 million in six months |
| Net loss | $4.65 million | $16.50 million | $1.10 million in Q2; $2.09 million in six months |
| Net loss attributed to common shareholders | $4.65 million | $21.22 million | $1.13 million in Q2; $2.15 million in six months |
| Basic and diluted loss per share | $0.06 | $0.22 | $0.02 in Q2; $0.03 in six months |
- At June 30, cash and cash equivalents were $24.68 million, versus $10.43 million at year-end 2021. Current assets were $26.96 million and current liabilities $5.19 million.
- Six-month operating cash use was $6.20 million; investing cash use was $345,000; financing provided $20.81 million. Financing primarily reflected the February IPO. Cash increased $14.26 million during the period.
- Six-month noncash stock-based compensation was $11.19 million. The company reported a $178,250 gain from PPP loan forgiveness.
- Debt principal totaled $7.02 million, including $403,567 current notes payable and $1.30 million of convertible notes. GE royalty obligations were separately reported at $3.24 million; operating lease liabilities totaled about $1.43 million.
- Net IPO proceeds were approximately $20.5 million on $23.1 million gross proceeds. The company reported 81.05 million common shares outstanding at June 30, up from 66.30 million at year-end 2021; 81.11 million were reported outstanding July 29.
Changes versus the prior period
- Revenue remained minimal as the company intentionally sold through discontinued inventory while shifting focus to new patented smart platforms. Six-month revenue declined 86% year over year.
- Net loss increased substantially, primarily as SG&A rose with stock-based compensation, marketing and product development, and costs to support planned expansion. Six-month stock-based compensation was $11.19 million, versus $337,000 a year earlier.
- Cash increased following the IPO, while operating cash use also rose to $6.20 million from $1.80 million in the first half of 2021.
- During the first half, 11.38 million shares of preferred stock converted to common stock. The filing also records $4.69 million of common stock issued under anti-dilutive provisions, an unusual item contributing to the larger loss attributed to common shareholders.
Outlook, risks, and other notable items
- Management expected commercial manufacturing and marketing of advanced and smart products to begin in the second half of 2022 and believed second-half revenue would exceed first-half revenue. These are expectations, not reported results.
- Management expected SG&A to be higher for full-year 2022 as it invested in anticipated growth, and expected increased inventory investment ahead of product launches. It believed cash on hand would fund working capital and capital expenditures for at least 12 months, while noting future financing might be needed and could be unavailable on acceptable terms.
- Key risks include execution and market acceptance of new products, dependence on a single customer for 100% of revenue and accounts receivable, and two vendors for 100% of cost of sales. The company also cited manufacturing and supplier concentration, supply-chain constraints, inflation, COVID-19 impacts, competition, and financing and debt-repayment needs.
- Uninsured bank deposits were $24.38 million at quarter-end. The GE license expires November 30, 2023 and requires minimum payments; $2.25 million was due in the remaining 2022 period and $988,000 in 2023. The filing states the NBG note is secured by substantially all company assets.
- The company reported no material pending legal matters and no material change in previously disclosed risk factors. Management concluded disclosure controls were effective as of June 30, 2022.
Important facts for investors to verify
- Whether the anticipated second-half 2022 product launches and commercial manufacturing occurred, and whether they generated meaningful revenue.
- Cash burn, remaining liquidity, and the timing and terms of any additional financing; also monitor debt service, GE royalty payments, and lease commitments.
- Whether customer and vendor concentration has changed, and whether supply-chain and manufacturing constraints affect product availability or costs.
- The nature and potential dilution from stock options, preferred shares, warrants, and anti-dilutive share provisions; reconcile the $16.50 million net loss with the $21.22 million loss attributed to common shareholders.