SKYX Platforms Corp 10-Q for FY2022 Q1
SKYX Platforms Corp. (SKYX)
About this 10-Q
SKYX Platforms Corp filed this 10-Q on May 9, 2022, covering the quarter ended March 31, 2022 (FY2022 Q1).
Headline figures
Quarter ended March 31, 2022, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $6971
- down 93.0% from $100.19K a year earlier
- Net loss
- $11.86M
- compared with a net loss of $986.94K a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
For
the quarterly period ended
OR
For the transition period from to
Commission
File Number:
(Exact name of registrant as specified in its charter)
| (State
or other jurisdiction of incorporation or organization) |
(IRS Employer Identification No.) |
(Address, including zip code, of principal executive offices)
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading symbol(s) | Name of each exchange on which registered | ||
| The
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Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Indicate
by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule
405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant
was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☐ |
| ☒ | Smaller reporting company | ||
| Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐
As of May 6, 2022, the registrant had shares of common stock, no par value per share, issued and outstanding.
SQL TECHNOLOGIES CORP.
Form 10-Q
TABLE OF CONTENTS
| 2 |
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q (this “Form 10-Q”) of SQL Technologies Corp. (the “Company,” “we,” “us,” or “our”) contains forward-looking statements that are based on management’s beliefs and assumptions and on information currently available to management. All statements other than statements of historical facts contained in this Form 10-Q, including statements regarding our strategy, future financial condition, future operations, projected costs, prospects, plans, objectives of management, outlook, and expected market growth, are forward-looking statements. In some cases, you can identify forward-looking statements by the following words: “may,” “might,” “will,” “could,” “would,” “should,” “expect,” “intend,” “plan,” “aim,” “objective,” “anticipate,” “believe,” “estimate,” “predict,” “project,” “potential,” “continue,” “ongoing,” “target,” “seek” or the negative of these terms or other comparable terminology, although not all forward-looking statements contain these words. These statements involve risks, uncertainties and other factors, many of which have been, and may further be, exacerbated by the COVID-19 pandemic, that may cause actual results, levels of activity, performance or achievements to be materially different from the information expressed or implied by these forward-looking statements. Forward-looking statements in this Form 10-Q include, but are not limited to, statements about:
| ● | our ability to successfully launch, develop additional features and achieve market acceptance of our smart products and technologies, access and integrate our products and technologies with third-party platforms or technologies, respond to rapidly changing technology and customer demands, and compete in our industry; | |
| ● | our financial performance and liquidity, including our ability to successfully generate sufficient revenue to support our operations; | |
| ● | our ability to expand, operate and successfully manage our operations, including managing our business transformation in connection with evolving our business strategy to focus on smart products and technologies; | |
| ● | our ability to raise additional financing to support our operations as needed; | |
| ● | our ability to comply with the terms of, and timely repay, our current debt financing; | |
| ● | the impact of the COVID-19 pandemic on our business and operations, including the potential impact on manufacturing operations in China; | |
| ● | our reliance on a limited number of third-party manufacturers and suppliers and our ability to successfully reduce our production costs; | |
| ● | our potential dependence upon a limited number of customers and/or on contracts awarded through competitive bidding processes; | |
| ● | any downturn in the cyclical industries in which our customers operate; | |
| ● | our ability to acquire other businesses, license rights, form alliances or dispose of operations when desired; | |
| ● | our ability to comply with regulations relating to applicable quality standards; | |
| ● | our ability to maintain our license agreement with General Electric (“GE”); | |
| ● | our ability to maintain, protect and enhance our intellectual property; | |
| ● | the potential outcome of any legal proceedings; | |
| ● | our ability to successfully sell and distribute our products and technologies; | |
| ● | our ability to retain key executives and qualified personnel; | |
| ● | our ability to successfully manage our planned development and expansion, including the additional costs of being a public company; | |
| ● | our ability to maintain effective internal control over financial reporting and disclosure controls and procedures; | |
| ● | the potential impact of unstable market and economic conditions on our business, financial condition and stock price, including the effects of the Russia-Ukraine conflict; | |
| ● | the potential impact of cybersecurity breaches or disruptions to our information systems, including our cloud-based infrastructure; | |
| ● | the potential impact of natural disasters and other catastrophic events, such as the COVID-19 pandemic; | |
| ● | risks related to ownership of our common stock; and | |
| ● | the potential impact of anti-takeover and director and officer liability provisions in our charter documents and under Florida law. |
These forward-looking statements represent our intentions, plans, expectations, assumptions, and beliefs about future events and are subject to risks, uncertainties, and other factors, including unpredictable or unanticipated factors that we have not discussed in this Form 10-Q. Investors should refer to the heading “Part I. Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2021 for a discussion of other important factors, many of which are out of our control, that may cause actual results to differ materially from those expressed or implied by the forward-looking statements. As a result of these factors, we cannot assure you that the forward-looking statements in this Form 10-Q will prove to be accurate. Furthermore, if the forward-looking statements prove to be inaccurate, the inaccuracy may be material. In light of the significant uncertainties in these forward-looking statements, you should not regard these statements as a representation or warranty by us or any other person that we will achieve our objectives and plans in any specified time frame, or at all. The forward-looking statements in this Form 10-Q represent our views as of the date of this Form 10-Q. We anticipate that subsequent events and developments will cause our views to change; however, we undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by U.S. federal securities laws. You should, therefore, not rely on these forward-looking statements as representing our views as of any date subsequent to the date of this Form 10-Q.
| 3 |
Part I. FINANCIAL STATEMENTS
ITEM 1. FINANCIAL STATEMENTS
SQL TECHNOLOGIES CORP.
Consolidated Balance Sheets
(Unaudited) March 31, 2022 | (Audited) December 31, 2021 | |||||||
| Assets | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Inventory | ||||||||
| Prepaid expenses and other assets | ||||||||
| Total current assets | ||||||||
| Other assets: | ||||||||
| Furniture and equipment, net | ||||||||
| Patents, net | ||||||||
| Other assets | ||||||||
| Total other assets | ||||||||
| Total Assets | $ | $ | ||||||
| Liabilities and Stockholders’ Equity (Deficit) | ||||||||
| Current liabilities: | ||||||||
| Accounts payable and accrued expenses | $ | $ | ||||||
| Notes payable, current | ||||||||
| Royalty obligation | ||||||||
| Total current liabilities | ||||||||
| Long term liabilities: | ||||||||
| Notes payable | ||||||||
| Convertible notes | ||||||||
| Royalty obligation | ||||||||
| Total long-term liabilities | ||||||||
| Total liabilities | ||||||||
| Commitments and Contingent Liabilities: | - | - | ||||||
| Redeemable preferred stock - subject to redemption: $par value; shares authorized; and shares issued and outstanding at March 31, 2022 and December 31, 2021, respectively | ||||||||
| Stockholders’ Equity (Deficit): | ||||||||
| Common stock and additional paid-in-capital: $ par value, shares authorized; and and shares issued and outstanding at March 31, 2022 and December 31, 2021, respectively | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total stockholders’ equity (deficit) | ( | ) | ||||||
| Non-controlling interest | ( | ) | ||||||
| Total equity (deficit) | ( | ) | ||||||
| Total Liabilities and Stockholders’ Equity (Deficit) | $ | $ | ||||||
The accompanying notes are an integral part of the consolidated financial statements.
| 4 |
SQL Technologies Corp.
Consolidated Statements of Operations
(Unaudited)
| For the three months ended March 31, | ||||||||
| 2022 | 2021 | |||||||
| Revenue | $ | $ | ||||||
| Cost of revenues | ( | ) | ( | ) | ||||
| Gross income (loss) | ( | ) | ||||||
| Selling, general and administrative expenses | ||||||||
| Loss from operations | ( | ) | ( | ) | ||||
| Other income / (expense) | ||||||||
| Interest expense | ( | ) | ( | ) | ||||
| Other income, loan forgiveness | - | |||||||
| Interest income | ||||||||
| Total other (expense), net | ( | ) | ||||||
| Net loss | ( | ) | ( | ) | ||||
| Common stock issued pursuant to antidilutive provisions | - | |||||||
| Preferred dividends | ||||||||
| Net loss attributed to common shareholders | $ | ( | ) | $ | ( | ) | ||
| Net loss per share - basic and diluted | $ | ( | ) | $ | ( | ) | ||
| Weighted average number of common shares outstanding during the year – basic and diluted | ||||||||
The accompanying notes are an integral part of the consolidated financial statements.
| 5 |
SQL Technologies Corp.
Consolidated Statements of Stockholders’ Equity (Deficit)
(Unaudited)
For the three months ended March 31, | ||||||||
| 2022 | 2021 | |||||||
| Shares of Common stock | ||||||||
| Balance, beginning of period | $ | $ | ||||||
| Balance, beginning of period | ||||||||
| Common stock issued pursuant to offerings | ||||||||
| Common stock issued pursuant to offerings | ||||||||
| Common stock issued pursuant to services | ||||||||
| Common stock issued pursuant to services | ||||||||
| Common stock issued pursuant to conversion of preferred stock | ||||||||
| Common stock issued pursuant to conversion of preferred stock | ||||||||
| Common stock issued pursuant to exercise of options | ||||||||
| Common stock issued pursuant to exercise of options | ||||||||
| Common stock issued pursuant to cashless exercise of warrants | ||||||||
| Common stock issued pursuant to antidilutive provisions | ||||||||
| Common stock issued pursuant to antidilutive provisions | ||||||||
| Balance, end of period | ||||||||
| Balance, end of period | ||||||||
| Common stock and paid-in capital | ||||||||
| Balance, beginning of period | $ | $ | ||||||
| Common stock issued pursuant to offerings | ||||||||
| Common stock issued pursuant to services | ||||||||
| Common stock issued pursuant to conversion of preferred stock | ||||||||
| Stock-based compensation | ||||||||
| Common stock issued pursuant to exercise of options | ||||||||
| Common stock issued pursuant to antidilutive provisions | ||||||||
| Balance, end of period | ||||||||
| Accumulated Deficit | ||||||||
| Balance, beginning of period | $ | ( | ) | $ | ( | ) | ||
| Net loss | ( | ) | ( | ) | ||||
| Non-controlling interest | ( | ) | - | |||||
| Common stock issued pursuant to antidilutive provisions | ( | ) | - | |||||
| Preferred Dividends | ( | ) | ( | ) | ||||
| Balance, end of period | ( | ) | ( | ) | ||||
| Beginning balance | - | - | ||||||
| Net loss | - | - | ||||||
| Total stockholders’ Equity (Deficit) | $ | $ | ( | ) | ||||
| Ending balance | $ | $ | ( | ) | ||||
The accompanying notes are an integral part of the consolidated financial statements.
| 6 |
SQL Technologies Corp.
Consolidated Statements of Cash Flows
(Unaudited)
| For the three months ended March 31, | ||||||||
| 2022 | 2021 | |||||||
| Cash flows from operating activities: | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Depreciation and amortization | ||||||||
| (Other income), loan forgiveness | ( | ) | - | |||||
| Non-cash equity-based compensation expense | ||||||||
| Change in operating assets and liabilities: | ||||||||
| Prepaid expenses and other assets | ( | ) | ( | ) | ||||
| Royalty obligation | ( | ) | ( | ) | ||||
| Accounts payable and accrued expenses | ||||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| Cash flows from investing activities: | ||||||||
| Purchase of property and equipment | ( | ) | - | |||||
| Payment of patent costs | ( | ) | ( | ) | ||||
| Net cash used in investing activities | ( | ) | ( | ) | ||||
| Cash flows from financing activities: | ||||||||
| Proceeds from common stock issuance | ||||||||
| Placement cost | ( | ) | - | |||||
| Proceeds from exercise of options | - | |||||||
| Proceeds from SBA - PPP notes payable | ||||||||
| Proceeds from issuance of convertible notes | ||||||||
| Dividends paid | ( | ) | ( | ) | ||||
| Principal repayments of notes payable | ( | ) | - | |||||
| Net cash provided by financing activities | ||||||||
| Increase (decrease) cash and cash equivalents | ||||||||
| Cash and cash equivalents at beginning of period | ||||||||
| Cash and cash equivalents at end of period | $ | $ | ||||||
| Supplementary disclosure of non-cash financing activities: | ||||||||
| Preferred stock conversion to common | $ | $ | ||||||
| Common stock issued pursuant to antidilutive provisions | ||||||||
| Stock issuance, cashless exercise of warrants | ||||||||
| Cash paid during the year for: | ||||||||
| Interest | $ | $ | ||||||
The accompanying notes are an integral part of the consolidated financial statements.
| 7 |
SQL Technologies Corp.
Notes to Consolidated Financial Statements
(Unaudited)
NOTE 1 ORGANIZATION AND NATURE OF OPERATIONS
SQL Technologies Corp., a Florida corporation (the “Company”), was originally organized in May 2004 as a limited liability company under the name of Safety Quick Light, LLC. The Company was converted to corporation on November 6, 2012. Effective August 12, 2016, the Company changed its name from “Safety Quick Lighting & Fans Corp.” to “SQL Technologies Corp.” The Company holds over 60 U.S. and global patents and patent applications and has received a variety of final electrical code approvals, including UL, United Laboratories of Canada (cUL) and Conformité Européenne (CE), inclusion in the 2017 and 2020 National Electric Code (“NEC”) Code Book. The Company maintains offices in Johns Creek, Georgia, Pompano Beach, Florida, and Guangdong Province, China.
The Company has a series of advanced-safe smart platform technologies. The Company’s first-generation technologies enable light fixtures, ceiling fans and other electrically wired products to be installed safely and plugged-in into a ceiling’s electrical outlet box within seconds, and without the need to touch hazardous wires. The plug and play technology method is a universal power-plug device that has a matching receptacle that is simply connected to the electrical outlet box on the ceiling, enabling a safe and quick plug and play installation of light fixtures and ceiling fans in just seconds. The plug and play power-plug technology, eliminates the need of touching hazardous electrical wires while installing light fixtures, ceiling fans and other hard wired electrical products. In recent years the Company has expanded the capabilities of its power-plug product, to include advanced safe and quick universal installation methods, as well as advanced smart capabilities. The smart features include control of light fixtures and ceiling fans by the SkyHome App, through WIFI, Bluetooth Low Energy and voice control. It allows scheduling, energy savings eco mode, dimming, back-up emergency light, night light, light color changing and much more. The Company’s second-generation technology is an all-in-one safe and smart advanced platform that is designed to enhance all-around safety and lifestyle of homes and other buildings.
NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of the Company’s significant accounting policies:
Basis of Presentation
The accompanying consolidated financial statements of the Company have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) for interim financial statements and with the instructions to Form 10-Q and Rule 8-03 of Regulation S-X. Accordingly, they do not include all of the information and disclosures required for annual financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. The consolidated financial statements as of March 31, 2022 and for the three months ended March 31, 2022 and 2021 are unaudited. The results of operations for the interim periods are not necessarily indicative of the results of operations for the respective fiscal years. The consolidated statement of financial condition at December 31, 2021 has been derived from the audited financial statements at that date, but does not include all of the information and notes required by GAAP for complete financial statement presentation. The accompanying consolidated financial information should be read in conjunction with the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021 for additional disclosures and accounting policies.
Reclassifications
For comparability, reclassifications of certain prior-year balances were made in order to confirm with current-year presentations, such as grouping of common stock and additional paid-in capital.
| 8 |
Inventory
Inventories are stated at the lower of cost, determined on the first-in, first-out (FIFO) method. Cost principally consists of the purchase price (adjusted for lower of cost or market), customs, duties, and freight. The Company periodically reviews historical sales activity to determine potentially obsolete items and evaluates the impact of any anticipated changes in future demand.
SCHEDULE OF INVENTORY
| March 31, 2022 | December 31, 2021 | |||||||
| Inventory, component parts | $ | $ | ||||||
Basic net earnings (loss) per share is computed by dividing net income (loss) for the period by the weighted average number of common stock outstanding during each period. Diluted earnings (loss) per share is computed by dividing net income (loss) for the period by the weighted average number of common stock, common stock equivalents and potentially dilutive securities outstanding during each period.
The Company uses the “treasury stock” method to determine whether there is a dilutive effect of outstanding convertible debt, option and warrant contracts. For the three months ended March 31, 2022 and 2021, the Company recognized net loss and a dilutive net loss, and the effect of considering any common stock equivalents would have been antidilutive for the period. Therefore, separate computation of diluted earnings (loss) per share is not presented for the periods presented.
SCHEDULE OF EARNING (LOSS) PER SHARE
| March 31, 2022 | December 31, 2021 | |||||||
| Stock Warrants | ||||||||
| Stock Options | ||||||||
| Convertible Notes | ||||||||
| Preferred stock | ||||||||
| Total | ||||||||
Recently Issued Accounting Pronouncements
Management does not believe that any recently issued, but not yet effective accounting pronouncements, if adopted, would have a material effect on its consolidated financial statements.
| 9 |
NOTE 3 FURNITURE AND EQUIPMENT
Furniture and equipment consisted of the following:
SCHEDULE OF FURNITURE AND EQUIPMENT
| March 31, 2022 | December 31, 2021 | |||||||
| Machinery and equipment | $ | $ | ||||||
| Computer equipment | ||||||||
| Furniture and fixtures | ||||||||
| Tooling and production | ||||||||
| Leasehold improvements | ||||||||
| Total | ||||||||
| Less: accumulated depreciation | ( | ) | ( | ) | ||||
| Total, net | $ | $ | ||||||
Depreciation
expense amounted to $
NOTE 4 INTANGIBLE ASSETS
Intangible assets consisted of the following:
SCHEDULE OF INTANGIBLE ASSETS
| March 31, 2022 | December 31, 2021 | |||||||
| Patents | $ | $ | ||||||
| Trademark | ||||||||
| Less: accumulated amortization | ( | ) | ( | ) | ||||
| Total, net | $ | $ | ||||||
Amortization
expense on intangible assets was $
The following table sets forth the estimated amortization expense for future periods:
SCHEDULE OF INTANGIBLE ASSETS AMORTIZATION EXPENSE FOR FUTURE
| 2022 | $ | |||
| 2023 | ||||
| 2024 | ||||
| 2025 | ||||
| 2026 | ||||
| 2027 and thereafter | ||||
| Total | $ |
NOTE 5 DEBT
The following table presents the details of the principal outstanding:
SCHEDULE OF DEBT TABLE
| March 31, 2022 | December 31, 2021 | |||||||
| a) PPP1 Loan | $ | $ | ||||||
| b) PPP2 Loan | ||||||||
| c) EIDL | ||||||||
| d) Note payable | ||||||||
| e) Convertible Notes | ||||||||
| Total | $ | $ | ||||||
| Notes payable, current portion | ||||||||
| Non-current term notes payable | $ | $ | ||||||
| 10 |
As of March 31, 2022, the expected future principal payments for the Company’s debt are due as follows:
SCHEDULE OF FUTURE PRINCIPAL PAYMENTS
| 2022 –Remaining Period | $ | |||
| 2023 | ||||
| 2024 | ||||
| 2025 | ||||
| 2026 | ||||
| 2027 and thereafter | ||||
| Total | $ |
CARES Act Loans
In March 2020, the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) was enacted. Among other things, the CARES Act established the Paycheck Protection Program (“PPP”), which funded eligible businesses through federally guaranteed loans. Under the PPP, companies are eligible for forgiveness of principal and accrued interest if the proceeds are used for eligible costs, which include, but are not limited to, payroll, benefits, mortgage, lease, and utility expenses.
a)
Paycheck Protection Program Loan - On April 13, 2020, the Company was granted a loan (the “PPP1 Loan”) under the Paycheck
Protection Program in the aggregate amount of $
The
PPP1 Loan matures on
The
loan obligation was $
b)
Second Paycheck Protection Program Loan - On February 3, 2021, the Company was granted a loan (the “PPP2 Loan”) under the
Paycheck Protection Program Second Draw program in the aggregate amount of $
c)
EIDL Loan - On June 24, 2020, the Company received a loan (the “EIDL Loan”) from the SBA under its Economic Injury Disaster
Loan (“EIDL”) assistance program. The principal amount of the EIDL Loan is $
d) Note payable (“NBG”)
On
December 14, 2021, the Company entered into a new secured promissory note with Nielsen & Bainbridge, LLC (“NBG”), in
the amount of approximately $
| 11 |
e) Convertible Notes
SCHEDULE OF CONVERTIBLE DEBT
| March 31, 2022 | December 31, 2021 | |||||||
| Convertible Notes, dated 9/23/2020 | $ | $ | ||||||
| Convertible Notes, dated 11/10/2020 | ||||||||
| Convertible Notes, dated 10/30/2020 | ||||||||
| Convertible Notes, dated 11/3/2020 | ||||||||
| Convertible Notes, dated 01/13/2021 | ||||||||
| Total | $ | $ | ||||||
Included
in Convertible Notes are loans provided to the Company from two directors, an officer and two investors. The notes each have the following
terms: three-year subordinated convertible promissory note of principal face amounts. Subject to other customary terms, the Convertible
Notes mature in between
Accrued
interest on Convertible Notes was $
NOTE 6 GE ROYALTY OBLIGATIONS
On June 15, 2011, we entered into a license agreement with GE, pursuant to which we have the right to market certain ceiling light and fan fixtures displaying the GE brand. The license agreement, as amended, imposes certain manufacturing and quality control conditions that we must maintain in order to continue to use the GE brand. The License agreement is nontransferable and cannot be sublicensed.
On
August 13, 2014, we entered into a second amendment to the license agreement pertaining to our royalty obligations. Under the
initial terms of the amendment, we agreed to pay to GE a minimum trademark license fee of $
We
are expanding our relationship with GE to collaborate on mutual capabilities, and in December 2020, we entered into the current amendment
to the license agreement. The amendments following the second amendment expanded our product range, including smart, and added
additional global territory rights. The license agreement has been extended for an additional five years and expires on November
30, 2023. Pursuant to the third amendment, entered into September 2018, the approximate remaining $
Royalty payments are due quarterly, using a December 1 – November 30 contract year and based upon the prior quarter’s sales. Royalty payments will be paid from sales of GE branded product subject to the following repayment schedule:
SCHEDULE OF GE ROYALTY OBLIGATIONS
| Net Sales in Contract Year | Percentage of Contract Year Net Sales owed to GE | |||
| $ | % | |||
| $ | % | |||
| $ | % | |||
| 12 |
The
Company made principal payments of $
Minimum future payment obligations are approximately as follows:
SCHEDULE OF GE ROYALTY OBLIGATION MINIMUM FUTURE MINIMUM PAYMENT
| Year | Minimum Obligation | |||
| 2022, remaining period | $ | |||
| 2023 | ||||
| Total principal payments | $ | |||
NOTE 7 ACCRUED EXPENSES
Accrued expenses consisted of the following:
SCHEDULE OF ACCRUED EXPENSES
| March 31, 2022 | December 31, 2021 | |||||||
| Accrued interest, convertible notes | $ | $ | ||||||
| Accrued wages | ||||||||
| Total accrued expenses | $ | $ | ||||||
NOTE 8 RELATED PARTY TRANSACTIONS
Convertible Notes Due to Related Parties
Convertible
Notes due to Related Parties represent amounts provided to the Company from two directors and the Chief Executive Officer of the Company,
as well as a greater than 5% investor. See Note 5 “e) Convertible Notes” for additional information regarding the convertible
notes. The outstanding principal on the Convertible Promissory Notes, associated with Related Party transactions was $
Bridge Line Ventures
The Company and Bridge Line Ventures, LLC Series ST-1 (“Bridge Line Ventures”), the manager of which is Bridge Line Advisors, LLC, of which Leonard J. Sokolow, a member of the Company’s board of directors, is Chief Executive Officer and President, entered into the following stock purchase agreements during the three month period ended March 31, 2021 (collectively, the “Bridge Line SPAs”):
| ● | Stock Purchase Agreement, dated February 26, 2021, as amended March 30, 2021, June 30, 2021 and August 31, 2021, pursuant to which Bridge Line Ventures purchased shares of common stock at a purchase price per share of $. | |
| ● | Stock Purchase Agreement, dated March 30, 2021, as amended April 30, 2021, June 30, 2021 and August 31, 2021, pursuant to which Bridge Line Ventures purchased shares of common stock at a purchase price per share of $. |
| 13 |
Gross
proceeds from Bridge Line Ventures amounted to $
Each of the Bridge Line SPAs contains substantially the same terms. Among other things, the Bridge Line SPAs contain anti-dilutive price protection measures, which apply for 24 months following the date of closing of the Bridge Line SPAs, subject to certain exceptions, and provide for certain piggyback registration rights, such that, subject to certain exceptions, including if the registration statement is for an initial public offering, if the Company registers any of its securities either for its own account or for the account of other security holders, Bridge Line Ventures is entitled to include its shares in the registration. Subject to certain exceptions, if the offering is being underwritten, the Company and the underwriters may limit the number of shares included in the underwritten offering if the underwriters believe that including such shares would adversely affect the offering.
The Bridge Line SPAs also contain a standstill provision pursuant to which Bridge Line Ventures agreed to certain restrictions related to the Company for three years following the effective date of each of the Bridge Line SPAs, including, among other things, prohibitions on, either alone or together with any other person, acquiring additional shares of the Company’s common stock or any of its assets, soliciting proxies or seeking representation on our board of directors, unless the Company agrees to such actions in writing.
Initial Public Offering
The
Company issued shares of its common stock to certain directors, officers and greater than 5% stockholders which generated gross
proceeds of $
The Company issued shares of its common stock to affiliates of certain directors and greater than 5% stockholders pursuant to certain anti-dilutive provisions during the three-month period ended March 31, 2022. The issuance of such shares was triggered based on the Company’s effective price of its initial public offering in February 2022.
NOTE 9 STOCKHOLDERS’ EQUITY (DEFICIT)
(A) Common Stock
The Company issued the following common stock during the three months ended March 31, 2022 and 2021:
SCHEDULE OF COMMON STOCK
| Transaction Type | Shares Issued | Valuation
$ (Issued) | Range of Value Per Share | |||||||||
| 2022 Equity Transactions | ||||||||||||
| Common stock issued per exercise of options | $ | - | ||||||||||
| Common stock issued per exercise of warrants, cashless | ||||||||||||
| Common stock issued, pursuant to services provided | - $ | |||||||||||
| Conversion of preferred stock | ||||||||||||
| Issuance of common stock pursuant to offering, net | ||||||||||||
| Issuance of common stock, pursuant to anti-dilutive provisions | ||||||||||||
| 14 |
| Transaction Type | Qty Shares Issued | Valuation $ (Issued) | Range of Value Per Share | |||||||||
| 2021 Equity Transactions | ||||||||||||
| Common stock issued per PPM, Bridge Line Ventures | ||||||||||||
| Common stock issued, exercise of warrants | ||||||||||||
| Common stock issued, pursuant to services provided | ||||||||||||
| Conversion of preferred stock | ||||||||||||
The Company issued shares of its common stock to certain stockholders pursuant to certain anti-dilutive provisions during the three-month period ended March 31, 2022. The issuance of such shares was triggered based on the Company’s effective price of its initial public offering in February 2022. The shares were recorded as an increase in common stock and additional paid-in capital and accumulated deficit during the period, using the fair value of the shares at the date of issuance.
(B) Preferred Stock
The following is a summary of the Company’s Preferred Stock activity during the three months ended March 31, 2022:
SCHEDULE OF PREFERRED STOCK
| Transaction Type | Quantity | Valuation | Value per Share | |||||||||
| Preferred Stock Balance at December 31, 2021 | $ | $ | ||||||||||
| Preferred Stock redemptions | ( | ) | ( | ) | ||||||||
| Preferred Stock Balance at March 31, 2022 | $ | |||||||||||
The
Preferred Stock is convertible at the holder’s option. Shares of the Preferred Stock may be repurchased by the Company upon 30
days’ prior written notice, for USD $per share. Holders also have a put option, allowing
them to sell their shares of Preferred Stock back to the Company at $per share, the Note conversion price, and therefore
the stock is classified as Mezzanine equity rather than permanent equity. For the three months ended March 31, 2022 and 2021, the Company
paid dividends in the amount of $
| 15 |
(C) Stock Options
SCHEDULE OF STOCK OPTION ACTIVITY
| Options | Shares | Weighted Average Exercise Price | Weighted Average Remaining Contractual Life (In Years) | Aggregate Intrinsic Value | ||||||||||||
| Outstanding, January 1, 2022 | $ | $ | ||||||||||||||
| Exercised | ( | ) | - | - | ||||||||||||
| Granted | - | - | ||||||||||||||
| Forfeited | ( | ) | - | - | ||||||||||||
| Outstanding, March 31, 2022 | $ | $ | ||||||||||||||
| Exercisable, March 31, 2022 | $ | $ | ||||||||||||||
| Options | Shares | Weighted Average Exercise Price | Weighted Average Remaining Contractual Life (In Years) | Aggregate Intrinsic Value | ||||||||||||
| Outstanding, January 1, 2021 | $ | $ | ||||||||||||||
| Forfeited | ( | ) | - | - | ||||||||||||
| Outstanding, March 31, 2021 | $ | $ | ||||||||||||||
| Exercisable, March 31, 2021 | $ | |||||||||||||||
The fair value of share options and similar instruments is estimated on the date of grant using a Black-Scholes. The range of inputs used by the Company are as follows:
During the three-month period ended March 31, 2022, the Black-Scholes model calculations included stock price on the date of measurement ranging from $ - $, exercise price with a range of $ - $, a term of years, expected volatility of %, and a discount rate ranging from % to %.
| 16 |
During the three-month period ended March 31, 2021, the Black-Scholes model calculations included stock price on the date of measurement ranging from $ - $, exercise price with a range of $ - $, a term ranging from years to years, expected volatility of % , and a discount rate ranging from % to %.
The Company cannot use its historical volatility as expected volatility because there is not enough liquidity in trades of common stock during a term comparable to the expected term of stock option issued. The Company relies on the expected volatility of comparable publicly-traded companies within its industry sector, which is deemed more relevant, to compute its expected volatility.
Unamortized
future option expense was $
(D) Warrants Issued
The following is a summary of the Company’s warrant activity during the three month periods ended March 31, 2022 and 2021:
SCHEDULE OF WARRANT ACTIVITY
| Number of Warrants | Weighted Average Exercise Price | |||||||
| Balance, January 1, 2022 | $ | |||||||
| Issued | ||||||||
| Exercised | ( | ) | ||||||
| Forfeited | ( | ) | ||||||
| Balance, March 31, 2022 | $ | |||||||
| Number of Warrants | Weighted Average Exercise Price | |||||||
| Balance, January 1, 2021 | $ | |||||||
| Exercised | ( | ) | ||||||
| Balance, March 31, 2021 | $ | |||||||
NOTE 10 CONCENTRATIONS OF RISKS
Major Customers and Accounts Receivable
The Company had certain customers whose revenue individually represented 10% or more of the Company’s total revenue, or whose accounts receivable balances individually represented 10% or more of the Company’s total accounts receivable, as follows:
For
the three months ended March 31, 2022 and 2021, one customer accounted for
At
March 31, 2022 and December 31, 2021, one customer accounted for
| 17 |
Major Vendors
The
Company had two major vendors that accounted for
Liquidity
The
Company’s cash and cash equivalents are held primarily with two financial institutions. The Company has deposits which exceed the
amount insured by the FDIC. The amount of uninsured deposits was $
Product Risks
The Company generates its income primarily from its proprietary-based technology and related products.
NOTE 11 SUBSEQUENT EVENTS
Management has evaluated subsequent events through May 9, 2022, which is the date the consolidated financial statements were available to be issued. There were no subsequent events that required adjustment to or disclosure in the consolidated financial statements.
| 18 |
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with the unaudited consolidated financial statements and related notes included elsewhere in this Form 10-Q and our audited financial statements and related notes thereto for the year ended December 31, 2021 included in our Annual Report on Form 10-K for the year ended December 31, 2021. This discussion and analysis and other parts of this Form 10-Q contain forward-looking statements based upon current beliefs, plans and expectations that involve risks, uncertainties and assumptions, such as statements regarding our plans, objectives, strategy, expectations, outlook, intentions and projections. Our actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of several factors, including those set forth in “Part I. Item 1A. Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2021 and in other filings with the Securities and Exchange Commission (the “SEC”). Please also see the section entitled “Cautionary Note Regarding Forward-Looking Statements” contained in this Form 10-Q.
Overview
We have a series of advanced-safe-smart platform technologies. Our first-generation technologies enable light fixtures, ceiling fans and other electrically wired products to be installed safely and plugged-in into a ceiling’s electrical outlet box within seconds, and without the need to touch hazardous wires. The plug and play technology method is a universal power-plug device that has a matching receptacle that is simply connected to the electrical outlet box on the ceiling, enabling a safe and quick plug and play installation of light fixtures and ceiling fans in just seconds. The plug and play power-plug technology eliminates the need of touching hazardous electrical wires while installing light fixtures, ceiling fans and other hard wired electrical products. In recent years, we have expanded the capabilities of our power-plug product to include advanced safe and quick universal installation methods, as well as advanced smart capabilities. The smart features include control of light fixtures and ceiling fans by the SkyHome App, through WIFI, BLE and voice control. It allows scheduling, energy savings eco mode, dimming, back-up emergency light, night light, light color changing and much more. Our second-generation technology is an all-in-one safe and smart advanced platform that is designed to enhance all-around safety and lifestyle of homes and other buildings. Our products are designed to improve all around home and building safety and lifestyle. While we have developed and created working prototypes of our advanced and smart products, we are continuing to refine the product prototypes and expect to begin commercial manufacturing and marketing in the second half of 2022 for the advanced products and the smart universal power-plug, ceiling fans and lighting products and for the Smart Sky Platform. We hold over 60 U.S. and global patents and patent applications and have received a variety of final electrical code approvals, including UL, United Laboratories of Canada (cUL) and Conformité Européenne (CE), and 2017 and 2020 inclusion in the NEC Code Book.
On April 28, 2022, we entered into a sublease agreement, pursuant to which we agreed to sublease approximately 3,400 square feet of office space located on the 54th floor of Carnegie Hall Tower, located at 152 West 57th Street, New York, New York, at a fixed monthly base rent starting at $26,893 for the first year of the sublease. We plan to use the New York office space to support our general and administrative functions, sales and marketing, and business development. The sublease will commence upon the landlord signing a consent to the sublease agreement.
| 19 |
Results of Operations
Comparison of the Three Months Ended March 31, 2022 and 2021
For the Three Months Ended March 31, | Change Between the Months Ended March 31, | |||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| Revenue | $ | 6,971 | $ | 100,185 | $ | (93,214 | ) | (93.0 | )% | |||||||
| Cost of revenues | (31,137 | ) | (82,508 | ) | (51,371 | ) | (62.3 | )% | ||||||||
| Gross (loss) income | (24,166 | ) | 17,677 | (41,843 | ) | (236.7 | )% | |||||||||
| Selling, general and administrative expenses | 11,921,943 | 867,680 | 11,054,263 | NM | ||||||||||||
| Loss from operations | (11,946,109 | ) | (850,003 | ) | 11,096,106 | NM | ||||||||||
| Other income / (expense) | ||||||||||||||||
| Interest expense | (90,630 | ) | (136,958 | ) | (46,328 | ) | (33.8 | )% | ||||||||
| Other income, loan forgiveness | 178,250 | - | 178,250 | NM | ||||||||||||
| Interest income | 125 | 22 | 103 | 463.6 | % | |||||||||||
| Total other income (expense), net | 87,745 | (136,936 | ) | 244,681 | NM | % | ||||||||||
| Net loss | (11,858,364 | ) | (986,939 | ) | 10,871,425 | NM | ||||||||||
NM: Not meaningful
Revenue
The decrease in revenues was directly related to the planned reduction of discontinued inventory as we continued to shift our focus to the development of our new patented “Smart” platforms and technologies. During 2022 and 2021, we opted to sell through our existing inventory of discontinued products to facilitate our planned transition into our new patented product lines.
Cost of Revenues
The cost of revenues consists primarily of inspection fees related to certain certifications. Revenues are mostly derived from the sale of a small number of replacement parts and standard canopy kits. The inventory and related costs of such products are not significant and are not reflected on our balance sheet nor in the cost of revenues. The reduction in cost of revenues was related to the decrease in sales, which resulted from our decision to discontinue our old products and transition to our patented “Smart” platforms and technologies.
| 20 |
Selling, General and Administrative Expenses
Selling, general and administrative expenses consist primarily of an allocation of product development, sales, finance, legal, human resources, including salaries, wages, and benefits, and depreciation and amortization, including non-cash equity-based compensation
The increase in selling, general, and administrative expenses during the three months ended 2022 when compared to the prior year period was primarily due to the following:
| ● | Increase of $8.6 million related to stock-based compensation which is primarily due to a greater number of shares of common stock issued and options granted for services during the three-month ended March 31, 2022 when compared to the prior year period; | |
| ● | Increase of $1.5 million related to marketing programs and product development in anticipation of the launch of our product offerings; | |
| ● | Increase in other spending related to support of planned scope of operations. |
Other Income (Expense)
The decrease in interest expense in the three months ended March 31, 2022 when compared to the prior year period resulted from the lower interest bearing rate associated from the conversion of the Company’s line of credit to secured notes payable at the end of fiscal 2021.
The increase in other income loan forgiveness during the three months ended March 31, 2022 when compared to the prior year period was the forgiveness of a PPP loan during the three months ended March 31, 2022, which did not occur during the same period in 2021.
Liquidity and Capital Resources
As we develop our revenue base, we have raised additional funds through the sale of our common stock and issuance of debt, including completing our initial public offering in February 2022 for gross proceeds of $23.1 million. We believe that our existing cash will be sufficient to support our working capital and capital expenditure requirements for at least the next 12 months. Our future capital requirements will depend on many factors, including our revenue growth rate, expenditures related to our headcount growth, the timing and the amount of cash received from customers, the expansion of sales and marketing activities, the timing and extent of spending to support development efforts, the price at which we are able to purchase parts to incorporate in our product offerings, the introduction of platform enhancements, and the continuing market adoption of our platforms. We may continue to enter into arrangements to acquire or invest in complementary businesses, products, and technologies. We may, as a result of those arrangements or the general expansion of our business, be required to seek additional equity or debt financing. In the event that we require additional financing, we may not be able to raise such financing on terms acceptable to us or at all. If we are unable to raise additional capital or generate cash flows necessary to expand our operations and invest in continued innovation, we may not be able to compete successfully, which would harm our business, results of operations, and financial condition.
| 21 |
Three-months period ended March 31, 2022:
We had $28 million in cash and cash equivalents as of March 31, 2022.
We used $3.4 million in our operating activities which consists of a net loss of $12 million adjusted for the following:
| ● | Stock-based compensation of $8.8 million. | |
| ● | Increase in prepaid assets of $1.4 million and a commensurate increase of accounts payable which will be substantially recognized and paid during fiscal 2022. |
We used $240,000 in investing activities which were primarily capital expenditures.
We generated $21 million in financing activities which were primarily related to proceeds we generated from the issuance of shares of common stock pursuant to our initial public offering.
Three-months period ended March 31, 2021:
We had $2.4 million in cash and cash equivalents as of March 31, 2021.
We used $800,000 in our operating activities which consists of a net loss of $1.0 million adjusted for the following:
| ● | Stock-based compensation of $190,000; | |
| ● | Increase in prepaid assets of $180,000 and an increase of accounts payable of $320,000 which were recognized and paid during fiscal 2021. |
We used $55,000 in investing activities which were primarily related to patents.
We generated $1.0 million in financing activities which were primarily related to proceeds we generated from the issuance of shares of common stock pursuant to a private placement of $800,000.
A majority of our sales do not require us to take delivery of inventory. Production of the Sky technology and products will commence upon receipt of FOB (free on board) purchase contracts from customers. Upon the completion of each purchase contract, the finished products will be transported from the manufacturer directly to the designated destination, upon which the products become the property of the customer.
Future Impact of COVID-19
The negative impact of the COVID-19 pandemic on companies continues and we are currently unable to assess with certainty the broad effects of COVID-19 on our future business. As of March 31, 2022, we had no material assets that would be subject to impairment or change in valuation due to COVID-19.
Critical Accounting Policies
Our significant accounting policies are disclosed in Note 2 to our consolidated financial statements for the year ended December 31, 2021 contained in our Annual Report on Form 10-K for the year ended December 31, 2021. The following is a summary of those accounting policies that involve significant estimates and judgment of management.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in our financial statements and accompanying notes.
Such estimates and assumptions impact both assets and liabilities, including but not limited to: net realizable value of accounts receivable and inventory, estimated useful lives and potential impairment of property and equipment, the valuation of intangible assets, estimate of fair value of share based payments and derivative liabilities, estimates of fair value of warrants issued and recorded as debt discount, estimates of tax liabilities and estimates of the probability and potential magnitude of contingent liabilities.
Making estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the financial statements, which management considered in formulating its estimate could change in the near term due to one or more future non-conforming events. Accordingly, actual results could differ significantly from estimates.
Fair Value of Financial Instruments
Disclosures about fair value of financial instruments require disclosure of the fair value information, whether or not recognized in the balance sheet, where it is practicable to estimate that value. As of March 31, 2022 and December 31, 2021, we believe the amounts reported for cash, prepaid expenses, accounts payable, accounts payable – related party, accrued expenses and other current liabilities, accrued interest, notes payable and convertible note payable approximate fair value because of their short maturities.
| 22 |
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. ASC Topic 820 established a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurements) and the lowest priority to unobservable inputs (level 3 measurements). These tiers include:
| ● | Level 1, defined as observable inputs such as quoted prices for identical instruments in active markets; | |
| ● | Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable such as quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active; and | |
| ● | Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions, such as valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable. |
Stock-Based Compensation
Stock-based compensation is accounted for based on the requirements of ASC 718 – “Compensation–Stock Compensation”, which requires recognition in the financial statements of the cost of employee, non-employee and director services received in exchange for an award of equity instruments over the period the employee or director is required to perform the services in exchange for the award (presumptively, the vesting period). The ASC also requires measurement of the cost of employee and director services received in exchange for an award based on the grant-date fair value of the award.
Stock-based compensation is measured at the grant date based on the value of the award granted using the Black- Scholes option pricing model based on projections of various potential future outcomes and recognized over the period in which the award vests. For stock awards no longer expected to vest, any previously recognized stock compensation expense is reversed in the period of termination. The stock-based compensation expense is included in general and administrative expenses.
Revenue Recognition
We account for revenues in accordance with Accounting Standards Update No. 2014-09, “Revenue from Contracts with Customers” (Topic 606).
Under Topic 606, revenue is recognized when control of the promised goods or services is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services.
We determine revenue recognition through the following steps:
| ● | identification of the contract, or contracts, with a customer; | |
| ● | identification of the performance obligations in the contract; | |
| ● | determination of the transaction price; | |
| ● | allocation of the transaction price to the performance obligations in the contract; and | |
| ● | recognition of revenue when, or as, we satisfy a performance obligation. |
Recent Accounting Pronouncements
Although there are several new accounting pronouncements issued or proposed by the Financial Accounting Standards Board, which we have adopted or will adopt, as applicable, we do not believe any of these accounting pronouncements has had or will have a material impact on our financial position or results of operations.
| 23 |
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As a “smaller reporting company”, we are not required to provide the information required by this Item.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Our management is responsible for establishing and maintaining a system of disclosure controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) that is designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer’s management, including its principal executive officer and principal financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Management recognizes that there are inherent limitations to the effectiveness of any system of disclosure controls and procedures and any controls and procedures, no matter how well designed and operated, can only provide reasonable assurance of achieving their control objectives.
As of the end of the period covered by this report, management, including our Principal Executive Officer and Principal Financial Officer, evaluated the effectiveness of our disclosure controls and procedures. Based upon the evaluation, our Principal Executive Officer and Principal Financial Officer concluded that our disclosure controls and procedures were effective as of March 31, 2022.
Changes in Internal Controls Over Financial Reporting:
There were no changes in our internal control over financial reporting during the quarter ended March 31, 2022 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
| 24 |
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
There are no legal proceedings or arbitration proceedings currently pending against our Company. From time to time, we may become involved in legal proceedings arising in the ordinary course of our business. As of the date of this Form 10-Q, we were not a party to any material legal matters or claims. In the future, we may become party to legal matters and claims in the ordinary course of business, the resolution of which we do not anticipate would have a material adverse impact on our financial position, results of operations or cash flows.
ITEM 1A. RISK FACTORS
There have been no material changes from the risk factors set forth in “Part I. Item 1A. Risk Factors” of our Annual Report on Form 10-K for the fiscal year ended December 31, 2021. Our business, operations and financial results are subject to various risks and uncertainties that could materially adversely affect our business, results of operations, financial condition, and the trading price of our common stock. You should carefully read and consider the risks and uncertainties included in the report referenced above, together with all of the other information in such report and this Form 10-Q, including the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and related notes, and other documents that we file with the SEC. The risks and uncertainties described in these reports may not be the only ones we face, and the disclosure of any risk factor should not be interpreted to imply that the risk has not already materialized. The factors discussed in these reports, among others, could cause our actual results to differ materially from historical results and those expressed in forward-looking statements made by us or on our behalf in filings with the SEC, press releases, communications with investors, and oral statements.
Item 2 Unregistered Sales of Equity Securities and Use of Proceeds
Recent Sales of Unregistered Securities
The following is a summary of issuances of unregistered securities during the quarter ended March 31, 2022: 248,500 shares of common stock were issued to employees, consultants and advisors pursuant to various employment, advisory and consulting agreements; 9,976,536 shares of common stock were issued pursuant to the conversion of 9,976,536 shares of Series A Convertible Preferred Stock, no par value; 335,073 shares of common stock were issued pursuant to anti-dilution provisions set forth in the terms of stock purchase agreements entered into during 2019 through 2021; five-year options to purchase 1,140,000 shares of common stock and five-year performance-based options to purchase 10,000,000 shares of common stock upon achieving certain Company valuations, were granted pursuant to an employment agreement; 200,000 shares of common stock were issued pursuant to the exercise of options granted under our 2015 Stock Incentive Plan at exercise prices ranging from $0.60 to $1.80 per share; and 311,750 shares of common stock were issued pursuant to exercise of warrants with an exercise price of $3.30 per share.
The sales or issuances of the securities described above were deemed to be exempt from registration pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended, including Regulation D and Rule 506 promulgated thereunder, as transactions by the Company not involving a public offering or Rule 701 promulgated under the Securities Act as transactions pursuant to compensatory benefit plans.
Use of Proceeds
On February 14, 2022, we completed our initial public offering. We received approximately $20.5 million in net proceeds after deducting underwriting discounts and commissions of $1.8 million and offering expenses of approximately $700,000. There has been no material change in the use of proceeds from our initial public offering as described in our final prospectus filed with the SEC pursuant to Rule 424(b) of the Securities Act of 1933, as amended, and other periodic reports previously filed with the SEC.
Item 3. Defaults Upon Senior Securities
None.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
Item 5. Other Information
Not applicable.
| 25 |
Item 6. Exhibits
* Indicates management contract or any compensatory plan, contract or arrangement.
+ Certain of the exhibits and schedules to this exhibit have been omitted in accordance with Regulation S-K Item 601(a)(5). The Company agrees to furnish a copy of all omitted exhibits and schedules to the SEC upon its request.
† Portions of this exhibit (indicated by bracketed asterisks) are omitted in accordance with the rules of the SEC because they are both not material and the Company customarily and actually treats such information as private or confidential.
| 26 |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| SQL TECHNOLOGIES CORP. | ||||
| Date: | May 9, 2022 | By: | /s/ John P. Campi | |
| John P. Campi, Chief Executive Officer | ||||
| (Principal Executive Officer) | ||||
| Date: | May 9, 2022 | By: | /s/ Marc-Andre Boisseau | |
| Marc-Andre Boisseau, Chief Financial Officer | ||||
| (Principal Financial and Accounting Officer) | ||||
| 27 |
Exhibit 31.1
CERTIFICATION
I, John P. Campi, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of SQL Technologies Corp.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) [Intentionally omitted];
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
| Date: May 9, 2022 | By: | /s/ John P. Campi |
| John P. Campi | ||
| Chief Executive Officer | ||
| (Principal Executive Officer) |
Exhibit 31.2
CERTIFICATION
I, Marc-Andre Boisseau, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of SQL Technologies Corp.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) [Intentionally omitted];
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
| Date: May 9, 2022 | By: | /s/ Marc-Andre Boisseau |
| Marc-Andre Boisseau | ||
| Chief Financial Officer | ||
| (Principal Financial and Accounting Officer) |
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report on Form 10-Q of SQL Technologies Corp. (the “Company”) for the quarter ended March 31, 2022, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
| Date: May 9, 2022 | By: | /s/ John P. Campi |
| John P. Campi | ||
| Chief Executive Officer | ||
| (Principal Executive Officer) |
Exhibit 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report on Form 10-Q of SQL Technologies Corp. (the “Company”) for the quarter ended March 31, 2022, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
| Date: May 9, 2022 | By: | /s/ Marc-Andre Boisseau |
| Marc-Andre Boisseau | ||
| Chief Financial Officer | ||
| (Principal Financial and Accounting Officer) |