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) |
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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
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As of August 1, 2025, the registrant had shares of common stock, no par value per share, issued and outstanding.
SKYX PLATFORMS 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 SKYX Platforms 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 outcomes that are difficult to predict and may be outside our control, 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 ability to successfully manage and grow the operations of Belami, Inc. (“Belami”) with our business; | |
| ● | 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 and integrating new lines of business; | |
| ● | our ability to raise additional financing to support and continue our operations as needed; | |
| ● | our ability to comply with the terms of, and timely repay, our current debt financing; | |
| ● | 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, protect and enhance our intellectual property and retain rights to use intellectual property owned by third parties; | |
| ● | the potential outcome of any legal proceedings; | |
| ● | compliance with various tax laws and regulations, including income and sale taxes; | |
| ● | our ability to successfully sell and distribute our products and technologies; | |
| ● | our ability to attract and retain key executives and qualified personnel; | |
| ● | guidance provided by management, which may differ from our actual operating results; | |
| ● | our ability to successfully manage our planned development and expansion, including the additional costs of being a public company; | |
| ● | our estimated total addressable market; | |
| ● | 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 governmental regulations, geopolitical conflicts, including the conflict in the Middle East and potentially deteriorating relationships with China, tariffs and other trade barriers or restrictions, inflation, labor shortages, supply chain constraints and shortages, including availability of affordable electronic microchips, instability in the global banking system and the possibility of an economic recession; | |
| ● | the potential impact of cybersecurity breaches or disruptions to our or our third-party vendors’ information systems, including our cloud-based infrastructure; | |
| ● | risks related to our use of artificial intelligence capabilities in our product offerings, including operational and reputational risks; | |
| ● | the potential impact of widespread outages, interruptions, or other failures of operational, communication, and other systems; | |
| ● | the potential impact of natural disasters and other catastrophic events; | |
| ● | risks related to ownership of our common stock; | |
| ● | the potential impact of anti-takeover and director and officer liability provisions in our charter documents and under Florida law; and | |
| ● | other risks and uncertainties, including those listed under the section titled “Risk Factors.” |
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, 2024 and in this Form 10-Q for a discussion of other important factors, many of which are outside 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. Considering 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 INFORMATION
ITEM 1. FINANCIAL STATEMENTS
SKYX PLATFORMS CORP.
Consolidated Balance Sheets
| (Unaudited) June 30, 2025 | (Audited) December 31, 2024 | |||||||
| Assets | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Accounts receivable | ||||||||
| Inventory, net | ||||||||
| Prepaid expenses and other assets | ||||||||
| Total current assets | ||||||||
| Long-term assets: | ||||||||
| Property and equipment, net | ||||||||
| Restricted cash | ||||||||
| Right of use assets | ||||||||
| Intangibles, definite life | ||||||||
| Goodwill | ||||||||
| Other assets | ||||||||
| Total long-term assets | ||||||||
| Total Assets | $ | $ | ||||||
| Liabilities and Stockholders’ Equity | ||||||||
| Current liabilities: | ||||||||
| Accounts payable and accrued expenses | $ | $ | ||||||
| Accounts payable and accrued expenses-related party | ||||||||
| Notes payable, current | ||||||||
| Operating lease liabilities, current | ||||||||
| Royalty obligation | ||||||||
| Deferred revenues | ||||||||
| Convertible notes, current-related parties | ||||||||
| Convertible notes, current | ||||||||
| Total current liabilities | ||||||||
| Long term liabilities: | ||||||||
| Long term accounts payable and accrued expenses | ||||||||
| Notes payable | ||||||||
| Operating lease liabilities | ||||||||
| Convertible notes | ||||||||
| Royalty obligations | ||||||||
| Total long-term liabilities | ||||||||
| Total liabilities | ||||||||
| Mezzanine equity | ||||||||
| Series A Preferred Stock-shares authorized , outstanding and | ||||||||
| Stockholders’ Equity: | ||||||||
| Series A-1 Preferred Stock-shares authorized , outstanding and | ||||||||
| Common stock and additional paid-in-capital: shares authorized outstanding and | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total stockholders’ equity | ||||||||
| Total Liabilities and Stockholders’ Equity | $ | $ | ||||||
The accompanying notes are an integral part of the unaudited consolidated financial statements.
| 4 |
SKYX Platforms Corp.
Consolidated Statements of Operations
(Unaudited)
| For the three months ended June 30, | For the six months ended June 30, | |||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||
| Revenue | $ | $ | $ | |||||||||||||
| Operating expenses | ||||||||||||||||
| Cost of revenues | ||||||||||||||||
| Selling and marketing expenses | ||||||||||||||||
| General and administrative expenses | ||||||||||||||||
| Total expenses, net | ||||||||||||||||
| Loss from operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other expense | ||||||||||||||||
| Interest expense, net | ||||||||||||||||
| Interest expense, net related parties | ||||||||||||||||
| Total other expense, net | ||||||||||||||||
| Net loss | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Preferred dividends-related parties | ||||||||||||||||
| Preferred dividends | ||||||||||||||||
| Net loss attributed to common stockholders | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Net loss per share - basic and diluted | $ | ) | $ | ) | $ | ) | $ | ) | ||||||||
| Weighted average number of common shares outstanding – basic and diluted | ||||||||||||||||
The accompanying notes are an integral part of the unaudited consolidated financial statements.
| 5 |
SKYX Platforms Corp.
Consolidated Statements of Stockholders’ Equity
(Unaudited)
| For the three months ended June 30, | For the six months ended June 30, | |||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||
| Shares of Preferred stock ( Series A-1) | ||||||||||||||||
| Balance, beginning of period | ||||||||||||||||
| Preferred stock issued pursuant to offerings | ||||||||||||||||
| Conversion to common stock | ( | ) | ||||||||||||||
| Balance, June 30 | ||||||||||||||||
| Preferred stock ( Series A-1) | ||||||||||||||||
| Balance, beginning of period | $ | $ | ||||||||||||||
| Preferred stock issued pursuant to offerings | ||||||||||||||||
| Conversion to common stock | ( | ) | ||||||||||||||
| Balance, June 30 | $ | $ | $ | $ | ||||||||||||
| Shares of Common stock | ||||||||||||||||
| 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 | ||||||||||||||||
| Common stock issued pursuant to acquisition | ||||||||||||||||
| Balance, June 30 | ||||||||||||||||
| Common stock and paid-in capital | ||||||||||||||||
| Balance, beginning of period | $ | $ | $ | $ | ||||||||||||
| Common stock issued pursuant to stock offering | ||||||||||||||||
| Common stock issued pursuant to services | ||||||||||||||||
| Common stock issued pursuant to conversion of preferred stock | ||||||||||||||||
| Common stock issued pursuant to exercise of options and warrants | ||||||||||||||||
| Common stock issued pursuant to acquisition | ||||||||||||||||
| Common stock issued pursuant to antidilutive provisions | ||||||||||||||||
| Balance, June 30 | $ | $ | $ | $ | ||||||||||||
| Accumulated Deficit | ||||||||||||||||
| Balance, beginning of period | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Net loss | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Preferred dividends | ( | ) | ( | ) | ||||||||||||
| Balance, end of period | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Total stockholders’ equity | $ | $ | $ | $ | ||||||||||||
The accompanying notes are an integral part of the unaudited consolidated financial statements.
| 6 |
SKYX Platforms Corp.
Consolidated Statements of Cash Flows
(Unaudited)
| For the six months ended June 30, | ||||||||
| 2025 | 2024 | |||||||
| Operations: | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Depreciation and amortization | ||||||||
| Amortization of debt discount | ||||||||
| Non-cash equity-based compensation expense | ||||||||
| Change in operating assets and liabilities: | ||||||||
| Inventory | ( | ) | ||||||
| Accounts receivable | ||||||||
| Prepaid expenses and other assets | ( | ) | ( | ) | ||||
| Deferred revenues | ||||||||
| Operating lease liabilities | ( | ) | ( | ) | ||||
| Royalty obligation | ( | ) | ( | ) | ||||
| Consideration payable | ( | ) | ||||||
| Accounts payable and accrued expenses | ||||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| Investing: | ||||||||
| Purchase of property and equipment | ( | ) | ( | ) | ||||
| Net cash (used in) provided by investing activities | ( | ) | ( | ) | ||||
| Financing: | ||||||||
| Proceeds from issuance of common stock- offerings | ||||||||
| Placement costs | ( | ) | ( | ) | ||||
| Dividends | ( | ) | ||||||
| Proceeds from issuance of preferred stocks | ||||||||
| Proceeds from issuance of convertible notes | ||||||||
| Principal repayments of notes payable | ( | ) | ( | ) | ||||
| Net cash provided by financing activities | ||||||||
| Change in cash, cash equivalents and restricted cash | ( | ) | ||||||
| Cash, cash equivalents, and restricted cash at beginning of period | ||||||||
| Cash, cash equivalents and restricted cash at end of period | $ | $ | ||||||
| Cash paid during the period for: | ||||||||
| Interest | $ | $ | ||||||
| Taxes | ||||||||
| Supplementary disclosure of non-cash financing activities: | ||||||||
| Preferred stock conversion to common stock | $ | $ | ||||||
| Substitution of royalty payable to convertible note | ||||||||
| Substitution of consideration payable to convertible note | ||||||||
| Right-of-use assets and operating lease liabilities | ||||||||
The accompanying notes are an integral part of the unaudited consolidated financial statements.
| 7 |
SKYX Platforms Corp.
Notes to Consolidated Financial Statements
(Unaudited)
NOTE 1 ORGANIZATION AND NATURE OF OPERATIONS
SKYX Platforms Corp., a corporation (the “Company”), was incorporated in Florida in May 2004.
The Company maintains offices in Sacramento, California, Johns Creek, Georgia, Miami and Pompano Beach, Florida, New York City, 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 to 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 its second generation 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 third-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.
Since April 2023, the Company also markets home lighting, ceiling fans and other home furnishings from third parties.
Going Concern
The
Company’s liquidity sources include $
Management intends to mitigate such conditions by supporting its continued growth, decreasing its cash used in operating activities through increased revenues and increased margins from products sold to large retailers and its internet portals, and to the extent necessary, generate cash provided by financing activities through at the market (“ATM”) offering or other equity or debt financing means.
NOTE 2 SUMMARY OF 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 June 30, 2025 and for the three and six months ended June 30, 2025 and 2024 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, 2024 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, 2024 for additional disclosures and accounting policies.
| 8 |
Use of Estimates
The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the 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 nonconforming events. Accordingly, actual results will differ from estimates.
Basis of Consolidation
The consolidated financial statements include the results of the Company and all its subsidiaries, including SQL Lighting and Fans LLC , Belami, Inc., BEC, CA 1, Inc., BEC CA 2, LLC, Luna BEC, Inc., and Confero Group LLC. All intercompany balances and transactions have been eliminated in consolidation.
Cash, Cash Equivalents, and Restricted Cash
The Company considers all highly liquid securities with original maturities of three months or less when acquired to be cash equivalents. On June 30, 2025, and December 31, 2024, the Company’s cash composition was as follows:
| June 30, 2025 | December 31, 2024 | |||||||
| Cash and cash equivalents | $ | $ | ||||||
| Restricted cash | ||||||||
| Total cash, cash equivalents and restricted cash | $ | $ | ||||||
Restricted Cash
The
Company issued a letter of credit of $
Customer Contracts Balances
Accounts
receivable are recorded in the period when the right to receive payment or other consideration becomes unconditional. Accounts receivable
are recorded at the invoiced amount and are not interest bearing. The Company maintains an allowance for doubtful accounts based upon
an estimate of probable credit losses in existing accounts receivable. The majority of the Company’s accounts receivable are from
third-party payers and are paid within a few days from the order date. The Company determines the allowance based upon individual accounts
when information indicates the customers may have an inability to meet their financial obligations, historical experience, and currently
available evidence. As of June 30, 2025, and December 31, 2024, the Company’s allowance for doubtful accounts was $
| 9 |
The
Company determines an allowance for sales returns based upon historical experience. The Company’s allowance for sales returns was
$
The Company defers the revenue related to undelivered customer orders for which it was paid or has a right to be paid at each measurement date. Such amounts are recognized as deferred revenues in the accompanying balance sheet.
The costs associated with such deferred revenues are recognized as deferred charges in the accompanying balance sheet. Such charges include the carrying value of freight, and sales charges. Deferred charges are included in prepaid costs and other assets in the accompanying balance sheet.
Inventory
Inventories are stated at the lower of cost or market, 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.
| June 30, 2025 | December 31, 2024 | |||||||
| Inventory, component parts | $ | $ | ||||||
| Inventory, finished goods | ||||||||
| Allowance | ( | ) | ( | ) | ||||
| Inventory-total | $ | $ | ||||||
The
Company maintains an allowance based on specific inventory items that have shown no activity over a reasonable period. The Company tracks
inventory as it is repurposed, disposed, scrapped, or sold at below cost to determine whether additional items on hand should be reduced
in value through an allowance method. The Company has recorded an allowance of $
| 10 |
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 are computed by dividing net income (loss) for the period by the weighted average number of common stocks, 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 six-month periods ended June 30, 2025, and 2024, 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, a separate computation of diluted earnings (loss) per share is not presented for the periods presented.
| June 30, 2025 | June 30, 2024 | |||||||
| Stock warrants | ||||||||
| Stock options | ||||||||
| Unvested restricted stock | ||||||||
| Convertible notes | ||||||||
| Preferred stock | ||||||||
| Total | ||||||||
Income Taxes – Improvements to Income Tax Disclosures
In December 2023, the Financial Accounting Standards Board (“FASB”) issued a new standard to improve income tax disclosures. The guidance requires disclosure of disaggregated income taxes paid, prescribes standardized categories for the components of the effective tax rate reconciliation, and modifies other income tax-related disclosures. The standard will be effective for us beginning with our 2025 annual reporting with early adoption permitted. We are currently evaluating the impact of this standard on our income tax disclosures.
Comprehensive Income- Improvements to Expense Disaggregation Disclosures
In November 2024, FASB issued a new standard to improve expense disaggregation disclosures. The guidance expands the disclosures required for certain costs and expenses in our annual and interim consolidated financial statements, primarily through enhanced disclosures about significant expenses. The standard is effective as of March 31, 2026 and interim and annual periods thereafter. The impact of this standard is only on the Company’s expenses disclosures.
| 11 |
NOTE 3 PROPERTY AND EQUIPMENT
Property and equipment consisted of the following:
| June 30, 2025 | December 31, 2024 | |||||||
| Equipment and furniture | $ | $ | ||||||
| Internal-use software | ||||||||
| Leasehold improvements | ||||||||
| Total | ||||||||
| Less: accumulated depreciation | ( | ) | ( | ) | ||||
| Total, net | $ | $ | ||||||
Depreciation
expense amounted to $
NOTE 4 INTANGIBLE ASSETS AND GOODWILL
Intangible assets consisted of the following:
| June 30, 2025 | December 31, 2024 | |||||||||||||||||||||||||||
| Useful life | Carrying Value | Accumulated Amortization | Net carrying value | Carrying Value | Accumulated Amortization | Net carrying value | ||||||||||||||||||||||
| Customer relationships | $ | $ | ( | ) | $ | $ | $ | ( | ) | $ | ||||||||||||||||||
| E-commerce technology platforms | ( | ) | ( | ) | ||||||||||||||||||||||||
| Patents and other | ( | ) | ( | ) | ||||||||||||||||||||||||
| $ | $ | ( | ) | $ | $ | $ | ( | ) | $ | |||||||||||||||||||
Amortization
expense on intangible assets amounted to $
The following table sets forth the estimated amortization expenses for the next five years:
| Twelve months ended June 30: | ||||
| 2026 | $ | |||
| 2027 | ||||
| 2028 | ||||
| 2029 | ||||
| 2030 |
| 12 |
NOTE 5 DEBTS
The following table presents the components of debt as of June 30, 2025 and December 31, 2024:
| June 30, 2025 | December 31, 2024 | APR on June 30, 2025 | Maturity | Collateral | ||||||||||||||
| Convertible Notes (b,c) | % | Substantially all company assets | ||||||||||||||||
| Notes payable to financial institutions and others(a) | % | Substantially all Company assets | ||||||||||||||||
| Total | $ | $ | ||||||||||||||||
| Unamortized debt discount | ( | ) | ( | ) | ||||||||||||||
| Debt, net of Unamortized debt Discount | $ | $ | ||||||||||||||||
| For the six-month period ended | ||||||||
| June 30, 2025 | June 30, 2024 | |||||||
| Interest expense | $ | $ | ||||||
As of June 30, 2025, the expected future principal payments for the Company’s debt are due as follows:
| Twelve months ended June 30, 2026 | $ | |||
| Twelve months ended June 30, 2027 | ||||
| Twelve months ended June 30, 2028 | ||||
| Twelve months ended June 30, 2029 | ||||
| Twelve months ended June 30, 2030, and thereafter | ||||
| $ |
| (a) | ||
| (b) | ||
| 13 |
| (c) |
Each
seller received a Seller Note in an amount of $ | |
| Additionally,
the convertible promissory notes include a $ |
NOTE 6 OPERATING LEASE LIABILITIES
In
April 2022, the Company entered into a 58-month lease related to certain office and showroom space pursuant to a sublease that expires
in February 2027. The Company recognized a right-of-use asset and a liability of $
In
September 2022, the Company entered a 124-month lease related to its future headquarters offices and showrooms space. The Company recognized
a right-of-use asset and a liability of $
The following table outlines the total lease cost for the Company’s operating leases as well as weighed average information for these leases as of June 30, 2025, and 2024 respectively:
| Six Months Ended June 30 | ||||||||
| 2025 | 2024 | |||||||
| Cash paid for operating lease liabilities | $ | $ | ||||||
| Rights-of-use obtained in exchange for new operating lease liabilities | - | |||||||
| Fixed rent payments | ||||||||
| Lease - Depreciation expense | $ | $ | ||||||
| Weighted-average discount rate | % | % | ||||||
| Weighted-average remaining lease term (in months) | ||||||||
| Minimum Lease obligation | ||||
| Twelve months ended June 30, 2026 | $ | |||
| Twelve months ended June 30, 2027 | ||||
| Twelve months ended June 30, 2028 | ||||
| Twelve months ended June 30, 2029 | ||||
| Twelve months ended June 30, 2030, and thereafter | ||||
| Total | $ | |||
NOTE 7 ROYALTY OBLIGATIONS
The Company had a license agreement with General Electric (“GE”) which provided, among other things, for rights to market certain of the Company’s products displaying the GE brand in consideration of royalty payments to GE. The agreement expired in 2023.
The
Company owes $
| 14 |
NOTE 8 ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable and accrued expenses consisted of the following:
| June 30, 2025 | December 31, 2024 | |||||||
| Accrued interest, convertible notes | $ | $ | ||||||
| Accrued dividends | ||||||||
| Trade payables | ||||||||
| Accrued compensation | ||||||||
| $ | $ | |||||||
NOTE 9 RELATED PARTY TRANSACTIONS
Convertible Notes
Convertible
notes due to related parties represent amounts provided to the Company from a director and the Company’s Co-Chief Executive Officers.
The outstanding principal on the convertible promissory notes, associated with related parties was $
Preferred Stock Dividends
The
Company paid and declared dividends to related parties (a director and officer and two officers) amounting to $
NOTE 10 STOCKHOLDERS’ EQUITY
(A) Common Stock
The Company issued the following common stock during the six months ended June 30, 2025, and 2024:
| Transaction Type | Shares Issued | Valuation $ | Average Value Per Share | |||||||||
| 2025 Equity Transactions | ||||||||||||
| Common stock issued, pursuant to services provided | $ – | |||||||||||
| Common stock issued pursuant to stock at the market offering, net | ||||||||||||
| Common stock issued pursuant to conversion of preferred stock and related dividends | ||||||||||||
| Transaction Type | Shares Issued | Valuation $ | Average Value Per Share | |||||||||
| 2024 Equity Transactions | ||||||||||||
| Common stock issued, pursuant to services provided | $ | |||||||||||
| Common stock issued pursuant to stock at the market offering, net | ||||||||||||
| Common stock issued pursuant to acquisition (1) | ||||||||||||
| (1) |
| 15 |
(B) Preferred Stock Series A-1
The following is a summary of the Company’s Preferred Stock A-1 activity during the six months ended June 30, 2025:
| Transaction Type | Quantity | Carrying Value | Value per Share, gross | |||||||||
| Preferred Stock Series A-1 Balance at January 1, 2025 | $ | $ | ||||||||||
| Issuance | ||||||||||||
| Conversion to common stock | ( | ) | ( | ) | ||||||||
| Preferred Stock Series A-1 Balance at June 30, 2025 | $ | $ | ||||||||||
During May 2025, increased the authorized amount of shares of Series A-1 Preferred Stock to shares. In March 2025 a holder converted Preferred stocks Series A-1 into shares of common stock, within terms.
The designations of each class of preferred stock are as follows:
Series A Preferred Stock (temporary equity):
| ● | Cumulative
dividend of | |
| ● | Original issue price of $ per share; | |
| ● | Conversion
option at the holder’s option at $ | |
| ● | Redemption
at the price of $ per share at | |
| ● | Voting rights on as converted basis. |
Series A-1 Preferred Stock (permanent equity):
| ● | Cumulative
dividend of | |
| ● | Original issue price of $ per share; | |
| ● | Conversion
option at the holder’s option at $ | |
| ● | Redemption
at the price of $ per share at | |
| ● | Voting rights on as converted basis. |
(C) Stock Options and Restricted Stock
| Options | Shares | Weighted Average Exercise Price | Weighted Average Remaining Contractual Life (In Years) | Aggregate Intrinsic Value | ||||||||||||
| Outstanding, January 1, 2025 | $ | — | $ | |||||||||||||
| Granted | — | — | ||||||||||||||
| Forfeited | ( | ) | - | - | ||||||||||||
| Outstanding, June 30, 2025 | $ | $ | ||||||||||||||
| Exercisable, June 30, 2025 | $ | $ | ||||||||||||||
| 16 |
| Options | Shares | Weighted Average Exercise Price | Weighted Average Remaining Contractual Life (In Years) | Aggregate Intrinsic Value | ||||||||||||
| Outstanding, January 1, 2024 | $ | - | $ | |||||||||||||
| Granted | - | - | ||||||||||||||
| Forfeited | ( | ) | $ | - | - | |||||||||||
| Outstanding, June 30, 2024 | $ | $ | ||||||||||||||
| Exercisable, June 30, 2024 | $ | $ | ||||||||||||||
| June 30, 2025 | June 30, 2024 | |||||||
| Range | Range | |||||||
| Stock price | $ - | $ - | ||||||
| Exercise price | $ - | $ - | ||||||
| Expected life (in years) | - yrs. | - yrs. | ||||||
| Volatility | - | % | - | % | ||||
| Risk-fee interest rate | - | % | - | % | ||||
| Dividend yield |
Prior to the second quarter of 2025, the Company did not have historical stock prices that could be reliably determined for a period that is at least equal to the expected terms of its options. The expected options terms, which were calculated using the plain vanilla method, are years, and its historical period was years. The Company relied on the expected volatility of comparable peer-group publicly traded companies within its industry sector, to supplement the Company’s historical data for the period of the expected terms of the options that exceeded the period of the Company’s historical volatility data. As of May 1, 2025, the Company uses its historical stock prices to determine its expected volatility.
A summary of the Company’s non-vested restricted stock units and awards (“RSUA”) during the six months ended June 30, 2025, and 2024 are follows:
| Shares | Weighted Average Grant Due Fair Value | |||||||
| Non-vested restricted stock units, January 1, 2025 | $ | |||||||
| Granted | ||||||||
| Vested | ( | ) | ||||||
| Forfeited | ( | ) | ||||||
| Non-Vested restricted stock units, June 30, 2025 | $ | |||||||
| Non-vested restricted stock units, January 1, 2024 | $ | |||||||
| Granted | ||||||||
| Vested | ( | ) | ||||||
| Forfeited | ( | ) | ||||||
| Non-vested restricted stock units on June 30, 2024 | $ | |||||||
The weighted-average remaining contractual life of the restricted units as of June 30, 2025, is years.
One RSUAs give the right to receive one share of the Company’s common stock. RSUAs that vest based on service and performance are measured based on the fair values of the underlying stock on the date of grant. The Company used a Lattice model to determine the fair value of the RSU with a market condition. Compensation with respect to RSUA awards is expensed on a straight-line basis over the vesting period.
The Company recognized compensation expenses of $ , and $, respectively, related to RSUs and RSAs during the six-month periods ending June 30, 2025 and 2024. The Company recognized compensation expenses of $ and $, respectively, related to stock options during the six-month periods ending June 30, 2025 and 2024.
The options and RSUAs are granted to the Company’s employees, board members, and certain consultants. There is no difference in characteristics of the awards other than the stock options have to be exercised and restricted awards and units do not. The vesting of the options, restricted stock units or awards is based on the requisite service period of the employees and the non-employee’s vesting period is generally based on a period of up to six years. The maximum contractual term of the options is up to 5 years. The number of shares available for grant of options, and restricted stock units or awards amounts to at June 30, 2025.
Unamortized future stock-based compensation expense was $ million as of June 30, 2025, and it is expected to be recognized over a weighted-average period of years.
(D) Warrants
The following is a summary of the Company’s warrant activity during the six months ended June 30, 2025, and 2024:
Number of Warrants | Weighted Average Exercise Price | |||||||
| Balance, January 1, 2025 | $ | |||||||
| Issued | ||||||||
| Exercised | ||||||||
| Forfeited | ||||||||
| Balance, June 30, 2025 | $ | |||||||
| 17 |
Number of Warrants | Weighted Average Exercise Price | |||||||
| Balance, January 1, 2024 | $ | |||||||
| Issued | ||||||||
| Exercised | ||||||||
| Forfeited | ( | ) | ||||||
| Balance, June 30, 2024 | $ | |||||||
During the six months ended June 30, 2025, and 2024, the Company did not issue any warrants except for warrants issued to a placement agent in connection with its Series A -1 Preferred offerings in the second quarter of 2025.
NOTE 11 CONCENTRATIONS OF RISKS AND SEGMENT
Major Customers and Accounts Receivable
The
Company had no customers whose accounts receivable or revenue individually represented 10% or more of the Company’s total accounts
receivable or revenue as of and during the six-month periods ended June 30, 2025, and 2024. The Company had two and three third party
payors representing
| 18 |
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. To reduce the risk associated with the failure of such counterparties, the Company periodically evaluates the credit quality of the financial institutions in which it holds deposits.
Product and Geographic Markets
The Company generates its income primarily from lighting and heating products, and increasingly, smart-based products sold primarily in the United States.
Segment
The Company operates in one segment: advanced-safe-smart technologies and related products. The Company used the following factors to identify includes the basis of organization, the relative similarities in types of product offerings. The chief operating decision maker consists of a team comprised of the Company’s Executive Chairman and its two Co-Chief Executive Officers. The total assets of the segments amount to the Company’s consolidated assets. Long-lived assets, which consists of property and equipment and right of use assets are located in the United States.
The Company has concluded that consolidated net income or loss is the measure of segment profitability. The following is a reconciliation of the Company’s revenues from external customers and consolidated revenues and the consolidated and segment loss, including significant segment expenses.
For the six months ended June 30, | ||||||||
| 2025 | 2024 | |||||||
| Revenues from external customers and consolidated revenues | $ | $ | ||||||
| Cost of revenues | ||||||||
| Compensation costs, excluding share-based payments | ||||||||
| Share-based payments | ||||||||
| Marketing programs | ||||||||
| Professional fees, excluding share-based payments | ||||||||
| Depreciation, amortization, and impairment of intangibles | ||||||||
| Other operating expenses | ||||||||
| Total operating expenses, net | ||||||||
| Other expenses | ||||||||
| Amortization of debt discount | ||||||||
| Interest expense, net | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
NOTE 12 SUBSEQUENT EVENTS
Management has evaluated subsequent events since June 30, 2025, through the date the consolidated financial statements were available to be issued. There were no significant subsequent events that required adjustment to or disclosure in the consolidated financial statements.
| 19 |
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, 2024 included in our Annual Report on Form 10-K for the year ended December 31, 2024. 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, 2024, in this Form 10-Q, 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 and second-generation technologies enable light fixtures, ceiling fans and other electrically wired products to be installed safely and plugged in to 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, Bluetooth Low Energy and voice control connections. The SkyHome App allows scheduling, energy saving-eco mode, dimming, back-up emergency light, night light, light color changing and much more. Our third-generation technology is an all-in-one safe and smart-advanced platform (the “Smart Sky Platform”) that is designed to enhance all-around safety and lifestyle of homes and other buildings. We are continuing to refine our products and began manufacturing certain advanced and smart products in 2023 and expect additional products, including the third-generation smart-advanced platform to be available in 2025. Our products are designed to improve all around home and building safety and lifestyle. We expect to manufacture the additional product offerings within the next six months. We hold 100 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.
We believe our total addressable market in the United States exceeds $500 billion, based on the Company’s internal calculations derived from the estimation of the total target user pool, projected average selling price, and projected units per household. We believe there are billions of installations of light and other electrical fixtures globally. Our estimates of the addressable market for our products may prove to be incorrect. The projected demand for our products could differ materially from actual demand. Even if the total addressable market for our products is as large as we have estimated and even if we are able to gain market awareness and acceptance, we may not be able to penetrate the existing market to capture additional market share.
Monetary and trade policies impact in varying degrees our industry market participants ( from manufacturer to user). The reaction(s) by the market participants to such policies or changes in policies may impact on our operations. Those policies, such as tariffs, increases in interest rates, supply and overhead costs and transportation costs, may adversely affect our operating results, and we may not be able to offset increased costs with increased sales price per unit, particularly as we work toward commercial manufacturing of our products. Although we do not believe that monetary and trade policies have had a material impact on our financial position or results of operations to date, we may experience some effect in the near future as we continue to navigate changes in such policies. In addition, we may be negatively impacted because of supply chain constraints, consequences associated with government regulations, ongoing and potential geopolitical conflicts, instability in the global banking system, employee availability and wage increases.
| 20 |
Recent Developments
In March 2024 and as amended in June 2025, the Company and the Belami sellers entered into a letter agreement modifying certain obligations under the stock purchase agreement for the acquisition of Belami. In connection with the letter agreement, the Company issued convertible promissory notes to each of the sellers (the “Seller Note(s)”) in substitution of an aggregate of $3,117,408 in cash due to the sellers on the first anniversary of the closing of the Belami acquisition. Each seller received a Seller Note in an amount of $1,039,303 on the same date. In addition to other customary terms, the Seller Notes bear annual interest at 10%, with aggregate principal and interest monthly payments of $300,000 effective July 1, 2025 until fully paid in January 2026. The outstanding obligation can be converted by the sellers into shares of our common stock at any time at $3 per share of our common stock.
During the second quarter of 2023, we began our at the market offering (“ATM”) pursuant to which we may sell up to $20 million of shares of our common stock.
Between October 2024 and May 2025, the Company issued shares of newly authorized Series A Preferred Stock and Series A-1 Preferred Stock which generated proceeds of $14.2 million.
| 21 |
Results of Operations
Comparison of the Three and Six months ended June 30, 2025
| Three months ended June 30, | Increase/ Decrease | Increase/ Decrease | Six months ended June 30, | Increase/ Decrease | Increase/ Decrease | |||||||||||||||||||||||||||
| 2025($) | 2024($) | $ | % | 2025($) | 2024($) | $ | % | |||||||||||||||||||||||||
| Revenue | 23,061,655 | 21,446,148 | 1,615,507 | 8 | 43,175,593 | 40,423,969 | 2,751,624 | 7 | ||||||||||||||||||||||||
| Cost of revenues | 16,064,486 | 14,869,521 | 1,194,965 | 8 | 30,466,974 | 28,269,292 | 2,197,682 | 8 | ||||||||||||||||||||||||
| Selling and marketing expenses | 6,185,017 | 6,271,708 | (86,691 | ) | (1 | ) | 13,012,437 | 12,798,524 | 213,913 | 2 | ||||||||||||||||||||||
| General and administrative expenses | 8,333,265 | 6,540,218 | 1,793,047 | 27 | 14,930,320 | 14,479,799 | 450,521 | 3 | ) | |||||||||||||||||||||||
| Total expenses | 30,582,768 | 27,681,447 | 2,901,321 | 10 | 58,409,731 | 55,547,615 | 2,862,116 | 5 | ||||||||||||||||||||||||
| Operating loss | (7,521,113 | ) | (6,235,299 | ) | 1,285,814 | 21 | (15,234,138 | ) | (15,123,646 | ) | 110,492 | (1 | ) | |||||||||||||||||||
| Interest expense, net | 1,305,816 | 1,227,650 | 78,166 | 6 | 2,644,919 | 2,015,504 | 629,415 | 31 | ||||||||||||||||||||||||
| - | ||||||||||||||||||||||||||||||||
| Net loss | (8,826,929 | ) | (7,462,949 | ) | 1,363,980 | 18 | (17,879,057 | ) | (17,139,150 | ) | 739,907 | 4 | ||||||||||||||||||||
NM: Not meaningful
Revenue
The increase in revenues is primarily due to an increased number of units of lighting and heating products sold.
We believe that our revenues will be higher in 2025 than in 2024 primarily resulting from revenues from the sale of our advanced and smart products.
| 22 |
Cost of Revenues
The increase in cost of revenue is proportionate to the increase in revenues.
We believe that the cost of revenues will increase in 2025 compared to 2024, commensurate with an anticipated increase in revenues.
Selling and Marketing Expenses
Selling and marketing expenses consist primarily of sales and marketing compensation as well as sales and marketing programs.
The selling and marketing expenses are relatively unchanged. The changes are primarily due to lower share-based payments associated with marketing personnel in the second quarter of 2025 by approximately $1.0 million, offset by increased sales and marketing programs expenses during the second quarter of 2025.
General and Administrative Expenses
General and administrative expenses consist primarily of an allocation of product development, finance, legal, human resources, including salaries, wages, and benefits, and depreciation and amortization, including share-based payments.
The increase in general and administrative expenses is primarily due to increased share-based payments of approximately $1.6 million during the second quarter of 2025.
Interest Expense
The increase in interest expense resulted primarily from interest charges related to increased interest-bearing weighted average debt in the first quarter of 2024 when compared to the prior year periods.
| 23 |
Liquidity and Capital Resources
As of June 30, 2025, and 2024, we had $15.7 million and $15.6 million in cash, cash equivalents, and restricted cash, respectively.
We have raised additional funds through the sale of our common stock for gross proceeds of $ 4.8 million pursuant to placements and offerings during the six-month period ended June 30, 2025. Since October 2024, we generated proceeds of $14.2 million by issuing shares of our Preferred Series A and A-1 stock.
These offerings included shares sold pursuant to our ATM offering program which provides us with additional access to capital, as needed, subject to market conditions. During the three- months ended June 30, 2025, we issued 3,651,257 shares of common stock under such program for net proceeds of $4,221,956, excluding placement fees of $127,563. From inception through June 30, 2025, we issued 11,769,912 shares of common stock under such a program for net proceeds of $18,299,956, net of brokerage fees and legal fees of $ 756,251. As of June 30, 2025, the remaining amount to be used under the ATM offering program is $940,000.
Our future capital requirements will depend on many factors, our revenue growth rate, expenditures related to our headcount growth and manufacturing, 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 market adoption of our platforms. We may continue to enter arrangements to acquire or invest in complementary businesses, products, and technologies. We may, because of those arrangements, or the general expansion of our business, be required to seek additional equity or debt financing. If 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.
We owe approximately $20.0 million under fixed rate obligations as of June 30, 2025. In addition, we owe GE certain minimum royalty payments under a license agreement and other accrued expenses which amounted to $1.5 million as of June 30, 2025.
As common with companies having a similar cash conversion cycle as ours, when sales are converted into cash rapidly, often referred to as the “Dell Working Capital Model,” we leverage our trades payable to finance our operations to lower our cost of capital, and accordingly, we may have negative working capital. This negative working capital is partly inherent to the relatively quick turnaround of finished goods inventory, quicker collection of accounts receivables, and longer payment cycle of trades payable. Our negative working capital, which consists of accounts receivable, inventory, net of trades and compensation payable, amounted to $8.5 million and $7.2 million as of June 30, 2025, and 2024 respectively.
| 24 |
Please see below a summary of the primary components of our cash used in or provided by operating investing and financing activities during the six-month period ended June 30, 2025 and 2024:
| For the six months ended June 30, | ||||||||
| 2025 | 2024 | |||||||
| Operations: | ||||||||
| Net loss | $ | (17,879,057 | ) | $ | (17,139,150 | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Depreciation and amortization | 2,280,154 | 2,399,350 | ||||||
| Amortization of debt discount | 556,998 | 604,976 | ||||||
| Non-cash equity-based compensation expense | 6,653,522 | 6,070,935 | ||||||
| Change in operating assets and liabilities: | ||||||||
| Working capital changes | 2,078,605 | (2,333,130 | ) | |||||
| Net cash used in operating activities | (6,309,778 | ) | (10,397,019 | ) | ||||
| Investing: | ||||||||
| Purchase of property and equipment | (775,365 | ) | (279,277 | ) | ||||
| Net cash (used in) provided by investing activities | (775,365 | ) | (279,277 | ) | ||||
| Financing: | ||||||||
| Proceeds from issuance of stock | 8,346,550 | 4,330,295 | ||||||
| Dividends | (484,504 | ) | - | |||||
| Principal repayments of notes payable | (569,790 | ) | (482,585 | ) | ||||
| Net cash provided by financing activities | 7,292,256 | 3,847,710 | ||||||
| Change in cash, cash equivalents and restricted cash | 207,113 | (6,828,586 | ) | |||||
| Cash, cash equivalents, and restricted cash at beginning of period | 15,500,495 | 22,430,253 | ||||||
| Cash, cash equivalents and restricted cash at end of period | $ | 15,707,608 | $ | 15,601,667 | ||||
The changes in working capital, net are primarily attributable to timing differences in accounts receivable, accounts payable related to operations and deferred revenues.
Dividends are related to the Series A and A-1 Preferred Stock initially issued in October 2024.
Going Concern
The Company’s liquidity sources include $15.7 million in cash and cash equivalents, including restricted cash of $2.8 million held for long-term purposes, and $8.6 million of working capital deficit as of June 30, 2025. The Company has a history of recurring operating losses, and its net cash used in operating activities amounted to $6.3 million and $10.4 million during the six months ended June 30, 2025, and 2024, respectively. The Company has also generated net cash provided by financing activities of $7.3 million and $3.8 million during the six months ended June 30, 2025, and 2024, respectively. Accordingly, the Company’s management cannot ascertain that there is no substantial doubt that it will be able to meet its obligations as they become due within one year after the date that its financial statements are issued.
| 25 |
Management intends to mitigate such conditions by supporting its continued growth, decreasing its cash used in operating activities through increased revenues and increased margins from products sold to large retailers and its internet portals, and to the extent necessary, generating cash provided by financing activities through at the market offering or other equity or debt financing means.
Non-GAAP Financial Measures
Management considers earnings (loss) before interest, taxes, depreciation and amortization, or EBITDA, as adjusted, an important indicator in evaluating our business on a consistent basis across various periods. Due to the significance of non-recurring items, EBITDA, as adjusted, enables our management to monitor and evaluate our business on a consistent basis. We use EBITDA, as adjusted, as a primary measure, among others, to analyze and evaluate financial and strategic planning decisions regarding future operating investments and potential acquisitions. We believe that EBITDA, as adjusted, eliminates items that are not part of our core operations, such as interest expense and amortization and impairment expense associated with intangible assets, or items that do not involve a cash outlay, such as share-based payments, and non-recurring items, such as transaction costs. EBITDA, as adjusted, should be considered in addition to, rather than as a substitute for, pre-tax income (loss), net income (loss) and cash flows used in operating activities. This non-GAAP financial measure excludes significant expenses that are required by GAAP to be recorded in our financial statements and is subject to inherent limitations. Investors should review the reconciliation of this non-GAAP financial measure to the comparable GAAP financial measure included below. Investors should not rely on any single financial measure to evaluate our business.
| For the three months ended June 30, | For the six months ended June 30 | |||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||
| Net loss | $ | (8,826,929 | ) | $ | (7,462,949 | ) | $ | (17,879,057 | ) | $ | (17,139,150 | ) | ||||
| Share-based payments | 3,612,364 | 2,775,906 | 6,653,521 | 6,070,935 | ||||||||||||
| Interest expense | 1,305,816 | 1,227,650 | 2,644,919 | 2,015,504 | ||||||||||||
| Depreciation, amortization | 1,272,337 | 1,338,779 | 2,280,154 | 2,399,350 | ||||||||||||
| EBITDA, as adjusted | $ | (2,636,412 | ) | $ | (2,120,614 | ) | $ | (6,300,463 | ) | $ | (6,653,361 | ) | ||||
Critical Accounting Policies
Our significant accounting policies are disclosed in Note 2 to our consolidated financial statements for the year ended December 31, 2024 contained in our Annual Report on Form 10-K. 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.
| 26 |
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 June 30, 2025, and December 31, 2024, we believe the amounts reported for cash, prepaid expenses, accounts payable and accrued expenses and other current liabilities, accrued interest, notes payable and convertible note payable approximate fair value because of their short maturities.
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.
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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 have had or will have a material impact on our financial position or results of operations.
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 Officers and Principal Financial Officer, evaluated the effectiveness of our disclosure controls and procedures. Based upon the evaluation, our Principal Executive Officers and Principal Financial Officer concluded that our disclosure controls and procedures were effective as of June 30, 2025.
Changes in Internal Controls Over Financial Reporting:
There were no changes in our internal control over financial reporting during the quarter ended June 30, 2025 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II. OTHER INFORMATION
Item 1. Legal Proceedings
From time to time, we become involved in legal proceedings arising in the ordinary course of our business. As of the date of this Form 10-Q, we are not a party to any material legal matters or claims. Legal proceedings are inherently uncertain and the outcome of a particular matter or a combination of matters may be material to our results of operations for a particular period, depending upon the size of the loss or our income for that particular period.
We assess our liabilities and contingencies in connection with outstanding legal proceedings utilizing the latest information available. Where it is probable that we will incur a loss and the amount of the loss can be reasonably estimated, we record a liability in our consolidated financial statements. These legal accruals may be increased or decreased to reflect any relevant developments on a quarterly basis. Where a loss is not probable or the amount of the loss is not estimable, we do not record an accrual, consistent with applicable accounting guidance.
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, 2024, other than as noted below. 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.
We may be adversely impacted by monetary and trade policies.
Monetary and trade policies impact in varying degrees our industry market participants ( from manufacturer to user). The reaction(s) by the market participants to such policies or changes in policies may impact our operations. While all market participants react to such policies, very few economists have been able to accurately forecast the short-term impact of the trade policies in particular. Relatively high interest rates and rapidly changing trade policies and postures create different reactions from the market participants. For the most part so far, our manufacturers have substantially reduced their prices to offset the increased tariffs related to the products we market. Also, a significant portion of the products we market are manufactured in the United States. The Chinese manufacturers we use are all looking at alternatives to move away their production from China. Some of the third-party manufacturers we use are located in countries which are not severely impacted by the trade policies postures. We are also looking at repatriating the manufacturing of certain components and assembly of our smart and advanced products to the United States. Accordingly, with a few exceptions, we do not believe that there will be increased pressure from customer demands to reduce our gross profit per unit. There are no guarantees that it will remain so. Changing trade policies and reactions by market participants are impossible to predict at this point. We believe that the macroeconomic conditions in the United States will improve once interest rates are lowered and trade policies are effective and predictable. Impact from the monetary and trade policies, such as tariffs, increases in interest rates, supply and overhead costs and transportation costs, may adversely affect our operating results, and we may not be able to offset increased costs with increased sales price per unit, particularly as we work toward commercial manufacturing of our products. Although we do not believe that inflation has had a material impact on our financial position or results of operations to date, we may experience some effect in the near future (especially if tariffs are significantly increased and are not absorbed by the manufacturers). In addition, we may be negatively impacted because of supply chain constraints, consequences associated with government regulations, ongoing and potential geopolitical conflicts, instability in the global banking system, employee availability and wage increases.
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ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Recent Sales of Unregistered Securities
There were no unregistered sales of equity securities during the quarter ended June 30, 2025 that were not previously reported in a Current Report on Form 8-K, with the exception of the following:
We issued 100,000 shares of our common stock to a contractor, warrants exercisable for up to 64,750 shares of our common stock to the placement agent for certain offerings of Series A-1 Preferred Stock, and we extended the period under which notes holders aggregating $3,117,408 can convert such notes into shares of our common stock from May 2025 to January 2026.
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 (the “Securities Act”), including Regulation D and Rule 506 promulgated thereunder, as transactions by the Company not involving a public offering.
Issuer Purchases of Equity Securities
| Period | Total Number of Shares Purchased(1) | Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | Maximum Number of Shares That May Yet be Purchased Under the Plans or Programs | ||||||||||||
| April 1-April 30, 2025 | — | $ | — | — | — | |||||||||||
| May 1-May 31, 2025 | 70,683 | 1.44 | — | — | ||||||||||||
| June 1-June 30, 2025 | — | — | — | — | ||||||||||||
| Total | 70,683 | $ | 1.44 | — | — | |||||||||||
(1) Includes shares repurchased to satisfy tax withholding obligations due upon the vesting of certain restricted stock held by certain employees. We did not pay cash to repurchase these shares, nor were these repurchases part of a publicly announced plan or program. Excludes shares repurchased to settle tax withholdings related to the vesting of restricted stock units.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
Item 5. Other Information
Rule 10b5-1 Trading Plans
During
the quarter ended June 30, 2025, none of the Company’s directors or executive officers
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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.
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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.
| SKYX PLATFORMS CORP. | ||||
| Date: | August 12, 2025 | By: | /s/ John P. Campi | |
| John P. Campi, Co- Chief Executive Officer | ||||
| (Principal Executive Officer) | ||||
| Date: | August 12, 2025 | By: | /s/ Leonard J. Sokolow | |
| Leonard J. Sokolow, Co-Chief Executive Officer | ||||
| (Principal Executive Officer) | ||||
| Date: | August 12, 2025 | By: | /s/ Marc-Andre Boisseau | |
| Marc-Andre Boisseau, Chief Financial Officer | ||||
| (Principal Financial and Accounting Officer) | ||||
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